ICN MERGER CORP, S-4, 1994-09-30

ICN MERGER CORP
S-4, 1994-09-30
PHARMACEUTICAL PREPARATIONS

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<PAGE> 1

AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 28, 1994.

REGISTRATION STATEMENT NO. 33-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------

FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------------
ICN MERGER CORP.
(Exact Name of Registrant as specified in its charter)

<TABLE>
<S> <C> <C>
DELAWARE 2834 33-0628076
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>

-------------------------

3300 HYLAND AVENUE
COSTA MESA, CALIFORNIA 92626
(714) 545-0100
(Address, including zip code, and telephone number, including area code,
of registrant's principal executive offices)

MILAN PANIC
CHAIRMAN OF THE BOARD AND CHIEF EXECUTIVE OFFICER
3300 HYLAND AVENUE
COSTA MESA, CALIFORNIA 92626
(714) 545-0100
(Address, including zip code, and telephone number, including area code,
of agent for service)
-------------------------

Copies to:
JEFFREY BAGNER
FRIED, FRANK, HARRIS, SHRIVER & JACOBSON
ONE NEW YORK PLAZA
NEW YORK, NEW YORK 10004
(212) 820-8000
-------------------------

APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as practicable after the effective date of this Registration Statement.
-------------------------

If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /

CALCULATION OF REGISTRATION FEE

<TABLE>
<S> <C> <C> <C> <C>
- ------------------------------------------------------------------------------------------------------------------
TITLE OF EACH CLASS OF AMOUNT TO BE PROPOSED MAXIMUM PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED(1) REGISTERED OFFERING AGGREGATE REGISTRATION FEE
PRICE PER UNIT OFFERING PRICE
- ------------------------------------------------------------------------------------------------------------------
Common Stock, par value $.01 30,000,000 Not applicable Not applicable $148,586.34(2)
per share and associated
Preferred Stock Purchase
Rights
- ------------------------------------------------------------------------------------------------------------------
</TABLE>

(1) This Registration Statement covers the maximum number of shares of common
stock, par value $.01 per share (the "Common Stock"), of Registrant which
will be issued in connection with the merger (the "Merger") of ICN
Pharmaceuticals, Inc., a Delaware corporation ("ICN"), SPI Pharmaceuticals,
Inc., a Delaware corporation ("SPI"), Viratek, Inc., a Delaware corporation
("Viratek"), ICN Biomedicals, Inc., a Delaware corporation ("Biomedicals"),
and the Registrant, as described in the enclosed Joint Proxy
Statement/Prospectus and shares which may be issued pursuant to the exercise
of outstanding convertible debentures, warrants and employee stock options.

(2) Pursuant to Rule 457(f)(1) of the Securities Act of 1933, as amended, the
registration fee is based on an aggregate offering value equal to the sum of
$24.19 (the average of the high and low prices per share of SPI Common
Stock, par value $.01 per share, as reported on the American Stock Exchange
on September 22, 1994), multiplied by each of (i) the product of 20,529,181
(the number of issued and outstanding shares of ICN Common Stock, par value
$1.00 per share, on June 30, 1994) and .512 (the fraction of a share of
Registrant's Common Stock into which each share of ICN Common Stock will be
exchanged pursuant to the Merger), (ii) the product of 12,530,737 (the
number of issued and outstanding shares of SPI Common Stock on June 30, 1994
(other than shares owned by ICN) and 1.0 (the fraction of a share of
Registrant's Common Stock into which each share of SPI Common Stock will be
exchanged pursuant to the Merger), (iii) the product of 2,776,242 (the
number of issued and outstanding shares of Biomedicals Common Stock, par
value $.01 per share, on June 30, 1994 (other than shares owned by ICN)) and
.197 (the fraction of a share of Registrant's Common Stock into which each
share of Biomedicals Common Stock will be exchanged pursuant to the Merger),
(iv) the product of 6,759,591 (the number of issued and outstanding shares
of Viratek Common Stock, par value $.10 per share, on June 30,1994 (other
than shares owned by ICN)) and .499 (the fraction of a share of Registrant's
Common Stock into which each share of Viratek Common Stock will be exchanged
pursuant to the Merger) and (v) 3,038,366 (the number of additional shares
of Common Stock which may be issued as described in Footnote 1, above). The
amount to be paid has been reduced by the amount of the filing fee
previously paid in connection with the Joint Proxy Statement/Prospectus.
-------------------------

THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8 (A),
MAY DETERMINE.
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- --------------------------------------------------------------------------------
<PAGE> 2

ICN MERGER CORP.
-------------------------

CROSS-REFERENCE SHEET BETWEEN ITEMS IN FORM S-4
AND PROSPECTUS PURSUANT TO ITEM 501 (B) OF REGULATION S-K

<TABLE>
<CAPTION>
FORM S-4 ITEM LOCATION IN PROSPECTUS
- ------------------------------------------------- --------------------------------------------
<C> <S> <C>
A. INFORMATION ABOUT THE TRANSACTION
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages of
Prospectus................................ Table of Contents; Available Information;
Incorporation of Certain Documents by
Reference
3. Risk Factors and Other Information.......... Summary; Certain Considerations; Selected
Financial Data; The Merger
4. Terms of the Transaction.................... Summary; The Meetings; The Merger; The
Merger Agreement; Management and
Operations of New ICN After the Merger;
Description of New ICN Capital Stock;
Comparative Rights of Stockholders
5. Pro Forma Financial Information............. Summary; Unaudited Pro Forma Combined
Condensed Financial Statements
6. Material Contracts with Company being
Acquired.................................. Not Applicable
7. Additional Information Required for
Reoffering by Persons and Parties Deemed
to be Underwriters........................ Not Applicable
8. Interests of Named Experts and Counsel...... Legal Matters
9. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Not Applicable
B. INFORMATION ABOUT THE REGISTRANT
10... Information with Respect to S-3
Registrants............................... Not Applicable
11. Incorporation of Certain Information by
Reference................................. Not Applicable
12. Information with Respect to S-2 or S-3
Registrants............................... Not Applicable
13. Incorporation of Certain Information by
Reference................................. Not Applicable
14. Information with Respect to Registrants
Other Than S-3 or S-2 Registrants......... Available Information; Summary; The Merger;
Management and Operations of New ICN After
the Merger; Comparative Rights of
Stockholders; Liability and
Indemnification of Directors and Officers
of New ICN; ICN Merger Corp. 1994 Stock
Incentive Plan; Addendum
C. INFORMATION ABOUT THE COMPANIES BEING
ACQUIRED
15. Information with Respect to S-3 Companies... Incorporation of Certain Documents by
Reference; Summary; Comparative Market Data;
Selected Consolidated Financial Data;
Selected Unaudited Pro Forma Combined
Condensed Financial Data; Description of
New ICN Capital Stock; Certain
Transactions; Addendum
ICN; Addendum SPI; Appendix F -- 1993
Annual Report to Stockholders of ICN
Pharmaceuticals, Inc.; Appendix G -- 1993
Annual Report to Stockholders of SPI
Pharmaceuticals, Inc.; Appendix
I -- Interim Financial Statements of ICN
Pharmaceuticals, Inc.; Appendix
K -- Interim Financial Statements of SPI
Pharmaceuticals, Inc.
</TABLE>
<PAGE> 3

<TABLE>
<C> <S> <C>
ICN; Addendum SPI; Appendix F -- 1993
Annual Report to Stockholders of ICN
Pharmaceuticals, Inc.; Appendix G -- 1993
Annual Report to Stockholders of SPI
Pharmaceuticals, Inc.; Appendix
I -- Interim Financial Statements of ICN
Pharmaceuticals, Inc.; Appendix
K -- Interim Financial Statements of SPI
Pharmaceuticals, Inc.
16. Information with Respect to S-2 or S-3
Companies................................. Incorporation of Certain Documents by
Reference; Summary; Comparative Market Data;
Selected Unaudited Financial Data;
Selected Unaudited Pro Forma Combined
Condensed Financial Data; Description of
New ICN Capital Stock; Certain
Transactions, Addendum Biomedicals;
Addendum Viratek; Appendix H -- 1993
Annual Report to Stockholders of Viratek,
Inc.; Appendix I -- 1993 Annual Report to
Stockholders of ICN Biomedicals, Inc.;
Appendix L -- Interim Financial Statements
of Viratek, Inc.; Appendix M -- Interim
Financial Statements of ICN Biomedicals,
Inc.
17. Information with Respect to Companies other
Than S-2 or S-3 Companies................. Not Applicable
D. VOTING AND MANAGEMENT INFORMATION
18. Information of Proxies, Consents or
Authorizations are to be Solicited........ Summary; the Meetings; The Merger
1. Date, Time and Place Information........ Outside Front Cover Page; Summary;
Stockholder Proposals for the Next Annual
Meeting
2. Revocability of Proxy................... The Meetings
3. Dissenters' Rights of Appraisal......... Summary; The Meetings
4. Persons Making the Solicitation......... Outside Front Cover Page; Summary; The
Meetings
5. Interest of Certain Persons in matters
to be Acted Upon and Voting Securities and
principal Holders Thereof............... The Merger; The Meetings; Management and
Operations of New ICN after the Merger;
Addendum ICN; Addendum SPI; Addendum
Viratek; Addendum Biomedicals;
Incorporation of Certain Documents by
Reference
6. Vote Required for Approval.............. Summary; The Meetings
7. Directors and Executive Officers
Executive Compensation.................... Addendum ICN; Addendum SPI; Addendum
Viratek; Addendum Biomedicals;
Incorporation of Certain Documents by
Reference
19. Information if Proxies, Consents or
Authorizations are not to be solicited in
an Exchange Offer......................... Not Applicable
</TABLE>
<PAGE> 4

[ICN Pharmaceuticals, Inc. Letterhead]

September 28, 1994

To the Stockholders of
ICN Pharmaceuticals, Inc.

Dear Fellow Stockholder:

You are cordially invited to attend the Annual Meeting (the "ICN Meeting")
of stockholders of ICN Pharmaceuticals, Inc., a Delaware corporation ("ICN"), to
be held on Tuesday, November 1, 1994 at the corporate headquarters of ICN, 3300
Hyland Avenue, Costa Mesa, California 92626, commencing at 9:00 a.m., local
time.

At the ICN Meeting, you will be asked to consider and vote upon a proposal
to approve (i) an Agreement and Plan of Merger, dated as of August 1, 1994, as
amended (the "Merger Agreement"), by and among ICN and its three publicly-held
affiliates, SPI Pharmaceuticals, Inc. ("SPI"), Viratek, Inc. ("Viratek") and ICN
Biomedicals, Inc. ("Biomedicals"), and ICN Merger Corp., a Delaware corporation
and a wholly owned subsidiary of SPI ("New ICN," to be renamed "ICN
Pharmaceuticals, Inc."), and (ii) the mergers as contemplated by the Merger
Agreement pursuant to which, subject to the terms and conditions of the Merger
Agreement, ICN, SPI and Viratek will be merged with and into New ICN and
Biomedicals will become a wholly-owned subsidiary of New ICN as a result of a
merger of Biomedicals with and into a wholly-owned subsidiary of New ICN
(collectively, the "Merger"). If the Merger Agreement is approved and the Merger
is consummated, ICN stockholders will receive in exchange for each of their
shares of ICN common stock ("ICN Common Stock") 0.512 shares (the "ICN Exchange
Ratio") of New ICN common stock (the "New ICN Shares"). In addition, pursuant to
the Merger, SPI stockholders (other than ICN) will receive in exchange for each
of their shares of SPI Common Stock 1.00 New ICN Share, Viratek stockholders
(other than ICN) will receive in exchange for each of their shares of Viratek
Common Stock 0.499 New ICN Shares and Biomedicals stockholders (other than ICN)
will receive in exchange for each of their shares of Biomedicals Common Stock
0.197 New ICN Shares. After giving effect to the Merger, the current ICN
stockholders will own in the aggregate approximately 38.98% of the outstanding
New ICN Shares.

The Board of Directors of ICN believes that the Merger is fair to, and in
the best interests of, ICN and its stockholders and has unanimously approved the
Merger and the Merger Agreement. Prior to the Board's approval, a specially
constituted committee of the Board of Directors of ICN, comprised of certain
non-management directors (the "Special Committee"), recommended the Merger to
the Board of Directors. The Special Committee and the Board of Directors
unanimously recommend that stockholders vote for approval and adoption of the
Merger Agreement and the Merger.

The Board of Directors received an opinion from Prudential Securities
Incorporated ("Prudential Securities") that the ICN Exchange Ratio is fair, from
a financial point of view, to the ICN stockholders. The written opinion of
Prudential Securities is included in the accompanying Joint Proxy
Statement/Prospectus and should be read carefully by stockholders.

At the ICN Meeting, stockholders will also be asked to elect ten directors
to hold office until the 1995 Annual Meeting (who, if elected and the Merger is
consummated, will become directors of New ICN) and to consider and vote upon a
proposal to (i) approve the Amended and Restated ICN Pharmaceuticals, Inc. 1992
Non-Qualified Stock Option Plan, which amendment and restatement increased the
number of shares
<PAGE> 5

available for grant under the plan from 500,000 to 1,250,000 shares of ICN
Common Stock and provided that the maximum number of shares with respect to
which options may be granted to any individual during the term of the plan may
not exceed 400,000 shares of ICN Common Stock and (ii) approve the Amended and
Restated ICN Pharmaceuticals, Inc. 1992 Employee Incentive Stock Option Plan,
which amendment and restatement increased the number of shares available for
grant under the plan from 500,000 to 750,000 shares of ICN Common Stock and
provided that the maximum number of shares with respect to which options may be
granted to any individual during the term of the plan may not exceed 200,000
shares of ICN Common Stock.

In view of the importance of the actions to be taken at the ICN Meeting, we
urge you to carefully review the accompanying Notice of Annual Meeting of
Stockholders and the Joint Proxy Statement/Prospectus, which contains
information about ICN and the Affiliates and describes in detail the Merger and
certain related matters, including the procedures and deadline for submitting a
properly completed form of election. Whether or not you are able to attend the
ICN Meeting, please complete, sign, date and return the enclosed proxy card as
soon as possible. A postage-paid envelope is enclosed for your convenience. If
you attend the ICN Meeting, you may revoke your proxy and, if you wish, vote
your shares of ICN Common Stock in person.

Very truly yours,

[SIG]

Milan Panic
Chairman of the Board
<PAGE> 6

[SPI Pharmaceuticals, Inc. Letterhead]

September 28, 1994

To the Stockholders of
SPI Pharmaceuticals, Inc.

Dear Fellow Stockholder:

You are cordially invited to attend the Annual Meeting (the "SPI Meeting")
of stockholders of SPI Pharmaceuticals, Inc., a Delaware corporation ("SPI"), to
be held on Tuesday, November 1, 1994 at the corporate headquarters of SPI, 3300
Hyland Avenue, Costa Mesa, California 92626, commencing at 10:00 a.m., local
time.

At the SPI Meeting, you will be asked to consider and vote upon a proposal
to approve (i) an Agreement and Plan of Merger, dated as of August 1, 1994, as
amended (the "Merger Agreement"), by and among ICN Pharmaceuticals, Inc. ("ICN")
and its three publicly-held affiliates, SPI, Viratek, Inc. ("Viratek") and ICN
Biomedicals, Inc. ("Biomedicals"), and ICN Merger Corp., a Delaware corporation
and a wholly owned subsidiary of SPI ("New ICN," to be renamed "ICN
Pharmaceuticals, Inc."), and (ii) the mergers as contemplated by the Merger
Agreement, pursuant to which, subject to the terms and conditions of the Merger
Agreement, SPI, ICN and Viratek will be merged with and into New ICN and
Biomedicals will become a wholly-owned subsidiary of New ICN as a result of a
merger of Biomedicals with and into a wholly-owned subsidiary of New ICN
(collectively, the "Merger"). If the Merger Agreement is approved and the Merger
is consummated, SPI stockholders (other than ICN) will receive in exchange for
each of their shares of SPI common stock ("SPI Common Stock") 1.00 share (the
"SPI Exchange Ratio") of New ICN common stock (the "New ICN Shares"). The shares
of SPI Common Stock presently held by ICN will be canceled in the Merger. In
addition, pursuant to the Merger, ICN stockholders will receive in exchange for
each of their shares of ICN Common Stock 0.512 New ICN Shares, Viratek
stockholders (other than ICN) will receive in exchange for each of their shares
of Viratek Common Stock 0.499 New ICN Shares and Biomedicals stockholders (other
than ICN) will receive in exchange for each of their shares of Biomedicals
Common Stock 0.197 New ICN Shares. After giving effect to the Merger, the
current SPI stockholders (other than ICN) will own in the aggregate
approximately 46.48% of the outstanding New ICN Shares.

The Board of Directors of SPI believes that the Merger is fair to, and in
the best interests of, SPI and its stockholders and has unanimously approved the
Merger and the Merger Agreement. Prior to the Board's approval, a specially
constituted committee of the Board of Directors of SPI, comprised of certain
non-management directors (the "Special Committee"), recommended the Merger to
the Board of Directors. The Special Committee and the Board of Directors
unanimously recommend that stockholders vote for approval and adoption of the
Merger Agreement and the Merger.

The Board of Directors received an opinion from Wertheim Schroder & Co.
Incorporated ("Wertheim Schroder") that the SPI Exchange Ratio is fair, from a
financial point of view, to SPI's stockholders (other than ICN). The written
opinion of Wertheim Schroder is included in the accompanying Joint Proxy
Statement/Prospectus and should be read carefully by stockholders.

At the SPI Meeting, stockholders will also be asked to elect eight
directors to hold office until the 1995 Annual Meeting (who, if elected and the
Merger is consummated, will become directors of New ICN) and to
<PAGE> 7

consider and vote upon a proposal to (i) approve the Amended and Restated SPI
Pharmaceuticals, Inc. 1992 Non-Qualified Stock Option Plan, which amendment and
restatement increased the number of shares available for grant under the plan
from 1,000,000 to 3,000,000 shares of SPI Common Stock and provided that the
maximum number of shares with respect to which options may be granted to any
individual during the term of the plan may not exceed 500,000 shares of SPI
Common Stock and (ii) approve the Amended and Restated SPI Pharmaceuticals, Inc.
1992 Employee Incentive Stock Option Plan, which amendment and restatement
increased the number of shares available for grant under the plan from 500,000
to 1,000,000 shares of SPI Common Stock and provided that the maximum number of
shares with respect to which options may be granted to any individual during the
term of the plan may not exceed 500,000 shares of SPI Common Stock.

In view of the importance of the actions to be taken at the SPI Meeting, we
urge you to carefully review the accompanying Notice of Annual Meeting of
Stockholders and the Joint Proxy Statement/Prospectus, which contains
information about SPI, ICN, Viratek and Biomedicals and describes in detail the
Merger and certain related matters, including the procedures and deadline for
submitting a properly completed form of election. Whether or not you are able to
attend the SPI Meeting, please complete, sign, date and return the enclosed
proxy card as soon as possible. A postage-paid envelope is enclosed for your
convenience. If you attend the SPI Meeting, you may revoke your proxy and, if
you wish, vote your shares of SPI Common Stock in person.

Very truly yours,

[SIG]

Milan Panic
Chairman of the Board
<PAGE> 8

[Viratek, Inc. Letterhead]

September 28, 1994

To the Stockholders of
Viratek, Inc.

Dear Fellow Stockholder:

You are cordially invited to attend the Annual Meeting (the "Viratek
Meeting") of stockholders of Viratek, Inc., a Delaware corporation ("Viratek"),
to be held on Tuesday, November 1, 1994 at the corporate headquarters of
Viratek, 3300 Hyland Avenue, Costa Mesa, California 92626, commencing at 11:00
a.m., local time.

At the Viratek Meeting, you will be asked to consider and vote upon a
proposal to approve (i) an Agreement and Plan of Merger, dated as of August 1,
1994, as amended (the "Merger Agreement"), by and among ICN Pharmaceuticals,
Inc. ("ICN") and its three publicly-held affiliates, SPI Pharmaceuticals, Inc.
("SPI"), Viratek and ICN Biomedicals, Inc. ("Biomedicals"), and ICN Merger
Corp., a Delaware corporation and a wholly owned subsidiary of SPI ("New ICN,"
to be renamed "ICN Pharmaceuticals, Inc."), and (ii) the mergers as contemplated
by the Merger Agreement, pursuant to which, subject to the terms and conditions
of the Merger Agreement, Viratek, ICN and SPI will be merged with and into New
ICN and Biomedicals will become a wholly-owned subsidiary of New ICN as a result
of a merger of Biomedicals with and into a wholly-owned subsidiary of New ICN
(collectively, the "Merger"). If the Merger Agreement is approved and the Merger
is consummated, Viratek stockholders (other than ICN) will receive in exchange
for each of their shares of Viratek common stock ("Viratek Common Stock") 0.499
shares (the "Viratek Exchange Ratio") of New ICN common stock (the "New ICN
Shares"). The shares of Viratek Common Stock presently held by ICN will be
canceled in the Merger. In addition, pursuant to the Merger, ICN stockholders
will receive in exchange for each of their shares of ICN Common Stock 0.512 New
ICN Shares, SPI stockholders (other than ICN) will receive in exchange for each
of their shares of SPI Common Stock 1.00 New ICN Share and Biomedicals
stockholders (other than ICN) will receive in exchange for each of their shares
of Biomedicals Common Stock 0.197 New ICN Shares. After giving effect to the
Merger, the current Viratek stockholders (other than ICN) will own in the
aggregate approximately 12.51% of the outstanding New ICN Shares.

The Board of Directors of Viratek believes that the Merger is fair to, and
in the best interests of, Viratek and its stockholders and has unanimously
approved the Merger and the Merger Agreement. Prior to the Board's approval, a
specially constituted committee of the Board of Directors of Viratek, comprised
of a non-management director (the "Special Committee"), recommended the Merger
to the Board of Directors. The Special Committee and the Board of Directors
unanimously recommend that stockholders vote for approval and adoption of the
Merger Agreement and the Merger.

The Board of Directors received an opinion from Kemper Securities, Inc.
("Kemper") that the Viratek Exchange Ratio is fair, from a financial point of
view, to Viratek's stockholders (other than ICN). The written opinion of Kemper
is included in the accompanying Joint Proxy Statement/Prospectus and should be
read carefully by stockholders.

ICN owns approximately 63% of the outstanding shares of Viratek Common
Stock and intends to vote all of such shares of Viratek Common Stock for
approval and adoption of the Merger Agreement and the Merger. Therefore, with
respect to Viratek, ICN will cause the Merger Agreement and the Merger to be
adopted without the vote of any other stockholder of Viratek.
<PAGE> 9

At the Viratek Meeting, stockholders will also be asked to elect six
directors to hold office until the 1995 Annual Meeting (who, if elected and the
Merger is consummated, will become directors of New ICN) and to consider and
vote upon a proposal to (i) approve the Amended and Restated Viratek, Inc. 1992
Non-Qualified Stock Option Plan, which amendment and restatement increased the
number of shares available for grant under the plan from 500,000 to 1,000,000
shares of Viratek Common Stock and provided that the maximum number of shares
with respect to which options may be granted to any individual during the term
of the plan may not exceed 400,000 shares of Viratek Common Stock and (ii)
approve the Amended and Restated Viratek, Inc. 1992 Employee Incentive Stock
Option Plan, which amendment and restatement increased the number of shares
available for grant under the plan from 500,000 to 1,000,000 shares of Viratek
Common Stock and provided that the maximum number of shares with respect to
which options may be granted to any individual during the term of the plan may
not exceed 400,000 shares of Viratek Common Stock.

In view of the importance of the actions to be taken at the Viratek
Meeting, we urge you to carefully review the accompanying Notice of Annual
Meeting of Stockholders and the Joint Proxy Statement/Prospectus, which contains
information about Viratek, ICN, SPI and Biomedicals and describes in detail the
Merger and certain related matters, including the procedures and deadline for
submitting a properly completed form of election. Whether or not you are able to
attend the Viratek Meeting, please complete, sign, date and return the enclosed
proxy card as soon as possible. A postage-paid envelope is enclosed for your
convenience. If you attend the Viratek Meeting, you may revoke your proxy and,
if you wish, vote your shares of Viratek Common Stock in person.

Very truly yours,

[SIG]

Milan Panic
Chairman of the Board
<PAGE> 10

[ICN Biomedicals, Inc. Letterhead]

September 28, 1994

To the Stockholders of
ICN Biomedicals, Inc.

Dear Fellow Stockholder:

You are cordially invited to attend the Annual Meeting (the "Biomedicals
Meeting") of stockholders of ICN Biomedicals, Inc., a Delaware corporation
("Biomedicals"), to be held on Tuesday, November 1, 1994 at the corporate
headquarters of Biomedicals, 3300 Hyland Avenue, Costa Mesa, California 92626,
commencing at 11:30 a.m., local time.

At the Biomedicals Meeting, you will be asked to consider and vote upon a
proposal to approve (i) an Agreement and Plan of Merger, dated as of August 1,
1994, as amended (the "Merger Agreement"), by and among ICN Pharmaceuticals,
Inc. ("ICN") and its three publicly-held affiliates, SPI Pharmaceuticals, Inc.
("SPI"), Viratek, Inc. ("Viratek") and Biomedicals, and ICN Merger Corp., a
Delaware corporation and a wholly owned subsidiary of SPI ("New ICN," to be
renamed "ICN Pharmaceuticals, Inc."), and (ii) the mergers as contemplated by
the Merger Agreement, pursuant to which, subject to the terms and conditions of
the Merger Agreement, ICN, SPI and Viratek will be merged with and into New ICN
and Biomedicals will become a wholly-owned subsidiary of New ICN as a result of
a merger of Biomedicals with and into a wholly-owned subsidiary of New ICN
(collectively, the "Merger"). If the Merger Agreement is approved and the Merger
is consummated, Biomedicals stockholders (other than ICN) will receive in
exchange for each of their shares of Biomedicals common stock ("Biomedicals
Common Stock") 0.197 shares (the "Biomedicals Exchange Ratio") of New ICN common
stock (the "New ICN Shares"). The shares of Biomedicals Common Stock and the
shares of Preferred Stock of Biomedicals held by ICN will be canceled in the
Merger. In addition, pursuant to the Merger, ICN stockholders will receive in
exchange for each of their shares of ICN Common Stock 0.512 New ICN Shares, SPI
stockholders (other than ICN) will receive in exchange for each of their shares
of SPI Common Stock 1.00 New ICN Share and Viratek stockholders (other than ICN)
will receive in exchange for each of their shares of Viratek Common Stock 0.499
New ICN Shares. After giving effect to the Merger, the current Biomedicals
stockholders (other than ICN) will own in the aggregate approximately 2.03% of
the outstanding New ICN Shares.

The Board of Directors of Biomedicals believes that the Merger is fair to,
and in the best interests of, Biomedicals and its stockholders and has
unanimously approved the Merger and the Merger Agreement. Prior to the Board's
approval, a specially constituted committee of the Board of Directors of
Biomedicals, comprised of a non-management director (the "Special Committee"),
recommended the Merger to the Board of Directors. The Special Committee and the
Board of Directors unanimously recommend that stockholders vote for approval and
adoption of the Merger Agreement and the Merger.

The Board of Directors received an opinion from Jefferies & Co.
("Jefferies") that the Biomedicals Exchange Ratio is fair, from a financial
point of view, to Biomedicals' stockholders (other than ICN). The written
opinion of Jefferies is included in the accompanying Joint Proxy
Statement/Prospectus and should be read carefully by stockholders.

ICN owns approximately 69% of the outstanding shares of Biomedicals Common
Stock and intends to vote all of such shares of Biomedicals Common Stock for
approval and adoption of the Merger Agreement and
<PAGE> 11

the Merger. Therefore, with respect to Biomedicals, ICN will cause the Merger
Agreement and the Merger to be adopted without the vote of any other stockholder
of Biomedicals.

At the Biomedicals Meeting, stockholders will also be asked to elect four
directors to hold office until the 1995 Annual Meeting (who, if elected and the
Merger is consummated, will become directors of New ICN) and to consider and
vote upon a proposal to (i) approve the Amended and Restated ICN Biomedicals,
Inc. 1992 Non-Qualified Stock Option Plan, which amendment and restatement
increased the number of shares available for grant under the plan from 500,000
to 1,000,000 shares of Biomedicals Common Stock and provided that the maximum
number of shares with respect to which options may be granted to any individual
during the term of the plan may not exceed 500,000 shares of Biomedicals Common
Stock and (ii) approve the Amended and Restated ICN Biomedicals, Inc. 1992
Employee Incentive Stock Option Plan, which amendment and restatement increased
the number of shares available for grant under the plan from 500,000 to
1,000,000 shares of Biomedicals Common Stock and provided that the maximum
number of shares with respect to which options may be granted to any individual
during the term of the plan may not exceed 500,000 shares of Biomedicals Common
Stock.

In view of the importance of the actions to be taken at the Biomedicals
Meeting, we urge you to carefully review the accompanying Notice of Annual
Meeting of Stockholders and the Joint Proxy Statement/Prospectus, which contains
information about Biomedicals, ICN, SPI and Viratek and describes in detail the
Merger and certain related matters, including the procedures and deadline for
submitting a properly completed form of election. Whether or not you are able to
attend the Biomedicals Meeting, please complete, sign, date and return the
enclosed proxy card as soon as possible. A postage-paid envelope is enclosed for
your convenience. If you attend the Biomedicals Meeting, you may revoke your
proxy and, if you wish, vote your shares of Biomedicals Common Stock in person.

Very truly yours,

[SIG]

Milan Panic
Chairman of the Board
<PAGE> 12

ICN PHARMACEUTICALS, INC.
3300 HYLAND AVENUE
COSTA MESA, CALIFORNIA 92626

------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

NOVEMBER 1, 1994

To the Stockholders of
ICN Pharmaceuticals, Inc.:

NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders of ICN
Pharmaceuticals, Inc., a Delaware corporation ("ICN"), will be held at the
corporate headquarters of ICN, 3300 Hyland Avenue, Costa Mesa, California, on
November 1, 1994, at 9:00 a.m., local time, for the purpose of considering and
acting upon the following:

1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of August 1, 1994, as amended (the
"Merger Agreement"), by and among ICN, SPI Pharmaceuticals, Inc., a
Delaware corporation ("SPI"), Viratek, Inc., a Delaware corporation
("Viratek"), ICN Biomedicals, Inc., a Delaware corporation ("Biomedicals"),
and ICN Merger Corp., a Delaware corporation and a wholly owned subsidiary
of SPI ("New ICN," to be renamed "ICN Pharmaceuticals, Inc."), and the
mergers as contemplated by the Merger Agreement pursuant to which, subject
to the terms and conditions of the Merger Agreement, ICN, SPI and Viratek
will be merged with and into New ICN and Biomedicals will become a
wholly-owned subsidiary of New ICN as a result of a merger of Biomedicals
with and into a wholly-owned subsidiary of New ICN (collectively, the
"Merger"). If the Merger Agreement is approved and the Merger is
consummated, ICN stockholders will receive in exchange for each of their
shares of ICN common stock, par value $1.00 per share, 0.512 shares of
common stock, par value $.01 per share, of New ICN. A copy of the Merger
Agreement is attached as Appendix A to the Joint Proxy Statement/Prospectus
that accompanies this Notice.

2. The election of ten directors, to hold office until the 1995 Annual
Meeting of Stockholders (who, if elected and the Merger is consummated,
will become directors of New ICN) and thereafter until their successors are
elected and qualified.

3. To consider and vote upon a proposal to approve the Amended and
Restated ICN Pharmaceuticals, Inc. 1992 Non-Qualified Stock Option Plan,
which amendment and restatement increased the number of shares available
for grant under the plan from 500,000 to 1,250,000 shares and provided that
the maximum number of shares with respect to which options may be granted
to any individual during the term of the plan may not exceed 400,000
shares.

4. To consider and vote upon a proposal to approve the Amended and
Restated ICN Pharmaceuticals, Inc. 1992 Employee Incentive Stock Option
Plan, which amendment and restatement increased the number of shares
available for grant under the plan from 500,000 to 750,000 shares and
provided that the maximum number of shares with respect to which options
may be granted to any individual during the term of the plan may not exceed
200,000 shares.

5. The transaction of such other business as may properly come before
the meeting or any adjournments thereof.
<PAGE> 13

Only stockholders of record at the close of business on October 3, 1994,
will be entitled to notice of and to vote at the meeting and any adjournments
thereof.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.

THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE ELECTION OF THE TEN NOMINEES FOR DIRECTORS OF ICN NAMED IN THIS JOINT
PROXY STATEMENT/PROSPECTUS.

THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE AMENDED AND RESTATED STOCK OPTION PLANS.

By Order of the Board of Directors,

[SIG]

MILAN PANIC
Chairman of the Board

[SIG]

DAVID C. WATT
Secretary

YOUR VOTE IS IMPORTANT

To ensure that your interest will be represented at the Annual Meeting,
whether or not you plan to attend the Annual Meeting, please complete, date,
sign, and mail your proxy promptly in the enclosed postage-paid envelope.
Stockholders who attend the Annual Meeting in person may revoke their proxies
and vote in person if they desire.
<PAGE> 14

SPI PHARMACEUTICALS, INC.
3300 HYLAND AVENUE
COSTA MESA, CALIFORNIA 92626

------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

NOVEMBER 1, 1994

To the Stockholders of
SPI Pharmaceuticals, Inc.:

NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders of SPI
Pharmaceuticals, Inc., a Delaware corporation ("SPI"), will be held at the
corporate headquarters of SPI, 3300 Hyland Avenue, Costa Mesa, California, on
November 1, 1994, at 10:00 a.m., local time, for the purpose of considering and
acting upon the following:

1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of August 1, 1994, as amended (the
"Merger Agreement"), by and among SPI, ICN Pharmaceuticals, Inc., a
Delaware corporation ("ICN"), Viratek, Inc., a Delaware corporation
("Viratek"), ICN Biomedicals, Inc., a Delaware corporation ("Biomedicals"),
and ICN Merger Corp., a Delaware corporation and a wholly owned subsidiary
of SPI ("New ICN," to be renamed "ICN Pharmaceuticals, Inc."), and the
mergers as contemplated by the Merger Agreement, pursuant to which, subject
to the terms and conditions of the Merger Agreement, ICN, SPI and Viratek
will be merged with and into New ICN and Biomedicals will become a
wholly-owned subsidiary of New ICN as a result of a merger of Biomedicals
with and into a wholly-owned subsidiary of New ICN (collectively, the
"Merger"). If the Merger Agreement is approved and the Merger is
consummated, SPI stockholders (other than ICN) will receive in exchange for
each of their shares of SPI common stock, par value $.01 per share, 1.00
share of common stock, par value $.01 per share, of New ICN. A copy of the
Merger Agreement is attached as Appendix A to the Joint Proxy
Statement/Prospectus that accompanies this Notice.

2. The election of eight directors, to hold office until the 1995
Annual Meeting of Stockholders (who, if elected and the Merger is
consummated, will become directors of New ICN) and thereafter until their
successors are elected and qualified.

3. To consider and vote upon a proposal to approve the Amended and
Restated SPI Pharmaceuticals, Inc. 1992 Non-Qualified Stock Option Plan,
which amendment and restatement increased the number of shares available
for grant under the plan from 1,000,000 to 3,000,000 shares and provided
that the maximum number of shares with respect to which options may be
granted to any individual during the term of the plan may not exceed
500,000 shares.

4. To consider and vote upon a proposal to approve the Amended and
Restated SPI Pharmaceuticals, Inc. 1992 Employee Incentive Stock Option
Plan, which amendment and restatement increased the number of shares
available for grant under the plan from 500,000 to 1,000,000 shares and
provided that the maximum number of shares with respect to which options
may be granted to any individual during the term of the plan may not exceed
500,000 shares.

5. The transaction of such other business as may properly come before
the meeting or any adjournments thereof.
<PAGE> 15

Only stockholders of record at the close of business on October 3, 1994,
will be entitled to notice of and to vote at the meeting and any adjournments
thereof.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.

THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE ELECTION OF THE EIGHT NOMINEES FOR DIRECTORS OF SPI NAMED IN THIS JOINT
PROXY STATEMENT/PROSPECTUS.

THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE AMENDED AND RESTATED STOCK OPTION PLANS.

By Order of the Board of Directors

[SIG]

MILAN PANIC
Chairman of the Board

[SIG]

M'LISS JONES KANE
Secretary

YOUR VOTE IS IMPORTANT

VIRATEK, INC.
3300 HYLAND AVENUE
COSTA MESA, CALIFORNIA 92626

------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

NOVEMBER 1, 1994

To the Stockholders of
Viratek, Inc.:

NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders of Viratek,
Inc., a Delaware corporation ("Viratek"), will be held at the corporate
headquarters of Viratek, 3300 Hyland Avenue, Costa Mesa, California, on November
1, 1994, at 11:00 a.m., local time, for the purpose of considering and acting
upon the following:

1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of August 1, 1994 (the "Merger
Agreement"), by and among Viratek, ICN Pharmaceuticals, Inc., a Delaware
corporation ("ICN"), SPI Pharmaceuticals, Inc., a Delaware corporation
("SPI"), ICN Biomedicals, Inc., a Delaware corporation ("Biomedicals"), and
ICN Merger Corp., a Delaware corporation and a wholly owned subsidiary of
SPI ("New ICN," to be renamed "ICN Pharmaceuticals, Inc."), and the mergers
as contemplated by the Merger Agreement, pursuant to which, subject to the
terms and conditions of the Merger Agreement, ICN, SPI and Viratek will be
merged (the "Merger") with and into New ICN and Biomedicals will become a
wholly-owned subsidiary of New ICN as a result of a merger of Biomedicals
with and into a wholly-owned subsidiary of New ICN (collectively, the
"Merger"). If the Merger Agreement is approved and the Merger is
consummated, Viratek stockholders (other than ICN) will receive in exchange
for each of their shares of Viratek common stock, par value $.10 per share,
0.499 shares of common stock, par value $.01 per share, of New ICN. A copy
of the Merger Agreement is attached as Appendix A to the Joint Proxy
Statement/ Prospectus that accompanies this Notice.

2. The election of six directors, to hold office until the 1995 Annual
Meeting of Stockholders (who, if elected and the Merger is consummated,
will become directors of New ICN) and thereafter until their successors are
elected and qualified.

3. To consider and vote upon a proposal to approve the Amended and
Restated Viratek, Inc. 1992 Non-Qualified Stock Option Plan, which
amendment and restatement increased the number of shares available for
grant under the plan from 500,000 to 1,000,000 shares and provided that the
maximum number of shares with respect to which options may be granted to
any individual during the term of the plan may not exceed 400,000 shares.

4. To consider and vote upon a proposal to approve the Amended and
Restated Viratek, Inc. 1992 Employee Incentive Stock Option Plan, which
amendment and restatement increased the number of shares available for
grant under the plan from 500,000 to 1,000,000 shares and provided that the
maximum number of shares with respect to which options may be granted to
any individual during the term of the plan may not exceed 400,000 shares.

5. The transaction of such other business as may properly come before
the meeting or any adjournments thereof.
<PAGE> 17

Only stockholders of record at the close of business on October 3, 1994,
will be entitled to notice of and to vote at the meeting and any adjournments
thereof.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.

THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE ELECTION OF THE SIX NOMINEES FOR DIRECTORS OF VIRATEK NAMED IN THIS
JOINT PROXY STATEMENT/PROSPECTUS.

THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE AMENDED AND RESTATED STOCK OPTION PLANS.

By Order of the Board of Directors

[SIG]

MILAN PANIC
Chairman of the Board

[SIG]

THOMAS SEOH
Secretary

YOUR VOTE IS IMPORTANT

<PAGE> 18

ICN BIOMEDICALS, INC.
3300 HYLAND AVENUE
COSTA MESA, CALIFORNIA 92626

------------------------

NOTICE OF ANNUAL MEETING OF STOCKHOLDERS

NOVEMBER 1, 1994

To the Stockholders of
ICN Biomedicals, Inc.:

NOTICE IS HEREBY GIVEN that an Annual Meeting of Stockholders of ICN
Biomedicals, Inc., a Delaware corporation ("Biomedicals"), will be held at the
corporate headquarters of Biomedicals, 3300 Hyland Avenue, Costa Mesa,
California, on November 1, 1994, at 11:30 a.m., local time, for the purpose of
considering and acting upon the following:

1. To consider and vote upon a proposal to approve and adopt an
Agreement and Plan of Merger, dated as of August 1, 1994, as amended (the
"Merger Agreement"), by and among ICN Pharmaceuticals, Inc., a Delaware
corporation ("ICN"), SPI Pharmaceuticals, Inc., a Delaware corporation
("SPI"), Viratek, Inc., a Delaware corporation ("Viratek"), Biomedicals and
ICN Merger Corp., a Delaware corporation and a wholly owned subsidiary of
SPI ("New ICN," to be renamed "ICN Pharmaceuticals, Inc."), and the mergers
as contemplated by the Merger Agreement, pursuant to which, subject to the
terms and conditions of the Merger Agreement, ICN, SPI and Viratek will be
merged with and into New ICN and Biomedicals will become a wholly-owned
subsidiary of New ICN as a result of a merger of Biomedicals with and into
a wholly-owned subsidiary of New ICN (collectively, the "Merger"). If the
Merger Agreement is approved and the Merger is consummated, Biomedicals
stockholders (other than ICN) will receive in exchange for each of their
shares of Biomedicals common stock, par value $.01 per share, 0.197 shares
of common stock, par value $.01 per share, of New ICN. A copy of the Merger
Agreement is attached as Appendix A to the Joint Proxy Statement/Prospectus
that accompanies this Notice.

2. The election of four directors, to hold office until the 1995
Annual Meeting of Stockholders (who, if elected and the Merger is
consummated, will become directors of New ICN) and thereafter until their
successors are elected and qualified.

3. To consider and vote upon a proposal to approve the Amended and
Restated ICN Biomedicals, Inc. 1992 Non-Qualified Stock Option Plan, which
amendment and restatement increased the number of shares available for
grant under the plan from 500,000 to 1,000,000 shares and provided that the
maximum number of shares with respect to which options may be granted to
any individual during the term of the plan may not exceed 500,000 shares.

4. To consider and vote upon a proposal to approve the Amended and
Restated ICN Biomedicals, Inc. 1992 Employee Incentive Stock Option Plan,
which amendment and restatement increased the number of shares available
for grant under the plan from 500,000 to 1,000,000 shares and provided that
the maximum number of shares with respect to which options may be granted
to any individual during the term of the plan may not exceed 500,000
shares.

5. The transaction of such other business as may properly come before
the meeting or any adjournments thereof.
<PAGE> 19

Only stockholders of record at the close of business on October 3, 1994,
will be entitled to notice of and to vote at the meeting and any adjournments
thereof.

THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER.

THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT STOCKHOLDERS VOTE
FOR THE ELECTION OF THE FOUR NOMINEES FOR DIRECTORS OF BIOMEDICALS NAMED IN THIS
JOINT PROXY STATEMENT/PROSPECTUS.

THE BOARD OF DIRECTORS ALSO UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR
OF THE AMENDED AND RESTATED STOCK OPTION PLANS.

By Order of the Board of Directors

[SIG]

MILAN PANIC
Chairman of the Board

[SIG]

M'LISS JONES KANE
Secretary

YOUR VOTE IS IMPORTANT

PROSPECTUS

FOR COMMON STOCK OF
ICN MERGER CORP.
(TO BE RENAMED ICN PHARMACEUTICALS, INC.)

------------------------

JOINT PROXY STATEMENT
OF
ICN PHARMACEUTICALS, INC., SPI PHARMACEUTICALS, INC., VIRATEK, INC.
AND
ICN BIOMEDICALS, INC.

------------------------

ANNUAL MEETINGS OF STOCKHOLDERS

TO BE HELD ON TUESDAY, NOVEMBER 1, 1994

This Joint Proxy Statement/Prospectus (the "Joint Proxy
Statement/Prospectus") is furnished in connection with the solicitation of
proxies by the Boards of Directors of ICN Pharmaceuticals, Inc., a Delaware
corporation ("ICN"), SPI Pharmaceuticals, Inc., a Delaware corporation ("SPI"),
Viratek, Inc., a Delaware corporation ("Viratek"), and ICN Biomedicals, Inc., a
Delaware corporation ("Biomedicals" and, together with ICN, SPI and Viratek, the
"Merging Companies"), for use at an Annual Meeting of Stockholders of ICN (the
"ICN Meeting"), an Annual Meeting of Stockholders of SPI (the "SPI Meeting"), an
Annual Meeting of Stockholders of Viratek (the "Viratek Meeting") and an Annual
Meeting of Stockholders of Biomedicals (the "Biomedicals Meeting" and, together
with the ICN Meeting, the SPI Meeting and the Viratek Meeting, the "Meetings"),
respectively, each of which is to be held on Tuesday, November 1, 1994 at the
corporate headquarters, 3300 Hyland Avenue, Costa Mesa, California, including
any adjournments or postponements thereof. The ICN Meeting will be held at 9:00
a.m., local time, the SPI Meeting at 10:00 a.m., local time, the Viratek Meeting
at 11:00 a.m., local time, and the Biomedicals Meeting at 11:30 a.m., local
time.

At the Meetings, the stockholders of each of the Merging Companies will
consider and vote upon a proposal to approve and adopt an Agreement and Plan of
Merger, dated as of August 1, 1994, as amended (the "Merger Agreement"), by and
among each of the Merging Companies and ICN Merger Corp., a Delaware corporation
and a wholly owned subsidiary of SPI ("New ICN," to be renamed "ICN
Pharmaceuticals, Inc."), and the mergers as contemplated by the Merger Agreement
pursuant to which, subject to the terms and conditions of the Merger Agreement,
ICN, SPI and Viratek will be merged with and into New ICN and Biomedicals will
become a wholly-owned subsidiary of New ICN as a result of a merger of
Biomedicals with and into a wholly-owned subsidiary of New ICN (collectively,
the "Merger"). The surviving corporation in the Merger of ICN, SPI and Viratek
with and into New ICN will be renamed ICN Pharmaceuticals, Inc. A copy of the
Merger Agreement is attached to this Joint Proxy Statement/Prospectus as
Appendix A.
<PAGE> 21

In the Merger, (i) each share of common stock, par value $1.00 per share
("ICN Common Stock"), of ICN (except for shares held by ICN as treasury shares,
which will be canceled) will be converted into the right to receive 0.512 shares
of common stock, par value $.01 per share ("New ICN Shares"), of New ICN, (ii)
each share of common stock, par value $.01 per share ("SPI Common Stock"), of
SPI (except for shares held by SPI as treasury shares and shares of SPI Common
Stock owned by ICN, which will be canceled) will be converted into the right to
receive 1.00 New ICN Share, (iii) each share of common stock, par value $.10 per
share ("Viratek Common Stock"), of Viratek (except for shares held by Viratek as
treasury shares and shares of Viratek Common Stock owned by ICN, which will be
canceled) will be converted into the right to receive 0.499 New ICN Shares and
(iv) each share of common stock, par value $.01 per share ("Biomedicals Common
Stock"), of Biomedicals (except for shares held by Biomedicals as treasury
shares and shares of Biomedicals Common Stock owned by ICN, which will be
canceled) will be converted into the right to receive 0.197 New ICN Shares.
Shares of Preferred Stock of Biomedicals, which are all owned by ICN, will also
be canceled in the Merger. A detailed description of the Merger is set forth in
this Joint Proxy Statement/Prospectus.

After giving effect to the Merger and the issuance of New ICN Shares, and
based upon the shares of Merging Company Common Stock outstanding on the Merging
Company Record Date, the public holders of SPI Common Stock, ICN Common Stock,
Viratek Common Stock and Biomedicals Common Stock will own approximately 46.48%,
38.98%, 12.51% and 2.03%, respectively, of the outstanding New ICN Shares.

At the Meetings, the stockholders of each of the Merging Companies will
also (i) elect directors to serve on the respective Boards of Directors (and
who, if elected and the Merger is consummated, will become directors of New ICN)
and (ii) consider and vote upon amendments and restatements to certain stock
option plans, all as more fully described in this Joint Proxy
Statement/Prospectus.

This Joint Proxy Statement/Prospectus also constitutes the prospectus of
New ICN with respect to New ICN Shares to be issued in the Merger in exchange
for outstanding shares of common stock of ICN, SPI, Viratek and Biomedicals. New
ICN has filed a Registration Statement on Form S-4 (together with any amendments
thereto, the "Registration Statement") with the Securities and Exchange
Commission (the "Commission"), of which this Joint Proxy Statement/Prospectus is
a part.

THE NEW ICN SHARES TO BE ISSUED IN THE MERGER HAVE NOT BEEN APPROVED OR
DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.

The approximate date on which this Joint Proxy Statement/Prospectus and the
accompanying proxy will first be mailed to stockholders of the Merging Companies
is September 30, 1994.

The date of this Joint Proxy Statement/Prospectus is September 28, 1994.
<PAGE> 22

AVAILABLE INFORMATION

Each of the Merging Companies is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and in
accordance therewith file reports, proxy statements and other information with
the Commission. The reports, proxy statements and other information filed by
each of the Merging Companies with the Commission can be inspected and copied at
the public reference facilities maintained by the Commission at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549, and should be available at the
Commission's Regional Offices at 7 World Trade Center, New York, New York 10048,
and Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such material also can be obtained at prescribed rates
from the Public Reference Section of the Commission at 450 Fifth Street, N.W.,
Washington, D.C. 20549. The shares of ICN Common Stock are listed on the New
York Stock Exchange (the "NYSE"), and the shares of SPI Common Stock, Viratek
Common Stock and Biomedicals Common Stock are listed on the American Stock
Exchange (the "AMEX"), and certain reports, proxy materials and other
information concerning each of the Merging Companies may be available for
inspection at the offices of, in the case of ICN, the NYSE, 20 Broad Street, New
York, New York 10005, or, in the case of the other Merging Companies, the AMEX,
86 Trinity Place, New York, New York 10006, respectively.

New ICN has filed a Registration Statement on Form S-4 with the Commission
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the shares of New ICN Common Stock to be issued in connection with
the Merger. This Joint Proxy Statement/Prospectus also constitutes the
Prospectus of New ICN filed as part of the Registration Statement. This Joint
Proxy Statement/Prospectus does not contain all the information set forth in the
Registration Statement and the exhibits thereto, certain parts of which are
omitted in accordance with the rules and regulations of the Commission. Such
additional information may be obtained from the Commission's principal office in
Washington, D.C. Statements contained in this Joint Proxy Statement/Prospectus
or in any document incorporated in this Joint Proxy Statement/Prospectus by
reference as to the contents of any contract or other document referred to
herein or therein are not necessarily complete, and in each instance reference
is made to the copy of such contract or other document filed as an exhibit to
the Registration Statement, each such statement being qualified in all respects
by such reference.

INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE

THIS JOINT PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE
WHICH ARE NOT PRESENTED HEREIN OR DELIVERED HEREWITH. SUCH DOCUMENTS (OTHER THAN
EXHIBITS TO SUCH DOCUMENTS, UNLESS SUCH EXHIBITS ARE SPECIFICALLY INCORPORATED
BY REFERENCE TO SUCH DOCUMENTS) ARE AVAILABLE, WITHOUT CHARGE, TO ANY PERSON,
INCLUDING ANY BENEFICIAL OWNER, TO WHOM THIS JOINT PROXY STATEMENT/PROSPECTUS IS
DELIVERED, ON WRITTEN OR ORAL REQUEST TO ICN PHARMACEUTICALS, INC., 3300 HYLAND
AVENUE, COSTA MESA, CALIFORNIA 92626, ATTENTION: OFFICE OF THE SECRETARY,
TELEPHONE: (714) 545-0100. IN ORDER TO ENSURE DELIVERY OF THE DOCUMENTS PRIOR TO
THE MEETINGS, REQUESTS MUST BE RECEIVED BY OCTOBER 25, 1994.

The following ICN documents are incorporated by reference herein:

1. ICN's Annual Report on Form 10-K for the fiscal year ended December
31, 1993;

2. ICN's Form 10-K/A filed on April 27, 1994, amending ICN's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993;

3. ICN's Quarterly Report on Form 10-Q for the quarter ended March 31,
1994; and

4. ICN's Quarterly Report on Form 10-Q for the quarter ended June 30,
1994.

The following SPI documents are incorporated by reference herein:

1. SPI's Annual Report on Form 10-K for the fiscal year ended December
31, 1993;

2. SPI's Form 10-K/A filed on April 28, 1994, amending SPI's Annual
Report on Form 10-K for the fiscal year ended December 31, 1993;

(i)
<PAGE> 23

3. SPI's Quarterly Report on Form 10-Q for the quarter ended March 31,
1994; and

4. SPI's Quarterly Report on Form 10-Q for the quarter ended June 30,
1994.

The following Viratek documents are incorporated by reference herein:

1. Viratek's Annual Report on Form 10-K for the fiscal year ended
December 31, 1993;

2. Viratek's Form 10-K/A filed on April 28, 1994, amending Viratek's
Annual Report on Form 10-K for the fiscal year ended December 31, 1993;

3. Viratek's Quarterly Report on Form 10-Q for the quarter ended March
31, 1994; and

4. Viratek's Quarterly Report on Form 10-Q for the quarter ended June
30, 1994.

The following Biomedicals documents are incorporated by reference herein:

1. Biomedicals' Annual Report on Form 10-K for the fiscal year ended
December 31, 1993;

2. Biomedicals' Form 10-K/A filed on April 27, 1994, amending
Biomedicals' Annual Report on Form 10-K for the fiscal year ended December
31, 1993;

3. Biomedicals' Quarterly Report on Form 10-Q for the quarter ended
March 31, 1994; and

4. Biomedicals' Quarterly Report on Form 10-Q for the quarter ended
June 30, 1994.

All documents and reports filed by ICN and SPI with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Joint Proxy Statement/Prospectus and prior to the date of the Meetings shall be
deemed to be incorporated by reference in this Joint Proxy Statement/Prospectus
and to be a part hereof from the dates of filing of such documents or reports.
Any statement contained in a document incorporated or deemed to be incorporated
by reference herein or contained in this Joint Proxy Statement/Prospectus shall
be deemed to be modified or superseded for purposes of this Joint Proxy
Statement/Prospectus to the extent that a statement contained herein or in any
other subsequently filed document which also is or is deemed to be incorporated
by reference herein modifies or supersedes such statement. Any such statement so
modified or superseded shall not be deemed, except as so modified or superseded,
to constitute a part of this Joint Proxy Statement/Prospectus.

------------------------

NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS JOINT PROXY STATEMENT/PROSPECTUS OR IN THE
DOCUMENTS INCORPORATED OR DEEMED TO BE INCORPORATED BY REFERENCE HEREIN IN
CONNECTION WITH THE SOLICITATION AND THE OFFERING MADE HEREBY AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATION SHOULD NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY ANY OF THE MERGING COMPANIES OR NEW ICN. THIS JOINT PROXY
STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF
AN OFFER TO PURCHASE, THE NEW ICN SHARES OFFERED BY THIS JOINT PROXY
STATEMENT/PROSPECTUS, OR THE SOLICITATION OF A PROXY FROM ANY PERSON, IN ANY
JURISDICTION IN WHICH IT IS UNLAWFUL TO MAKE SUCH OFFER, SOLICITATION OF AN
OFFER OR PROXY SOLICITATION. NEITHER THE DELIVERY OF THIS JOINT PROXY
STATEMENT/PROSPECTUS NOR ANY DISTRIBUTION OF THE SECURITIES MADE UNDER THIS
JOINT PROXY STATEMENT/PROSPECTUS SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN
IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF ANY OF THE MERGING
COMPANIES SINCE THE DATE OF THIS JOINT PROXY STATEMENT/PROSPECTUS OTHER THAN AS
SET FORTH IN THE DOCUMENTS INCORPORATED HEREIN BY REFERENCE.

(ii)
<PAGE> 24

TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION............................. (i)
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE... (i)
SUMMARY........................................... 1
The Parties..................................... 1
Annual Meetings of Stockholders................. 2
Record Date; Quorum............................. 3
Required Vote................................... 4
The Merger...................................... 6
Selected Consolidated Financial Data............ 10
Selected Unaudited Pro Forma Combined Condensed
Financial Data................................ 17
Comparative Market Data......................... 17
Dividend Policy................................. 19
Stock Option Plans.............................. 19
Certain Considerations.......................... 20
CERTAIN CONSIDERATIONS............................ 21
Uncertain Benefits of the Merger................ 21
Dependence on Foreign Operations................ 21
Risks of Operations in Yugoslavia............... 21
No Assurance of Successful Development and
Commercialization of Future Products.......... 22
Limited Patent Protection....................... 22
Uncertain Impact of Acquisition Plans........... 22
Potential Litigation Exposure................... 23
Potential Product Liability Exposure and Lack of
Insurance..................................... 23
Government Regulation........................... 23
Competition..................................... 24
Uncertain Effect of United States Health Care
Proposals on Pharmaceutical Industry.......... 24
Dividend Policy................................. 24
Anti-Takeover Provisions........................ 24
Absence of a Prior Public Market................ 24
THE MEETINGS...................................... 25
Matters to be Considered at the Meetings........ 25
Votes Required.................................. 26
Proxies......................................... 28
Record Date; Shares Entitled to Vote; Quorum.... 29
No Dissenters' Rights........................... 29
Solicitation of Proxies......................... 29
THE MERGER........................................ 30
General......................................... 30
Background of the Merger........................ 30
Advantages and Disadvantages of the Merger to
Stockholders of the Merging Companies......... 31
Reasons for the Merger; Recommendations of the
Special Committees and the Boards of
Directors..................................... 32
Opinions of Financial Advisors.................. 36
Accounting Treatment............................ 50
Certain Federal Income Tax Consequences......... 50
Regulatory Approval............................. 51
Resale Restrictions............................. 52
Litigation...................................... 52
THE MERGER AGREEMENT.............................. 52
The Merger...................................... 53

<CAPTION>
PAGE
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<S> <C>
Treatment of Outstanding Options................ 53
Exchange Procedures............................. 53
Representations and Warranties.................. 54
Certain Covenants............................... 55
No Solicitation of Transactions................. 55
Indemnification................................. 56
Conditions...................................... 56
Termination..................................... 57
Expenses........................................ 57
Alternative Structure........................... 58
Amendment and Waiver............................ 58
MANAGEMENT AND OPERATIONS OF NEW ICN AFTER THE
MERGER.......................................... 58
Directors prior to the Merger................... 58
Directors after the Merger...................... 58
Executive Officers after the Merger............. 61
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL
STATEMENTS...................................... 62
SECURITY OWNERSHIP................................ 69
DESCRIPTION OF NEW ICN CAPITAL STOCK.............. 69
Authorized Capital Stock........................ 69
New ICN Shares.................................. 69
New ICN Preferred Stock......................... 69
New ICN Preferred Stock Purchase Rights......... 69
COMPARATIVE RIGHTS OF STOCKHOLDERS................ 72
Classified Board of Directors................... 73
Number of Directors; Removal; Filling
Vacancies..................................... 73
No Stockholder Action by Written Consent;
Special Meetings.............................. 74
Fair Price Provision............................ 74
Advance Notice Provisions for Stockholder
Nominations and Stockholder Proposals......... 76
Preferred Stock................................. 77
Other Provisions................................ 77
Amendment of the Certificate of Incorporation
and By-Laws................................... 78
Section 203 of the Delaware Law................. 78
LIABILITY AND INDEMNIFICATION OF DIRECTORS AND
OFFICERS OF NEW ICN............................. 79
Limitation of Liability of Directors............ 79
Indemnification of Directors and Officers....... 79
ICN MERGER CORP. 1994 STOCK INCENTIVE PLAN........ 80
LEGAL MATTERS..................................... 80
EXPERTS........................................... 80
CERTAIN TRANSACTIONS.............................. 81
General......................................... 81
Royalty Agreements.............................. 81
Cost Allocations................................ 83
Investment Policy............................... 83
Other........................................... 85
Income Taxes.................................... 87
STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL
MEETING......................................... 89
ANNUAL REPORTS.................................... 89
MISCELLANEOUS..................................... 89
</TABLE>

(iii)
<PAGE> 25

<TABLE>
<CAPTION>
PAGE
--------------
<S> <C>
ADDENDUM
ICN
ICN PROPOSAL NO. 2 -- ELECTION OF
DIRECTORS.............................. ICN-1
OWNERSHIP OF ICN'S SECURITIES............ ICN-1
INFORMATION CONCERNING
DIRECTORS OF ICN....................... ICN-2
EXECUTIVE OFFICERS OF ICN................ ICN-6
OWNERSHIP OF SECURITIES OF ICN AND
SUBSIDIARIES BY DIRECTORS AND EXECUTIVE
OFFICERS............................... ICN-7
ICN EXECUTIVE COMPENSATION AND RELATED
MATTERS................................ ICN-10
PERFORMANCE GRAPH........................ ICN-18
LITIGATION............................... ICN-18
ICN PROPOSAL NO. 3 -- APPROVAL OF AMENDED
AND RESTATED 1992 ICN NON-QUALIFIED
STOCK OPTION PLAN, WHICH AMENDMENT AND
RESTATEMENT INCREASED THE NUMBER OF
SHARES AVAILABLE FOR GRANT THEREUNDER
FROM 500,000 TO 1,250,000 SHARES AND
PROVIDED THAT THE MAXIMUM NUMBER OF
SHARES WITH RESPECT TO WHICH OPTIONS
MAY BE GRANTED TO ANY INDIVIDUAL DURING
THE TERM OF THE PLAN MAY NOT EXCEED
400,000 SHARES......................... ICN-19
NEW PLAN BENEFITS........................ ICN-23
ICN PROPOSAL NO. 4 -- APPROVAL OF AMENDED
AND RESTATED 1992 ICN EMPLOYEE
INCENTIVE STOCK OPTION PLAN, WHICH
AMENDMENT AND RESTATEMENT INCREASED THE
NUMBER OF SHARES AVAILABLE FOR GRANT
THEREUNDER FROM 500,000 TO 750,000
SHARES AND PROVIDED THAT THE MAXIMUM
NUMBER OF SHARES WITH RESPECT TO WHICH
OPTIONS MAY BE GRANTED TO ANY
INDIVIDUAL DURING THE TERM OF THE PLAN
MAY NOT EXCEED 200,000 SHARES.......... ICN-24
SPI
SPI PROPOSAL NO. 2 -- ELECTION OF
DIRECTORS.............................. SPI-1
INFORMATION CONCERNING NOMINEES AND
DIRECTORS OF SPI....................... SPI-1
EXECUTIVE OFFICERS OF SPI................ SPI-4
OWNERSHIP OF SPI'S SECURITIES............ SPI-5
SPI'S EXECUTIVE COMPENSATION AND RELATED
MATTERS................................ SPI-7
PERFORMANCE GRAPH........................ SPI-12
LITIGATION............................... SPI-12
SPI PROPOSAL NO. 3 -- APPROVAL OF AMENDED
AND RESTATED 1992 SPI NON-QUALIFIED
STOCK OPTION PLAN, WHICH AMENDMENT AND
RESTATEMENT INCREASED THE NUMBER OF
SHARES AVAILABLE FOR GRANT THEREUNDER
FROM 1,000,000 TO 3,000,000 SHARES AND
PROVIDED THAT THE MAXIMUM NUMBER OF
SHARES WITH RESPECT TO WHICH OPTIONS
MAY BE GRANTED TO ANY INDIVIDUAL DURING
THE TERM OF THE PLAN MAY NOT EXCEED
500,000 SHARES......................... SPI-13
NEW PLAN BENEFITS........................ SPI-17

<CAPTION>
PAGE
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<S> <C>
SPI PROPOSAL NO. 4 -- APPROVAL OF AMENDED
AND RESTATED 1992 SPI INCENTIVE PLAN,
WHICH AMENDMENT AND RESTATEMENT IN-
CREASED THE NUMBER OF SHARES AVAILABLE
FOR GRANT THEREUNDER FROM 500,000 TO
1,000,000 SHARES AND PROVIDED THAT THE
MAXIMUM NUMBER OF SHARES WITH RESPECT
TO WHICH OPTIONS MAY BE GRANTED TO ANY
INDIVIDUAL DURING THE TERM OF THE PLAN
MAY NOT EXCEED 500,000 SHARES.......... SPI-18
VIRATEK
VIRATEK PROPOSAL NO. 2 --
ELECTION OF DIRECTORS.................. Viratek-1
INFORMATION CONCERNING NOMINEES AND
DIRECTORS OF VIRATEK................... Viratek-1
EXECUTIVE OFFICERS OF VIRATEK............ Viratek-3
OWNERSHIP OF VIRATEK'S
SECURITIES............................. Viratek-4
VIRATEK'S EXECUTIVE COMPENSATION AND
RELATED MATTERS........................ Viratek-5
PERFORMANCE GRAPH........................ Viratek-10
LITIGATION............................... Viratek-10
VIRATEK PROPOSAL NO. 3 -- APPROVAL OF
AMENDED AND RESTATED 1992 VIRATEK STOCK
OPTION PLAN, WHICH AMENDMENT AND
RESTATEMENT INCREASED THE NUMBER OF
SHARES AVAILABLE FOR GRANT THEREUNDER
FROM 500,000 TO 1,000,000 SHARES AND
PROVIDED THAT THE MAXIMUM NUMBER OF
SHARES WITH RESPECT TO WHICH OPTIONS
MAY BE GRANTED TO ANY INDIVIDUAL DURING
THE TERM OF THE PLAN MAY NOT EXCEED
400,000 SHARES......................... Viratek-10
NEW PLAN BENEFITS........................ Viratek-15
VIRATEK PROPOSAL NO. 4 -- APPROVAL OF
AMENDED AND RESTATED 1992 VIRATEK
INCENTIVE PLAN, WHICH AMENDMENT AND
RESTATEMENT INCREASED THE NUMBER OF
SHARES AUTHORIZED TO BE ISSUED
THEREUNDER FROM 500,000 TO 1,000,000
SHARES AND PROVIDED THAT THE MAXIMUM
NUMBER OF SHARES WITH RESPECT TO WHICH
OPTIONS MAY BE GRANTED TO ANY
INDIVIDUAL DURING THE TERM OF THE PLAN
MAY NOT EXCEED 400,000................. Viratek-15
BIOMEDICALS
BIOMEDICALS PROPOSAL NO. 2 -- ELECTION OF
DIRECTORS.............................. Biomedicals-1
INFORMATION CONCERNING NOMINEES AND
DIRECTORS.............................. Biomedicals-1
EXECUTIVE OFFICERS OF BIOMEDICALS........ Biomedicals-3
OWNERSHIP OF BIOMEDICALS' SECURITIES..... Biomedicals-4
BIOMEDICALS' EXECUTIVE COMPENSATION AND
RELATED MATTERS........................ Biomedicals-6
PERFORMANCE GRAPH........................ Biomedicals-11
LITIGATION............................... Biomedicals-11
</TABLE>

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<PAGE> 26
<TABLE>
<CAPTION>
PAGE
--------------
<S> <C>
BIOMEDICALS PROPOSAL NO. 3 -- APPROVAL OF
AMENDED AND RESTATED 1992 BIOMEDICALS
NON-QUALIFIED STOCK OPTION PLAN, WHICH
AMENDMENT AND RESTATEMENT INCREASED THE
NUMBER OF SHARES AVAILABLE FOR GRANT
THEREUNDER FROM 500,000 TO 1,000,000
SHARES AND PROVIDED THAT THE NUMBER OF
SHARES WITH RESPECT TO WHICH OPTIONS
MAY BE GRANTED TO ANY INDIVIDUAL DURING
THE TERM OF THE PLAN MAY NOT EXCEED
500,000 SHARES......................... Biomedicals-11
NEW PLAN BENEFITS........................ Biomedicals-16
BIOMEDICALS PROPOSAL NO. 4 -- APPROVAL OF
AMENDED AND RESTATED 1992 BIOMEDICALS
INCENTIVE PLAN, WHICH AMENDMENT AND
RESTATEMENT INCREASED THE NUMBER OF
SHARES AVAILABLE FOR GRANT THEREUNDER
FROM 500,000 TO 1,000,000 AND PROVIDED
THAT THE MAXIMUM NUMBER OF SHARES WITH
RESPECT TO WHICH OPTIONS
MAY BE GRANTED TO ANY INDIVIDUAL DURING
THE TERM OF THE PLAN MAY NOT EXCEED
500,000 SHARES......................... Biomedicals-16
</TABLE>

<TABLE>
APPENDICES
<S> <C> <C>
A -- Agreement and Plan of Merger
B -- Opinion of Prudential Securities Incorporated
C -- Opinion of Wertheim Schroder & Co. Incorporated
D -- Opinion of Kemper Securities, Inc.
E -- Opinion of Jefferies & Co.
F -- 1993 Annual Report to Stockholders of ICN
Pharmaceuticals, Inc.
G -- 1993 Annual Report to Stockholders of SPI
Pharmaceuticals, Inc.
H -- 1993 Annual Report to Stockholders of Viratek,
Inc.
I -- 1993 Annual Report to Stockholders of ICN
Biomedicals, Inc.
J -- Interim Financial Statements of ICN
Pharmaceuticals, Inc.
K -- Interim Financial Statements of SPI
Pharmaceuticals, Inc.
L -- Interim Financial Statements of Viratek, Inc.
M -- Interim Financial Statements of ICN
Biomedicals, Inc.
</TABLE>

(v)
<PAGE> 27

SUMMARY

The following is a brief summary of certain information contained elsewhere
in this Joint Proxy Statement/Prospectus (the "Joint Proxy
Statement/Prospectus"). This summary is not intended to be a complete
description of the matters covered in this Joint Proxy Statement/Prospectus and
is subject to and qualified in its entirety by reference to the more detailed
information and financial statements contained elsewhere in this Joint Proxy
Statement/Prospectus, including the Appendices hereto and the documents
incorporated herein by reference. Stockholders are urged to read carefully the
entire Joint Proxy Statement/ Prospectus, including the Appendices.

THE PARTIES

ICN

ICN, through its subsidiaries and an affiliate, develops, manufactures,
distributes and sells pharmaceutical and nutritional products, research chemical
and cell biology products and related services, biomedical instrumentation and
immunodiagnostic reagents and instrumentation. ICN's pharmaceuticals group is
composed of a subsidiary and an equity investment: (i) Viratek (ICN's 63%-owned
subsidiary, as of June 30, 1994), and (ii) SPI (ICN's 38%-owned equity
investment, as of June 30, 1994). ICN's biomedicals group consists of
Biomedicals (ICN's 69%-owned subsidiary, as of June 30, 1994). The businesses of
SPI, Viratek and Biomedicals are summarized below.

SPI

SPI manufactures, distributes and sells pharmaceutical and nutritional
products, primarily in North America, Latin America, Western Europe and Eastern
Europe. SPI was incorporated by ICN in November 1981 and, effective January 1,
1983, became the successor to certain of ICN's North American pharmaceutical
operations, part of which had been operated by ICN or its predecessors for more
than 20 years. Major product lines include anti-infectives, medicated
nutritionals and vitamins, anticholinesterases, dermatologicals and vision care
products.

VIRATEK

Viratek is principally engaged in the development of therapeutic
pharmaceutical compounds derived from nucleic acids, including the broad
spectrum antiviral agent ribavirin that is marketed in the United States, Canada
and most of Europe under the trade name Virazole(R), under license to SPI.
Viratek was formed in August 1980 for the purpose of continuing ICN's research
and development of compounds related to nucleic acids. ICN transferred to
Viratek in November 1980 all its rights to the compounds developed at a former
division of ICN, including Virazole(R).

BIOMEDICALS

Biomedicals and its subsidiaries develop, manufacture and sell research
chemical products, biomedical instrumentation, diagnostic reagents and radiation
monitoring services. Biomedicals also purchases research chemicals from other
manufacturers, in bulk, for repackaging and distributes biomedical
instrumentation manufactured by others. Major markets are located in the United
States, Canada, Mexico, South America, Eastern and Western Europe, Australia and
Japan.

ICN MERGER CORP.

ICN Merger Corp., a Delaware corporation and a wholly owned subsidiary of
SPI ("New ICN"), is a corporation recently organized by SPI for the purpose of
effecting the transactions as contemplated by the Merger Agreement. New ICN has
no material assets and has not engaged in any activities except in connection
with the Merger.

1
<PAGE> 28

The principal executive offices of each of the Merging Companies and New
ICN are located at 3300 Hyland Avenue, Costa Mesa, California 92626. The
telephone number at such address is
(714) 545-0100.

ANNUAL MEETINGS OF STOCKHOLDERS

Purpose of the Annual Meetings. This Joint Proxy Statement/Prospectus
relates to an Annual Meeting of Stockholders of ICN (the "ICN Meeting"), an
Annual Meeting of Stockholders of SPI (the "SPI Meeting"), an Annual Meeting of
Stockholders of Viratek (the "Viratek Meeting"), and an Annual Meeting of
Stockholders of Biomedicals (the "Biomedicals Meeting" and collectively with the
ICN Meeting, the SPI Meeting and the Viratek Meeting, the "Meetings"). The
purpose of the Meetings, among other things, is to consider and vote upon a
proposal to approve the Agreement and the Plan of Merger, dated as of August 1,
1994, as amended, by and among each of the Merging Companies and New ICN (the
"Merger Agreement"), pursuant to which, subject to the terms and conditions of
the Merger Agreement, ICN, SPI and Viratek will be merged with and into New ICN
and Biomedicals will become a wholly-owned subsidiary of New ICN as a result of
a merger of Biomedicals with and into a wholly-owned subsidiary of New ICN
(collectively, the "Merger"). A copy of the Merger Agreement is attached to this
Joint Proxy Statement/Prospectus as Appendix A.

At the ICN Meeting, ICN stockholders will also (i) vote to elect ten
directors to serve until the 1995 Annual Meeting (who, if elected and the Merger
is consummated, will become directors of New ICN), (ii) consider and vote upon a
proposal to approve the Amended and Restated ICN Pharmaceuticals, Inc. 1992
Non-Qualified Stock Option Plan (the "Amended and Restated 1992 ICN
Non-Qualified Plan"), which amendment and restatement increased the number of
shares of ICN Common Stock available for grant under the plan from 500,000 to
1,250,000 shares of ICN Common Stock and provided that the maximum number of
shares with respect to which options may be granted to any individual during the
term of the plan may not exceed 400,000 shares, (iii) consider and vote upon a
proposal to approve the Amended and Restated ICN Pharmaceuticals, Inc. 1992
Employee Incentive Stock Option Plan (the "Amended and Restated 1992 ICN
Incentive Plan" and, together with the Amended and Restated 1992 ICN
Non-Qualified Plan, the "Amended and Restated ICN Plans"), which amendment and
restatement increased the number of shares of ICN Common Stock available for
grant under the plan from 500,000 to 750,000 shares of ICN Common Stock and
provided that the maximum number of shares with respect to which options may be
granted to any individual during the term of the plan may not exceed 200,000
shares and (iv) consider such other matters as may properly be brought before
the ICN Meeting.

At the SPI Meeting, SPI stockholders will also (i) vote to elect eight
directors to serve until the 1995 Annual Meeting (who, if elected and the Merger
is consummated, will become directors of New ICN), (ii) consider and vote upon a
proposal to approve the Amended and Restated SPI Pharmaceuticals, Inc. 1992
Non-Qualified Stock Option Plan (the "Amended and Restated 1992 SPI
Non-Qualified Plan"), which amendment and restatement increased the number of
shares available for grant under the plan from 1,000,000 to 3,000,000 shares of
SPI Common Stock and provided that the maximum number of shares with respect to
which options may be granted to any individual during the term of the plan may
not exceed 500,000 shares, (iii) consider and vote upon a proposal to approve
the Amended and Restated SPI Pharmaceuticals, Inc. 1992 Employee Incentive Stock
Option Plan (the "Amended and Restated 1992 SPI Incentive Plan" and, together
with the Amended and Restated 1992 SPI Non-Qualified Plan, the "Amended and
Restated SPI Plans"), which amendment and restatement increased the number of
shares available for grant under the plan from 500,000 to 1,000,000 shares of
SPI Common Stock and provided that the maximum number of shares with respect to
which options may be granted to any individual during the term of the plan may
not exceed 500,000 shares and (iv) consider such other matters as may properly
be brought before the SPI Meeting.

At the Viratek Meeting, Viratek stockholders will also (i) vote to elect
six directors to serve until the 1995 Annual Meeting (who, if elected and the
Merger is consummated, will become directors of New ICN), (ii) consider and vote
upon a proposal to approve the Amended and Restated Viratek, Inc. 1992 Non-
Qualified Stock Option Plan (the "Amended and Restated 1992 Viratek
Non-Qualified Plan"), which amendment and restatement increased the number of
shares available for grant under the plan from 500,000

2
<PAGE> 29

to 1,000,000 shares of Viratek Common Stock and provided that the maximum number
of shares with respect to which options may be granted to any individual during
the term of the plan may not exceed 400,000 shares, (iii) consider and vote upon
a proposal to approve the Amended and Restated Viratek, Inc. 1992 Employee
Incentive Stock Option Plan (the "Amended and Restated 1992 Viratek Incentive
Plan" and, together with the Amended and Restated 1992 Viratek Non-Qualified
Plan, the "Amended and Restated Viratek Plans"), which amendment and restatement
increased the number of shares available for grant under the plan from 500,000
to 1,000,000 shares of Viratek Common Stock and provided that the maximum number
of shares with respect to which options may be granted to any individual during
the term of the plan may not exceed 400,000 shares and (iv) consider such other
matters as may properly be brought before the Viratek Meeting.

At the Biomedicals Meeting, Biomedicals' stockholders will also (i) vote to
elect four directors to serve until the 1995 Annual Meeting (who, if elected and
the Merger is consummated will become directors of New ICN), (ii) consider and
vote upon a proposal to approve the Amended and Restated ICN Biomedicals, Inc.
1992 Non-Qualified Stock Option Plan (the "Amended and Restated 1992 Biomedicals
Non-Qualified Plan"), which amendment and restatement increased the number of
shares available for grant under the plan from 500,000 to 1,000,000 shares of
Biomedicals Common Stock and provided that the maximum number of shares with
respect to which options may be granted to any individual during the term of the
plan may not exceed 500,000 shares, (iii) consider and vote upon a proposal to
approve the Amended and Restated ICN Biomedicals, Inc. 1992 Employee Incentive
Stock Option Plan (the "Amended and Restated 1992 Biomedicals Incentive Plan"
and, together with the Amended and Restated 1992 Biomedicals Non-Qualified Plan,
the "Amended and Restated Biomedicals Plans") which amendment and restatement
increased the number of shares available for grant under the plan from 500,000
to 1,000,000 shares and provided that the maximum number of shares with respect
to which options may be granted to any individual during the term of the plan
may not exceed 500,000 shares, and (iv) consider such other matters as may
properly be brought before the Biomedicals Meeting.

As a result of the Merger, all of the present members of the Boards of
Directors of each of the Merging Companies will, if elected to the respective
boards at the Meetings, become members of the newly-constituted Board of
Directors of New ICN. The New ICN Board of Directors will have a total of 17
members. Also as a result of the Merger, no additional Options will be granted
pursuant to the stock option plans being amended at the Meetings. Although no
definitive determination has been made, New ICN may adopt a new stock option
plan, which if adopted, in the future, will be voted upon by its stockholders.
All Options then outstanding under the stock option plans of each of the Merging
Companies, however, will remain outstanding and will be assumed by New ICN. Each
such Option will be exercisable upon the same terms and conditions as under the
plan pursuant to which it was granted and will be exercisable into New ICN
Shares (based on the applicable Exchange Ratio) and the exercise price of such
Option will be adjusted.

Time, Date and Place. The Meetings will be held on Tuesday, November 1,
1994 commencing with the ICN Meeting at 9:00 a.m., local time, at the corporate
headquarters of the Merging Companies, 3300 Hyland Avenue, Costa Mesa,
California 92626. The SPI Meeting will be held at 10:00 a.m., local time, the
Viratek Meeting will be held at 11:00 a.m., local time, and the Biomedicals
Meeting will be held at 11:30 a.m., local time.

RECORD DATE; QUORUM

ICN. The close of business on October 3, 1994 (the "Merging Company Record
Date") has been fixed as the record date for determining holders of shares of
ICN Common Stock entitled to vote at the ICN Meeting. As of September 23, 1994,
20,529,181 shares of ICN Common Stock were outstanding and entitled to vote. The
presence, in person or by proxy, of the holders of a majority of the outstanding
shares of ICN Common Stock entitled to vote at the ICN Meeting is necessary to
constitute a quorum for the transaction of business at the ICN Meeting. Shares
of ICN Common Stock represented by properly executed proxies received at or
prior to the ICN Meeting and which have not been revoked will be voted in
accordance with the instructions indicated therein. If no instructions are
indicated on a properly executed proxy, such proxies will be voted FOR Approval
and adoption of the Merger Agreement and the Merger, FOR the election of the

3
<PAGE> 30

nominees of the Board of Directors of ICN, FOR approval of the Amended and
Restated ICN Plans and in the discretion of the proxy holder as to any other
matter which may properly come before the ICN Meeting.

SPI. The close of business on the Merging Company Record Date has been
fixed as the record date for determining holders of shares entitled to vote at
the SPI Meeting. As of September 23, 1994, 20,494,139 shares of SPI Common Stock
were outstanding and entitled to vote. The presence, in person or by proxy, of
the holders of a majority of the outstanding shares of SPI Common Stock entitled
to vote at the SPI Meeting is necessary to constitute a quorum for the
transaction of business at the SPI Meeting. Shares of SPI Common Stock
represented by properly executed proxies received at or prior to the SPI Meeting
and which have not been revoked will be voted in accordance with the
instructions indicated therein. If no instructions are indicated on a properly
executed proxy, such proxies will be voted FOR approval and adoption of the
Merger Agreement and the Merger, FOR the election of the nominees of the Board
of Directors of SPI, FOR approval of the Amended and Restated SPI Plans and in
the discretion of the proxy holder as to any other matter which may properly
come before the SPI Meeting.

Viratek. The close of business on the Merging Company Record Date has been
fixed as the record date for determining holders of shares of Viratek Common
Stock entitled to vote at the Viratek Meeting. As of September 23, 1994,
18,113,149 shares of Viratek Common Stock were outstanding and entitled to vote.
The presence, in person or by proxy, of the holders of a majority of the
outstanding shares of Viratek Common Stock entitled to vote at the Viratek
Meeting is necessary to constitute a quorum for the transaction of business at
the Viratek Meeting. Shares of Viratek Common Stock represented by properly
executed proxies received at or prior to the Viratek Meeting and which have not
been revoked will be voted in accordance with the instructions indicated
therein. If no instructions are indicated on a properly executed proxy, such
proxies will be voted FOR approval and adoption of the Merger Agreement and the
Merger, FOR the election of the nominees of the Board of Directors of Viratek,
FOR approval of the Amended and Restated Viratek Plans and in the discretion of
the proxy holder as to any other matter which may properly come before the
Viratek Meeting.

Biomedicals. The close of business on the Merging Company Record Date has
been fixed as the record date for determining holders of shares of Biomedicals
Common Stock entitled to vote at the Biomedicals Meeting. As of September 23,
1994, 9,033,873 shares of Biomedicals Common Stock were outstanding and entitled
to vote. The presence, in person or by proxy, of the holders of a majority of
the outstanding shares of Biomedicals Common Stock entitled to vote at the
Biomedicals Meeting is necessary to constitute a quorum for the transaction of
business at the Biomedicals Meeting. Shares of Biomedicals Common Stock
represented by properly executed proxies received at or prior to the Biomedicals
Meeting and which have not been revoked will be voted in accordance with the
instructions indicated therein. If no instructions are indicated on a properly
executed proxy, such proxies will be voted FOR approval and adoption of the
Merger Agreement and the Merger, FOR the election of the nominees of the Board
of Directors of Biomedicals, FOR approval of the Amended and Restated
Biomedicals Plans and in the discretion of the proxy holder as to any other
matter which may properly come before the Biomedicals Meeting.

If, with respect to any of the Merging Companies, a quorum is not obtained,
the relevant stockholders meeting may be adjourned for the purpose of obtaining
additional proxies or for any other purpose, and, at any subsequent reconvening
of such meeting, all proxies will be voted in the same manner as such proxies
would have been voted at the original convening of the meeting (except for any
proxies which have theretofore effectively been revoked or withdrawn).

REQUIRED VOTE

ICN. The affirmative vote of the holders of a majority of the outstanding
shares of ICN Common Stock is required to approve and adopt the Merger Agreement
and the Merger. A plurality of votes cast in person or by proxy at the ICN
Meeting is required to elect the directors. The affirmative vote of a majority
of the shares of ICN Common Stock present and entitled to vote at the ICN
Meeting is required to ratify and approve the Amended and Restated ICN Plans.
Directors and executive officers beneficially owned in the aggregate 640,772
shares of ICN Common Stock (or approximately 3% of the outstanding shares of ICN
Common

4
<PAGE> 31

Stock) as of September 23, 1994, excluding shares of ICN Common Stock that may
be acquired upon exercise of outstanding stock options, and have indicated that
they will vote all such shares FOR approval and adoption of the Merger Agreement
and the Merger, FOR the election of the nominees for director and FOR approval
of the Amended and Restated ICN Plans.

SPI. The affirmative vote of the holders of a majority of the outstanding
shares of SPI Common Stock is required to approve and adopt the Merger Agreement
and the Merger. A plurality of votes cast in person or by proxy at the SPI
Meeting is required to elect the directors. The affirmative vote of a majority
of the SPI Shares present and entitled to vote at the SPI Meeting is required to
ratify and approve the Amended and Restated SPI Plans. Directors and executive
officers beneficially owned in the aggregate 116,861 shares of SPI Common Stock
(or approximately .56% of the outstanding shares of SPI Common Stock) as of
September 23, 1994, excluding shares of SPI Common Stock that may be acquired
upon exercise of outstanding stock options, and have indicated that they will
vote all such shares FOR approval and adoption of the Merger Agreement and the
Merger, FOR the election of the nominees for director and FOR approval of the
Amended and Restated SPI Plans. ICN OWNS APPROXIMATELY 38% OF THE OUTSTANDING
SHARES OF SPI COMMON STOCK AND INTENDS TO VOTE ALL OF SUCH SHARES OF SPI COMMON
STOCK FOR THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER, FOR
THE ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR APPROVAL OF THE AMENDED AND
RESTATED SPI PLANS.

Viratek. The affirmative vote of the holders of a majority of the
outstanding shares of Viratek Common Stock is required to approve and adopt the
Merger Agreement and the Merger. A plurality of votes cast in person or by proxy
at the Viratek Meeting is required to elect the directors. The affirmative vote
of a majority of the shares of Viratek Common Stock present and entitled to vote
at the Viratek Meeting is required to ratify and approve the Amended and
Restated Viratek Plans. Directors and executive officers beneficially owned in
the aggregate 33,471 shares of Viratek Common Stock (or approximately .18% of
the outstanding shares of Viratek Common Stock) as of September 23, 1994,
excluding shares of Viratek Common Stock that may be acquired upon exercise of
outstanding stock options, and have indicated that they will vote all such
shares FOR approval and adoption of the Merger Agreement and the Merger, FOR the
election of the nominees for director and FOR approval of the Amended and
Restated Viratek Plans. ICN OWNS APPROXIMATELY 63% OF THE OUTSTANDING SHARES OF
VIRATEK COMMON STOCK AND INTENDS TO VOTE ALL OF SUCH SHARES OF VIRATEK COMMON
STOCK FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER, FOR THE
ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR APPROVAL OF THE AMENDED AND
RESTATED VIRATEK PLANS. THEREFORE, WITH RESPECT TO VIRATEK, ICN WILL CAUSE THE
MERGER AGREEMENT AND THE MERGER TO BE ADOPTED WITHOUT THE VOTE OF ANY OTHER
STOCKHOLDER OF VIRATEK. ICN WILL ALSO CAUSE THE NOMINEES FOR DIRECTOR TO BE
ELECTED AND THE AMENDED AND RESTATED VIRATEK PLANS TO BE APPROVED.

Biomedicals. The affirmative vote of the holders of a majority of the
outstanding shares of Biomedicals Common Stock is required to approve and adopt
the Merger Agreement and the Merger. A plurality of votes cast in person or by
proxy at the Biomedicals Meeting is required to elect the directors. The
affirmative vote of a majority of the shares of Biomedicals Common Stock present
and entitled to vote at the Biomedicals Meeting is required to ratify and
approve the Amended and Restated Biomedicals Plans. Directors and executive
officers beneficially owned in the aggregate 30,367 shares of Biomedicals Common
Stock (or approximately .34% of the outstanding shares of Biomedicals Common
Stock) as of September 23, 1994, excluding shares of Biomedicals Common Stock
that may be acquired upon exercise of outstanding stock options, and have
indicated that they will vote all such shares FOR approval and adoption of the
Merger Agreement and the Merger, FOR the election of the nominees for director
and FOR approval of the Amended and Restated Biomedicals Plans. ICN OWNS
APPROXIMATELY 69% OF THE OUTSTANDING SHARES OF BIOMEDICALS COMMON STOCK AND
INTENDS TO VOTE ALL OF SUCH SHARES OF BIOMEDICALS COMMON STOCK FOR APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER, FOR THE ELECTION OF THE
NOMINEES FOR DIRECTOR AND FOR APPROVAL OF THE AMENDED AND RESTATED BIOMEDICALS
PLANS. THEREFORE, WITH RESPECT TO BIOMEDICALS, ICN WILL CAUSE THE MERGER
AGREEMENT AND THE MERGER TO BE ADOPTED WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER
OF BIOMEDICALS. ICN WILL ALSO CAUSE THE NOMINEES FOR DIRECTOR TO BE ELECTED AND
THE AMENDED AND RESTATED BIOMEDICALS PLANS TO BE APPROVED.

5
<PAGE> 32

THE MERGER

Conversion of Securities. Upon consummation of the transactions
contemplated by the Merger Agreement, and subject to the terms and conditions of
the Merger Agreement, (a) ICN, SPI and Viratek will each be merged with and into
New ICN and Biomedicals will become a wholly-owned subsidiary of New ICN as a
result of a merger of Biomedicals with and into a wholly-owned subsidiary of New
ICN (collectively, the "Merger") and (b) each issued and outstanding share of
(i) ICN Common Stock (other than shares held by ICN as treasury shares, if any,
which will be canceled) will be converted into the right to receive 0.512 New
ICN Shares (the "ICN Exchange Ratio"), (ii) SPI Common Stock (other than shares
held by SPI as treasury shares, if any, and shares owned by ICN, which will be
canceled) will be converted into the right to receive 1.00 New ICN Share (the
"SPI Exchange Ratio"), (iii) Viratek Common Stock (other than shares held by
Viratek as treasury shares, if any, and shares owned by ICN, which will be
canceled) will be converted into the right to receive 0.499 New ICN Shares (the
"Viratek Exchange Ratio"), and (iv) Biomedicals Common Stock (other than shares
held by Biomedicals as treasury shares, if any, and shares owned by ICN, which
will be canceled) will be converted into the right to receive 0.197 New ICN
Shares (the "Biomedicals Exchange Ratio" and, together with the ICN Exchange
Ratio, the SPI Exchange Ratio and the Viratek Exchange Ratio, the "Exchange
Ratios"). Pursuant to the Merger Agreement, a subsidiary of New ICN may be
merged into or with one or more of the Merging Companies. Such change in
structure, if any, would be effected only if it would have no effect on the
rights of holders of the Common Stock of any such Merging Company under the
Merger Agreement or on the applicable Exchange Ratio. As discussed in this Joint
Proxy Statement/Prospectus, it is the present intention to merge Biomedicals
with and into a wholly-owned subsidiary of New ICN. See "The Merger
Agreement -- Alternative Structure." Fractional New ICN Shares will not be
issued in connection with the Merger. A holder otherwise entitled to a
fractional New ICN Share will be paid cash in lieu of such fractional New ICN
Share in an amount equal to such holder's fractional interest in the proceeds of
the sale by the Exchange Agent of all "excess New ICN Shares" (consisting of
those New ICN Shares in excess of the number of whole New ICN Shares to be
distributed to all Merging Company Stockholders). In addition, shares of
preferred stock of Biomedicals which are presently issued and outstanding (all
of which are owned by ICN) will be canceled in the Merger.

Advantages and Disadvantages of the Merger. The Merger has both advantages
and disadvantages for stockholders of the Merging Companies. Some of the
advantages of the Merger include:

- All of the stockholders should gain increased liquidity because of
the increased capitalization of New ICN compared to the four Merging
Companies on a stand-alone basis;

- The elimination of potential conflicts of interest among the Merging
Companies and the direct access for New ICN to Viratek's and Biomedicals'
products;

- The creation of a more fully integrated pharmaceutical company which
will be potentially more easily understood in the financial community; and

- New ICN should enjoy increased access to the capital markets due to
its simplified structure and greater resources.

Some of the disadvantages of the Merger are:

- New ICN's Certificate of Incorporation and by-laws will contain
certain anti-takeover provisions (discussed below in "Comparative Rights of
Stockholders") which do not currently exist in the Merging Companies'
certificates and by-laws, and as described below New ICN plans to adopt a
shareholder rights plan; these provisions could have the effect of
discouraging unsolicited acquisition proposals or making it more difficult
for a third party to gain control of New ICN; and

- The shareholders of SPI will potentially experience dilution in book
value per share and net income per share.

6
<PAGE> 33

For a more detailed discussion of the advantages and disadvantages of the
Merger, see "The Merger -- Advantages and Disadvantages of the Merger."

Recommendations of the Special Committees and the Boards of Directors.

Each of the respective Boards of Directors of ICN, SPI, Viratek and
Biomedicals has elected a specially constituted committee of Directors (the
"Special Committee") to consider the proposed Merger and the strategic rationale
for the Merger. Each Special Committee was also given the responsibility of
reviewing the terms of the Merger and the Merger Agreement for their respective
Merging Company. The Special Committees are comprised of certain non-management
members of each Board of Directors who are also not members of any of the other
Boards of Directors of the Merging Companies.

ICN. The Board of Directors of ICN has unanimously approved the Merger
Agreement and unanimously recommends a vote for approval and adoption of the
Merger Agreement and the Merger by the stockholders of ICN. The Board of
Directors of ICN believes that the terms of the Merger are fair to and in the
best interests of ICN and it stockholders. In addition, prior to the Board's
approval, the Special Committee of the Board of Directors of ICN (the "ICN
Special Committee") reviewed the terms of the Merger and the Merger Agreement
and unanimously recommended approval of the Merger and the Merger Agreement to
the entire Board of Directors.

SPI. The Board of Directors of SPI has unanimously approved the Merger
Agreement and unanimously recommends a vote FOR approval and adoption of the
Merger Agreement and the Merger by the stockholders of ICN. The Board of
Directors of SPI believes that the terms of the Merger are fair to and in the
best interests of SPI and its stockholders. In addition, prior to the Board's
approval, the Special Committee of the Board of Directors of SPI (the "SPI
Special Committee") reviewed the terms of the Merger and the Merger Agreement
and unanimously recommended approval of the Merger and the Merger Agreement to
the entire Board of Directors.

Viratek. The Board of Directors of Viratek has unanimously approved the
Merger Agreement and unanimously recommends a vote for approval and adoption of
the Merger Agreement and the Merger by the stockholders of Viratek. The Board of
Directors of Viratek believes that the terms of the Merger are fair to and in
the best interests of Viratek and its stockholders. In addition, prior to the
Board's approval, the Special Committee of the Board of Directors of Viratek
(the "Viratek Special Committee") reviewed the terms of the Merger and the
Merger Agreement and recommended approval of the Merger and the Merger Agreement
to the entire Board of Directors.

Biomedicals. The Board of Directors of Biomedicals has unanimously approved
the Merger Agreement and unanimously recommends a vote for approval and adoption
of the Merger Agreement and the Merger by the stockholders of Biomedicals. The
Board of Directors of Biomedicals believes that the terms of the Merger are fair
to and in the best interests of Biomedicals and its stockholders. In addition,
prior to the Board's approval, the Special Committee of the Board of Directors
of Biomedicals (the "Biomedicals Special Committee") reviewed the terms of the
Merger and the Merger Agreement and recommended approval of the Merger and the
Merger Agreement to the entire Board of Directors.

For a discussion of the factors considered by the respective Boards of
Directors and Special Committees in reaching their decisions, see "The
Merger -- Reasons for the Merger; Recommendations of the Special Committees and
of the Boards of Directors."

Opinions of Financial Advisors.

ICN. Prudential Securities Incorporated ("Prudential Securities") has
delivered its written opinion dated August 1, 1994 to the Board of Directors of
ICN that, as of such date, the ICN Exchange Ratio is fair to the stockholders of
ICN from a financial point of view. Prudential Securities has confirmed such
opinion in an opinion dated the date of this Joint Proxy Statement/Prospectus.

SPI. Wertheim Schroder & Co. Incorporated ("Wertheim Schroder") delivered
an opinion on July 28, 1994 to the Board of Directors of SPI to the effect that,
as of the date of such opinion, the SPI Exchange

7
<PAGE> 34

Ratio is fair, from a financial point of view, to the stockholders of SPI (other
than ICN, as to which no opinion was given). Wertheim Schroder has confirmed
such opinion in an opinion dated the date of this Joint Proxy
Statement/Prospectus.

Viratek. Kemper Securities, Inc. ("Kemper") delivered an opinion on August
1, 1994 to the Board of Directors of Viratek to the effect that, as of the date
of such opinion, the Viratek Exchange Ratio is fair, from a financial point of
view, to the stockholders of Viratek (other than ICN, as to which no opinion was
given). Kemper has confirmed such opinion in an opinion dated the date of this
Joint Proxy Statement/Prospectus.

Biomedicals. Jefferies & Co. ("Jefferies") delivered an opinion on July 31,
1994 to the Board of Directors of Biomedicals to the effect that, as of the date
of such opinion, the Biomedicals Exchange Ratio is fair, from a financial point
of view, to the stockholders of Biomedicals (other than ICN, as to which no
opinion was given). Jefferies has confirmed such opinion in an opinion dated the
date of this Joint Proxy Statement/Prospectus.

Copies of the full text of the written opinions of Prudential Securities,
Wertheim Schroder, Kemper and Jefferies, which set forth the assumptions made,
procedures followed, matters considered and limits of their respective reviews,
are attached to this Joint Proxy Statement/Prospectus as Appendices B, C, D and
E, respectively, and should be read carefully in their entirety. See "The
Merger -- Opinions of Financial Advisors."

New ICN presently intends that Wertheim Schroder will act as lead managing
underwriter of a proposed public offering of $150 million of convertible debt
securities or other debt securities (the "Financing"). New ICN also expects that
Jefferies and Kemper will serve as co-managers for the Financing. Completion of
the Financing is a condition, which may be waived, to the consummation of the
Merger. See "The Merger Agreement -- Conditions." THIS IS NOT AN OFFERING OF THE
CONVERTIBLE DEBENTURES WHICH WILL BE MADE ONLY BY MEANS OF A PROSPECTUS THAT
WILL BE CONTAINED IN A REGISTRATION STATEMENT FILED WITH THE COMMISSION. THE
CONVERTIBLE DEBENTURES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR
TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE.

Management Following the Merger. Following the consummation of the Merger,
the Board of Directors of New ICN will consist of 17 members, comprised of the
current directors of ICN, SPI, Viratek and Biomedicals. Although there are an
aggregate of 28 directors on the boards of directors of the Merging Companies,
due to the fact that certain individuals serve on more than one board, only 17
persons will actually become directors of New ICN. The Chairman of the Board of
New ICN will be Milan Panic, presently Chairman of the Board and Chief Executive
Officer of each of the Merging Companies. See "Management and Operations of New
ICN After the Merger."

Conditions to the Merger. The obligations of each of the Merging Companies
to consummate the Merger are subject to the satisfaction of certain conditions,
including, among others, (i) obtaining requisite stockholder approvals, (ii) the
expiration or termination of the waiting period applicable to the consummation
of the Merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as
amended (the "HSR Act"), (iii) the absence of any material adverse change in the
financial condition, business, operations or prospects of any other party, other
than any such change that affects all parties in a substantially similar manner,
(iv) New ICN Shares being approved for listing on the NYSE (although the Merging
Companies have reserved the right to accept a listing of the New ICN Shares on
the American Stock Exchange (the "AMEX") or on the National Association of
Securities Dealers, Inc. Automated Quotation System/National Market System (the
"NASDAQ")), and (v) the absence of any injunction prohibiting consummation of
the Merger. In addition, the Merging Companies' obligations are subject to the
condition, which may be waived, that New ICN shall have received gross proceeds
from the Financing of at least $150 million, which proceeds will be used to
repay or redeem a substantial portion of the long-term debt of the Merging
Companies. See "The Merger Agreement -- Conditions."

Effective Time of the Merger. The Merger will become effective upon the
filing of a Certificate of Merger with the Secretary of State of the State of
Delaware (or at such later time as may be specified therein) (the "Effective
Time"), which certificate will be filed as promptly as practicable after the
requisite

8
<PAGE> 35

stockholder approvals have been obtained and all other conditions to the Merger
have been satisfied or waived. Subject to the satisfaction (or waiver) of the
other conditions to the obligations of the Merging Companies and New ICN to
consummate the Merger, it is presently expected that the Merger will be
consummated as soon as possible after the Meetings are held and the other
conditions to the Merger are satisfied.

Calculation of Exchange Ratios. The Exchange Ratios were calculated based
on the average closing share prices of the Merging Companies for the 21 trading
days between June 23 and July 22, 1994, inclusive, and the number of shares of
Merging Company Common Stock outstanding as of June 30, 1994. The Merging
Companies determined to use this method because they believed it was fair and
the best one available given the capital structure of the Merging Companies and
the nature of the transaction, particularly given ICN's ownership interest in
the other Merging Companies (which interest will be cancelled in the Merger) and
the fact that the stockholders of each of the Merging Companies will have a
continuing equity interest in New ICN. The Merging Companies were advised by
their respective investment banking advisors that the Exchange Ratio was fair to
their respective stockholders. There are, of course, risks involved in using
this method, as the market may overvalue or undervalue one or more of the
Merging Companies. Overall, the Merging Companies believed that the method used,
which essentially accepted the market's relative valuation of the Merging
Companies, was the best way to establish relative values and one that was fair
to the stockholders of the Merging Companies. See "The Merger -- Background of
the Merger."

Exchange of Stock Certificates. Upon consummation of the Merger, each
holder of a certificate or certificates representing shares of ICN Common Stock,
SPI Common Stock, Viratek Common Stock or Biomedicals Common Stock
(collectively, "Merging Company Common Stock"), as the case may be,
("Certificates") outstanding immediately prior to the Merger will, upon the
surrender thereof (duly endorsed, if required) to a designated exchange agent
(the "Exchange Agent"), be entitled to receive a certificate or certificates
representing the number of whole New ICN Shares into which such shares of Common
Stock will have been automatically converted as a result of the Merger. After
the consummation of the Merger, the Exchange Agent will mail a letter of
transmittal with instructions to all holders of record of Merging Companies
Common Stock as of the Effective Time for use in surrendering their Certificates
in exchange for certificates representing New ICN Shares. Certificates should
not be surrendered until the letter of transmittal and instructions are
received. See "The Merger Agreement -- Exchange Procedures."

No Dissenters' Rights. Under applicable law, no holder of Merging Company
Common Stock will have dissenters' rights in connection with, or as a result of,
the matters to be acted upon at the Meetings.

Certain Federal Income Tax Consequences. The Merging Companies believe that
no gain or loss would be recognized by New ICN or by Merging Company
stockholders on the exchange of shares of Merging Companies Common Stock for New
ICN Shares (except with respect to cash received in lieu of a fractional
interest in New ICN Shares). See "The Merger -- Certain Federal Income Tax
Consequences."

Accounting Treatment. As required by generally accepted accounting
principles, the purchase method of accounting will be used to account for the
Merger and, for accounting purposes, SPI will be deemed to have acquired ICN as
well as the interests in Viratek and Biomedicals not owned by ICN and to be the
predecessor company to New ICN. See "The Merger -- Accounting Treatment."

Resale Restrictions. All New ICN Shares received in the Merger will be
freely transferable, except that New ICN Shares received by persons who are
deemed to be "affiliates" (as such term is defined under the Securities Act) of
any of the Merging Companies at the time of the Meetings may be resold by them
only in certain permitted circumstances. See "The Merger -- Resale
Restrictions."

Termination. The Merger Agreement may be terminated and the Merger may be
abandoned at any time prior to the Effective Time, before or after the approval
by the stockholders of the Merging Companies in a number of circumstances, which
include, among others: (a) by the mutual consent of the Merging Companies by
action of their respective Boards of Directors; (b) by action of the Board of
Directors of any of the Merging Companies if (i) the Merger shall not have been
consummated by December 31, 1994, or (ii) the adoption of the Merger Agreement
and the approval of the transactions contemplated thereby by any

9
<PAGE> 36

of the Merging Companies' stockholders shall not have been obtained at a
stockholders' meeting duly convened for such purpose (or any adjournment
thereof); (c) by action of the Board of Directors of any Merging Company, if (i)
in the exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law, the Board of Directors of such Merging Company
determines that such termination is required by reason of an Acquisition
Proposal (as hereinafter defined) being made for such Merging Company, or (ii)
there has been a material breach of any representation or warranty or covenant
contained in the Merger Agreement. See "The Merger Agreement -- Termination."

New York Stock Exchange Listing. The NYSE has notified New ICN that,
subject to official notice of issuance, it has approved the New ICN Shares to be
issued in the Merger for listing on the NYSE.

SELECTED CONSOLIDATED FINANCIAL DATA

Set forth below are selected historical financial data of ICN, SPI, Viratek
and Biomedicals. The annual data has been derived from the audited historical
consolidated financial statements of ICN, SPI, Viratek and Biomedicals,
respectively. The data for the six month periods ended June 30, 1994 and 1993
have been derived from the unaudited consolidated financial statements of ICN,
SPI, Viratek and Biomedicals which, in the opinion of each of the respective
Merging Companies' management, reflect all adjustments (consisting of only
normal recurring adjustments) necessary for a fair presentation of interim
financial data. Operating results for the six month period ended June 30, 1994
are not necessarily indicative of the results for the full year ending December
31, 1994. The following data should be read in conjunction with the respective
consolidated financial statements and management's discussion and analysis of
Financial Position and Results of Operations incorporated by reference in this
Joint Proxy Statement/Prospectus and those contained in Appendices F through I
to this Joint Proxy Statement/Prospectus.

10
<PAGE> 37

SELECTED CONSOLIDATED FINANCIAL DATA OF ICN

<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED YEAR ENDED
JUNE 30, YEAR ENDED DECEMBER 31, NOVEMBER 30,
--------------------- -------------------------------- -------------------
1994 1993 1993 1992(1) 1991(2)(3) 1990 1989
-------- -------- -------- -------- ---------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales.................................. $ 32,843 $ 32,355 $ 62,556 $551,766 $460,365 $271,975 $185,489
Cost of sales.............................. 13,500 14,333 27,631 253,596 225,234 121,628 80,520
-------- -------- -------- -------- ---------- -------- --------
Gross profit............................... 19,343 18,022 34,925 298,170 235,131 150,347 104,969
Selling, general and administrative
expenses................................. 20,554 18,202 43,690 224,235 152,947 108,178 80,584
Research and development costs............. 3,930 2,495 5,571 10,718 6,588 5,048 14,322
Write-off of goodwill...................... -- -- -- 15,362 -- -- 56,551
Equity earnings in SPI..................... (6,683) (4,193) (11,646) -- -- -- --
Gains on sales of subsidiaries stock....... -- (3,732) (8,345) (37,744) (29,797) -- --
Translation and exchange (gains) losses,
net...................................... 3,380 (1,774) (1,292) 21,648 4,517 14,020 --
Interest expense, net...................... 8,734 9,418 18,962 25,563 34,321 27,075 17,524
Other expense, net(4)...................... 1,010 (321) 1,079 15,187 29,479 11,518 26,922
Restructuring costs(5)..................... -- -- -- 63,032 6,087 -- --
Unrealized (gains) losses on marketable
securities............................... -- -- (200) 446 (475) 614 (4,425)
Provision (benefit) for income taxes....... (32) 162 (474) 9,967 6,574 6,860 2,086
Minority interests......................... (173) 295 (523) 14,558 19,035 3,709 (1,898)
-------- -------- -------- -------- ---------- -------- --------
Income (loss) before extraordinary
income................................... (11,377) (2,530) (11,897) (64,802) 5,855 (26,675) (86,697)
Extraordinary income....................... -- 627 627 -- -- 4,230 4,736
-------- -------- -------- -------- ---------- -------- --------
Net income (loss).......................... $(11,377) $ 1,903 $(11,270) $(64,802) $ 5,855 $(22,445) $(81,961)
======== ======== ======== ======== ========== ======== ========
PER SHARE DATA:
Income (loss) before extraordinary
income................................. $ (.55) $ (.13) $ (.60) $ (4.67) $ .40 $ (2.28) $ (6.36)
Extraordinary income..................... -- .03 .03 -- -- .36 .35
-------- -------- -------- -------- ---------- -------- --------
Net income (loss) applicable to common
stockholders............................. $ (.55) $ (.10) $ (.57) $ (4.67) $ .40 $ (1.92) $ (6.01)
======== ======== ======== ======== ========== ======== ========
Dividends paid............................. -- -- -- -- -- -- --
Weighted average common stock outstanding
and dilutive common stock equivalents.... 20,526 19,135 19,813 14,010 12,829 11,776 13,683
======== ======== ======== ======== ========== ======== ========
</TABLE>

BALANCE SHEET DATA (IN THOUSANDS):

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
JUNE 30, -------------------------------- -------------------
1994 1993 1992(1) 1991 1990 1989
-------- -------- ---------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Working capital(6)......................... $ 8,126 $ 29,627 $ 5,597 $123,301 $ 46,844 $ 94,155
Total assets............................... 188,640 207,856 223,568 575,086 408,214 436,439
Long-term debt, less current maturities.... 132,000 139,047 160,011 188,587 217,863 240,430
Stockholders' equity (deficit)............. (8,025) 4,020 (21,757) 16,456 12,082 33,226
</TABLE>

- ---------------

(1) As a result of the decline in ICN's percentage of ownership in SPI, the
balance sheet of SPI was deconsolidated, effective December 31, 1992, and
the investment is included as a long-term investment accounted for using the
equity method of accounting. Results of operations of SPI are included for
the entire 1992 year as ICN's ownership fell below 50% in December of 1992.
See Note 17 of Notes to Consolidated Financial Statements of ICN.

(2) Includes the results of Galenika, a subsidiary of SPI, from the effective
date of acquisition.

(3) ICN changed its fiscal year end from November 30 to December 31, effective
December 31, 1991. For financial statement purposes, ICN's separate results
of operations for the month of December 1990 are not reflected in the
Statement of Operations but have been included in retained earnings at
December 31, 1991.

(4) See Note 11 of Notes to Consolidated Financial Statements of ICN for
details.

(5) See Note 14 of Notes to Consolidated Financial Statements of ICN for
details.

(6) Includes cash and certificates of deposit of $17,698,000 and $11,564,000 as
of December 31, 1993 and June 30, 1994, respectively, which is to be used
exclusively by Viratek for research and development and its general working
capital requirements.

11
<PAGE> 38

SELECTED CONSOLIDATED FINANCIAL DATA OF SPI

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
--------------------------------- -------------------
JUNE 30, 1994 1993 1992 1991(1)(2) 1990 1989
------------------- -------- -------- ----------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (IN THOUSANDS):
Working capital........................... $ 104,151 $127,259 $120,942 $123,367(1) $ 40,630 $ 46,533
Total assets.............................. 305,131 302,017 333,218 336,905(1) 152,326 122,475
Long-term debt, less current maturities... 16,154 16,980 21,016 16,519(1) 11,257 6,039
Stockholder's equity...................... 165,400 155,879 135,427 88,134(1) 95,935 80,467
</TABLE>

- ---------------

(1) For financial statement purposes, SPI's separate results of operations for
the month of December 1990 are not reflected in the consolidated statement
of income but have been included in retained earnings at December 31, 1991.

(2) Financial data for 1991 includes the results of Galenika from the effective
date of acquisition, May 1, 1991.

(3) Galenika's sales have been adversely affected since the imposition in May
1992 of United Nations sanctions on Yugoslavia.

(4) During 1991, SPI wrote off goodwill, inventory and other assets totalling
$13,124,000, of which $10,878,000 relates to the domestic nutritional group.
During 1991, SPI continued to reassess its domestic nutritional business
which experienced a sales decline of 78% from 1988 to 1991. Additionally,
SPI recorded expenses of $2,198,000 related to relocation costs at its
Spanish subsidiary.

(5) During 1990, SPI recorded non-recurring gains of $3,688,000 related to the
sale and relocation of SPI's Spanish facility.

(6) During 1993, SPI recorded costs of $1,000,000 associated with the planned
layoff of employees at its Spanish subsidiary.

(7) On June 26, 1989, SPI's Board of Directors issued a 20% stock dividend,
which has been accounted for as a six-for-five stock split. In March and
July 1991, SPI issued 10% and 15% stock distributions, respectively, which
resulted in a 26% stock split. In January 1993, SPI issued a fourth quarter
1992 stock

12
<PAGE> 39

dividend of 2%. During 1993, SPI issued additional stock dividends which
totaled 6%. In January and May 1994, SPI declared a first and second quarter
1994 stock dividend of 1.4% and 1.3%, respectively. All share and per share
amounts have been restated to reflect these stock splits and dividends,
except for historical dividends issued which are unadjusted for stock
splits, dividends, and distributions.

(8) Dividends for 1993 include cash dividends of $.25 on a historical basis and
stock dividends equivalent to $.87. The dividends in 1992 include cash
dividends of $.86 on a historical basis and a January 1993 stock dividend
equivalent to $.20 per share. The stock dividends are based upon the market
value of SPI Common Stock at the declaration date. For 1991 and prior years
the dividends were paid in cash.

13
<PAGE> 40

SELECTED FINANCIAL DATA OF VIRATEK

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
------------------------------- -------------------
JUNE 30, 1994 1993 1992 1991(1) 1990 1989
------------- ------- ------- ------- ------ --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (IN THOUSANDS):
Working capital(4)............................. $10,415 $16,805 $ 8,828 $6,187 $ 146 $ 5,630
Total assets(4)................................ 34,165 35,248 11,640 9,347 6,953 12,878
Advances from ICN and other long-term
liabilities.................................. 255 260 270 299 658 19,860
Stockholders' equity (deficit)(5).............. 32,735 34,075 10,803 8,871 3,434 (9,905)
</TABLE>

- ---------------

(1) Viratek changed its year end from November 30 to December 31, effective
December 31, 1991. For financial statement purposes, Viratek's separate
results of operations for the month of December 1990 are not reflected in
the Statements of Income but have been charged directly to retained
earnings.

(2) See Note 3 of Notes to Financial Statements of Viratek for December 31, 1993
regarding royalty arrangements with SPI.

(3) In December 1993, Viratek declared a fourth quarter 1993 stock distribution
of 5%. All share and per share amounts have been restated to reflect this
stock distribution.

(4) Working capital includes net amounts due (to) from affiliate of $9,325,000,
$6,343,000 and ($1,538,000) as of December 31, 1992, 1991 and November 30,
1990, respectively. Total assets include amounts due from ICN of $19,911,000
and $15,503,000 at June 30, 1994 and December 31, 1993, respectively.

(5) In February 1990, ICN exchanged $12,000,000 of advances due from Viratek for
4,705,882 shares of Viratek Common Stock.

14
<PAGE> 41

SELECTED FINANCIAL DATA OF BIOMEDICALS

<TABLE>
<CAPTION>
SIX MONTH
PERIOD ENDED YEAR ENDED
JUNE 30, YEAR ENDED DECEMBER 31, NOVEMBER 30,
----------------- ----------------------------- -------------------
1994 1993 1993 1992 1991(1) 1990 1989
------- ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF INCOME DATA (IN THOUSANDS, EXCEPT PER
SHARE DATA):
Net sales........................................... $30,658 $31,224 $59,076 $ 75,648 $ 96,507 $131,259 $ 61,442
Cost of sales....................................... 13,500 14,333 27,631 44,851 51,917 66,394 28,687
------- ------- ------- -------- -------- -------- --------
Gross profit........................................ 17,158 16,891 31,445 30,797 44,590 64,865 32,755
Selling, general and administrative expenses........ 13,750 13,277 28,455 43,509 39,922 43,358 21,347
Research and development costs...................... -- -- 378 583 1,687 2,052 1,469
Amortization of goodwill and other intangibles...... -- -- 502 1,486 1,829 1,609 1,130
Interest expense, net............................... 1,066 1,266 2,250 4,567 7,073 3,773 84
Lease vacancy costs................................. -- -- 1,436 -- -- -- --
Restructuring costs and special charges(2).......... -- -- -- 63,032 6,087 -- --
Other (income) expense, net......................... 1,394 (1,587) (2,399) 4,731 1,268 160 322
------- ------- ------- -------- -------- -------- --------
Income (loss) before provision for income taxes and
extraordinary income.............................. 948 3,935 823 (87,111) (13,276) 13,913 8,403
Provision (benefit) for income taxes................ (102) 162 (312) 309 (384) 5,111 2,762
------- ------- ------- -------- -------- -------- --------
Income (loss) before extraordinary income........... 1,050 3,773 1,135 (87,420) (12,892) 8,802 5,641
Extraordinary income(4)............................. -- 627 627 -- -- -- 506
------- ------- ------- -------- -------- -------- --------
Net income (loss)................................... $ 1,050 $ 4,400 $ 1,762 $(87,420) $(12,892) $ 8,802 $ 6,147
======= ======= ======= ======== ======== ======== ========
PER SHARE DATA(3):
Income (loss) before extraordinary income........... $ .12 $ .17 $ .07 $ (4.80) $ (1.09) $ .80 $ .52
Extraordinary income(4)............................. -- .03 .03 -- -- -- .05
------- ------- ------- -------- -------- -------- --------
Net income (loss)................................... $ .12 $ .20 $ .10 $ (4.80) $ (1.09) $ .80 $ .57
======= ======= ======= ======== ======== ======== ========
Dividends per common share(5)....................... $ -- $ .085 $ .17 $ .17 $ .15 $ .18 $ .13
======= ======= ======= ======== ======== ======== ========
Weighted average shares outstanding(6).............. 9,128 22,440 17,464 18,224 11,790 10,963 10,697
======= ======= ======= ======== ======== ======== ========
Shares outstanding at end of period(6).............. 9,034 22,402 9,034 19,183 15,305 11,250 10,538
======= ======= ======= ======== ======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
JUNE 30, ----------------------------- -------------------
1994 1993 1992 1991(1) 1990 1989
-------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (IN THOUSANDS):
Working capital....................................... $ 13,659 $10,756 $ 8,676 $ 19,294 $ 26,235 $ 40,359
Total assets.......................................... 52,195 51,831 63,342 152,658 179,857 177,913
Long-term debt and capital lease obligations, less
current maturities.................................. 10,768 10,567 11,709 18,315 40,076 51,322
Total stockholders' equity(6)......................... 12,911 12,641 3,816 66,863 60,800 45,358
</TABLE>

- ---------------

(1) Biomedicals changed its year end from November 30 to December 31, effective
December 31, 1991. For financial statement purposes, Biomedicals' separate
results of operations for the month of December 1990 are not reflected in
the Statements of Income but have been charged directly to retained
earnings.

(2) See Note 12 of Notes to Consolidated Financial Statements of Biomedicals for
a discussion of the 1991 and 1992 restructuring plans.

(3) All per share information has been restated to reflect the 20% stock
dividend, accounted for as a six-for-five stock split, paid on July 31,
1989.

(4) Extraordinary income in 1993 of $627,000, or $.03 per share, results from
negotiated settlements with certain suppliers and banks. Extraordinary
income in 1989 pertains to gains resulting from the purchase of a portion of
the 5 1/2% Swiss Franc Exchangeable Certificates.

15
<PAGE> 42

(5) Reflects annual cash dividends for each of the years presented. During the
one-month ended December 31, 1990, Biomedicals declared a one-time special
dividend of $.035, in addition to the regular quarterly dividend. This
dividend was actually paid in January 1991 and is included in the annual
total of $.15 at December 31, 1991.

(6) On August 30, 1993, Biomedicals issued 300,000 shares of a new series "A" of
Biomedicals' non-convertible, nonvoting, preferred stock valued pursuant to
a fairness opinion, at $30,000,000. In exchange, ICN delivered 4,983,606
shares of Biomedicals Common Stock that ICN owned and exchanged intercompany
debt owed to ICN by Biomedicals in the amount of $11,000,000.
In addition, on August 30, 1993, the Company issued 390,000 shares of new
series "B" of Biomedicals' nonconvertible, non-voting, preferred stock
valued pursuant to a fairness opinion, at $32,000,000 to ICN. In exchange,
ICN delivered to Biomedicals 8,384,843 shares of Biomedicals Common Stock
that ICN owned.

16
<PAGE> 43

SELECTED UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL DATA

The following selected unaudited pro forma combined condensed balance sheet
data as of June 30, 1994 and the selected unaudited pro forma combined condensed
income statement data for the year ended December 31, 1993, and six months ended
June 30, 1994, give effect to the Merger accounted for under the purchase method
of accounting. The selected unaudited pro forma financial data are based on the
historical consolidated financial statements of SPI and ICN. The unaudited pro
forma combined financial data represent the acquisition by New ICN (a wholly
owned subsidiary of SPI and the surviving entity) of ICN and the minority
interest of Viratek and Biomedicals. The unaudited pro forma combined financial
data do not reflect any nonrecurring charges (in aggregate, estimated to be
approximately $190,000,000 ($185,000,000 of which is a non-cash charge) or $7.13
per share, on a pro forma basis for the year ended December 31, 1993) expected
to be incurred by the Merging Companies in connection with the Merger but do
reflect the consummation of the Financing. Non-recurring Merger costs are
currently estimated to be approximately $5,000,000; however, the ultimate costs
cannot be determined until the Merger is completed. Also, excluded from the
unaudited pro forma combined financial data are any benefits that may result
from the Merger due to synergies that may be derived and the elimination of
duplicate efforts. See "Unaudited Pro Forma Combined Condensed Financial
Statements."

NEW ICN SELECTED UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
FOR THE SIX MONTHS FOR THE YEAR ENDED
ENDED JUNE 30, 1994 DECEMBER 31, 1993
-------------------- --------------------
<S> <C> <C>
INCOME STATEMENT DATA:
Net Sales................................................ $181,752 $463,033
Costs and Expenses:
Cost of Sales.......................................... 91,283 239,554
Selling, general and administrative.................... 64,551 174,759
Research and development............................... 6,406 17,087
Translation and exchange (gains) losses................ 5,082 (4,326)
Interest expense, net.................................. 6,867 27,470
Other (income) expense, net............................ 1,915 4,161
----------- -----------
Income before taxes, minority interest, extraordinary
item and non-recurring charges......................... 5,648 4,328
Taxes on Income.......................................... 1,800 594
Minority Interest........................................ 433 189
----------- -----------
Net Income before extraordinary item and non-recurring
charges................................................ $ 3,415 $ 3,545
================ ===============
Earnings Per Share of Common Stock before extraordinary
item and non-recurring charges......................... $ 0.12 $ 0.13
================ ===============
Weighted Average Number of Common Shares Outstanding..... 27,477 26,647
================ ===============
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 1994
--------------------
<S> <C> <C>
BALANCE SHEET DATA:
Working Capital................................................................ $132,905
Total Assets................................................................... 418,608
Long-Term Debt................................................................. 185,513
Minority Interests............................................................. 41,862
Stockholders' Equity........................................................... 89,773
</TABLE>

17
<PAGE> 44

<TABLE>
<CAPTION>
CERTAIN COMPARATIVE INFORMATION(1):
ICN
BIOMEDICALSHISTORICAL SPI
HISTORICAL HISTORICAL(2)
---------- --------------------
VIRATEK
HISTORICAL(3)
--
--
<S> <C> <C> <C>
Book Value (deficit) per common share as of
June 30, 1994................................... ($ .39) $8.07 $ 1.81 $ 1.43
Income (loss) per share:
Year ended December 31, 1993.................... ($ .57) $1.08 $ .05 $ .10
Six months ended June 30, 1994.................. ($ .55) $ .65 ($ .07) $ .12
Dividends declared per share:
Year ended December 31, 1993.................... -- $1.12 $ .46(3) $ .17
Six months ended June 30, 1994.................. -- $ .60 -- --
</TABLE>

<TABLE>
<CAPTION>
ICN VIRATEK BIOMEDICALS
PRO FORMA EQUIVALENT EQUIVALENT EQUIVALENT
COMBINED(4) PRO FORMA(5) PRO FORMA(6) PRO FORMA(7)
----------- ------------ ------------ ------------
<S> <C> <C> <C> <C>
Book Value per common share as of
June 30, 1994.............................. $3.33 $ 1.71 $ 1.66 $.67
Income per share(8):
Year ended December 31, 1993............... $ .13 $ .07 $ .07 $.03
Six months ended June 30, 1994............. $ .12 $ .06 $ .06 $.02
Dividends declared per share:
Year ended December 31, 1993............... $ .84 $ .43 $ .43 $.17
Six months ended June 30, 1994............. $ .46 $ .24 $ .23 $.09
</TABLE>

- ---------------

(1) See accompanying Notes to the selected historical financial data of SPI,
ICN, Viratek and Biomedicals and the Notes to Unaudited Pro Forma Combined
Condensed Financial Statements.

(2) SPI historical dividends per share for the year ended December 31, 1993 and
for the six months ended June 30, 1994 include cash dividends of $.25 and
$.13 on a historical basis and stock dividends equivalent to $.87 and $.47,
respectively.

(3) Viratek's historical dividends per share for the year ended December 31,
1993 included a stock dividend equivalent to $.46 per share.

(4) Since the SPI Exchange Ratio is 1:1, the pro forma combined amounts are the
same as the SPI equivalent pro forma per share amounts.

(5) ICN equivalent pro forma per share amounts are calculated by multiplying the
respective pro forma combined per share amounts by the ICN Exchange Ratio of
.512:1.

(6) Viratek equivalent pro forma per share amounts are calculated by multiplying
the respective pro forma combined per share amounts by the Viratek Exchange
Ratio of .499:1.

(7) Biomedicals equivalent pro forma per share amounts are calculated by
multiplying the respective pro forma combined per share amounts by the
Biomedicals Exchange Ratio of .197:1.

(8) Income per share excludes certain non-recurring charges aggregating
$190,000,000 or $7.13 per New ICN Share on a pro forma combined basis.

18
<PAGE> 45

COMPARATIVE MARKET DATA

The shares of ICN Common Stock (symbol "ICN") are listed on the NYSE, and
the shares of SPI Common Stock (symbol "SPI"), Viratek Common Stock (symbol
"VRA") and Biomedicals Common Stock (symbol "BIM") are listed on the AMEX. The
table below sets forth, for the calendar quarters indicated, the high and low
sales prices per share (on an historical basis unadjusted for dividends)
reported on the NYSE Composite Tape or the AMEX Composite Tape as appropriate.

<TABLE>
<CAPTION>
ICN SPI VRA BIM
----------------- ----------------- ----------------- ----------------
HIGH LOW HIGH LOW HIGH LOW HIGH LOW
------- ------- ------- ------- ------- ------- ------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Calendar 1992
First Quarter............................ $25.375 $14.50 $38.375 $26.25 $25.75 $11.25 $11.00 $6.00
Second Quarter........................... 15.875 9.75 29.125 19.125 14.25 8.00 6.375 4.50
Third Quarter............................ 12.875 6.625 23.125 16.375 10.50 5.50 5.25 3.75
Fourth Quarter........................... 10.25 5.75 19.75 10.375 10.25 5.75 4.25 3.375
Calendar 1993
First Quarter............................ $15.75 $ 5.875 $22.25 $10.25 $14.00 $ 6.25 $ 5.25 $3.25
Second Quarter........................... 13.75 8.875 16.875 12.375 14.125 9.00 4.375 3.125
Third Quarter............................ 12.00 7.625 18.50 11.625 14.875 10.50 4.375 3.00
Fourth Quarter........................... 11.875 7.375 15.00 12.50 14.375 7.375 5.50 3.625
Calendar 1994
First Quarter............................ $10.625 $ 8.375 $19.625 $14.25 $11.625 $ 8.75 $ 5.375 $4.125
Second Quarter........................... 9.875 8.125 18.00 14.50 10.25 7.75 4.437 3.00
Third Quarter (through September 27,
1994).................................. 13.875 8.000 26.875 15.375 13.625 7.875 5.375 3.00
</TABLE>

DIVIDEND POLICY

It is the present intention of the Boards of Directors of the Merging
Companies that New ICN retain the present cash dividend policy of SPI ($.0655
per share on a quarterly basis), but the declaration and payment of any
dividends (cash or stock) by New ICN will be at the discretion of the Board of
Directors and will depend upon many factors, including, but not limited to, New
ICN's earnings, financial condition, business needs, capital and surplus. New
ICN's ability to pay dividends may be limited by the terms of the indebtedness
issued by New ICN pursuant to the Financing, the terms of which indebtedness
have not been finalized or by the terms of any additional financing completed in
the future.

SPI has declared and paid the following cash and stock dividends (on an
historical basis unadjusted for dividends) commencing with the fiscal year ended
December 31, 1992:

<TABLE>
<S> <C>
Cash Dividends:
---------------
1992 SPI
---- ---
First Quarter.......................... $ .25
Second Quarter......................... $ .25
Third Quarter.......................... $ .25
Fourth Quarter......................... $ .11

1993
----
First Quarter.......................... $.0625
Second Quarter......................... $.0625
Third Quarter.......................... $.0625
Fourth Quarter......................... $.0625

1994
----
First Quarter.......................... $.0650
Second Quarter......................... $.0650

Stock Dividends:
----------------
1992 SPI
---- ---
First Quarter.......................... --
Second Quarter......................... --
Third Quarter.......................... --
Fourth Quarter......................... 2.0%

1993
----
First Quarter.......................... 1.4%
Second Quarter......................... 1.4%
Third Quarter.......................... 1.5%
Fourth Quarter......................... 1.7%

1994
----
First Quarter.......................... 1.4%
Second Quarter......................... 1.3%
</TABLE>

During the same period, ICN did not pay any dividends and Viratek declared
and paid on January 21, 1994 a 5% common stock distribution. Biomedicals paid
quarterly dividends of $.0425 per share in 1992 and 1993, but no dividends have
been paid in 1994.

STOCK OPTION PLANS

Any stockholder of any of the Merging Companies who wishes to receive
copies of the stock option plans which are to be voted upon at the Meetings
should contact ICN as described under "Incorporation of Certain Documents by
Reference" above to receive such copies.

19
<PAGE> 46

CERTAIN CONSIDERATIONS

In evaluating the terms of the Merger, each of the Merging Companies
concluded that the combination of the four Merging Companies would produce a
company which would experience better results than those of the Merging
Companies standing alone. There can be no assurance, however, that the benefits
of the Merger will be achieved. In addition, New ICN will be heavily dependent
on operations outside the United States, particularly in Yugoslavia, which are
subject to certain risks which are absent in the United States. Also, New ICN's
future success will depend, in large part, upon its ability to develop or obtain
and commercialize new products and new formulations of, or indications for,
current products, including the application of Virazole(R) for the treatment of
chronic hepatitis C. There can be no assurance that New ICN will be able to
develop or acquire new products or obtain the necessary approvals for such new
applications. New ICN may be dependent on the protection afforded by Viratek's
patents relating to Virazole(R), which patent rights expire in the United States
in 1999 with respect to the use of Virazole(R) in humans to treat specified
viral diseases.

See "Certain Considerations" for a more detailed discussion with respect to
factors which should be considered in evaluating the Merger.

20
<PAGE> 47

CERTAIN CONSIDERATIONS

The following factors should be considered carefully by the stockholders of
ICN, SPI, Viratek and Biomedicals in connection with voting upon the Merger.

UNCERTAIN BENEFITS OF THE MERGER

In evaluating the terms of the Merger, each of ICN, SPI, Viratek and
Biomedicals analyzed its respective business and made certain assumptions
concerning its respective future operations. Each of the Merging Companies
concluded that, through the elimination of redundant operations and departments
and beneficial sharing of resources, the Merger would produce a combined company
with operating results better than those historically experienced or presently
expected to be experienced in the future by the four Merging Companies in the
absence of the Merger. See "Reasons for the Merger and Recommendations of the
Special Committees and Boards of Directors." There can be no assurance, however,
that these benefits will be achieved or that the results of the combined
operations will be improved. These anticipated benefits of the Merger will not
be achieved unless the Merging Companies are successfully combined in a timely
manner. The process of combining the organizations could cause the interruption
of, or a loss of momentum in, the activities of any or all of the Merging
Companies' businesses, which could have an adverse effect on New ICN. See
"Unaudited Pro Forma Combined Condensed Financial Statements."

DEPENDENCE ON FOREIGN OPERATIONS

Approximately 79% and 70% of the Merging Companies' pro forma net sales for
1993 and the six months ended June 30, 1994, respectively, were generated from
operations outside the United States. SPI, Viratek and Biomedicals operate
directly and through distributors in North America, Latin America, Australia,
Western Europe and Eastern Europe, and through distributors elsewhere in the
world. Foreign operations are subject to certain risks inherent in conducting
business abroad, including possible nationalization or expropriation, price and
exchange controls, changes in the relative values of currencies, limitations on
foreign participation in local enterprises and other restrictive governmental
actions. The Company does not currently have a hedging program to protect
against risks of adverse changes in foreign currencies.

RISKS OF OPERATIONS IN YUGOSLAVIA

ICN Galenika ("Galenika") represents a material part of SPI's business and
will represent a material component of New ICN's business. The current political
and economic circumstances in the Federal Republic of Yugoslavia (Montenegro and
Serbia) ("Yugoslavia") create certain business risks particular to that country.
Since May 1992, Yugoslavia has been operating under economic sanctions imposed
by the United Nations, which have prohibited all exports and severely limited
the ability of businesses to import raw materials for manufacturing. In
addition, certain risks such as hyperinflation, dramatic currency devaluations,
fluctuations in the relative value of the Yugoslav dinar, wage and price
controls, potential governmental action and a rapidly deteriorating economy have
had, and could continue to have in the future, a material adverse effect on New
ICN's results of operations. Under the sanctions SPI is not permitted to make
additional capital investments in Yugoslavia. If, after consummation of the
Merger, New ICN becomes unable to exercise control over Galenika's operations or
is prohibited by Yugoslavian law from receiving dividends from Galenika (which
New ICN believes is unlikely), New ICN could be required to deconsolidate
Galenika for financial reporting purposes and account for New ICN's investment
using the cost method of accounting. Upon a deconsolidation, the investment in
Galenika would be carried at the lower of cost or realizable value, which could
result in a substantial write-down of the carrying value of the assets of
Galenika. Due to the current economic conditions in Yugoslavia, most segments of
the population must rely on the government to subsidize and pay for prescription
drugs. Under the socialist government in Yugoslavia, the government subsidizes
the purchase by hospitals, pharmacies and other distributors, of pharmaceutical
products. Under this policy, the Yugoslavian government reimbursed purchases
representing $163,086,000, or 68%, of Galenika's net sales during 1993 (35% of
the Merging Companies' pro forma net sales for that period). Future sales of
Galenika could be dependent on the continuation of the current Yugoslavian
government policy and the ability of the government to subsidize the purchase of
pharmaceuticals. See Note 12 of Notes to Consolidated Financial Statements of
SPI.

21
<PAGE> 48

NO ASSURANCE OF SUCCESSFUL DEVELOPMENT AND COMMERCIALIZATION OF FUTURE PRODUCTS

New ICN's future success will depend, in large part, upon its ability to
develop or obtain and commercialize new products and new formulations of or
indications for current products. Viratek is engaged in an active research and
development program involving compounds owned by Viratek or licensed from others
which New ICN may, in the future, desire to develop commercially. The ability of
New ICN to increase revenues at a substantial rate may be materially dependent
on the authorization for the commercial sale in the United States and other
countries of Virazole(R) for indications and presentations not currently
approved, such as chronic hepatitis C. See "Government Regulation." There can be
no assurance that New ICN will be able to develop or acquire new products,
obtain regulatory approvals to use such products for proposed or new clinical
indications in a timely manner, manufacture its potential products in commercial
volumes or gain market acceptance for such products. In addition, New ICN may
require financing in excess of the Financing over the next several years to fund
its operations, in particular the costs of development and acquisitions of new
products and, if Virazole(R) is approved for treatment of chronic hepatitis C
(for which there can be no assurance), to expand the production and marketing of
Virazole(R). There can be no assurance that New ICN will be successful in
raising such additional capital, if required, or that such capital will be
raised on terms favorable to New ICN.

LIMITED PATENT PROTECTION

New ICN may be dependent on the protection afforded by Viratek's patents
relating to Virazole(R) and no assurance can be given as to the breadth or
degree of protection which these patents will afford Viratek. Viratek has patent
rights in the United States expiring in 1999 relating to the use of Virazole(R)
in humans to treat specified viral diseases. In addition, Viratek's remaining
foreign patent rights will expire at various times between 1994 and 1997. While
Viratek has foreign patents in certain countries covering Virazole(R), Viratek
has no, or limited, patent rights with respect to Virazole(R) in certain foreign
countries where Virazole(R) is currently, or in the future may be, approved for
commercial sale, including France, Germany and Great Britain. In addition,
Viratek's remaining foreign patent rights will expire at various times between
1994 and 1997. Viratek has been granted a review classification (Concertation
procedure) for Virazole(R) as a treatment for chronic hepatitis C in all
European Union countries (including France, Germany and Great Britain). As a
result, approval of the application of Virazole(R) for treatment of chronic
hepatitis C (if such approval is granted) would, in the European Union, provide
the Company up to ten years of protection from the date of such approval against
competitors relying upon Viratek's submitted documentation, including the
results of clinical trials, to support such competitors' application to
manufacture, market or sell generic substitutes of Virazole(R) for treatment of
chronic hepatitis C. There can be no assurance that the loss of Viratek's patent
rights with respect to Virazole(R) upon expiration of Viratek's patent rights in
the United States, Europe and elsewhere will not result in competition from
other drug manufacturers or will not otherwise have a significant adverse effect
upon the business and operations of New ICN. Marketing approvals in certain
foreign countries provide an additional level of protection for products
approved for sale in such countries. As a general policy, New ICN expects to
seek patents, where available, on inventions concerning novel drugs, techniques,
processes or other products which it may develop or acquire in the future.
However, there can be no assurance that any patents applied for will be granted,
or that, if granted, they will have commercial value or as to the breadth or the
degree of protection which these patents, if issued, will afford New ICN. New
ICN intends to rely substantially on its unpatented proprietary know-how, but
there can be no assurance that others will not develop substantially equivalent
proprietary information or otherwise obtain access to New ICN's know-how.
Patents for pharmaceutical compounds are not available in certain countries in
which SPI currently markets its products.

UNCERTAIN IMPACT OF ACQUISITION PLANS

New ICN expects to continue to pursue the Merging Companies' strategy of
targeted expansion through the acquisition of compatible businesses and product
lines and the formation of strategic alliances, joint ventures and other
business combinations. New ICN's attempt to acquire an interest on a
non-negotiated basis in a publicly-held company may result in defensive measures
by the subject company, including litigation, which could prevent or delay New
ICN from achieving its objectives and cause New ICN to incur substantial expense
and risk. Applicable statutes and regulations may delay or preclude an
acquisition. Additional

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substantial debt or equity financing may be required in order to finance any
future acquisitions. There can be no assurance that New ICN can successfully
complete or finance any acquisition. Should New ICN complete any material
acquisition, New ICN's success or failure in integrating the operations of the
acquired company may have a material impact on the future growth or success of
New ICN.

POTENTIAL LITIGATION EXPOSURE

SPI, ICN and Viratek have been named as defendants in certain consolidated
class action lawsuits alleging, among other things, violations of federal
securities laws. The plaintiffs allege that the defendants made, or aided and
abetted other defendants in making, misrepresentations of material facts and
omitted to state material facts concerning the business, financial condition and
future prospects of SPI, ICN and Viratek, primarily concerning developments
regarding Virazole(R), including the efficacy and safety of the drug and the
market for the drug in the treatment of AIDS and AIDS related diseases. As a
result of the Merger, New ICN will assume all of such Merging Companies'
liabilities with respect to such litigation. See "ICN -- Litigation."

Biomedicals is not a party to these class action lawsuits, and, therefore,
if the Merger is consummated, Biomedicals' stockholders, as stockholders of New
ICN, will have exposure to the potential risk that New ICN will be forced to pay
damages in connection with these lawsuits. In addition, SPI has opposed class
certification which could, if successful, have the result of dismissing SPI from
the actions. There can be no assurance that SPI will be successful in such
efforts. However, if the Merger is consummated, SPI stockholders, as
stockholders of New ICN, will have exposure to the potential risk that ICN will
be required to pay damages in connection with these lawsuits even if SPI is
successful in its efforts to be dismissed.

POTENTIAL PRODUCT LIABILITY EXPOSURE AND LACK OF INSURANCE

New ICN could be exposed to possible claims for personal injury resulting
from allegedly defective products. Even if a drug were approved for commercial
use by an appropriate governmental agency, there can be no assurance that users
will not claim that effects other than those intended may result from New ICN's
products. The Merging Companies generally self-insure against potential product
liability exposure with respect to their marketed products, including
Virazole(R). While to date no material adverse claim for personal injury
resulting from allegedly defective products, including Virazole(R), has been
successfully maintained against any of the Merging Companies, a substantial
claim, if successful, could have a material adverse effect on New ICN.

GOVERNMENT REGULATION

FDA approval must be obtained in the United States and approval must be
obtained from comparable agencies in other countries prior to marketing or
manufacturing new pharmaceutical products for use by humans in such respective
jurisdictions. Obtaining FDA approval for new products and manufacturing
processes can take a number of years and involves the expenditure of substantial
resources. Numerous requirements must be satisfied, including preliminary
testing programs on animals and subsequent clinical testing programs on humans,
to establish product safety and efficacy. On June 1, 1994, Viratek submitted a
New Drug Application (a "NDA") to the Food and Drug Administration (the "FDA")
for the approval of Virazole(R) for commercial sale in the treatment of chronic
hepatitis C. No assurance can be given that authorization of the commercial sale
of any new drugs or compounds by New ICN for any application will be secured in
the United States or any other country, or that, if such authorization is
secured, those drugs or compounds will be commercially successful.

The FDA in the United States and other regulatory agencies in other
countries also periodically inspect manufacturing facilities. Failure to comply
with applicable regulatory requirements can result in, among other things,
sanctions, fines, delays or suspensions of approvals, seizures or recalls of
products, operating restrictions and criminal prosecutions. Furthermore, changes
in existing regulations or adoption of new regulations could prevent or delay
New ICN from obtaining future regulatory approvals.

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COMPETITION

The Merging Companies operate in a highly competitive environment. The
Merging Companies' competitors, many of whom have substantially greater capital
resources and marketing capabilities and larger research and development staffs
and facilities than the Merging Companies, are actively engaged in marketing
products similar to those of the Merging Companies and in developing new
products similar to those proposed to be developed and sold by New ICN. Others
may succeed in developing products that are more effective than those presently
marketed or proposed for development by New ICN. Progress by other researchers
in areas similar to those being explored by New ICN may result in further
competitive challenges. New ICN may also face increased competition from
manufacturers of generic pharmaceutical products when certain of the patents
covering certain of its currently marketed products expire.

UNCERTAIN EFFECT OF UNITED STATES HEALTH CARE PROPOSALS ON PHARMACEUTICAL
INDUSTRY

The Clinton administration has identified the containment of healthcare
costs as a major national priority. As part of the administration's healthcare
proposals, President Clinton and members of the administration have called for
pharmaceutical companies to restrain price increases and have developed
proposals to contain healthcare costs. While the announced proposals, if
enacted, would not have a direct effect on New ICN's business, New ICN is unable
to predict the ultimate effect of these proposals on the pharmaceutical
industry. Legislation could be enacted that could adversely affect the industry
in general and the business of New ICN in particular.

DIVIDEND POLICY

Although there can be no assurances given that New ICN will declare and pay
dividends in the future, it is the present intention of the Board of Directors
of the Merging Companies that New ICN retain the cash dividend policy of SPI
($.0655 per share on a quarterly basis), but the declaration and payment of any
dividends (cash or stock) by New ICN will be at the discretion of the Board of
Directors and will depend upon many factors, including, but not limited to, New
ICN's earnings, financial condition, business needs, capital and surplus. In
addition, New ICN's ability to pay dividends may be limited by the terms of the
indebtedness issued by New ICN pursuant to the Financing, the terms of which
indebtedness have not been finalized, or by the terms of any additional
financing completed in the future.

ANTI-TAKEOVER PROVISIONS

New ICN's Certificate of Incorporation and By-laws will contain provisions
which may have the effect of discouraging a third party from making an
acquisition proposal for New ICN. The Certificate of Incorporation of New ICN
will, among other things, (i) classify the Board of Directors into three
classes, with directors of each class serving for staggered three-year periods,
(ii) provide that directors may be removed only for cause and only upon the
affirmative vote of at least 66 2/3% of the voting power of all the then
outstanding shares of stock entitled to vote, (iii) require that certain
business combinations be approved by an 85% vote of New ICN's outstanding voting
stock unless the transaction is approved by at least 66 2/3% of the continuing
directors, (iv) prohibit action by stockholders by written consent, (v) require
advance notice of stockholder nominations and proposals and (vi) preclude
stockholders from calling a special meeting of stockholders. Such provisions
would make the removal of incumbent directors more difficult and time-consuming
and may have the effect of discouraging a tender offer or other takeover attempt
not previously approved by the Board of Directors. The Board of Directors of New
ICN will also have the authority to issue up to 10,000,000 shares of preferred
stock in one or more series and to fix the powers, preferences and rights of any
such series without stockholder approval. In addition, New ICN will adopt a
shareholder rights plan. It is anticipated that the terms of the debt to be
issued in connection with the Financing will contain a provision permitting each
holder thereof to require New ICN, upon any change of control of New ICN, to
repurchase the debt at 100% of the principal amount thereof, plus accrued and
unpaid interest. These provisions could have the effect of discouraging
unsolicited acquisition proposals or making it more difficult for a third party
to gain control of New ICN or could otherwise adversely affect the market price
of the New ICN Shares. See "Description of New ICN Capital Stock."

ABSENCE OF A PRIOR PUBLIC MARKET

The New ICN Shares constitute a new issue of securities with no established
trading market. Although New ICN intends to apply to list the New ICN Shares on
the NYSE, there can be no assurance that such

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<PAGE> 51

application will be approved. It is a condition to the consummation of the
Merger that the New ICN Shares be approved for listing on the NYSE (although the
Merging Companies have reserved the right to accept a listing of the New ICN
Shares on the AMEX or on the NASDAQ). No assurance can be given that an active
trading market for the New ICN Shares will develop or be sustained after the
Merger.

THE MEETINGS

MATTERS TO BE CONSIDERED AT THE MEETINGS

ICN. At the ICN Meeting, holders of ICN Common Stock will consider and vote
upon a proposal to approve and adopt the Merger Agreement and the transactions
contemplated thereby. In addition, holders of ICN Common Stock will also (i)
vote to elect ten directors to serve until the 1995 Annual Meeting (who, if
elected and the Merger is consummated, will become directors of New ICN), (ii)
consider and vote upon a proposal to approve the Amended and Restated 1992 ICN
Non-Qualified Plan, which amendment and restatement increased the number of
shares of ICN Common Stock available for grant under the plan from 500,000 to
1,250,000 shares of ICN Common Stock and provided that the maximum number of
shares with respect to which options may be granted to any individual during the
term of the plan may not exceed 400,000 shares, (iii) consider and vote upon a
proposal to approve the Amended and Restated 1992 ICN Incentive Plan, which
amendment and restatement increased the number of shares of ICN Common Stock
available for grant under the plan from 500,000 to 750,000 shares of ICN Common
Stock and provided that the maximum number of shares with respect to which
options may be granted to any individual during the term of the plan may not
exceed 200,000 shares of ICN Common Stock and (iv) consider such other matters
as may properly be brought before the ICN Meeting or any adjournments or
postponements thereof.

THE ICN BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT ICN STOCKHOLDERS VOTE FOR
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. THE ICN BOARD OF
DIRECTORS ALSO RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR
AND FOR THE AMENDED AND RESTATED ICN PLANS.

SPI. At the SPI Meeting, holders of SPI Common Stock will consider and vote
upon a proposal to approve and adopt the Merger Agreement and the transactions
contemplated thereby. In addition, SPI stockholders will also (i) vote to elect
eight directors to serve until the 1995 Annual Meeting (who, if elected and the
Merger is consummated, will become directors of New ICN), (ii) consider and vote
upon a proposal to approve the Amended and Restated 1992 SPI Non-Qualified Plan,
which amendment and restatement increased the number of shares of SPI Common
Stock available for grant under the plan from 1,000,000 to 3,000,000 shares of
SPI Common Stock and provided that the maximum number of shares with respect to
which options may be granted to any individual during the term of the plan may
not exceed 500,000 shares of SPI Common Stock, (iii) consider and vote upon a
proposal to approve the Amended and Restated 1992 SPI Incentive Plan, which
amendment and restatement increased the number of shares of SPI Common Stock
available for grant under the plan from 500,000 to 1,000,000 shares of SPI
Common Stock and provided that the maximum number of shares with respect to
which options may be granted to any individual during the term of the plan may
not exceed 500,000 shares of SPI Common Stock and (iv) consider and vote upon
such other matters as may properly be brought before the SPI Meeting or any
adjournments or postponements thereof.

THE SPI BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT
AND THE MERGER AND RECOMMENDS THAT SPI STOCKHOLDERS VOTE FOR THE APPROVAL AND
ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. THE SPI BOARD OF DIRECTORS ALSO
RECOMMENDS A VOTE FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR THE
AMENDED AND RESTATED SPI PLANS.

Viratek. At the Viratek Meeting, holders of Viratek Common Stock will
consider and vote upon a proposal to approve and adopt the Merger Agreement and
the transactions contemplated thereby. In addition, holders of Viratek Common
Stock will also (i) vote to elect six directors to serve until the 1995 Annual
Meeting (who, if elected and the Merger is consummated, will become directors of
New ICN), (ii) consider and vote upon a proposal to approve the Amended and
Restated 1992 Viratek Non-Qualified Plan, which amendment and restatement
increased the number of shares available for grant under the plan from 500,000

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<PAGE> 52

to 1,000,000 shares of Viratek Common Stock and provided that the maximum number
of shares with respect to which options may be granted to any individual during
the term of the plan may not exceed 400,000 shares of Viratek Common Stock,
(iii) consider and vote upon a proposal to approve the Amended and Restated 1992
Viratek Incentive Plan, which amendment and restatement increased the number of
shares available for grant under the plan from 500,000 to 1,000,000 shares of
Viratek Common Stock and provided that the maximum number of shares with respect
to which options may be granted to any individual during the term of the plan
may not exceed 400,000 shares of Viratek Common Stock and (iv) consider such
other matters as may properly be brought before the Viratek Meeting or any
adjournments or postponements thereof.

THE VIRATEK BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT VIRATEK STOCKHOLDERS
VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER. THE
VIRATEK BOARD OF DIRECTORS ALSO RECOMMENDS A VOTE FOR THE ELECTION OF THE
NOMINEES FOR DIRECTOR AND FOR THE AMENDED AND RESTATED VIRATEK PLANS.

Biomedicals. At the Biomedicals Meeting, holders of Biomedicals Common
Stock will consider and vote upon a proposal to approve and adopt the Merger
Agreement and the transactions contemplated thereby. In addition, holders of
Biomedicals Common Stock will (i) vote to elect four directors to serve until
the 1995 Annual Meeting (who, if elected and the Merger is consummated, will
become directors of New ICN), (ii) consider and vote upon a proposal to approve
the Amended and Restated 1992 Biomedicals Non-Qualified Plan, which amendment
and restatement increased the number of shares available for grant under the
plan from 500,000 to 1,000,000 shares of Biomedicals Common Stock and provided
that the maximum number of shares with respect to which options may be granted
to any individual during the term of the plan may not exceed 500,000 shares of
Biomedicals Common Stock, (iii) consider and vote upon a proposal to approve the
Amended and Restated 1992 Biomedicals Incentive Plan, which amendment and
restatement increased the number of shares of Biomedicals Common Stock available
for grant under the plan from 500,000 to 1,000,000 shares of Biomedicals Common
Stock and provided that the maximum number of shares with respect to which
options may be granted to any individual during the term of the plan may not
exceed 500,000 shares of Biomedicals Common Stock and (iv) consider such other
matters as may properly be brought before the Biomedicals Meeting or any
adjournments or postponements thereof.

THE BIOMEDICALS BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER
AGREEMENT AND THE MERGER AND UNANIMOUSLY RECOMMENDS THAT BIOMEDICALS
STOCKHOLDERS VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE
MERGER. THE BIOMEDICALS BOARD OF DIRECTORS ALSO RECOMMENDS A VOTE FOR THE
ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR THE AMENDED AND RESTATED
BIOMEDICALS PLANS.

The Board of Directors of each of the Merging Companies knows of no other
matters which are likely to come before its respective Meeting. If any other
matters, of which the Boards are not now aware, should properly come before any
or all of the Meetings, it is intended that the person named in the accompanying
form of proxy will vote such proxy in accordance with his best judgment on such
matters.

VOTES REQUIRED

ICN. The affirmative vote of a majority of the outstanding shares of ICN
Common Stock is required to approve and adopt the Merger Agreement and the
Merger. Each share of ICN Common Stock is entitled to one vote. Abstention from
voting on the Merger Agreement or a broker non-vote on such matter will have the
practical effect of voting against such matter since it is one less vote for
approval. The affirmative vote of a plurality of the votes cast by the holders
of the shares of ICN Common Stock present in person or represented by proxy at
the ICN Meeting and entitled to vote thereat is required to elect directors.
Abstentions and broker non-votes in connection with the election of directors
will have no effect on such matter since directors are elected by a plurality of
the votes cast at the ICN Meeting. The affirmative vote of the holders of a
majority of the shares of ICN Common Stock present in person or represented by
proxy at the ICN Meeting and entitled to vote is required to approve the Amended
and Restated ICN Plans. Abstention from voting on the Amended and Restated ICN
Plans will have the practical effect of voting against such matters since it is
one less vote for approval. Broker non-votes on the Amended and Restated ICN
Plans will have no impact on such matters since they are not considered "shares
present" for voting purposes.

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At September 23, 1994, ICN's directors and executive officers may be deemed
to be beneficial owners of 640,772 shares of ICN Common Stock or approximately
3% of the then outstanding shares of ICN Common Stock. The directors and
executive officers of ICN have indicated that they intend to vote their shares
for approval and adoption of the Merger Agreement and the Merger, for the
election of the nominees for director and in favor of the Amended and Restated
ICN Plans.

SPI. The affirmative vote of a majority of the outstanding shares of SPI
Common Stock is required to approve and adopt the Merger Agreement and the
Merger. Each share of SPI Common Stock is entitled to one vote. Abstention from
voting on the Merger Agreement or a broker non-vote on such matter will have the
practical effect of voting against such matter since it is one less vote for
approval. The affirmative vote of a plurality of the votes cast by the holders
of the shares of SPI Common Stock present in person or represented by proxy at
the SPI Meeting and entitled to vote thereat is required to elect directors.
Abstentions and broker non-votes in connection with the election of directors
will have no effect on such matter since directors are elected by a plurality of
the votes cast at the SPI Meeting. The affirmative vote of the holders of a
majority of shares of SPI Common Stock present in person or represented by proxy
at the SPI Meeting and entitled to vote is required to approve the Amended and
Restated SPI Plans. Abstention from voting on the Amended and Restated SPI Plans
will have the practical effect of voting against such matters since it is one
less vote for approval. Broker non-votes on the Amended and Restated SPI Plans
will have no impact on such matters since they are not considered "shares
present" for voting purposes.

At September 23, 1994, SPI's directors and executive officers may be deemed
to be beneficial owners of 116,861 shares of SPI Common Stock, or approximately
.56% of the then outstanding shares of SPI Common Stock. The directors and
executive officers of SPI have indicated that they intend to vote their shares
for approval and adoption of the Merger Agreement and the Merger, for the
election of the nominees for director and in favor of the Amended and Restated
SPI Plans. IN ADDITION, ICN OWNS APPROXIMATELY 39% OF THE OUTSTANDING SHARES OF
SPI COMMON STOCK AND INTENDS TO VOTE ALL OF SUCH SHARES OF SPI COMMON STOCK FOR
THE APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER, FOR THE
ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR APPROVAL OF THE AMENDED AND
RESTATED SPI PLANS.

Viratek. The affirmative vote of a majority of the outstanding shares of
Viratek Common Stock is required to approve and adopt the Merger Agreement and
the Merger. Each share of Viratek Common Stock is entitled to one vote.
Abstention from voting on the Merger Agreement or a broker non-vote on such
matter will have the practical effect of voting against such matter since it is
one less vote for approval. The affirmative vote of a plurality of the votes
cast by the holders of the shares of Viratek Common Stock present in person or
represented by proxy at the Viratek Meeting and entitled to vote thereat is
required to elect directors. Abstentions and broker non-votes in connection with
the election of directors will have no effect on such matter since directors are
elected by a plurality of the votes cast at the Viratek Meeting. The affirmative
vote of the holders of a majority of shares of Viratek Common Stock present in
person or represented by proxy at the Viratek Meeting and entitled to vote is
required to approve the Amended and Restated Viratek Plans. Abstention from
voting on the Amended and Restated Viratek Plans will have the practical effect
of voting against such matters since it is one less vote for approval. Broker
non-votes on the Amended and Restated Viratek Plans will have no impact on such
matters since they are not considered "shares present" for voting purposes.

At September 23, 1994, Viratek's directors and executive officers may be
deemed to be beneficial owners of 33,471 shares of Viratek Common Stock, or
approximately .18% of the then outstanding shares of Viratek Common Stock. The
directors and executive officers of Viratek have indicated that they intend to
vote their shares for approval and adoption of the Merger Agreement, for the
election of the nominees for director and in favor of the Viratek Plan
Amendments. IN ADDITION, ICN OWNS APPROXIMATELY 63% OF THE OUTSTANDING SHARES OF
VIRATEK COMMON STOCK AND INTENDS TO VOTE ALL OF SUCH SHARES OF VIRATEK COMMON
STOCK FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT AND THE MERGER, FOR THE
ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR THE AMENDED AND RESTATED VIRATEK
PLANS. THEREFORE, WITH RESPECT TO VIRATEK, ICN WILL CAUSE THE MERGER AGREEMENT
AND THE MERGER TO BE ADOPTED WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER OF
VIRATEK. ICN WILL ALSO CAUSE THE NOMINEES FOR DIRECTOR TO BE ELECTED AND THE
AMENDED AND RESTATED VIRATEK PLANS TO BE APPROVED.

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Biomedicals. The affirmative vote of a majority of the outstanding shares
of Biomedicals Common Stock is required to approve and adopt the Merger
Agreement and the Merger. Each share of Biomedicals Common Stock is entitled to
one vote. Abstention from voting on the Merger Agreement or a broker non-vote on
such matter will have the practical effect of voting against such matter since
it is one less vote for approval. The affirmative vote of a plurality of the
votes cast by the holders of the shares of Biomedicals Common Stock present in
person or represented by proxy at the Biomedicals Meeting and entitled to vote
thereat is required to elect directors. Abstentions and broker non-votes in
connection with the election of directors will have no effect on such matter
since directors are elected by a plurality of the votes cast at the Biomedicals
Meeting. The affirmative vote of the holders of a majority of shares of
Biomedicals Common Stock present in person or represented by proxy at the
Biomedicals Meeting and entitled to vote is required to approve the Amended and
Restated Biomedicals Plans. Abstention from voting on the Amended and Restated
Biomedicals Plans will have the practical effect of voting against such matters
since it is one less vote for approval. Broker non-votes on the Amended and
Restated Biomedicals Plans will have no impact on such matters since they are
not considered "shares present" for voting purposes.

At September 23, 1994, Biomedicals' directors and executive officers may be
deemed to be beneficial owners of 30,367 shares of Biomedicals Common Stock
approximately 0.34% of the outstanding shares of Biomedicals Common Stock. The
directors and executive officers of Biomedicals have indicated that they intend
to vote their shares for approval and adoption of the Merger Agreement and the
Merger, for the election of the nominees for director and in favor of the
Amended and Restated Biomedicals Plans. IN ADDITION, ICN OWNS APPROXIMATELY 69%
OF THE OUTSTANDING SHARES OF BIOMEDICALS COMMON STOCK AND INTENDS TO VOTE ALL OF
SUCH SHARES OF BIOMEDICALS COMMON STOCK FOR APPROVAL AND ADOPTION OF THE MERGER
AGREEMENT AND THE MERGER, FOR THE ELECTION OF THE NOMINEES FOR DIRECTOR AND FOR
THE AMENDED AND RESTATED BIOMEDICALS PLANS. THEREFORE, WITH RESPECT TO
BIOMEDICALS, ICN WILL CAUSE THE MERGER AGREEMENT AND THE MERGER TO BE ADOPTED
WITHOUT THE VOTE OF ANY OTHER STOCKHOLDER OF BIOMEDICALS. ICN WILL ALSO CAUSE
THE NOMINEES FOR DIRECTOR TO BE ELECTED AND THE AMENDED AND RESTATED BIOMEDICALS
PLANS TO BE APPROVED.

PROXIES

Shares of ICN Common Stock, SPI Common Stock, Viratek Common Stock and
Biomedicals Common Stock, as the case may be, represented by properly executed
proxies received at or prior to the appropriate meeting and which have not been
revoked will be voted in accordance with the instructions indicated therein. If
no instructions are indicated, such proxies will be voted FOR approval and
adoption of the Merger Agreement and the Merger, FOR the election of the
nominees for director, FOR approval of the Amended and Restated ICN Plans, SPI
Plans, Viratek Plans and Biomedicals Plans and in the discretion of the proxy
holder as to any other matter which may properly come before the appropriate
meeting.

A stockholder of any of the Merging Companies who has given a proxy may
revoke such proxy at any time prior to its exercise at the appropriate meeting
by (i) giving written notice of revocation to the Secretary of ICN, SPI, Viratek
or Biomedicals, as the case may be, (ii) properly submitting to the appropriate
Merging Company a duly executed proxy bearing a later date, or (iii) attending
the appropriate meeting and voting in person. Attendance at the meeting will not
in and of itself revoke a proxy. All written notices of revocation and other
communications with respect to revocation of proxies should be addressed to the
applicable Merging Company as follows: 3300 Hyland Avenue, Costa Mesa,
California 92626, Attention: Secretary.

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have been voted at the original convening of the meeting (except for any proxies
which have theretofore effectively been revoked or withdrawn).

RECORD DATE; SHARES ENTITLED TO VOTE; QUORUM

ICN. Only holders of record of ICN Common Stock at the close of business on
October 3, 1994 will be entitled to receive notice of and to vote at the ICN
Meeting. As of September 23, 1994, ICN had outstanding 20,529,181 shares of ICN
Common Stock. A majority of the outstanding ICN Common Stock entitled to vote
must be represented in person or by proxy at the ICN Meeting in order for a
quorum to be present at the ICN Meeting.

SPI. Only holders of record of shares of SPI Common Stock at the close of
business on October 3, 1994 will be entitled to receive notice of and to vote at
the SPI Meeting. As of September 23, 1994, SPI had outstanding 20,494,139 shares
of SPI Common Stock. A majority of the outstanding shares of SPI Common Stock
entitled to vote must be represented in person or by proxy at the SPI Meeting in
order for a quorum to be present at the SPI Meeting.

Viratek. Only holders of record of Viratek Common Stock at the close of
business on October 3, 1994 will be entitled to receive notice of and to vote at
the Viratek Meeting. As of September 23, 1994, Viratek had outstanding
18,113,149 shares of Viratek Common Stock. A majority of the outstanding Viratek
Common Stock entitled to vote must be represented in person or by proxy at the
Viratek Meeting in order for a quorum to be present at the Viratek Meeting.

Biomedicals. Only holders of record of Biomedicals Common Stock at the
close of business on October 3, 1994 will be entitled to receive notice of and
to vote at the Biomedicals Meeting. As of September 23, 1994, Biomedicals had
outstanding 9,033,873 shares of Biomedicals Common Stock. A majority of the
outstanding Biomedicals Common Stock entitled to vote must be represented in
person or by proxy at the Biomedicals Meeting in order for a quorum to be
present at the Biomedicals Meeting.

NO DISSENTERS' RIGHTS

Under Delaware Law, no holder of Merging Company Common Stock will have
dissenters' rights in connection with, or as a result of, the matters to be
acted upon at the Meetings.

SOLICITATION OF PROXIES

The direct cost of solicitation of the stockholders of each of the Merging
Companies will be paid by the Merging Company which incurs such cost. Such costs
will also include the reimbursement of banks, brokerage firms, nominees,
fiduciaries and custodians for expenses of forwarding solicitation materials to
beneficial owners of shares. In addition to the solicitation of proxies by use
of mail, the directors, officers and employees of the Merging Companies may
solicit proxies personally or by telephone, telegraph or facsimile transmission.
Such directors, officers and employees will not be additionally compensated for
such solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith. In addition, the Merging Companies have retained Georgeson
& Company to assist in soliciting proxies and to provide proxy materials to
banks, brokerage firms, nominees, fiduciaries and other custodians. For such
services, the Merging Companies will pay to Georgeson & Company a fee of
approximately $50,000 plus expenses.

STOCKHOLDERS SHOULD NOT SEND STOCK
CERTIFICATES WITH THEIR PROXY CARDS

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THE MERGER
GENERAL

Subject to the terms and conditions thereof, the Merger Agreement provides
for a business combination among each of the Merging Companies and New ICN in
which each of the Merging Companies (other than Biomedicals) would be merged
with and into New ICN and Biomedicals would be merged with and into a wholly
owned subsidiary of New ICN. In the Merger, the holders of shares of ICN Common
Stock, SPI Common Stock, Viratek Common Stock and Biomedicals Common Stock would
be issued New ICN Shares in a transaction intended to qualify as a tax-free
reorganization for federal income tax purposes. The discussion in this Joint
Proxy Statement/Prospectus of the Merger and the description of the Merger's
principal terms are subject to and qualified in their entirety by reference to
the Merger Agreement, a copy of which is attached to this Joint Proxy
Statement/Prospectus as Appendix A and which is incorporated herein by
reference.

BACKGROUND OF THE MERGER

Following an analysis by the Merging Companies' senior management of the
Merging Companies' respective financial and strategic alternatives available to
enhance stockholder value, in May 1994, such senior management determined that a
combination of the four Merging Companies would enhance stockholder value of
each Merging Company by eliminating unnecessary duplication of certain costs and
placing the Merging Companies in a position to take advantage of certain
synergies. In addition, senior management believed that in light of industry
competition, it was necessary to combine the Merging Companies in order to
enable the combined entity to compete more effectively within the pharmaceutical
industry by giving the combined entity greater resources, improved business
opportunities and enhanced access to the financial markets. On June 14, 1994,
the Board of Directors of each of ICN, SPI, Viratek and Biomedicals met in a
joint session at which the management of the Merging Companies made a
presentation concerning the proposed Merger. At the joint session, each Board
elected its respective Special Committee. The ICN Special Committee consists of
Senator Birch E. Bayh, Dr. Weldon B. Jolley and Mr. Richard W. Starr. The SPI
Special Committee consists of Messrs. Alan F. Charles, Charles T. Manatt, James
P. Miscoll and Stephen D. Moses. The Viratek Special Committee consists of Dr.
Vernon Knight and the Biomedicals Special Committee consists of Mr. Thomas H.
Lenagh. For information concerning the members of the Special Committees, see
"Management and Operations of New ICN after the Merger -- Directors after the
Merger." Immediately following the joint meeting of the Boards of Directors,
each Special Committee held its first meeting to consider the Merger and each
Special Committee retained financial and legal advisors. A preliminary draft of
a merger agreement was circulated at or about this time, and the parties and
their representatives attempted to negotiate various terms of a proposed
agreement. At the same time, each of the Merging Companies conducted due
diligence investigations of the other Merging Companies.

While this due diligence was being conducted, the respective financial
advisors for each Merging Company held several joint meetings to discuss the
transaction and the relative value of each individual Merging Company. The
purpose of these meetings was to assist the Special Committees in establishing
the applicable Exchange Ratio to be used for each of the Merging Companies'
Common Stock in the Merger. During the same period, each of the Special
Committees held several meetings with their financial and legal advisors. On
July 12 and 13, the Boards of Directors of the four Merging Companies held
regularly scheduled board meetings at which the Merger was discussed. In late
July, the proposed Exchange Ratios were negotiated. The proposed Exchange Ratios
were determined based on the average closing share prices of the Merging
Companies for the 21 trading days between June 23 and July 22, 1994, inclusive,
and the number of shares of Merging Company Common Stock outstanding as of June
30, 1994.

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After the applicable Exchange Ratios were determined, each of the Special
Committees of the Boards of Directors of the Merging Companies held meetings
during the period from July 28 to August 1, 1994 to consider the proposed Merger
Agreement and the transactions contemplated thereby, including the proposed
applicable Exchange Ratio as well as the other provisions contained in the
Merger Agreement. Each of the Special Committees met with their respective
financial and legal advisors and, after receiving financial presentations and
reviewing fairness opinions to be delivered to the respective Boards of
Directors, each of the Special Committees resolved to recommend to its Board of
Directors to approve the Merger. After those meetings, the respective Boards of
Directors then each held meetings on August 1, 1994, at which time the
investment bank for each Merging Company delivered its opinion to the respective
Board of Directors that, based upon the matters presented to such investment
bank, as of such date, the applicable Exchange Ratio was fair, from a financial
point of view, to the stockholders of the respective Merging Company (other than
ICN in the case of SPI, Viratek and Biomedicals). After consideration, each of
the Merging Companies' Boards of Directors unanimously approved the Merger
Agreement and the transactions contemplated thereby, and authorized their
respective Merging Company to enter into the Merger Agreement.

As set forth above, the Exchange Ratios were calculated based on the
average closing share prices of the Merging Companies for the 21 trading days
between June 23 and July 22, 1994, inclusive, and the number of shares of
Merging Company Common Stock outstanding as of June 30, 1994. The Merging
Companies determined to use this method because they believed it was fair and
the best one available given the capital structure of the Merging Companies and
the nature of the transaction, particularly given ICN's ownership interest in
the other Merging Companies (which interest will be cancelled in the Merger) and
the fact that the stockholders of each of the Merging Companies will have a
continuing equity interest in New ICN. The Merging Companies were advised by
their respective investment banking advisors that the Exchange Ratio was fair to
their respective stockholders.The decision to use what is essentially a
one-month time period for the calculation was made because the Merging Companies
believed that one month would be of sufficient duration to eliminate the effect
of very short-lived changes in the relative values of the four Merging
Companies, yet would be long enough to ensure that the effect of outside general
economic influences would be reflected fairly on all four of the Merging
Companies. There are, of course, risks involved in using this method, as the
market may overvalue or undervalue one or more of the Merging Companies. In
addition, the market may assign different multiples to each company based on its
profile; for example, Viratek is essentially a research and development company,
while SPI is engaged in the manufacture and sale of pharmaceutical products.
Finally, the Special Committees believed that the existence of ICN, which has
varying degrees of control or influence over the other three Merging Companies,
has an effect on the market prices of those three companies. Allowing the market
to establish the Exchange Ratios, however, eliminates the potential for
conflicts of interest among the Merging Companies which might unfairly affect
the relative values of the Merging Companies. Consequently, in light of all of
these factors, the Merging Companies believed that the method used, which
essentially accepted the market's relative valuation of the Merging Companies,
was the best way to establish relative values and one that was most fair to the
stockholders of the Merging Companies.

ADVANTAGES AND DISADVANTAGES OF THE MERGER TO STOCKHOLDERS OF THE MERGING
COMPANIES

The Merger has both advantages and disadvantages for stockholders of the
Merging Companies. Some of the advantages of the Merger include the following:

- All of the stockholders should gain increased liquidity because of
the increased capitalization of New ICN compared to the four Merging
Companies on a stand-alone basis;

- The creation of a more fully integrated pharmaceutical company which
will be potentially more easily understood in the financial community;

- New ICN should enjoy increased access to the capital markets due to
its simplified structure and greater resources;

- The elimination of potential conflicts of interest among the Merging
Companies and the direct access for New ICN to Viratek's and Biomedicals'
products;

- The elimination of a controlling or significant shareholder in the
form of ICN, which may enhance the value of New ICN shares; and

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<PAGE> 58

- The opportunities for economies of scale and operating efficiencies
that should result from the Merger.

The Merger also has certain disadvantages for stockholders of the Merging
Companies, including the following:

- New ICN's Certificate of Incorporation and by-laws will contain
certain anti-takeover provisions (discussed below in "Comparative Rights of
Stockholders") which do not currently exist in the Merging Companies'
certificates and by-laws and, as described below, New ICN plans to adopt a
shareholder rights plan; these provisions could have the effect of
discouraging unsolicited acquisition proposals or making it more difficult
for a third party to gain control of New ICN;

- The shareholders of SPI will most likely experience dilution in book
value per share and net income per share; and

- The benefits of the Merger may not be achieved and the process of
combining the organizations could cause the interruption of, or loss of
momentum in, the activities of any or all of the Merging Companies'
businesses, which could have an adverse effect on New ICN.

REASONS FOR THE MERGER; RECOMMENDATIONS OF THE SPECIAL COMMITTEES AND THE BOARDS
OF DIRECTORS

ICN. The ICN Board of Directors believes that the terms of the Merger
Agreement and the transactions contemplated thereby are fair to and in the best
interests of ICN and its stockholders. At a meeting on July 29, 1994, the ICN
Special Committee resolved to recommend to ICN's Board of Directors that the
Board approve the Merger Agreement and the Merger. On August 1, 1994, ICN's
Board approved the Merger Agreement and the Merger and unanimously recommended
approval thereof by the stockholders of ICN. In reaching its determination, the
ICN Special Committee and the Board of Directors consulted with ICN management,
as well as its legal counsel and its financial advisors, and considered a number
of factors, including, without limitation, the following:

(i) ICN's strategic alternatives, including remaining a separate
company, and divesting of certain assets to repay indebtedness;

(ii) ICN's financial alternatives, including a recapitalization and
other releveraging transactions;

(iii) information concerning the financial performance, financial
condition, business operations and prospects of the Merging Companies;

(iv) the opportunities for economies of scale and operating
efficiencies that should result from the Merger, particularly in terms of
the integration of office facilities, information systems support functions
and the combined purchasing power of the four corporations;

(v) improvement afforded by the Merger in New ICN's ability to access
the capital markets and otherwise increase its financial flexibility due to
its increased capitalization, simplified capital structure and greater
resources which will be available to the combined entity;

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<PAGE> 59

(vi) the terms and conditions of the Merger Agreement, including that
the Merger will be a tax-free reorganization for federal income tax
purposes;

(vii) the elimination of potential conflicts of interest when dealing
with SPI, Viratek and Biomedicals;

(viii) the creation of a more fully integrated pharmaceutical company
which would be potentially more easily understood in the financial
community;

(ix) the ICN Exchange Ratio and recent trading prices for ICN Common
Stock;

(x) the net operating losses which exist at ICN which are currently
used to shelter capital gains can be used, subject to certain limitations,
to shelter net income produced by SPI;

(xi) the improved liquidity which would be provided to ICN's
stockholders as a result of the larger capitalization of New ICN as
compared to ICN; and

(xii) the financial presentation and the opinion, dated August 1,
1994, of Prudential Securities that, as of such date, the ICN Exchange
Ratio was fair to the holders of ICN Common Stock from a financial point of
view.

The Board of Directors of ICN believes that the Merger offers the
opportunity to create a combined company with greater financial resources and
flexibility, competitive strengths and business opportunities than would be
possible for ICN alone. In connection with the consideration by ICN's management
and the ICN Board of Directors of ICN's alternatives to the Merger, none of the
other strategic alternatives, such as a recapitalization or divestitures, were
actively considered and no other offers were solicited or entertained.

In view of the wide variety of factors considered in connection with its
evaluation of the proposed Merger, the ICN Board of Directors did not find it
practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination.

THE BOARD OF DIRECTORS OF ICN UNANIMOUSLY RECOMMENDS THAT ICN STOCKHOLDERS
VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER.

SPI. The SPI Board of Directors believes that the terms of the Merger
Agreement and the transactions contemplated thereby are fair to and in the best
interests of SPI and its stockholders. At a meeting on July 28, 1994, the SPI
Special Committee resolved to recommend to SPI's Board of Directors that the
Board approve the Merger Agreement and the Merger. On August 1, 1994, SPI's full
Board unanimously approved the Merger Agreement and the Merger and recommended
approval thereof by the stockholders of SPI. In reaching its determination, the
SPI Special Committee and the Board of Directors consulted with SPI management,
as well as its financial and legal advisors, and considered a number of factors,
including, without limitation, the following:

(i) the number of publicly held shares of the combined company will be
considerably larger than SPI's current number of publicly held shares,
providing SPI stockholders with enhanced liquidity;

(ii) the Merging Companies' business, operations and prospects;

(iii) the opportunities for economies of scale and operating
efficiencies that should result from the Merger, particularly in terms of
the integration of office facilities, information systems and support
functions;

(iv) the SPI Exchange Ratio and recent trading prices for SPI Common
Stock;

(v) the financial presentation and the opinion of Wertheim Schroder
that the SPI Exchange Ratio was fair to the holders of SPI Common Stock
(other than ICN as to which no opinion was given) from a financial point of
view;

(vi) the Merger would provide direct access to Viratek's research and
development resources, including its scientific expertise, and eliminate
SPI's royalty obligation to Viratek;

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(vii) the contribution of Biomedicals' resources, including its
marketing capabilities;

(viii) the availability of the other Merging Companies' net operating
loss carryforwards;

(ix) the terms and conditions of the Merger Agreement, including the
condition that the Merger will be a taxfree reorganization for federal
income tax purposes; and

(x) the creation of a more fully integrated pharmaceutical company
which would be potentially more easily understood in the financial
community.

The Board of Directors of SPI believes that the Merger offers the
opportunity to create a combined company with greater financial resources and
flexibility, competitive strengths and business opportunities than would be
possible for SPI alone. In connection with the consideration of the Merger by
SPI's management and Board of Directors, the Board did not actively consider
other strategic alternatives which may have been available to SPI.

In view of the wide variety of factors considered in connection with its
evaluation of the Merger, the SPI Board of Directors did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to the
specific factors considered in reaching its determination.

THE BOARD OF DIRECTORS OF SPI UNANIMOUSLY RECOMMENDS THAT SPI STOCKHOLDERS
VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER.

Viratek. The Viratek Board of Directors believes that the terms of the
Merger Agreement and the transactions contemplated thereby are fair to and in
the best interests of Viratek and its stockholders. At a meeting on August 1,
1994, the Viratek Special Committee resolved to recommend to Viratek's Board of
Directors that the Board approve the Merger Agreement and the Merger. On the
same date, Viratek's Board approved the Merger Agreement and the Merger and
unanimously recommended approval thereof by the stockholders of Viratek. In
reaching its determination, the Viratek Special Committee and the Board of
Directors consulted with Viratek management, as well as its legal counsel and
its financial advisors, and considered a number of factors, including, without
limitation, the following:

(i) Viratek's strategic alternatives, including remaining a separate
company, asset swaps, divesting of certain assets and selling Viratek to
another party;

(ii) Viratek's financial alternatives, including a recapitalization
and other transactions;

(iii) information concerning the financial performance, financial
condition, business operations and prospects of the Merging Companies;

(v) the Merger would improve Viratek's ability to access the capital
markets and otherwise increase its financial flexibility;

(vi) the terms and conditions of the Merger Agreement, including the
condition that the Merger will be a taxfree reorganization for federal
income tax purposes;

(vii) the Viratek Exchange Ratio and recent trading prices for Viratek
Common Stock;

(viii) the improved liquidity which would be provided to Viratek's
stockholders and the opportunity to own a financially stronger company;

(ix) the decreased reliance upon royalties from a single product,
Virazole(R) for respiratory syncytial virus ("RSV"), as Viratek's primary
source of revenue;

(x) the draft appraisal dated July 22, 1994 of certain assets of
Viratek and a limited amount of Biomedicals' assets performed by Houlihan,
Lokey, Howard & Zukin, Inc.;

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<PAGE> 61

(xi) the elimination of possible conflicts of interest between
Viratek, SPI and ICN with respect to the commercial development of
Viratek's products;

(xii) the Merger would provide Viratek with greater resources to fund
its research and enhanced marketing capabilities for its products; and

(xiii) the financial presentation and the opinion of Kemper that the
Viratek Exchange Ratio was fair to the holders of Viratek Common Stock
(other than ICN as to which no opinion was given) from a financial point of
view.

The Board of Directors of Viratek believes that the Merger offers the
opportunity to create a combined company with greater financial resources and
flexibility, competitive strengths and business opportunities than would be
possible for Viratek alone. In connection with the consideration by Viratek's
management and the Viratek Board of Directors of alternatives to the Merger,
none of the other strategic alternatives, such as the sale of assets of Viratek
to another party, were actively considered and no other offers were solicited or
entertained.

In view of the wide variety of factors considered in connection with its
evaluation of the proposed Merger, the Viratek Board of Directors did not find
it practicable to, and did not, quantify or otherwise attempt to assign relative
weights to the specific factors considered in reaching its determination.

THE BOARD OF DIRECTORS OF VIRATEK UNANIMOUSLY RECOMMENDS THAT VIRATEK
STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE MERGER.

Biomedicals. The Biomedicals Board of Directors believes that the terms of
the Merger Agreement and the transactions contemplated thereby are fair to and
in the best interests of Biomedicals and its stockholders. At a meeting on July
31, 1994, the Biomedicals Special Committee resolved to recommend to
Biomedicals' Board of Directors that the Board approve the Merger Agreement and
the Merger. On August 1, 1994, Biomedicals' full Board unanimously approved the
Merger Agreement and the Merger and recommended approval thereof by the
stockholders of Biomedicals. In reaching its determination, the Biomedicals
Special Committee and the Board of Directors consulted with Biomedicals
management, as well as its legal counsel and its financial advisors, and
considered a number of factors, including, without limitation, the following:

(i) Biomedicals' strategic and financial alternatives;

(ii) information concerning the financial performance, financial
condition, business operations and prospects of Biomedicals and the other
Merging Companies;

(iv) the Merger would improve the Merging Companies' ability to access
the capital markets and otherwise increase the financial flexibility of the
combined entity;

(v) the terms and conditions of the Merger Agreement, including the
condition that the Merger will be a taxfree reorganization for federal
income tax purposes;

(vi) the Biomedicals Exchange Ratio and recent trading prices for
Biomedicals Common Stock;

(vii) the nature of the existing market for Biomedicals Common Stock;

(viii) the ability of ICN, as a result of its ownership of more than
69% of the outstanding Biomedicals Common Stock, to influence the direction
of Biomedicals;

(ix) the improved liquidity which would be provided to Biomedicals'
stockholders; and

(x) the financial presentation and the opinion of Jefferies that the
Biomedicals Exchange Ratio was fair to the holders of Biomedicals Common
Stock (other than ICN as to which no opinion was given) from a financial
point of view.

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The Board of Directors of Biomedicals believes that the Merger offers the
opportunity to create a combined company with greater financial resources and
flexibility, competitive strengths and business opportunities than would be
possible for Biomedicals alone. In connection with the consideration by
Biomedical's management and the Biomedicals Board of Directors of Biomedicals'
alternatives to the Merger, none of the other strategic and financial
alternatives, such as a recapitalization, were actively considered and no other
offers were solicited or entertained.

In view of the wide variety of factors considered in connection with its
evaluation of the proposed Merger, the Biomedicals Board of Directors did not
find it practicable to, and did not, quantify or otherwise attempt to assign
relative weights to the specific factors considered in reaching its
determination.

THE BOARD OF DIRECTORS OF BIOMEDICALS UNANIMOUSLY RECOMMENDS THAT
BIOMEDICALS STOCKHOLDERS VOTE TO APPROVE AND ADOPT THE MERGER AGREEMENT AND THE
MERGER.

OPINIONS OF FINANCIAL ADVISORS

ICN.

Prudential Securities has delivered its written opinion dated August 1,
1994 to the Board of Directors of ICN that, as of such date, the ICN Exchange
Ratio is fair to holders of ICN Common Stock from a financial point of view.
Prudential Securities has confirmed such opinion in an opinion dated the date of
this Proxy Statement/Prospectus. A copy of the opinion of Prudential Securities
dated the date of this Proxy Statement/Prospectus, which sets forth the
assumptions made, matters considered and limits on the review undertaken, is
attached as Appendix B to this Proxy Statement/Prospectus and is incorporated
herein by reference. The summary of the opinion of Prudential Securities set
forth in this Proxy Statement/Prospectus is qualified in its entirety by
reference to the full text of such opinion. ICN's stockholders are urged to read
the opinion in its entirety. The August 1, 1994 opinion is substantially
identical to the opinion attached hereto.

Prudential Securities' opinions are directed only to the fairness from a
financial point of view of the ICN Exchange Ratio to the holders of ICN Common
Stock and do not constitute a recommendation to any stockholder as to how such
stockholder should vote at the ICN Meeting.

In arriving at its opinion dated the date of this Proxy
Statement/Prospectus, Prudential Securities reviewed, among other things: (i)
ICN's, Viratek's, Biomedical's and SPI's historical financial data and other
publicly available information for the three years ended December 31, 1993 as
well as interim financial results for the six months ended June 30, 1994; (ii)
certain information, including financial projections, for ICN, Viratek,
Biomedicals, and SPI prepared, in each case, by the respective managements of
each company and financial projections for New ICN prepared by ICN management
relating to the revenues, earnings and cash flow for each of the ICN, Viratek,
Biomedicals, SPI and New ICN businesses; (iii) the pro forma statement of income
for New ICN for the year ended December 31, 1993 and for the six months ended
June 30, 1994 and the pro forma balance sheet for New ICN as of June 30, 1994
prepared by ICN in conjunction with ICN's outside auditors; (iv) industry data
relating to each of ICN's, Viratek's, Biomedicals', SPI's and New ICN's
businesses; (v) the financial terms of the Merger and the financial terms of
certain other transactions Prudential Securities deemed relevant; (vi) the
trading history of the ICN Common Stock, the Viratek Common Stock, the
Biomedicals Common Stock and the SPI Common Stock; (vii) publicly available
information concerning certain other companies Prudential Securities deemed
reasonably similar to ICN, Viratek, Biomedicals, SPI and New ICN and the common
stock trading history for each such comparable company; (viii) the Merger
Agreement; (ix) the Registration Statement on Form S-1 filed with the SEC by New
ICN dated September 14, 1994, as amended, in connection with New ICN's proposed
convertible subordinated debenture financing; and (x) such other studies,
analyses and investigations as Prudential Securities deemed appropriate for the
purposes of its opinion. Prudential Securities met with senior officers of ICN,
Viratek, Biomedicals and SPI to discuss each company's financial condition and
prospects and such other matters as Prudential Securities deemed relevant. Due
to governmental restrictions on business travel to Yugoslavia, Prudential
Securities was not able to visit the operations of ICN Galenika, a subsidiary of
SPI

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located in The Federal Republic of Yugoslavia. Prudential Securities' opinions
were based on economic, financial and market conditions as they existed and
could be evaluated on the dates thereof.

In connection with its review and analysis, Prudential Securities relied
upon the accuracy and completeness of the financial data and other information
provided to it by ICN, Viratek, Biomedicals and SPI or that is publicly
available, and has not independently verified any such information. With respect
to the financial projections prepared by ICN management for New ICN, as well as
the financial projections for Viratek, Biomedicals and SPI, Prudential
Securities made certain modifications to such projections using assumptions less
optimistic than those employed by the ICN, Viratek, Biomedicals and SPI
managements. Prudential Securities neither made nor obtained any independent
appraisals of the properties, facilities or other assets of ICN, Viratek,
Biomedicals or SPI. In addition, Prudential Securities was not authorized by the
ICN Board of Directors or the ICN Special Committee to solicit and has not
solicited, third party indications of interest for the acquisition of ICN or any
interest therein. There were no limitations imposed by ICN or the ICN Special
Committee on the scope of the investigation conducted by Prudential Securities
in connection with its financial review and analysis.

The following is a summary of certain analyses performed by Prudential
Securities in connection with its opinion dated August 1, 1994, which it
presented to the Board of Directors of ICN on that date. These analyses are
substantially similar in nature to analyses presented by Prudential Securities
to the ICN Special Committee at meetings held on July 12, 1994 and July 29,
1994. In connection with its opinion dated the date of this Joint Proxy
Statement/Prospectus, Prudential Securities reviewed and updated as necessary
the analyses performed in connection with its opinion dated August 1, 1994.

For a discussion of the estimated purchase price for New ICN Common Stock
used for purposes of the preparation of the pro forma financial statements for
New ICN, see "Unaudited Pro Forma Combined Condensed Balance Sheet -- Note 10."

(i) Discounted Cash Flow Analysis. Prudential Securities calculated ranges
of equity values for New ICN based upon the discounted present value of its five
year stream of free cash flow and its fiscal year 1999 terminal values based
upon (i) a range of sale multiples of its projected fiscal year 1999 net income
and (ii) its projected 1999 free cash flow assuming a range of growth ratios in
perpetuity. In conducting its analyses, Prudential Securities utilized financial
projections for New ICN provided by the management of ICN ("Management
Projections") and modified such projections on the basis of less optimistic
assumptions. Prudential Securities utilized discount rates ranging from 15% to
24%, terminal net income sale multiples ranging from 10x to 15x 1999 net income
and free cash flow growth rates in perpetuity of 2.0% to 12.0%. Based on these
analyses and after eliminating certain high and low ranges that Prudential
Securities deemed not indicative of New ICN's equity values, Prudential
Securities advised the ICN Board of Directors that a reasonable range of New ICN
Common Stock equity values was $18.04 to $30.83.

(ii) Analysis of Selected Comparable Publicly Traded Companies. Prudential
Securities applied certain pro forma historical and projected financial
information for New ICN to the corresponding publicly available financial
information of certain other fully integrated pharmaceutical, diagnostic,
biotech, research and development and pharmaceutical sales and distribution
companies. Prudential Securities calculated multiples for such companies of the
current stock price to 1993 earnings per share ("EPS"), current fiscal year
projected EPS and next fiscal year projected EPS, and multiples of current total
equity market value plus long-term debt ("Unlevered Market Value") to latest
twelve months ("LTM") earnings before interest, taxes, depreciation and
amortization ("EBITDA"), and total current equity market value to book value.

Prudential Securities selected eight fully integrated pharmaceutical
companies that Prudential Securities determined to be reasonably similar to New
ICN: Bristol Meyers Squibb Co., Forest Labs, Inc., Marion Merrell Dow Inc.,
Merck & Co. Inc., Schering Plough Corp., Smithkline Beecham PLC., Syntex Corp.
and Upjohn Co. (collectively, the "New ICN Comparable Companies"). Applying the
multiples for the New ICN Comparable Companies produced the following results:
(a) current stock price to 1993 EPS yielded a range of 13.6x to 30.5x with an
average of 17.2x; (b) current stock price to current fiscal year projected EPS
yielded a range of 11.0x to 20.0x with an average of 14.3x; (c) current stock
price to next fiscal year projected

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EPS yielded a range of 10.8x to 20.1x with an average of 13.9x; (d) Unlevered
Market Value to LTM EBITDA yielded a range of 4.4x to 14.5x with an average of
9.8x; and (e) total current equity market value to book value yielded a range of
2.4x to 7.0x with an average of 4.0x.

Prudential Securities then calculated aggregate and per share equity values
for New ICN by applying certain pro forma historical and forecasted financial
results for New ICN to the multiples derived from its analyses of the New ICN
Comparable Companies described above. Prudential Securities calculated per share
equity values of New ICN ranging from $1.45 (based on total current equity
market value as a multiple of 1993 earnings divided by the total amount of New
ICN Common Stock to be outstanding) to $66.23 (based on total equity market
value as a multiple of next fiscal year projected earnings based on Management
Projections divided by the total amount of New ICN Common Stock to be
outstanding).

Prudential Securities selected seven companies that Prudential Securities
determined to be reasonably similar to Biomedicals: Bio-Rad Labs Inc.,
BioWhittaker Inc., Diagnostic Products Corp., Landauer Inc., Life Technologies
Inc., Mallinckrodt Group Inc., and Sigma Aldrich Corp. (collectively, the
"Biomedicals Comparable Companies"). Applying the multiples for the Biomedicals
Comparable Companies produced the following results: (a) current stock price to
1993 EPS yielded a range of 14.7x to 52.1x with an average of 26.4x; (b) current
stock price to current fiscal year projected EPS yielded a range of 13.0x to
19.5x with an average of 15.4x; (c) current stock price to next fiscal year
projected EPS yielded a range of 11.2x to 14.8x with an average of 12.6x; (d)
Unlevered Market Value to LTM EBITDA yielded a range of 5.9x to 53.2x with an
average of 15.0x and (e) total current equity market value to book value yielded
a range of 1.3x to 6.0x with an average of 2.7x.

Prudential Securities selected four companies that Prudential Securities
determined to be reasonably similar to Viratek: Alpha 1 Biomedicals Inc.,
Genelabs Technologies, Inc., Gilead Sciences Inc. and Isis Pharmaceuticals Inc.
(collectively, the "Viratek Comparable Companies"). Since none of the Viratek
Comparable Companies have any earnings, it was not possible to derive multiples
of their current stock price as a function of their EPS. The total current
equity market value to book value yielded a range from 1.4x to 4.7x with an
average of 2.3x.

Prudential Securities selected three companies that Prudential Securities
determined to be reasonably similar to SPI: Bergen Brunswig Corp., Mylan Labs
Inc. and Zenith Labs Inc. (collectively, the "SPI Comparable Companies").
Applying the multiples for the SPI Comparable Companies produced the following
results: (a) current stock price to 1993 EPS yielded a range of 18.7x to 23.8x
with an average of 20.4x; (b) current stock price to current fiscal year
projected EPS yielded a range of 9.6x to 19.2x with an average of 14.3x; (c)
current stock price to next fiscal year projected EPS yielded a range of 8.6x to
16.0x with an average of 11.3x; (d) Unlevered Market Value to LTM EBITDA yielded
a range of 9.9x to 17.8x with an average of 12.8x; (e) total current equity
market value to book value yielded a range of 1.3x to 4.7x with an average of
3.5x.

Prudential Securities then calculated aggregate and per share equity values
for New ICN by applying New ICN's pro forma historical and projected financial
results to a weighted average of the multiples derived from its analyses of the
Biomedicals, Viratek and SPI Comparable Companies described above. Prudential
Securities calculated per share equity values of New ICN ranging from $1.57
(based on current stock price as a multiple of 1993 earnings) to $41.84 (based
on current stock price as a multiple of next fiscal year projected earnings as
projected by ICN management).

The summary set forth above does not purport to be a complete description
of the analyses conducted by Prudential Securities or Prudential Securities'
presentation to the ICN Board of Directors. Prudential Securities' analyses must
be considered as a whole and selecting portions of its analyses and the factors
considered by it, without considering all factors and analyses considered by
Prudential Securities, could create an incomplete view of the process underlying
its opinions. The preparation of a fairness opinion is a complex process that is
not purely mathematical and is not necessarily susceptible to partial analysis
or summary description, rather it involves complex considerations and
judgements. In performing its analyses, Prudential Securities made numerous
assumptions with respect to industry performance, general business and economic
conditions and other matters, many of which are beyond the control of ICN,
Biomedicals, Viratek, SPI and

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New ICN. Any estimates contained in the analyses performed by Prudential
Securities are not necessarily indicative of actual values or actual future
results, which may be significantly more or less favorable than those suggested
by Prudential Securities' analyses. In addition, analyses relating to equity
values do not purport to be appraisals or to reflect the prices at which such
equity may actually trade or be sold. Because such estimates are inherently
subject to uncertainty, none of ICN, Prudential Securities or any other person
assumes responsibility for their accuracy.

ICN selected Prudential Securities to provide a fairness opinion because it
is an internationally recognized investment banking firm engaged in the
valuation of businesses and their securities in connection with mergers and
acquisitions and for other purposes and has substantial experience in
transactions similar to the Merger. ICN engaged Prudential Securities to render
its opinion as to whether the ICN Exchange Ratio is fair to the ICN stockholders
from a financial point of view. For Prudential Securities' services performed in
rendering the fairness opinion, ICN paid Prudential Securities a fee of
$500,000. In addition, the engagement letter with Prudential Securities provides
that ICN will reimburse Prudential Securities for its reasonable out-of-pocket
expenses (including reasonable fees and expenses of its legal counsel) and will
indemnify Prudential Securities and certain related persons against certain
liabilities, including liabilities under securities laws, arising out of the
Merger or its engagement.

In the ordinary course of its business, Prudential Securities may trade the
ICN Common Stock, the Biomedicals Common Stock, the SPI Common Stock and the
Viratek Common Stock for its own account and the accounts of customers, and
Prudential Securities may at any time hold a long or short position in such
securities.

At August 31, 1994, ICN had outstanding an aggregate of $4,560,000 of
margin borrowings with Prudential Securities. All of such margin borrowings are
collateralized by SPI Common Stock and Viratek Common Stock owned by ICN and
will be repaid out of the net proceeds of the Financing.

SPI.

The SPI Special Committee has retained Wertheim Schroder to act as its
exclusive financial adviser in connection with its consideration of the Merger
Agreement. Wertheim Schroder is a nationally recognized investment banking firm
and, as part of its business, is engaged in the valuation of businesses and
their securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
valuations for estate, corporate and other purposes. The SPI Special Committee
selected Wertheim Schroder to act as its financial adviser based on Wertheim
Schroder's experience in valuations of companies and their securities in
general, and their familiarity with SPI and the other Merging Companies based on
prior engagements. No limitations were imposed by the SPI Special Committee or
SPI on the scope of the investigations by Wertheim Schroder or the procedures
followed by Wertheim Schroder in connection with the rendering of its opinion.
Wertheim Schroder was not authorized to, nor did it, solicit any indications of
interest from any other party in connection with an acquisition of, or merger
with, SPI. In addition to its engagement by SPI, Wertheim Schroder will act as
lead manager of the Financing.

On July 28, 1994, Wertheim Schroder orally advised the SPI Special
Committee that, based on various considerations and assumptions, it was of the
opinion, as investment bankers, that as of such date, the SPI Exchange Ratio as
then currently proposed is fair, from a financial point of view, to the holders
(other than ICN) of SPI Common Stock. Wertheim Schroder subsequently confirmed
its oral opinion by delivering to the Board of Directors of SPI its written
opinion dated July 28, 1994. A subsequent written opinion, dated the date of
this Proxy Statement/Prospectus, was also delivered to the Board of Directors of
SPI, which opinion is substantially identical to the July 28, 1994 opinion. The
full text of Wertheim Schroder's written opinion, dated the date of the Proxy
Statement/Prospectus, which has set forth the assumptions made, procedures
followed, matters considered and limits of its review is attached hereto as
Appendix C and is incorporated by reference herein. The following summary is
qualified in its entirety by reference to the full text of such opinion. Holders
of SPI Common Stock are urged to and should read such opinion in its entirety.
Wertheim Schroder's

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opinion does not constitute a recommendation to holders of SPI Common Stock as
to how to vote on the Merger at the SPI Meeting.

In connection with its opinion, Wertheim Schroder reviewed, among other
things, (a) the Annual Reports on Form 10-K for the fiscal years ended December
31, 1991, 1992 and 1993 for each of the Merging Companies, as filed with the
Commission (including the respective Form 10K/As filed by the Merging Companies
for the fiscal year ended December 31, 1993), (b) Quarterly Reports on Form 10-Q
for the fiscal quarters ended March 31, 1994 and June 30, 1994 for each of the
Merging Companies, as filed with the Commission, and the internal unaudited
financial statements of SPI for the fiscal quarter ended June 30, 1994, (c)
certain other information, including financial forecasts and pro forma financial
information, provided to Wertheim Schroder by the Merging Companies, including
during meetings with certain members of management of the Merging Companies, (d)
the reported prices and historical trading activity of SPI Common Stock, ICN
Common Stock, Viratek Common Stock and the Biomedicals Common Stock, and the
public market valuation multiples of companies Wertheim Schroder deemed to be
reasonably similar to SPI and the other Merging Companies, (e) the financial
terms, to the extent publicly available, of certain comparable acquisition
transactions and (f) the Merger Agreement, and performed such other analyses and
reviewed and analyzed such other information as Wertheim Schroder deemed
appropriate. Wertheim Schroder also reviewed and discussed with certain members
of the management of the Merging Companies, certain internal financial
statements and financial operating data concerning the Merging Companies
prepared by the respective Merging Companies, and certain other financial
information prepared by the management of SPI, including certain projections.
Wertheim Schroder also participated in discussions and negotiations among
representatives of SPI and the other Merging Companies. In rendering its
opinion, Wertheim Schroder relied, with the permission of the SPI Special
Committee, upon the accuracy and completeness of all information supplied or
otherwise made available to it by SPI and the other Merging Companies, and
Wertheim Schroder did not assume any responsibility to independently verify such
information, or undertake an independent appraisal of the assets or liabilities
(contingent or otherwise) of the Merging Companies and was not furnished with
such appraisals, other than the appraisal dated July 22, 1994 of certain assets
of Viratek performed by Houlihan, Lokey, Howard & Zukin, Inc. ("Houlihan
Lokey"). With respect to financial projections used for purposes of Wertheim
Schroder's analysis, Wertheim Schroder was advised by the Merging Companies, and
it assumed without any responsibility to verify, that the projections were
reasonably prepared and reflected the best currently available estimates and
judgment of senior management of the Merging Companies as to the expected future
financial performance of the Merging Companies. Wertheim Schroder also reviewed
and discussed with management of SPI the various competitive factors affecting
the pharmaceutical industry, the strategic benefits of the Merger to SPI, and
the strategies that might be pursued by SPI as an alternative to the Merger and
the potential effect of each on SPI's future results.

The SPI Exchange Ratio (and the ICN Exchange Ratio, the Viratek Exchange
Ratio and the Biomedicals Exchange Ratio) are based upon the relative market
values of the Common Stock of each of the Merging Companies, which was
calculated using an average of the closing sales prices of such Common Stock for
the 21 trading days immediately preceding July 22, 1994. After giving effect to
the Merger and the issuance of New ICN Shares, the public holders of SPI Common
Stock, ICN Common Stock, Viratek Common Stock and Biomedicals Common Stock will
own approximately 46.48%, 38.98%, 12.51% and 2.03%, respectively, of the
outstanding New ICN Shares.

The following is a summary of each of the financial analyses utilized by
Wertheim Schroder in connection with its oral advice to the SPI Special
Committee on July 28, 1994, and its July 28, 1994 opinion to the SPI Special
Committee. It does not purport to be a complete description of such analyses
performed by Wertheim Schroder.

Market Value Contribution Analysis. Wertheim Schroder reviewed the
percentage of New ICN Shares to be received by the non-ICN holders of SPI Common
Stock in the Merger and compared this number to the percentage of New ICN Shares
they would have received had the SPI Exchange Ratio been based on the average
trading prices of the Common Stock of each of the Merging Companies over various
periods during the prior three years. The trading periods analyzed by Wertheim
Schroder were over the six month period ended July 22, 1994, and the one, two
and three year periods ended July 22, 1994. Wertheim Schroder

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calculated that such percentages would have ranged from 39.52% to 44.17%, as
compared to the 46.48% implied by the SPI Exchange Ratio.

Financial Contribution Analysis. Wertheim Schroder analyzed the relative
contribution of such financial measures as Revenues, earnings before interest
and taxes ("EBIT"), earnings before interest, taxes, depreciation and
amortization ("EBITDA") and Net Income of SPI and the other Merging Companies to
New ICN on an historical and projected basis, and the contribution of book value
of SPI and the other Merging Companies to New ICN on an historical basis.
Wertheim Schroder calculated that SPI's projected relative contributions ranged
from 71.9% to 94.2% over the projection periods 1994 to 1999, and calculated
that the relative proportion of New ICN Shares to be received by all holders of
SPI Common Stock (including ICN) was approximately 76.0%, which fell within this
range.

Historical and Projected Financial Statement Analysis. Wertheim Schroder
reviewed and analyzed certain historical proforma financial data for the year
ended December 31, 1993 and projected financial data for the years 1994 to 1999
for New ICN, and compared such data to the historical and projected results for
SPI for similar periods. Wertheim Schroder noted that holders of SPI Common
Stock would experience dilution in book value per share on a pro forma basis and
dilution in pro forma net income per share on a short-term basis.

Net Adjusted Asset Valuation Analysis of ICN. Due to ICN's structure,
Wertheim Schroder completed a net asset valuation analysis of ICN. Under this
methodology, Wertheim Schroder aggregated the estimated value of ICN's material
assets, including its shareholdings in the Merging Companies, and deducted all
material financial obligations of ICN. Wertheim Schroder estimated such value to
be approximately $173 million as compared to a current market capitalization for
ICN of $187 million at July 27, 1994.

Comparable Publicly Traded Company Analysis. Wertheim Schroder prepared a
valuation based on comparable publicly traded companies. For the valuations of
New ICN and SPI, Wertheim Schroder considered Abbott Laboratories, A.L.
Laboratories, Inc., American Cyanamid Company, American Home Products
Corporation, Astra AB, Bristol Meyers Squibb Company, Ciba Geigy AG, Eli Lilly
and Company, Forest Laboratories, Inc., Glaxo Holdings plc, Medeva plc, Merck &
Co., Inc., Pfizer, Inc., Rhone-Poulenc Rorer Inc., Roberts Pharmaceutical
Corporation, Roche Holding AG, Schering-Plough Corporation, Smith-Kline Beecham
plc, The Upjohn Company, Warner-Lambert Company and Wellcome plc. as comparable
publicly traded pharmaceutical companies. Wertheim Schroder compared Viratek to
other publicly traded research and development companies engaged in anti-viral
research such as Alpha Beta Technology, Inc., Genelabs Technologies, Inc.,
Gilead Sciences, Inc., Interferon Sciences, Inc., Isis Pharmaceuticals, Inc.,
MedImmune Inc., Protein Design Labs, Inc., SciClone Pharmaceuticals, Inc. and
Shaman Pharmaceuticals, Inc. For the valuation of Biomedicals, Wertheim Schroder
considered BioWhittaker, Inc., Diagnostic Products Corporation, Hycor
Biomedical, Inc., Landauer, Inc., Life Technologies, Inc., Mallinckrodt Group,
Inc. and Sigma-Aldrich Corporation as comparable publicly traded companies. Due
to ICN's structure, Wertheim Schroder did not view comparable companies analysis
as being relevant for ICN.

Wertheim Schroder reviewed historical financial information for each of
these comparable companies and identified a range of multiples to Revenues, EBIT
and EBITDA, respectively, at which businesses similar to New ICN and SPI,
individually, traded in the public markets. The stock of such pharmaceutical
companies traded in the public markets at multiples of Revenues, EBIT and EBITDA
ranging from 0.9x to 5.0x, 7.8x to 14.5x, and 5.7x to 11.6x, respectively. The
stock of publicly traded research and development companies engaged in
anti-viral research traded at multiples of Revenues and Total Research and
Development Expense from 5.8x to 13.7x and 0.9x to 4.6x, respectively. The stock
of diagnostic clinical producing companies traded in the public markets at
multiples of Revenues, EBIT and EBITDA ranging from 1.3x to 2.7x, 9.4x to 14.8x
and 7.6x to 8.2x, respectively. Because of the wide range of multiples for
research and development companies which was observed by Wertheim Schroder, and
the relative lack of historical earnings for these companies, Wertheim Schroder
believes that the comparable companies analysis was not a reliable indicator of
value for Viratek.

Wertheim Schroder then applied these multiple ranges to the respective
historical and pro forma financial results of each of New ICN and the Merging
Companies for the twelve months ended March 31, 1994

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("LTM"). Using an average of the valuations derived from multiples of Revenues,
EBIT and EBITDA, Wertheim Schroder determined a range of enterprise values for
New ICN, SPI and Biomedicals from which it subtracted each such company's debt
and added its excess cash to determine a range of values for each such company's
equity capital. Wertheim Schroder then calculated an enterprise value range of
$8.27 to $39.94 per New ICN Share, a range of $13.05 to $48.17 per share of SPI
Common Stock, a range of $3.14 to $9.46 per share of Viratek Common Stock and a
range of $0 to $2.57 per share of Biomedicals Common Stock. Due to ICN's
structure, Wertheim Schroder did not view this analysis as being relevant for
ICN.

Comparable Acquisition Transactions. Wertheim Schroder prepared a valuation
based on selected merger and acquisition transactions involving pharmaceutical
companies, research and development companies and diagnostic companies. From its
review of the transactions, Wertheim Schroder identified ranges of multiples of
Revenues, EBIT and EBITDA at which businesses similar to those of the Merging
Companies have been acquired in the past. The multiple ranges were 1.8x to 3.2x
for the LTM revenues, 9.8x to 23.5x for the LTM EBIT and 8.0x to 16.9x for the
LTM EBITDA, respectively. Using an average of the valuation ranges, Wertheim
Schroder derived an enterprise valuation range of $649 million to $1,350 million
for New ICN, $524 million to $1,083 million for SPI, $13 million to $23 million
for Viratek and $55 million to $108 million for Biomedicals. Due to ICN's
structure, Wertheim Schroder did not view this analysis as being relevant for
ICN. By deducting the net debt of the respective Merging Companies, Wertheim
Schroder calculated an equity value range per share of $16.46 to $42.47 for New
ICN, $21.98 to $49.23 for SPI, and $1.56 to $2.13 for Viratek.

Discounted Cash Flow Analysis. Using the projections and other financial
information supplied by each of the Merging Companies, Wertheim Schroder
analyzed the present value of each Companies' future tax-effected operating cash
flow for the years 1994 to 1999 and calculated the present value of these
amounts, using discount rates which it believed to be appropriate for each
company. It then estimated the "terminal value," i.e., the value of cash flow in
years after 1999, by applying multiples of 4, 5 and 6 to the pre-tax operating
cash flow in years after 1999 and discounting this value to the present.
Wertheim Schroder believed, based on its experience in the valuation of
companies in the industries in which the Merging Companies compete and
comparison with comparable companies, that multiples of 4, 5 and 6 were
appropriate. The present value of estimated tax-effected operating cash flows
for the years 1994 through 1999 were then added to the present value of the
terminal value to arrive at a total present enterprise value for each company.
The current net debt of each company was then subtracted from enterprise value
to arrive at equity value. The resulting present value per share for New ICN,
using discount rates ranging from 15% to 25%, ranged from $38.55 to $86.03. The
present value per share from SPI, using discount rates ranging from 15% to 25%,
ranged from $31.50 to $72.38. The present value per share for Viratek using
discount rates ranging from 20% to 30%, ranged from $9.08 to $17.92. The present
value per share for Biomedicals, using discount rates ranging from 15% to 25%,
ranged from $2.57 to $10.07. For New ICN, SPI and Viratek, Wertheim Schroder
conducted certain sensitivity analyses to evaluate the impact of sales of
Virazole for Hepatitis C on these results, and, for New ICN and SPI, the impact
of financial recovery at ICN Galenika.

General. The foregoing is only a summary of each of the financial analyses
performed by Wertheim Schroder and does not purport to be a complete description
of each of the analyses. It does, however, summarize all of the financial
analyses performed by and relied upon by Wertheim Schroder. The preparation of a
fairness opinion is a complex project and is not necessarily susceptible to
partial analysis or summary description. No single analytical methodology used
by Wertheim Schroder was critical to its overall conclusion as each analytical
technique has it inherent strengths and weaknesses. The nature of available
information may further affect the value of any particular methodology or
technique. Wertheim Schroder's conclusion was based upon all the analyses and
factors that it considered taken as a whole and also on the application of
Wertheim Schroder's experience and judgment. Its conclusion involved significant
elements of subjective judgment and qualitative analysis. No value, merit or
weight of any single technique or factor was assigned by Wertheim Schroder.
Accordingly, Wertheim Schroder believes that its analyses must be considered as
a whole and that to focus upon specific portions of such analyses and factors
would create an incomplete and misleading view of the process underlying the
preparation of the opinion. Wertheim Schroder's analyses and opinion were based
upon forecasts and projections of future results which are not necessarily
indicative of

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actual future results. Actual results may be significantly more or less
favorable than the projected results. In performing its analyses, Wertheim
Schroder made numerous assumptions with respect to industry performance, general
business and economic conditions and other matters, many of which are beyond the
Company's control, and therefore are inherently imprecise.

The terms of the engagement of Wertheim Schroder by the SPI Special
Committee are set forth in a letter agreement, dated May 11, 1994, between
Wertheim Schroder and SPI (the "Engagement Letter"). Wertheim Schroder also
received from the Company an indemnification letter of the same date (the
"Indemnification Letter"). Pursuant to the terms of the Engagement Letter, SPI
agreed to pay Wertheim Schroder, in consideration of certain advisory services
with respect to the restructuring or reorganization of the equity and debt of
SPI and the other Merging Companies, a cash advisory fee of $100,000 per month,
commencing as of the date of the Engagement Letter until the successful
completion of a restructuring plan (which would include the Merger), subject to
SPI's right to terminate the Engagement Letter, with or without cause, after
three months from the date of Wertheim Schroder's engagement. SPI has agreed to
pay Wertheim Schroder a cash fee of $500,000 upon the successful implementation
of a restructuring plan. SPI also agreed to reimburse Wertheim Schroder upon
request from time to time for its necessary and reasonable out-of-pocket
expenses, including the reasonable fees and expenses of its legal counsel, if
any, incurred in connection with the services performed under the Engagement
Letter, with the prior approval by SPI. Pursuant to the Indemnification Letter,
the Company agreed to indemnify Wertheim Schroder against certain liabilities
relating to or arising out of its engagement, including liabilities under
federal securities laws. The obligation of the Company to pay Wertheim
Schroder's fees and disbursements under the Engagement Letter was without
respect to whether any opinion would be sought or obtained from Wertheim
Schroder.

Wertheim Schroder has been engaged to act as lead managing underwriter for
the Financing for which it will receive customary compensation. Wertheim
Schroder served as financial advisor to ICN in its successful defense of a proxy
contest to replace the current Board of Directors of ICN at ICN's 1993 Annual
Meeting. Wertheim Schroder received $250,000 plus reimbursement of out-of-pocket
expenses in connection with such services.

VIRATEK.

The Board of Directors of Viratek has received a fairness opinion from
Kemper, dated the date of the Proxy Statement/Prospectus, to the effect that the
Viratek Exchange Ratio is fair, from a financial point of view, to the minority
shareholders of Viratek (i.e., shareholders of Viratek other than ICN). A copy
of the fairness opinion which sets forth the assumptions made, matters
considered and limits on the review undertaken is included in this Joint Proxy
Statement/Prospectus as Appendix D. This opinion confirmed the written opinion,
dated August 1, 1994, from Kemper previously received by the Board of Directors
of Viratek. Viratek shareholders are urged to read this opinion in its entirety.

Kemper is a nationally recognized investment banking firm and is
continually engaged in the valuation of businesses and their securities in
connection with mergers and acquisitions, leveraged buyouts, negotiated
underwritings, secondary distributions of listed and unlisted securities,
private placements and valuations for corporate and other purposes. Kemper has
received a fee of $275,000 from Viratek for rendering its opinion. The fee was
negotiated between Viratek and Kemper, and Kemper was the only firm contacted to
render an opinion to Viratek. Kemper is also expected to act as a co-managing
underwriter in the Financing and will receive a fee for such services. In
requesting the opinion, Viratek did not impose any limitations on the scope of
the investigations that Kemper conducted to enable it to deliver its opinion.

In connection with rendering its opinion dated the date of this Proxy
Statement/Prospectus, Kemper (i) reviewed a draft of this Joint Proxy
Statement/Prospectus, of the Merger Agreement and certain historical financial
and other publicly available information concerning each of the Merging
Companies and the markets for their securities; (ii) toured certain operating
facilities of the Merging Companies including the Costa Mesa facilities and the
manufacturing plants at Bryan, Ohio and Mexico City, Mexico; (iii) reviewed the
audited financial statements of each of the Merging Companies for the three
fiscal years ended December 31, 1993 and their unaudited statements for the
quarters ended March 31, 1994 and June 30, 1994; (iv) reviewed certain internal,
unaudited financial analyses and reports prepared by management of each of

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the Merging Companies; (v) reviewed management forecasts of the operating and
financial results for each of the Merging Companies and for New ICN; (vi)
reviewed the pro forma historical balance sheet and income statement for New ICN
for the year ended December 31, 1993; (vii) conducted discussions with the
senior management of each of the Merging Companies concerning the historical and
forecasted financial and operating results for each of the respective companies;
(viii) reviewed the absolute and relative historical trading values of Viratek
and each of the Merging Companies in the public marketplace over the latest five
year period; (ix) prepared and reviewed discounted cash flow valuations for each
of the Merging Companies and for New ICN; (x) reviewed the financial terms, to
the extent publicly available, of certain mergers and acquisitions of publicly
traded companies comparable to the Merging Companies; (xi) compared the
financial performance and the price and trading activity of the common stock of
Viratek, SPI and Biomedicals with those of certain other comparable
publicly-traded companies and their securities; (xii) reviewed the relative
financial and market value contributions of each of the Merging Companies;
(xiii) reviewed a draft of an appraisal prepared by Houlihan Lokey dated July
25, 1994, regarding the research and development efforts associated with various
Viratek compounds (See "Unaudited Pro Forma Combined Financial Statements"); and
(xiv) performed such other analyses as Kemper deemed appropriate and considered
such other information, financial studies, analyses and investigations and
financial, economic and market criteria and industry and competitive trends,
which Kemper deemed relevant.

In connection with rendering its opinion dated the date of this Proxy
Statement/Prospectus, Kemper relied upon, without independent verification, the
accuracy, completeness and fairness of the financial and other information
reviewed by Kemper, the accuracy, completeness and fairness of oral statements
made to Kemper, and the assurances of management of each of the Merging
Companies that they do not know anything regarding any of the Merging Companies
which would make the information provided Kemper incomplete or misleading for
the purposes of its opinion. With respect to the financial projections, Kemper
assumed that such projections were reasonably prepared on bases reflecting the
best available estimates and judgments of the future financial performance of
each of the Merging Companies. Kemper has not been asked to, and has not, sought
or solicited any offers for Viratek or any of the other Merging Companies. In
addition, Kemper has not made an independent evaluation or appraisal of the
assets of any of the Merging Companies. Kemper's opinion is necessarily based on
economic, market, and other conditions as in effect on, and the information made
available to Kemper as of, the date of its opinion. Kemper has disclaimed any
undertaking or obligation to advise any person of any change in any fact or
matter affecting its opinion which may come or be brought to its attention after
the date of its opinion.

The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analysis and the
application of these methods to the particular circumstances and, therefore, the
resulting opinion is not readily susceptible to a summary description.
Furthermore, in arriving at its fairness opinion, Kemper did not attribute any
particular weight to any single analysis or factor but instead made qualitative
judgments on the significance and relevance of each analysis and factor.
Accordingly, Kemper believes that its analyses must be considered as a whole and
that considering any isolated portion of the analyses or the factors considered,
without considering all analyses and factors, could create an incomplete or
misleading view of the process underlying the opinion. Any estimates contained
in these analyses are not necessarily indicative of actual values or predictive
of future results or values, which may be significantly more or less favorable
than those set forth therein. In addition, analyses relating to the value of
businesses or securities do not purport to be appraisals or to reflect the
prices at which businesses or securities actually may trade or be acquired or
sold.

The following is a summary of certain of the analyses conducted and factors
considered by Kemper in connection with its fairness opinion dated August 1,
1994. In connection with its fairness opinion dated the date of this Proxy
Statement/Prospectus, Kemper reviewed and updated as it deemed necessary the
analyses conducted and factors considered in connection with its fairness
opinion dated August 1, 1994. The analyses conducted and factors considered by
Kemper in connection with its fairness opinion dated the date of this

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Proxy Statement/Prospectus were substantially similar in nature to the analyses
conducted and factors considered in connection with its fairness opinion dated
August 1, 1994.

- - Discounted Cash Flow Analyses -- Kemper prepared discounted cash flow
analyses for Viratek, SPI, Biomedicals and New ICN based on estimates of
future operating results prepared by the management of each respective
company. Kemper also prepared an "implied discounted cash flow analysis" for
ICN based primarily on ICN's ownership interest in the discounted cash flow
valuations of Viratek, SPI and Biomedicals. Kemper conducted sensitivity
analyses of the discounted cash flows for each of the Merging Companies and
for New ICN over a range of discount rates applied on a consistent basis.

Kemper compared the value of the ownership interest of the Viratek minority
shareholders (i.e., shareholders of Viratek other than ICN) in the discounted
cash flow valuation of Viratek to the value of the ownership interest of the
Viratek minority shareholders, based on the Exchange Ratios, to the sum of
the discounted cash flow valuations of all of the Merging Companies,
adjusting to eliminate any double-counting of value resulting from ICN's
ownership interest in Viratek, SPI and Biomedicals. In all cases, the value
of the ownership interest of the Viratek minority shareholders, based on the
Exchange Ratios, in the sum of the discounted cash flow valuations of all of
the Merging Companies, adjusting to eliminate any double-counting of value
resulting from ICN's ownership interest in Viratek, SPI and Biomedicals,
exceeded the value of the ownership interest of the Viratek minority
shareholders in the discounted cash flow valuation of Viratek. Kemper also
compared the value of the ownership interest of the Viratek minority
shareholders in the discounted cash flow valuation of Viratek to the value of
the ownership interest of the Viratek minority shareholders, based on the
Exchange Ratios, in the discounted cash flow valuation of New ICN. In all
cases, the value of the ownership interest of the Viratek minority
shareholders, based on the Exchange Ratios, in the discounted cash flow
valuation of New ICN, exceeded the value of the ownership interest of the
Viratek minority shareholders in the discounted cash flow valuation of
Viratek.

Kemper's discounted cash flow analysis with respect to New ICN was based on
estimates provided by management and discount rates ranging from 25% to 40%,
which resulted in discounted cash flow valuations for New ICN ranging from
approximately $2.3 billion to approximately $1.2 billion. The interest of the
Viratek minority shareholders in such discounted cash flow valuation of New
ICN, based on the Viratek Exchange Ratio, ranged from approximately $283
million to approximately $150 million, or from approximately $41.94 to
approximately $22.14 per share of Viratek common stock.

Kemper believes that the discounted cash flow analyses, taken as a whole,
support the conclusion that the Viratek Exchange Ratio is fair, from a
financial point of view, to the minority shareholders of Viratek.

- - Review of Market Multiples of Comparable Publicly-Traded Companies -- A
review and analysis of comparative data regarding selected publicly traded
companies was made by Kemper to assess relative value assigned to shares of
publicly traded securities of selected companies considered to be comparable
to each of the Merging Companies. Kemper examined certain market multiples of
each of the Merging Companies and of selected publicly traded companies
considered comparable to each of the respective Merging Companies. Publicly
traded companies which were considered comparable to each of the Merging
Companies were selected based on the industry or industries in which they
compete, the scope of their activities, operating characteristics and other
factors which Kemper deemed relevant.

The market values for the five selected comparable publicly traded companies
that Kemper considered with respect to Viratek ranged from $15.7 million to
$422.7 million, compared to $176.6 million for Viratek. The market multiples
that Kemper considered included (i) market value of equity to sales, (ii)
market value of capitalization to earnings before interest, taxes,
depreciation and amortization, (iii) stock price to latest twelve months
earnings per share, (iv) stock price to next fiscal year's projected earnings
per share, (v) stock price to projected earnings per share two fiscal years
out, (vi) market value of equity to book value of equity and (vii) market
value of equity to accumulated deficit. Kemper believes that the usefulness
of comparable company trading multiples with respect to Viratek is limited by
the fact that Viratek and its comparable companies are largely biotech
research and development companies with limited revenues and operating
results. None of the comparable companies to Viratek reported positive

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earnings for the latest twelve month period. The market values for the six
selected comparable publicly traded companies that Kemper considered with
respect to SPI ranged from $24.4 million to $1,783 million, compared to
$355.8 million for SPI. The market multiples that Kemper considered included
(i) market value of equity to sales, (ii) market value of capitalization to
earnings before interest, taxes, depreciation and amortization, (iii) stock
price to latest twelve months earnings per share, (iv) stock price to next
fiscal year's projected earnings per share, (v) stock price to projected
earnings per share two fiscal years out, (vi) stock price to latest twelve
months cash flow per share, and (vii) market value of equity to book value of
equity.

The market values for the six selected comparable publicly traded companies
that Kemper considered with respect to Biomedicals ranged from $39.0 million
to $1,616.3 million, compared to $29.4 million for Biomedicals. The market
multiples that Kemper considered included (i) market value of equity to
sales, (iii) market value of capitalization to earnings before interest,
taxes, depreciation and amortization, (iii) stock price to latest twelve
months earnings per share, (iv) stock price to next fiscal year's projected
earnings per share, (v) stock price to projected earnings per share two
fiscal years out, (vi) stock price to latest twelve months cash flow per
share, and (vii) market value of equity to book value of equity.

The operation of the Merging Companies and the respective comparable
companies are inherently different. As a result, Kemper believes that a
purely quantitative comparable company analysis would not be particularly
meaningful in the context of the Merger. Kemper believes that an appropriate
use of a comparable company analysis in this instance involves qualitative
judgments concerning the differences between the financial and operating
characteristics of the Merging Companies and the respective comparable
companies that could affect the public trading values. Kemper believes that
its review of market multiples of publicly traded comparable companies, taken
as a whole, supports the conclusion that the Viratek Exchange Ratio is fair,
from a financial point of view, to the minority shareholders of Viratek.

- - Review of Certain Mergers and Acquisitions -- Kemper reviewed the financial
terms of certain mergers and acquisitions of publicly traded companies
comparable to one or more of the Merging Companies. Kemper selected certain
transactions during the latest two year period involving the acquisition of
at least 51% of the outstanding common stock of the target company with a
transaction value of at least $5 million, where the target company was
comparable to one or more of the Merging Companies based on the industry or
industries in which they compete, the scope of their activities, operating
characteristics and other factors which Kemper deemed relevant. Eight such
transactions were found and included in Kemper's analysis. Kemper evaluated
the implied valuation multiples of these transactions based on the
consideration period and certain financial and operating data of the target
company. The transactions ranged in size from $7.3 million to $736.3 million.
The valuation multiples which Kemper considered included (i) value of
transaction to sales, (ii) value of transaction to earnings before interest
and taxes, (iii) equity value of the transaction to net income and (iv)
equity value of transaction to cash flow. Kemper also considered premiums
paid to market prices prior to the announcement date.

Kemper believes that a purely quantitative analysis of acquisition
multiples would not be particularly meaningful in the context of the Merger.
Kemper believes that an appropriate use of an analysis of mergers and
acquisitions of comparable companies in this instance would involve qualitative
judgments concerning differences between the characteristics of these
transactions and the Merger and differences between the target companies in
these transactions and the Merging Companies that would affect the acquisition
value of the acquired companies and the value of the Merging Companies. Kemper
believes that its review of certain mergers and acquisitions, taken as a whole,
supports the conclusion that the Viratek Exchange Ratio is fair, from a
financial point of view, to the shareholders of Viratek (other than ICN, as to
which no opinion was given).

Kemper has been engaged to act as co-managing underwriter for the Financing
for which it will receive customary compensation. At June 30, 1994, ICN had
outstanding an aggregate of $566,403 of margin borrowings with Kemper. All of
such margin borrowings are collateralized by SPI Common Stock owned by ICN and
will be repaid out of the net proceeds of the Financing.

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BIOMEDICALS.

Jefferies & Company, Inc. ("Jefferies") delivered its written opinion to
the board of directors of ICN Biomedicals (the "Biomedicals Board"), dated July
27, 1994, to the effect that, as of such date and based upon procedures and
subject to the assumptions described in such opinion, the Biomedicals Exchange
Ratio is fair, from a financial point of view, to the holders of Biomedicals
Common Stock (other than ICN and its affiliates). Jefferies has confirmed such
opinion in an opinion dated the date of this Proxy Statement/Prospectus (the
"Opinion"). A copy of the Opinion is attached as Appendix E to this Joint Proxy
Statement/Prospectus. Stockholders of Biomedicals are urged to read this opinion
in its entirety. The July 27, 1994 opinion is substantially identical to the
Opinion.

No limitations were imposed by Biomedicals on the scope of Jefferies'
investigation or the procedures to be followed by Jefferies in rendering the
Opinion. Jefferies was not requested to, and did not: (a) participate in the
structuring or negotiating of the Merger, (b) solicit third party indications of
interest in acquiring all or any part of Biomedicals; or (c) make any
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of Biomedicals or any of the other Merging Companies, nor were they
furnished with any such evaluations or appraisals other than the appraisal,
dated July 25, 1994, of certain assets of Viratek performed by Houlihan Lokey.
Jefferies noted in the Opinion that, without limiting the foregoing, (i) SPI,
ICN and Viratek have been named as defendants in certain class action lawsuits
alleging, among other things, violations of Federal securities laws, (ii)
Biomedicals is not a party to those lawsuits, and (iii) upon consummation of the
Merger, the stockholders of Biomedicals, as stockholders of New ICN, will have
exposure to the potential risk that New ICN will be forced to pay damages in
connection therewith. Jefferies has assumed that the disposition of such
lawsuits, and the liabilities and expenses associated therewith, if any, will
not affect the value of New ICN or any of the Merging Companies and Jefferies
expressed no opinion with respect to any matter relating to such lawsuits.

In arriving at its Opinion, Jefferies did not ascribe a specific range of
fair value to the Biomedicals Common Stock, but made its determination on the
basis of financial and comparative analyses, including (without limitation)
those described below. The Opinion is based on economic, monetary and market
conditions prevailing, and other circumstances and conditions existing, on the
date thereof, and Jefferies did not express any opinion as to the market value
of the New ICN Shares to be received by the stockholders of Biomedicals upon, or
the price or trading range at which New ICN Shares will trade following,
consummation of the Merger.

The Opinion was directed to the Biomedicals Board only and does not
constitute a recommendation to any stockholder of Biomedicals (or of any of the
other Merging Companies) as to how such stockholder should vote with respect to
the Merger. In addition, Jefferies was not requested to opine as to, and its
Opinion did not address, the underlying business decision of the Biomedicals
Board to proceed with or to effect the Merger.

For the purposes of rendering the Opinion, Jefferies reviewed the Merger
Agreement, dated July 26, 1994, a draft of this Joint Proxy
Statement/Prospectus, dated September 21, 1994, and certain financial and other
information that was publicly available or furnished to them by Biomedicals and
the other Merging Companies, including certain internal financial analyses,
financial forecasts, reports and other information prepared by their respective
managements. Jefferies also held discussions with various members of senior
management of Biomedicals and the other Merging Companies concerning each such
company's historical and current operations, financial conditions and prospects,
as well as the strategic and operating benefits anticipated from the business
combination. In addition, Jefferies conducted such other financial studies,
analyses and investigations as it deemed appropriate for purposes of the
Opinion. Due to governmental restrictions on business travel to Yugoslavia,
Jeffries was not able to visit the operations of ICN Galenika, a subsidiary of
SPI located in The Federal Republic of Yugoslavia.

In rendering the Opinion, Jefferies relied, without independent
investigation or verification, on the accuracy, completeness and fairness of all
financial and other information reviewed by it. The Opinion is expressly
conditioned upon all such information (whether written or oral) being accurate,
complete and fair in all respects. With respect to the financial projections
examined by Jefferies (the "Projections"), which were

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provided by the Merging Companies, Jefferies assumed that they were reasonably
prepared on bases reflecting the best currently available estimates and good
faith judgments of the respective managements of Biomedicals and the other
Merging Companies as to the future performance of each such company and,
although Jefferies performed sensitivity analysis thereon, in rendering its
opinion, Jefferies assumed that each such company will perform in accordance
with such projections for all periods specified therein. Jefferies also assumed
that the Merger will be a tax free reorganization and will be accounted for
under the purchase method of accounting and that all consents and authorizations
necessary to consummate the Merger have been, or will be, obtained without
material expense. Jefferies has disclaimed any undertaking or obligation to
advise any person of any change in any fact or matter affecting its opinion of
which it becomes aware after the date of the Opinion.

The following summarizes the material financial and comparative analyses
Jefferies performed in arriving at the conclusions expressed in its opinion,
dated July 27, 1994, which it presented to the Biomedicals Board on that date.
In connection with its Opinion, dated the date of this Joint Proxy
Statement/Prospectus, Jefferies reviewed and updated as necessary the analyses
performed in connection with its opinion dated July 27, 1994. The following does
not purport to be a complete description of the analyses performed, or the
matters considered, by Jefferies in arriving at the opinion, dated July 27,
1994, or at the Opinion.

The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant methods of financial analyses and the
application of those methods to particular circumstances and, therefore, such an
opinion is not readily susceptible to summary description. Furthermore, in
arriving at its Opinion, Jefferies did not attribute any particular weight to
any analysis or factor considered by it, but rather made qualitative judgments
as to the significance and relevance of each analysis and factor. Accordingly,
Jefferies' analyses must be considered as a whole. Considering any portion of
such analyses and of the factors considered, without considering all analyses
and factors, could create a misleading or incomplete view of the process
underlying the Opinion. In its analyses, Jefferies made many assumptions with
respect to industry performance, general business and economic conditions and
other matters, many of which are beyond the control of the Merging Companies.
Any estimates contained in these analyses are not necessarily indicative of
actual values or predictive of future results or values, which may be
significantly more or less favorable than as set forth therein. In addition,
analyses relating to the value of businesses do not purport to be appraisals or
to reflect the prices at which businesses actually may be sold.

Comparable Company Analysis. Using publicly available information,
Jefferies reviewed and compared the financial and market performance of two sets
of companies that it deemed to be comparable to Biomedicals and New ICN,
respectively, on the basis of the industry or industries in which they compete
and other factors Jefferies deemed relevant. For the purposes of the Opinion,
the set of companies that Jefferies considered in valuing Biomedicals consisted
of Landauer, Inc., Sigma-Aldrich Corporation, Diagnostic Products Corporation,
Nichols Institute, Incstar Corporation and Bio-rad Laboratories, Inc. and the
set of companies that Jefferies considered in valuing New ICN consisted of
Pfizer, Inc., The Upjohn Company, Mylan Laboratories Inc., Merck & Co., Inc.,
Eli Lilly & Co., Bristol-Myers Squibb Company, Rhone-Poulenc Rorer Inc.,
Schering-Plough Corporation, Wellcome plc, American Home Products, Inc., Marion
Merell Dow, and SmithKline Beecham plc. and Forest Laboratories, Inc.

Among other things, Jefferies studied the ratio of each company's
enterprise value to its earnings before interest, taxes, depreciation and
amortization ("EBITDA") for the latest twelve months ("LTM") ended June 30, 1994
and its common share price to its earnings per share ("EPS") for the LTM and as
estimated for fiscal 1994 ("1994E"). Information with respect to 1994E was
provided by the Merging Companies with respect to Biomedicals and New ICN and
was obtained from Institutional Broker Estimating Service with respect to all
other companies. The comparable company analysis implied that the value of the
consideration to be received in the Merger with respect to each share of
Biomedicals Common Stock ranges from approximately $.28 to approximately $3.89.
In addition, because Viratek is a biotech research and development company with
limited revenues and operating results, the usefulness of comparable company
analysis with respect to the assets and operations of Viratek is limited. If the
assets and operations of Viratek in New ICN are valued at Viratek's pre-merger
trading value instead of at a multiple of EBITDA, the implied value of the
consideration to be received in the Merger with respect to each share of
Biomedicals Common Stock

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ranges from approximately $2.88 to approximately $4.88. Jefferies also noted
that Biomedical's LTM EBITDA was well below 1994E EBITDA.

None of the companies used in the above analysis is identical to any of the
Merging Companies or New ICN. Because of the inherent differences between the
operations of the Merging Companies and their respective comparable companies,
Jefferies believes that a purely quantitative comparable company analysis is not
particularly meaningful. An appropriate use of a comparable company analysis in
this instance necessarily involves qualitative judgments concerning, among other
things, differences between the financial and operating characteristics of the
Merging Companies and the selected comparable companies that would affect the
public trading values of the Merging Companies and the selected comparable
companies.

Comparable Transaction Analysis. Jefferies also reviewed two sets of
transactions it believed to be comparable to the Merger involving (i) seven
public acquisitions of pharmaceutical manufacturers and (ii) fifteen
acquisitions of minority interests by parent companies over the past three years
with a value over $20 million (the "Transaction Comparables"). Jefferies studied
certain publicly available data for each of the Transaction Comparables,
including the market value of the consideration to be received and the relevant
company's common share price one day prior to the first public announcement of
the relevant transaction (the "Transaction Value"). For each transaction,
Jefferies studied the ratio of the Transaction Value to the consideration
received. The seven public acquisitions of pharmaceutical manufacturers had
transaction value to LTM EBITDA multiples ranging from approximately (69)x to
approximately 46x, with the two most recent comparables having transaction
values of approximately 8x and approximately 10x LTM EBITDA. In comparison,
Jefferies calculated that the Merger has a transaction value to LTM EBITDA
multiple ranging from approximately 14x to approximately 19x.

Four of the fifteen acquisitions of minority interests by controlling
shareholders were at no premium or a discount and the remaining eleven
acquisitions were at a premium.

Because the reasons for and circumstances surrounding each of the
transactions analyzed were diverse and because of the inherent differences
between the operations of the Merging Companies and the companies engaged in the
selected transaction, Jefferies believes that a purely quantitative comparable
transaction analysis is not particularly meaningful. An appropriate use of a
comparable transaction analysis in this instance necessarily involves
qualitative judgments concerning, among other things, differences between the
characteristics of these transactions and the Merger that would affect the
acquisition value of the Transaction Comparables and the Merging Companies.

Pro Forma Earnings Analysis. Jefferies also analyzed the pro forma dilution
or accretion to Biomedicals EPS using the projected earnings for the years 1994
through 1997 provided by the Merging Companies. The analysis suggests that the
Merger will initially be dilutive to the minority shareholders of Biomedicals
but by 1997 would be accretive. In addition, the analysis suggested that the
Merger would be accretive at an earlier date if it is assumed that dividends
will be paid on the Biomedicals preferred stock if the Merger does not occur.
Jefferies also noted Biomedicals had negative EPS in each of 1991 and 1992.

Contribution Analysis. Jefferies calculated the contribution of each of the
Merging Companies to the pro forma combined company with respect to tangible
assets at March 31, 1994 and with respect to net sales, EBITDA, and earnings
before interest and taxes ("EBIT") for the years 1991 through 1993 and, using
management estimates, the twelve-month period ended June 30, 1994 (the
"Historical Period") and, using the Projections, for the years 1994 through 1997
(the "Projection Period"). The analysis showed, among other things, that the
minority interest of Biomedicals is contributing approximately 3.8% of tangible
assets at March 31, 1994 and would have contributed from approximately 4.0% to
6.5% of net sales, from a negative contribution to approximately 3.4% of EBITDA,
and from a negative contribution to approximately 3.1% of EBIT during the
Historical Period and will contribute from approximately 2.6% to 4.7% of net
sales, from approximately 1.9% to 5.6% of EBITDA, and from approximately 1.7% to
4.7% of EBIT during the Projection Period. In comparison, after giving effect to
the Merger, the holders of Biomedicals Common Stock immediately prior to the
Effective Time (other than ICN and its affiliates) will hold approximately 2.03%
of the New ICN Common stock immediately after the Effective Time.

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Discounted Cash Flow Analysis. Using the Projections and other financial
information supplied by each of the Merging Companies, for each of Biomedicals
and New ICN, Jefferies analyzed the sum of (i) the present value of tax-effected
operating cash flow for the years 1994 to 1998, using discount rates of 13.0% to
15.0% for Biomedicals and 14.2% to 16.2% for New ICN, plus (ii) the estimated
"terminal value" of the appropriate entity based upon a range of multiples of
7.0x to 9.0x projected 1998 EBITDA, discounted to the present, less (iii) net
debt of the appropriate entity at December 31, 1993. The discounted cash flow
analysis implies a Biomedicals Exchange Ratio of 0.07 to 0.16, compared to the
actual Biomedicals Exchange Ratio of 0.197.

The Board selected Jefferies to deliver the Opinion because Jefferies is a
nationally recognized investment banking firm. As part of its investment banking
business, Jefferies is regularly engaged in the evaluation of capital structures
and the rendering of advice in financial restructurings and recapitalizations.
In addition, Jefferies performs valuations of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, and other
financial services.

Pursuant to the terms of an engagement letter, dated July 19, 1994,
Biomedicals has paid Jefferies $350,000 for the rendering of the Opinion.
Biomedicals also has agreed to reimburse Jefferies for all fees, disbursements
and out-of-pocket expenses (including without limitation, fees and disbursements
of counsel, which fees and disbursements of counsel may not exceed $50,000
without Biomedicals' prior consent) and to indemnify Jefferies and certain
related persons against certain liabilities arising out of or in connection with
its engagement. Jefferies has been engaged to, among other things, act as a
co-managing underwriter for the Financing for which it will receive customary
compensation. Jefferies has expressed no opinion with respect to any matter
relating to the Financing.

In the ordinary course of its business, Jefferies may actively trade
securities of Biomedicals and the other Merging Companies for its own account
and for the accounts of its customers and, accordingly, may at any time hold a
long or short position in such securities.

ACCOUNTING TREATMENT

The Merger will be accounted for by New ICN, a subsidiary of SPI, under the
"purchase" method of accounting in accordance with generally accepted accounting
principles. Therefore, the aggregate consideration paid by New ICN in the Merger
(determined based upon the number of New ICN Shares issued in the Merger in
excess of the outstanding shares of SPI Common Stock) will be allocated to the
net assets of ICN, Viratek and Biomedicals based on their fair values; and the
results of operations of ICN, Viratek and Biomedicals will be included in the
results of operations of New ICN only for periods subsequent to the Effective
Time. In addition, for accounting purposes, SPI, as acquiror, is the predecessor
company to New ICN.

CERTAIN FEDERAL INCOME TAX CONSEQUENCES

The following is a summary of the material federal income tax consequences
of the Merger. It may not apply to a stockholder who acquired his shares of ICN
Common Stock, SPI Common Stock, Viratek Common Stock or Biomedicals Common
Stock, as the case may be, pursuant to the exercise of employee stock options or
rights or otherwise as compensation. This summary is provided for information
purposes only and relates only to Common Stock held as a capital asset within
the meaning of Section 1221 of the Code by persons who are citizens or residents
of the United States. This summary does not discuss tax consequences to
categories of holders entitled to special treatment under the Code (including,
without limitation, foreign persons, tax-exempt organizations, insurance
companies, financial institutions and dealers in stocks and securities). No
rulings will be sought from the Internal Revenue Service with respect to the
federal income tax consequences of the Merger. Stockholders of ICN, SPI, Viratek
and Biomedicals are urged to consult their own tax advisors as to specific tax
consequences to them of the Merger.

In the opinion of Fried, Frank, Harris, Shriver & Jacobson, New ICN's
special tax counsel, the Merger will, under current law, constitute a tax-free
reorganization under Section 368(a) of the Internal Revenue Code of 1986, as
amended (the "Code"), and each Merging Company and New ICN will be a party to
the reorganization within the meaning of Section 368(b) of the Code. No ruling
has been sought from the

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Internal Revenue Service as to the federal income tax consequences of the
Merger, and this opinion is not binding on the Internal Revenue Service or any
court.

As a tax-free reorganization, the Merger will have the following Federal
income tax consequences for (i) stockholders of the Merging Companies, (ii) the
Merging Companies and (iii) New ICN.

1. No gain or loss will be recognized by holders of Merging Company
Common Stock as a result of the exchange of such shares solely for New ICN
Shares pursuant to the Merger, except that gain or loss will be recognized
on the receipt of cash, if any, received in lieu of fractional New ICN
Shares. Any cash received by a Merging Company stockholder in lieu of a
fractional share will be treated as received in exchange for such
fractional share and not as a dividend, and any gain or loss recognized as
a result of the receipt of such cash will be capital gain or loss equal to
the difference between the cash received and the portion of the
stockholder's basis in Merging Company Common Stock allocable to such
fractional share interest.

2. The aggregate tax basis of the New ICN Shares received by each
Merging Company stockholder will equal the aggregate tax basis of such
stockholder's shares of Merging Company Common Stock (reduced by any amount
allocable to fractional share interests for which cash is received)
exchanged in the Merger.

3. The holding period for the New ICN Shares received by a Merging
Company stockholder will include the holding period for the shares of
Merging Company Common Stock of such stockholder exchanged in the Merger.

4. Neither New ICN nor any of the Merging Companies will recognize
gain or loss as a result of the Merger.

As of December 31, 1993, the Merging Companies estimate that their combined
United States net operating loss carryovers ("NOLs") equaled approximately $156
million. Following the Merger, New ICN (and any subsidiary of New ICN into which
any of the Merging Companies merges pursuant to the alternative structure
described under "The Merger Agreement -- Alternative Structure") will succeed to
the use of these NOLs, subject to certain limitations arising as a result of the
Merger (including the ones described below), and subject to existing limitations
(as discussed in the section captioned CERTAIN TRANSACTIONS -- Income Taxes).
The NOLs to which New ICN succeeds may be carried forward and used in future
taxable years to reduce the taxable income of New ICN while the NOLs to which
any such New ICN subsidiary succeeds may be carried forward and used in future
taxable years to reduce the taxable income of such subsidiary.

Section 382 of the Code generally imposes limitations on the availability
of NOLs (which may be carried back three years or forward 15 years to the extent
not used to reduce taxable income in a previous year) to reduce future federal
income tax liability upon certain substantial ownership changes in the stock of
a corporation (an "Ownership Change"). The Merger likely will cause an Ownership
Change with respect to each Merging Company. Accordingly, following the Merger
New ICN (and any subsidiary of ICN into which any of the Merging Companies
merges pursuant to the alternative structure described under "The Merger
Agreement -- Alternative Structure") will be able to use only a limited amount
of the NOLs of a Merging Company in any one post-change taxable year. This
annual limitation with respect to NOLs of each Merging Company generally will
equal the value of the stock of the Merging Company immediately before the
Ownership Change (subject to certain reductions) multiplied by the highest of
the three most recent long-term tax-exempt rates published monthly by the
Treasury Department to represent current interest rates on long-term tax-exempt
obligations (which for transactions closing in the month of July 1994 would be
6.01%). The Merging Companies do not believe this limitation will have a
material adverse effect on the after-tax consolidated financial results of New
ICN following the Merger.

THE DISCUSSION SET FORTH ABOVE DOES NOT ADDRESS THE STATE, LOCAL OR FOREIGN
TAX ASPECTS OF THE MERGER. THE DISCUSSION IS BASED ON CURRENTLY EXISTING
PROVISIONS OF THE CODE, EXISTING AND PROPOSED TREASURY REGULATIONS THEREUNDER
AND CURRENT ADMINISTRATIVE RULINGS AND COURT DECISIONS. ALL OF THE FOREGOING ARE
SUBJECT TO CHANGE AND ANY SUCH CHANGES

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COULD AFFECT THE CONTINUING VALIDITY OF THIS DISCUSSION. EACH
STOCKHOLDER OF THE COMPANIES SHOULD CONSULT SUCH STOCKHOLDER'S OWN TAX ADVISOR
WITH RESPECT TO THE SPECIFIC TAX CONSEQUENCES OF THE MERGER TO SUCH STOCKHOLDER,
INCLUDING THE APPLICATION AND EFFECT OF STATE, LOCAL AND FOREIGN TAX LAWS AND
THE POSSIBLE EFFECTS OF CHANGES IN FEDERAL LAWS OR OTHER TAX LAWS.

REGULATORY APPROVAL

Under the HSR Act, and the rules promulgated thereunder by the Federal
Trade Commission (the "FTC"), the Merger cannot be consummated until certain
notifications have been given and certain information has been furnished to the
FTC and the Antitrust Division of the Department of Justice (the "Antitrust
Division") and specified waiting period requirements have been satisfied. ICN
and SPI each intend to file shortly notification and report forms under the HSR
Act with the FTC and the Antitrust Division. The waiting period under the HSR
Act will expire 30 days after the date of filing of such forms unless such
waiting period is terminated earlier or any of the Merging Companies receives a
request for additional information from the FTC or the Antitrust Division prior
to such date. If a request for additional information is received, the waiting
period will terminate 20 days after ICN and SPI have substantially complied with
the request. At any time before or after consummation of the Merger, the
Antitrust Division or the FTC could take such action under the antitrust laws as
it deems necessary or desirable in the public interest, including seeking to
enjoin the consummation of the Merger or seeking divestiture of substantial
assets of New ICN. At any time before or after the Effective Time, and
notwithstanding that the HSR Act waiting period has expired, any state could
take such action under the antitrust laws as it deems necessary or desirable.
Such action could include seeking to enjoin the consummation of the Merger or
seeking divestiture of assets or businesses by New ICN. Private parties may also
seek to take legal action under the antitrust laws under certain circumstances.
Since ICN owns in excess of 50% of the outstanding shares of Viratek Common
Stock and Biomedicals Common Stock, neither Viratek nor Biomedicals is required
to file notification and report forms under the HSR Act.

RESALE RESTRICTIONS

All New ICN Shares received by stockholders of ICN, SPI, Viratek and
Biomedicals, as the case may be, in the Merger will be freely transferable,
except that New ICN Shares received by persons who are deemed to be "affiliates"
(as such term is defined under the Securities Act) of any of the Merging
Companies prior to the Merger may be resold by them only in transactions
permitted by the resale provisions of Rule 145 promulgated under the Securities
Act (or Rule 144 in the case of such persons who become affiliates of New ICN)
or as otherwise permitted under the Securities Act. Persons who may be deemed to
be affiliates of any of the Merging Companies generally include individuals or
entities that control, are controlled by, or are under common control with, such
party and may include certain officers and directors of such party as well as
principal stockholders of such party. The Merger Agreement requires each of the
Merging Companies to exercise its reasonable efforts to cause each of its
affiliates to execute a written agreement to the effect that such person will
not offer to sell, transfer or otherwise dispose of any of the New ICN Shares
issued to such person in or pursuant to the Merger unless (a) such sale,
transfer or other disposition has been registered under the Securities Act, (b)
such sale, transfer or other disposition is made in conformity with Rule 145
under the Securities Act or (c) in the opinion of counsel, such sale, transfer
or other disposition is exempt from registration under the Securities Act.

LITIGATION

Four lawsuits have been filed with respect to the Merger in the Court of
Chancery in the State of Delaware. Three of the lawsuits, entitled Helmut Kling
v. Milan Panic, et al., Solomon Jallath v. Milan Panic, et al., and Amy Hoffman
v. Milan Panic, et al. were filed by stockholders of SPI and, in the Jallath
lawsuit, of Viratek against ICN, SPI, Viratek (in the Jallath lawsuit) and
certain directors, and officers of ICN, SPI and/or Viratek (including Milan
Panic) and purport to be class actions on behalf of all persons who hold shares
of SPI Common Stock and, in the Jallath lawsuit, Viratek Common Stock. The
fourth lawsuit entitled Joice Perry v. Nils O. Johannesson, et al., was filed by
a stockholder of Viratek against ICN, Viratek and

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certain directors and officers of ICN, SPI, and Viratek (including Milan Panic),
and purports to be a class action on behalf of all persons who hold shares of
Viratek Common Stock. These suits allege that the consideration to be provided
to the public stockholders of SPI and/or Viratek (as applicable) in the Merger
is unfair and inadequate, and that the defendants have breached their fiduciary
duties in approving the proposed Merger and otherwise. The Merging Companies
believe that these suits are without merit, and intend to defend them
vigorously.

THE MERGER AGREEMENT

The following is a brief summary of certain provisions of the Merger
Agreement, a copy of which is attached as Appendix A to this Joint Proxy
Statement/Prospectus and is incorporated herein by reference. This summary is
qualified in its entirety by reference to the full text of the Merger Agreement.

THE MERGER

Pursuant to the Merger Agreement, subject to the terms and conditions
thereof, at the Effective Time (as defined below), ICN, SPI, Viratek and
Biomedicals will each be merged with and into New ICN. The Merger will have the
effects specified in the Delaware General Corporation Law.

Upon the satisfaction or waiver of all conditions to the Merger, and
provided that the Merger Agreement has not been terminated or abandoned, New ICN
and the Merging Companies will cause a Certificate or Certificates of Merger
(the "Certificate of Merger") to be executed, acknowledged and filed with the
Secretary of State of the State of Delaware as provided in Section 251 of the
Delaware General Corporation Law (the "Delaware Law"). The time at which the
Merger becomes effective is referred to as the Effective Time.

As a result of the Merger and without any action on the part of the holders
thereof, (i) each share of ICN Common Stock issued and outstanding immediately
prior to the Effective Time will be converted into the right to receive 0.512
New ICN Shares (the "ICN Exchange Ratio") and will cease to be outstanding and
will be canceled and retired, (ii) each share of SPI Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares owned by
ICN, which will be canceled) will be converted into the right to receive 1.00
New ICN Share (the "SPI Exchange Ratio") and will cease to be outstanding and
will be canceled and retired, (iii) each share of Viratek Common Stock issued
and outstanding immediately prior to the Effective Time (other than shares owned
by ICN, which will be canceled) will be converted into the right to receive
0.499 New ICN Shares (the "Viratek Exchange Ratio") and will cease to be
outstanding and will be canceled and retired and (iv) each share of Biomedicals
Common Stock issued and outstanding immediately prior to the Effective Time
(other than shares owned by ICN, which will be canceled) will be converted into
the right to receive 0.197 New ICN Shares (the "Biomedicals Exchange Ratio") and
will cease to be outstanding and will be canceled and retired. Each holder of a
Certificate representing any such shares of Common Stock will thereafter cease
to have any rights with respect to such shares of Common Stock, except the right
to receive, without interest, New ICN Shares and cash for fractional interests
of New ICN Shares (as described in "-- Exchange Procedures") upon the surrender
of such Certificate. Each share of Common Stock held in the treasury of ICN,
SPI, Viratek or Biomedicals, as the case may be, at the Effective Time will
cease to be outstanding and will be canceled and retired without payment of any
consideration therefor. In addition, each share of preferred stock of
Biomedicals which is outstanding (all of which shares are presently owned by
ICN) at the Effective Time will cease to be outstanding and will be canceled and
retired.

TREATMENT OF OUTSTANDING OPTIONS

At the Effective Time, all Options then outstanding under the stock option
plans of ICN, SPI, Viratek and Biomedicals (the "Stock Option Plans"),
respectively, will remain outstanding and will be assumed by New ICN. Each such
Option will be exercisable upon the same terms and conditions as under the
applicable Stock Option Plan and the applicable option agreement issued
thereunder, except that (a) each such Option will be exercisable for that whole
number of New ICN Shares (to the nearest whole share) into which the number of
shares of Common Stock of the applicable Merging Company, under the unexercised
portion of such option would be converted at the Effective Time and (b) the
exercise price per New ICN Share will be

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an amount equal to the exercise price per share subject to such Option prior to
the Effective Time divided by the applicable Exchange Ratio (rounded upward to
the nearest full cent).

EXCHANGE PROCEDURES

Promptly after the Effective Time, American Stock Transfer (the "Exchange
Agent"), will mail to each person who was, at the Effective Time, a holder of
record of shares of Merging Company Common Stock, a letter of transmittal to be
used by such holders in forwarding their certificates representing shares of
Common Stock ("Certificates"), and instructions for effecting the surrender of
the Certificates in exchange for certificates representing New ICN Shares. Upon
surrender to the Exchange Agent of a Certificate for cancellation, together with
such letter of transmittal, the holder of such Certificate will be entitled to
receive a certificate representing that number of whole New ICN Shares, cash in
lieu of any fractional shares (as described below) and unpaid dividends and
distributions, if any, which such holder has the right to receive in respect of
the Certificate surrendered, and the Certificate so surrendered will be
canceled. STOCKHOLDERS OF ICN, SPI, VIRATEK, OR BIOMEDICALS SHOULD NOT SEND IN
THEIR CERTIFICATES UNTIL THEY RECEIVE A LETTER OF TRANSMITTAL.

No fractional New ICN Shares will be issued in connection with the Merger
for Merging Company Common Stock. In lieu of any fractional shares, holders of
shares of Merging Company Common Stock otherwise entitled under the Merger
Agreement to receive fractional shares will be entitled to receive an amount in
cash equal to their fractional interests in the proceeds of the sale by the
Exchange Agent of all "excess New ICN Shares" (consisting of those New ICN
Shares in excess of the number of whole New ICN Shares to be distributed to all
Merging Company stockholders in the Merger).

No dividends on New ICN Shares will be paid with respect to any shares of
Merging Company Common Stock until the certificate that had represented any
shares of Merging Company Common Stock is surrendered for exchange as provided
in the Merger Agreement. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of
certificates representing New ICN Shares issued in exchange therefor, (i) at the
time of such surrender, the amount of any dividends or other distributions with
a record date after the Effective Time theretofore payable with respect to such
New ICN Shares and not paid, less the amount of any withholding taxes which may
be required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender thereof and a payment date subsequent to surrender thereof
payable with respect to such whole New ICN Shares less the amount of any
withholding taxes which may be required thereon.

At or after the Effective Time, there will be no transfers on the transfer
books of any of the Merging Companies of shares of Merging Company Common Stock
which were outstanding immediately prior to the Effective Time.

Any portion of the monies from which cash payments in lieu of fractional
interests in New ICN Shares will be made (including the proceeds of any
investments thereof) and any New ICN Shares that are unclaimed by the former
stockholders of the Merging Companies one year after the Effective Time will be
delivered to New ICN. Any former stockholders of the Merging Companies who have
not theretofore complied with the exchange procedures in the Merger Agreement
may thereafter look to New ICN only as general creditors for payment of their
New ICN Shares, cash in lieu of fractional shares, and any unpaid dividends and
distributions on New ICN Shares, deliverable in respect of each share of Common
Stock such stockholder holds. Notwithstanding the foregoing, none of the Merging
Companies, the Exchange Agent or any other person will be liable to any former
holder of shares of Merging Company Common Stock for any amount properly
delivered to a public official pursuant to applicable abandoned property,
escheat or similar laws.

No interest will be paid or accrued on cash in lieu of fractional shares
and unpaid dividends and distributions, if any, which will be paid upon
surrender of certificates that had represented shares of any Merging Company
Common Stock.

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In the event that any certificate has been lost, stolen or destroyed, upon
the making of an affidavit of that fact by the person claiming such certificate
to be lost, stolen or destroyed and, if required by New ICN, the posting by such
person of a bond in such reasonable amount as New ICN may direct as indemnity
against any claim that may be made against it with respect to such Certificate,
the Exchange Agent will issue in exchange for such lost, stolen or destroyed
certificate the New ICN Shares, cash in lieu of fractional shares, and any
unpaid dividends and distributions on New ICN Shares, as described above.

REPRESENTATIONS AND WARRANTIES

The Merger Agreement contains various representations and warranties
relating to, among other things: (a) the due organization, power and standing of
each of the Merging Companies and similar corporate matters; (b) the
authorization, execution, delivery and enforceability of the Merger Agreement;
(c) the capital structure of each of the Merging Companies; (d) subsidiaries of
each of the Merging Companies; (e) the absence of other investment interests of
each of the Merging Companies; (f) conflicts under charters or bylaws,
violations of any instruments or law and required consents or approvals; (g)
certain documents filed by each of the Merging Companies with the Commission and
the accuracy of information contained therein; (h) litigation; (i) conduct of
business in the ordinary course and the absence of certain changes or material
adverse effects; (j) taxes; (k) retirement and other employee benefit plans of
each of the Merging Companies; (l) labor matters; (m) brokers' and finders' fees
with respect to the Merger; (n) receipt of fairness opinions; and (o) ownership
of the capital stock of the other companies.

CERTAIN COVENANTS

Each of the Merging Companies has agreed (and has agreed to cause its
subsidiaries), among other things, prior to the consummation of the Merger,
unless the other Merging Companies agree in writing or as otherwise required or
permitted by the Merger Agreement, (i) to conduct its operations according to
its usual, regular and ordinary course in substantially the same manner as
theretofore conducted; (ii) to use its reasonable efforts to preserve intact
their business organizations and goodwill, keep available the services of their
respective officers and employees and maintain satisfactory relationships with
those persons having business relationships with them; (iii) to confer on a
regular basis with one or more representatives of the other to report
operational matters of materiality and any proposals to engage in material
transactions; (iv) promptly to notify the other of any material emergency or
other material change in the condition (financial or otherwise), business,
properties, assets, liabilities, prospects or the normal course of its
businesses or in the operation of its properties, any material litigation or
material governmental complaints, investigations or hearings (or communications
indicating that the same may be contemplated), or the breach in any material
respect of any representation or warranty contained in the Merger Agreement; and
(v) promptly to deliver to the other true and correct copies of any report,
statement or schedule filed with the Commission subsequent to August 1, 1994. In
addition, each of the Merging Companies has agreed that, among other things,
prior to the consummation of the Merger, unless the other agrees in writing or
as otherwise required or permitted by the Merger Agreement, each of them shall
not (and shall cause its subsidiaries not to) (i) amend its certificate of
incorporation or bylaws; (ii) except pursuant to the exercise of certain
options, warrants, conversion rights and other contractual rights existing on
August 1, 1994, issue any shares of capital stock, effect any stock split or
otherwise change its capitalization as it existed on August 1, 1994; (iii)
grant, confer or award any option, warrant, conversion right or other right not
existing on August 1, 1994 to acquire shares of its capital stock; (iv) increase
any compensation or enter into or amend any employment agreement with any of its
present or future officers or directors, except for normal increases consistent
with past practice and the payment of cash bonuses to officers pursuant to and
consistent with existing plans or programs; (v) adopt any new employee benefit
plan (including any stock option, stock benefit or stock purchase plan) or amend
any existing employee benefit plan in any material respect, except for changes
which are less favorable to participants in such plans or which apply to
employees of each of the Merging Companies to the same extent such new plan or
amendment would apply to such employees if adopted by New ICN after the
Effective Time; (vi) declare, set aside or pay any dividend to its stockholders
or make any other distribution or payment on its capital stock; (vii) except in
connection with the use of shares of capital stock to pay the exercise price or
tax withholding in connection with stock-based employee benefit plans, directly
or indirectly, redeem, purchase or otherwise acquire any

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shares of its capital stock or capital stock of any of its subsidiaries, or make
any commitment for such action; or (viii) sell, lease or otherwise dispose of
any of its assets which are material, individually or in the aggregate, except
in the ordinary course of business.

Each of the Merging Companies has agreed: (a) to cooperate in the prompt
preparation and filing of certain documents under federal and state securities
laws and with applicable government entities and (b) to use their best efforts
to obtain and deliver to each other certain letters from "affiliates," as
defined under Rule 145 under the Securities Act or by applicable accounting
rules.

NO SOLICITATION OF TRANSACTIONS

Each of the Merging Companies has agreed that it will not, and each will
direct and use its best efforts to cause its respective officers and directors,
employees, agents and representatives not to, initiate, solicit or encourage,
directly or indirectly, any inquiries or the making or implementation of any
proposal or offer (including, without limitation, any proposal or offer to its
stockholders) with respect to a merger, acquisition, consolidation or similar
transaction involving, or any purchase of all or any significant portion of the
assets or any equity securities of, it or any of its significant subsidiaries
(any such proposal or offer being hereinafter referred to as an "Acquisition
Proposal"), or engage in any negotiations concerning, or provide any
confidential information or data to, or have any discussions with, any person
relating to an Acquisition Proposal, or otherwise facilitate any effort or
attempt to make or implement an Acquisition Proposal. Each of the Merging
Companies has also agreed to notify the other Merging Companies immediately if
any such inquiries or proposals are received by, any such information is
requested from, or any such negotiations or discussions are sought to be
initiated or continued with it; provided that the Board of Directors of such
party may (i) furnish information to, or enter into discussions or negotiations
with, any person or entity that makes an unsolicited bona fide proposal to
acquire such party pursuant to a merger, consolidation, share exchange, business
combination, purchase of a substantial portion of its assets or other similar
transactions, if, and only to the extent that, (a) the Board of Directors of
such party determines in good faith that such action is required for the Board
of Directors of such party to comply with its fiduciary duties to stockholders
imposed by law, (b) prior to furnishing such information to, or entering into
discussions or negotiations with, the other person or entity, such party
provides written notice to the other party to the effect that it is furnishing
information to, or entering into discussions or negotiations with, the other
person or entity, and (c) subject to any confidentiality agreement with the
other person or entity (which such party determined in good faith was required
to be executed in order for the Board of Directors to comply with its fiduciary
duties to stockholders imposed by law), such party keeps the other party
informed of the status (not the terms) of any such discussions or negotiations
and (ii) to the extent applicable, comply with Rule 14e-2 promulgated under the
Exchange Act with regard to the Acquisition Proposal.

INDEMNIFICATION

New ICN has agreed to indemnify, defend and hold harmless and advance
expenses to officers, directors, employees and agents of the Merging Companies
(the "Indemnified Parties"), to the fullest extent permitted under applicable
law, against all losses, claims, damages, liabilities, costs or expenses
(including attorneys' fees), judgments, fines, penalties and amounts paid in
settlement in connection with any claim, action, suit, proceeding or
investigation arising out of or pertaining to acts or omissions, or alleged acts
or omissions, by them in their capacities as such, whether commenced, asserted
or claimed before or after the Effective Time and including, without limitation,
liabilities arising under the Securities Act, the Exchange Act and state
corporation laws in connection with the Merger.

CONDITIONS

The respective obligations of each of the Merging Companies and New ICN to
consummate the Merger are subject to the fulfillment of each of the following
conditions, among others: (a) the Merger Agreement shall have been approved in
the manner required by applicable law or by applicable regulations of any stock
exchange or other regulatory body by the holders of the issued and outstanding
shares of capital stock of each of the Merging Companies entitled to vote
thereon; (b) the waiting period applicable to the consummation of

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the Merger under the HSR Act shall have expired or been terminated; (c) none of
the parties to the Merger Agreement shall be subject to any order or injunction
against the consummation of the transactions contemplated by the Merger
Agreement; (d) the Registration Statement shall have become effective under the
Securities Act and no stop order with respect thereto shall be in effect; and
(e) all consents, authorizations, orders and approvals of (or filings or
registrations with) any governmental commission, board or other regulatory body
required in connection with the execution, delivery and performance of the
Merger Agreement shall have been obtained or made (except where the failure to
obtain or make any such consent, authorization, order, approval, filing or
registration would not have a material adverse effect on the business of the
Merging Companies (and their respective subsidiaries), taken as a whole,
following the Effective Time).

The obligations of each of the Merging Companies to effect the Merger are
also subject to the satisfaction or waiver by the other party prior to the
Effective Time of the following conditions, among others: (a) each of the other
Merging Companies shall have performed all obligations required to be performed
by it under the Merger Agreement and the representations and warranties of the
other party and its subsidiaries set forth in the Merger Agreement shall be true
in all material respects as of the Effective Time unless the failure of such
representation and warranty to be so true and correct would not have or would
not be reasonably likely to have a material adverse effect on the business of
such party and its subsidiaries taken as a whole; (b) from the date of the
Merger Agreement through the Effective Time, there shall not have occurred any
change in the financial condition, business, operations or prospects of the
other party that would have or would be reasonably likely to have a material
adverse effect on the other party and its subsidiaries taken as a whole, other
than any such change that affects each of the Merging Companies in a
substantially similar manner; and (c) the New ICN Shares shall have been
approved for listing on the NYSE. The parties to the Merger Agreement have the
right to waive any or all of these conditions.

Finally, the Merging Companies' obligations are conditioned upon New ICN
receiving gross proceeds from the sale of notes, debentures, common stock and
preferred stock or a combination thereof of at least $150 million and the terms
of such financing shall be mutually acceptable to the Merging Companies, which
condition may be waived. New ICN presently intends that the Financing will
consist of a public offering of convertible debentures, but no assurances can be
given that the Financing will consist of convertible debentures rather than
other debt or other equity securities of New ICN. The final determination will
be dependent upon market conditions at the time of the Financing and
consultations between New ICN and the underwriters for the Financing.

TERMINATION

The Merger Agreement may be terminated and the Merger may be abandoned at
any time prior to the Effective Time, before or after the approval by the
stockholders of each of the Companies, respectively: (a) by the mutual consent
of each of the Merging Companies and New ICN by action of their respective Board
of Directors; (b) by action of the Board of Directors of any of the Merging
Companies or New ICN if (i) the Merger shall not have been consummated by
December 31, 1994, or (ii) the adoption of the Merger Agreement and the approval
of the transactions contemplated thereby by the stockholders of each of the
Merging Companies shall not have been obtained at a meeting duly convened
therefor or at any adjournment thereof; (c) by action by the Board of Directors
of any of the Merging Companies or New ICN if a United States federal or state
court of competent jurisdiction or United States federal or state governmental,
regulatory or administrative agency or commission shall have issued an order,
decree or ruling or taken any other action permanently restraining, enjoining or
otherwise prohibiting the transactions contemplated by the Merger Agreement and
such order, decree, ruling or other action shall have become final and
non-appealable; provided, that the party seeking to terminate the Merger
Agreement pursuant to this clause (c) shall have used all reasonable efforts to
remove such injunction, order or decree; (d) by action of the Board of Directors
of any Merging Company or New ICN, if such Board determines that such
termination is required by reason of an Acquisition Proposal being made; or (e)
by action by the Board of Directors of any of the Merging Companies or New ICN
if there has been a material breach of any representation, warranty, covenant or
agreement contained in the Merger Agreement which is not curable or, if curable,
is not cured within 30 days after written notice of such breach. In the event of
the termination of the Merger Agreement pursuant to

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(e) above, nothing in the Merger Agreement shall prejudice the ability of the
non-breaching party to seek damages from any other party for any breach of the
Merger Agreement, including without limitation, attorneys' fees and the right to
pursue any remedy at law or in equity.

EXPENSES

Whether or not the Merger is consummated, all costs and expenses incurred
in connection with the Merger Agreement and the transactions contemplated
thereby shall be paid by the party incurring such expenses, except as otherwise
provided in the Merger Agreement. The Merger Agreement provides that the
following expenses will be shared by each of the Merging Companies on a
proportionate basis based on the number of Shares to be issued to, or retained
by, the stockholders of each Merging Company: (a) the filing fee in connection
with the HSR Act filing, (b) the filing fee in connection with the filing of the
Registration Statement or this Joint Proxy Statement/Prospectus with the
Commission, (c) all filing fees in connection with any filings required under
applicable blue sky laws, (d) the expenses incurred in connection with printing
and mailing this Joint Proxy Statement/Prospectus, (e) the fees and
disbursements of Fried, Frank, Harris, Shriver & Jacobson incurred in its
capacity as transaction counsel, (f) the fees and expenses of Houlihan Lokey
incurred in connection with the preparation of an appraisal of the assets of the
Merging Companies, and (g) any other expenses not directly attributable to any
one of the Merging Companies.

ALTERNATIVE STRUCTURE

The Merger Agreement provides that notwithstanding anything to the contrary
contained therein, the parties to the Merger Agreement may, by mutual consent,
elect, in lieu of merging one or more of the Merging Companies into New ICN, as
provided for, to merge one or more of the Merging Companies into or with a
wholly owned subsidiary of New ICN. Such change in structure, if any, would be
effected only if it would have no effect on the rights of holders of any Merging
Company Common Stock under the Merger Agreement or on the applicable Exchange
Ratio. While no definitive determination has been made, it is the present
intention to merge ICN, SPI and Viratek with and into New ICN, but to merge
Biomedicals with and into a wholly owned subsidiary of New ICN (in which case,
the successor to Biomedicals will become a wholly owned subsidiary of ICN Merger
upon the consummation of the Merger). If this alternative structure is effected,
stockholders of Biomedicals will still receive in exchange for each of their
shares of Biomedical Common Stock 0.197% New ICN Shares.

AMENDMENT AND WAIVER

The parties may modify or amend the Merger Agreement by written agreement
at any time prior to the Effective Time, before or after approval by the
stockholders of the Merging Companies, to the extent permitted by applicable
law. The conditions to each party's obligation to consummate the Merger may be
waived by the other parties in whole or in part to the extent permitted by
applicable law.

MANAGEMENT AND OPERATIONS OF NEW ICN AFTER THE MERGER

DIRECTORS PRIOR TO THE MERGER

Prior to the consummation of the Merger, the members of the Board of
Directors of New ICN will be Milan Panic, John E. Giordani and Bill A.
MacDonald. Each of these individuals is currently an executive officer of ICN.
See "ICN -- Executive Officers of ICN."

DIRECTORS AFTER THE MERGER

It is expected that the members of the Board of Directors of New ICN, other
than officers of New ICN, will be paid an annual fee of $22,000, payable
quarterly, plus a fee of $500 for every Board meeting attended and an additional
fee of $500 for every committee meeting attended. Such fees would be consistent
with the fees currently paid to the ICN directors. See "ICN -- Compensation of
Directors of ICN." It is also expected that New ICN will provide other
compensation to the New ICN directors substantially similar to the compensation
presently provided to the directors of Merging Companies.

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After the consummation of the Merger, the following individuals will be the
members of the Board of Directors of New ICN. Each of these individuals is
presently a director of at least one of the Merging Companies. See "Description
of New ICN Capital Stock -- Classified Board of Directors" for the staggered
terms to which the directors will be initially elected.

Norman Barker, Jr., age 71, has served as a director of ICN since 1992 and
as a director of SPI since 1988. Mr. Barker is the retired Chairman of the Board
of First Interstate Bank of California and Former Vice Chairman of the Board of
First Interstate Bancorp. Mr. Barker joined First Interstate Bank of California
in 1957 and was elected President and Director in 1968, Chief Executive Officer
in 1971 and Chairman of the Board in 1973. He retired as Chairman of the Board
at the end of 1985. Mr. Barker is also a director of Pacific American Income
Shares, Inc., Southern California Edison Company, and TCW Convertible Securities
Fund, Inc.

Birch E. Bayh, Esq., age 66, has served as a director of ICN since 1992.
Senator Bayh is a partner in the law firm of Bayh, Connaughton, Fensterheim &
Malone. Senator Bayh was previously a partner of the Indianapolis, Indiana and
Washington, D.C. law firm of Bayh, Tabbert & Capehart from April 1981 through
June 1985. From 1963 to 1981, Senator Bayh served as United States Senator from
the State of Indiana. Senator Bayh is also a director of Acordia, Inc. and Simon
Property Group.

Alan F. Charles, age 56, has served as a director of SPI since 1986. Mr.
Charles was Vice Chancellor of University Relations at the University of
California, Los Angeles from 1980 to 1993 and served in various administrative
capacities at that university since 1972.

Robert H. Finch, Esq., age 68, has served as a director of ICN since 1976
and as a director of Viratek since 1980. Mr. Finch has been a partner in the
Pasadena, California law firm of Fleming, Anderson, McClung & Finch since 1976.
Prior thereto he was Counsel to the President of the United States from 1971 to
1972, Secretary of the United States Department of Health, Education and Welfare
from 1969 to 1972, and Lieutenant Governor of the State of California from 1967
to 1969. Mr. Finch is also a director of Nationwide Health Properties, Inc. and
Continental Graphics.

Roger Guillemin, M.D., Ph.D., age 70, has served as a director of SPI since
1989, as a director of Viratek since 1992 and as a director of ICN since 1993.
Dr. Guillemin has been Distinguished Scientist at the Whittier Institute in La
Jolla, California since March 1989 and was Resident Fellow and Chairman of the
Laboratories for Neuroendocrinology at the Salk Institute in La Jolla,
California, and Adjunct Professor of Medicine at the Medical School of the
University of California at San Diego. Dr. Guillemin was awarded the Nobel Prize
in Medicine in 1977 and, in the same year, was presented the National Medal of
Science by the President of the United States. He was affiliated with the
Department of Physiology at Baylor College of Medicine in Houston, Texas from
1952 to 1970. Dr. Guillemin is a member of the National Academy of Sciences, and
a Fellow of the American Association for the Advancement of Science. Dr.
Guillemin has also served as President of the American Endocrine Society. Dr.
Guillemin is also a director of Erbamont N.V.

Adam Jerney, age 52, has served as a director of ICN, SPI, Viratek and
Biomedicals since 1992. Mr. Jerney is President and Chief Operating Officer of
SPI. He served as Chairman of the Board and Chief Executive Officer of ICN, SPI,
Viratek and Biomedicals from July 14, 1992 to March 4, 1993 during Milan Panic's
leave of absence (as discussed below). Mr. Jerney joined ICN in 1973 as Director
of Marketing Research in Europe and assumed the position of General Manager of
ICN Netherlands in 1975. In 1981, he was elected Vice President -- Operations
and in 1987 he assumed his current position. Prior to joining ICN he spent four
years with F. Hoffmann-LaRoche & Company.

Weldon B. Jolley, Ph.D., age 67, has served as a director of ICN since
1960. Dr. Jolley is President of Golden Opportunities and was President of the
Nucleic Acid Research Institute, a former division of ICN, from 1985 to 1989.
Dr. Jolley was a Vice-President of ICN until 1990. Prior to that, he was, for
eleven years, Professor of Surgery at the Loma Linda University School of
Medicine in Loma Linda, California and a physiologist at the Veterans Hospital
in Loma Linda, California.

Vernon Knight, M.D., age 76, has served as a director of Viratek since
1981. Dr. Knight is Professor at Baylor College of Medicine in Houston, Texas.
He has also served as a consultant to the United States Army

59
<PAGE> 86

Medical Research Institute of Infectious Diseases and has served as a member of
the National Institutes of Health's Task Force on Immunization, Research and
Development Panel.

Jean-Francois Kurz, age 60, has served as a director of Biomedicals since
1989. Mr. Kurz was a member of the Board of Directors and the Executive
Committee of the Board of DG Bank Switzerland Ltd. from 1990 to 1992. In 1988
and 1989, Mr. Kurz served as a General Manager of TDB American Express Bank of
Geneva and from 1969 to 1988, he was Chief Executive Officer of Banque
Gutzweiler, Kurz, Bungener in Geneva. Mr. Kurz is also Chairman of the Board and
a director of Banque Pasche S.A., Geneva.

Thomas H. Lenagh, age 73, has served as a director of Biomedicals since
1983 and was a director of ICN from 1979 to April 1989. Mr. Lenagh is an
independent financial advisor. He was Chairman of the Board of Greiner
Engineering, Inc. from 1982 to 1985. Mr. Lenagh served as Financial Vice
President to the Aspen Institute from 1978 to 1980, and since then as an
independent financial consultant. From 1964 to 1978 he was Treasurer of the Ford
Foundation. Mr. Lenagh is also a director of Adams Express Company, U.S. Life
Corporation, SCI Systems, Inc., Gintel Funds, Irvine Sensors, Inc., CML, Inc.,
Clemente Global Funds, Franklin Quest, V Band Corp. and Styles On Video.

Charles T. Manatt, Esq., age 58, has served as a director of SPI since
1992. Mr. Manatt is a partner in the law firm of Manatt, Phelps & Phillips, of
which he was a founder in 1964. Mr. Manatt served as Chairman of the Democratic
Party from 1981 to 1985. Mr. Manatt is also a director of Federal Express, GTE
and Castle & Cooke Homes.

James P. Miscoll, age 59, has served as a director of SPI since 1992. Mr.
Miscoll is the retired Vice-Chairman of Bank of America, where he had served in
a number of positions since 1962. Mr. Miscoll is also a director of Coast
Federal Financial Inc., Rykoff Sexton, Inc. and the California Higher Education
Loan Authority.

Stephen D. Moses, age 59, has served as a director of SPI since 1988. Mr.
Moses is Chairman of the Board of Stephen Moses Interests. He was formerly
Chairman of the Board of National Investment Development Corporation and
Brentwood Bank in Los Angeles, California and a member of the National Advisory
Board of the Center for National Policy. Mr. Moses serves on the Board of
Visitors of Hebrew Union College as well as the Board of Trustees of Franklin
and Marshall College and the UCLA Foundation. From 1967 to 1971, Mr. Moses was
an executive of the Boise Cascade Corporation, serving in several capacities,
including President of Boise Cascade Home and Land Corporation. In the early
1970s, Mr. Moses was President of Flagg Communications, Inc.

Milan Panic, age 64, the founder of ICN, has been Chairman of the Board,
Chief Executive Officer and President of ICN since its inception in 1960; except
for a leave of absence from July 14, 1992 to March 4, 1993 while he was serving
as Prime Minister of Yugoslavia and a leave of absence from October 1979 to June
1980. Mr. Panic has also served as Chairman of the Board and Chief Executive
Officer of SPI, Viratek and Biomedicals since their respective inceptions
(except for such leaves of absence), and he may be deemed to be a "control
person" of the Merging Companies.

Michael Smith, Ph.D., age 62, has served as a director of ICN since 1994.
Dr. Smith is Director of the Biomedical Research Center, a privately funded
research institute at the University of British Columbia. In 1993, Dr. Smith
received the Nobel Prize in Chemistry. He has been a career investigator of the
Medical Research Council of Canada since 1979 and is a member of the American
Endocrine Society.

Roberts A. Smith, Ph.D., age 65, has served as a director of ICN since 1960
and as a director of Viratek since 1992. Dr. Smith was President of Viratek and
Vice President -- Research and Development of SPI through 1992. Dr. Smith was
also a director of the Nucleic Acid Research Institute from 1985 to 1989. For
more than eleven years, Dr. Smith was Professor of Chemistry and Biochemistry at
the University of California at Los Angeles. Dr. Smith is also a director of PLC
Systems.

Richard W. Starr, age 73, has served as a director of ICN since 1983. Mr.
Starr is the retired Executive Vice President and Chief Credit Officer Worldwide
of First Interstate Bank of California. Mr. Starr spent

60
<PAGE> 87

31 years with First Interstate before retiring in 1983 and has over 44 years of
experience in commercial banking.

EXECUTIVE OFFICERS AFTER THE MERGER

Upon consummation of the Merger, it is intended that New ICN will be
operated by the current operating management of the Merging Companies. The
persons expected to be executive officers of New ICN following the Merger are
listed below. All of those individuals are currently executive officers of at
least one of the Merging Companies. Information (including their present
positions) is provided in the Addendum to this Joint Proxy Statement/Prospectus
under "ICN -- Executive Officers" with respect to Messrs. Panic, Jerney,
MacDonald, Giordani and Watt, under "SPI -- Executive Officers" with respect to
Messrs. Phillips and Sholl and under "Viratek -- Executive Officers" with
respect to Dr. Johannesson.

<TABLE>
<S> <C>
Chairman, President and Chief Executive Officer Milan Panic
Executive Vice President -- Chief Operating Officer Adam Jerney
Executive Vice President -- Chief Financial Officer
and Corporate
Controller John E. Giordani
Executive Vice President -- Research and Development Nils O. Johannesson, M.D., Ph.D.
Executive Vice President -- Corporate Development Bill A. MacDonald
Executive Vice President -- Administration John F. Phillips
Executive Vice President -- General Counsel David C. Watt
Senior Vice President -- Human Resources Jack Sholl
</TABLE>

61
<PAGE> 88

UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS

The following Unaudited Pro Forma Combined Condensed Balance Sheet of New
ICN as of June 30, 1994 and the Unaudited Pro Forma Combined Condensed
Statements of Income of New ICN for the year ended December 31, 1993, and six
months ended June 30, 1994, give effect to the Merger accounted for under the
purchase method of accounting. The unaudited pro forma combined condensed
financial statements are based on the historical consolidated financial
statements of SPI and ICN under the assumptions and adjustments set forth in the
accompanying notes to the unaudited pro forma combined condensed financial
statements. The unaudited pro forma combined condensed financial statements
represent the acquisition by New ICN (a wholly owned subsidiary of SPI) of ICN
and the minority stockholder interests in Viratek and Biomedicals. The separate
financial information of Viratek and Biomedicals has not been reflected
separately in the unaudited pro forma combined condensed financial statements as
such information has been consolidated with ICN and all significant intercompany
amounts have been eliminated. ICN owns 63% and 69% of the outstanding Viratek
Common Stock and Biomedicals Common Stock, respectively. The Unaudited Pro Forma
Combined Condensed Balance Sheet assumes that the Merger was consummated on June
30, 1994, and the Unaudited Pro Forma Combined Condensed Statements of Income
assume that the Merger was consummated on January 1, 1993.

The pro forma adjustments are based on the Merger Agreement, which provides
for stockholders of SPI (other than ICN) to receive 1.000 New ICN Share for each
share of SPI Common Stock, for ICN stockholders to receive 0.512 New ICN Shares
for each share of ICN Common Stock and for the stockholders of Viratek and
Biomedicals (other than ICN) to receive 0.499 and 0.197 New ICN Shares,
respectively, for each share of Viratek Common Stock or Biomedicals Common
Stock. In determining these ratios, the share prices used were $16.89, $8.65,
$8.43 and $3.32 for SPI, ICN, Viratek and Biomedicals, respectively. (These
prices represent the average closing share prices of the Merging Companies for
the 21 trading days between June 23 and July 22, 1994, inclusive, which was the
basis used by the Special Committees to determine the Exchange Ratios, see "The
Merger -- Background of the Merger"). The shares of SPI Common Stock currently
held by ICN will be cancelled as will the Viratek Common Stock and Biomedicals
Common Stock and the Biomedicals preferred stock owned by ICN. For purposes of
the pro forma financial statements, the purchase price paid by New ICN for ICN
and the minority stockholder interests in Viratek and Biomedicals was determined
based upon the issuance of an additional 6,477,000 New ICN Shares at an assumed
price of $16.89 per share (computed as discussed above). The actual purchase
price may vary and will be based on the value of the New ICN Shares at the
Effective Time. For purposes of developing the Unaudited Pro Forma Combined
Condensed Balance Sheet, the book values of ICN's net assets are assumed to
approximate fair value, and the excess purchase price of $16,333,000, net of
amounts representing purchased research and development for which no alternative
use exists of $185,000,000, has been assigned to patents and trademarks. The
determination of the final assignment to trademarks or goodwill is subject to
appraisals, evaluations and other studies of the fair value of ICN's net assets
which will be completed following consummation of the Merger.

The Unaudited Pro Forma Combined Condensed Statements of Income do not
reflect any nonrecurring costs expected to be incurred by the Merging Companies
in connection with the Merger but do reflect the consummation of the Financing.
The amount of these Merger costs are currently estimated to be approximately
$5,000,000, although the ultimate costs cannot be determined until the Merger is
completed. Also, excluded from the Unaudited Pro Forma Combined Condensed
Statements of Income are any benefits that may result from the Merger due to
synergies that may be derived, the elimination of duplicate costs, a non-
recurring charge to earnings immediately following the Merger for purchased
research and development for which no alternative use exists and any loss from
early extinguishment of the debt (presently, not expected to be material)being
repaid from the net proceeds of the Financing. See Notes 4 and 10 to the
Unaudited Pro Forma Combined Condensed Statements of Income.

The unaudited pro forma combined condensed financial statements may not be
indicative of the results that actually would have occurred if the Merger had
been consummated on the dates indicated or which may be obtained in the near
future. The unaudited pro forma combined condensed financial statements should
be read in conjunction with related historical consolidated financial statements
and Management's Discussion and Analysis of Financial Condition and Results of
Operations of each of the Merging Companies included elsewhere in this Joint
Proxy Statement/Prospectus.

62
<PAGE> 89

<TABLE>
UNAUDITED PRO FORMA COMBINED CONDENXED STATEMENTS OF INCOME
<CAPTION>
YEAR ENDED DECEMBER 31, 1993 SIX MONTHS ENDED JUNE 30, 1994
----------------------------------------------- -----------------------------------------------
HISTORICAL HISTORICAL
------------------- PRO FORMA PRO FORMA ------------------- PRO FORMA PRO FORMA
SPI ICN ADJUSTMENTS NEW ICN SPI ICN ADJUSTMENTS NEW ICN
-------- -------- ----------- --------- -------- -------- ----------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
Net sales..................... $403,957 $ 62,556 $ (3,480)(1) $463,033 $151,094 $ 32,843 $(2,185)(1) $181,752
Cost of sales................. 211,923 27,631 239,554 77,783 13,500 91,283
-------- -------- --------- -------- -------- -------- ------- --------
Gross profit.............. 192,034 34,925 (3,480) 223,479 73,311 19,343 (2,185) 90,469
-------- -------- --------- -------- -------- -------- ------- --------
Selling, general and
administrative.............. 131,069 43,690 174,759 43,997 20,554 64,551
Royalties to affiliates....... 6,121 -- (6,121)(1) -- 3,749 (3,749)(1) --
Research and development...... 11,516 5,571 17,087 2,476 3,930 6,406
Translation and exchange
(gains) losses.............. (3,282) (1,292) 248 (5) (4,326) 2,254 3,380 (552) (5) 5,082
Equity in earnings of SPI..... (11,646) 2,423 (1) -- (6,683) 1,385 (1) --
9,223 (2) 5,298 (2)
Gain on sale of subsidiary
common stock owned by ICN... (8,345) 8,345 (3) -- --
Interest expense, net......... 15,717 18,962 (17,329)(4) 27,470 840 8,734 (7,938)(4) 6,867
(1,880)(4) (769)(4)
12,000 (4) 6,000 (4)
Other (income) expense, net... 3,826 879 218 (1) 4,161 1,099 1,010 179 (1) 1,915
(2,395)(6) (1,189)(6)
1,633 (7) 816 (7)
-------- -------- ---------- -------- -------- -------- --------- --------
Income (loss) before income
taxes, minority interest,
extraordinary item and
certain nonrecurring
charges (aggregating
$190,000 or $7.13 per
share for the year ended
December 31, 1993)........ 27,067 (12,894) (9,845) 4,328 18,896 (11,582) (1,666) 5,648
Income taxes.................. 5,368 (474) (4,300)(8) 594 4,854 (32) (3,022)(8) 1,800
Minority interest............. 189 (523) 523 (9) 189 433 (173) (173)(9) 433
-------- -------- ---------- -------- -------- -------- ------- --------
Income (loss) before
extraordinary item and
certain nonrecurring
charges (aggregating
$190,000 or $7.13 per
share for the year ended
December 31, 1993)(10).... $ 21,510 $(11,897) $ (6,068) $ 3,545 $ 13,609 $(11,377) $ 1,183 $ 3,415
======== ======== ========== ======== ======== ======== ========= ========
Per share data:
Income (loss) before
extraordinary item and
certain nonrecurring
charges (aggregating
$190,000 or $7.13 per
share for the year ended
December 31, 1993)(10).... $ 1.07 $ (0.60) $ 0.13 $ 0.65 $ (0.55) $ 0.12
======== ======== ======== ======== ======== ========
Weighted average number of
common shares
outstanding(11)........... 20,157 19,813 26,647 20,815 20,523 27,477
======== ======== ======== ======== ======== ========
Ratio of earnings to fixed
charges(12)............... 1.12 1.68
======== ========
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Statements of
Income

63
<PAGE> 90

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME

The Unaudited Pro Forma Combined Condensed Statements of Income have been
prepared to reflect the Merger as if the Merger occurred on January 1, 1993. The
Merger has been accounted for under the purchase method of accounting. The
excess of the purchase price over the fair value of the net assets acquired, net
of purchased research and development, for which no alternative use exists, is
being amortized on a straight-line basis over 10 years.

The following is a summary of reclassifications and adjustments reflected
in the Unaudited Pro Forma Combined Condensed Statements of Income:

(1) Represents elimination of related party royalty income and
expense. SPI pays royalties to Viratek on its worldwide sales of ribavirin
and pays royalties to ICN on its sales of Brown Pharmaceutical products. A
portion of the royalties on sales of ribavirin by SPI had been previously
eliminated in the consolidation of ICN.

(2) Represents elimination of ICN's equity in the earnings of SPI.

(3) Represents elimination of ICN's gain on sales of subsidiary stock.
During 1993, ICN sold 1,618,000 shares of SPI Common Stock and 273,000
shares of Viratek Common Stock for an aggregate gain of $8,345,000.

(4) Assumes that New ICN will issue $150,000,000 principal amount of
debentures in a public offering, convertible into New ICN Shares at a 20%
conversion premium (conversion price currently estimated at $20.268 per New
ICN Share), estimated deferred loan costs of $6,000,000, and an assumed
annual effective interest rate of 8% (the "New Debt"). A substantial
portion of the proceeds will be used to retire certain existing debt with a
fair value of $136,976,000. ("Old Debt") plus accrued interest of
$4,826,000, as follows:

<TABLE>
<CAPTION>
AT JUNE 30, 1994
--------------------------------
EFFECTIVE
DEBT FAIR VALUE INTEREST RATE
------------------------------------------ -------------- -------------
<S> <C> <C>
12 7/8% sinking fund debentures........... $ 70,697,000 13.4%
12 1/2% senior subordinated debentures.... 20,238,000 17.6
6% Dutch Guilder subordinated convertible
bonds................................... 6,696,000 6.5
Various foreign bank debt payable in
Spanish Pesetas and Mexican Pesos....... 19,744,000 13.3
Mortgage payable.......................... 13,058,000 6.0
Other..................................... 6,543,000 7.1
-------------- -----
$ 136,976,000 12.6%
=========== =========
</TABLE>

The 6% Dutch Guilder subordinated convertible bonds were repaid in
September 1994 with the proceeds of a foreign bank loan, due March 12,
1995, in the principal amount of $5,067,500 collateralized by common stock
of SPI owned by ICN, at an annual interest rate as of September 12, 1994 of
7 3/4%.

The pro forma statements include adjustments to reverse interest and
amortization of deferred loan costs on the Old Debt of $17,329,000 and
$1,880,000, respectively, for the year ended December 31, 1993 and
$7,938,000 and $769,000, respectively, for the six months ended June 30,
1994. The adjustments also reflect interest on the New Debt at an
anticipated effective interest rate of 8% or $12,000,000 and $6,000,000 for
the year ended December 31, 1993 and the six months ended June 30, 1994,
respectively, which includes amortization of the estimated deferred loan
costs on the New Debt. A 1/8 percent variance in the interest rate on the
New Debt will result in a $187,500 change in the annual interest costs.

THE TERMS OF THE NEW DEBT USED FOR PURPOSES OF PREPARING THE PRO FORMA
STATEMENTS ARE NOT NECESSARILY INDICATIVE OF WHAT THE ACTUAL TERMS OF THE
NEW DEBT WILL BE (IF THE NEW DEBT IS ISSUED). THE ACTUAL TERMS OF THE NEW
DEBT WILL DEPEND UPON A NUMBER OF FACTORS, INCLUDING PREVALENT MARKET
CONDITIONS, AT THE TIME OF ISSUANCE.

Under the terms of the Merger Agreement the Merger is contingent upon
the successful issuance of the New Debt. However this condition can be
waived by the Board of Directors of New ICN if market

64
<PAGE> 91

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME (CONTINUED)

conditions change such that it is not economically viable for New ICN to
issue the New Debt. If market conditions preclude the issuance of New Debt,
the following summarizes the effect on the Unaudited Pro Forma Combined
Condensed Statements of Income for the year ended December 31, 1993 and for
the six months ended June 30, 1994 of New ICN (in thousands).

<TABLE>
<CAPTION>
FISCAL YEAR ENDED SIX MONTHS
DECEMBER 31, 1993 ENDED JUNE 30, 1994
---------------------------------------- ----------------------------------------
WITH EFFECT OF WITHOUT WITH EFFECT OF WITHOUT
"NEW DEBT" FINANCING "NEW DEBT" "NEW DEBT" FINANCING "NEW DEBT"
------------ ---------- ------------ ------------ ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Translation and exchange (gains)
losses.............................. $ (4,326) $ (248) $ (4,574) $5,082 $ 552 $5,634
Interest expense...................... 27,470 7,209 34,679 6,867 2,707 9,574
Income (loss) before extraordinary
item................................ $ 3,545 $ (6,961) $ (3,416) $3,415 $ (3,259) $ 156
=========== ========= =========== =========== ========= ===========
Per share income (loss) before
extraordinary item.................. $ 0.13 $ (0.12) $ 0.12 $ 0.01
=========== =========== =========== ===========
Ratio of Earnings to Fixed Charges.... 1.12x 1.68x 1.22x
=========== =========== ===========
Deficiency in earnings available to
cover fixed charges................. $ (2,633)
===========
</TABLE>

(5) Represents reversal of the translation gain (loss) in connection
with the early extinguishment of ICN's foreign denominated old debt with a
portion of the proceeds from the anticipated New Debt.

(6) Represents reversal of goodwill and other intangible amortization
previously recorded by ICN.

(7) Represents amortization of the estimated excess purchase price
over the fair value of ICN net assets acquired (patents and trademarks)
over 10 years.

(8) Represents a reduction in domestic income tax expense as a result
of the pro forma reductions in income for SPI's U.S. operation and the
utilization of ICN's net operating loss carryforwards. (See "Certain
Federal Income Tax Consequences.")

(9) Represents elimination of minority interest relating to Viratek
and Biomedicals as a result of the Merger.

(10) These pro forma combined condensed statements of income exclude
the following non-recurring expenses which will be incurred in connection
with the proposed business combination and proposed Financing:

(a) Estimated Merger costs of approximately $5,000,000.

(b) In connection with the Merger, an independent valuation has
been obtained which valued current in-process research and development
efforts acquired for which no alternative use exists at $185,000,000
which will be charged to ongoing operations immediately following
consummation of the Merger. In accordance with Financial Accounting
Standards Board ("FASB") Interpretation No. 4, "Applicability of FASB
Statement No. 2 to Business Combinations Accounted for by the Purchase
Method", the costs assigned to in-process research and development for
which no alternative use exists are charged to expense on the date of
consummation of the business combination.

(11) The weighted average number of shares outstanding assumes that
the 6,477,000 New ICN Shares to be issued to ICN stockholders and Viratek
and Biomedicals stockholders (other than ICN) are outstanding for all
periods presented. All per share amounts have been restated to reflect
stock splits and stock dividends.

(12) For purposes of these calculations, earnings before fixed charges
consists of income (loss) before income taxes, minority interest,
extraordinary income and nonrecurring charges incurred in connection with
the Merger, (as discussed in note 10 above aggregating $190,000,000
($185,000,000 of which is a non-cash charge) or $7.13 per New ICN Share for
the year ended December 31, 1993) plus fixed charges. Fixed charges
consists of interest on indebtedness and that portion of operating rental
expense representative of the interest factor.

65
<PAGE> 92

<TABLE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
<CAPTION>
AS OF JUNE 30, 1994
----------------------------------------------------
HISTORICAL
---------------------- PRO FORMA PRO FORMA
SPI ICN ADJUSTMENTS NEW ICN
-------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Current assets:
Cash and cash equivalents................ $ 19,238 $ 13,264 $ 2,198 (6) $ 34,700
Restricted cash.......................... 1,262 1,262
Receivables, net......................... 50,279 14,134 64,413
Receivable from SPI...................... 5,225 (5,225)(1) --
Inventories, net......................... 91,883 15,473 107,356
Prepaid expenses and other current
assets................................ 17,465 3,846 21,311
-------- --------- --------- ---------
Total current assets............. 178,865 53,204 (3,027) 229,042
Property, plant and equipment.............. 80,183 36,439 116,622
Marketable securities...................... 29,826 224 30,050
Investment in SPI.......................... 75,407 (75,407)(2) --
Investment in other equity securities...... 3,827 3,827
Other assets and deferred charges.......... 14,686 7,089 (2,464)(3) 37,496
16,333 (4)
(4,148)(5)
6,000 (6)
Goodwill related to purchased businesses... 1,571 2,404 (2,404)(7) 1,571
Goodwill related to publicly traded
subsidiaries............................. 10,046 (10,046)(7) --
-------- --------- --------- ---------
Total assets..................... $305,131 $ 188,640 $ (75,163) $ 418,608
======== ========= ========= =========
Current liabilities
Notes payable............................ $ 15,006 $ 3,456 $ 18,462
Current maturities of long-term debt..... 4,207 17,942 (13,604)(6) 8,545
Accounts payable......................... 15,277 5,770 21,047
Accrued liabilities...................... 20,827 17,910 (4,826)(6) 33,911
Payable to ICN........................... 5,225 (5,225)(1) --
Income taxes payable..................... 14,172 14,172
-------- --------- --------- ---------
Total current liabilities........ 74,714 45,078 (23,655) 96,137
Long-term debt, less current portion....... 16,154 132,000 2,186 (5) 176,968
(123,372)(6)
150,000(6)
Other liabilities and deferred income
taxes.................................... 7,001 6,867 13,868
Minority interest.......................... 41,862 12,720 (12,720)(8) 41,862
Stockholders' equity(13):
ICN common stock......................... 20,529 (20,529)(9) --
SPI/New ICN Common stock................. 204 65 (10) 269
Additional capital....................... 97,496 180,911 (180,911)(9) 206,804
109,308 (10)
Retained earnings........................ 77,389 (205,088) 205,088 (9) (107,611)
(185,000)(11)
Unrealized loss on marketable
securities............................ (2,761) (2,761)
Foreign currency translation
adjustments........................... (6,928) (4,377) 4,377(12) (6,928)
-------- --------- --------- ---------
Total stockholders' equity....... 165,400 (8,025) (67,602) 89,773
-------- --------- --------- ---------
Total liabilities and
stockholders' equity........... $305,131 $ 188,640 $ (75,163) $ 418,608
======== ========= ========= =========
</TABLE>

See accompanying Notes to Unaudited Pro Forma Combined Condensed Balance Sheet

66
<PAGE> 93

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET

The Unaudited Pro Forma Combined Condensed Balance Sheet was prepared to
reflect the Merger, which was accounted for under the purchase method of
accounting, assuming it was consummated on June 30, 1994.

The following is a summary of the reclassifications and adjustments
reflected in the Unaudited Pro Forma Combined Condensed Balance Sheet:

(1) Represents elimination of intercompany balances between ICN and
SPI.

(2) Represents elimination of ICN's investment in SPI.

(3) Represents elimination of existing intangibles, including patents,
trademarks and clinical trials of ICN.

(4) Represents the preliminary estimate of excess purchase price over
the fair value of ICN net assets acquired (patents and trademarks) net of
purchased research and development for which no alternative use exists (see
Note 11).

(5) Represents the adjustment to record debt assumed in the Merger at
fair value and elimination of deferred loan costs on the debt assumed.

(6) Assumes that New ICN will issue $150,000,000 principal amount of
debentures in a public offering, convertible into New ICN Shares at a 20%
conversion premium (conversion price currently estimated at $20.268 per
share of New ICN), with estimated deferred loan costs of $6,000,000, and an
assumed effective interest rate of 8% (the "New Debt"). A substantial
portion of the proceeds will be used to retire the Old Debt with a fair
value of $136,976,000, plus accrued interest of $4,826,000. The remaining
net proceeds will be used for general corporate purposes and has been
reflected as cash. Following is a summary of Old Debt anticipated to be
retired:

<TABLE>
<CAPTION>
FAIR VALUE AT EFFECTIVE
DEBT JUNE 30, 1994 INTEREST RATE
----------------------------------------- -------------- -------------
<S> <C> <C>
12 7/8% sinking fund debentures.......... $ 70,697,000 13.4%
12 1/2% senior subordinated debentures... 20,238,000 17.6
6% Dutch Guilder subordinated convertible
bond................................... 6,696,000 6.5
Various foreign bank debt payable in
Spanish Pesetas and Mexican Pesos...... 19,744,000 13.3
Mortgage payable......................... 13,058,000 6.0
Other.................................... 6,543,000 7.1
-------------- -----
$ 136,976,000 12.6%
=========== ==========
</TABLE>

See Note 4 of Notes to Unaudited Pro Forma Combined Condensed
Statements of Income.

(7) Represents elimination of existing goodwill at ICN.

(8) Represents elimination of minority interest relating to Viratek
and Biomedicals as a result of the acquisition of the minority interest by
New ICN.

(9) Represents elimination of ICN's historical deficit.

(10) Reflects the additional 6,477,000 New ICN Shares to be issued to
ICN stockholders and the Viratek and Biomedicals stockholders (other than
ICN) in connection with the Merger at an assumed price of $16.89 per share
(based on the average closing share prices of the Merging Companies for the
21 trading days between June 23 and July 22, 1994, inclusive, which was the
basis used by the Special Committees to determine the Exchange Ratios; see
"The Merger -- Background of the Merger"). The actual purchase price may
vary and will be based on the market value of the New ICN Shares at the
Effective Time.

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<PAGE> 94

NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET (CONTINUED)

(11) In connection with the Merger, an independent valuation has been
obtained which valued current in-process research and development efforts
acquired for which no alternative use exists at $185,000,000 which will be
charged to ongoing operations immediately following consummation of the
Merger. In accordance with Financial Accounting Standards Board ("FASB")
Interpretation No. 4, "Applicability of FASB Statement No. 2 to Business
Combinations Accounted for by the Purchase Method", the costs assigned to
in-process research and development for which no alternative use exists are
charged to expense on the date of consummation of the business combination.

(12) Represents the elimination of the foreign currency translation
adjustment related to ICN's foreign subsidiaries.

(13) Under the terms of the Merger Agreement, all options outstanding
under the stock option plans of ICN, SPI, Viratek and Biomedicals will
remain outstanding after the consummation of the Merger and will be assumed
by New ICN. Each such option will be exercisable upon the same terms and
conditions as were in effect prior to the consummation of the Merger,
except that (a) each such option will be exercisable for that number of New
ICN Shares (to the nearest whole share) into which the number of shares of
common stock of the applicable Predecessor Company under the unexercised
portion of such option, if then outstanding, would have been converted at
the effective time of the Merger, and (b) the exercise price per New ICN
Share will be an amount equal to the exercise price per share subject to
such option prior to the effective time of the Merger divided by the
applicable exchange ratio (i.e., 0.512 in the case of options to purchase
common stock of ICN, 1.000 in the case of options to purchase common stock
of SPI, 0.499 in the case of options to purchase common stock of Viratek
and 0.197 in the case of options to purchase common stock of Biomedicals)
(rounded upward to the nearest full cent). Assuming that the Merger was
consummated on June 30, 1994, on a pro forma basis there were outstanding
options to purchase 5,333,039 New ICN Shares.

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<PAGE> 95

SECURITY OWNERSHIP

The following table sets forth certain information with respect to all
stockholders known by any of the Merging Companies based upon public filings,
who would have been beneficial owners of more than 5% of the outstanding New ICN
Shares if the Merger had occurred on September 23, 1994.

<TABLE>
<CAPTION>
ESTIMATED
NUMBER OF SHARES
BENEFICIALLY OWNED PERCENT
NAME AND ADDRESS OF BENEFICIAL OWNER AFTER THE MERGER OF CLASS
------------------------------------------------- ------------------ --------
<S> <C> <C>
Invesco MIM, PLC................................. 2,412,163 8.94%
11 Devonshire Square
London EC2M 7 YR
England
</TABLE>

DESCRIPTION OF NEW ICN CAPITAL STOCK

AUTHORIZED CAPITAL STOCK

New ICN's authorized capital stock presently consists of 100,000,000 New
ICN Shares, 100 of which shares are issued and outstanding and are owned by SPI.
All of the New ICN Shares issued in the Merger will be validly issued, fully
paid and non-assessable. After giving effect to the Merger, based upon the
Merging Company Common Stock outstanding as of September 23, 1994, there will be
approximately 27,971,000 New ICN Shares outstanding, 5,333,000 options to
acquire New ICN Shares and approximately 1,900,000 New ICN Shares reserved for
issuance pursuant to other outstanding convertible securities (other than any
convertible securities which may be issued in the Financing).

NEW ICN SHARES

The holders of New ICN Shares will be entitled to one vote for each share
on all matters voted on by stockholders, including the election of directors
and, except as otherwise required by law or provided in any resolution adopted
by the New ICN Board with respect to any series of New ICN Preferred Stock, will
exclusively possess all voting power. The holders of New ICN Shares will not
have any cumulative voting, conversion, redemption or preemptive rights. Subject
to any preferential rights of any outstanding series of New ICN Preferred Stock
designated by the Board of Directors of New ICN from time to time, the holders
of New ICN Shares will be entitled to such dividends as may be declared from
time to time by the Board of Directors of New ICN from funds available therefor,
and upon liquidation will be entitled to receive pro rata all assets of New ICN
available for distribution to such holders. See "Certain Considerations --
Dividend Policy."

NEW ICN PREFERRED STOCK

The New ICN Board will be authorized to provide for the issuance of shares
of New ICN Preferred Stock, in one or more series, and to fix for each such
series such voting powers, designations, preferences and relative,
participating, optional and other special rights, and such qualifications,
limitations or restrictions, as are stated in the resolution adopted by the New
ICN Board providing for the issuance of such series and as are permitted by the
Delaware Law. In connection with the Shareholder Rights Plan to be adopted by
New ICN, New ICN will have authorized a series of 1,000,000 shares of New ICN
Preferred Stock designated Series A Participating Preferred Stock (the "New ICN
Series A Preferred Stock"). For a description of the terms of the New ICN Series
A Preferred Stock, see "Description of New ICN Capital Stock -- New ICN
Preferred Stock Purchase Rights."

NEW ICN PREFERRED STOCK PURCHASE RIGHTS

Prior to the consummation of the Merger, the New ICN Board intends to adopt
a Shareholder Rights Plan and cause to be issued with each New ICN Share issued
to the Merging Companies' stockholders in the Merger one Preferred Stock
Purchase Right (a "New ICN Right"). Each New ICN Right will entitle the

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<PAGE> 96

registered holder to purchase from New ICN one one-hundredth of a share of New
ICN Series A Preferred Stock at a price expected to be approximately $125 per
one one-hundredth of a share, subject to adjustment. The description and terms
of the New ICN Rights will be set forth in a Rights Agreement (the "Rights
Agreement") between New ICN and a rights agent to be selected by New ICN (the
"Rights Agent").

The New ICN Rights will have certain anti-takeover effects. The New ICN
Rights will cause substantial dilution to a person or group that attempts to
acquire New ICN without conditioning the offer on the New ICN Rights being
redeemed or a substantial number of New ICN Rights being acquired. However, the
New ICN Rights should not interfere with any tender offer or merger approved by
New ICN (other than with an Acquiring Person) (as defined below) because the New
ICN Rights (i) do not become exercisable in the event of a Permitted Offer (as
defined below) and expire automatically upon the consummation of a merger in
which the form of consideration is the same as, and the price is not less than
the price paid in, the Permitted Offer and (ii) are redeemable in connection
with an approved merger in which all holders of New ICN Shares are treated
alike.

The New ICN Rights will be attached to all New ICN Share certificates
representing New ICN Shares issued in the Merger and thereafter issued prior to
the Rights Distribution Date (as defined below). Initially, no separate New ICN
Rights certificates will be distributed. Until the earlier to occur of (i) the
first date (the "Stock Acquisition Date") of a public announcement that a person
or group of affiliated or associated persons (an "Acquiring Person") has
acquired, or obtained the right to acquire, beneficial ownership of securities
having 15% or more of the voting power of all outstanding voting securities of
New ICN or (ii) ten days (unless such date is extended by the New ICN Board)
following the commencement of (or a public announcement of an intention to make)
a tender offer or exchange offer which would result in any person or group of
related persons becoming an Acquiring Person (in either case, except as a result
of a Permitted Offer) (the earlier of such dates being called the "Rights
Distribution Date"), the New ICN Rights will be evidenced by the New ICN Share
certificates. Until the Rights Distribution Date, the New ICN Rights will be
transferred with and only with New ICN Share certificates. New ICN Share
certificates issued after the Merger upon transfer or new issuance of the New
ICN Shares will contain a notation incorporating the Rights Agreement by
reference. Until the Rights Distribution Date (or earlier redemption or
expiration of the Rights), the surrender for transfer of any certificates for
New ICN Shares will also constitute the transfer of the New ICN Rights
associated with the New ICN Shares represented by such certificate. As soon as
practicable following the Rights Distribution Date, separate certificates
evidencing the New ICN Rights ("Rights Certificates") will be mailed to holders
of record of the New ICN Shares as of the close of business on the Rights
Distribution Date, and the separate Rights Certificates alone will evidence the
New ICN Rights.

The New ICN Rights will not be exercisable until the Rights Distribution
Date. The Rights will expire on the earliest of (i) November 1, 2004, (ii)
consummation of a merger transaction with a person or group who acquired New ICN
Shares pursuant to a Permitted Offer, and is offering in the merger the same
form of consideration, and not less than the price per New ICN Share, paid
pursuant to the Permitted Offer or (iii) redemption by New ICN as described
below.

The Purchase Price payable, and the number of shares of New ICN Series A
Preferred Stock or other securities issuable, upon exercise of the New ICN
Rights will be subject to adjustment from time to time to prevent dilution (i)
in the event of a stock dividend on, or a subdivision, combination or
reclassification of, the New ICN Series A Preferred Stock, (ii) upon the grant
to holders of the New ICN Series A Preferred Stock of certain rights or warrants
to subscribe for New ICN Series A Preferred Stock, certain convertible
securities or securities having rights, privileges and preferences the same as,
or more favorable than, the New ICN Series A Preferred Stock at less than the
current market price of the New ICN Series A Preferred Stock or (iii) upon the
distribution to holders of the New ICN Series A Preferred Stock of evidences of
indebtedness, cash (excluding regular quarterly cash dividends out of earnings
or retained earnings), assets (other than a dividend payable in New ICN Series A
Preferred Stock) or of subscription rights or warrants (other than those
referred to above).

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<PAGE> 97

In the event that, after the first date of public announcement by New ICN
or an Acquiring Person that an Acquiring Person has become such, New ICN is
involved in a merger or other business combination transaction in which the New
ICN Shares are exchanged or changed (other than a merger with a person or group
who acquired New ICN Shares pursuant to a Permitted Offer and is offering in the
merger not less than the price paid pursuant to the Permitted Offer and the same
form of consideration paid in the Permitted Offer), or 50% or more of New ICN's
assets or earning power are sold (in one transaction or a series of
transactions), proper provision shall be made so that each holder of a New ICN
Right (other than such Acquiring Person) shall thereafter have the right to
receive, upon the exercise thereof at the then current exercise price of the New
ICN Right, that number of shares of common stock of the acquiring company (or,
in the event that there is more than one acquiring company, the acquiring
company receiving the greatest portion of the assets or earning power
transferred) which at the time of such transaction would have a market value of
two times the exercise price of the New ICN Right (such right being called the
"Merger Right"). "Permitted Offer" means a tender offer or exchange offer for
all outstanding New ICN Shares at a price and on terms determined, prior to the
purchase of shares under such tender offer or exchange offer, by at least a
majority of the members of the Board of Directors who are not officers of New
ICN to be both adequate and otherwise in the best interests of New ICN, its
stockholders (other than the person on whose behalf the offer is being made) and
other relevant constituencies.

In the event that an Acquiring Person becomes such, each holder of a New
ICN Right (other than such Acquiring Person) will for a 60-day period thereafter
have the right to receive upon exercise that number of New ICN Shares having a
market value of two times the exercise price of the New ICN Right, to the extent
available, and then (after all authorized and unreserved New ICN Shares have
been issued) a common stock equivalent (such as New ICN Series A Preferred Stock
or another equity security with at least the same economic value as the New ICN
Shares) having a market value of two times the exercise price of the New ICN
Right, with New ICN Shares to the extent available being issued first (such
right being called the "Subscription Right").

The holder of a New ICN Right will continue to have the Merger Right
whether or not such holder exercises the Subscription Right. Upon the occurrence
of any of the events giving rise to the exercisability of the Merger Right or
the Subscription Right, any New ICN Rights that are or were at any time owned by
an Acquiring Person shall become void insofar as they relate to the Merger Right
or the Subscription Right.

With certain exceptions, no adjustments in the Purchase Price will be
required until cumulative adjustments require an adjustment of at least 1% in
such Purchase Price. No fractions of New ICN Shares will be issued and, in lieu
thereof, an adjustment in cash will be made based on the market price of the New
ICN Shares on the last trading date prior to the date of exercise.

At any time prior to the earlier to occur of (i) a person becoming an
Acquiring Person or (ii) the expiration of the New ICN Rights, New ICN may
redeem the Rights in whole, but not in part, at a price of $.01 in cash per
Right (the "Redemption Price"), which redemption shall be effective upon the
action of the New ICN Board in the exercise of its sole discretion.
Additionally, New ICN may, following the Stock Acquisition Date, redeem the then
outstanding New ICN Rights in whole, but not in part, at the Redemption Price
provided that such redemption is (i) in connection with a merger or other
business combination transaction or series of transactions involving the Company
in which all holders of New ICN Shares are treated alike but not involving an
Acquiring Person or any person who was an Acquiring Person or (ii) following an
event giving rise to, and the expiration of the exercise period for, the
Subscription Right if and for as long as no person beneficially owns securities
representing 15% or more of the voting power of New ICN's voting securities.
Upon the effective date of the redemption of the New ICN Rights, the right to
exercise the New ICN Rights will terminate and the only right of the holders of
New ICN Rights will be to receive the Redemption Price.

Any of the provisions of the Rights Agreement may be amended by the New ICN
Board prior to the Rights Distribution Date. After the Rights Distribution Date,
the provisions of the Rights Agreement may be amended by the New ICN Board in
order to cure any ambiguity, defect or inconsistency, or to make changes

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<PAGE> 98

which do not adversely affect the interests of holders of New ICN Rights
(excluding the interests of any Acquiring Person).

The New ICN Series A Preferred Stock purchasable upon exercise of the New
ICN Rights will be nonredeemable and junior to any other series of preferred
stock New ICN may issue (unless otherwise provided in the terms of such stock).
Each share of New ICN Series A Preferred Stock will have a preferential
quarterly dividend in an amount equal to 100 times the dividend declared on each
share of Common Stock, but in no event less than $1.00. In the event of
liquidation, the holders of New ICN Series A Preferred Stock will, subject to
the availability of assets for distribution (including the rights of
securityholders of New ICN having priority in liquidation to the holders of
shares of New ICN Series A Preferred Stock), receive a preferred liquidation
payment equal to $100 per share, plus an amount equal to accrued and unpaid
dividends thereon to the date of such payment, and thereafter, once holders of
the New ICN Shares have received an equivalent liquidation payment, the holders
of shares of New ICN Series A Preferred Stock and the New ICN Shares will
receive their ratable share of any remaining assets to be distributed. Each
share of New ICN Series A Preferred Stock will have 100 votes, voting together
with the New ICN Shares. In the event of any merger, consolidation or other
transaction in which New ICN Shares are exchanged, each share of New ICN Series
A Preferred Stock will be entitled to receive 100 times the amount and type of
consideration received per New ICN Share. The rights of the New ICN Series A
Preferred Stock as to dividends, liquidation and voting, and in the event of
mergers and consolidations, are protected by customary anti-dilution provisions.
Fractional shares of New ICN Series A Preferred Stock will be issuable; however,
New ICN may elect to distribute depositary receipts in lieu of such fractional
shares. In lieu of fractional shares other than fractions that are multiples of
one one-hundredth of a share, an adjustment in cash will be made based on the
market price of the New ICN Series A Preferred Stock on the last trading date
prior to the date of exercise.

Until a New ICN Right is exercised, the holder thereof, as such, will have
no rights as a stockholder of New ICN, including, without limitation, the right
to vote or to receive dividends.

The New ICN Rights will have certain anti-takeover effects. The New ICN
Rights will cause substantial dilution to a person or group that attempts to
acquire New ICN without conditioning the offer on the New ICN Rights being
redeemed or a substantial number of New ICN Rights being acquired. However, the
New ICN Rights should not interfere with any tender offer or merger approved by
New ICN (other than with an Acquiring Person) because the New ICN Rights (i) do
not become exercisable in the event of a Permitted Offer and expire
automatically upon the consummation of a merger in which the form of
consideration is the same as, and the price is not less than the price paid in,
the Permitted Offer and (ii) are redeemable in connection with an approved
merger in which all holders of New ICN Shares are treated alike.

The foregoing summary of certain terms of the New ICN Rights is qualified
in its entirety by reference to the form of Rights Agreement, a copy of which is
filed as an exhibit to the Form S-4.

COMPARATIVE RIGHTS OF STOCKHOLDERS

As a result of consummation of the Merger, holders of Merging Company
Common Stock will become stockholders of New ICN and the rights of all such
former Merging Company stockholders will thereafter be governed by the
certificate of incorporation of New ICN (the "New ICN Certificate"), the by-laws
of New ICN (the "New ICN By-Laws") and Delaware Law. The rights of the holders
of Merging Company Common Stock are presently governed by the Certificates of
Incorporation and bylaws of each of the respective Merging Companies and
Delaware Law. The description set forth below is intended as a summary, which
does not purport to be a complete statement, of the general differences among
the rights of the stockholders of the Merging Companies and New ICN. This
summary is qualified in its entirety by reference to the forms of the New ICN
Certificate and the New ICN By-Laws which are attached as exhibits to the Form
S-4 and the organizational documents of the Merging Companies which may be
obtained by stockholders of Merging Companies. For information as to how such
documents may be obtained, see "Available Information."

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<PAGE> 99

CLASSIFIED BOARD OF DIRECTORS

The New ICN Certificate will provide that the New ICN Board will be divided
into three classes of directors, as nearly equal in number as reasonably
possible, except for any directors elected separately by the holders of any one
or more series of New ICN Preferred Stock. The New ICN Board will consist
initially of the persons referred to in "Management and Operations of New ICN
After the Merger -- Directors After the Merger" above. The Certificate of
Incorporation of New ICN will provide that the term of office of the first class
of directors will expire at the 1995 Annual Meeting of Stockholders, the term of
office of the second class of directors will expire at the 1996 Annual Meeting
of Stockholders, and the term of office of the third class of directors will
expire at the 1997 Annual Meeting of Stockholders. Of the initial directors,
Drs. Knight, Jolley, Roberts Smith, and Messrs. Finch, Lenagh and Starr will
serve until the 1995 Annual Meeting of Stockholders; Dr. Smith and Messrs.
Barker, Bayh, Charles, Jerney and Moses will serve until the 1996 Annual Meeting
of Stockholders; and Dr. Guillemin and Messrs. Kurz, Manatt, Miscoll and Panic
will serve until the 1997 Annual Meeting of Stockholders. Starting with the 1995
Annual Meeting of Stockholders, one class of directors will be elected each year
for a three-year term.

The classification of directors will have the effect of making it more
difficult for stockholders to change the composition of the New ICN Board. At
least two annual meetings of stockholders, instead of one, will generally be
required to effect a change in a majority of the New ICN Board. Such a delay may
help ensure that New ICN's directors, if confronted by a holder attempting to
force a proxy contest, a tender or exchange offer or other extraordinary
corporate transaction, would have sufficient time to review the proposal as well
as any available alternatives to the proposal and to act in what they believe to
be the best interests of the stockholders.

The classification provisions could also have the effect of discouraging a
third party from initiating a proxy contest, making a tender offer or otherwise
attempting to obtain control of New ICN, even though such an attempt might be
beneficial to New ICN and its stockholders. The classification of the New ICN
Board could thus increase the likelihood that incumbent directors will retain
their positions.

The members of the Board of Directors of each of the Merging Companies are
presently elected for one-year terms and must be elected at each annual meeting
of stockholders.

NUMBER OF DIRECTORS; REMOVAL; FILLING VACANCIES

The New ICN Certificate will provide that, subject to any rights of holders
of New ICN Preferred Stock to elect additional directors under specified
circumstances, the number of directors will be fixed from time to time by action
of not less than a majority of the New ICN Board then in office, but in no event
shall be less than three nor more than twenty. In addition, the New ICN
Certificate will provide that, subject to any rights of holders of New ICN
Preferred Stock, any vacancies will be filled only by the affirmative vote of a
majority of the remaining directors, though less than a quorum. Accordingly, the
New ICN Board could prevent any stockholder from enlarging the New ICN Board and
filling the new directorships with such stockholder's own nominees.

Under the Delaware Law, unless otherwise provided in the certificate of
incorporation, directors serving on a classified board may only be removed by
the stockholders for cause. The New ICN Certificate will provide that, except
for any directors elected separately by holders of one or more series of New ICN
Preferred Stock, directors may be removed only for cause and only upon the
affirmative vote of holders of at least 66 2/3% of the voting power of all the
then outstanding shares of stock entitled to vote generally in the election of
directors ("Voting Stock"), voting together as a single class. Subject to the
rights, if any, of the holders of any one or more series of Preferred Stock then
outstanding, newly created directorships resulting from an increase in the
authorized number of directors or vacancies in the New ICN Board resulting from
death, resignation, disqualification or removal of directors may be filled only
by a majority of the directors then in office, though less than a quorum.

None of the certificates of incorporation of the Merging Companies
currently contain similar provisions. Therefore, the stockholders of the Merging
Companies currently can remove the directors with or without cause and are
entitled to enlarge the respective Boards of Directors and to vote to fill the
new directorships with their own nominees.

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NO STOCKHOLDER ACTION BY WRITTEN CONSENT; SPECIAL MEETINGS

The New ICN Certificate will provide that, subject to the rights of holders
of any series of New ICN Preferred Stock, stockholder action can be taken only
at an annual or special meeting of stockholders and will prohibit stockholder
action by written consent in lieu of a meeting. The New ICN Certificate will
provide that, subject to the rights of holders of any series of New ICN
Preferred Stock, special meetings of stockholders can be called only by the
Chairman of the New ICN Board or by the New ICN Board and stockholders will not
be permitted to call a special meeting or to require that the New ICN Board call
a special meeting of stockholders. Moreover, the business permitted to be
conducted at any special meeting of stockholders will be limited to the business
brought before the meeting pursuant to the notice of meeting given by New ICN.

The provisions of the New ICN Certificate prohibiting stockholder action by
written consent may have the effect of delaying consideration of a stockholder
proposal until the next annual meeting unless a special meeting is called by the
Chairman or the New ICN Board. These provisions would also prevent the holders
of a majority of the voting power of the Voting Stock from unilaterally using
the written consent procedure to take stockholder action. Moreover, a
stockholder could not force stockholder consideration of a proposal over the
opposition of the Chairman and the New ICN Board by calling a special meeting of
stockholders prior to the time the Chairman or the New ICN Board believes such
consideration to be appropriate.

None of the certificates of incorporation of the Merging Companies
presently contain a prohibition against stockholder action by written consent.
Under Delaware Law, therefore, stockholders of the Merging Companies may
presently act by written consent.

FAIR PRICE PROVISION

The New ICN Certificate will contain a "fair price" provision, which
requires that, in addition to any other vote required by the Certificate of
Incorporation or the Delaware Law, certain "Business Combination" transactions
with a "Related Person" require the affirmative vote of the holders of not less
than 85% of the outstanding Voting Stock held by stockholders other than the
Related Person.

For the purposes of this provision, certain terms are defined as follows:

"Business Combination" means (a) any merger or consolidation of New ICN or
a subsidiary with a Related Person, (b) any sale, lease, exchange, mortgage,
pledge, transfer or other disposition other than in the ordinary course of
business to or with a Related Person of any assets of New ICN or a subsidiary
having an aggregate fair market value of $25,000,000 or more, (c) the issuance
or transfer by New ICN of any shares of Voting Stock or securities convertible
into or exercisable for such shares (other than by way of pro rata distribution
to all stockholders) to a Related Person, (d) any recapitalization, merger or
consolidation that would have the effect of increasing the voting power of a
Related Person, (e) the adoption of any plan or proposal for the liquidation or
dissolution of New ICN or a subsidiary proposed, directly or indirectly, by or
on behalf of a Related Person, (f) any merger or consolidation of New ICN with
another person proposed, directly or indirectly, by or on behalf of a Related
Person unless the entity surviving or resulting from such merger or
consolidation has a provision in its certificate or articles of incorporation,
charter or similar governing instrument which is substantially identical to the
"fair price" provision of the Certificate of Incorporation of New ICN or (g) any
agreement, contract or other arrangement or understanding providing, directly or
indirectly, for any of the foregoing transactions.

"Related Person" means any individual, partnership, corporation, trust or
other person which, together with its "affiliates" and "associates," as defined
in Rule 12b-2 under the Exchange Act as in effect on January 1, 1994, and
together with any other individual, partnership, corporation, trust or other
person with which it or they have any agreement, contract or other arrangement
or understanding with respect to acquiring, holding, voting or disposing of
Voting Stock, "beneficially owns" (within the meaning of Rule 13d-3 under the
Exchange Act on said date) an aggregate of 10% or more of the outstanding Voting
Stock. A Related Person, its affiliates and associates and all such other
individuals, partnerships, corporations and other persons with whom it or they
have any such agreement, contract or other arrangement or understanding, are
deemed a single Related Person for purposes of this provision; provided,
however, that the members of the

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New ICN Board shall not be deemed to be associates or otherwise to constitute a
Related Person solely by reason of their board membership. A person who is a
Related Person as of (i) the time any definitive agreement relating to a
Business Combination is entered into, (ii) the record date for the determination
of stockholders entitled to notice of and to vote on a Business Combination or
(iii) immediately prior to the consummation of a Business Combination, shall be
deemed a Related Person for purposes of this provision.

"Continuing Director" means any member of the New ICN Board who is not an
"affiliate" or "associate" of the Related Person and was a member of the New ICN
Board prior to the time that such person became a Related Person, and any
successor of a Continuing Director who is unaffiliated with such Related Person
and is recommended to succeed a Continuing Director by a majority of the
Continuing Directors.

"Market Value" means the average of the high-and low-quoted sales price on
the date in question (or, if there is no reported sale on such date, on the last
preceding date on which any reported sale occurred) of a share on the NYSE
Composite Tape, or, if the shares are not listed or admitted to trading on such
exchange, on the principal United States securities exchange registered under
the Exchange Act on which the shares are listed or admitted to trading, or, if
the shares are not listed or admitted to trading on any such exchange, the mean
between the closing high bid and low-asked quotations with respect to a share on
such date as quoted on the National Association of Securities Dealers Automated
Quotations System, or any similar system then in use, or, if no such quotations
are available, the fair market value on such date of a share as at least 66 2/3%
of the Continuing Directors shall determine.

The 85% voting requirement will not be applicable and a Business
Combination with a Related Person may be approved by the vote (if any) required
by law or by any other provision of the Certificate of Incorporation of New ICN
if either:

(1) The Business Combination is approved by the Board of Directors of
New ICN by the affirmative vote of at least 66 2/3% of the Continuing
Directors, or

(2) All of the following conditions are satisfied:

(a) The aggregate amount of cash and the fair market value of the
property, securities or other consideration to be received per share of
capital stock of New ICN in the Business Combination by the holders of
capital stock of New ICN, other than the Related Person involved in the
Business Combination, will not be less than the highest of (i) the
highest per share price (including brokerage commissions, soliciting
dealers' fees, and dealer-management compensation, and with appropriate
adjustments for recapitalization, stock splits, stock dividends and like
transactions and distributions) paid by such Related Person in acquiring
any of its holdings of such class or series of capital stock, (ii) the
highest per share Market Value of such class or series of capital stock
within the twelve-month period immediately preceding the date the
proposal for such Business Combination was first publicly announced or
(iii) the book value per share of such class or series of capital stock,
determined in accordance with generally accepted accounting principles,
as of the last day of the month immediately preceding the date the
proposal for such Business Combination was first publicly announced;

(b) The consideration to be received in such Business Combination
by holders of capital stock other than the Related Person involved will,
except to the extent that a shareholder agrees otherwise as to all or
part of the shares which he or she owns, be in the same form and of the
same kind as the consideration paid by the Related Person in acquiring
capital stock already owned by it, provided, however, that if the
Related Person has paid for capital stock with varying forms of
consideration, the form of consideration for shares of capital stock
acquired in the Business Combination by the Related Person must either
be cash or the form used to acquire the largest number of shares of
capital stock previously acquired by it; and

(c) A proxy statement responsive to the requirements of the
Exchange Act is mailed to the stockholders of New ICN for the purpose of
soliciting stockholder approval of such Business Combination and
contains (i) any recommendations as to the advisability (or
inadvisability) of the Business Combination which the Continuing
Directors may choose to state and (ii) the opinion of a

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reputable investment banking firm selected by the Continuing Directors
as to the fairness of the terms of such Business Combination, from a
financial point of view, to the public stockholders (other than the
Related Person) of New ICN.

The "fair price" provision is intended to ensure that all stockholders
receive equal treatment in the event of a tender or exchange offer and to
protect stockholders against coercive or two-tiered takeover bids.
Notwithstanding the foregoing, the provision could also have the effect of
discouraging a third party from making a tender or exchange offer for New ICN,
even though such an offer might be beneficial to New ICN and its stockholders.

None of the certificates of incorporation of the Merging Companies
presently contain a "fair price" provision.

ADVANCE NOTICE PROVISIONS FOR STOCKHOLDER NOMINATIONS AND STOCKHOLDER PROPOSALS

The New ICN Certificate will establish an advance notice procedure for
stockholders to make nominations of candidates for election as directors, or
bring other business before an annual meeting of stockholders of New ICN (the
"Stockholder Notice Procedure").

The Stockholder Notice Procedure will provide that, subject to the rights
of any holders of New ICN Preferred Stock, only persons who are nominated by, or
at the direction of, the New ICN Board, or by a stockholder who has given timely
written notice to the Secretary of New ICN prior to the meeting at which
directors are to be elected, will be eligible for election as directors of New
ICN. The Stockholder Notice Procedure will provide that at an annual meeting
only such business may be conducted as has been brought before the meeting by,
or at the direction of, the Chairman or the New ICN Board or by a stockholder
who has given timely written notice to the Secretary of New ICN of such
stockholder's intention to bring such business before such meeting. Under the
Stockholder Notice Procedure, to be timely, notice of stockholder nominations or
proposals to be made at an annual or special meeting must be received by New ICN
not less than 60 days nor more than 90 days prior to the scheduled date of the
meeting (or, if less than 70 days' notice or prior public disclosure of the date
of the meeting is given, the 10th day following the earlier of (i) the day such
notice was mailed or (ii) the day such public disclosure was made).

Under the Stockholder Notice Procedure, a stockholder's notice to New ICN
proposing to nominate a person for election as a director must contain certain
information, including, without limitation, the identity and address of the
nominating stockholder, the class and number of shares of stock of New ICN which
are owned by such stockholder and all information regarding the proposed nominee
that would be required to be included in a proxy statement soliciting proxies
for the proposed nominee. Under the Stockholder Notice Procedure, a
stockholder's notice relating to the conduct of business other than the
nomination of directors must contain certain information about such business and
about the proposing stockholder, including, without limitation, a brief
description of the business the stockholder proposes to bring before the
meeting, the reasons for conducting such business at such meeting, the name and
address of such stockholder, the class and number of shares of stock of New ICN
beneficially owned by such stockholder, and any material interest of such
stockholder in the business so proposed. If the Chairman of the Board or other
officer presiding at a meeting determines that a person was not nominated, or
other business was not brought before the meeting, in accordance with the
Stockholder Notice Procedure, such person will not be eligible for election as a
director, or such business will not be conducted at such meeting, as the case
may be.

By requiring advance notice of nominations by stockholders, the Stockholder
Notice Procedure will afford the New ICN Board an opportunity to consider the
qualifications of the proposed nominees and, to the extent deemed necessary or
desirable by the New ICN Board, to inform stockholders about such
qualifications. By requiring advance notice of other proposed business, the
Stockholder Notice Procedure will also provide a more orderly procedure for
conducting annual meetings of stockholders and, to the extent deemed necessary
or desirable by the New ICN Board, will provide the New ICN Board with an
opportunity to inform stockholders, prior to such meetings, of any business
proposed to be conducted at such meetings, together with any recommendations as
to the New ICN Board's position regarding action to be taken with respect to
such

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business, so that stockholders can better decide whether to attend such a
meeting or to grant a proxy regarding the disposition of any such business.

Although the New ICN Certificate will not give the New ICN Board any power
to approve or disapprove stockholder nominations for the election of directors
or proposals for action, the foregoing provisions may have the effect of
precluding a contest for the election of directors or the consideration of
stockholder proposals if the proper procedures are not followed, and of
discouraging or deterring a third party from conducting a solicitation of
proxies to elect its own slate of directors or to approve its own proposal,
without regard to whether consideration of such nominees or proposals might be
harmful or beneficial to New ICN and its stockholders.

None of the certificates of incorporation of the Merging Companies
presently contain similar provisions.

PREFERRED STOCK

Pursuant to the New ICN Certificate, the New ICN Board will be authorized,
subject to the limitations prescribed by law, to provide for the issuance of
shares of New ICN Preferred Stock in one or more series, to establish the number
of shares of each such series, and to fix the designations, voting powers,
preferences and rights of the shares of each such series, and any
qualifications, limitations or restrictions thereof.

New ICN believes that the ability of the New ICN Board to issue one or more
series of New ICN Preferred Stock will provide New ICN with flexibility in
structuring possible future financing and acquisitions, and in meeting other
corporate needs which might arise. The authorized shares of New ICN Preferred
Stock, as well as New ICN Shares, will be available for issuance without further
action by New ICN's stockholders, unless such action is required by applicable
law or the rules of any stock exchange or automated quotation system on which
New ICN's securities may be listed or traded. The NYSE currently requires
stockholder approval as a prerequisite to listing shares in several instances,
including where the present or potential issuance of shares could result in an
increase in the number of shares of common stock, or in the amount of voting
securities, outstanding by at least 20%. If the approval of New ICN's
stockholders is not required for the issuance of shares of New ICN Preferred
Stock or New ICN Shares, the New ICN Board may determine not to seek stockholder
approval.

Although the New ICN Board has no intention at the present time of doing
so, it could issue a series of New ICN Preferred Stock that could, depending on
the terms of such series, impede the completion of a merger, tender offer or
other takeover attempt. The New ICN Board will make any determination to issue
such shares based on its judgment as to the best interests of New ICN and its
stockholders. The New ICN Board, in so acting, could issue New ICN Preferred
Stock having terms that could discourage an acquisition attempt through which an
acquiror may be able to change the composition of the New ICN Board, including a
tender offer or other transaction that some, or a majority, of New ICN's
stockholders might believe to be in their best interests or in which
stockholders might receive a premium for their stock over the then current
market price of such stock.

In connection with the Shareholder Rights Plan to be adopted by New ICN,
the New ICN Certificate will provide for the issuance of New ICN Series A
Preferred Stock. For a description of the terms of the New ICN Series A
Preferred Stock, see "Description of New ICN Capital Stock -- New ICN Preferred
Stock" and "Description of New ICN Capital Stock -- New ICN Preferred Stock
Purchase Rights."

None of the Merging Companies presently have a stockholder rights plan
although each has authorized shares of Preferred Stock.

OTHER PROVISIONS

The New ICN Certificate will provide that in discharging their respective
duties under applicable law and in determining what they believe to be in the
best interests of New ICN and its stockholders, the New ICN Board, each
committee of the Board and each director may take into account the effects, both
long-and short-term of the proposed action on the employees, associates,
distributors, or other customers, suppliers and creditors of New ICN and the
communities in which New ICN conducts its business, to the extent such

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persons believe pertinent (including the possibility that the interests of New
ICN may best be served by remaining independent).

The New ICN Certificate will also authorize the New ICN Board and any
committee authorized by the New ICN Board to take such action as it may
determine to be reasonably necessary or desirable to encourage any person or
entity to enter into negotiations with the New ICN Board and management
respecting any transaction which may result in a change of control of New ICN,
and to contest or oppose any such transaction which the New ICN Board determines
to be unfair, abusive or otherwise undesirable to New ICN, its businesses or
stockholders. The New ICN Board or any such committee will be specifically
authorized to adopt plans or to issue securities of the company (including New
ICN Shares or New ICN Preferred Stock, rights or debt securities), which
securities may be exchangeable or convertible into cash or other securities on
such terms as the New ICN Board or any such committee determines and may provide
for differential and unequal treatment of different holders or classes of
holders. The existence of this authority or the actions which may be taken by
the New ICN Board pursuant thereto are intended to give the New ICN Board
flexibility in order to act in the best interests of stockholders in the event
of a potential change of control transaction. Such provisions may, however,
deter potential acquirors from proposing unsolicited transactions not approved
by the New ICN Board and might enable the New ICN Board to hinder or frustrate
such a transaction if proposed.

None of the certificates of incorporation of the Merging Companies
presently contain similar provisions.

AMENDMENT OF THE CERTIFICATE OF INCORPORATION AND BY-LAWS

The New ICN Certificate will contain provisions requiring the affirmative
vote of the holders of at least 75% of the voting power of the Voting Stock to
amend certain provisions of the Certificate of Incorporation (including the
provisions discussed above relating to directors, action by written consent,
special stockholder meetings and Stockholder Notice Procedures) or to amend any
provision of the New ICN By-Laws by action of stockholders. An affirmative vote
of at least 75% of the voting power of the Voting Stock is also required to
amend provisions in the New ICN Certificate setting forth the liability and
indemnification of New ICN officers and directors, the ability of the Board to
consider constituent interests when discharging its duties, the authorization
for the Board to take steps to encourage or oppose, as the case may be,
transactions which may result in a change of control of New ICN, and the
provisions regarding the amendment of the New ICN Certificate. An amendment of
the "fair price" provision will require the approval of 66 2/3% of the directors
of New ICN then in office and the affirmative vote of 85% of the Voting Stock
held by stockholders other than the Related Person, unless the amendment is
approved by 66 2/3% of the Continuing Directors. These provisions will make it
more difficult for stockholders to make changes in the New ICN Certificate and
the New ICN By-Laws, including changes designed to facilitate the exercise of
control over New ICN.

None of the certificates of incorporation of the Merging Companies
presently contain similar "supermajority" provisions.

SECTION 203 OF THE DELAWARE LAW

Section 203 of the Delaware Law provides that, subject to certain
exceptions specified therein, a corporation shall not engage in any business
combination with any "interested stockholder" for a three-year period following
the date that such stockholder becomes an interested stockholder unless (i)
prior to such date, the board of directors of the corporation approved either
the business combination or the transaction which resulted in the stockholder
becoming an interested stockholder, (ii) upon consummation of the transaction
which resulted in the stockholder becoming an interested stockholder, the
interested stockholder owned at least 85% of the voting stock of the corporation
outstanding at the time the transaction commenced (excluding certain shares) or
(iii) on or subsequent to such date, the business combination is approved by the
board of directors of the corporation and by the affirmative vote of at least
66 2/3% of the outstanding voting stock which is not owned by the interested
stockholder. Except as specified in Section 203 of the Delaware Law, an
interested stockholder is defined to include (x) any person that is the owner of
15% or more of the outstanding voting stock of the corporation or is an
affiliate or associate of the corporation and was the owner

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of 15% or more of the outstanding voting stock of the corporation, at any time
within three years immediately prior to the relevant date and (y) the affiliates
and associates of any such person.

Under certain circumstances, Section 203 of the Delaware Law may make it
more difficult for a person who would be an "interested stockholder" to effect
various business combinations with a corporation for a three-year period,
although the stockholders may elect to exclude a corporation from the
restrictions imposed thereunder. The Certificate of Incorporation of New ICN
does not exclude New ICN from the restrictions imposed under Section 203 of the
Delaware Law. It is anticipated that the provisions of Section 203 of the
Delaware Law may encourage companies interested in acquiring New ICN to
negotiate in advance with the New ICN Board, since the stockholder approval
requirement would be avoided if the board of directors then in office approves
either the business combination or the transaction which results in the
stockholder becoming an interested stockholder.

LIABILITY AND INDEMNIFICATION
OF DIRECTORS AND OFFICERS OF NEW ICN

LIMITATION OF LIABILITY OF DIRECTORS

The New ICN Certificate will provide that a director will not be personally
liable to the corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the Delaware Law, which
concerns unlawful payments of dividends, stock purchases or redemptions or (iv)
for any transaction from which the director derived an improper personal
benefit. If Delaware Law is subsequently amended to permit further limitation of
the personal liability of directors, the liability of a director of New ICN will
be eliminated or limited to the fullest extent permitted by the Delaware Law as
amended.

While these provisions provide directors with protection from awards for
monetary damages for breaches of their duty of care, they do not eliminate such
duty. Accordingly, these provisions will have no effect on the availability of
equitable remedies such as an injunction or rescission based on a director's
breach of his or her duty of care. The provisions described above apply to an
officer of the corporation only if he or she is a director of the corporation
and is acting in his or her capacity as director, and do not apply to officers
of the corporation who are not directors.

INDEMNIFICATION OF DIRECTORS AND OFFICERS

The New ICN Certificate will provide that each person who is involved in
any actual or threatened action, suit or proceeding, whether civil, criminal,
administrative or investigative by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise, including service with respect to an employee benefit plan, will be
indemnified by the corporation to the full extent permitted by the Delaware Law,
as the same exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the corporation to
provide broader indemnification rights than said law permitted prior to such
amendment) or by other applicable laws then in effect. The New ICN Certificate
provides that the expenses incurred by any director or officer in the defense of
any such action, suit or proceeding shall be paid by New ICN in advance of final
disposition of such action, suit or proceeding upon receipt of an undertaking by
such director or officer to repay all amounts so advanced in the event that it
shall ultimately be determined that such director or officer is not entitled to
indemnification. Other employees or agents will be entitled to advance payment
of expenses, if at all, under such terms and conditions as are determined by a
majority of the disinterested directors. The indemnification rights conferred by
the New ICN Certificate are not exclusive of any other right to which a person
seeking indemnification may be entitled under any law, by-law, agreement, vote
of stockholders or disinterested directors or otherwise. New ICN intends to
enter into indemnification agreements with its directors and officers providing
indemnification to the full extent permitted by Delaware Law. New ICN will

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be authorized to purchase and maintain (and New ICN will maintain) insurance on
behalf of its directors, officers, employees and agents.

ICN MERGER CORP. 1994 STOCK INCENTIVE PLAN

It is expected that the Board of Directors of New ICN will adopt a new
stock option plan (the "1994 Stock Incentive Plan"), subject to approval by
holders of a majority of the voting shares of New ICN. New ICN intends to seek
such approval at its first annual meeting of stockholders occurring after the
Effective Time. The terms of the 1994 Stock Incentive Plan have not been
determined as of the date hereof and will be determined by the Compensation
Committee of New ICN and the full Board of Directors after consummation of the
Merger.

LEGAL MATTERS

The validity of the issuance of the New ICN Shares being offered hereby
will be passed upon for New ICN by M'Liss Jones Kane, Vice President, General
Counsel and Secretary of SPI and Biomedicals. As of June 30, 1994, Ms. Kane had
stock options to purchase 4,000, 4,000 and 1,313 shares of ICN Common Stock,
Biomedicals Common Stock and Viratek Common Stock, respectively. After giving
effect to the Merger, Ms. Kane will have options to acquire 3,491 New ICN
Shares.

EXPERTS

The consolidated financial statements and financial statement schedules of
the Merging Companies as of December 31, 1993 and 1992 and for each of the three
years in the period ended December 31, 1993 included or incorporated by
reference in this Joint Proxy Statement/Prospectus, have been audited by Coopers
& Lybrand, independent auditors, as stated in their reports appearing herein,
which reports express an unqualified opinion and include an emphasis of a matter
paragraph related to certain transactions between the Merging Companies and, as
it relates to ICN, includes an explanatory paragraph referring to the change to
the equity method of accounting for a previously consolidated subsidiary, and
have been so included in reliance upon the report of such firm given their
authority as experts in accounting and auditing.

With respect to the unaudited interim financial information for ICN only
for the six month period ended June 30, 1994 and 1993 and the three month period
ended March 31, 1994 and 1993 which are included in and incorporated herein by
reference, respectively, Coopers & Lybrand have applied limited procedures in
accordance with professional standards for a review of such information.
However, as stated in their reports included in ICN's Quarterly Reports on Form
10-Q for the Quarters ended June 30, 1994 and March 31, 1994 and included in and
incorporated by reference herein, respectively, they did not audit and they do
not express an opinion on that interim financial information. Accordingly, the
degree of reliance on their reports on such information should be restricted in
light of the limited nature of the review procedures applied. Coopers & Lybrand
are not subject to the liability provisions of Section 11 of the Securities Act
for their reports on the unaudited interim financial information because those
reports are not "reports" or a "part" of the Joint Proxy Statement/Prospectus
prepared or certified by an accountant within the meaning of Sections 7 and 11
of the Act.

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CERTAIN TRANSACTIONS

GENERAL

ICN controls Biomedicals and Viratek through stock ownership, voting
control and board representation and is affiliated with SPI. Certain officers of
ICN occupy similar positions with SPI, Biomedicals and Viratek. The Merging
Companies have engaged in, and, if the Merger is not consummated, will continue
to engage in, certain transactions with each other.

An Oversight Committee consisting of one non-management director of each of
the Merging Companies reviews transactions between or among the Merging
Companies to determine whether a conflict of interest exists among the Merging
Companies with respect to a particular transaction and whether the transaction
is fair and the manner in which such conflict can be resolved. The Oversight
Committee was formed in October 1984 and consisted of a representative of each
of ICN, SPI and Viratek. A representative of Biomedicals joined the Oversight
Committee in October 1986. The Oversight Committee has advisory authority only
and makes recommendations to the Boards of Directors of each of the Merging
Companies. The Oversight Committee consists of one non-management director of
each Merging Company and a non-voting chairman. The significant related party
transactions have been reviewed and recommended for approval by the Oversight
Committee, and approved by the respective Boards of Directors. See "Information
Concerning Directors -- Committees and Meetings of the Board of Directors" in
the Addendum for each of the Merging Companies.

ROYALTY AGREEMENTS

SPI entered into an exclusive License Agreement with Viratek, effective
July 1, 1983, pursuant to which Viratek licensed SPI as an exclusive distributor
of Virazole(R) in Canada. This Agreement is effective for a term of ten years
from the expiration of the last Canadian patent or ten years after the
commencement of sales in Canada, whichever is later, unless earlier terminated
by SPI. The agreement provided for the payment by SPI to Viratek of $100,000
upon execution thereof, which has been paid. The initial payment of $100,000 is
creditable against future royalties payable by SPI to Viratek at a rate of 7% of
sales for the term of the agreement. The agreement further provides for an
initial price of $1,800 per kilo for bulk Virazole(R) to be purchased by SPI
from Viratek. In August 1986, the Canadian Health Protection Branch ("HPB")
approved Virazole(R) for hospital use in aerosolized form for the treatment of
respiratory syncytial virus infections ("RSV") in certain age groups. Sales of
Virazole(R) made under such agreement in Canada in fiscal 1990, 1989, and 1988
subsequent to such approval were not material.

Effective January 21, 1983, SPI entered into a License Agreement with
Viratek, pursuant to which SPI received a worldwide license to develop,
manufacture and distribute twelve new compounds, including nine anti-cancer
compounds, two cardiovascular compounds and one tranquilizer compound. The term
of this agreement is for at least ten years from the first sale of licensed
products. There is a provision for an initial payment by SPI of $70,000 to
Viratek which has been paid, plus an additional one-time payment of $500,000
upon the first registration and commercial sale of any one of these compounds in
any of the United States, the Federal Republic of Germany, France, the United
Kingdom or Japan. Both of the foregoing payments will be credited against future
royalty payments. None of these compounds has been developed for production and
distribution, and none has been approved for sale for human use in any country
where sale may be contemplated.

SPI entered into a Supply Agreement with Viratek in 1985, pursuant to which
Viratek has agreed to sell bulk Virazole(R) on an exclusive basis to SPI for
further manufacture and distribution under SPI's Mexican subsidiary's existing
Mexican government health registration. At the present time, the Mexican
subsidiary distributes Virazole(R) in Mexico in oral and injectable formulations
under the trade names Vilona and Virazid for the treatment of herpes zoster,
influenza and other respiratory infections.

During 1985, in anticipation of the approval by the United States Food and
Drug Administration ("FDA") of Virazole(R) for commercial use in aerosolized
applications for the treatment of respiratory syncytial virus ("RSV"), Viratek
and SPI entered into an agreement whereby SPI agreed to assume certain

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operating functions on behalf of Viratek, including physical custody and
shipping of inventory, accounting and certain other administrative functions for
a term of four years. In addition, SPI agreed to pay to Viratek $1,552,000 in
consideration of the grant by Viratek to SPI of certain rights relating to the
commercial sale and use of Virazole(R), which amount is creditable against the
purchase by SPI from Viratek of Virazole(R). Purchases were subject to approval
by the FDA of the commercial sale of Virazole(R). In December 1985, the FDA
advised Viratek that the FDA had approved Viratek's New Drug Application for the
hospital use of aerosolized Virazole(R) for the treatment of RSV in infants and
young children.

In April 1985, ICN, Viratek and SPI entered into a six-year joint venture
("ICN-NARI") with Kodak to conduct research and development with nucleic acid
compounds for application in the area of human health. Effective August 31,
1988, ICN, Viratek, SPI and Kodak amended the terms of the joint venture
agreement whereby Kodak paid the estimated present value of its funding
obligation and contributed the net assets of the joint venture and all compounds
in development in exchange for relief from all obligations under the joint
venture agreement. On September 1, 1988, ICN-NARI purchased SPI's share of the
joint venture for $1,355,000, the net book value of SPI's interest in ICN-NARI.
As a result, ICN's and Viratek's ownership increased to 41% and 59%,
respectively. Effective November 30, 1989, ICN-NARI was dissolved and its assets
were distributed to Viratek and ICN in accordance with their respective
ownership interests.

During 1985, SPI and Viratek entered into agreements whereby SPI acted as
Viratek's exclusive distributor, for a five-year period ending in 1990, of
Virazole(R) for the treatment of RSV in the United States. Under this agreement,
Viratek paid $1,250,000 to SPI to defray initial marketing costs and thereafter
cumulative domestic pre-tax profits or losses were allocated 75% to Viratek and
25% to SPI. During 1990, SPI sold $16,025,000 of Virazole(R) domestically and
domestic pre-tax profits were $3,569,000, of which $2,677,000 was credited to
Viratek.

Effective December 1, 1986, SPI and Viratek entered into a two-year
licensing agreement whereby SPI marketed all forms of Virazole(R) outside the
United States (except in Mexico and Canada, for which other agreements apply).
SPI and Viratek continued to follow the terms of the agreement although the
agreement was not renegotiated until December 1, 1990. Under this agreement, SPI
paid Viratek a royalty of 7% on sales outside the United States. For 1990,
royalties under this agreement were $306,000.

Effective December 1, 1990, SPI and Viratek entered into a new royalty
agreement. Under this agreement, SPI continued to act as Viratek's exclusive
distributor of Virazole(R) and paid Viratek a royalty of 20% on sales worldwide
for a term of 10 years with an option by either party to extend it for an
additional 10 years. Worldwide sales for Virazole(R) for 1993, 1992 and 1991
were $29,515,000, $27,240,000 and $21,315,000, respectively, which generated
royalties to Viratek for 1993, 1992 and 1991 of $5,903,000, $5,448,000 and
$4,263,000, respectively.

During 1991 and 1990, SPI purchased $235,000, and $2,190,000, respectively,
of Virazole(R) from Viratek and, effective March 1, 1991 Viratek transferred all
inventory, consisting of ribavirin in bulk, work-in-process and finished goods
form, to SPI at its recorded book value of $2,943,000.

In 1990, SPI sold $16,025,000 of Virazole(R) domestically, resulting in
domestic pre-tax profits of $3,569,000, of which $2,677,000 was credited to
Viratek. During 1989, SPI sold $7,082,000 of Virazole(R) domestically, resulting
in domestic pre-tax losses of $4,049,000, of which $3,037,000 was charged to
Viratek. In 1988, SPI sold $10,078,000 of Virazole(R) domestically, resulting in
domestic pre-tax profits of $1,625,000, of which $1,219,000 was credited to
Viratek.

Under an agreement entered into in 1982 between ICN and Baylor College of
Medicine ("Baylor"), the employer of Dr. Vernon Knight, a Viratek director, SPI
is required to pay a 2% royalty to Baylor on all sales of Virazole(R) in
aerosolized form. Such royalties for 1993, 1992 and 1991 were $422,000, $430,000
and $313,000, respectively.

In July 1988, SPI began marketing products under license from ICN for the
treatment of myasthenia gravis, a disease characterized by muscle weakness and
atrophy. ICN charged SPI royalties at the rate of 9% of net sales. Such
royalties for 1990 were $936,000. Effective September 1, 1990, SPI prepaid
royalties to ICN

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<PAGE> 109

in the amount of $9,590,000, which has been recorded in Other Assets and is
being amortized using the straight-line method over 15 years. There are no
future royalties due to ICN for these products.

Beginning December 1986, SPI began selling Brown Pharmaceuticals, Inc.
products under license from ICN. ICN charges SPI royalties at the rate of 8 1/2%
of net sales. During 1993, 1992 and 1991, SPI paid ICN $218,000, $65,000 and
$93,000, respectively, in royalties under this arrangement.

COST ALLOCATIONS

Effective December 1, 1988, Viratek transferred all Small Particle Aerosol
Generator ("SPAG") units and related spare parts to SPI at their net book value
of $3,738,000. The SPAG units are used in the delivery of aerosolized
Virazole(R) for the treatment of RSV in infants. SPI accounts for the SPAG units
as fixed assets and depreciates them over an estimated useful life of 10 years.

For fiscal 1989, ICN allocated $175,000 to Viratek for financial marketing
and legal services provided by ICN. No charges for these services were allocated
to Viratek in fiscal 1991 and 1990 as the reduced level of operations of Viratek
did not require this level of support.

The Merging Companies occupy ICN's facility in Costa Mesa, California. In
each of 1993, 1992 and 1991, ICN charged facility costs of $279,000, $310,000
and $30,000 to SPI, Biomedicals and Viratek, respectively. The costs of common
services such as maintenance, purchasing and personnel are paid by SPI and
allocated to ICN, Biomedicals and Viratek based on services utilized. The total
of such costs were $2,584,000 in 1993, $2,556,000 in 1992 and $2,617,000 in 1991
of which $1,733,000, $1,679,000 and $1,568,000 were allocated to ICN, Viratek
and Biomedicals, respectively. Effective January 1, 1993, ICN reimburses
Biomedicals for those allocations which are in excess of the amounts determined
by Biomedicals' management using competitive data, as reviewed and recommended
by the Oversight Committee, that would have been incurred by Biomedicals if it
operated in a facility suited solely to its requirements. During 1993, such
reimbursements totaled $772,000. It is management's belief that the methods used
and amounts allocated for facility costs and common services are reasonable
based upon the usage by the respective companies.

Viratek occupied a portion of Biomedicals' United Kingdom facility. During
1990, Biomedicals charged Viratek $411,000 for salaries, rent and common
services.

During 1990, Viratek charged SPI $44,000 for regulatory advice and quality
assurance services.

During 1990, SPI incurred $1,207,000 in net transaction and tax expenses
associated with funds transferred from Laboratories Hubber, S.A. ("Hubber"), a
subsidiary of SPI, to ICN. ICN reimbursed SPI $1,829,000 for these expenses on a
pre-tax basis. Such reimbursement has been included in Other (income) expense,
net.

During 1990, ICN transferred to SPI $917,000 for costs incurred in SPI's
acquisition of ICN Galenika. These costs were capitalized in Other Assets and
Deferred Charges as of November 30, 1990, and were subsequently recorded as a
component of the purchase price of ICN Galenika.

During 1991, Viratek began renting certain office equipment to ICN for use
at the Costa Mesa facility. Rent is being charged at the rate of $20,000 per
month. During 1993, 1992 and 1991, Viratek charged ICN $240,000, $240,000 and
$120,000, respectively.

INVESTMENT POLICY

Effective December 1, 1986, ICN and its affiliates adopted a policy
covering intercompany advances and interest rates, and the type of investments
(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 SPI, Viratek and
Biomedicals is transferred to ICN, and cash advances are made by ICN to SPI,
Viratek and Biomedicals to fund short-term cash requirements, acquisitions and
certain other transactions. The affiliates are credited with interest income
based on prime (7 1/4% at June 30, 1994) less 1/2% and are charged interest at
the prime rate plus 1/2% on the amounts invested or advanced.

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<PAGE> 110

In accordance with this investment policy, Biomedicals advanced the net
proceeds of Biomedicals' Bio Capital Holding Swiss Franc public offering,
completed in February 1987 to ICN. These advances are payable to Biomedicals by
ICN in Swiss Francs. At March 1, 1991, Biomedicals converted to an advance due
from ICN of SFr 14,386,000 into $10,849,000. As a result of this change,
Biomedicals 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.

In March 1987 and October 1988, Biomedicals purchased ICN 12 1/2%
debentures due 1998 and ICN 12 1/2% debentures due 1999 on the open market. The
debentures had a book value of $3,567,250. On December 30, 1991, Biomedicals
sold all the debentures to ICN for a loss of $64,250.

During 1988, ICN exchanged $10,000,000 of advances due from Viratek for
1,045,697 shares of Viratek Common Stock. The price paid was based on the
current market price less a discount of 15%. The discount was determined, in
part, by an opinion from an underwriter for similar transactions undertaken in
the past and also by an estimate of the costs Viratek would have incurred had
Viratek issued the shares in a public offering.

On September 24, 1990, ICN issued 123,750 shares of Biomedicals registered
Common Stock owned by ICN to DG Bank in payment of costs incurred by ICN
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 Biomedicals by ICN.

Under the terms of the series "A" and "B" preferred stock discussed below,
Biomedicals is restricted from obtaining any additional borrowings without ICN's
permission.

SPI had outstanding borrowings from ICN in the amount of $18,313,000 and
$30,433,000 as of December 31, 1993 and 1992. During 1993, 1992 and 1991, ICN
charged (credited) SPI interest of $800,000, $1,195,000 and ($2,486,000),
respectively. During 1993 and 1992, SPI reclassified its Biomedicals
intercompany receivable of $2,333,000 and $3,631,000 and its Viratek
intercompany payable of $5,228,000 and $6,332,000, respectively, to SPI's ICN
intercompany account resulting in a net increase in SPI's liability to ICN of
$2,895,000 and $2,701,000, respectively.

In 1990, ICN exchanged, in a non-cash transaction, $12,000,000 of advances
due from Viratek into 4,705,882 shares of Viratek common stock. The number of
shares issued was based on an estimate of the fair market value (current stock
bid price less a discount of 15%) of the shares pursuant to a fairness opinion
at February 28, 1990.

During 1991, advances from ICN to Viratek totaled $1,006,000. During the
year Viratek reclassified $5,515,000 of intercompany receivables from SPI to
ICN, which resulted in a receivable of $3,767,000 due from ICN at December 31,
1991. Interest is credited on outstanding balances at prime (6.5% at December
31, 1991) plus 1/2%.

During the year ended December 31, 1993 and 1992, Biomedicals reclassified
its SPI intercompany payable of $2,333,000 and $3,631,000, and its Viratek
intercompany receivable of $272,000 and $536,000 to ICN, resulting in a net
increase in Biomedicals' liability to ICN of $2,061,000 and $3,095,000 and total
intercompany payables of $5,932,000 and $8,414,000 to ICN as of December 31,
1993 and 1992, respectively. ICN charged (credited) $420,000, $314,000 and
($218,000) to Biomedicals for interest on the average balance outstanding during
1993, 1992 and 1991, respectively, at average interest rates of approximately
6.5%, 6.75% and 7.9%, respectively.

During 1993 and 1992, Viratek reclassified $272,000 and $536,000 of
intercompany payables to Biomedicals to ICN and reclassified $5,228,000 and
$6,332,000 of intercompany receivables from SPI to ICN, which resulted in a
receivable of $15,528,000 and $9,325,000 due from ICN at December 31, 1993 and
1992, respectively. Viratek earned interest income of $714,000, $239,000 and
$271,000 from ICN on the average balance outstanding during 1993, 1992 and 1991.
In addition, Viratek had a receivable from SPI of $2,576,000 at December 31,
1991, upon which interest was not earned.

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<PAGE> 111

OTHER

Certain outside directors have provided legal and other consultation
services to ICN, which amounted to approximately $154,000, $811,000 and $58,000
during 1993, 1992 and 1991, respectively.

Effective May 31, 1989, Biomedicals transferred at book value ($1,762,000)
its Lisle, Illinois facility to ICN. On March 4, 1992, ICN sold a parcel of this
real property for $261,000 to a third party.

In 1991, Galenika, purchased equipment from Viratek for its net book amount
of $333,000. On December 31, 1991, in connection with the Galenika joint venture
agreement, ICN, on behalf of SPI, contributed 1,468,000 shares of SPI Common
Stock to Galenika. The transfer of the stock resulted in the liability of SPI to
ICN based on the stock's fair value of $38,528,000. ICN's cost basis in the
stock of $11,555,000 was used to record SPI's investment in Galenika. In
consolidation SPI recorded 1,101,000 shares of stock for $8,665,000 as treasury
stock which represents its 75% interest in Galenika. The remaining 367,000
shares for $2,890,000 were recorded as a component of minority interest and are
considered issued and outstanding. Pending sale of the stock to third parties,
the $26,973,000 difference between the fair value of the stock and the
predecessor basis (ICN's cost) was recorded as a reduction of paid-in capital.
As the stock is sold, the excess of the stock proceeds over the predecessor
basis represents additional investment by SPI, resulting in an increase in
paid-in capital. During 1992, Galenika sold 1,200,000 shares of SPI Common Stock
for proceeds of $30,822,000. Net of amounts attributable to minority interest,
the sale of the stock increased paid-in capital and decreased treasury stock by
$28,628,000.

On August 1, 1991, SPI's Mexican subsidiary, ICN Mexico, purchased
inventory from Biomedicals for approximately $500,000, which was returned for
credit in 1992.

During 1991, ICN transferred to SPI an idle manufacturing facility in
Brooksville, Mississippi at its net book amount of $3,114,000.

During the first quarter 1993, Biomedicals transferred its Dublin, Virginia
facility to ICN in exchange for a reduction in the intercompany amounts due to
ICN of $586,000 representing the net book value at the date of the transfer.

Since SPI assumed production and sales of Virazole(R), effective March 1,
1991, Viratek transferred to SPI all inventory at its net book amount of
$2,943,000.

During 1991, SPI acquired various licenses and patents from ICN and Viratek
which it has contributed to Galenika as part of the agreement. SPI incurred a
liability to ICN and Viratek totaling $1,600,000 and a corresponding reduction
of paid-in capital.

During 1991, Biomedicals charged $250,000 to SPI representing costs
expended by Biomedicals for a product development program launched for SPI which
SPI determined not to pursue.

On December 31, 1992, Biomedicals exchanged, in a non-cash transaction,
$11,250,000 of debt owed to ICN in exchange for 3,214,286 shares of Biomedicals
Common Stock issued to ICN at a price of $3.50 per share which represented the
closing market price of the stock at that date.

On December 31, 1992, Biomedicals transferred $5,747,000 of debt owed to a
major supplier to ICN. ICN became primarily liable for the debt and Biomedicals
became guarantor.

In connection with the acquisition of Flow Laboratories, Inc. ("Flow"),
Biomedicals obtained $27,000,000 revolving line of credit from First City Bank,
N.A., of Houston, Texas ("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, 1990, 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 outstanding balance of the
debt ($13,072,000 plus accrued interest) to ICN as of April 1, 1992 in exchange
for 2,412,449 shares of Biomedicals Common Stock at a price of $5.42 per share,
which represented the closing market price of the stock at that date less a
discount of 15 percent. Terms of the commitment eliminated Biomedicals'

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<PAGE> 112

maintenance of certain financial ratio covenants. Substantially all of
Biomedicals' 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 March 31, 1991, Biomedicals, in reliance on a fairness opinion,
exchanged, in a non-cash transaction, $3,833,000 of advances due to ICN for
538,000 shares of Biomedicals Common Stock, issued at a price of $7.125 which
represented the fair market value of Biomedicals' stock at that date less a
discount of 22%.

On December 31, 1991, Biomedicals issued, in a non-cash transaction,
3,363,298 shares of Biomedicals Common Stock to ICN at a price of $6.25 which
represented the fair market value of Biomedicals' stock at that date in exchange
for a reduction of Biomedicals' debt owed to ICN in the amount of $18,167,523.

On March 31, 1992, Biomedicals transferred, in a non-cash transaction,
$2,711,000 of debt owed to Skopbank of Finland to ICN. Biomedicals, in exchange,
issued 500,334 shares of Biomedicals Common Stock at a price of $5.42 per share
which represented the closing market price of Biomedicals' stock on that date
less a discount of 15%. ICN became primarily liable for the debt and Biomedicals
became guarantor.

On March 31, 1992 Biomedicals exchanged, in a non-cash transaction,
$4,837,000 of debt owed to ICN for 892,703 shares of Biomedicals Common Stock
issued to ICN at a price of $5.42 per share which represented the closing market
price of the stock at that date less a discount of 15%.

On August 30, 1993, Biomedicals issued 300,000 shares of a new series "A"
of its 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
Biomedicals Common Stock that ICN owned and exchanged intercompany debt owed to
ICN by Biomedicals in the amount of $11,000,000. In addition, on August 30,
1993, Biomedicals issued 390,000 shares of a new series "B" of its
non-convertible, non-voting, preferred stock valued pursuant to a fairness
opinion, at $32,000,000 to ICN. In exchange, ICN delivered to Biomedicals
8,384,843 shares of Biomedicals Common Stock that ICN owned. Subsequent to the
exchange, Biomedicals had 9,033,623 common shares issued and outstanding.
Subject to declaration by Biomedicals' Board of Directors, the new series "A"
preferred stock pays an annual dividend of $8 per share, noncumulative, payable
quarterly, and the new series "B" preferred stock pays an annual dividend of $10
per share, 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 stock. The series "A" preferred stock is senior in ranking
to the series "B" preferred stock, and the series "B" preferred stock is senior
to Biomedicals Common Stock. As to voluntary or involuntary liquidation,
dissolution or winding up of the affairs of Biomedicals, after payment or
provision for payment of the debts and other liabilities of Biomedicals 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 $104.50 per share in voluntary
liquidation prior to August 31, 1995 and which amount declines ratably per year
to $100 per share after August 31, 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 Biomedicals only, subject to approval by a vote of a majority of the
independent directors of Biomedicals. The series "A" preferred shares are
redeemable at $104.50 per share prior to August 31, 1995 which amount declines
ratably per year to $100 after August 31, 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.

Effective May 1, 1991, Viratek and ICN transferred the rights to four
compounds, in various stages of development, to SPI for $1,350,000 and $250,000,
respectively, plus a royalty of 6.8% of future sales representing a non-cash
transaction. These amounts have been credited to additional capital. Future
royalties will be recognized as income when earned. During 1993 and 1992, there
have been no sales of product subject to this royalty.

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<PAGE> 113

During 1990, Biomedicals transferred an idle office and manufacturing
facility in Carson, California and other related capitalized costs to ICN at
Biomedicals' recorded net book amount, which represented the lower of cost or
net realizable value, of $4,119,000 and related mortgage indebtedness of
$1,972,000, representing a non-cash transaction.

Effective January 1, 1992, Viratek and Biomedicals entered into an
agreement whereby Biomedicals agreed to transfer rights, title and interest in
certain of its research and development assets to Viratek. Biomedicals retains a
right of first refusal to the marketing and distribution rights for any product
developed from the transferred assets and pay a royalty to Viratek. Accordingly,
Viratek incurred $793,000 and $514,000 of expenses relating to biomedical
research and development for the years ended December 31, 1993 and 1992,
respectively. Products being developed on or prior to January 1, 1992 remain
with Biomedicals.

On November 15, 1993, SPI issued 200,000 shares of SPI Common Stock to ICN
in exchange for reducing its debt outstanding to ICN by $3,075,000. The value of
the shares issued was based on the quoted share price on the transaction date.

Pursuant to an agreement between ICN and Viratek, all the expenses incurred
by the Merging Companies in connection with the class action lawsuits described
under "ICN -- Litigation" in the Addendum are allocated equally between ICN and
Viratek.

ICN currently owns approximately 63% of Viratek's outstanding Common Stock.
ICN's Board of Directors has authorized purchases from time to time in open
market transactions and privately negotiated sales of up to 3,500,000 shares of
Viratek Common Stock. As of February 16, 1990, 2,469,450 shares had been
purchased in open market and privately negotiated transactions for an aggregate
purchase price of $66,998,000. During 1991, ICN sold 200,000 shares of Viratek
Common Stock for total proceeds of $2,790,000 to fund cash flow requirements.

On December 20, 1990, with the approval of the Board of Directors of ICN,
Mr. Panic borrowed 200,000 shares of SPI Common Stock from ICN (which shares had
a market value as of that date of $1,935,000). Mr. Panic was obligated to return
these shares together with interest at the rate of two times SPI's then current
dividend rate. No restrictions were imposed on the use of such shares and,
therefore, the shares could have been used by Mr. Panic as collateral for
borrowing or could have been sold by him. All of the shares have been returned
to ICN.

Management of the Merging Companies believe that the foregoing transactions
between ICN and its affiliates have been effected on terms no more or less
favorable than could have been obtained from third parties. If the Merger is not
consummated, any future material transactions between the Merging Companies 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 Merging Companies than could be obtained from third
parties, and the Merging Companies do not expect that any preference will be
given to the interest of any of the Merging Companies.

INCOME TAXES

Effective January 1, 1993, the Merging Companies adopted Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS
109). The new statement supersedes the Merging Companies' previous policy of
accounting for income taxes under Statement of Financial Accounting Standards
No. 96, "Accounting for Income Taxes" (SFAS 96). Both statements require the use
of the liability method of accounting for income taxes, but the recognition of
deferred tax assets was limited under SFAS 96. Under SFAS 109, deferred tax
liabilities and assets are determined based on the difference between the
financial statement and tax bases of assets and liabilities, using enacted tax
rates in effect for the year in which the differences are expected to reverse.
The change in the method of accounting for income taxes from SFAS 96 to SFAS 109
resulted in no cumulative effect adjustment for any of the Merging Companies.

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<PAGE> 114

Each of the Merging Companies files its federal income tax return on a
stand-alone basis. In years prior to 1993, tax sharing agreements allocated
taxes for periods when a subsidiary was included in ICN's consolidated tax
return. The following table indicates inclusion of subsidiaries in ICN's
consolidated tax return.

<TABLE>
<CAPTION>
1992 1991
---- ----
<S> <C> <C>
SPI............................ -- Until 8-13-91
Biomedicals.................... -- --
Viratek........................ Until 2-1-92 Entire year
</TABLE>

In accordance with the terms of tax-sharing agreements with SPI and
Viratek, respectively, SPI and Viratek were required to pay ICN for federal
taxes otherwise payable on a stand-alone basis. The federal tax-sharing
agreements and consolidated federal filing was terminated with SPI in August
1991 and was terminated with Viratek in January 1992, when ICN ownership of SPI
and Viratek, respectively, dropped below 80 percent.

Upon leaving the consolidated group, SPI was allocated $17,000,000 of net
operating loss carryforwards ("NOL") which represents SPI's share of the
consolidated NOL carryforward at the time of the deconsolidation. The allocated
NOL was utilized for book purposes in 1991 to reduce deferred tax liabilities
resulting in a reduction of income tax expense. For tax purposes, SPI's NOL at
December 31, 1993 is $4,279,000. The utilization of this NOL is limited to
$540,000 per year until the year 2003.

The Merging Companies conduct business in a number of different tax
jurisdictions. Accordingly, losses sustained in one jurisdiction generally
cannot be applied to reduce taxable income in another jurisdiction. The income
of certain foreign subsidiaries is not subject to U.S. income taxes, except when
such income is paid to the U.S. parent company or one of its domestic
subsidiaries. No U.S. taxes have been provided on the Merging Companies' foreign
subsidiaries, with the exception of SPI's Panamanian subsidiary (Alfa
Pharmaceuticals), since management intends to reinvest those amounts in foreign
operations. Included in consolidated retained earnings (deficit) of SPI and ICN
at December 31, 1993 is approximately $49,000,000 and $1,820,000, respectively,
of accumulated earnings of foreign operations that would be subject to U.S.
income taxes if and when repatriated.

ICN has NOLs of approximately $190,000,000 (of which $17,800,000 will be
credited to additional capital when utilized) at December 31, 1993, expiring at
various dates from 1994 through the year 2008.

Included in the $190,000,000 NOL is approximately $47,500,000 of NOL
attributable to Viratek expiring in various dates from 1995 to 2005. Of the
$47,500,000 NOL attributable to Viratek, $10,900,000 of stock option deductions
will be credited to paid-in capital when utilized. Viratek has research and
development tax credit carryovers of $800,000 which expire in varying amounts
from 1996 to 2002. Viratek's NOL can only be utilized by Viratek to offset
Viratek taxable income generated on a separate company basis.

Also included in the $190,000,000 NOL is approximately $39,000,000 of
domestic NOLs and $38,000,000 of foreign NOLs attributable to Biomedicals, of
which $458,000 will be credited to additional paid-in capital when utilized.
Biomedicals' NOLs are restricted to utilization by that company. In connection
with the acquisition of Flow, Biomedicals acquired Flow's domestic net operating
loss carryforwards of $9,771,000. Biomedicals has agreed to pay Flow the first
$500,000 of any benefits realized. In the event this amount is not realized by
November 1994, it will become due and payable to Flow including interest at 10%.
Tax benefits realized in excess of $500,000 will be shared equally with Flow.

In 1987, SPI acquired certain domestic corporations with existing NOLs. On
November 30, 1989 these corporations were merged into SPI and the NOL from these
subsidiaries were utilized by SPI to partially offset domestic taxable income
for 1991 and 1990. The federal tax benefit of $1,174,000 related to the
utilization of the NOL for 1991 was credited to goodwill.

ICN is currently under examination by the U.S. Internal Revenue Service
("IRS") for the tax years ended November 30, 1991, 1990, 1989 and 1988. While
the proposed adjustments, if upheld, would not result

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<PAGE> 115

in a significant additional tax liability, they would result in significant
reductions in the NOLs available to New ICN in the future.

STOCKHOLDER PROPOSALS FOR THE NEXT ANNUAL MEETINGS

In order for proposals of stockholders to be considered for inclusion in
the proxy statement for the 1995 Annual Meeting of Stockholders of ICN (if the
Merger is not consummated), such proposals must be received by the Secretary of
ICN by January 15, 1995 for inclusion in ICN's 1995 proxy material.

In order for proposals of stockholders to be considered for inclusion in
the proxy statement for the 1995 Annual Meeting of Stockholders of SPI (if the
Merger is not consummated), such proposals must be received by the Secretary of
SPI by January 15, 1995 for inclusion in SPI's 1995 proxy material.

In order for proposals of stockholders to be considered for inclusion in
the proxy statement for the 1995 Annual Meeting of Stockholders of Viratek (if
the Merger is not consummated), such proposals must be received by the Secretary
of Viratek by January 15, 1995 for inclusion in Viratek's 1995 proxy material.

In order for proposals of stockholders to be considered for inclusion in
the proxy statement for the 1995 Annual Meeting of Stockholders of Biomedicals
(if the Merger is not consummated), such proposals must be received by the
Secretary of Biomedicals by January 15, 1995 for inclusion in Biomedicals' 1995
proxy material.

If the Merger is consummated, in order for proposals of stockholders to be
considered for inclusion in the proxy statement for the 1995 Annual Meeting of
Stockholders of New ICN, such proposals must be received by the Secretary of New
ICN by January 15, 1995 for inclusion in New ICN's 1995 proxy material.

ANNUAL REPORTS

The Annual Report to Stockholders for the year ended December 31, 1993, for
each of the Merging Companies is being mailed to stockholders as an attachment
to this Joint Proxy Statement/Prospectus as Appendices hereto. The Annual
Reports do not form part of the material for the solicitation of proxies.

MISCELLANEOUS

Where information contained in this Joint Proxy Statement/Prospectus rests
particularly within the knowledge of a person other than ICN, SPI, Viratek or
Biomedicals, such Merging Companies, as applicable, have relied upon information
furnished by such person or contained in filings made by such person with the
Commission.

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ADDENDUM

THE FOLLOWING INFORMATION CONTAINED IN THIS ADDENDUM TO THE JOINT PROXY
STATEMENT/PROSPECTUS RELATES TO MATTERS TO BE VOTED ON AT THE MEETINGS OTHER
THAN THE MERGER AND THE MERGER AGREEMENT.

Unless otherwise noted, cross references within the Addendum are to
Sections of the Addendum with respect to the particular Merging Company in which
the cross reference is made.

INDEX

<TABLE>
<CAPTION>
COMPANY PAGE
------- ----
<S> <C>
ICN........................ ICN-1 -- ICN-28
SPI........................ SPI-1 -- SPI-22
Viratek.................... Viratek-1 -- Viratek-19
Biomedicals................ Biomedicals-1 -- Biomedicals-20
</TABLE>
<PAGE> 117

ICN

ICN PROPOSAL NO. 2

ELECTION OF DIRECTORS

Ten directors are to be elected at the ICN Meeting (who, if elected, will
become directors of New ICN if the Merger is consummated), each to serve until
the next Annual Meeting of Stockholders of ICN (if the Merger is not
consummated) and until his successor is elected and qualified. Unless marked to
the contrary, proxies received will be voted for the election of the following
nominees: Norman Barker, Jr., Senator Birch E. Bayh, Jr., Robert H. Finch, Esq.,
Roger Guillemin, M.D., Ph.D., Adam Jerney, Weldon B. Jolley, Ph.D., Milan Panic,
Michael Smith, Ph.D., Roberts A. Smith, Ph.D. and Richard W. Starr, all of whom
currently serve as directors of ICN. If for any reason any nominee should not be
available for election or be unable to serve as a director, the accompanying
proxy will be voted for the election of such other person, if any, as the ICN
Board of Directors may designate. The ICN Board of Directors has no reason to
believe that any nominee will be unavailable for election or unable to serve.

The Board of Directors of ICN recommends that the stockholders vote FOR the
election of the ten nominees for director of ICN named in this Joint Proxy
Statement/Prospectus.

OWNERSHIP OF ICN'S SECURITIES

PRINCIPAL STOCKHOLDER

As of June 30, 1994, the following stockholder was known to management to
be the beneficial owner of more than 5% of the outstanding shares of ICN Common
Stock:

<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING (1)
------------------- ------------------ ----------------
<S> <C> <C>
Invesco MIM, PLC................................... 1,700,000(2) 8.4%
11 Devonshire Square
London EC2M 7 YR
England
</TABLE>

- ---------------

(1) Total outstanding shares of ICN Common Stock for purposes of this table
include 20,529,181 shares outstanding on June 30, 1994.

(2) Information with respect to these shares of ICN Common Stock was reported on
Amendment No. 1 to Schedule 13G filed with the Commission on February 8,
1994, by Invesco MIM, PLC, on behalf of itself and Invesco North American
Holdings, Inc. and Invesco Funds Group, Inc., each a subsidiary of Invesco
MIM, PLC. The entities have expressly declared that the filing of the
Schedule 13G was not an admission of beneficial ownership of any of the
securities covered therein.

When a proxy in the form enclosed with this Joint Proxy
Statement/Prospectus is returned properly executed, unless marked to the
contrary, such proxy will be voted in favor of the ten nominees listed above.

ICN-1
<PAGE> 118

INFORMATION CONCERNING DIRECTORS OF ICN

The current Board of Directors of ICN consists of ten members: Messrs.
Barker, Bayh and Finch, Dr. Guillemin, Mr. Jerney, Dr. Jolley, Mr. Panic, Drs.
Michael and Roberts Smith and Mr. Starr, each of whom is standing for
re-election. Messrs. Finch, Jolley, Panic, Smith and Starr were elected at the
last Annual Meeting of Stockholders. On October 21, 1993, Dr. Guillemin was
elected to fill a new position which was created by an amendment to the By-laws
increasing the number of directors from eight to nine. On February 1, 1994, Dr.
Michael Smith was elected to fill a new position which was created by an
amendment to the By-laws increasing the number of directors from nine to ten.
The names of the ten nominees for election as directors are listed below,
together with certain personal information, including the present principal
occupation and recent business experience of each nominee.

<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING
AS
DIRECTOR OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE OF ICN DIRECTORSHIPS
- -------------------------------------------- ---- --------- -------------------------
<S> <C> <C> <C>
NORMAN BARKER, JR.(a) 71 1992 Pacific American Income
Mr. Barker is retired Chairman of the Board Shares, Inc.; Southern
of First Interstate Bank of California and California Edison
Former Vice Chairman of the Board of First Company; TCW Convertible
Interstate Bancorp. Mr. Barker joined First Securities Fund, Inc.;
Interstate Bank of California in 1957 and SPI
was elected President and Director in 1968,
Chief Executive Officer in 1971 and Chairman
of the Board in 1973. He retired as Chairman
of the Board at the end of 1985.
</TABLE>

<TABLE>
<S> <C> <C> <C>
SENATOR BIRCH E. BAYH, JR. 66 1992 Acordia, Inc.; Simon
Senator Bayh is a partner in the law firm of Property Group
Bayh, Connaughton, Fensterheim & Malone.
He was a partner in the Indianapolis,
Indiana and Washington, D.C. law firm of
Bayh, Tabbert & Capehart from April 1981
through June 1985. From 1963 to 1981,
Senator Bayh served as United States Senator
from the State of Indiana.
ROBERT H. FINCH, ESQ.(a)(b)(c) 68 1976 Nationwide Health
Mr. Finch has been a partner in the Properties, Inc.;
Pasadena, California law firm of Fleming, Viratek; Continental
Anderson, McClung & Finch since 1976. Prior Graphics
thereto he was Counsel to the President of
the United States from 1971 to 1972,
Secretary of the United States Department of
Health, Education and Welfare from 1969 to
1972, and Lieutenant Governor of the State
of California from 1967 to 1969.
</TABLE>

ICN-2
<PAGE> 119

<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING
AS
DIRECTOR OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE OF ICN DIRECTORSHIPS
- -------------------------------------------- ---- --------- -------------------------
<S> <C> <C> <C>
ROGER GUILLEMIN, M.D., Ph.D 70 1993 SPI; Viratek; Erbamont
Dr. Guillemin has been Distinguished N.V.
Scientist at The Whittier Institute in La
Jolla, California since March 1989 and was
Resident Fellow and Chairman of the
Laboratories for Neuroendocrinology at The
Salk Institute in La Jolla, California, and
Adjunct Professor of Medicine at the Medical
School of the University of California at
San Diego. He was awarded the Nobel Prize in
Medicine in 1977, and, in the same year, was
presented the National Medal of Science by
the President of the United States. He is a
member of the National Academy of Sciences,
the American Academy of Arts and Sciences,
and a Fellow of the American Association for
the Advancement of Science. He has also
served as President of the American
Endocrine Society.
ADAM JERNEY(c) 52 1992 SPI; Biomedicals; Viratek
Mr. Jerney is President and Chief Operating
Officer of SPI. He served as Chairman of
the Board and Chief Executive Officer of ICN
from July 14, 1992, to March 4, 1993, during
Mr. Panic's leave of absence from ICN. Mr.
Jerney is also a director of SPI,
Biomedicals and Viratek. 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 1981,
he was elected Vice President-Operations and
in 1987 he assumed his current position of
Executive Vice President.
WELDON B. JOLLEY, Ph.D.(a) 67 1960
Dr. Jolley is President of Golden
Opportunities, and was President of the
Nucleic Acid Research Institute, a former
division of ICN, from 1985 to 1989. Dr.
Jolley was a Vice President of ICN until
1990. Prior to that, he was, for over eleven
years, Professor of Surgery at the Loma
Linda University School of Medicine in Loma
Linda, California and a physiologist at the
Veterans Hospital in Loma Linda, California.
</TABLE>

ICN-3
<PAGE> 120

<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING
AS
DIRECTOR OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE OF ICN DIRECTORSHIPS
- -------------------------------------------- ---- --------- -------------------------
<S> <C> <C> <C>
MILAN PANIC(c) 64 1960 SPI; Viratek; Biomedicals
Mr. Panic, the founder of ICN, has been
Chairman of the Board, Chief Executive
Officer and President of ICN since its
inception; except, he did not serve as
President from October 1979 to June 1980,
and from July 14, 1992 to March 4, 1993, he
was on leave of absence from ICN while
serving as Prime Minister of Yugoslavia. Mr.
Panic also serves as Chairman of the Board,
Chief Executive Officer and director of
various subsidiaries of ICN and may be
deemed to be a "control person" of ICN.
MICHAEL SMITH, Ph.D. 62 1994
Dr. Smith is Director of the Biomedical
Research Center, a privately funded
research institute at the University of
British Columbia. In 1993, Dr. Smith
received the Nobel Prize in Chemistry. He
has been a career investigator of the
Medical Research Council of Canada since
1979. He is a member of the American
Endocrine Society.
ROBERTS A. SMITH, Ph.D.(c) 65 1960 Viratek; PLC Systems
Dr. Smith was President of Viratek, Inc.
through 1992 and Vice Chairman of the
Board of Directors during Mr. Panic's leave
of absence. He was, through 1992, Vice
President R&D of SPI and was a member of the
Executive Committee of the Nucleic Acid
Research Institute. He was a director of
that institute from 1985 to 1989. For more
than eleven years, Dr. Smith was Professor
of Chemistry and Biochemistry at the
University of California at Los Angeles.
RICHARD W. STARR(a)(b) 73 1983
Mr. Starr retired April 1, 1983 from First
Interstate Bank of California as Executive
Vice President and Chief Credit Officer
Worldwide. He spent 31 years with First
Interstate Bank and has over 44 years
experience in commercial banking.
</TABLE>

- ---------------

(a) Member of the Compensation and Stock Option Committee.

(b) Member of the Audit Committee.

None of the proposed nominees are related by blood or marriage to one
another or to an executive officer of ICN.

In May 1991, ICN completed a civil settlement with the U.S. Justice
Department regarding a grand jury investigation initiated in September 1988. The
grand jury investigation, in which ICN and its subsidiaries were targets,
generally related to compliance by ICN and its subsidiaries with applicable Food
and Drug Administration ("FDA") statutes and regulations concerning the
marketing and sale of Virazole(R). In settling the matter, ICN entered into a
civil consent decree whereby it neither admitted nor denied any violations of

ICN-4
<PAGE> 121

FDA statutes and regulations. In addition, ICN agreed to abide by all FDA laws
and regulations in the future and to pay $400,000 and to reimburse the FDA
$200,000 for administrative costs. On October 7, 1991 ICN, Viratek, Milan Panic,
as Chairman of the Board, President and Chief Executive Officer of ICN and Dr.
Weldon B. Jolley, a director of ICN, entered into a settlement agreement in the
form of a Consent Decree with the SEC, ending the investigation of ICN and its
subsidiaries which began in 1987 and generally concerned ICN disclosures in 1986
and 1987 relating to the safety and efficacy of Virazole(R) in treating certain
AIDS-related conditions. Without admitting or denying any violations of the
securities laws, ICN, Viratek and the individuals agreed not to violate
securities laws in the future.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS OF ICN

The Board of Directors of ICN has a standing Executive Committee, Audit
Committee and Compensation and Stock Option Committee, but does not have a
standing nominating committee.

The members of the Executive Committee are Messrs. Panic, Finch, Jerney and
Dr. Roberts Smith. This Committee, which held no meetings during the year ended
December 31, 1993, is empowered to act upon any matter for the Board of
Directors, other than matters which may not be delegated under Delaware law.

The current members of the Audit Committee, which Committee held four
meetings during the year ended December 31, 1993, are Messrs. Finch and Starr.
Its functions include recommending to the Board of Directors the selection of
ICN's independent public accountants and reviewing with such accountants the
plan and results of their audit, the scope and results of ICN's internal audit
procedures and the adequacy of ICN's systems of internal accounting controls. In
addition, the Audit Committee reviews the independence of the independent public
accountants and reviews the fees for audit and non-audit services rendered to
ICN by its independent public accountants.

The Compensation and Stock Option Committee establishes and recommends to
the Board of Directors the compensation and benefits for senior management and
directors, including the grant of stock options. The current members of this
Committee, which Committee held four meetings during the year ended December 31,
1993, are Mr. Finch, Dr. Jolley and Mr. Starr. See "ICN Executive Compensation
and Related Matters -- Compensation Committee Interlocks and Insider
Participation."

During the year ended December 31, 1993, the Board of Directors met twelve
times and no director attended fewer than 75% of the meetings of the Board and
the committees of the Board on which he served (other than Mr. Panic who did not
attend four Board meetings during his leave of absence which is described under
"ICN Executive Compensation and Related Matters" below).

In October 1984, the Board of Directors of ICN, Viratek and SPI formed an
Oversight Committee. In October 1986, Biomedicals, upon becoming a separate
public company, began to participate in the Oversight Committee. The purpose of
the Oversight Committee, which has advisory authority only, is to review
transactions between or among the four corporations to determine whether a
conflict of interest exists among them with respect to a particular transaction
and the manner in which such conflict can be resolved. The Oversight Committee
consists of one non-management director of each corporation and a non-voting
chairman. The current members of the Oversight Committee are Mr. Thomas H.
Lenagh, a director of Biomedicals; Dr. Vernon Knight, a director of Viratek; Mr.
James Miscoll, a director of SPI; and Mr. Richard W. Starr, a director of ICN.
Dr. Weldon Jolley is the non-voting chairman. During the year ended December 31,
1993, the Oversight Committee held four meetings. Each member of the Oversight
Committee receives a fee of $500 for each meeting he attends.

Mr. Panic and Mr. Jerney are also directors of, and hold executive officer
positions at, SPI, Viratek and Biomedicals. Dr. Roberts Smith is also a director
of Viratek. Mr. Finch is also a director of Viratek. Mr. Barker is also a
director of SPI. Dr. Guillemin is also a director of SPI and Viratek.

ICN-5
<PAGE> 122

EXECUTIVE OFFICERS OF ICN

Set forth below are the executive officers of ICN and a summary of their
business experience. There is no family relationship among the following
executive officers, and there is no arrangement or understanding between any
executive officer and any other person pursuant to such officer's election as an
officer of ICN.

<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVICE
NAME AGE WITH ICN POSITION
- ------------------ --- --------- ---------------------------------------------
<S> <C> <C> <C>
Milan Panic 64 1960 Chairman of the Board, President and Chief
Executive Officer
Adam Jerney 52 1973 Executive Vice President
John E. Giordani.. 52 1986 Executive Vice President -- Finance and Chief
Financial Officer
Bill A. 46 1982 Executive Vice President -- Tax
MacDonald.......
David C. Watt 41 1988 Executive Vice President -- Corporate
Development, General Counsel and Secretary
</TABLE>

Certain officers of ICN are also officers of Viratek, SPI and Biomedicals.
ICN has adopted a charter provision which limits the monetary liability under
certain circumstances of its directors and, as a matter of policy, enters into
agreements with certain of its officers and directors providing indemnification
to the fullest extent permitted under Delaware law.

Mr. Panic is the founder of ICN and has been Chairman of the Board,
President and Chief Executive Officer since ICN's inception in 1960, except he
did not serve as President from October 16, 1979 to June 30, 1980 and from July
14, 1992 to March 4, 1993. Mr. Panic is also Chairman of the Board and Chief
Executive Officer of SPI, Biomedicals and Viratek. On July 14, 1992, Mr. Panic
became Prime Minister of Yugoslavia and, with the approval of ICN's Board of
Directors, took a paid leave of absence from all duties at ICN while retaining
his title as Chairman of the Board. Mr. Panic, with the approval of the
respective Boards of Directors of those Merging Companies, also took leaves of
absence from SPI, Viratek and Biomedicals. Mr. Panic and each of ICN, SPI,
Viratek and Biomedicals entered into an agreement providing for Mr. Panic's
automatic reinstatement as Chief Executive Officer upon termination of the leave
of absence. Under a license from the United States government, Mr. Panic, an
American citizen, was permitted to serve as Prime Minister of Yugoslavia without
violating applicable United States laws and regulations concerning sanctions
imposed against the Federal Republic of Yugoslavia (Serbia and Montenegro). The
license restricted Mr. Panic from engaging in any business with ICN and its
affiliates. On March 4, 1993, Mr. Panic completed his service as Prime Minister
and returned to ICN as Chief Executive Officer and President.

Mr. Jerney is the Executive Vice President of ICN and he also serves as the
President and Chief Operating Officer of SPI. Mr. Jerney served as President and
Chief Executive Officer of ICN during Mr. Panic's leave of absence in 1992-1993.
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.
Mr. Jerney's primary duties are as President and Chief Operating Officer of SPI.
He devotes insubstantial time as an officer of ICN.

Mr. Giordani is ICN's Executive Vice President -- Finance and Chief
Financial Officer. He joined ICN in June 1986 after serving as Vice President
and Corporate Controller of Revlon, Inc., in New York, New York since February
1982. From 1978 until February 1982, he held Deputy and Assistant Corporate
Controller positions with Revlon, Inc. He was with Peat, Marwick, Mitchell & Co.
from 1969 to 1978. Mr. Giordani's primary duties are as Chief Financial Officer
of ICN. He devotes insubstantial time to Biomedicals and Viratek.

Mr. MacDonald is ICN's Executive Vice President -- Taxes. Mr. MacDonald
became President of Biomedicals on March 18, 1993 and the duties of this
position are his primary responsibility. He joined ICN in

ICN-6
<PAGE> 123

March 1982. From 1980 to 1982, he served as the Tax Manager of Pertec Computer
Corporation. From 1973 to 1980, he was Tax Manager and Assistant Treasurer of
Republic Corporation.

Mr. Watt joined ICN in March 1988 as Assistant General Counsel and
Secretary. He was elected Vice President -- Law and Secretary in December 1988.
In January 1992, Mr. Watt was promoted to Senior Vice President of ICN. On
February 1, 1994, Mr. Watt was elected Executive Vice President -- Corporate
Development of ICN. From 1986 to 1987, he was President and Chief Executive
Officer of Unitel Corporation. He also served as Executive Vice President and
General Counsel and Secretary of Unitel Corporation during 1986. From 1983 to
1986, he served with ICA Mortgage Corporation as Vice President, General Counsel
and Corporate Secretary. Prior to that time, he served with Central Savings
Association as Assistant Vice President and Associate Counsel from 1981 to 1983
and as Assistant Vice President from 1980 to 1981. Mr. Watt devotes his time
primarily to SPI and an insignificant amount of time is devoted to ICN and
Viratek.

OWNERSHIP OF SECURITIES OF ICN AND SUBSIDIARIES
BY DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth, as of June 30, 1994, the number of shares
of ICN Common Stock, SPI Common Stock, Viratek Common Stock and Biomedicals
Common Stock, respectively, and the percent of shares of ICN Common Stock, SPI
Common Stock, Viratek Common Stock and Biomedicals Common Stock, respectively,
owned beneficially by each director of ICN, by the executive officers of ICN and
by all directors and executive officers of ICN as a group.

<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
SHARES AND SHARES AND SHARES AND SHARES AND
NATURE OF NATURE OF NATURE OF NATURE OF
BENEFICIAL BENEFICIAL BENEFICIAL BENEFICIAL
OWNERSHIP OWNERSHIP OWNERSHIP OF OWNERSHIP
OF ICN'S OF SPI'S BIOMEDICALS' OF VIRATEK'S
IDENTITY OF OWNER COMMON PERCENTAGE COMMON PERCENTAGE COMMON PERCENTAGE COMMON PERCENTAGE
OR GROUP(1) STOCK OF CLASS STOCK OF CLASS STOCK OF CLASS STOCK OF CLASS
- -------------------- ---------- ---------- ---------- ---------- ------------ ---------- ------------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Norman Barker,
Jr................ 1,000 (2) 23,044(3) (2) 0 0 0 0
Birch E. Bayh,
Jr................ 400 (2) 0 0 0 0 31,500(4) (2)
Robert H. Finch..... 5,100(5) (2) 0 0 0 0 7,875(6) (2)
Roger Guillemin,
M.D., Ph.D........ 1,000 (2) 29,438(7) (2) 0 0 2,625(8) 0
Adam Jerney......... 57,500(9) (2) 208,382(10) (2) 25,000(11) 0 39,375(12) 0
Weldon B. Jolley,
Ph.D.............. 115,000(13) (2) 56,624(14) (2) 30,000(15) (2) 26,250(16) (2)
Milan Panic......... 533,008 2.57% 522,762(17) 2.44% 423,867(18) 4.44% 394,408(19) 2.11%
Roberts A. Smith,
Ph.D.............. 78,096(20) (2) 42,034(21) (2) 30,000(22) (2) 49,350(23) (2)
Michael Smith,
Ph.D.............. 0 (2) 0 (2) 0 (2) 0 (2)
Richard W. Starr.... 25,000(24) (2) 4,200 (2) 0 0 0 0
John E. Giordani.... 14,821(25) (2) 22,241(26) (2) 27,500(27) (2) 5,251(28) (2)
Bill A. MacDonald... 12,858(29) (2) 40,831(30) (2) 16,400(31) (2) 6,301(32) (2)
David C. Watt....... 18,750(33) (2) 34,386(34) (2) 0 0 2,625(35) (0)
Directors and
officers as
a group (13
persons).......... 862,533(36) 4.16% 983,942(37) 4.59% 552,767(38) 5.78% 565,560(39) 3.03%
</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 ICN has
no information as to whether any shares shown in this table are subject to
community property laws.

(2) Less than 1%.

(3) Includes 20,998 shares of SPI Common Stock which Mr. Barker has the right
to acquire upon the exercise of currently exercisable stock options.

(4) Includes 31,500 shares of Viratek Common Stock which Mr. Bayh has the right
to acquire upon the exercise of currently exercisable stock options.

ICN-7
<PAGE> 124

(5) Includes 5,000 shares of ICN Common Stock Mr. Finch has the right to
acquire upon the exercise of currently exercisable stock options.

(6) Includes 7,875 shares of Viratek Common Stock which Mr. Finch has the right
to acquire upon the exercise of currently exercisable stock options.

(7) Includes 29,438 shares of SPI Common Stock which Dr. Guillemin has the
right to acquire upon the exercise of currently exercisable stock options.

(8) Includes 2,625 shares of Viratek Common Stock which Dr. Guillemin has the
right to acquire upon the exercise of currently exercisable stock options.

(9) Includes 37,500 shares of ICN Common Stock which Mr. Jerney has the right
to acquire upon the exercise of currently exercisable stock options.

(10) Includes 176,434 shares of SPI Common Stock which Mr. Jerney has the right
to acquire upon the exercise of currently exercisable stock options.

(11) Includes 25,000 shares of Biomedicals Common Stock which Mr. Jerney has the
right to acquire upon the exercise of currently exercisable stock options.

(12) Includes 39,375 shares of Viratek Common Stock which Mr. Jerney has the
right to acquire upon the exercise of currently exercisable stock options.

(13) Includes 105,000 shares of ICN Common Stock which Dr. Jolley has the right
to acquire upon the exercise of currently exercisable stock options.

(14) Includes 56,624 shares of SPI Common Stock which Dr. Jolley has the right
to acquire upon the exercise of currently exercisable stock options.

(15) Includes 30,000 shares of Biomedicals Common Stock which Dr. Jolley has the
right to acquire upon the exercise of currently exercisable stock options.

(16) Includes 26,250 shares of Viratek Common Stock which Dr. Jolley has the
right to acquire upon the exercise of currently exercisable stock options.

(17) Includes 508,789 shares of SPI Common Stock which Mr. Panic has the right
to acquire upon the exercise of currently exercisable stock options.

(18) Includes 400,000 shares of Biomedicals Common Stock which Mr. Panic has the
right to acquire upon the exercise of currently exercisable stock options
and does not include 1,349 shares of Biomedicals Common Stock indirectly
held for which Mr. Panic disclaims ownership.

(19) Includes 383,908 shares of Viratek Common Stock which Mr. Panic has the
right to acquire upon the exercise of currently exercisable stock options.

(20) Includes 20,686 shares of ICN Common Stock which Dr. Smith has the right to
acquire upon the exercise of currently exercisable stock options.

(21) Includes 42,034 shares of SPI Common Stock which Dr. Smith has the right to
acquire upon the exercise of currently exercisable stock options.

(22) Includes 30,000 shares of Biomedicals Common Stock which Dr. Smith has the
right to acquire upon the exercise of currently exercisable stock options.

(23) Includes 49,350 shares of Viratek Common Stock which Dr. Smith has the
right to acquire upon the exercise of currently exercisable stock options.

(24) Includes 25,000 shares of ICN Common Stock which Mr. Starr has the right to
acquire upon the exercise of currently exercisable stock options.

(25) Includes 6,250 shares of ICN Common Stock which Mr. Giordani has the right
to acquire upon the exercise of currently exercisable stock options.

ICN-8
<PAGE> 125

(26) Includes 22,241 shares of SPI Common Stock which Mr. Giordani has the right
to acquire upon the exercise of currently exercisable stock options.

(27) Includes 27,500 shares of Biomedicals Common Stock which Mr. Giordani has
the right to acquire upon the exercise of currently exercisable stock
options.

(28) Includes 5,251 shares of Viratek Common Stock which Mr. Giordani has the
right to acquire upon the exercise of currently exercisable stock options.

(29) Includes 6,250 shares of ICN Common Stock which Mr. MacDonald has the right
to acquire upon the exercise of currently exercisable stock options.

(30) Includes 37,590 shares of SPI Common Stock which Mr. MacDonald has the
right to acquire upon the exercise of currently exercisable stock options.

(31) Includes 9,900 shares of Biomedicals Common Stock which Mr. MacDonald has
the right to acquire upon the exercise of currently exercisable stock
options.

(32) Includes 6,301 shares of Viratek Common Stock which Mr. MacDonald has the
right to acquire upon the exercise of currently exercisable stock options.

(33) Includes 16,250 shares of ICN Common Stock which Mr. Watt has the right to
acquire upon the exercise of currently exercisable stock options.

(34) Includes 33,816 shares of SPI Common Stock which Mr. Watt has the right to
acquire upon the exercise of currently exercisable stock options.

(35) Includes 2,625 shares of Viratek Common Stock which Mr. Watt has the right
to acquire upon the exercise of currently exercisable stock options.

(36) Includes 221,936 shares of ICN Common Stock which certain directors and
officers have the right to acquire upon the exercise of currently
exercisable stock options.

(37) Includes 927,964 shares of SPI Common Stock which certain directors and
officers have the right to acquire upon the exercise of currently
exercisable stock options.

(38) Includes 522,400 shares of Biomedicals Common Stock which certain directors
and officers have the right to acquire upon the exercise of currently
exercisable stock options.

(39) Includes 555,060 shares of Viratek Common Stock which certain directors and
officers have the right to acquire upon the exercise of currently
exercisable stock options.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Exchange Act requires ICN's officers and directors,
and persons who own more than ten percent of a registered class of ICN's equity
securities, to file reports of ownership and changes in ownership with the
Commission and the NYSE. Such officers, directors and shareholders are required
by Commission regulation to furnish ICN with copies of all Section 16(a) forms
they file.

Based on its review of the copies of such forms received by ICN, or written
representations from certain reporting persons that no Forms 5 were required for
those persons, ICN believes that during fiscal year 1993 all filing requirements
applicable to its officers, directors and ten percent beneficial owners were
timely satisfied.

ICN-9
<PAGE> 126

ICN EXECUTIVE COMPENSATION AND RELATED MATTERS

SUMMARY COMPENSATION TABLE

The following table sets forth the annual and long-term compensation
awarded to, earned by, or paid to the Chief Executive Officer and the four most
highly paid executive officers other than the Chief Executive Officer of ICN
(collectively, the "named executive officers") by ICN and the other Merging
Companies for services rendered in all capacities for 1993, 1992 and 1991.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
ANNUAL COMPENSATION COMPENSATION
---------------------------------------- AWARDS
OTHER ------------
ANNUAL SECURITIES ALL OTHER
NAME AND COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) (1)($) OPTIONS(2)(#) (3)($)
- -------------------- ---- --------- --------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic(4) 1993 $ 535,000 -- $ 60,000 $ 49,245
Chief Executive 1992 535,000 5,675,000 900,000 49,041(5)
Officer and President 1991 535,000 150,000 -0- 1,458
Adam Jerney 1993 380,000 38,100 150,000(6) 18,730
Executive Vice 1992 321,821 370,000 450,000 20,268
President 1991 244,799 156,000 140,000 6,421
Bill A. MacDonald 1993 200,000 -- 125,000(7) 13,496
Executive Vice 1992 168,322 90,000 30,000 15,125
President -- Tax 1991 157,310 190,000 25,000 14,960
John E. Giordani 1993 225,195 -- 65,000(8) 38,886
Executive Vice 1992 210,472 90,000 30,000 25,778
President -- Finance 1991 196,693 130,000 25,000 9,828
and Chief Financial
Officer
David C. Watt 1993 180,000 -- 55,000(9) 5,817
Executive Vice 1992 134,825 169,200 20,000 1,320
President -- Corporate 1991 128,404 25,000 32,500 1,020
Development
</TABLE>

- ---------------

(1) Unless otherwise indicated, with respect to any individual named in the
above table, the aggregate amount of perquisites and other personal
benefits, securities or property was less than either $50,000 or 10% of the
total annual salary and bonus reported for the named executive officer.

(2) Includes grants of options to purchase shares of ICN Common Stock, SPI
Common Stock, Viratek Common Stock and Biomedicals Common Stock.

(3) Except where otherwise indicated, the amounts in this column represent
matching contributions to ICN's 401(k) plan, amounts accrued under the
Executive Deferral Plan and medical benefits and medical and life insurance
premiums.

(4) Mr. Panic was granted options to purchase the following shares of ICN Common
Stock, SPI Common Stock, Viratek Common Stock and Biomedicals Common Stock:

<TABLE>
<CAPTION>
ICN SPI BIOMEDICALS VIRATEK
------- ------- ----------- -------
<S> <C> <C> <C> <C>
1993...................... -0- -0- 60,000 -0-
1992...................... -0- 400,000 300,000 200,000
1991...................... -0- -0- -0- -0-
</TABLE>

(5) Includes $39,262 and $38,242 for legal services and miscellaneous fringe
benefits in 1993 and 1992, respectively.

ICN-10
<PAGE> 127

(6) Mr. Jerney is also President of SPI and his salary is paid by SPI. Mr.
Jerney was granted options to purchase the following shares of ICN Common
Stock, SPI Common Stock, Viratek Common Stock and Biomedicals Common Stock:

<TABLE>
<CAPTION>
ICN SPI BIOMEDICALS VIRATEK
------- ------- ----------- -------
<S> <C> <C> <C> <C>
1993...................... 50,000 50,000 -0- 50,000
1992...................... 100,000 150,000 100,000 100,000
1991...................... 40,000 100,000 -0- -0-
</TABLE>

(7) Mr. MacDonald was granted options to purchase the following shares of ICN
Common Stock, SPI Common Stock, Viratek Common Stock and Biomedicals Common
Stock:

<TABLE>
<CAPTION>
ICN SPI BIOMEDICALS VIRATEK
------- ------- ----------- -------
<S> <C> <C> <C> <C>
1993...................... 25,000 40,000 50,000 10,000
1992...................... -0- 30,000 -0- -0-
1991...................... 10,000 10,000 -0- 5,000
</TABLE>

(8) Mr. Giordani was granted options to purchase the following shares of ICN
Common Stock, SPI Common Stock, Viratek Common Stock and Biomedicals Common
Stock:

<TABLE>
<CAPTION>
ICN SPI BIOMEDICALS VIRATEK
------- ------- ----------- -------
<S> <C> <C> <C> <C>
1993...................... 25,000 -0- 30,000 10,000
1992...................... -0- 30,000 -0- -0-
1991...................... 10,000 10,000 -0- 5,000
</TABLE>

(9) Mr. Watt is also Senior Vice President, General Counsel and Secretary of SPI
and his salary is paid by SPI. Mr. Watt was granted options to purchase the
following shares of ICN Common Stock, SPI Common Stock, Viratek Common Stock
and Biomedicals Common Stock:

<TABLE>
<CAPTION>
ICN SPI BIOMEDICALS VIRATEK
------- ------- ----------- -------
<S> <C> <C> <C> <C>
1993...................... 25,000 20,000 -0- 10,000
1992...................... -0- 20,000 -0- -0-
1991...................... 20,000 12,500 -0- -0-
</TABLE>

In July 1992, Milan Panic, Chairman of the Board, President and Chief
Executive Officer of ICN, 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 ICN 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 reemploy Mr. Panic
and that Mr. Panic return to his previous positions with ICN. Mr. Panic was
succeeded as Prime Minister on March 4, 1993, and pursuant to the Leave of
Absence and Reemployment Agreement, returned to his duties at ICN.

In addition to the salaries of Mr. Panic and certain ICN employees
assisting him during his leave of absence, ICN has incurred certain other
expenses in connection with Mr. Panic's transition to and return from his leave
of absence. Mr. Panic reimbursed ICN for certain expenses paid by ICN but sought
reimbursement from ICN for certain of these expenses. ICN retained a recently
retired member of the California Superior Court to review the expenses. The
Judge prepared a report for the Audit Committees of ICN and SPI, which report
was reviewed and approved by these Audit Committees. Based on the recommendation
of these Audit Committees, the ICN and SPI Boards of Directors approved the
reimbursement to Mr. Panic of substantially all of the expenses.

Mr. Panic has reimbursed certain withholding taxes due as of December 31,
1992, previously advanced by ICN, in connection with the exercise of stock
options, in the amount of $1,351,000. Mr. Panic paid these amounts, in 1993, in
the form of cash in the amount of $678,000 and Viratek Common Stock in the
amount of $776,000 valued at fair market value, subject to receipt of a fairness
opinion.

ICN-11
<PAGE> 128

On April 1, 1992, the Board of Directors 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 of these shares at the date of grant was
$5,375,000. Mr. Panic sold the shares during 1993 for a realized value of
$4,005,223. Additionally, in 1993, Mr. Panic realized $1,881,250 and $1,853,000
on other sales of shares of ICN Common Stock and SPI Common Stock, respectively.

On December 20, 1990, with the approval of the Board of Directors of ICN,
Mr. Panic borrowed 200,000 shares of SPI Common Stock from ICN (which shares had
a market value as of that date of $1,935,000). Mr. Panic was obligated to return
these shares together with interest at the rate of two times SPI's then-current
dividend rate. No restrictions were imposed on the use of such shares and,
therefore, the shares could have since been used by Mr. Panic as collateral for
borrowing or could have been sold by him. All such shares of SPI Common Stock
have since been returned to ICN.

OPTION GRANTS

The following table sets forth information with respect to options to
purchase shares of ICN Common Stock, SPI Common Stock, Viratek Common Stock and
Biomedicals Common Stock granted in 1993 to the named executive officers of ICN.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION PRESENT VALUE
NAME COMPANY GRANTED FISCAL YEAR PRICE DATE (1)(2)
- ------------------ ----------- ---------- --------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic Biomedicals 60,000 12.0% $ 3.250 4/15/03 $ 60,600
Adam Jerney ICN 50,000 30.1 6.375 1/13/03 245,500
SPI 50,000 7.2 10.375 1/12/03 325,731
Viratek 50,000 22.7 10.000 5/11/03 424,500
Bill A. MacDonald ICN 25,000 15.1 6.375 1/13/03 122,750
SPI 40,000 5.7 10.375 1/12/03 255,473
Viratek 10,000 4.5 10.000 5/11/03 84,900
Biomedicals 50,000 10.0 3.250 4/15/03 50,500
John E. Giordani ICN 25,000 15.1 6.375 1/12/03 122,750
Viratek 10,000 4.5 10.000 5/11/03 84,900
Biomedicals 30,000 6.0 3.250 4/15/03 30,300
David C. Watt ICN 25,000 15.1 6.375 1/13/03 122,750
SPI 20,000 2.9 10.375 1/12/03 130,289
Viratek 10,000 4.5 10.000 5/11/03 84,900
</TABLE>

- ---------------

(1) The options granted have ten year terms. The options vest according to the
following schedule: 25% on the first anniversary of the date of grant and
25% on each of the next succeeding three anniversary dates of the grant
date. The options were granted with an exercise price equal to the fair
market value of the underlying shares on the date of grant.

(2) 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.

ICN-12
<PAGE> 129

AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES

The following table sets forth information with respect to each of the
Merging Companies regarding (i) stock option exercises by the named executive
officers of ICN during 1993 and (ii) unexercised stock options held by the named
executive officers of ICN at December 31, 1993.

AGGREGATED OPTION EXERCISES
IN 1993 AND DECEMBER 31, 1993 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED
SECURITIES UNDERLYING VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES DECEMBER 31, 1993 AT DECEMBER 31, 1993 ($)(2)
ACQUIRED ON VALUE ------------------------------ ------------------------------
NAME COMPANY EXERCISE REALIZED ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------- ----------- ----------- ---------------- ------------ -------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C> <C>
Milan Panic ICN 832,000 $5,436,000 0 0 $ 0 $ 0
SPI 284,054(3) 2,644,935 502,259 0 601,891 0
Viratek 141,091(4) 1,461,306 488,908 0 2,291,033 0
Biomedicals 0 0 400,000 260,000 0 75,000
Adam Jerney ICN 50,519 372,795 37,500 132,500 93,750 343,750
SPI 80,420 894,569 132,194 233,158 187,920 677,128
Viratek 0 0 26,250 131,250 68,750 243,750
Biomedicals 0 0 25,000 75,000 18,750 56,250
Bill A.
MacDonald ICN 6,608 39,114 6,250 23,750 15,625 62,500
SPI 0 0 28,659 62,475 91,969 156,532
Viratek 0 0 6,301 10,499 25,506 20,619
Biomedicals 0 0 9,900 52,500 0 62,500
John E.
Giordani ICN 8,571 54,818 6,250 23,750 15,625 62,500
SPI 6,126 67,550 29,020 28,898 67,325 66,167
Viratek 0 0 5,251 10,499 16,881 20,619
Biomedical 0 0 15,000 35,000 0 37,500
David C. Watt ICN 2,500 20,000 16,250 28,750 46,875 78,125
SPI 11,990 172,700 26,949 43,601 107,076 109,757
Viratek 7,350 68,000 2,625 7,875 1,875 5,625
Biomedical 0 0 0 0 0 0
</TABLE>

- ---------------

(1) Difference between the fair market value of ICN Common Stock at the date of
exercise and the exercise price.

(2) Difference between the fair market value of the shares of Common Stock of
each of the Merging Companies on December 31, 1993 and the exercise price.

(3) 227,191 of these shares were transferred to ICN in repayment of all expenses
related to a loan to Mr. Panic authorized by the Board of Directors.

(4) The options with respect to these shares were exercised in April of 1993 and
transferred to ICN to reimburse ICN for certain expenses previously paid by
ICN on behalf of Mr. Panic.

COMPENSATION OF DIRECTORS OF ICN

The directors, other than officers of ICN or its affiliates, are paid an
annual fee of $22,000, payable quarterly, plus a fee of $500 for every Board
meeting attended and an additional fee of $500 for every committee meeting
attended. During 1993, Messrs. Bayh and Finch and Dr. Jolley, or firms with
which they are affiliated, received legal or consulting fees from ICN in the
amounts of $50,598, $20,958 and $55,464, respectively. Dr. Guillemin received
$6,000 from Viratek for consulting services rendered. Dr. Smith received $21,000
in 1993 from Viratek for consulting services rendered. In addition, nonemployee
directors on the first business day following each annual meeting of
stockholders are granted options to purchase 10,000 shares of ICN Common Stock
pursuant to the 1992 ICN Non-Qualified Plan, as defined below.

ICN-13
<PAGE> 130

COMPENSATION PURSUANT TO ICN PLANS

Stock Option Plans

As of December 31, 1993, under ICN's 1981 Employee Incentive Stock Option
Plan (which terminated in 1991) options to acquire 35,878 shares of ICN Common
Stock were outstanding and exercisable (at prices ranging from $3.00 to $9.25).
There were options to acquire 30,256 shares of ICN Common Stock exercised during
1993 at $4.65 per share. There were options to acquire 2,250 shares of ICN
Common Stock exercised during 1992 at $3.00. There were options to acquire 5,000
shares of ICN Common Stock exercised during 1991 at an average price of $6.375.

Pursuant to non-qualified stock option agreements with key employees and
officers of ICN, options to acquire 215,863 shares of ICN Common Stock were
outstanding (at prices ranging from $3.00 to $5.75) of which options to acquire
126,863 shares of ICN Common Stock were exercisable at December 31, 1993. There
were options to acquire 153,808 shares exercised during 1993 at an average price
of $4.736. There were options to acquire 181,855 shares exercised during 1992 at
an average price of $3.55. There were options to acquire 348,007 shares of ICN
Common Stock exercised during 1991 at an average price of $3.00.

During 1992, the stockholders of ICN approved the 1992 ICN Non-Qualified
Stock Option Plan (the "1992 ICN Non-Qualified Plan") and the 1992 ICN Employee
Incentive Stock Plan (the "1992 ICN Incentive Plan"), reserving 500,000 shares
per plan of ICN Common Stock for issuance to employees and directors of ICN. ICN
has granted options for shares under both plans. Options under both plans are
exercisable over a period to be determined by the Compensation Committee, which
shall not exceed ten years from the date of grant and will expire at the end of
the option period.

As of December 31, 1993, options to acquire 85,000 shares of ICN Common
Stock were outstanding under the 1992 ICN Non-Qualified Plan (at prices ranging
from $6.375 to $22.875) of which 11,000 were exercisable at December 31, 1993.
Options to acquire 255,000 shares of ICN Common Stock were outstanding under the
1992 ICN Incentive Plan (at prices ranging from $6.375 to $9.50) of which 26,250
were exercisable at December 31, 1993. There were no options exercised under
either plan during 1993.

Mr. Panic exercised options for 832,000 shares of ICN Common Stock at a
price of $3.00 per share in 1993 under three individual grants of stock options
approved by the shareholders in 1984, 1985 and 1989, respectively.

CERTAIN EMPLOYMENT AGREEMENTS

On March 18, 1993, the Board of Directors of ICN adopted Employment
Agreements ("Employment Agreements") which contain "Change in Control" benefits
for six current key senior executive officers of ICN and its subsidiaries. The
executives include Messrs. Jerney, Giordani, MacDonald and Watt, officers of
ICN, Mr. John Phillips, Executive Vice President and Chief Financial Officer,
and Mr. Jack Sholl, Senior Vice President, Human Resources, respectively, of
SPI.

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 ending March
30, 1996 and is automatically extended for one year terms each year thereafter
unless either the executive or ICN elects not to extend it (provided that any
notice by ICN not to extend the agreement cannot cause the agreement to be
terminated prior to the 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 bonus (and
certain other benefits) if the executive's employment is terminated without
cause, following a Change in Control of ICN or a subsidiary, as the case may be,
or if 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 for any reason or without reason during a sixty day
period commencing six months after the Change in Control. The executive is under
no obligation to mitigate amounts payable under the Employment Agreements.

ICN-14
<PAGE> 131

For purposes of the Employment Agreements, a "Change in Control" means any
of the following events: (i) the acquisition (other than from ICN) 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 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 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 of (a) a merger or consolidation involving
ICN if the stockholders of ICN, 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 the corporation 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 outstanding immediately
before such merger or consolidation, or (b) a complete liquidation or
dissolution of ICN or an agreement for the sale or other disposition of all or
substantially all of the assets of ICN. Removal of ICN's Board of Directors
would also constitute a Change in Control under the Employment Agreements. If
the employment of such key senior executives is terminated under any of the
circumstances described above following a Change in Control, the executives
would be entitled to receive the following amounts (based upon present
compensation): Adam Jerney $2,092,623; John Giordani $1,238,277; Bill MacDonald
$1,179,486; John Phillips $1,180,251; David Watt $935,955 and Jack Sholl
$737,076. In addition, the vesting of certain options granted to the executives
would be accelerated. The value of the accelerated options would depend upon the
market price of the shares at that time.

In connection with the Merger, each of the senior executives has executed
an agreement waiving the effect under the Employment Agreements of any Change in
Control which may be deemed to arise as a result of the Merger. Upon
consummation of the Merger, any Employment Agreements will remain in effect.

PANIC EMPLOYMENT AGREEMENT

ICN and Milan Panic entered into an Employment Agreement effective October
1, 1988, which, as amended, terminates on November 30, 1994 (the "Panic
Employment Agreement"). The base amount of salary for Mr. Panic was determined
by the Compensation Committee of the Board of Directors of ICN in 1988. In
setting the base amount, the Compensation Committee took into consideration Mr.
Panic's then-current base salary, the base salaries of chief executives of
companies of similar scope and complexity and the Compensation Committee's
desire to retain Mr. Panic's services, given his role as founder of ICN. The
Panic Employment Agreement provides for an annual salary, currently $535,000,
with an annual 7% increase payable under certain circumstances. The Panic
Employment Agreement provides that during the period of his employment, Mr.
Panic will not engage in businesses competitive with ICN without the approval of
the Board of Directors. Under the Panic Employment Agreement, Mr. Panic agreed
to waive and eliminate retirement benefits contained in his prior employment
contract with ICN. Instead, Mr. Panic may, at his option, retire upon
termination of the Panic Employment Agreement.

Upon retirement, Mr. Panic has agreed to provide consulting services to ICN
for $120,000 per year, which amount is subject to annual cost-of-living
adjustments from the base year of 1967 until the date of retirement not to
exceed his salary at the date of retirement (currently estimated to be in excess
of $535,000 per year, as adjusted). Mr. Panic's agreement to provide consulting
services to ICN is a lifetime agreement. The consulting fee shall not at any
time exceed the highest annual compensation, as adjusted, paid to Mr. Panic
during his employment by ICN. Upon Mr. Panic's retirement, the consulting fee
shall not be subject to further cost-of-living adjustments. The Panic Employment
Agreement includes a severance compensation provision in the event of a Change
in Control of ICN. The Panic Employment Agreement provides that if within two
years after a Change in Control of ICN, Mr. Panic's employment with ICN is
terminated, except as a result of death, disability or illness, or if Mr. Panic
leaves the employ of ICN within such two-year period, then Mr. Panic will
receive as severance compensation, five times his annual salary, as adjusted,
and Mr. Panic will be deemed to have retired and will receive the same
consulting fees to which he would otherwise have been entitled under the Panic
Employment Agreement. A Change in Control of ICN would occur, for purposes of
the Panic Employment Agreement, if (i) a Change in Control shall occur of a

ICN-15
<PAGE> 132

nature which would be required to be reported in response to Item 6(e) of
Schedule 14A under the Exchange Act (for purposes of that Item, "control" is
defined as the power to direct or cause the direction of the management and
policies of ICN, whether through the ownership of voting securities, by
contract, or otherwise) unless two-thirds of the Existing Board of Directors, as
defined below, decide in their discretion that no Change in Control has occurred
for purposes of the agreement; (ii) any person is or becomes the beneficial
owner, directly or indirectly, of securities of ICN representing 15% or more of
the combined voting power of ICN's then outstanding securities; (iii) the
persons constituting the Existing Board of Directors, as defined below, cease
for any reason to constitute a majority of ICN's Board of Directors; or (iv)
shares of ICN Common Stock cease to be registered under the Exchange Act.
"Existing Board of Directors" is defined in the Panic Employment Agreement as
those persons constituting the Board of Directors at the date of the Panic
Employment Agreement, together with each new director whose election or
nomination for election by ICN's stockholders was previously approved, or is
approved within thirty days of such election or nomination, by a vote of at
least two-thirds of the directors in office prior to such person's election as a
director. If Mr. Panic's employment is terminated under any of the circumstances
described above following such a Change in Control, in addition to the
consulting fee as described above, Mr. Panic would be entitled to receive (based
upon present compensation) $2,675,000.

In connection with the Merger, Mr. Panic has executed an agreement waiving
the effect under the Panic Employment Agreement of any Change in Control which
may be deemed to arise as a result of the Merger. Upon consummation of any
Merger, the Panic Employment Agreement will remain in effect.

COMPENSATION REPORT OF ICN

The Compensation and Stock Option Committee of ICN (the "ICN Compensation
Committee") is composed of three independent nonemployee directors, Messrs.
Finch and Starr and Dr. Jolley.

The following statement made by the members of the ICN Compensation
Committee shall not be deemed incorporated by reference into any filing under
the Securities Act or the Exchange Act and shall not otherwise be deemed filed
under such Acts.

COMPENSATION PHILOSOPHY

The Board of Directors adopts an annual budget and financial plan which
incorporates the goals and objectives to be achieved by ICN and its 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 his or
her unit in relation to the plan. Specific goals and objectives for each
executive are reviewed by the executive and his or her 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 the executive's base salary for
the following fiscal year. The salaries and bonuses of Mr. Jerney, who was Chief
Executive Officer during Mr. Panic's leave of absence, and Mr. Watt were paid by
SPI and reviewed by the SPI Compensation Committee. The members of the SPI
Compensation Committee are different individuals than those on the ICN
Compensation Committee, although the criteria used by them to determine
compensation are substantially similar. With respect to ICN, eligibility for
bonus awards for Mr. Giordani and Mr. MacDonald was based on the pre-set
performance guidelines and growth in operating income and earnings per share.
However, bonuses may be paid even when these objective standards are not met if
specific contributions by an executive merit a bonus or the reason for failure
to meet the objective standards are beyond the control of ICN and/or the
executive. Growth in operating income goals were met in 1993 despite very
difficult circumstances relating to ICN's subsidiary, SPI, operating in
Yugoslavia under U.N.-imposed economic sanctions. Stock options are granted
based on a program developed for ICN by Towers Perrin, a compensation consulting
company. Each individual's base number of options is derived from a formula
which ties to his or her base salary. The ICN Compensation Committee may then
consider the achievement of individual as well as corporate performance goals in
determining the ultimate number of options granted.

ICN-16
<PAGE> 133

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 like companies in the same industry. ICN
reviewed salary surveys prepared by Coopers & Lybrand and Towers Perrin. The
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 ICN Compensation
Committee.

BONUS PLAN

During 1988, ICN 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 ICN
Compensation Committee.

LONG-TERM STOCK INCENTIVE PLANS

Stock options are granted as long-term incentives to executives. Options
vest over a ten year period. Options are granted at fair market value. The
amount of options granted to executives is tied to salary and performance and
each grant is evaluated. No grant to executives is automatic.

CHIEF EXECUTIVE OFFICER COMPENSATION

The ICN Compensation Committee determines the compensation of the Chief
Executive Officer based on a number of factors. The goal of the ICN Compensation
Committee is to grant compensation consistent with that granted to chief
executive officers of other companies in the same industry. The Chief Executive
Officer's compensation is comprised of a base salary and a bonus based on ICN's
performance and special one-time bonuses will be paid, at the ICN Compensation
Committee's discretion, based on special contributions made to ICN. Substantial
bonuses are approved by the Board of Directors. With regard to Mr. Panic, his
base compensation is set pursuant to his employment agreement, which is
described above. With respect to Mr. Jerney, when he became Chief Executive
Officer of ICN 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
ICN Compensation Committee of other chief executive officers' compensation.

INTERNAL REVENUE CODE SECTION 162(M)

Section 162(m) of the Code, which was enacted in 1993, generally disallows
a federal income tax deduction to any publicly-held corporation for compensation
paid in excess of $1 million in any taxable year beginning after January 1, 1994
to the chief executive officer and any of the four other most highly compensated
executive officers who are employed by ICN on the last day of the taxable year.
Section 162(m), however, does not disallow a federal income tax deduction for
qualified "performance-based compensation," the material terms of which are
disclosed to and approved by stockholders. The application of Section 162(m) to
compensation attributable to options granted under the Amended and Restated 1992
ICN Non-Qualified Plan is not expected to have a material impact on the federal
income tax liability of ICN.

Compensation and Stock Option
Committee
Robert H. Finch
Weldon B. Jolley
Richard W. Starr

ICN-17
<PAGE> 134

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Fleming, Anderson, McClung and Finch received legal fees of $20,958 in 1993
from ICN for legal services rendered. Mr. Finch, former Chairman of Viratek, is
a partner of the firm. Dr. Jolley, who was a Vice President of ICN until 1990,
was paid $55,464 for consulting services rendered in 1993. Mr. Birch E. Bayh,
Jr. is a partner in the firm of Bayh, Connaughton, Fensterheim & Malone which
was paid $50,598 in legal fees in 1993. Dr. Roberts Smith received $21,000 in
1993 from Viratek for consulting services rendered.

PERFORMANCE GRAPH

The following graph compares ICN's cumulative total stock return on the
shares with the cumulative return on the Standard & Poor's 500 Stock Index and
the Standard & Poor's Health Care Diversified Index for the five years ended
December 31, 1993. The graph assumes that the value of the investment of the ICN
Common Stock in each index was $100 at December 31, 1988 and that all dividends
were reinvested.

CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING DECEMBER 31, 1988

<TABLE>
<CAPTION>
ICN S&P HEALTH
MEASUREMENT PERIOD PHARMACEUTI- CARE DIVERSI-
(FISCAL YEAR COVERED) CALS INC. S&P 500 FIED INDEX
<S> <C> <C> <C>
DEC-88 100 100 100
DEC-89 73 132 139
DEC-90 41 128 169
DEC-91 257 166 250
DEC-92 93 179 214
DEC-93 127 197 204
</TABLE>

LITIGATION

ICN, SPI, Viratek and certain of their current or former officers and
directors (collectively, the "ICN Defendants") are defendants in certain
consolidated class actions pending in the United States District Court for the
Southern District of New York entitled In re PaineWebber Securities Litigation
(Case No. 86 Civ. 6776 (VLB); In re ICN/Viratek Securities Litigation (Case No.
87 Civ. 4296 (VLB)). In the Third Amended Consolidated Class Action Complaint
plaintiffs allege that the ICN Defendants made, or aided and abetted
PaineWebber, Inc. ("PaineWebber") in making, misrepresentations of material fact
and omitted to state material facts concerning the business, financial condition
and future prospects of ICN, Viratek and SPI in certain public announcements,
PaineWebber research reports and filings with the Commission. The alleged
misstatements and omissions primarily concern developments regarding
Virazole(R), including the efficacy, safety, and market for the drug. The
plaintiffs allege that such misrepresentations and omissions violate Section
10(b) of the Exchange Act and Rule 10b-5 promulgated thereunder and constitute
common law

ICN-18
<PAGE> 135

fraud and misrepresentation. The ICN Defendants filed their Answer, containing
affirmative defenses, on February 15, 1993. Plaintiffs seek the certification of
classes of persons who purchased ICN, Viratek, or SPI common stock during the
period January 7, 1986 through April 15, 1987. In their memorandum of law, dated
February 4, 1994, the ICN Defendants argue that class certification may only be
granted for purchasers of ICN Common Stock for the period August 12, 1986
through February 20, 1987 and for purchasers of Viratek Common Stock for the
period December 9, 1986 through February 20, 1987. The ICN Defendants assert
that no class should be certified for purchasers of the common stock of SPI for
any period. Oral argument on plaintiffs' motion for class certification was held
on June 2, 1994. To date, no decision has been rendered. On October 20, 1993,
plaintiffs informed the Court that they had reached an agreement to settle with
co-defendant PaineWebber for a payment by PaineWebber of $6,500,000. On May 6,
1994, plaintiffs submitted their Stipulation of Settlement to the Court. The
hearing on the Stipulation of Settlement was held on July 27, 1994, at which
time the Court requested additional information from plaintiffs' counsel. Fact
discovery is complete and expert discovery is virtually complete. Plaintiffs'
damages expert, utilizing assumptions and methodologies that the ICN Defendants'
damages experts find to be inappropriate under the circumstances, has testified
that assuming that classes were certified for purchasers of ICN, Viratek, and
SPI common stock for the entire class periods alleged by plaintiffs, January 7,
1986 through April 15, 1987, and further assuming that all of the plaintiffs'
allegations were proven, potential damages against ICN, Viratek, and SPI would,
in the aggregate, amount to $315,000,000. The ICN Defendants' four damages
experts have testified that damages are zero. On May 4, 1994, plaintiffs'
counsel agreed to stipulate to the dismissal of the aiding and abetting claim
asserted against the ICN Defendants and a formal stipulation will be submitted
to the Court in the near future. Management believes that, having extensively
reviewed the issues in the above referenced matters, there are strong defenses
and the ICN Defendants intend to defend the litigation vigorously. While the
ultimate outcome of these lawsuits cannot be predicted with certainty, and an
unfavorable outcome could have an adverse effect on the ICN Defendants, at this
time management does not expect that these matters will have a material adverse
effect on the financial position, results of operations or liquidity of the ICN
Defendants. The attorney's fees and other costs of the litigation are allocated
equally between ICN and Viratek.

ICN is a party to a number of other pending or threatened lawsuits arising
out of, or incident to, its ordinary course of business. In the opinion of
management, these other pending lawsuits will not have a material adverse effect
on the consolidated financial position or operations of ICN.

ICN PROPOSAL NO. 3

APPROVAL OF AMENDED AND RESTATED 1992 ICN NON-QUALIFIED STOCK OPTION PLAN,
WHICH AMENDMENT AND RESTATEMENT INCREASED THE NUMBER OF SHARES AVAILABLE FOR
GRANT THEREUNDER FROM 500,000 TO 1,250,000 SHARES AND PROVIDED THAT THE MAXIMUM
NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO ANY INDIVIDUAL
DURING THE TERM OF THE PLAN MAY NOT EXCEED 400,000 SHARES.

EFFECT OF THE MERGER ON THE 1992 ICN NON-QUALIFIED PLAN

At the Effective Time, all Options then outstanding under the Amended and
Restated 1992 ICN Non-Qualified Plan will remain outstanding and will be assumed
by New ICN. Each such Option will be exercisable upon the same terms and
conditions as under the Amended and Restated 1992 ICN Non-Qualified Plan and the
applicable option agreement issued thereunder, except that (a) each such Option
will be exercisable for that whole number of New ICN Shares (to the nearest
whole share) into which the number of shares of Common Stock of ICN under the
unexercised portion of such option, if then outstanding, would have been
converted at the Effective Time, and (b) the exercise price per New ICN Share
will be an amount equal to the exercise price per share subject to such Option
prior to the Effective Time divided by the ICN Exchange Ratio (rounded upward to
the nearest full cent).

ICN-19
<PAGE> 136

1992 ICN NON-QUALIFIED PLAN

The 1992 ICN Non-Qualified Plan was originally adopted by the Board of
Directors and approved by the stockholders in 1992. The 1992 ICN Non-Qualified
Plan provides for the granting of options to key employees, officers, directors,
consultants and scientific advisors of ICN.

At the ICN Meeting, stockholders will be asked to consider and vote on a
proposal to approve the Amended and Restated 1992 ICN Non-Qualified Plan.

THE BOARD OF DIRECTORS OF ICN RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.

PROPOSED AMENDMENTS

The ICN Compensation Committee has unanimously approved, effective as of
April 27, 1994 and subject to approval of stockholders at the ICN Meeting,
amendments to the 1992 ICN Non-Qualified Plan (i) to increase from 500,000 to
1,250,000 the number of shares of ICN Common Stock authorized for issuance under
the 1992 ICN Non-Qualified Plan and (ii) to provide that the maximum number of
shares with respect to which options may be granted thereunder to any individual
during the term of such plan cannot exceed 400,000 shares of ICN Common Stock.

During 1994, options to acquire 243,890 shares of ICN Common Stock were
granted in excess of the shares authorized by the 1992 ICN Non-Qualified Plan.
Such grants are subject to, and are not exercisable prior to, stockholder
approval of the Amended and Restated 1992 ICN Non-Qualified Plan and will be
canceled should such approval not be obtained.

The 1992 ICN Non-Qualified Plan as previously approved by stockholders does
not limit the maximum number of shares of ICN Common Stock with respect to which
options may be granted to any individual during the term of the plan. The
proposed amendment to limit the number of shares that may be granted to any
individual is intended to attempt to qualify the compensation attributable to
stock option grants under the plan for an exclusion from the deduction
limitation of Section 162(m) of the Code. In addition, in order to attempt to
qualify for this exclusion, ICN is disclosing the material terms of the Amended
and Restated 1992 ICN Non-Qualified Plan to stockholders and seeking their
approval. See "Federal Income Tax Consequences Relating to Non-Qualified Stock
Options," below.

The principal provisions of the Amended and Restated 1992 ICN Non-Qualified
Plan are summarized below. This summary, however, does not purport to be
complete and is qualified in its entirety by the terms of the Amended and
Restated 1992 ICN Non-Qualified Plan. All defined terms used below have the
meaning set forth in the Amended and Restated 1992 ICN Non-Qualified Plan,
unless otherwise indicated.

PURPOSE OF THE AMENDED AND RESTATED 1992 ICN NON-QUALIFIED PLAN

ICN believes stock option plans advance the interests of ICN and further
its growth and development by encouraging and enabling key employees, officers,
directors, consultants and advisors of ICN and its subsidiaries to acquire an
increased personal and proprietary interest in its continued success and
progress. ICN believes that the Amended and Restated 1992 ICN Non-Qualified Plan
aids in attracting and retaining directors, officers and other key employees who
are in a position to contribute materially to the successful conduct of ICN's
business and affairs.

STOCK OPTION RIGHTS

Options granted under the Amended and Restated 1992 ICN Non-Qualified Plan
are exercisable and expire in accordance with the specific terms and conditions
approved as to each option by the ICN Compensation Committee as set forth in a
written stock option agreement. Under no circumstances may an option be
exercised later than ten years after the date it is granted. Participation in
the Amended and Restated 1992 ICN Non-Qualified Plan does not confer any right
of a participant to continue in the employ of ICN or affect any right or power
of ICN to terminate the services of such participant at any time.

ICN-20
<PAGE> 137

GRANTS TO NONEMPLOYEE DIRECTORS

The Amended and Restated 1992 ICN Non-Qualified Plan provides for automatic
non-discretionary annual grants to outside directors (nonemployee directors);
the timing, amounts, and other terms and provisions of such grants will
generally not be amended more than once every six months. Currently, non-
discretionary grants to purchase 10,000 shares of ICN Common Stock are made at
the close of business on the first business day following the date of each
annual meeting of stockholders of ICN.

DURATION AND MODIFICATIONS

The Amended and Restated 1992 ICN Non-Qualified Plan shall remain in effect
until all options granted thereunder have been satisfied by the issuance of
shares or the payment of cash and/or shares, or terminated under the terms of
the Amended and Restated 1992 ICN Non-Qualified Plan, provided that no
non-qualified stock options may be granted under the Amended and Restated 1992
ICN Non-Qualified Plan after January 22, 2002. The Board of Directors and the
ICN Compensation Committee may, at any earlier time, amend, alter, suspend or
discontinue the Amended and Restated 1992 ICN Non-Qualified Plan as it may deem
proper, except that no such action shall impair the rights of any grantee under
any option previously granted under the Amended and Restated 1992 ICN
Non-Qualified Plan without the consent of the grantee. ICN may not, however,
without further approval by ICN's shareholders, take any action for which
stockholder approval is required under Rule 16b-3 under the Exchange Act.

FEDERAL INCOME TAX CONSEQUENCES RELATING TO NON-QUALIFIED STOCK OPTIONS

Options granted under the Amended and Restated 1992 ICN Non-Qualified Plan
are intended to be non-qualified (i.e., non-statutory) stock options. In
general, an optionee to whom a non-qualified stock option is granted will
recognize no income at the time of the grant of the option. Upon exercise of a
non-qualified stock option, an optionee will recognize ordinary income in an
amount equal to the amount by which the fair market value of the shares on the
date of exercise exceeds the exercise price of the option (special rules may
apply in the case of an optionee who is subject to Section 16(b) of the Exchange
Act). Subject to the discussion below with respect to Section 162(m) of the
Code, if it complies with applicable withholding requirements, ICN will be
entitled to a business expense deduction in the same amount and at the same time
as the optionee recognizes ordinary income.

Under certain circumstances, the accelerated vesting or the cashout of
options in connection with a Change in Control of ICN might be deemed an "excess
parachute payment" for purposes of the golden parachute tax provisions of
Section 280G of the Code. To the extent it is so considered, the optionee may be
subject to a 20% excise tax and ICN may be denied a tax deduction.

Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly-held corporation for compensation paid in excess of $1
million in any taxable year beginning after January 1, 1994 to the chief
executive officer and any of the four other most highly compensated executive
officers who are employed by ICN on the last day of the taxable year. Section
162(m), however, does not disallow a federal income tax deduction for qualified
"performance-based compensation," the material terms of which have been
disclosed to and approved by stockholders. The application of Section 162(m) to
compensation attributable to options granted under the Amended and Restated 1992
ICN Non-Qualified Plan is not expected to have a material impact on the federal
income tax liability of ICN.

SECURITIES SUBJECT TO THE AMENDED AND RESTATED 1992 ICN NON-QUALIFIED PLAN

The maximum number of shares of ICN Common Stock currently available for
issuance under the 1992 ICN Non-Qualified Plan is 500,000 shares, except as
described below under the caption "Adjustment of Shares and Price." If the
Amended and Restated 1992 ICN Non-Qualified Plan is approved by stockholders,
such maximum number will be increased to 1,250,000 shares and the maximum number
which may be issued under the Amended and Restated 1992 ICN Non-Qualified Plan
to any individual during the term of the plan would be limited to 400,000 shares
(except, in each instance, as described below under the caption "Adjustment of
Shares and Price"). The shares of ICN Common Stock issued under the Amended and

ICN-21
<PAGE> 138

Restated 1992 ICN Non-Qualified Plan may be either authorized and unissued
shares or shares previously issued and reacquired by ICN. If an option expires
or terminates without having been exercised in full or if shares issued pursuant
to stock option agreements are repurchased by ICN in accordance with the terms
thereof, the shares of ICN Common Stock subject thereto shall again be available
for grant under the Amended and Restated 1992 ICN Non-Qualified Plan.

ADJUSTMENT OF SHARES AND PRICE

In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of ICN's stock,
appropriate adjustment will be made of both the number of shares which may be
purchased under the Amended and Restated 1992 ICN Non-Qualified Plan and the
number and price per share of stock which may be purchased under any outstanding
options. In the case of a merger, sale of assets or similar transaction which
results in a replacement of ICN's stock by stock of another corporation, ICN
will make a reasonable effort to replace any outstanding options granted under
the Plan with comparable options to purchase the stock of such other
corporation, or will provide for immediate maturity of all outstanding options
and the termination of those options not exercised within the time period
specified by the Board of Directors.

ADMINISTRATION OF THE AMENDED AND RESTATED 1992 ICN NON-QUALIFIED PLAN

The Amended and Restated 1992 ICN Non-Qualified Plan is administered by the
ICN Compensation Committee, which is comprised of not less than two directors of
ICN each of whom are "disinterested persons" as defined in subparagraph
(c)(2)(i) of Rule 16b-3 under the Exchange Act and "outside directors" within
the meaning of Section 162(m) of the Code and the regulations promulgated
thereunder. The present members of the ICN Compensation Committee are Messrs.
Starr and Finch and Dr. Jolley.

No member of the Board of ICN receives additional compensation for his
services in administering the Amended and Restated 1992 ICN Non-Qualified Plan
except insofar as such members receive $500 for each ICN Compensation Committee
meeting attended. The Board shall from time to time appoint members of the ICN
Compensation Committee who are disinterested persons and outside directors for
such terms as the Board shall determine, and members of the ICN Compensation
Committee may be removed by the Board at any time with or without cause.

Subject to the provisions of the Amended and Restated 1992 ICN
Non-Qualified Plan, the ICN Compensation Committee has full authority to
implement and carry out the Amended and Restated 1992 ICN Non-Qualified Plan,
including, but not limited to, the following: to construe and interpret the
Amended and Restated 1992 ICN Non-Qualified Plan and to make all other
determinations necessary or advisable for the administration of the Amended and
Restated 1992 ICN Non-Qualified Plan.

ELIGIBILITY AND EXTENT OF PARTICIPATION

Non-qualified options may be granted and shares may be acquired pursuant to
stock option agreements under the Amended and Restated 1992 ICN Non-Qualified
Plan for such number of shares and to such employees, directors, advisors and
consultants as the ICN Compensation Committee may from time to time determine.
See "Administration of the Amended and Restated 1992 Non-Qualified Plan." A
grantee may be granted more than one option under the Amended and Restated 1992
ICN Non-Qualified Plan. If the

ICN-22
<PAGE> 139

Amended and Restated 1992 ICN Non-Qualified Plan is approved, the maximum number
of shares with respect to which options may be granted to any individual during
the term of the plan may not exceed 400,000 shares. All options are subject to
the terms of non-qualified option agreements executed by ICN and the respective
grantees. There are currently approximately 29 individuals eligible to
participate in the Amended and Restated 1992 ICN Non-Qualified Plan.

EXERCISE OF OPTIONS; DEATH, TERMINATION OF EMPLOYMENT

Options are granted by the ICN Compensation Committee at a price not less
than one hundred percent of the fair market value of the ICN Common Stock on the
date of grant.

Shares of ICN Common Stock purchased pursuant to exercise of an option are
paid for in full at the time of exercise in cash or by certified check or by
surrender of previously acquired shares of ICN Common Stock, unless otherwise
determined by the Board of Directors or the ICN Compensation Committee.

The times at which non-qualified stock options are exercisable will be
determined by the ICN Compensation Committee at the time of grant, which shall
in no event be more than ten years from the date of grant. The ICN Compensation
Committee is authorized to determine the nature and extent of any restrictions
to be imposed on the shares of ICN Common Stock which may be acquired under the
Amended and Restated 1992 ICN Non-Qualified Plan, including restrictions on the
transferability of such shares.

Non-qualified stock options are nonassignable and nontransferable other
than by will or by the laws of descent and distribution or pursuant to a
qualified domestic relations order (as defined in the Code). During the life of
the recipient, the non-qualified stock option shall be exercisable only by the
recipient.

If an optionee's employment is terminated for any reason, other than death
or disability, the option shall be exercisable within three months after such
termination, but only to the extent it was exercisable on the date of
termination, provided that if such optionee should die during the three-month
period without having exercised his option, his personal representative, heirs
or legatees, as the case may be, shall have the right to exercise his option
within twelve (12) months of the date of death, but only to the extent it was
exercisable at the date of termination. If the optionee is disabled, his options
shall terminate one year after the date of disability. In the event of the death
of an optionee, while an employee, director, scientific advisor or consultant of
ICN, his personal representative, heirs or legatees, as the case may be, shall
have the right to exercise such option, to the extent it was exercisable on the
date of death, up to twelve (12) months from the date of death of the optionee,
but in no event after the expiration of the exercise period.

The ICN Compensation Committee will determine all questions regarding
termination of employment and cause of termination, disability or retirement.

FORM OF OPTIONS

Each non-qualified stock option under the Amended and Restated 1992 ICN
Non-Qualified Plan is evidenced by a written stock option agreement in such form
as the ICN Compensation Committee shall have approved. The holders of options
shall have no rights as stockholders with respect to any shares covered by
options until the date of issuance of a stock certificate for such shares.

NEW PLAN BENEFITS

The following table sets forth certain information concerning the number of
shares with respect to which options have been granted, subject to stockholder
approval, under the Amended and Restated 1992 ICN Non-Qualified Plan to the
named executive officers.

ICN-23
<PAGE> 140

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION UNDERLYING OPTIONS
------------------------------------------------------------ ------------------
<S> <C>
Milan Panic................................................. 22,500
Chief Executive Officer and President
Adam Jerney................................................. 15,000
Executive Vice President
Bill A. MacDonald........................................... 25,000
Executive Vice President -- Tax
John E. Giordani............................................ 15,000
Executive Vice President -- Finance and CFO
David C. Watt............................................... 15,000
Executive Vice President -- Corporate Development
Executive Group............................................. 92,500
Non-Executive Director Group................................ 18,750
Non-Executive Officer Employee Group........................ 132,640
</TABLE>

Options which have been granted under the Amended and Restated 1992 ICN
Non-Qualified Plan are for a term of ten years, subject to earlier termination
under certain circumstances. The exercise price of the options is 100% of the
fair market value of the underlying stock on the date of grant. The per share
exercise price of each option heretofore granted is $9.25. Options are
exercisable with respect to 25% of the underlying shares on each of the first
four anniversaries of the date of grant, provided that, the optionee is and has
been, on the relevant anniversary since the date of grant, an employee,
director, scientific advisor or consultant of ICN. In the event that the
optionee ceases to serve as an employee, director, scientific advisor or
consultant of ICN for any reason, other than death or disability, the option
terminates three months after termination. The per share closing price of ICN
Common Stock on September 23, 1994, as reported on the NYSE Composite Tape, was
$12.25.

VOTE REQUIRED

Adoption of the Amended and Restated 1992 ICN Non-Qualified Plan requires
the favorable vote of the holders of a majority of the shares of ICN Common
Stock represented at the ICN Meeting. Proxies submitted by the Board of
Directors of ICN will be voted for the proposal unless a vote against the
proposal or abstention is specifically indicated. See "The Meetings -- Votes
Required."

ICN PROPOSAL NO. 4

APPROVAL OF AMENDED AND RESTATED 1992 ICN EMPLOYEE INCENTIVE STOCK OPTION
PLAN, WHICH AMENDMENT AND RESTATEMENT INCREASED THE NUMBER OF SHARES AVAILABLE
FOR GRANT THEREUNDER FROM 500,000 TO 750,000 SHARES AND PROVIDED THAT THE
MAXIMUM NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO ANY
INDIVIDUAL DURING THE TERM OF THE PLAN MAY NOT EXCEED 200,000 SHARES.

EFFECT OF THE MERGER ON THE 1992 ICN INCENTIVE PLAN

At the Effective Time, all Options then outstanding under the Amended and
Restated 1992 ICN Incentive Plan will remain outstanding and will be assumed by
New ICN. Each such Option will be exercisable upon the same terms and conditions
as under the Amended and Restated 1992 ICN Incentive Plan and the applicable
option agreement issued thereunder, except that (a) each such Option will be
exercisable for that whole number of New ICN Shares (to the nearest whole share)
into which the number of shares of Common Stock of ICN under the unexercised
portion of such option, if then outstanding, would have been converted at the
Effective Time, and (b) the exercise price per New ICN Share will be an amount
equal to the exercise price per share subject to such Option prior to the
Effective Time divided by the ICN Exchange Ratio (rounded upward to the nearest
full cent).

ICN-24
<PAGE> 141

1992 ICN INCENTIVE PLAN

1992 ICN Incentive Plan was originally adopted by the Board of Directors
and approved by the stockholders in 1992. The 1992 ICN Incentive Plan provides
for the granting of options to key employees and officers of ICN.

At the ICN Meeting, stockholders will be asked to consider and vote on a
proposal to approve the Amended and Restated 1992 ICN Incentive Plan.

THE BOARD OF DIRECTORS OF ICN RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.

PROPOSED AMENDMENTS

The ICN Compensation Committee has unanimously approved, effective as of
April 27, 1994 and subject to approval by stockholders at the ICN Meeting,
amendments to the 1992 ICN Incentive Plan (i) to increase from 500,000 shares to
750,000 shares, the number of shares authorized for issuance under the 1992 ICN
Incentive Plan and (ii) to provide that the maximum number of shares with
respect to which options may be granted thereunder to any individual during the
term of such plan cannot exceed 200,000 shares.

The principal provisions of the Amended and Restated 1992 ICN Incentive
Plan are summarized below. The summary, however, does not purport to be complete
and is qualified in its entirety by the terms of the Amended and Restated 1992
ICN Incentive Plan. All defined terms used below have the same meaning set forth
in the Amended and Restated 1992 ICN Incentive Plan, unless otherwise indicated.

PURPOSE OF THE AMENDED AND RESTATED 1992 ICN INCENTIVE PLAN

ICN believes stock option plans advance the interests of ICN and further
its growth and development by encouraging and enabling key employees and
officers of ICN and its subsidiaries to acquire an increased personal and
proprietary interest in its continued success and progress. ICN believes that
the Amended and Restated 1992 ICN Incentive Plan aids in attracting and
retaining officers and other key employees who are in a position to contribute
materially to the successful conduct of ICN's business and affairs.

STOCK OPTION RIGHTS

Options granted under the Amended and Restated 1992 ICN Incentive Plan are
exercisable and expire in accordance with the specific terms and conditions
approved as to each option by the ICN Compensation Committee as set forth in a
written stock option agreement. Under no circumstances may an option be
exercised later than ten years after the date it is granted (five years in the
case of an option granted to a Ten Percent Stockholder (as defined below)). See
"Federal Income Tax Consequences Relating to Incentive Stock Options."
Participation in the Amended and Restated 1992 ICN Incentive Plan does not
confer any right on a participant to continue in the employ of ICN or affect any
right or power of ICN to terminate the services of such participant at any time.

DURATION AND MODIFICATIONS

The Amended and Restated 1992 ICN Incentive Plan will remain in effect
until all options granted thereunder have been satisfied by the issuance of
shares or the payment of cash and/or shares, or terminated under the terms of
the Amended and Restated 1992 ICN Incentive Plan, provided that no incentive
stock options may be granted under the Amended and Restated 1992 ICN Incentive
Plan after January 21, 2002. The Board of Directors and the ICN Compensation
Committee may, at any earlier time, amend, alter, suspend or discontinue the
Amended and Restated 1992 ICN Incentive Plan as it may deem proper, except that
no such action shall impair the rights of any grantee under any option
previously granted under the Amended and Restated 1992 ICN Incentive Plan
without the consent of the grantee. The Board of Directors may not, however,
without further approval by ICN's shareholders, take any action for which
stockholder approval is required under Section 422 of the Code or any successor
provision or under Rule 16b-3 under the Exchange Act, including, without
limitation, any action which would increase the total number of shares for

ICN-25
<PAGE> 142

which options may be issued under the Amended and Restated 1992 ICN Incentive
Plan, except as described under the caption "Adjustment of Shares and Price,"
change the minimum exercise price, extend the duration of the Amended and
Restated 1992 ICN Incentive Plan or extend the period during and over which
options may be exercised under the Amended and Restated 1992 ICN Incentive Plan.

FEDERAL INCOME TAX CONSEQUENCES RELATING TO INCENTIVE STOCK OPTIONS

Options granted under the Amended and Restated 1992 ICN Incentive Plan are
intended to qualify as "Incentive Stock Options" within the meaning of Section
422 and predecessor provisions of the Code. In general, an optionee will not
recognize taxable income upon the grant or exercise of an Incentive Stock Option
and ICN will not be entitled to any business expense deduction with respect to
the grant or exercise of an Incentive Stock Option. (However, upon the exercise
of an Incentive Stock Option, the excess of the fair market value on the date of
the exercise of the shares received over the exercise price of the shares will
be treated as an adjustment to alternative minimum taxable income). In order for
the exercise of an Incentive Stock Option to qualify for the foregoing tax
treatment, the optionee generally must be an employee of ICN from the date the
Incentive Stock Option is granted through the date three months before the date
of exercise, except in the case of death or disability, where special rules
apply.

If the optionee has held the shares acquired upon the exercise of an
Incentive Stock Option for at least two years after the date of grant and for at
least one year after the date of exercise, upon the disposition of the shares by
the optionee, the difference, if any, between the sale price of the shares and
the exercise price of the option will be treated as long-term capital gain or
loss. If the optionee does not satisfy these holding period requirements, the
optionee will recognize ordinary income at the time of the disposition of the
shares, generally in an amount equal to the excess of the fair market value of
the shares at the time the option was exercised over the exercise price of the
option. The balance of the gain realized, if any, will be long-term or
short-term capital gain, depending on whether or not the shares were sold more
than one year after the option was exercised. If the optionee sells the shares
prior to the satisfaction of the holding period requirements but at a price
below the fair market value of the shares at the time the option was exercised,
the amount of ordinary income will be limited to the excess of the amount
realized on the sale over the exercise price of the option. ICN will generally
be allowed a business expense deduction to the extent the optionee recognizes
ordinary income.

Under certain circumstances, the accelerated vesting or the cashout of
options in connection with a Change in Control might be deemed an "excess
parachute payment" for purposes of the golden parachute tax provisions of
Section 280G of the Code. To the extent that it is so considered, the optionee
may be subject to a 20% excise tax and ICN may be denied a tax deduction.

SECURITIES SUBJECT TO THE AMENDED AND RESTATED 1992 ICN INCENTIVE PLAN

The maximum number of shares of Common Stock currently available for
issuance under the 1992 ICN Incentive Plan is 500,000 shares, except as
described below under the caption "Adjustment of Shares and Price." If the
Amended and Restated 1992 ICN Incentive Plan is approved by stockholders, such
maximum number will be increased to 750,000 shares and the maximum number which
may be issued under the plan to any individual during the term of the plan would
be limited to 200,000 shares, except as described below under the caption
"Adjustment of Shares and Price." The shares of ICN Common Stock issued under
the Amended and Restated 1992 ICN Incentive Plan may be either authorized and
unissued shares or shares previously issued and reacquired by ICN. If an option
expires or terminates without having been exercised in full or if shares issued
pursuant to stock option agreements are repurchased by ICN in accordance with
the terms thereof, the shares of ICN Common Stock subject thereto shall again be
available for grant under the Amended and Restated 1992 ICN Incentive Plan.

ICN-26
<PAGE> 143

exercisable for that whole number of New ICN Shares (to the nearest whole share)
into which the number of shares of Common Stock of ICN under the unexercised
portion of such option, if then outstanding, would have been converted at the
Effective Time, and (b) the exercise price per New ICN Share will be an amount
equal to the exercise price per share subject to such Option prior to the
Effective Time divided by the ICN Exchange Ratio (rounded upward to the nearest
full cent).

ADJUSTMENT OF SHARES AND PRICE

In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of ICN's stock,
appropriate adjustment will be made of both the number of shares which may be
purchased under the Amended and Restated 1992 ICN Incentive Plan and the number
and price per share of stock which may be purchased under any outstanding
options. In the case of a merger, sale of assets or similar transaction which
results in a replacement of ICN's stock by stock of another corporation, ICN
will make a reasonable effort to replace any outstanding options granted under
the plan with comparable options to purchase the stock of such other
corporation, or will provide for immediate maturity of all outstanding options
and the termination of those options not exercised within the time period
specified by the ICN Compensation Committee.

ADMINISTRATION OF THE AMENDED AND RESTATED 1992 ICN INCENTIVE PLAN

The Amended and Restated 1992 ICN Incentive Plan is administered by the ICN
Compensation Committee, which is comprised of not less than two directors of ICN
each of whom are "disinterested persons" as defined in subparagraph (c)(2)(i) of
Rule 16b-3 under the Exchange Act and "outside directors" as defined in Section
162(m) of the Code and the regulations promulgated thereunder. The present
members of the ICN Compensation Committee are Messrs. Starr and Finch and Dr.
Jolley.

No member of the Board receives additional compensation for his services in
administering the Amended and Restated 1992 ICN Incentive Plan except insofar as
such member receives $500 for each ICN Compensation Committee meeting attended.
The Board shall from time to time appoint members of the ICN Compensation
Committee who are disinterested persons and outside directors, for such terms as
the Board shall determine, and members of the ICN Compensation Committee may be
removed by the Board at any time with or without cause.

Subject to the provisions of the Amended and Restated 1992 ICN Incentive
Plan, the ICN Compensation Committee has full authority to implement and carry
out the Amended and Restated 1992 ICN Incentive Plan including, but not limited
to, the following: to construe and interpret the Amended and Restated 1992 ICN
Incentive Plan and to make all other determinations necessary or advisable for
the administration of the Amended and Restated 1992 ICN Incentive Plan.

ELIGIBILITY AND EXTENT OF PARTICIPATION

Incentive Stock Options may be granted and shares may be acquired pursuant
to stock option agreements under the Amended and Restated 1992 ICN Incentive
Plan for such number of shares and to such employees, as the ICN Compensation
Committee may from time to time determine. See "Administration of the Amended
and Restated 1992 ICN Incentive Plan." A grantee may be granted more than one
option under the Amended and Restated 1992 ICN Incentive Plan. If the Amended
and Restated 1992 ICN Incentive Plan is approved, the maximum number of shares
with respect to which options may be granted to any individual during the term
of the plan may not exceed 200,000 shares. All options are subject to the terms
of Incentive Stock Option agreements executed by ICN and the respective
grantees. There are currently approximately 16 individuals eligible to
participate in the Amended and Restated 1992 ICN Incentive Plan.

EXERCISE OF OPTIONS; DEATH, TERMINATION OF EMPLOYMENT

Options are granted by the ICN Compensation Committee at a price not less
than one hundred percent of the fair market value of the ICN Common Stock on the
date of grant (not less than 110% in the case of

ICN-27
<PAGE> 144

options granted to an employee who at the time of grant owns stock possessing
more than 10% of the total combined voting power of all classes of capital stock
of ICN (a "Ten Percent Stockholder")).

Shares of ICN Common Stock purchased pursuant to exercise of an option are
paid for in full at the time of exercise in cash or by certified check or by the
surrender of previously acquired shares of ICN Common Stock, unless otherwise
determined by the Board of Directors or the ICN Compensation Committee.

The times at which Incentive Stock Options are exercisable will be
determined by the ICN Compensation Committee at the time of grant, which shall
in no event be more than ten years from the date of grant (five years in the
case of options granted to a Ten Percent Stockholder). The ICN Compensation
Committee is authorized to determine the nature and extent of any restrictions
to be imposed on the shares of ICN Common Stock which may be acquired under the
Amended and Restated 1992 ICN Incentive Plan, including restrictions on the
transferability of such shares.

Options granted under the Amended and Restated 1992 ICN Incentive Plan are
nonassignable and nontransferable other than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order (as defined
in the Code). During the life of the recipient, the Incentive Stock Option shall
be exercisable only by the recipient.

If an optionee's employment is terminated for any reason, other than death
or disability, the option shall be exercisable within three months after such
termination, but only to the extent it was exercisable on the date of
termination, provided that if such employee should die during that three-month
period without having exercised his option, his personal representative, heirs
or legatees, as the case may be, shall have the right to exercise his option
within twelve (12) months of the date of death, but only to the extent it was
exercisable at the date of termination. If the optionee is disabled, his options
shall terminate one year after the date of disability. In the event of the death
of an optionee while an employee of ICN, his personal representatives, heirs or
legatees, as the case may be, shall have the right to exercise such option, to
the extent it was exercisable on the date of death, up to twelve (12) months
from the date of death of the optionee, but in no event after the expiration of
the exercise period.

The ICN Compensation Committee will determine all questions regarding
termination of employment and cause of termination, permanent disability or
retirement.

FORM OF OPTIONS

Each Incentive Stock Option under the Amended and Restated 1992 ICN
Incentive Plan is evidenced by a written stock option agreement in such form as
the ICN Compensation Committee shall have approved. The holders of options shall
have no rights as stockholders with respect to any shares covered by options
until the date of issuance of a stock certificate for such shares.

VOTE REQUIRED

Adoption of the Amended and Restated 1992 ICN Incentive Plan requires the
favorable vote of the holders of a majority of the shares of ICN Common Stock
represented at the ICN Meeting. Proxies submitted by the Board of Directors will
be voted for the proposal unless a vote against the proposal or abstention is
specifically indicated.

ICN-28
<PAGE> 145

SPI

SPI PROPOSAL NO. 2

ELECTION OF DIRECTORS

Eight directors are to be elected at the SPI Meeting (who, if elected, will
become directors of New ICN if the Merger is consummated), each to serve until
the next Annual Meeting of Stockholders of SPI (if the Merger is not
consummated) and until his successor is elected and qualified. Unless marked to
the contrary, proxies received will be voted for the election of the following
nominees: Norman Barker, Jr., Alan F. Charles, Roger Guillemin, M.D., Ph.D.,
Adam Jerney, Charles T. Manatt, James P. Miscoll, Stephen D. Moses and Milan
Panic, all of whom currently serve as directors of SPI. If for any reason any
nominee should not be available for election or be unable to serve as a
director, the accompanying proxy will be voted for the election of such other
person, if any, as the SPI Board of Directors may designate. The SPI Board of
Directors has no reason to believe that any nominee will be unavailable for
election or unable to serve.

The Board of Directors of SPI recommends that the stockholders vote FOR the
election of the eight nominees for director named in this Joint Proxy
Statement/Prospectus.

INFORMATION CONCERNING NOMINEES AND DIRECTORS OF SPI

The current Board of Directors of SPI consists of eight members: Norman
Barker, Jr., Alan F. Charles, Roger Guillemin, M.D., Ph.D., Adam Jerney, Charles
T. Manatt, James P. Miscoll, Stephen D. Moses and Milan Panic, all of whom are
standing for re-election. All of the nominees were elected at the last Annual
Meeting of Stockholders. The names of the eight nominees for election as
directors are listed below, together with certain personal information,
including the present principal occupation and recent business experience of
each nominee.

<TABLE>
<CAPTION>
YEAR COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE SPI DIRECTORSHIPS
- ----------------------------------------------- --- -------------- -------------------------
<S> <C> <C> <C>
NORMAN BARKER, JR. (a) 71 1988 Pacific American Income
Mr. Barker is retired Chairman of the Board Shares, Inc.; Southern
of First Interstate Bank of California and California Edison
Former Vice Chairman of the Board of First Company; TCW Convertible
Interstate Bancorp. Mr. Barker joined First Securities Fund, Inc.;
Interstate Bank of California in 1957 and was ICN
elected President and Director in 1968, Chief
Executive Officer in 1971 and Chairman of the
Board in 1973. He retired as Chairman of the
Board at the end of 1985.
ALAN F. CHARLES (a)(b)(c) 56 1986
Mr. Charles was Vice Chancellor of University
Relations at the University of California,
Los Angeles from 1980 through 1993 and served
in various administrative capacities at that
university since 1972.
</TABLE>

SPI-1
<PAGE> 146

<TABLE>
<CAPTION>
YEAR COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE SPI DIRECTORSHIPS
- ----------------------------------------------- --- -------------- -------------------------
<S> <C> <C> <C>
ROGER GUILLEMIN, M.D., Ph.D. (c) 70 1989 Erbamont, N.V.; Viratek;
Dr. Guillemin has been Distinguished ICN
Scientist at The Whittier Institute in La
Jolla, California since March 1989 and was
Resident Fellow and Chairman of the
Laboratories for Neuroendocrinology at The
Salk Institute in La Jolla, California, and
Adjunct Professor of Medicine at the Medical
School of the University of California at San
Diego. He was awarded the Nobel Prize in
Medicine in 1977, and, in the same year, was
presented the National Medal of Science by
the President of the United States. He was
affiliated with the Department of Physiology
at Baylor College of Medicine in Houston,
Texas from 1952 to 1970. He is a member of
the National Academy of Sciences, the
American Academy of Arts and Sciences, and a
Fellow of the American Association for the
Advancement of Science. He has also served as
President of the American Endocrine Society.
ADAM JERNEY 52 1992 ICN; Biomedicals; Viratek
Mr. Jerney is President and Chief Operating
Officer of SPI. He served as Chairman of the
Board and Chief Executive Officer from July
14, 1992, to March 3, 1993, during Mr.
Panic's leave of absence from SPI. Mr. Jerney
is also a director of ICN, Biomedicals and
Viratek. 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 1981, he was elected
Vice President-Operations and in 1987 he
assumed his current position. Prior to
joining ICN, he spent four years with F.
Hoffmann-LaRoche & Company.
CHARLES T. MANATT, ESQ. 58 1992 Federal Express; GTE;
Mr. Manatt is a partner in the law firm of Castle & Cooke Homes
Manatt, Phelps & Phillips, of which he was a
founder in 1964. Mr. Manatt served as
Chairman of the Democratic Party from 1981 to
1985.
JAMES P. MISCOLL 59 1992 Coast Federal Financial
Mr. Miscoll retired as Vice-Chairman of Bank Inc.; Rykoff Sexton,
of America in 1992 where he served from 1962 Inc.; California Higher
to 1992. Mr. Miscoll served in a number of Education Loan Authority
positions during his tenure with the bank.
</TABLE>

SPI-2
<PAGE> 147

<TABLE>
<CAPTION>
YEAR COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE SPI DIRECTORSHIPS
- ----------------------------------------------- --- -------------- -------------------------
<S> <C> <C> <C>
STEPHEN D. MOSES (a)(b)(c) 59 1988
Mr. Moses is Chairman of the Board of Stephen
Moses Interests. He was formerly Chairman of
the Board of National Investment Development
Corporation and Brentwood Bank, Los Angeles,
California and a member of the Board of
Directors of Dayna Communications, Inc. and
FPC Financial Services, Inc. Mr. Moses was a
director of the National Housing Conference,
and a member of the National Advisory Board
of the Center for National Policy. He serves
on the Board of Visitors of Hebrew Union
College as well as the Board of Trustees of
Franklin and Marshall College and the UCLA
Foundation. From 1967 to 1971, Mr. Moses was
an executive of the Boise Cascade
Corporation, serving in several capacities
including President of Boise Cascade Home and
Land Corporation. In the early 1970's, Mr.
Moses was President of Flagg Communities,
Inc.
MILAN PANIC (b) 64 1981 ICN; Viratek; Biomedicals
Mr. Panic, the founder of ICN, has been
Chairman of the Board and Chief Executive
Officer of SPI since its inception. Mr. Panic
also serves as Chairman of the Board,
President and Chief Executive Officer of ICN,
except he did not serve as President from
October 1979 to June 1980 and from July 14,
1992 to March 4, 1993, he was on leave of
absence from SPI while serving as Prime
Minister of Yugoslavia. Mr. Panic is also
Chairman of the Board and Chief Executive
Officer of Viratek and Chairman of the Board
and Chief Executive Officer of Biomedicals
and Chairman of the Board of Galenika, a
subsidiary of SPI, and may be deemed to be a
"control person" of ICN and SPI.
</TABLE>

- ---------------

(a) Member of the Audit Committee.

(b) Member of the Executive Committee.

None of the proposed nominees is related by blood or marriage to one
another or to an executive officer of SPI.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS OF SPI

The Board of Directors of SPI has a standing Executive Committee, Audit
Committee and Compensation and Stock Option Committee, but does not have a
standing nominating committee.

The members of the Executive Committee are Messrs. Panic, Moses and
Charles. That Committee is empowered to act upon any matter for the Board of
Directors, other than matters which may not be delegated under Delaware law. The
Executive Committee did not meet during 1993.

SPI-3
<PAGE> 148

The members of the Audit Committee are Messrs. Barker, Charles and Moses.
That Committee met four times during the year ended December 31, 1993. Its
functions include recommending the annual appointment of the independent public
accountants with whom the Committee reviews the scope of the audit and non-audit
assignments and the related fees, the accounting principles being applied by SPI
in financial reporting, the scope of internal financial auditing procedures and
the adequacy of internal controls.

The members of the Compensation and Stock Option Committee are Mr. Charles,
Dr. Guillemin and Mr. Moses. The Committee met four times during the year ended
December 31, 1993. Its functions include setting the compensation and benefits
for senior management and directors, including the granting of stock options.
See "SPI's Executive Compensation and Related Matters -- Compensation Committee
Interlocks and Insider Participation."

During the year ended December 31, 1993, the Board of Directors met six
times and no director attended fewer than 83% of the meetings of the Board and
the committees of the Board on which he served (other than Mr. Panic who did not
attend two Board meetings during his leave of absence described under "SPI's
Executive Compensation and Related Matters" below).

In October 1984, the Boards of Directors of SPI, ICN and Viratek formed an
Oversight Committee. In October 1986, Biomedicals, upon becoming a separate
public company, began to participate in the Oversight Committee. The purpose of
the Oversight Committee, which has advisory authority only, is to review
transactions between or among the four corporations to determine whether a
conflict of interest exists among them with respect to a particular transaction
and the manner in which such conflict can be resolved. The Oversight Committee
consists of one non-management director of each affiliated corporation and a
non-voting chairman. The current members of the Oversight Committee are Thomas
H. Lenagh, a director of Biomedicals; Dr. Vernon Knight, a director of Viratek;
James P. Miscoll, a director of SPI; and Richard W. Starr, a director of ICN.
During 1993, the Oversight Committee met four times.

EXECUTIVE OFFICERS OF SPI

Set forth below are the executive officers of SPI. Certain of these
individuals are also executive officers of ICN and a summary of their business
experience can be found under "Executive Officers of ICN." A summary of the
business experience of those individuals who are not executive officers of ICN
is set forth below. There is no family relationship among the following
executive officers, and there is no arrangement or understanding between any
executive officers and any other person pursuant to such officer's election as
an officer of SPI.

<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVICE
NAME AGE WITH SPI POSITION
---------------------- ----- --------- ----------------------------------------------
<S> <C> <C> <C>
Milan Panic 64 1981 Chairman of the Board, President and Chief
Executive Officer
Adam Jerney 52 1981 President and Chief Operating Officer
John Phillips 53 1988 Executive Vice President and Chief Financial
Officer
M'Liss Jones Kane 41 1994 Vice President, General Counsel and Secretary
Jack Sholl 52 1990 Senior Vice President -- Public Relations
</TABLE>

Certain officers of SPI are also officers of ICN, Viratek and Biomedicals. SPI
has adopted a charter provision which limits the monetary liability under
certain circumstances of its directors and, as a matter of policy, enters into
agreements with certain of its officers and directors providing indemnification
to the fullest extent permitted under Delaware Law.

Mr. Phillips joined SPI in April, 1988, as Senior Vice President and Chief
Financial Officer. In December 1992, he was promoted to the position of
Executive Vice President and Chief Financial Officer. He managed private assets
and was a business consultant from January 1986 to March 1988. From June 1984
through November 1985 he was Senior Vice President and Chief Financial Officer
for Playboy Enterprises,

SPI-4
<PAGE> 149

Inc. From 1978 through 1984 he was with Max Factor and Company as Senior Vice
President and Financial Officer.

Mr. Sholl joined ICN in August 1987 as Vice President, Public Relations. In
January 1992, he was promoted to Senior Vice President. From 1979 to August
1987, he served as Director of Financial and Media Communications with
Warner-Lambert Company of Morris Plains, New Jersey, and from 1973 to 1979 as
Manager, Department of Communications with Equibank, N.A. of Pittsburgh,
Pennsylvania. Prior to that time, he served on the Public Relations staff of the
New York Stock Exchange in New York (1971-1973) and in editorial positions with
The Associated Press (1968-1971), the last as supervising Business and Financial
Editor in New York. He transferred to SPI from ICN effective December 1, 1990.

Ms. Kane, Vice President-General Counsel and Secretary of SPI and
Biomedicals, joined Biomedicals in March 1990. She was Senior Counsel and
Secretary of Countrywide Credit Industries and Countrywide Funding Corporation
from 1988 until March 1990. Prior to that time she was Assistant General Counsel
and Secretary of ICN, holding various legal titles, from January of 1984 through
January of 1988.

OWNERSHIP OF SPI'S SECURITIES

PRINCIPAL STOCKHOLDER

As of June 30, 1994, the following stockholders were known to management to
be the beneficial owner of more than 5% of shares of SPI Common Stock:

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING(1)
------------------------------------------- ------------------ ----------------
<S> <C> <C>
ICN Pharmaceuticals, Inc................... 7,963,402(2) 38.46%
3300 Hyland Avenue
Costa Mesa, California 92626
Invesco MIM, PLC........................... 1,541,763 7.52%
11 Devonshire Square
London EC2M 7YR
England
</TABLE>

- ---------------

(1) Total outstanding shares for purposes of this table include 20,704,278
shares of SPI Common Stock outstanding on June 30, 1994.

(2) ICN has sole voting and investment power with respect to the shares shown.

SPI-5
<PAGE> 150

OWNERSHIP BY MANAGEMENT OF SPI

The following table sets forth, as of June 30, 1994, the number and percent
of shares of SPI Common Stock owned beneficially by each director of SPI, each
of the executive officers of SPI and by all directors and executive officers of
SPI as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES AND
NATURE OF BENEFICIAL
OWNERSHIP OF SPI PERCENTAGE
IDENTITY OF OWNER OR GROUP COMMON STOCK(1) OF CLASS
--------------------------------------------- -------------------- ----------
<S> <C> <C>
Norman Barker, Jr............................ 23,044(2) (3)
Alan F. Charles.............................. 8,980(4) (3)
Roger Guillemin, M.D., Ph.D.................. 29,438(5) (3)
Adam Jerney.................................. 208,382(6) (3)
Charles T. Manatt............................ 8,210(7) (3)
James P. Miscoll............................. 8,210(8) (3)
Stephen D. Moses............................. 8,218(9) (3)
Milan Panic.................................. 522,762(10) 2.45%
John Phillips................................ 81,794(11) (3)
David C. Watt................................ 34,386(12) (3)
Jack Sholl................................... 19,588(13) (3)
Directors and officers as a group (12
persons)................................... 953,012(14) 4.46%(3)
</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 SPI has
no information as to whether any shares shown in this table are subject to
community property laws.

(2) Includes 20,998 shares of SPI Common Stock which Mr. Barker has the right
to acquire upon the exercise of currently exercisable stock options.

(3) Less than 1%.

(4) Includes 8,210 shares of SPI Common Stock which Mr. Charles has the right
to acquire upon the exercise of currently exercisable stock options.

(5) Includes 29,438 shares of SPI Common Stock which Dr. Guillemin has the
right to acquire upon the exercise of currently exercisable stock options.

(6) Includes 176,434 shares of SPI Common Stock which Mr. Jerney has the right
to acquire upon the exercise of currently exercisable stock options.

(7) Includes 8,210 shares of SPI Common Stock which Mr. Manatt has the right to
acquire upon the exercise of currently exercisable stock options.

(8) Includes 8,210 shares of SPI Common Stock which Mr. Miscoll has the right
to acquire upon the exercise of currently exercisable stock options.

(9) Includes 8,210 shares of SPI Common Stock which Mr. Moses has the right to
acquire upon the exercise of currently exercisable stock options.

(10) Includes 508,789 shares of SPI Common Stock which Mr. Panic has the right
to acquire upon the exercise of currently exercisable stock options.

(11) Includes 35,863 shares of SPI Common Stock which Mr. Phillips has the right
to acquire upon the exercise of currently exercisable stock options.

SPI-6
<PAGE> 151

(12) Includes 33,816 shares of SPI Common Stock which Mr. Watt has the right to
acquire upon the exercise of currently exercisable stock options.

(13) Includes 16,781 shares of SPI Common Stock which Mr. Sholl has the right to
acquire upon the exercise of currently exercisable stock options.

(14) Includes 854,959 shares of SPI Common Stock which certain directors and
officers have the right to acquire upon the exercise of currently
exercisable stock options.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Compliance with Section 16(a) of the Exchange Act requires SPI's officers
and directors, and persons who own more than ten percent of a registered class
of SPI's equity securities, to file reports of ownership and changes in
ownership with the Commission and the American Stock Exchange. Such officers,
directors and shareholders are required by Commission regulation to furnish SPI
with copies of all Section 16(a) forms they file.

Based on its review of the copies of such forms received by SPI, or written
representations from certain reporting persons that no Forms 5 were required for
those persons, SPI believes that during fiscal year 1993, all filing
requirements applicable to its officers, directors and ten percent beneficial
owners were timely satisfied.

SPI'S EXECUTIVE COMPENSATION AND RELATED MATTERS

SUMMARY COMPENSATION TABLE

The following table sets forth the annual and long-term compensation
awarded to, earned by, or paid to the Chief Executive Officer and the four most
highly compensated executive officers other than the Chief Executive Officer of
SPI (collectively, the "named executive officers") by SPI for services rendered
in all capacities for 1993, 1992 and 1991.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
----------------------------------------- ------------
OTHER ANNUAL SECURITIES ALL OTHER
NAME AND COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) ($)(1) OPTIONS ($)(2)(5)
- ------------------------- ----- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic(3) 1993 $ 535,000 -- -- $ 49,245
Chief Executive Officer 1992 535,000 $5,675,000 $400,000 49,014(6)
1991 535,000 150,000 -- 1,458
Adam Jerney 1993 380,000 38,100 50,000 18,730
President and 1992 321,821 370,000(4) 150,000 20,268
Chief Operating Officer 1991 244,799 156,000 100,000 6,421
John Phillips 1993 190,000 0 55,000 7,617
Executive Vice 1992 140,000 228,600(4) 20,000 4,200
President and 1991 130,005 82,000 23,000 2,119
Chief Financial Officer
David C. Watt 1993 180,000 0 20,000 5,817
Senior Vice President, 1992 134,825 169,200(4) 20,000 1,320
General Counsel, 1991 128,404 25,000 12,500 1,020
Secretary
Jack Sholl 1993 172,043 25,000 10,000 24,429
Senior Vice
President -- 1992 163,856 70,000(4) 10,000 11,716
Public Relations 1991 153,137 25,000 2,551 -- 2,551
</TABLE>

SPI-7
<PAGE> 152

- ---------------

(2) In the three year period 1993, 1992 and 1991, Mr. Jerney realized $359,541
and $2,280,698 on sales of ICN and SPI Common Stock, respectively. Mr. Watt
realized $69,375, $68,000 and $646,699 on sales of ICN, Viratek and SPI
Common Stock, respectively. Mr. Sholl realized $90,918 on sales of ICN
Common Stock. These stock option gains are not reflected in the "All Other
Compensation" column.

(3) Mr. Panic's compensation was paid by ICN. In July 1992, Mr. Panic, Chairman
of the Board, and Chief Executive Officer of SPI 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 SPI 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 SPI 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, 1993, and pursuant to the Leave of
Absence and Reemployment Agreement, returned to his duties at SPI as well as
ICN and its other subsidiaries.

In addition to the salaries of Mr. Panic and certain ICN employees
assisting him during his leave of absence, ICN has incurred certain other
expenses in connection with Mr. Panic's transition to and return from his
leave of absence. Mr. Panic has reimbursed ICN for expenses paid by ICN but
is seeking reimbursement from ICN for certain expenses. ICN has retained
Judge Christian Markey, a recently retired member of the California
Superior Court, to review the expenses. Judge Markey is preparing a report
for the Audit Committees of ICN and SPI and, after the report is prepared
and reviewed by these Audit Committees, the ICN and SPI Boards of Directors
will make a determination as to whether to reimburse Mr. Panic for all or a
portion of such expenses.

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 Galenika transaction. The value of these shares at the date
of grant was $5,375,000. Mr. Panic sold the shares of SPI Common Stock
during 1993 for a realized value of $4,005,223.

(4) Includes 1991 performance bonus paid in 1992, bonus on the completion of the
Galenika transaction and the early payment of the 1992 performance bonus in
anticipation of the increase in federal income tax rates (which bonus would
have ordinarily been paid 1993).

(5) The amounts in this column represent matching contributions to SPI's 401(k)
plan, amounts accrued under the ICN Executive Deferral Plan and medical and
life insurance premiums.

(6) Includes $38,242 for legal services and miscellaneous fringe benefits.

COMPENSATION PURSUANT TO PLANS

STOCK OPTION PLANS

As of December 31, 1993, under SPI's 1982 Incentive Stock Option Plan (the
"1982 ISO Plan") (which terminated in 1992) options to acquire 1,369 shares of
SPI Common Stock were outstanding and exercisable at a price of $4.77 per share.
There were no option exercises in 1993.

Pursuant to the 1982 Non-Qualified Stock Option Plan (the "1982 SPI
Non-Qualified Plan") as of December 31, 1993, there were options to acquire
856,232 shares of SPI Common Stock outstanding (at prices ranging from $4.20 to
$24.83 per share) of which 456,887 are currently exercisable. During 1993,
183,805 options were exercised at an average price of $5.03 per share of SPI
Common Stock.

As of December 31, 1993, under SPI's 1992 Incentive Stock Option Plan (the
"1992 SPI Incentive Plan") options to acquire 505,858 shares of SPI Common Stock
were outstanding (at prices ranging from $9.13 to $24.36 per share) of which
89,899 are currently exercisable. During 1993, there were no exercises.

As of December 31, 1993, under SPI's 1992 Non-Qualified Stock Option Plan
(the "1992 SPI Non-Qualified Plan"), options to acquire 1,483,007 shares of SPI
Common Stock were outstanding (at prices

SPI-8
<PAGE> 153

ranging from $9.45 to $29.49 per share) of which 400,421 were granted subject to
the approval of the stockholders of the Amended and Restated 1992 SPI
Non-Qualified Plan (See Proposal No. 3) and of which 551,438 are currently
exercisable. During 1993, there were no exercises.

OPTION GRANTS

The following table sets forth information with respect to options to
purchase shares of SPI Common Stock granted in 1993 to the named executive
officers of SPI.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF % OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED GRANT DATE
OPTIONS EMPLOYEES PRESENT
NAME GRANTED IN FISCAL YEAR EXERCISE PRICE EXPIRATION DATE VALUE(1)(2)
- ---------------------------------- ---------- --------------- --------------- ---------------- -----------
<S> <C> <C> <C> <C> <C>
Adam Jerney....................... 50,000 7.2 $10.375 01/12/03 $ 325,731
John Phillips..................... 20,000 9 10.375 01/12/03 130,289
David C. Watt..................... 20,000 9 10.375 01/12/03 130,289
Jack Sholl........................ 10,000 1.5 10.375 01/12/03 65,141
</TABLE>

- ---------------

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 of SPI during 1993 and (ii)
unexercised stock options held by the named executive officers of SPI at
December 31, 1993.

AGGREGATED OPTION EXERCISES IN 1993
AND DECEMBER 31, 1993 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
OPTIONS OPTIONS AT DECEMBER 31,
SHARES VALUE AT DECEMBER 31, 1993 1993($)(2)
ACQUIRED REALIZED --------------------------- ---------------------------
NAME ON EXERCISE ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------------- ------------ --------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic................ 284,054(3) 2,644,935 502,259 -- $ 601,891 $ --
Adam Jerney................ 80,420 894,569 132,194 233,158 187,920 677,128
John Phillips.............. 18,953 145,450 23,601 47,989 33,868 113,687
David C. Watt.............. 11,990 172,700 26,949 43,601 107,076 109,757
Jack Sholl................. -- -- 13,822 16,466 92,716 39,919
</TABLE>

- ---------------

(1) Difference between the fair market value of SPI Common Stock at the date of
exercise and the exercise price.

(2) Difference between the fair market value of SPI Common Stock at December 31,
1993 and the exercise price.

(3) 227,191 shares of SPI were transferred to ICN in repayment of all expenses
related to a loan to Mr. Panic authorized by the Board of Directors of ICN.

SPI-9
<PAGE> 154

COMPENSATION OF DIRECTORS OF SPI

Members of the Board of Directors of SPI, 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. Jerney received fees in the amount of $500 per
Board meeting and $500 per Committee meeting actually attended, and were
reimbursed for their out-of-pocket expenses in attending meetings. During 1993,
Dr. Guillemin received $6,000 in consulting fees. In addition, nonemployee
directors on the first business day following each annual meeting of
shareholders are granted options to acquire 10,000 shares of Common Stock of SPI
on such date pursuant to the 1992 SPI Non-Qualified Plan.

CERTAIN EMPLOYMENT AGREEMENTS

On March 18, 1993, the Board of Directors of ICN adopted Employment
Agreements which contain "Change in Control" benefits for six key senior
executive officers of ICN and its subsidiaries. The executives include Messrs.
Jerney, Phillips, Watt and Sholl, who are officers of SPI. The Employment
Agreements are discussed above. See "ICN Executive Compensation and Related
Matters -- Certain Employment Agreements" in the ICN section of the Addendum.

COMPENSATION REPORT OF SPI

The Compensation and Stock Option Committee of SPI (the "SPI Compensation
Committee") is composed of three independent nonemployee directors, Messrs.
Charles and Moses and Dr. Guillemin.

The following statement made by the members of the SPI Compensation
Committee shall not be deemed incorporated by reference into any filing under
the Securities Act or the Exchange Act and shall not otherwise be deemed filed
under such Acts.

COMPENSATION PHILOSOPHY

The Board of Directors of SPI adopts an annual budget and financial plan
which incorporates the goals and objectives to be achieved by SPI and its
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 his or her unit in relation to the plan. Specific goals and objectives for
each executive are reviewed by the executive and his or her 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. Eligibility for bonus awards was based on the pre-set
performance guidelines and growth in operating income and earnings per share.
However, bonuses may be paid even when these objective standards are not met if
specific contributions by an employee merit a bonus or the reasons for the
failure to meet the objective standards are beyond the control of SPI and/or the
executive. Growth in operating income goals were met in 1993 despite very
difficult circumstances relating to SPI's subsidiary, Galenika, operating in
Yugoslavia under U.N. imposed economic sanctions. Stock options are granted
based on a program developed for SPI by Towers Perrin, a compensation consulting
company. Each individual's base number of options is derived from a formula
which ties to his or her base salary. The SPI Compensation 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 like companies in the same industry. SPI
reviewed salary surveys prepared by Coopers & Lybrand and Towers Perrin. The
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

SPI-10
<PAGE> 155

the marketplace. The salaries of executives are reviewed on an annual basis by
supervisory managers and the SPI Compensation Committee.

BONUS PLAN

During 1988, SPI 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 SPI
Compensation Committee.

LONG-TERM STOCK INCENTIVE PLANS

Stock options are granted as long term incentives to executives. Options
vest over a ten year period. Options are granted at fair market value. The
amount of options granted to executives is tied to salary and performance and
each grant is evaluated. No grant to executives is automatic.

CHIEF EXECUTIVE OFFICER COMPENSATION

The SPI Compensation Committee determines the compensation of the Chief
Executive Officer based on a number of factors. The goal of the SPI Compensation
Committee is to grant compensation consistent with that granted to chief
executive officers of other companies in the same industry. The Chief Executive
Officer's compensation is based on a contract comprised of a base salary and
based on SPI's performance. Special one-time bonuses will be paid, at the SPI
Compensation Committee's discretion, based on special contributions made to SPI.
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 SPI 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
SPI Compensation Committee of other chief executive officers' compensation.

INTERNAL REVENUE CODE SECTION 162(M)

Section 162(m) of the Code, which was enacted in 1993, generally disallows
a federal income tax deduction to any publicly-held corporation for compensation
paid in excess of $1 million in any taxable year beginning after January 1, 1994
to the chief executive officer and any of the four other most highly compensated
executive officers who are employed by SPI on the last day of the taxable year.
Section 162(m), however, does not disallow a federal income tax deduction for
qualified "performance-based compensation," the material terms of which are
disclosed to and approved by stockholders. The application of Section 162(m) to
compensation attributable to options granted under the Amended and Restated 1992
SPI Non-Qualified Plan is not expected to have a material impact on the federal
income tax liability of SPI.

Compensation and Stock Option
Committees
Alan F. Charles
Roger Guillemin
Stephen D. Moses

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Dr. Guillemin was paid $6,000 by Viratek in 1993 in consulting fees.

SPI-11
<PAGE> 156

PERFORMANCE GRAPH

The following graph compares SPI's cumulative total stock return on the
shares with the cumulative return on the Standard & Poor's 500 Stock Index and
the 5-Stock Custom Composite Index for the five years ended December 31, 1993.
The graph assumes that the value of the investment of the SPI Common Stock in
each index was $100 at December 31, 1988 and that all dividends were reinvested.

CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING DECEMBER 31, 1988

<TABLE>
<CAPTION>
CUSTOM
SPI COMPOSITE
MEASUREMENT PERIOD PHARMACEUTI- INDEX (5
(FISCAL YEAR COVERED) CALS INC. S&P 500 STOCKS)
<S> <C> <C> <C>
DEC-88 100 100 100
DEC-89 103 132 128
DEC-90 122 128 165
DEC-91 541 166 348
DEC-92 199 179 265
DEC-93 289 197 202
</TABLE>

(1) The 5-Stock Custom Composite Index includes Allergan Inc., Carter Wallace
Inc., Amgen Inc., Forest Labs Inc. -- Class A, and Syntex Corp.

LITIGATION

SPI is a defendant in certain consolidated class actions pending in the
United States District Court for the Southern District of New York entitled In
re PaineWebber Securities Litigation (Case No. 86 Civ. 6776 (VLB)); In re
ICN/Viratek Securities Litigation (Case No. 87 Civ. 4296 (VLB)) which is
discussed above (see "ICN -- Litigation").

In February 1992, an action was filed in California Superior Court for the
County of Orange by Gencon Pharmaceuticals, Inc. ("Gencon") against ICN Canada
Limited ("ICN Canada"), its parent, SPI, and ICN alleging breach of contract and
related claims arising out of a manufacturing contract between Gencon and ICN
Canada. ICN and SPI were dismissed from the action in March 1993 based on SPI's
agreement to guarantee any judgment against ICN Canada. Following trial in
October and November 1993, the judge signed a decision granting judgment in
favor of Gencon for breach of contract in the amount of approximately $2,100,000
plus interest, costs and attorney's fees (which sums total approximately
$650,000). Trial counsel has advised SPI that the decision contains serious
errors of law and fact. ICN Canada's appeal from the judgment is now pending.
SPI's December 31, 1993 financial statements includes an accrual amount
equivalent to what SPI believes is the maximum exposure with regard to this
contingency.

SPI-12
<PAGE> 157

SPI is a party to a number of other pending or threatened lawsuits arising
out of, or incident to, its ordinary course of business. In the opinion of
management, neither the lawsuits discussed above nor various other pending
lawsuits will have a material adverse effect on the consolidated financial
position or operations of SPI.

EFFECT OF THE MERGER ON THE 1992 SPI NON-QUALIFIED PLAN

At the Effective Time, all Options then outstanding under the Amended and
Restated 1992 SPI Non-Qualified Plan will remain outstanding and will be assumed
by New ICN. Each such Option will be exercisable upon the same terms and
conditions as under the Amended and Restated 1992 SPI Non-Qualified Plan and the
applicable option agreement issued thereunder, except that (a) each such Option
will be exercisable for that whole number of New ICN Shares (to the nearest
whole share) into which the number of shares of Common Stock of SPI under the
unexercised portion of such option, if then outstanding, would have been
converted at the Effective Time, and (b) the exercise price per New ICN Share
will be an amount equal to the exercise price per share subject to such Option
prior to the Effective Time divided by the SPI Exchange Ratio (rounded upward to
the nearest full cent).

SPI PROPOSAL NO. 3

APPROVAL OF AMENDED AND RESTATED 1992 SPI NON-QUALIFIED STOCK OPTION PLAN,
WHICH AMENDMENT AND RESTATEMENT INCREASED THE NUMBER OF SHARES AVAILABLE FOR
GRANT THEREUNDER FROM 1,000,000 TO 3,000,000 SHARES AND PROVIDED THAT THE
MAXIMUM NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO ANY
INDIVIDUAL DURING THE TERM OF THE PLAN MAY NOT EXCEED 500,000 SHARES.

1992 SPI NON-QUALIFIED PLAN

The 1992 SPI Non-Qualified Plan was originally adopted by the Board of
Directors and approved by stockholders in 1992. The 1992 SPI Non-Qualified Plan
provides for the granting of options to key employees, officers, directors,
consultants and scientific advisors of SPI.

At the SPI Meeting, stockholders will be asked to consider and vote on a
proposal to approve the Amended and Restated 1992 SPI Non-Qualified Plan.

THE BOARD OF DIRECTORS OF SPI RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.

PROPOSED AMENDMENTS

The SPI Compensation Committee has unanimously approved, effective as of
January 11, 1993 and subject to approval of stockholders at the SPI Meeting,
amendments to the 1992 SPI Non-Qualified Plan (i) to increase from 1,000,000 to
3,000,000 the number of shares of SPI Common Stock authorized for issuance under
the 1992 SPI Non-Qualified Plan and (ii) to provide that the maximum number of
shares with respect to which options may be granted thereunder to any individual
during the term of such plan cannot exceed 500,000 shares.

During 1993 and 1994, options to acquire 1,151,257 shares of SPI Common
Stock were granted in excess of the shares authorized by the 1992 SPI
Non-Qualified Plan. Such grants are subject to, and not exercisable prior to,
stockholder approval of the Amended and Restated 1992 SPI Non-Qualified Plan and
will be canceled should approval not be obtained.

The 1992 SPI Non-Qualified Plan as previously approved by stockholders does
not limit the maximum number of shares of SPI Common Stock with respect to which
options may be granted to any individual during the term of the plan. The
proposed amendment to limit the number of shares that may be granted to any
individual is intended to attempt to qualify the compensation attributable to
stock option grants under the

SPI-13
<PAGE> 158

plan for an exclusion from the eduction limitation of Section 162(m) of the
Code. In addition, in order to attempt to qualify for this exclusion, SPI is
disclosing the material terms of the Amended and Restated 1992 SPI Non-Qualified
Plan to stockholders and seeking their approval. See "Federal Income Tax
Consequences Relating to Non-Qualified Stock Options" below.

The principal provisions of the Amended and Restated 1992 SPI Non-Qualified
Plan are summarized below. This summary, however, does not purport to be
complete and is qualified in its entirety by the terms of the Amended and
Restated 1992 SPI Non-Qualified Plan. All defined terms used below have the
meaning set forth in the Amended and Restated 1992 SPI Non-Qualified Plan,
unless otherwise indicated.

PURPOSE OF THE AMENDED AND RESTATED 1992 SPI NON-QUALIFIED PLAN

SPI believes stock option plans advance the interests of SPI and further
its growth and development by encouraging and enabling key employees, officers,
directors, consultants and advisors of SPI and its subsidiaries and parent to
acquire an increased personal and proprietary interest in its continued success
and progress. SPI believes that the Amended and Restated 1992 SPI Non-Qualified
Plan aids in attracting and retaining directors, officers and other key
employees who are in a position to contribute materially to the successful
conduct of SPI's business and affairs.

STOCK OPTION RIGHTS

Options granted under the Amended and Restated 1992 SPI Non-Qualified Plan
are exercisable and expire in accordance with the specific terms and conditions
approved as to each option by the SPI Compensation Committee as set forth in a
written stock option agreement. Under no circumstances may an option be
exercised later than ten years after the date it is granted. Participation in
the Amended and Restated 1992 SPI Non-Qualified Plan does not confer any right
on a participant to continue in the employ of SPI or affect any right or power
of SPI to terminate the services of such participant at any time.

GRANTS TO NONEMPLOYEE DIRECTORS

The Amended and Restated 1992 SPI Non-Qualified Plan provides for automatic
non-discretionary annual grants to outside directors (nonemployee directors),
provided that the timing, amounts, and other terms and provisions of the grants
will generally not be amended more than once every six months. Currently,
non-discretionary grants to purchase 10,000 shares of SPI Common Stock are made
at the close of business on the first business day following the day of each
respective annual meeting of stockholders of SPI.

DURATION AND MODIFICATIONS

The Amended and Restated 1992 SPI Non-Qualified Plan will remain in effect
until all options granted thereunder have been satisfied by the issuance of
shares or the payment of cash and/or shares, or terminated under the terms of
such Amended and Restated 1992 SPI Non-Qualified Plan; no non-qualified stock
options may be granted under the 1992 SPI Non-Qualified Plan after January 20,
2002. The Board of Directors and the SPI Compensation Committee may, at any
earlier time, amend, alter, suspend or discontinue the Amended and Restated 1992
SPI Non-Qualified Plan as it may deem proper, except that no such action shall
impair the rights of any grantee under any option previously granted under the
Amended and Restated 1992 SPI Non-Qualified Plan without the consent of the
grantee. SPI may not, however, without further approval by SPI's shareholders,
take any action for which stockholder approval is required under Rule 16b-3
under the Exchange Act.

FEDERAL INCOME TAX CONSEQUENCES RELATING TO NON-QUALIFIED STOCK OPTIONS

Options granted under the Amended and Restated 1992 SPI Non-Qualified Plan
are intended to be non-qualified (i.e., non-statutory) stock options. In
general, an optionee to whom a non-qualified stock option is granted will
recognize no income at the time of the grant of the option. Upon exercise of a
non-qualified stock option, an optionee will recognize ordinary income in an
amount equal to the amount by which the fair market value of the shares on the
date of exercise exceeds the exercise price of the option (special rules may
apply in

SPI-14
<PAGE> 159

the case of an optionee who is subject to Section 16(b) of the Exchange Act).
Subject to the discussion below with respect to Section 162(m) of the Code, if
it complies with applicable withholding requirements, SPI will be entitled to a
business expense deduction in the same amount and at the same time as the
optionee recognizes ordinary income.

Under certain circumstances, the accelerated vesting or the cashout of
options in connection with a Change in Control of SPI might be deemed an "excess
parachute payment" for purposes of the golden parachute tax provisions of
Section 280G of the Code. To the extent it is so considered, the optionee may be
subject to a 20% excise tax and SPI may be denied a tax deduction.

Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of $1
million in any taxable year beginning after January 1, 1994 to the chief
executive officer and any of the four other most highly compensated executive
officers who are employed by SPI on the last day of the taxable year. Section
162(m), however, does not disallow a federal income tax deduction for qualified
"performance-based compensation," the material terms of which have been
disclosed to and approved by stockholders. The application of Section 162(m) to
compensation attributable to options granted under the Amended and Restated 1992
SPI Non-Qualified Plan is not expected to have a material impact on the federal
income tax liability of SPI.

SECURITIES SUBJECT TO THE AMENDED AND RESTATED 1992 SPI NON-QUALIFIED PLAN

The maximum number of shares of SPI Common Stock currently available for
issuance under the 1992 SPI Non-Qualified Plan is 1,000,000 shares, except as
described below under the caption "Adjustment of Shares and Price." If the
Amended and Restated 1992 SPI Non-Qualified Plan is approved by stockholders,
such maximum number will be increased to 3,000,000 shares and the maximum number
which may be issued under the Amended and Restated 1992 SPI Non-Qualified Plan
to any individual during the term of the plan would be limited to 500,000
shares, except as described below under the caption "Adjustment of Shares and
Price." The shares of SPI Common Stock issued under the Amended and Restated
1992 SPI Non-Qualified Plan may be either authorized and unissued shares or
shares previously issued and reacquired by SPI. If an option expires or
terminates without having been exercised in full or if shares issued pursuant to
stock option agreements are repurchased by SPI in accordance with the terms
thereof, the shares of SPI Common Stock subject thereto shall again be available
for grant under the Amended and Restated 1992 SPI Non-Qualified Plan.

ADJUSTMENT OF SHARES AND PRICE

In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of SPI Common
Stock, appropriate adjustment will be made of both the number of shares which
may be purchased under the Amended and Restated 1992 SPI Non-Qualified Plan and
the number and price per share of stock which may be purchased under any
outstanding options. In the case of a merger, sale of assets or similar
transaction which results in a replacement of SPI Common Stock by stock of
another corporation, SPI will make a reasonable effort to replace any
outstanding options granted under the Plan with comparable options to purchase
the stock of such other corporation, or will provide for immediate maturity of
all outstanding options and the termination of those options not exercised
within the time period specified by the Board of Directors.

SPI-15
<PAGE> 160

ADMINISTRATION OF THE AMENDED AND RESTATED 1992 SPI NON-QUALIFIED PLAN

The Amended and Restated 1992 SPI Non-Qualified Plan is administered by the
SPI Compensation Committee, which is comprised of not less than two directors of
SPI each of whom are "disinterested persons" as defined in subparagraph
(c)(2)(i) of Rule 16b-3 under the Exchange Act and "outside directors" within
the meaning of Section 162(m) of the Code and the regulations promulgated
thereunder. The present members of the SPI Compensation Committee are Mr. Moses,
Dr. Guillemin and Mr. Charles.

No member of the Board receives additional compensation for his services in
administering the Amended and Restated 1992 SPI Non-Qualified Plan except
insofar as such members receive $500 for each SPI Compensation Committee meeting
attended. The Board shall from time to time appoint members of the SPI
Compensation Committee who are disinterested persons and outside directors for
such terms as the Board shall determine, and members of the SPI Compensation
Committee may be removed by the Board at any time with or without cause.

Subject to the provisions of the Amended and Restated 1992 SPI
Non-Qualified Plan, the SPI Compensation Committee has full authority to
implement and carry out the Amended and Restated 1992 SPI Non-Qualified Plan,
including, but not limited to, the following: to construe and interpret the
Amended and Restated 1992 SPI Non-Qualified Plan and to make all other
determinations necessary or advisable for the administration of the Amended and
Restated 1992 SPI Non-Qualified Plan.

ELIGIBILITY AND EXTENT OF PARTICIPATION

Non-qualified options may be granted and shares may be acquired pursuant to
stock option agreements under the Amended and Restated 1992 SPI Non-Qualified
Plan for such number of shares and to such employees, directors and advisors and
consultants as the SPI Compensation Committee may from time to time determine.
See "Administration of the Amended and Restated 1992 SPI Non-Qualified Plan." A
grantee may be granted more than one option under the Amended and Restated 1992
SPI Non-Qualified Plan. If the Amended and Restated 1992 SPI Non-Qualified Plan
is approved, the maximum number of shares with respect to which options may be
granted to any individual during the term of the plan may not exceed 500,000
shares. All options are subject to the terms of non-qualified option agreements
executed by SPI and the respective grantees. There are currently approximately
221 individuals eligible to participate in the 1992 SPI Non-Qualified Plan.

EXERCISE OF OPTIONS; DEATH, TERMINATION OF EMPLOYMENT

Options are granted by the SPI Compensation Committee at a price not less
than one hundred percent of the fair market value of the SPI Common Stock on the
date of grant.

Shares of SPI Common Stock purchased pursuant to exercise of an option are
paid for in full at the time of exercise in cash or by certified check or by
surrender of previously acquired shares of SPI Common Stock, unless otherwise
determined by the Board of Directors or the SPI Compensation Committee.

The times at which non-qualified stock options are exercisable will be
determined by the SPI Compensation Committee at the time of grant, which shall
in no event be more than ten years from the date of grant. The SPI Compensation
Committee is authorized to determine the nature and extent of any restrictions
to be imposed on the shares of SPI Common Stock which may be acquired under the
Amended and Restated 1992 SPI Non-Qualified Plan, including restrictions on the
transferability of such shares.

SPI-16
<PAGE> 161

exercise his option within twelve (12) months of the date of death, but only to
the extent it was exercisable at the date of termination. If the optionee is
disabled, his options shall terminate one year after the date of disability. In
the event of the death of an optionee while an employee, director, scientific
advisor or consultant of SPI, his personal representative, heirs or legatees, as
the case may be, shall have the right to exercise such option, to the extent it
was exercisable on the date of death, up to twelve (12) months from the date of
death of the optionee, but in no event after the expiration of the exercise
period.

The SPI Compensation Committee will determine all questions regarding
termination of employment and cause of termination, disability or retirement.

FORM OF OPTIONS

Each non-qualified stock option under the Amended and Restated 1992 SPI
Non-Qualified Plan is evidenced by a written stock option agreement in such form
as the SPI Compensation Committee shall have approved. The holders of options
shall have no rights as stockholders with respect to any shares covered by
options until the date of issuance of a stock certificate for such shares.

NEW PLAN BENEFITS

AMENDED AND RESTATED 1992 SPI NON-QUALIFIED PLAN

The following table sets forth certain information concerning the number of
shares with respect to which options have been granted, adjusted for stock
dividends, subject to shareholder approval, under the Amended and Restated 1992
SPI Non-Qualified Plan to the named executive officers.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME AND POSITION UNDERLYING OPTIONS
----------------- -------------------
<S> <C>
Milan Panic................................................. 177,275
Chief Executive Officer
Adam Jerney................................................. 50,650
President and Chief Operating Officer
John Phillips............................................... 29,883
Executive Vice President, Chief Financial Officer
David C. Watt............................................... 29,883
Senior Vice President, General Counsel, Secretary
Jack Sholl.................................................. 10,130
Senior Vice President, Human Resources
Executive Group............................................. 297,821
Non-Executive Director Group................................ 63,618
Non-Executive Officer Employee Group........................ 789,818
</TABLE>

Options which have been granted under the Amended and Restated 1992 SPI
Non-Qualified Plan are for a term of ten years, subject to earlier termination
under certain circumstances. The exercise price of the options is 100% of the
fair market value of the underlying stock on the date of grant. The per share
exercise price of options heretofore granted ranged from $9.33 to $18.63.
Options are exercisable with respect to 25% of the underlying shares on each of
the first four anniversaries of the date of grant, provided that, on the
relevant anniversary, the optionee is and has been since the date of grant an
employee, director, scientific advisor or consultant of SPI. In the event that
the optionee ceases to serve as an employee, director, scientific advisor or
consultant of SPI for any reason, other than death or disability, the option
terminates three months after termination. The per share closing price of SPI
Common Stock on September 23, 1994, as reported on the AMEX, was $23.625.

SPI-17
<PAGE> 162

VOTE REQUIRED

Adoption of the Amended and Restated 1992 SPI Non-Qualified Plan requires
the favorable vote of the holders of a majority of the shares of SPI Common
Stock represented at the SPI Meeting. Proxies submitted by the Board of
Directors will be voted for the proposal unless a vote against the proposal or
abstention is specifically indicated.

SPI PROPOSAL NO. 4

APPROVAL OF AMENDED AND RESTATED 1992 SPI INCENTIVE PLAN, WHICH AMENDMENT
AND RESTATEMENT INCREASED THE NUMBER OF SHARES AVAILABLE FOR GRANT THEREUNDER
FROM 500,000 TO 1,000,000 SHARES AND PROVIDED THAT THE MAXIMUM NUMBER OF SHARES
WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO ANY INDIVIDUAL DURING THE TERM
OF THE PLAN MAY NOT EXCEED 500,000 SHARES.

EFFECT OF THE MERGER ON THE 1992 SPI INCENTIVE PLAN

At the Effective Time, all Options then outstanding under the Amended and
Restated 1992 SPI Incentive Plan will remain outstanding and will be assumed by
New ICN. Each such Option will be exercisable upon the same terms and conditions
as under the Amended and Restated 1992 SPI Incentive Plan and the applicable
option agreement issued thereunder, except that (a) each such Opton will be
exercisable for that whole number of New ICN Shares (to the nearest whole share)
into which the number of shares of Common Stock of SPI under the unexercised
portion of such option, if then outstanding, would have been converted at the
Effective Time, and (b) the exercise price per New ICN Share will be an amount
equal to the exercise price per share subject to such Option prior to the
Effective Time divided by the SPI Exchange Ratio (rounded upward to the nearest
full cent).

1992 SPI INCENTIVE PLAN

The 1992 SPI Incentive Plan was originally adopted by the Board of
Directors and approved by shareholders in 1992. The 1992 SPI Incentive Plan
provides for the granting of options to key employees and officers of SPI.

At the SPI Meeting, stockholders will be asked to consider and vote on a
proposal to approve the Amended and Restated 1992 SPI Incentive Plan.

THE BOARD OF DIRECTORS OF SPI RECOMMENDS A VOTE IN FAVOR OF THIS PROPOSAL.

PROPOSED AMENDMENTS

The SPI Compensation Committee has unanimously approved, effective as of
January 10, 1993 and subject to approval of stockholders at the SPI Meeting,
amendments to the 1992 SPI Incentive Plan (i) to increase from 500,000 shares to
1,000,000 shares of SPI Common Stock, the number of shares authorized for
issuance under the 1992 SPI Incentive Plan and (ii) to provide that the maximum
number of shares with respect to which options may be granted thereunder to any
individual during the term of such plan cannot exceed 500,000 shares.

The principal provisions of the Amended and Restated 1992 SPI Incentive
Plan are summarized below. This summary, however, does not purport to be
complete and is qualified in its entirety by the terms of the Amended and
Restated 1992 SPI Incentive Plan. All defined terms below have the meaning set
forth in the Amended and Restated 1992 SPI Incentive Plan, unless otherwise
indicated.

SPI-18
<PAGE> 163

PURPOSE OF THE AMENDED AND RESTATED 1992 SPI INCENTIVE PLAN

SPI believes stock option plans advance the interests of SPI and further
its growth and development by encouraging and enabling key employees and
officers of SPI and its subsidiaries and parent to acquire an increased personal
and proprietary interest in its continued success and progress. SPI believes
that the Amended and Restated 1992 SPI Incentive Plan aids in attracting and
retaining officers and other key employees who are in a position to contribute
materially to the successful conduct of SPI's business and affairs.

STOCK OPTION RIGHTS

Options granted under the Amended and Restated 1992 SPI Incentive Plan are
exercisable and expire in accordance with the specific terms and conditions
approved as to each option by the SPI Compensation Committee as set forth in a
written stock option agreement. Under no circumstances may an option be
exercised later than ten years after the date it is granted (five years in the
case of an option granted to a Ten Percent Stockholder (as defined below)). See
"Federal Income Tax Consequences Relating to Incentive Stock Options."
Participation in the Amended and Restated 1992 SPI Incentive Plan does not
confer any right on any participant to continue in the employ of SPI or affect
any right or power of SPI to terminate the services of such participant at any
time.

DURATION AND MODIFICATIONS

The Amended and Restated 1992 SPI Incentive Plan shall remain in effect
until all options granted thereunder have been satisfied by the issuance of
shares or the payment of cash or shares, or terminated under the terms of the
Amended and Restated 1992 SPI Incentive Plan, provided that no incentive stock
options may be granted under the Amended and Restated 1992 SPI Incentive Plan
after January 20, 2002. The Board of Directors and the SPI Compensation
Committee may, at any earlier time, amend, alter, suspend or discontinue the
Amended and Restated 1992 SPI Incentive Plan as it may deem proper, except that
no such action shall impair the rights of any grantee under any option
previously granted under the Amended and Restated 1992 SPI Incentive Plan
without the consent of the grantee. The Board of Directors may not, however,
without further approval by SPI's shareholders, take any action for which
stockholder approval is required under Section 422 of the Code or any successor
provision or under Rule 16b-3 under the Exchange Act, including, without
limitation, any action which would increase the total number of shares for which
options may be issued under the Amended and Restated 1992 SPI Incentive Plan,
except as described under the caption "Adjustment of Shares and Price," change
the minimum exercise price, extend the duration of the Amended and Restated 1992
SPI Incentive Plan or extend the period during and over which options may be
exercised under the Amended and Restated 1992 SPI Incentive Plan.

FEDERAL INCOME TAX CONSEQUENCES RELATING TO INCENTIVE STOCK OPTIONS

Options granted under the Amended and Restated 1992 SPI Incentive Plan are
intended to qualify as "Incentive Stock Options" within the meaning of Section
422 and predecessor provisions of the Code. In general, an optionee will not
recognize taxable income upon the grant or exercise of an Incentive Stock Option
and SPI will not be entitled to any business expense deduction with respect to
the grant or exercise of an Incentive Stock Option. (However, upon the exercise
of an Incentive Stock Option, the excess of the fair market value on the date of
the exercise of the shares received over the exercise price of the shares will
be treated as an adjustment to alternative minimum taxable income). In order for
the exercise of an Incentive Stock Option to qualify for the foregoing tax
treatment, the optionee generally must be an employee of SPI from the date the
Incentive Stock Option is granted through the date three months before the date
of exercise, except in the case of death or disability, where special rules
apply.

SPI-19
<PAGE> 164

requirements, the optionee will recognize ordinary income at the time of the
disposition of the shares, generally in an amount equal to the excess of the
fair market value of the shares at the time the option was exercised over the
exercise price of the option. The balance of the gain realized, if any, will be
long-term or short-term capital gain, depending on whether or not the shares
were sold more than one year after the option was exercised. If the optionee
sells the shares prior to the satisfaction of the holding period requirements
but at a price below the fair market value of the shares at the time the option
was exercised, the amount of ordinary income will be limited to the excess of
the amount realized on the sale over the exercise price of the option. SPI will
generally be allowed a business expense deduction to the extent the optionee
recognizes ordinary income.

SECURITIES SUBJECT TO THE AMENDED AND RESTATED 1992 SPI INCENTIVE PLAN

The maximum number of shares of SPI Common Stock currently available for
issuance under the 1992 SPI Incentive Plan is 500,000 shares, except as
described below under the caption "Adjustment of Shares and Price." If the
Amended and Restated 1992 SPI Incentive Plan is approved by stockholders, such
maximum number will be increased to 1,000,000 shares and the maximum number
which may be issued under the plan to any individual during the term of the plan
would be limited to 500,000 shares, except as described below under the caption
"Adjustment of Shares and Price." The shares of SPI Common Stock issued under
the Amended and Restated 1992 SPI Incentive Plan may be either authorized and
unissued shares or shares previously issued and reacquired by SPI. If an option
expires or terminates without having been exercised in full or if shares issued
pursuant to stock option agreements are repurchased by SPI in accordance with
the terms thereof, the shares of SPI Common Stock subject thereto shall again be
available for grant under the Amended and Restated 1992 SPI Incentive Plan.

ADJUSTMENT OF SHARES AND PRICE

In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of SPI Common
Stock, appropriate adjustment will be made of both the number of shares which
may be purchased under the Amended and Restated 1992 SPI Incentive Plan and the
number and price per share of stock which may be purchased under any outstanding
options. In the case of a merger, sale of assets or similar transaction which
results in a replacement of SPI Common Stock by stock of another corporation,
SPI will make a reasonable effort to replace any outstanding options granted
under the plan with comparable options to purchase the stock of such other
corporation, or will provide for immediate maturity of all outstanding options
and the termination of those options not exercised within the time period
specified by the SPI Compensation Committee.

At the Effective Time, all Options then outstanding under the Amended and
Restated 1992 SPI Incentive Plan will remain outstanding and will be assumed by
New ICN. Each such Option will be exercisable upon the same terms and conditions
as under the Amended and Restated 1992 SPI Incentive Plan and the applicable
option agreement issued thereunder, except that (a) each such Option will be
exercisable for that whole number of New ICN Shares (to the nearest whole share)
into which the number of shares of Common Stock of SPI under the unexercised
portion of such option, if then outstanding, would have been converted at the
Effective Time, and (b) the exercise price per New ICN Share will be an amount
equal to the exercise price per share subject to such Option prior to the
Effective Time divided by the SPI Exchange Ratio (rounded upward to the nearest
full cent).

ADMINISTRATION OF THE AMENDED AND RESTATED 1992 SPI INCENTIVE PLAN

The Amended and Restated 1992 SPI Incentive Plan is administered by the SPI
Compensation Committee, which is comprised of not less than two directors of SPI
each of whom are "disinterested persons"

SPI-20
<PAGE> 165

as defined in subparagraph (c)(2)(i) of Rule 16b-3 under the Exchange Act and
"outside directors" within the meaning of Section 162(m) of the Code and the
regulations promulgated thereunder. The present members of the SPI Compensation
Committee are Messrs. Moses, Guillemin and Charles.

No member of the Board receives additional compensation for his services in
administering the Amended and Restated 1992 SPI Incentive Plan except insofar as
such member receives $300 for each SPI Compensation Committee meeting attended.
The Board shall from time to time appoint members of the SPI Compensation
Committee who are disinterested persons and outside directors for such terms as
the Board shall determine, and members of the SPI Compensation Committee may be
removed by the Board at any time with or without cause.

Subject to the provisions of the Amended and Restated 1992 SPI Incentive
Plan, the SPI Compensation Committee has full authority to implement and carry
out the Amended and Restated 1992 SPI Incentive Plan including, but not limited
to, the following: to construe and interpret the Amended and Restated 1992 SPI
Incentive Plan and to make all other determinations necessary or advisable for
the administration of the Amended and Restated 1992 SPI Incentive Plan.

ELIGIBILITY AND EXTENT OF PARTICIPATION

Incentive Stock Options may be granted and shares may be acquired pursuant
to stock option agreements under the Amended and Restated 1992 SPI Incentive
Plan for such number of shares and to such employees and directors who are also
employees as the SPI Compensation Committee may from time to time determine. See
"Administration of the Amended and Restated 1992 SPI Incentive Plan." A grantee
may be granted more than one option under the Amended and Restated 1992 SPI
Incentive Plan. If the Amended and Restated 1992 SPI Incentive Plan is approved,
the maximum number of shares with respect to which options may be granted to any
individual during the term of the plan may not exceed 500,000 shares. All
options are subject to the terms of Incentive Stock Option agreements executed
by SPI and the respective grantees. There are currently approximately 91
individuals eligible to participate in the Amended and Restated 1992 SPI
Incentive Plan.

EXERCISE OF OPTIONS; DEATH, TERMINATION OF EMPLOYMENT

Options are granted by the SPI Compensation Committee at a price not less
than one hundred percent of the fair market value of the SPI Common Stock on the
date of grant (not less than 110% in the case of options granted to an employee
who at the time of grant owns stock possessing more than 10% of the total
combined voting power of all classes of capital stock of SPI (a "Ten Percent
Stockholder")).

Shares of SPI Common Stock purchased pursuant to exercise of an option are
paid for in full at the time of exercise in cash or by certified check or by the
surrender of previously acquired shares of SPI Common Stock, unless otherwise
determined by the Board of Directors or the SPI Compensation Committee.

The times at which Incentive Stock Options are exercisable will be
determined by the SPI Compensation Committee at the time of grant, which shall
in no event be more than ten years from the date of grant (five years in the
case of options granted to a Ten Percent Stockholder). The SPI Compensation
Committee is authorized to determine the nature and extent of any restrictions
to be imposed on the shares of SPI Common Stock which may be acquired under the
Amended and Restated 1992 SPI Incentive Plan, including restrictions on the
transferability of such shares.

Options granted under the Amended and Restated 1992 SPI Incentive Plan are
nonassignable and nontransferable other than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order (as defined
in the Code). During the life of the recipient, the Incentive Stock Option shall
be exercisable only by the recipient.

SPI-21
<PAGE> 166

exercise his option within twelve (12) months of the date of death, but only to
the extent it was exercisable at the date of termination. If the optionee is
disabled, his options shall terminate one year after the date of disability. In
the event of the death of an optionee while an employee of SPI, his personal
representatives, heirs or legatees, as the case may be, shall have the right to
exercise such option, to the extent it was exercisable on the date of death, up
to twelve (12) months from the date of death of the optionee, but in no event
after the expiration of the exercise period.

The SPI Compensation Committee shall determine all questions regarding
termination of employment and cause of termination, permanent disability or
retirement.

FORM OF OPTIONS

Each Incentive Stock Option under the Amended and Restated 1992 SPI
Incentive Plan is evidenced by a written stock option agreement in such form as
the SPI Compensation Committee shall have approved. The holders of options shall
have no rights as stockholders with respect to any shares covered by options
until the date of issuance of a stock certificate for such shares.

VOTE REQUIRED

Adoption of the Amended and Restated 1992 SPI Incentive Plan requires the
favorable vote of the holders of a majority of the shares of SPI Common Stock
represented at the SPI Meeting. Proxies submitted by the Board of Directors will
be voted for the proposal unless a vote against the proposal or abstention is
specifically indicated.

SPI-22
<PAGE> 167

VIRATEK

VIRATEK PROPOSAL NO. 2

ELECTION OF DIRECTORS

Six directors are to be elected at the Viratek Meeting (who, if elected,
will become directors of New ICN if the Merger is consummated), each to serve
until the next Annual Meeting of Stockholders of Viratek (if the Merger is not
consummated) and until his successor is elected and qualified. Unless marked to
the contrary, proxies received will be voted for the election of the following
nominees: Robert H. Finch, Esq., Adam Jerney, Roger Guillemin, M.D., Ph.D.,
Vernon Knight, M.D., Milan Panic, and Roberts A. Smith, M.D., Ph.D., all of whom
currently serve as directors of Viratek. If for any reason any nominee should
not be available for election or be unable to serve as a director, the
accompanying proxy will be voted for the election of such other person, if any,
as the Viratek Board of Directors may designate. The Board of Directors of
Viratek has no reason to believe that any nominee will be unavailable for
election or unable to serve.

The Board of Directors of Viratek recommends that the stockholders vote FOR
the election of the six nominees for director named in this Joint Proxy
Statement/Prospectus.

INFORMATION CONCERNING NOMINEES AND DIRECTORS OF VIRATEK

The current Board of Directors of Viratek consists of six members: Messrs.
Finch, Jerney and Panic, and Drs. Guillemin, Knight and Smith, each of whom is
standing for re-election. The names of the six nominees for election as
directors are listed below, together with certain personal information,
including the present principal occupation and recent business experience of
each nominee.

<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING AS
DIRECTOR
OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE VIRATEK DIRECTORSHIPS
----------------------------- ---- ---------- ---------------
<S> <C> <C> <C>
ROBERT H. FINCH, ESQ.(a)(b)(c) 68 1980 Nationwide Health
Mr. Finch has been a partner in the Pasadena, Properties, Inc.; ICN;
California law firm of Fleming, Anderson, Continental Graphics
McClung and Finch since 1976. Prior thereto he was
Counsel to the President of the United States from
1971 to 1972, Secretary of the United States
Department of Health, Education and Welfare from
1969 to 1972, and Lieutenant Governor of the State
of California from 1967 to 1969.

ROGER GUILLEMIN, M.D., Ph.D. 70 1992 Erbamont, N.V.; SPI; ICN
Dr. Guillemin has been Distinguished Scientist at
the Whittier Institute at La Jolla, California
since March 1989, and was a Resident Fellow and
Chairman of the Laboratories for
Neuroendocrinology at The Salk Institute in La
Jolla, California in San Diego. He was awarded the
Nobel Prize in Medicine in 1977, and, in the same
year, was presented the National Medal of Science
by the President of the United States. He was
affiliated with the Department of Physiology at
Baylor College of Medicine in Houston, Texas from
1952 to 1970, and served as Professor of
Physiology there from 1962 to 1970. He is a member
of the National Academy of Sciences, the American
</TABLE>

Viratek-1
<PAGE> 168

<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING AS
DIRECTOR
OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE VIRATEK DIRECTORSHIPS
----------------------------- --- ---------- ---------------
<S> <C> <C> <C>
Academy of Arts and Sciences, and a Fellow of the
American Association for the Advancement of
Science. He has also served as President of the
American Endocrine Society.

ADAM JERNEY(b) 52 1992 ICN: SPI; Biomedicals
Mr. Jerney served as Viratek's Chief Executive
Officer from October 1992 until March 4, 1993,
when Mr. Panic returned as CEO of Viratek, ICN,
Biomedicals and SPI. He has also served as
President and Chief Executive Officer of ICN and
SPI since July 1992 and Chief Executive Officer of
Biomedicals from December 1992. Mr. Jerney has
served as director of Viratek, ICN, Biomedicals
and SPI since July 1992. Mr. Jerney is President
of SPI. Prior to joining ICN, he spent four years
with F. Hoffmann-La Roche & Company.

VERNON KNIGHT, M.D.(a)(c) 76 1981
Dr. Knight is Professor at Baylor College of
Medicine, Houston, Texas. Dr. Knight also served
as a consultant to the United States Army Medical
Research Institute of Infectious Diseases and
served as a member of the National Institutes of
Health's Task Force on Immunization, Research and
Development Panel.

MILAN PANIC(b) 64 1980 ICN; SPI; Biomedicals
Mr. Panic, founder of ICN, has been Chairman of
the Board and Chief Executive Officer of Viratek
since its inception. He was on leave of absence
from July 14, 1992 while serving as Prime Minister
of Yugoslavia until his return to Viratek on March
4, 1993. Mr. Panic also serves as Chairman of the
Board and Chief Executive Officer of ICN and as
Chairman of the Board and Chief Executive Officer
of SPI and Biomedicals and may be deemed to be a
"control person" of ICN and of Viratek.

ROBERTS A. SMITH, Ph.D. 65 1992 ICN; PLC Systems
Dr. Smith was President of Viratek through 1992
and Vice Chairman of the board of directors of
ICN during Mr. Panic's leave of absence. He was,
through 1992, Vice President of R&D of SPI and was
a member of the Executive Committee of the Nucleic
Acid Research Institute. He was a director of that
institute from 1985 to 1989. For more than eleven
years, Dr. Smith was Professor of Chemistry and
Biochemistry at the University of California, Los
Angeles.
</TABLE>

- ---------------
(a) Member of the Audit Committee.
(b) Member of the Executive Committee.
(c) Member of the Compensation and Stock Option Committee.

None of the proposed nominees are related by blood or marriage to one
another or to an executive officer of Viratek.

Viratek-2
<PAGE> 169

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS OF VIRATEK

The Board of Directors of Viratek has a standing Executive Committee, Audit
Committee and Compensation and Stock Option Committee, but does not have a
standing nominating committee.

The members of the Executive Committee are Messrs. Jerney, Finch, and
Panic. That Committee is empowered to act upon any matter for the Board of
Directors, other than matters which may not be delegated under Delaware law. The
Executive Committee did not meet during 1993.

The members of the Audit Committee are Dr. Knight and Mr. Finch. The
Committee met four times in 1993. Its functions include recommending the annual
appointment of the independent public accountants with whom the Committee
reviews the scope of the audit and non-audit assignments and the related fees,
the accounting principles being applied by Viratek in financial reporting, the
scope of internal financial auditing procedures and the adequacy of internal
controls.

The members of the Compensation and Stock Option Committee are Messrs.
Finch and Knight. That Committee met three times in 1993. Its functions include
setting the compensation of officers and key employees of Viratek and granting
stock options. See "Executive Compensation and Related Matters -- Compensation
Committee Interlocks and Insider Participation."

During the year ended December 31, 1993, the Board of Directors met seven
times and no director attended fewer than 71% of the meetings of the Board and
the committees of the Board on which he served except Mr. Panic, who was on
leave of absence from Viratek as described below.

In October 1984, the Boards of Directors of Viratek, ICN and SPI formed an
Oversight Committee. In October 1986, Biomedicals, upon becoming a separate
public company, began to participate in the Oversight Committee. The purpose of
the Oversight Committee, which has advisory authority only, is to review
transactions between or among the four corporations to determine whether a
conflict of interest exists among them with respect to a particular transaction
and the manner in which such conflict can be resolved. The Oversight Committee
consists of one non-management director of each corporation and a non-voting
chairman. The current members of the Oversight Committee are Thomas H. Lenagh, a
director of Biomedicals; Vernon Knight, a director of Viratek; James P. Miscoll,
a director of SPI; and Richard W. Starr, a director of ICN. During the year
ended December 31, 1993, the Oversight Committee met four times.

EXECUTIVE OFFICERS OF VIRATEK

Set forth below are the executive officers of Viratek. Certain of these
individuals are also executive officers of ICN and a summary of their business
experience can be found under "Executive Officers of ICN." A summary of the
business experience of those individuals who are not executive officers of ICN
is set forth below. There is no family relationship among the following
executive officers, and there is no arrangement or understanding between any
executive officers and any other person pursuant to such officer's election as
an officer of Viratek.

<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVICE
NAME AGE WITH VIRATEK POSITION
- -------------------- --- ------------ --------------------------------------------------
<S> <C> <C> <C>
Milan Panic 64 1980 Chairman of the Board, President and Chief
Executive Officer
Nils Johannesson 49 1993 President
Adam Jerney 52 1980 President and Chief Operating Officer
John E. Giordani 52 1991 Executive Vice President and Chief Financial
Officer
Thomas Seoh 37 1993 Vice President, General Counsel and Secretary
</TABLE>

Certain officers of Viratek are also officers of ICN, SPI and Biomedicals.
Viratek has adopted a charter provision which limits the monetary liability
under certain circumstances of its directors and, as a matter of policy, enters
into agreements with certain of its officers and directors providing
indemnification to the fullest extent permitted under Delaware law.

Viratek-3
<PAGE> 170

Dr. Johannesson became President of Viratek in 1993. He is also Vice
President of Research and Development and New Products of SPI. He joined SPI in
1992 after serving as Senior Vice President, Research and Development at AL
Labs, Inc. since 1990. From 1986 to 1990, he served as President of the
pharmaceutical division of the Danish company, Dumex, an AL Labs subsidiary and
from 1984 to 1985, he headed research and development and production at Dumex.
From 1979 through 1984, Dr. Johannesson was employed by Astra where he was
responsible for clinical trials and project management.

Mr. Seoh has served as Viratek's Vice President, General Counsel and
Secretary since October, 1993. Mr. Seoh joined ICN in 1992 and continues to
serve as Deputy General Counsel of SPI. From 1990 to 1992, Mr. Seoh was General
Counsel and Secretary of Consolidated Press U.S. Inc., a member of the Sydney,
Australia-based Consolidated Press media group, in Livonia, Michigan. From 1981
to 1990, Mr. Seoh was with the New York and London offices of Lord Day & Lord,
Barrett Smith.

OWNERSHIP OF VIRATEK'S SECURITIES

PRINCIPAL STOCKHOLDER

As of June 30, 1994, the following stockholder was known to management to
be the beneficial owner of more than 5% of Viratek's Common Stock:

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS
NAME AND ADDRESS OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING(1)
--------------------------------------------- ------------------ ----------------
<S> <C> <C>
ICN Pharmaceuticals, Inc..................... 11,353,558(2) 62.68%
3300 Hyland Avenue
Costa Mesa, California 92626
</TABLE>

- ---------------

(1) Total outstanding shares for purposes of this table include 18,113,149
shares outstanding on June 30, 1994.

(2) ICN has sole voting and investment power with respect to the shares shown.
ICN, Viratek's parent, is a Delaware corporation which is engaged primarily
in the development, manufacture and sale of pharmaceutical and chemical
products and services.

OWNERSHIP BY MANAGEMENT OF VIRATEK

The following table sets forth as of June 30, 1994, the number of shares of
Viratek Common Stock owned beneficially by each director and nominee for
director of Viratek, each of the executive officers, and by all directors and
executive officers of Viratek as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES AND
NATURE OF BENEFICIAL
OWNERSHIP OF
VIRATEK'S PERCENTAGE
IDENTITY OF OWNER OR GROUP COMMON STOCK(1) OF CLASS
----------------------------------------------- -------------------- ----------
<S> <C> <C>
Robert H. Finch, Esq........................... 7,875(2) (3)
Roger Guillemin, M.D., Ph.D.................... 2,625(4) (3)
Adam Jerney.................................... 39,375(5) (3)
Vernon Knight, M.D............................. 30,846(6) (3)
Milan Panic.................................... 394,408(7) 2.68%
Roberts A. Smith, Ph.D......................... 49,350(8) (3)
All directors and officers as a group (9
persons)..................................... 603,229(9) 3.22%
</TABLE>

- ---------------

(1) Except as otherwise indicated in the following notes, shares shown as
beneficially owned are those as to which the named persons possess sole
voting and investment powers. 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 Viratek
has no information as to whether any

Viratek-4
<PAGE> 171

shares shown in this table are subject to community property laws. Option
shares reflect shares exercisable within sixty days following May 2, 1994.

(2) Includes 7,875 shares of Viratek Common Stock which Mr. Finch has the right
to acquire upon the exercise of currently exercisable stock options.

(3) Less than 1%.

(4) Includes 2,625 shares of Viratek Common Stock which Dr. Guillemin has the
right to acquire upon the exercise of currently exercisable stock options.

(5) Includes 39,375 shares of Viratek Common Stock which Mr. Jerney has the
right to acquire upon the exercise of currently exercisable stock options.

(6) Includes 7,875 shares of Viratek Common Stock which Dr. Knight has the right
to acquire upon the exercise of currently exercisable stock options.

(7) Includes 383,908 shares of Viratek Common Stock which Mr. Panic has the
right to acquire upon the exercise of currently exercisable stock options.

(8) Includes 49,350 shares of Viratek Common Stock which Dr. Smith has the right
to acquire upon the exercise of currently exercisable stock options.

(9) Includes 565,883 shares of Viratek Common Stock which certain directors and
officers have the right to acquire upon exercise of currently exercisable
stock options.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Exchange Act requires Viratek's officers and
directors, and persons who own more than ten percent of a registered class of
Viratek's equity securities, to file reports of ownership and changes in
ownership with the Commission and the American Stock Exchange. Such officers,
directors and shareholders are required by Commission regulation to furnish
Viratek with copies of all Section 16(a) forms they file.

Based on its review of the copies of such forms received by Viratek, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, Viratek believes that during fiscal year 1993 all
filing requirements applicable to its officers, directors and ten percent
beneficial owners were timely satisfied.

VIRATEK'S EXECUTIVE COMPENSATION AND RELATED MATTERS

SUMMARY COMPENSATION TABLE

The following table sets forth the annual and long-term compensation
awarded to, earned by, or paid to the Chief Executive Officer and the President
of Viratek (collectively, the "named executive officers") for services rendered
in all capacities for 1993, 1992 and 1991.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION AWARDS
--------------------------------------- ------------
OTHER ANNUAL SECURITIES OTHER ANNUAL
NAME AND PRINCIPAL COMPENSATION UNDERLYING COMPENSATION
POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS ($)(2)(5)
- ----------------------- ------ -------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic(3)(4) 1993 $535,000 -0- $ 49,245
Chief Executive Officer 1992 535,000 $5,675,000 -- 200,000 49,041(6)
1991 535,000 150,000 -0- 1,458
Nils Johannesson 1993 193,333 6,667 15,000
President 1992 120,697 74,480 15,000
1991 -- -- -0-
</TABLE>

Viratek-5
<PAGE> 172

- ---------------

(2) ICN entered into certain Change in Control Employment Agreements in 1993.
See "ICN Executive Compensation and Related Matters -- Change of Control
Employment Agreements" in the ICN section of the Addendum. Additionally, in
the three year period 1993, 1992 and 1991, Mr. Panic realized $7,498,500,
$6,030,112 and $1,461,306 on sales of ICN, Viratek, and SPI Common Stock,
which gains are not disclosed in the "All Other Compensation" column.

(3) Mr. Panic returned to Viratek on March 4, 1993 as well as to ICN, SPI and
Biomedicals. His compensation was paid by ICN.

(4) Mr. Adam Jerney served as Chief Executive Officer of Viratek from July 15,
1992 through March 4, 1993 when Mr. Panic returned to Viratek. Mr. Jerney's
compensation was paid by SPI, an affiliate of Viratek, as follows:

ANNUAL COMPENSATION

<TABLE>
<CAPTION>
LONG-TERM
PAYOUTS COMPENSATION
------------ AWARDS
-------------
YEAR SALARY ($) BONUS ($) LTIP PAYOUTS STOCK OPTIONS ALL OTHER COMPENSATION
---- ---------- --------- ------------ ------------- ----------------------
<S> <C> <C> <C> <C> <C>
1993 $ 380,000 $ 38,100 0 50,000 $ 18,730
1992 321,821 370,000 0 100,000 20,268
1991 244,799 156,000 0 0 6,421
</TABLE>

In July 1992, Mr. Panic, Chairman of the Board and Chief Executive Officer
of Viratek, 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 Viratek 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 Viratek 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, 1993, and pursuant to the Leave of Absence and
Reemployment Agreement, returned to his duties at Viratek 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 of these shares at the
date of grant was $5,375,000. Mr. Panic sold the shares of SPI Common Stock
during 1993 for a realized value of $4,005,223.

(5) Except where otherwise indicated, the amounts in this column represent
401(k) matching contributions, amounts accrued under the Executive Deferral
Plan, medical benefits and medical and life insurance premiums.

(6) Includes $38,242 for legal services and miscellaneous fringe benefits.

COMPENSATION PURSUANT TO PLANS

STOCK OPTION PLANS

As of December 31, 1993, under Viratek's 1982 Non-Qualified Stock Option
Plan (the "1982 Viratek Non-Qualified Plan") (which terminated in 1992) options
for 310,222 shares were outstanding (at prices ranging from $2.023 to $4.52 per
share) of which all are currently exercisable. During 1993, 164,698 shares were
exercised at an average price of $2.16 per share.

As of December 31, 1993 under Viratek's 1992 Incentive Stock Option Plan
(the "1992 Viratek ISO Plan") options to acquire 425,250 shares of Viratek
Common Stock were outstanding (at prices ranging from $7.61 to $21.19 per share)
of which 250,688 are currently exercisable. During 1993 there were no exercises.

Viratek-6
<PAGE> 173

As of December 31, 1993, under Viratek's 1992 Non-Qualified Stock Option
Plan (the "1992 Viratek Non-Qualified Plan") options to acquire 151,750 shares
of Viratek Common Stock were outstanding (at prices ranging from $6.42 to $13.21
per share) of which 21,002 are currently exercisable. During 1993, there were no
exercises.

OPTION GRANTS

The following table sets forth information with respect to options to
purchase shares of Viratek Common Stock granted in 1993 to the named executive
officers of Viratek.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL
SECURITIES OPTIONS
UNDERLYING GRANTED TO GRANT DATE
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION PRESENT
NAME GRANTED FISCAL YEAR PRICE DATE VALUE(1)(2)
----------------------- ---------- ------------ -------- ---------- -----------
<S> <C> <C> <C> <C> <C>
Milan Panic............ 0
Nils Johannesson....... 15,000 12.5% $10.00 1/12/03 $ 127,350
</TABLE>

- ---------------

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 of Viratek and (ii) unexercised stock
options held by the named executive officers of Viratek at December 31, 1993.

AGGREGATED OPTION EXERCISES IN 1993
AND DECEMBER 31, 1993 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF
SECURITIES UNDERLYING VALUE OF UNEXERCISED
UNEXERCISED OPTIONS IN-THE-MONEY OPTIONS
SHARES AT DECEMBER 31, 1993 AT DECEMBER 31, 1993($)(2)
ACQUIRED ON VALUE --------------------------- ---------------------------
NAME EXERCISE REALIZED($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---------------------- ----------- -------------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic........... 141,091(3) $1,461,306 488,908 -0- $ 2,291,033 $ 0
Nils Johannesson...... -- -- -- 15,000 -- $54,375
</TABLE>

- ---------------

(1) Difference between the fair market value of Viratek Common Stock at the date
of exercise and the exercise price.

(2) Difference between the fair market value of Viratek Common Stock at December
31, 1993 and the exercise price.

(3) Options to acquire these shares of Viratek Common Stock were exercised in
April 1993 and the shares of Viratek Common Stock acquired upon exercise
were transferred to ICN to reimburse ICN for certain expenses paid by ICN on
Mr. Panic's behalf.

Viratek-7
<PAGE> 174

COMPENSATION OF DIRECTORS OF VIRATEK

Members of the Board of Directors, other than Mr. Panic and Mr. Jerney, are
paid an annual fee of $20,000, payable quarterly, plus a fee of $500 for every
Board meeting and $500 for every committee meeting actually attended, and are
reimbursed for their out-of-pocket expenses in attending meetings. During 1993,
Mr. Finch's law firm, Fleming, Anderson, McClung & Finch was paid $20,958 by
ICN. Dr. Knight is a professor at Baylor. ICN has a royalty agreement with
Baylor (see "Certain Transactions") and SPI paid a royalty of $422,000 in 1993.
Dr. Smith was paid $21,000 in 1993 by Viratek for consulting services. In
addition, nonemployee directors on the first business day following each annual
meeting of shareholders are granted options to acquire 10,000 shares of Viratek
Common Stock on such date pursuant to the Viratek 1992 Non-Qualified Plan.

CERTAIN EMPLOYMENT AGREEMENTS

On March 18, 1993, the Board of Directors of ICN adopted Employment
Agreements which contain "Change in Control" benefits for six key senior
executive officers of ICN and its subsidiaries. The executives include Messrs.
Jerney, Giordani and Watt, who are officers of Viratek. The Employment
Agreements are discussed above. See "ICN Executive Compensation and Related
Matters -- Certain Employment Agreements" in the ICN section of the Addendum.

COMPENSATION REPORT OF VIRATEK

The Compensation and Stock Option Committee of Viratek (the "Viratek
Compensation Committee") is composed of two independent nonemployee directors,
Mr. Finch and Dr. Knight.

The following statement made by the members of the Viratek Compensation
Committee shall not be deemed incorporated by reference into any filing under
the Securities Act or the Exchange Act and shall not otherwise be deemed filed
under such Acts.

COMPENSATION PHILOSOPHY

The Board of Directors of Viratek adopts an annual budget and financial
plan which incorporates the goals and objectives to be achieved by Viratek in
its development and licensing of therapeutic compounds derived from nucleic
acids. A major focus of Viratek is in its development efforts of Virazole(R),
the broad spectrum anti-viral agent. Current plans include clinical testing and
preparation of a New Drug Application to the Food and Drug Administration in the
treatment of chronic active hepatitis C. Executives of Viratek have specific
goals and objectives for development efforts reviewed regularly by the executive
and his or her supervisor, salary increases relate to accomplishment of the
performance objectives. The compensation of executives consists of salary and
stock option incentives. Stock options are granted based on a program developed
for Viratek by Towers Perrin, a compensation consulting company. Each
individual's base number of options is derived from a formula which ties to his
or her base salary. The Viratek Compensation Committee may then consider the
achievement of individual as well as corporate performance goals in determining
the ultimate number of options granted.

BASE SALARY

Salaries are paid within certain grades which are established by the Human
Resources Department reviewing data of like companies in the same industry.
Viratek reviewed salary surveys prepared by Coopers & Lybrand and Towers Perrin.
The 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
Viratek Compensation Committee.

Viratek-8
<PAGE> 175

LONG-TERM STOCK INCENTIVE PLANS

Stock options are granted as long-term 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 to executives is tied to
salary and performance and each grant is evaluated. No grant to executives is
automatic.

CHIEF EXECUTIVE OFFICER COMPENSATION

The Viratek Compensation Committee determines the compensation of the Chief
Executive Officer based on a number of factors. The goal of the Viratek
Compensation Committee is to grant compensation consistent with compensation
granted to chief executive officers of other companies in the same industry. The
Chief Executive Officer's compensation is comprised of a base salary and, based
on Viratek's performance, special one-time bonuses will be paid, at the Viratek
Compensation Committee's discretion, based on special contributions made to
Viratek. 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 Viratek 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 Viratek Compensation Committee of other chief executive officers'
compensation.

INTERNAL REVENUE CODE SECTION 162(M)

Section 162(m) of the Code of 1986, which was enacted in 1993, generally
disallows a federal income tax deduction to any publicly-held corporation for
compensation paid in excess of $1 million in any taxable year beginning after
January 1, 1994 to the chief executive officer and any of the four other most
highly compensated executive officers who are employed by Viratek on the last
day of the taxable year. Section 162(m), however, does not disallow a federal
income tax deduction for qualified "performance-based compensation," the
material terms of which are disclosed to and approved by stockholders. The
application of Section 162(m) to compensation attributable to options granted
under the Amended and Restated 1992 Viratek Non-Qualified Plan is not expected
to have a material impact on the federal income tax liability of Viratek.
Compensation and Stock Option
Committee
Robert Finch, Esq.
Vernon Knight, M.D.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

Mr. Finch's law firm, Fleming, Anderson, McClung & Finch was paid $20,958
in 1993 by ICN. Dr. Knight is a Professor at Baylor College of Medicine,
Houston, Texas ("Baylor"). ICN has a royalty agreement with Baylor (see "Certain
Transactions") and SPI paid a royalty of $422,000 in 1993.

Viratek-9
<PAGE> 176

PERFORMANCE GRAPH

The following graph compares Viratek's cumulative total stock return on the
shares with the cumulative return on the Standard & Poor's 500 Stock Index and
the 3-Stock Custom Composite Index for the five years ended December 31, 1993.
The graph assumes that the value of the investment of the Viratek Common Stock
in each index was $100 at December 31, 1988 and that all dividends were
reinvested.

CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING DECEMBER 31, 1988

<TABLE>
<CAPTION>
CUSTOM
COMPOSITE
MEASUREMENT PERIOD INDEX (3
(FISCAL YEAR COVERED) VIRATEK INC. S&P 500 STOCKS)
<S> <C> <C> <C>
DEC-88 100 100 100
DEC-89 47 132 134
DEC-90 18 128 206
DEC-91 87 166 527
DEC-92 54 179 515
DEC-93 84 197 465
</TABLE>

- ---------------

(1) The 3-Stock Custom Composite Index includes Amgen Inc., Genentech Inc., and
Scios-Nova Inc.

LITIGATION

Viratek is a defendant in certain consolidated class actions pending in the
United States District Court for the Southern District of New York entitled In
re PaineWebber Securities Litigation (Case No. 86 Civ. 6776 (VLB); In re
ICN/Viratek Securities Litigation (Case No. 87 Civ. 4296 (VLB)), which are
discussed above (see "ICN -- Litigation").

Viratek is a party to a number of other pending or threatened lawsuits
arising out of, or incident to, its ordinary course of business. In the opinion
of management, neither the lawsuits discussed above nor various other pending
lawsuits will have a material adverse effect on the consolidated financial
position or operations of Viratek.

VIRATEK PROPOSAL NO. 3

APPROVAL OF AMENDED AND RESTATED 1992 VIRATEK STOCK OPTION PLAN, WHICH
AMENDMENT AND RESTATEMENT INCREASED THE NUMBER OF SHARES AVAILABLE FOR GRANT
THEREUNDER FROM 500,000 TO 1,000,000 SHARES AND PROVIDED THAT THE MAXIMUM NUMBER
OF SHARES WITH RESPECT TO WHICH OPTIONS

Viratek-10
<PAGE> 177

MAY BE GRANTED TO ANY INDIVIDUAL DURING THE TERM OF THE PLAN MAY NOT EXCEED
400,000 SHARES.

EFFECT OF THE MERGER ON THE 1992 VIRATEK NON-QUALIFIED PLAN

At the Effective Time, all Options then outstanding under the Amended and
Restated 1992 Viratek Non-Qualified Plan will remain outstanding and will be
assumed by New ICN. Each such Option will be exercisable upon the same terms and
conditions as under the Amended and Restated 1992 Viratek Non-Qualified Plan and
the applicable option agreement issued thereunder, except that (a) each such
Option will be exercisable for that whole number of New ICN Shares (to the
nearest whole share) into which the number of shares of Common Stock of Viratek
under the unexercised portion of such option, if then outstanding, would have
been converted at the Effective Time, and (b) the exercise price per New ICN
Share will be an amount equal to the exercise price per share subject to such
Option prior to the Effective Time divided by the Viratek Exchange Ratio
(rounded upward to the nearest full cent).

1992 VIRATEK NON-QUALIFIED PLAN

The 1992 Viratek Non-Qualified Plan was originally adopted by the Board of
Directors and approved by the stockholders in 1992. The 1992 Viratek
Non-Qualified Plan provides for the granting of options to key employees,
officers, directors, consultants and scientific advisors of Viratek.

At the Viratek Meeting, stockholders will be asked to consider and vote on
a proposal to approve the Amended and Restated 1992 Viratek Non-Qualified Plan.

THE BOARD OF DIRECTORS OF VIRATEK RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.

PROPOSED AMENDMENTS

The Viratek Compensation Committee has unanimously approved effective as of
April 26, 1994 and subject to approval of the stockholders at the Viratek
Meeting, amendments to the 1992 Viratek Non-Qualified Plan (i) to increase from
500,000 to 1,000,000 the number of shares of Viratek Common Stock authorized for
issuance under the 1992 Viratek Non-Qualified Plan and (ii) to provide that the
maximum number of shares with respect to which options may be granted thereunder
to any individual during the term of such plan may not exceed 400,000 shares.

During 1994, options to acquire 137,625 shares of Viratek Common Stock were
granted in excess of the shares authorized by the 1992 Viratek Non-Qualified
Plan. Such grants are subject to, and are not exercisable prior to, stockholder
approval of the Amended and Restated 1992 Viratek Non-Qualified Plan and will be
canceled should approval not be obtained.

The 1992 Viratek Non-Qualified Plan as previously approved by stockholders
does not limit the maximum number of shares of Viratek Common Stock with respect
to which options may be granted to any individual during the term of the plan.
The proposed amendment to limit the number of shares that may be granted to any
individual is intended to attempt to qualify the compensation attributable to
stock option grants under the plan for an exclusion from the deduction
limitation of Section 162(m) of the Code. In addition, in order to attempt to
qualify for this exclusion, Viratek is disclosing the material terms of the
Amended and Restated 1992 Viratek Non-Qualified Plan to stockholders and seeking
their approval. See "Federal Income Tax Consequences Relating to Non-Qualified
Options," below.

The principal provisions of the Amended and Restated 1992 Viratek
Non-Qualified Plan are summarized below. This summary, however, does not purport
to be complete and is qualified in its entirety by the terms of the Amended and
Restated 1992 Viratek Non-Qualified Plan. All defined terms used below have the
meaning set forth in the Amended and Restated 1992 Viratek Non-Qualified Plan,
unless otherwise provided.

Viratek-11
<PAGE> 178

PURPOSE OF THE AMENDED AND RESTATED 1992 VIRATEK NON-QUALIFIED PLAN

Viratek believes stock option plans advance the interests of Viratek and
further its growth and development by encouraging and enabling key employees,
officers, directors, consultants and advisors of Viratek and its subsidiaries
and parent to acquire an increased personal and proprietary interest in its
continued success and progress. Viratek believes that the Amended and Restated
1992 Viratek Non-Qualified Plan aids in attracting and retaining directors,
officers and other key employees who are in a position to contribute materially
to the successful conduct of Viratek's business and affairs.

STOCK OPTION RIGHTS

Options granted under the Amended and Restated 1992 Viratek Non-Qualified
Plan are exercisable and expire in accordance with the specific terms and
conditions approved as to each option by the Viratek Compensation Committee as
set forth in a written stock option agreement. Under no circumstances may an
option be exercised later than ten years after the date it is granted.
Participation in the Amended and Restated 1992 Viratek Non-Qualified Plan does
not confer any right on a participant to continue in the employ of Viratek or
affect any right or power of Viratek to terminate the services of such
participant at any time.

GRANTS TO NONEMPLOYEE DIRECTORS

The Amended and Restated 1992 Viratek Non-Qualified Plan provides for
automatic, non-discretionary annual grants to outside directors (nonemployee
directors); the timing, amounts, and other terms and provisions of such grants
will generally not be amended more than once every six months. Currently, non-
discretionary grants to purchase 10,000 shares of Viratek Common Stock are made
at the close of business on the first business day following the day of each
annual meeting of stockholders of Viratek.

DURATION AND MODIFICATIONS

The Amended and Restated 1992 Viratek Non-Qualified Plan will remain in
effect until all options granted thereunder have been satisfied by the issuance
of shares or the payment of cash and/or shares, or terminated under the terms of
the Amended and Restated 1992 Viratek Non-Qualified Plan, provided that no
non-qualified stock options may be granted under the Amended and Restated 1992
Viratek Non-Qualified Plan after January 22, 2002. The Board of Directors and
the Viratek Compensation Committee may, at any earlier time, amend, alter,
suspend or discontinue the Amended and Restated 1992 Viratek Non-Qualified Plan
as it may deem proper, except that no such action shall impair the rights of any
grantee under any option previously granted under the Amended and Restated 1992
Viratek Non-Qualified Plan without the consent of the grantee. Viratek may not,
however, without further approval by Viratek's shareholders, take any action for
which stockholder approval is required under Rule 16b-3 under the Exchange Act.

FEDERAL INCOME TAX CONSEQUENCES RELATING TO NON-QUALIFIED STOCK OPTIONS

Options granted under the Amended and Restated 1992 Viratek Non-Qualified
Plan are intended to be non-qualified (i.e., non-statutory) stock options. In
general, an optionee to whom a non-qualified stock option is granted will
recognize no income at the time of the grant of the option. Upon exercise of a
non-qualified stock option, an optionee will recognize ordinary income in an
amount equal to the amount by which the fair market value of the shares on the
date of exercise exceeds the exercise price of the option (special rules may
apply in the case of an optionee who is subject to Section 16(b) of the Exchange
Act). Subject to the discussion below with respect to Section 162(m) of the
Code, if it complies with applicable withholding requirements, Viratek will be
entitled to a business expense deduction in the same amount and at the same time
as the optionee recognizes ordinary income.

Under certain circumstances, the accelerated vesting or the cashout of
options in connection with a Change in Control of Viratek might be deemed an
"excess parachute payment" for purposes of the golden parachute tax provisions
of Section 280G of the Code. To the extent it is so considered, the optionee may
be subject to a 20% excise tax and Viratek may be denied a tax deduction.

Viratek-12
<PAGE> 179

Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly-held corporation for compensation paid in excess of $1
million in any taxable year beginning after January 1, 1994 to the Chief
Executive Officer and any of the four other most highly compensated executive
officers who are employed by Viratek on the last day of the taxable year.
Section 162(m), however, does not disallow a federal income tax deduction for
qualified "performance-based compensation," the material terms of which have
been disclosed to and approved by stockholders. The application of Section
162(m) to compensation attributable to options granted under the Amended and
Restated 1992 Viratek Non-Qualified Plan is not expected to have a material
impact on the federal income tax liability of Viratek.

SECURITIES SUBJECT TO THE AMENDED AND RESTATED 1992 VIRATEK NON-QUALIFIED PLAN

The maximum number of shares of Viratek Common Stock currently available
for issuance under the 1992 Viratek Non-Qualified Plan is 500,000 shares of
Viratek Common Stock, except as described below under the caption "Adjustment of
Shares and Price." If the Amended and Restated 1992 Viratek Non-Qualified Plan
is approved by stockholders, such maximum number will be increased to 1,000,000
shares and the maximum number which may be issued under the plan to any
individual during the term of the plan would be limited to 400,000 shares,
except as described below under the caption "Adjustment to Shares and Price."
The shares of Viratek Common Stock issued under the Amended and Restated 1992
Viratek Non-Qualified Plan may be either authorized and unissued shares or
shares previously issued and reacquired by Viratek. If an option expires or
terminates without having been exercised in full or if shares issued pursuant to
stock option agreements are repurchased by Viratek in accordance with the terms
thereof, the shares of Viratek Common Stock subject thereto shall again be
available for grant under the Amended and Restated 1992 Viratek Non-Qualified
Plan.

ADJUSTMENT OF SHARES AND PRICE

In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of Viratek's
stock, appropriate adjustment will be made of both the number of shares which
may be purchased under the Amended and Restated 1992 Viratek Non-Qualified Plan
and the number and price per share of stock which may be purchased under any
outstanding options. In the case of a merger, sale of assets or similar
transaction which results in a replacement of Viratek's stock by stock of
another corporation, Viratek will make a reasonable effort to replace any
outstanding options granted under the Amended and Restated 1992 Viratek
Non-Qualified Plan with comparable options to purchase the stock of such other
corporation, or will provide for immediate maturity of all outstanding options
and the termination of those options not exercised within the time period
specified by the Board of Directors.

ADMINISTRATION OF THE AMENDED AND RESTATED 1992 VIRATEK NON-QUALIFIED PLAN

The Amended and Restated 1992 Viratek Non-Qualified Plan is administered by
the Viratek Compensation Committee, which is comprised of not less than two
directors of Viratek each of whom are "disinterested persons" as defined in
subparagraph (c)(2)(i) of Rule 16b-3 under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder. The present members of the Viratek Compensation
Committee are Messrs. Finch and Knight.

Viratek-13
<PAGE> 180

No member of the Board receives additional compensation for his services in
administering the Amended and Restated 1992 Viratek Non-Qualified Plan except
insofar as such members receive $300 for each Viratek Compensation Committee
meeting attended. The Board shall from time to time appoint members of the
Viratek Compensation Committee who are disinterested persons and outside
directors for such terms as the Board shall determine, and members of the
Viratek Compensation Committee may be removed by the Board at any time with or
without cause.

Subject to the provisions of the Amended and Restated 1992 Viratek
Non-Qualified Plan, the Viratek Compensation Committee has full authority to
implement and carry out the Amended and Restated 1992 Viratek Non-Qualified
Plan, including, but not limited to, the following: to construe and interpret
the Amended and Restated 1992 Viratek Non-Qualified Plan and to make all other
determinations necessary or advisable for the administration of the Amended and
Restated 1992 Viratek Non-Qualified Plan.

ELIGIBILITY AND EXTENT OF PARTICIPATION

Non-qualified options may be granted and shares may be acquired pursuant to
stock option agreements under the Amended and Restated 1992 Viratek
Non-Qualified Plan for such number of shares and to such employees, directors,
advisors and consultants as the Viratek Compensation Committee may from time to
time determine. See "Administration of the Amended and Restated 1992 Viratek
Non-Qualified Plan." A grantee may be granted more than one option under the
1992 Viratek Non-Qualified Plan. If the Amended and Restated 1992 Viratek
Non-Qualified Plan is approved, the maximum number of shares with respect to
which options may be granted to any individual during the term of the plan may
not exceed 400,000 shares. All options are subject to the terms of non-qualified
option agreements executed by Viratek and the respective grantees. There are
currently approximately 49 individuals eligible to participate in the Amended
and Restated 1992 Viratek Non-Qualified Plan.

EXERCISE OF OPTIONS; DEATH, TERMINATION OF EMPLOYMENT

Options are granted by the Viratek Compensation Committee at a price not
less than one hundred percent of the fair market value of the Viratek Common
Stock on the date of grant.

Shares of Viratek Common Stock purchased pursuant to exercise of an option
are paid for in full at the time of exercise in cash or by certified check or by
surrender of previously acquired shares of Viratek Common Stock, unless
otherwise determined by the Board of Directors or the Viratek Compensation
Committee.

The times at which non-qualified stock options are exercisable will be
determined by the Viratek Compensation Committee at the time of grant, which
shall in no event be more than ten years from the date of grant. The Viratek
Compensation Committee is authorized to determine the nature and extent of any
restrictions to be imposed on the shares of Viratek Common Stock which may be
acquired under the Amended and Restated 1992 Viratek Non-Qualified Plan,
including restrictions on the transferability of such shares.

If an optionee's employment is terminated for any reason, other than death
or disability, the option shall be exercisable within three months after such
termination, but only to the extent it was exercisable on the date of
termination, provided that if such optionee should die during the three-month
period without having exercised his option, his personal representative, heirs
or legatees, as the case may be, shall have the right to exercise his option
within twelve (12) months of the date of death, but only to the extent it was
exercisable at the date of termination. If an optionee is disabled, his options
shall terminate one year after the date of disability. In the event of the death
of an optionee while an employee, director, scientific advisor or consultant of
Viratek, his personal representative, heirs or legatees, as the case may be,
shall have the right to exercise such option, to the extent it was exercisable
on the date of death, up to twelve (12) months from the date of death of the
optionee, but in no event after the expiration of the exercise period.

Viratek-14
<PAGE> 181

The Viratek Compensation Committee shall determine all questions regarding
termination of employment and cause of termination, disability or retirement.

FORM OF OPTIONS

Each non-qualified stock option under the Amended and Restated 1992 Viratek
Non-Qualified Plan is evidenced by a written stock option agreement in such form
as the Viratek Compensation Committee shall have approved. The holders of
options shall have no rights as stockholders with respect to any shares covered
by options until the date of issuance of a stock certificate for such shares.

NEW PLAN BENEFITS

AMENDED AND RESTATED 1992 VIRATEK NON-QUALIFIED PLAN

The following table sets forth certain information concerning the number of
shares with respect to which options have been granted, as adjusted for stock
dividends, subject to shareholder approval, under the Amended and Restated 1992
Viratek Non-Qualified Plan to the named executive officers.

Options which have been granted under the Amended and Restated 1992 Viratek
Non-Qualified Plan are for a term of ten years, subject to earlier termination
under certain circumstances. The exercise price of the options is 100% of the
fair market value of the underlying stock on the date of grant. The per share
exercise price of each option heretofore granted is $9.75. Options are
exercisable with respect to 25% of the underlying shares on each of the first
four anniversaries of the date of grant, provided that, on the relevant
anniversary, the optionee is and has been since the date of grant an employee,
director, scientific advisor or consultant of Viratek. In the event that the
optionee ceases to serve as an employee, director, scientific advisor or
consultant of Viratek for any reason, other than death or disability, the option
terminates three months after termination. The per share closing price of
Viratek Common Stock on September 23, 1994, as reported on the AMEX was $11.625.

VOTE REQUIRED

Adoption of the Amended and Restated 1992 Viratek Non-Qualified Plan
requires the favorable vote of the holders of a majority of the shares of
Viratek Common Stock represented at the Viratek Meeting. Proxies submitted by
the Board of Directors will be voted for the proposal unless a vote against the
proposal or abstention is specifically indicated.

VIRATEK PROPOSAL NO. 4

APPROVAL OF AMENDED AND RESTATED 1992 VIRATEK EMPLOYEE INCENTIVE STOCK
OPTION PLAN, WHICH AMENDMENT AND RESTATEMENT INCREASED THE NUMBER OF SHARES
AVAILABLE FOR GRANT THEREUNDER FROM 500,000 TO 1,000,000 SHARES AND PROVIDED
THAT THE MAXIMUM NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED
TO ANY INDIVIDUAL DURING THE TERM OF THE PLAN MAY NOT EXCEED 400,000.

Viratek-15
<PAGE> 182

EFFECT OF THE MERGER ON THE 1992 VIRATEK ISO PLAN

At the Effective Time, all Options then outstanding under the Amended and
Restated 1992 Viratek ISO Plan will remain outstanding and will be assumed by
New ICN. Each such Option will be exercisable upon the same terms and conditions
as under the Amended and Restated 1992 Viratek ISO Plan and the applicable
option agreement issued thereunder, except that (a) each such Option will be
exercisable for that whole number of New ICN Shares (to the nearest whole share)
into which the number of shares of Common Stock of Viratek under the unexercised
portion of such option, if then outstanding, would have been converted at the
Effective Time, and (b) the exercise price per New ICN Share will be an amount
equal to the exercise price per share subject to such Option prior to the
Effective Time divided by the Viratek Exchange Ratio (rounded upward to the
nearest full cent).

THE 1992 VIRATEK ISO PLAN

The 1992 Viratek ISO Plan was adopted by the Board of Directors and
approved by the stockholders in 1992. The 1992 Viratek ISO Plan provides for the
granting of options to key employees and officers of Viratek.

At the Viratek Meeting, stockholders will be asked to consider and vote on
a proposal to approve the Amended and Restated 1992 Viratek ISO Plan.

THE BOARD OF DIRECTORS OF VIRATEK RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.

PROPOSED AMENDMENTS

The Viratek Compensation Committee has unanimously approved, effective as
of April 26, 1994 and subject to approval of stockholders at the Viratek
Meeting, amendments to the 1992 Viratek ISO Plan (i) to increase from 500,000
shares to 1,000,000 shares of Viratek Common Stock, the number of shares
authorized for issuance under the 1992 Viratek ISO Plan and (ii) to provide that
the maximum number of shares with respect to which options may be granted
thereunder to any individual during the term of the plan cannot exceed 400,000
shares.

The principal provisions of the Amended and Restated 1992 Viratek ISO Plan
are summarized below. The summary, however, does not purport to be complete and
is qualified in its entirety by the terms of the Amended and Restated 1992
Viratek ISO Plan. All defined terms used below have the meaning set forth in the
Amended and Restated 1992 Viratek ISO Plan, unless otherwise indicated.

PURPOSE OF THE AMENDED AND RESTATED 1992 VIRATEK ISO PLAN

Viratek believes stock option plans advance the interests of Viratek and
further its growth and development by encouraging and enabling key employees and
officers of Viratek and its subsidiaries and parent to acquire an increased
personal and proprietary interest in its continued success and progress. Viratek
believes that the 1992 Viratek ISO Plan aids in attracting and retaining
officers and other key employees who are in a position to contribute materially
to the successful conduct of Viratek's business and affairs.

STOCK OPTION RIGHTS

Options granted under the Amended and Restated 1992 Viratek ISO Plan are
exercisable and expire in accordance with the specific terms and conditions
approved as to each option by the Viratek Compensation Committee as set forth in
a written stock option agreement. Under no circumstances may an option be
exercised later than ten years after the date it is granted (five years in the
case of an option granted to a Ten Percent Stockholder (as defined below)). See
"Federal Income Tax Consequences Relating to Incentive Stock Options."
Participation in the Amended and Restated 1992 Viratek ISO Plan does not confer
any right on any participant to continue in the employ of Viratek or affect any
right or power of Viratek to terminate the service of such participant at any
time.

Viratek-16
<PAGE> 183

DURATION AND MODIFICATIONS

The Amended and Restated 1992 Viratek ISO Plan shall remain in effect until
all options granted thereunder have been satisfied by the issuance of shares or
the payment of cash and/or shares, or terminated under the terms of the Amended
and Restated 1992 Viratek ISO Plan, provided that no incentive stock options may
be granted under the Amended and Restated 1992 Viratek ISO Plan after January
21, 2002. The Board of Directors and the Viratek Compensation Committee may, at
any earlier time, amend, alter, suspend or discontinue the Amended and Restated
1992 Viratek ISO Plan as it may deem proper, except that no such action shall
impair the rights of any grantee under any option previously granted under the
Amended and Restated 1992 Viratek ISO Plan without the consent of the grantee.
The Board of Directors may not, however, without further approval by Viratek's
shareholders take any action for which stockholder approval is required under
Section 422 of the Code or any successor provision or under Rule 16b-3 under the
Exchange Act, including, without limitation, any action which would increase the
total number of shares for which options may be issued under the Amended and
Restated 1992 Viratek ISO Plan, except as described under the caption
"Adjustment of Shares and Price," change the minimum exercise price, extend the
duration of the Amended and Restated 1992 Viratek ISO Plan or extend the period
during and over which options may be exercised under the Amended and Restated
1992 Viratek ISO Plan.

FEDERAL INCOME TAX CONSEQUENCES RELATING TO INCENTIVE STOCK OPTIONS

Options granted under the Amended and Restated 1992 Viratek ISO Plan are
intended to qualify as "Incentive Stock Options" within the meaning of Section
422 and predecessor provisions of the Code. In general, an optionee will not
recognize taxable income upon the grant or exercise of an Incentive Stock Option
and Viratek will not be entitled to any business expense deduction with respect
to the grant or exercise of an Incentive Stock Option. (However, upon the
exercise of an Incentive Stock Option, the excess of the fair market value on
the date of the exercise of the shares received over the exercise price of the
shares will be treated as an adjustment to alternative minimum taxable income).
In order for the exercise of an Incentive Stock Option to qualify for the
foregoing tax treatment, the optionee generally must be an employee of Viratek
from the date the Incentive Stock Option is granted through the date three
months before the date of exercise, except in the case of death or disability,
where special rules apply.

If the optionee has held the shares acquired upon the exercise of an
Incentive Stock Option for at least two years after the date of grant and for at
least one year after the date of exercise, upon the disposition of the shares by
the optionee, the difference, if any, between the sale price of the shares and
the exercise price of the option will be treated as long-term capital gain or
loss. If the optionee does not satisfy these holding period requirements, the
optionee will recognize ordinary income at the time of the disposition of the
shares, generally in an amount equal to the excess of the fair market value of
the shares at the time the option was exercised over the exercise price of the
option. The balance of the gain realized, if any, will be long-term or
short-term capital gain, depending on whether or not the shares were sold more
than one year after the option was exercised. If the optionee sells the shares
prior to the satisfaction of the holding period requirements but at a price
below the fair market value of the shares at the time the option was exercised,
the amount of ordinary income will be limited to the excess of the amount
realized on the sale over the exercise price of the option. Viratek will
generally be allowed a business expense deduction to the extent the optionee
recognizes ordinary income.

SECURITIES SUBJECT TO THE AMENDED AND RESTATED 1992 VIRATEK ISO PLAN

The maximum number of shares of Viratek Common Stock which may currently be
issued under the 1992 Viratek ISO Plan is 500,000 shares, except as described
below under the caption "Adjustment of Shares and Price." If the Amended and
Restated 1992 Viratek ISO Plan is approved by stockholders such maximum

Viratek-17
<PAGE> 184

number will be increased to 1,000,000 shares and the maximum number which may be
issued under the plan to any individual during the term of the plan would be
limited to 400,000 shares, except as described below under the caption
"Adjustment of Shares and Price." The shares of Viratek Common Stock issued and
sold under the Amended and Restated 1992 Viratek ISO Plan may be either
authorized and unissued shares or shares previously issued and reacquired by
Viratek. If an option expires or terminates without having been exercised in
full or if shares issued pursuant to stock option agreements are repurchased by
Viratek in accordance with the terms thereof, the shares of Viratek Common Stock
subject thereto shall again be available for grant under the Amended and
Restated 1992 Viratek ISO Plan.

ADJUSTMENT OF SHARES AND PRICE

In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of Viratek's
stock, appropriate adjustment will be made of both the number of shares which
may be purchased under the Amended and Restated 1992 Viratek ISO Plan and the
number and price per share of stock which may be purchased under any outstanding
options. In the case of a merger, sale of assets or similar transaction which
results in a replacement of Viratek's stock by stock of another corporation,
Viratek will make a reasonable effort to replace any outstanding options granted
under the Amended and Restated 1992 Viratek ISO Plan with comparable options to
purchase the stock of such other corporation, or will provide for immediate
maturity of all outstanding options and the termination of those options not
exercised within the time period specified by the Viratek Compensation
Committee.

ADMINISTRATION OF THE AMENDED AND RESTATED 1992 VIRATEK ISO PLAN

The Amended and Restated 1992 Viratek ISO Plan is administered by the
Viratek Compensation Committee, which is comprised of not less than two
directors of Viratek each of whom are "disinterested persons" as defined in
subparagraph (c)(2)(i) of Rule 16b-3 under the Exchange Act and "outside
directors" within the meaning of Section 162(m) of the Code and the regulations
promulgated thereunder. The present members of the Viratek Compensation
Committee are Messrs. Finch and Knight.

No member of the Board receives additional compensation for his services in
administering the 1992 Viratek ISO Plan except insofar as such member receives
$500 for each Viratek Compensation Committee meeting attended. The Board shall
from time to time appoint members of the Viratek Compensation Committee who are
disinterested persons and outside directors, for such terms as the Board shall
determine, and members of the Viratek Compensation Committee may be removed by
the Board at any time with or without cause.

Subject to the provisions of the Amended and Restated 1992 Viratek ISO
Plan, the Viratek Compensation Committee has full authority to implement and
carry out the Amended and Restated 1992 Viratek ISO Plan, including, but not
limited to, the following: to construe and interpret the Amended and Restated
1992 Viratek ISO Plan and to make all other determinations necessary or
advisable for the administration of the Amended and Restated 1992 Viratek ISO
Plan.

ELIGIBILITY AND EXTENT OF PARTICIPATION

Incentive Stock Options may be granted and shares may be acquired pursuant
to stock option agreements under the Amended and Restated 1992 Viratek ISO Plan
for such number of shares and to such employees and directors who are also
employees, as the Viratek Compensation Committee may from time to time

Viratek-18
<PAGE> 185

determine. See "Administration of the Amended and Restated 1992 Viratek ISO
Plan." A grantee may be granted more than one option under the Amended and
Restated 1992 Viratek ISO Plan. If the Amended and Restated 1992 Viratek ISO
Plan is approved, the maximum number of shares with respect to which options may
be granted to any individual during the term of the plan may not exceed 400,000
shares. All options are subject to the terms of incentive stock option
agreements executed by Viratek and the respective grantees. There are currently
approximately 5 individuals eligible to participate in the 1992 Viratek ISO
Plan.

EXERCISE OF OPTIONS; DEATH, TERMINATION OF EMPLOYMENT

Options are granted by the Viratek Compensation Committee at a price not
less than one hundred percent of the fair market value of the Viratek Common
Stock on the date of grant (not less than 110% in the case of options granted to
an employee who at the time of grant owns stock possessing more than 10% of the
total combined voting power of all classes of capital stock of ICN (a "Ten
Percent Stockholder")).

Shares of Viratek Common Stock purchased pursuant to exercise of an option
are paid for in full at the time of exercise in cash or by certified check or by
the surrender of previously acquired shares of Viratek Common Stock, unless
otherwise determined by the Board of Directors or the Viratek Compensation
Committee.

The times at which Incentive Stock Options are exercisable will be
determined by the Committee at the time of grant, which shall in no event be
more than ten years from the date of grant (five years in the case of options
granted to a Ten Percent Stockholder). The Viratek Compensation Committee is
authorized to determine the nature and extent of any restrictions to be imposed
on the shares of Common Stock which may be acquired under the Amended and
Restated 1992 Viratek ISO Plan, including restrictions on the transferability of
such shares.

Options granted under the Amended and Restated 1992 Viratek ISO Plan are
nonassignable and nontransferable other than by will or by the laws of descent
and distribution or pursuant to a qualified domestic relations order (as defined
in the Code). During the life of the recipient, the Incentive Stock Option shall
be exercisable only by the recipient.

If an optionee's employment is terminated for any reason, other than death
or disability, the option shall be exercisable within three months after such
termination, but only to the extent it was exercisable on the date of
termination, provided that if such employee should die during that three-month
period without having exercised his option, his personal representative, heirs
or legatees, as the case may be, shall have the right to exercise his option
within twelve (12) months of the date of death, but only to the extent it was
exercisable at the date of termination. If the optionee is disabled, his options
shall terminate one year after the date of disability. In the event of the death
of an optionee while an employee of Viratek, his personal representatives, heirs
or legatees, as the case may be, shall have the right to exercise such option,
to the extent it was exercisable on the date of death, up to twelve (12) months
from the date of death of the optionee, but in no event after the expiration of
the exercise period.

The Viratek Compensation Committee shall determine all questions regarding
termination of employment and cause of termination, permanent disability or
retirement.

FORM OF OPTIONS

Each Incentive Stock Option under the Amended and Restated 1992 Viratek ISO
Plan is evidenced by a written stock option agreement in such form as the
Viratek Compensation Committee shall have approved. The holders of options shall
have no rights as stockholders with respect to any shares covered by options
until the date of issuance of a stock certificate for such shares.

VOTE REQUIRED

Adoption of the Amended and Restated 1992 Viratek ISO Plan requires the
favorable vote of the holders of a majority of the shares of Viratek Common
Stock represented at the Viratek Meeting. Proxies submitted by the Board of
Directors will be voted for the proposal unless a vote against the proposal or
abstention is specifically indicated.

Viratek-19
<PAGE> 186

BIOMEDICALS

BIOMEDICALS PROPOSAL NO. 2

ELECTION OF DIRECTORS

Four directors are to be elected at the Biomedicals Meeting (who, if
elected, will become directors of New ICN if the Merger is consummated), each to
serve until the 1995 Annual Meeting of Stockholders of Biomedicals (if the
Merger is not consummated) and until his successor is elected and qualified.
Unless marked to the contrary, proxies received will be voted for the election
of the following nominees: Adam Jerney, Jean-Francois Kurz, Thomas H. Lenagh and
Milan Panic all of whom currently serve as directors of Biomedicals. If for any
reason any nominee should not be available for election or be unable to serve as
a director, the accompanying proxy will be voted for the election of such other
person, if any, as the Biomedicals Board of Directors may designate. The
Biomedicals Board of Directors has no reason to believe that any nominee will be
unavailable for election or unable to serve.

The Board of Directors of Biomedicals recommends that the stockholders vote
FOR the election of the four nominees for director named in this Joint Proxy
Statement/Prospectus.

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 of Biomedicals.
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 nominee.

<TABLE>
<CAPTION>
YEAR
COMMENCED OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE SERVING DIRECTORSHIPS
- ----------------------------------------------- --- --------- -------------------------
<S> <C> <C> <C>
ADAM JERNEY 52 1992 ICN; SPI; Viratek
Mr. Jerney served as Biomedicals's Chief
Executive Officer from October 1992 until
March 4, 1993, when Mr. Panic returned as Chief
Executive Officer of Biomedicals, 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 service. He is
President and Chief Operating Officer of SPI.
Mr. Jerney has served as director of
Biomedicals, 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.
</TABLE>

Biomedicals-1
<PAGE> 187

<TABLE>
<S> <C> <C> <C>
JEAN-FRANCOIS KURZ (a) 60 1989 Banque Pasche S.A., Ge-
Mr. Kurz has been a board member of neva
Biomedicals since October 1989. 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;
Mr. Lenagh is an independent financial U.S. Life Corporation;
advisor. He was Chairman of the Board of SCI Systems, Inc.; Gintel
Greiner Engineering, Inc. from 1982 until Funds; Irvine Sensors,
1985. He served as Financial Vice President Inc.; CML, Inc.; Clemente
to the Aspen Institute from 1978 until 1980, Global Funds; Franklin
and since then as an independent financial Quest; Styles on Video.
consultant to the Aspen Institute. From 1964
to 1978 he was Treasurer of the Ford
Foundation. He served as a director of ICN
from 1979 to April 1989.
MILAN PANIC (a) 64 1983 ICN; SPI; Viratek
Mr. Panic has been the Chairman of the Board
and Chief Executive Officer of Biomedicals
since its inception in 1983. Mr. Panic is the
founder of ICN, of which Biomedicals 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
while he was on leave of absence serving as
Prime Minister of Yugoslavia. Mr. Panic is
also Chairman of the Board and Chief
Executive Officer of SPI, Viratek, and ICN
and may be deemed to be a "control person" of
ICN and Biomedicals.
</TABLE>

- ---------------

(a) Member of the Executive Committee of the Board of Directors.

(b) Member of the Audit Committee of the Board of Directors.

None of the proposed nominees is related by blood or marriage to one
another, or to an executive officer of Biomedicals.

COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS OF BIOMEDICALS

The Board of Directors of Biomedicals has a standing Executive Committee,
Audit Committee and Compensation and Stock Option Committee, but does not have a
standing nominating committee.

The members of the Executive Committee are currently Messrs. Kurz and
Panic. That Committee is empowered to act upon any matter for the Board of
Directors, other than matters which may not be delegated under Delaware law. The
Executive Committee did not meet in fiscal 1993.

Biomedicals-2
<PAGE> 188

The sole member of the Audit Committee is Mr. Lenagh. That Committee met
four times during the last fiscal year. Its functions include recommending the
annual appointment of Biomedicals's independent public accountants with whom the
Committee reviews the scope of the audit and non-audit assignments and the
related fees, the accounting principles being applied by Biomedicals in
financial reporting, the scope of internal financial auditing procedures and the
adequacy of internal controls.

The sole member of the Compensation and Stock Option Committee is Mr.
Lenagh. That Committee met four times during the last fiscal year. Its functions
include setting the compensation of officers and key employees of Biomedicals
and granting stock options. See "Executive Compensation and Related Matters --
Compensation Committee Interlocks and Insider Participation."

During the last fiscal year the Board of Directors met five times and took
action by unanimous written consent one time and no director attended fewer than
80% percent of the meetings of the Board and the committees of the Board on
which he served other than Mr. Panic who did not attend Board Meetings during
his absence from Biomedicals as described under "Executive Compensation and
Related Matters" below).

In October 1984, the Boards of Directors of SPI, ICN and Viratek formed an
Oversight Committee. In October 1986, Biomedicals, upon becoming a separate
public company, began to participate in the Oversight Committee. The purpose of
the Oversight Committee, which has advisory authority only, is to review
transactions between or among the four corporations to determine whether a
conflict of interest exists among them with respect to a particular transaction
and the manner in which any such conflict can be resolved. The Oversight
Committee consists of one non-management director of each affiliated corporation
and a non-voting chairman. The current members of the Oversight Committee are
Messrs. Weldon B. Jolley, Ph.D., the chairman of the Oversight Committee and a
director of ICN; Thomas H. Lenagh, a director of Biomedicals; Dr. Vernon Knight,
a director of Viratek; James P. Miscoll, a director of SPI; and Richard W.
Starr, a director of ICN. During fiscal 1993, the Oversight Committee met four
times.

EXECUTIVE OFFICERS OF BIOMEDICALS

Set forth below are the executive officers of Biomedicals. Certain of these
individuals are also executive officers of ICN and SPI and a summary of their
business experience can be found under "Executive Officers of ICN" or "Executive
Officers of SPI." There is no family relationship among the following executive
officers, and there is no arrangement or understanding between any executive
officers and any other person pursuant to such officer's election as an officer
of Biomedicals.

<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVICE WITH
NAME AGE BIOMEDICALS POSITION
- -------------------- ---- ------------- ------------------------------------------------
<S> <C> <C> <C>
Milan Panic 64 1983 Chairman of the Board, President and Chief
Executive Officer
Adam Jerney 52 1983 President and Chief Operating Officer
Bill A. MacDonald 46 1993 President
John E. Giordani 52 1992 Senior Vice President and Chief Financial
Officer
M'Liss Jones Kane 41 1990 Vice President, General Counsel and Secretary
</TABLE>

Certain officers of Biomedicals are also officers of ICN, Viratek and SPI.
Biomedicals has adopted a charter provision which limits the monetary liability
under certain circumstances of its directors and, as a matter of policy, enters
into agreements with certain of its officers and directors providing
indemnification to the fullest extent permitted under Delaware law.

Biomedicals-3
<PAGE> 189

OWNERSHIP OF BIOMEDICALS' SECURITIES

PRINCIPAL STOCKHOLDER

As of June 30, 1994, the following stockholder was known to Biomedicals to
be the beneficial owner of more than 5% of Biomedicals Common Stock:

<TABLE>
<CAPTION>
NUMBER OF SHARES PERCENT OF CLASS
NAME AND ADDRESS 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 9,033,873 shares
of Biomedicals Common Stock outstanding on June 30, 1994.

(2) ICN has sole voting and investment power with respect to the shares of
Biomedicals Common Stock shown.

OWNERSHIP BY MANAGEMENT OF BIOMEDICALS

The following table sets forth, as of June 30, 1994, the number and percent
of shares of Biomedicals Common Stock beneficially owned by each director and
nominee for director of Biomedicals, each of the executive officers of
Biomedicals and all directors and executive officers of Biomedicals as a group.

<TABLE>
<CAPTION>
NUMBER OF SHARES
AND NATURE OF
BENEFICIAL OWNERSHIP OF
BIOMEDICALS PERCENTAGE
IDENTITY OF OWNER OR GROUP COMMON STOCK(1) OF CLASS
---------------------------------------------- ----------------------- ----------
<S> <C> <C>
Milan Panic................................... 423,867(2)
Francis L. Dale............................... 2,500(3) (4)
Adam Jerney................................... 25,000(5) (4)
Jean-Francois Kurz............................ 9,500(6) (4)
Thomas H. Lenagh.............................. 29,500(7) (4)
Bill A. MacDonald............................. 16,400(8)
Fred Andrea................................... 77,502(9) (4)
Richard M. Fallis............................. 38,500(10) (4)
All executive officers and directors
as a group (10 persons)..................... 662,644(11) 6.8%
</TABLE>

- ---------------

(1) Except as otherwise indicated 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
Biomedicals has no information as to whether any shares shown in this table
are subject to community property laws. Shares shown include shares subject
to options exercisable within 60 days following December 31, 1993.

(2) Includes 400,000 shares of Biomedicals Common Stock which Mr. Panic has the
right to acquire upon the exercise of currently exercisable stock options
and does not include 1,349 shares indirectly held for which Mr. Panic
disclaims ownership.

(3) Includes 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) Includes 25,000 shares of Biomedicals Common Stock which Mr. Jerney has the
right to acquire upon the exercise of currently exercisable stock options.

Biomedicals-4
<PAGE> 190

(6) Includes 9,000 shares of Biomedicals Common Stock which Mr. Kurz has the
right to acquire upon the exercise of currently exercisable stock options.

(7) Includes 9,500 shares of Biomedicals Common Stock which Mr. Lenagh has the
right to acquire upon the exercise of currently exercisable stock options.

(8) Includes 9,900 shares of Biomedicals Common Stock which Mr. MacDonald has
the right to acquire upon the exercise of currently exercisable stock
options.

(9) Includes 36,250 shares of Biomedicals Common Stock which Mr. Andrea has the
right to acquire upon the exercise of exercisable stock options.

(10) Includes 35,000 shares of Biomedicals Common Stock which Mr. Fallis has the
right to acquire upon the exercise of currently exercisable stock options.

(11) Includes 579,525 shares of Biomedicals Common Stock which certain directors
and executive directors have a right to acquire upon the exercise of
currently exercisable stock options.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Section 16(a) of the Exchange Act requires Biomedicals's officers and
directors, and persons who own more than ten percent of a registered class of
Biomedicals's equity securities, to file reports of ownership and changes in
ownership with the Commission and the New York Stock Exchange. Such officers,
directors and shareholders are required by Commission regulation to furnish
Biomedicals with copies of all Section 16(a) forms they file.

Based on its review of the copies of such forms received by Biomedicals, or
written representations from certain reporting persons that no Forms 5 were
acquired for those persons, Biomedicals believes that during fiscal year 1993
all filing requirements applicable to its officers, directors and ten percent
beneficial owners were timely satisfied.

Biomedicals-5
<PAGE> 191

BIOMEDICALS' EXECUTIVE COMPENSATION AND RELATED MATTERS

SUMMARY COMPENSATION TABLE

The following table sets forth the annual and long-term compensation
awarded to, earned by, or paid to the Chief Executive Officer and the four most
highly compensated executive officers other than the Chief Executive Officer of
Biomedicals (collectively, the "named executive officers") by Biomedicals for
services rendered in all capacities for 1993, 1992, and 1991.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
------------
ANNUAL COMPENSATION
-------------------------------------- AWARDS
OTHER ------------
ANNUAL SECURITIES ALL OTHER
NAME AND COMPENSATION UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) (1)($) OPTIONS ($)(2)(3)
- ------------------------------ ---- ---------- ---------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic 1993 $ 535,000 -- 60,000 $ 49,245
Chief Executive Officer 1992 535,000 $5,675,000 300,000 49,041(7)
1991 535,000 150,000 1,458
Adam Jerney(4) 1993 380,000 38,100 18,730
Former Acting CEO and 1992 321,821 370,000 100,000 20,268
Director 1991 244,799 156,000 6,421
Bill A. MacDonald(5) 1993 200,000 -- 50,000 13,498
President 1992 168,322 90,000 15,125
1991 157,310 190,000 14,960
Fred Andrea(6) 1993 199,509 -- -- 10,387
Retired President and 1992 25,000 2,524
Former Vice Chairman 1991 190,000 -- -- 2,841
Richard M. Fallis 1993 272,242 -- 30,000 7,038
Senior Vice President of 1992 160,000 3,000 20,000 4,729
Operations 1991 155,000 3,896 -- 6,134
</TABLE>

- ---------------

(2) ICN entered into certain Change in Control Employment Agreements in 1993.
See "ICN Executive Compensation and Related Matters -- Change of Control
Agreements" in the ICN section of the Addendum. Additionally, in the three
year period of 1993, 1992 and 1991, Mr. Panic realized $7,498,500,
$6,030,112 and $1,461,306, respectively, on sales of ICN, SPI and Viratek
Common Stock. In the same three year period, Mr. Jerney realized $1,012,799,
$0 and $1,627,440, respectively, on sales of ICN and SPI common stock. Mr.
Andrea realized $54,901 and $274,514, respectively, on sales of ICN and
Biomedicals Common Stock in the same three year period. Mr. Fallis realized
$105,850, $94,068 and $147,412, respectively, on sales of ICN, SPI and
Viratek 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 Biomedicals' 401(k) plan
and medical benefits and medical and life insurance premiums.

(4) Mr. Jerney was Chief Executive Officer of Biomedicals from July 15, 1992
through March 4, 1993. His compensation was paid by SPI, an affiliate of
Biomedicals.

(5) Mr. Bill MacDonald, President of Biomedicals since March 1993, was paid by
ICN.

(6) Mr. Andrea's salary in 1992 was paid by ICN. Mr. Andrea retired from
Biomedicals on June 7, 1993.

(7) Includes $39,262 and $38,242 for legal services and miscellaneous fringe
benefits in 1993 and 1992, respectively.

In July 1992, Milan Panic, Chairman of the Board, and Chief Executive
Officer of Biomedicals, with the approval of ICN's Board of Directors, became
Prime Minister of Yugoslavia and was granted a paid leave of

Biomedicals-6
<PAGE> 192

absence from all duties to Biomedicals 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 Biomedicals 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, 1993, and pursuant to the Leave of Absence and
Reemployment Agreement, returned to his duties at Biomedicals 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 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
$4,005,223.

COMPENSATION PURSUANT TO PLANS

STOCK OPTION PLANS

As of December 31, 1993, under Biomedicals' 1983 Incentive Stock Option
Plan (the "1983 Biomedicals ISO Plan") (which terminated in 1993) options to
acquire 433,360 shares of Biomedicals Common Stock 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 (the "1983 Biomedicals
Non-Qualified Plan"), as of December 31, 1993 there were options to acquire
323,970 shares of Biomedicals Common Stock outstanding (at prices ranging from
$0.83 to $7.50 per share) of which 199,165 options are currently exercisable.
During 1993, options to acquire 4,800 shares of Biomedicals Common Stock were
exercised at an average price of $4.125 per share.

At December 31, 1993, under Biomedicals' 1992 Incentive Stock Option Plan
(the "1992 Biomedicals Incentive Plan") options to acquire 418,750 shares of
Biomedicals Common Stock were outstanding (at a price of $3.25 per share) of
which 10,000 options are currently exercisable. During 1993, there were no
exercises.

At December 31, 1993, under Biomedicals' 1992 Non-Qualified Stock Option
Plan (the "1992 Biomedicals Non-Qualified Plan"), options to acquire 500,000
shares of Biomedicals Common Stock were outstanding (at prices ranging from
$3.25 to $7.00 per share) of which there are currently 132,500 options
exercisable. During 1993 there were 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, options to acquire 600,000 shares of Biomedicals Common Stock are
outstanding, all of which are exercisable at a price of $6.125 to $7.00 per
share.

COMPENSATION OF DIRECTORS OF BIOMEDICALS

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. In addition, nonemployee directors on the first business
day following each annual meeting of shareholders are granted options to acquire
10,000 shares of Biomedicals Common Stock pursuant to the 1992 Biomedicals
Non-Qualified Plan.

Biomedicals-7
<PAGE> 193

OPTION GRANTS

The following table sets forth information with respect to options to
purchase shares of Biomedicals Common Stock granted in 1993 to the named
executive officers.

OPTION GRANTS IN LAST FISCAL YEAR

<TABLE>
<CAPTION>
NUMBER OF % OF TOTAL OPTIONS GRANT DATE
SECURITIES UNDERLYING GRANTED TO EMPLOYEES EXERCISE EXPIRATION PRESENT VALUE
NAME OPTIONS GRANTED IN FISCAL YEAR PRICE DATE (1)(2)
- ----------------------------- --------------------- -------------------- -------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Milan Panic.................. 60,000 12% $ 3.25 2003 $60,600
Bill A. MacDonald............ 50,000 10% 3.25 2003 50,500
Richard M. Fallis............ 30,000 6% 3.25 2003 30,384
</TABLE>

- ---------------

(2) 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.

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 of Biomedicals during 1993 and (ii)
unexercised stock options held by the named executive officers of Biomedicals at
December 31, 1993.

AGGREGATED OPTION EXERCISES IN 1993
AND DECEMBER 31, 1993 OPTION VALUES

<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES VALUE DECEMBER 31, 1993 AT DECEMBER 31, 1993(2)
ACQUIRED 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 28,750 -0- -0-
Bill A. MacDonald............ -- -- 9,900 52,500 -0- 62,500
Richard M. Fallis............ 4,800 17,001.60 35,000 55,000 -0- 37,500
</TABLE>

- ---------------

(1) Difference between the fair market value of Biomedicals Common Stock on
December 31, 1993 and the exercise price at the date of exercise.

(2) Difference between the fair market value of Biomedicals Common Stock on
December 31, 1993 and the exercise price.

CERTAIN EMPLOYMENT AGREEMENTS

Biomedicals-8
<PAGE> 194

include Messrs. Jerney, Giordani and MacDonald, who are officers of Biomedicals.
The Employment Agreements are discussed above. See "Executive Compensation and
Related Matters -- Change in Control Employment Agreements" in the ICN section
of the Addendum.

COMPENSATION REPORT OF BIOMEDICALS

In 1993, the Compensation and Stock Option Committee of Biomedicals (the
"Biomedicals Compensation Committee") was composed of two independent
nonemployee directors, Mr. Lenagh and Mr. Dale. Mr. Dale passed away at the end
of 1993.

The following statement made by the sole member of the Biomedicals
Compensation Committee shall not be deemed incorporated by reference into any
filing under the Securities Act or the Exchange Act and shall not otherwise be
deemed filed under such Acts.

COMPENSATION PHILOSOPHY

The Board of Directors of Biomedicals adopts an annual and financial plan
which incorporated the goals and objectives to be achieved by Biomedicals and
its 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 his or her unit in relation to the plan. Specific goals and objectives for
each executive are reviewed by the executive and his or her 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 the executive's
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 Biomedicals by ICN and reviewed by the ICN Compensation Committee.
The members of the ICN Compensation Committee are different individuals than
those on the Biomedicals Compensation Committee, although the criteria used by
them to determine compensation are substantially 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, 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
Biomedicals and/or the executive. Growth in earnings per share goals for
Biomedicals were not met in 1992, primarily due to a restructuring of
Biomedicals. No bonuses were paid to executives in 1993 as the performance goals
of Biomedicals were not met. Stock options are granted based on a program
developed for Biomedicals by Towers Perrin, a compensation consulting company.
Each individual's base number of options is derived from a formula which ties to
his or her base salary. The Biomedicals Compensation 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 like companies in the same industry.
Biomedicals reviewed salary surveys prepared by Coopers & Lybrand and Towers
Perrin. The 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. Normally,
executives are reviewed annually; however, in 1992, only certain executives were
reviewed with an eye to retaining them as in 1992 performance of Biomedicals was
below expectations. In 1993, executives' base salaries were also not reviewed
due to Biomedicals' performance which was also below expectations.

Biomedicals-9
<PAGE> 195

BONUS PLAN

Biomedicals 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 term 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 to executives is tied to
salary and performance and each grant is evaluated. No grant to executives is
automatic.

CHIEF EXECUTIVE OFFICER COMPENSATION

The Biomedicals Compensation Committee determines the compensation of the
Chief Executive Officer based on a number of factors. The goal of the
Biomedicals Compensation 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 Biomedicals' performance, special one-time bonuses will be
paid, at the Biomedicals Compensation Committee's discretion, based on special
contributions made to Biomedicals. 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 Biomedicals 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 Biomedicals Compensation Committee of other
chief executive officers' compensation.

INTERNAL REVENUE CODE SECTION 162(M)

Section 162(m) of the Code, which was enacted in 1993, generally disallows
a federal income tax deduction to any publicly-held corporation for compensation
paid in excess of $1 million in any taxable year beginning after January 1, 1994
to the chief executive officer and any of the four other most highly compensated
executive officers who are employed by Biomedicals on the last day of the
taxable year. Section 162(m), however, does not disallow a federal income tax
deduction for qualified "performance-based compensation," the material terms of
which are disclosed to and approved by stockholders. The application of Section
162(m) to compensation attributable to options granted under the Amended and
Restated 1992 Non-Qualified Plan is not expected to have a material impact on
the federal income tax liability of Biomedicals.

Compensation and Stock Option
Committee
Thomas H. Lenagh

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

None.

Biomedicals-10
<PAGE> 196

PERFORMANCE GRAPH

The following graph compares Biomedicals' cumulative total stock return on
the shares of Biomedicals Common Stock with the cumulative return on the
Standard & Poor's 500 Stock Index and the 9-Stock Custom Composite Index for the
five years ended December 31, 1993. The graph assumes that the value of the
investment of the Biomedicals Common Stock in each index was $100 at December
31, 1988 and that all dividends were reinvested.

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.

LITIGATION

Biomedicals is a party to a number of pending or threatened lawsuits
arising out of, or incident to, the ordinary course of business. In the opinion
of management, the resolutions of these matters will not have a material adverse
effect upon the consolidated financial position or operations of Biomedicals.

BIOMEDICALS PROPOSAL NO. 3

APPROVAL OF AMENDED AND RESTATED 1992 BIOMEDICALS NON-QUALIFIED STOCK
OPTION PLAN, WHICH AMENDMENT AND RESTATEMENT INCREASED THE NUMBER OF SHARES
AVAILABLE FOR GRANT THEREUNDER FROM 500,000 TO 1,000,000 SHARES AND PROVIDED
THAT THE NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO ANY
INDIVIDUAL DURING THE TERM OF THE PLAN MAY NOT EXCEED 500,000 SHARES.

Biomedicals-11
<PAGE> 197

EFFECT OF THE MERGER ON THE 1992 BIOMEDICALS NON-QUALIFIED PLAN

At the Effective Time, all Options then outstanding under the Amended and
Restated 1992 Biomedicals Non-Qualified Plan will remain outstanding and will be
assumed by New ICN. Each such Option will be exercisable upon the same terms and
conditions as under the Amended and Restated 1992 Biomedicals Non-Qualified Plan
and the applicable option agreement issued thereunder, except that (a) each such
Option will be exercisable for that whole number of New ICN Shares (to the
nearest whole share) into which the number of shares of Common Stock of
Biomedicals under the unexercised portion of such option, if then outstanding,
would have been converted at the Effective Time, and (b) the exercise price per
New ICN Share will be an amount equal to the exercise price per share subject to
such Option prior to the Effective Time divided by the Biomedicals Exchange
Ratio (rounded upward to the nearest full cent).

1992 BIOMEDICALS NON-QUALIFIED PLAN

The 1992 Biomedicals Non-Qualified Plan was originally adopted by the Board
of Directors and approved by stockholders in 1992. The 1992 Biomedical
Non-Qualified Plan provides for the granting of options to key employees,
officers, directors, consultants and scientific advisors of Biomedicals.

At the Biomedicals Meeting, stockholders will be asked to consider and vote
on a proposal to approve the Amended and Restated 1992 Biomedicals Non-Qualified
Plan.

THE BOARD OF DIRECTORS OF BIOMEDICALS RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.

PROPOSED AMENDMENTS

The Biomedicals Compensation Committee has approved, effective as of May
10, 1994 and subject to approval of the stockholders at the Biomedicals Meeting,
amendments to the 1992 Biomedicals Non-Qualified Plan (i) to increase from
500,000 to 1,000,000 the number of shares authorized for issuance under the 1992
Biomedicals Non-Qualified Plan and (ii) to provide that the maximum number of
shares with respect to which options may be granted thereunder to any individual
during the term of such plan cannot exceed 500,000 shares.

During 1994, options to acquire 51,765 shares of Biomedicals Common Stock
were granted in excess of the shares authorized by the 1992 Biomedicals
Non-Qualified Plan. Such grants are subject to, and are not exercisable prior
to, stockholder approval of the Amended and Restated 1992 Biomedicals
Non-Qualified Plan and will be canceled should approval not be obtained.

The principal provisions of the Amended and Restated 1992 Biomedicals
Non-Qualified Plan are summarized below. This summary, however, does not purport
to be complete and is qualified in its entirety by the terms of the Amended and
Restated 1992 Biomedicals Non-Qualified Plan. All defined terms used below have
the meaning set forth in the Amended and Restated 1992 Biomedicals Non-Qualified
Plan, unless otherwise indicated.

PURPOSE OF THE AMENDED AND RESTATED 1992 BIOMEDICALS NON-QUALIFIED PLAN

Biomedicals believes stock option plans advance the interests of
Biomedicals and further its growth and development by encouraging and enabling
key employees, officers, directors, consultants and advisors of Biomedicals and
its subsidiaries and parent to acquire an increased personal and proprietary
interest in its continued success and progress. Biomedicals believes that the
Amended and Restated 1992 Biomedicals Non-Qualified Plan aids in attracting and
retaining directors, officers and other key employees who are in a position to
contribute materially to the successful conduct of Biomedicals's business and
affairs.

STOCK OPTION RIGHTS

Options granted under the Amended and Restated 1992 Biomedicals
Non-Qualified Plan are exercisable and expire in accordance with the specific
terms and conditions approved as to each option by the Biomedicals

Biomedicals-12
<PAGE> 198

Compensation Committee as set forth in a written stock option agreement. Under
no circumstances may an option be exercised later than ten years after the date
it is granted. Participation in the Amended and Restated 1992 Biomedicals
Non-Qualified Plan does not confer any right on a participant to continue in the
employ of Biomedicals or affect any right or power of Biomedicals to terminate
the services of such participant at any time.

GRANTS TO NONEMPLOYEE DIRECTORS

The Amended and Restated 1992 Biomedicals Non-Qualified Plan provides for
automatic non-discretionary annual grants to outside directors (nonemployee
directors); the timing, amounts, and other terms and provisions of such grants
will generally not be amended more than once every six months. Currently,
non-discretionary grants to purchase 10,000 shares of Biomedicals Common Stock
are made at the close of business on the first business day following the day of
each annual meeting of stockholders of Biomedicals.

DURATION AND MODIFICATIONS

The Amended and Restated 1992 Biomedicals Non-Qualified Plan shall remain
in effect until all options granted thereunder have been satisfied by the
issuance of shares and/or the payment of cash or shares, or terminated under the
terms of the Amended and Restated 1992 Biomedicals Non-Qualified Plan, provided
that no non-qualified stock options may be granted under the Amended and
Restated 1992 Biomedicals Non-Qualified Plan after January 23, 2002. The Board
of Directors and the Biomedicals Compensation Committee may, at any earlier
time, amended, alter, suspend or discontinue the Amended and Restated 1992
Biomedicals Non-Qualified Plan as it may deem proper, except that no such action
shall impair the rights of any grantee under any option previously granted under
the Amended and Restated 1992 Biomedicals Non-Qualified Plan without the consent
of the grantee. Biomedicals may not, however, without further approval by
Biomedicals's shareholders, take any action for which stockholder approval is
required under Rule 16b-3 of the Exchange Act.

FEDERAL INCOME TAX CONSEQUENCES RELATING TO NON-QUALIFIED STOCK OPTIONS

Options granted under the Amended and Restated 1992 Biomedicals
Non-Qualified Plan are intended to be non-qualified (i.e., non-statutory) stock
options. In general, an optionee to whom a non-qualified stock option is granted
will recognize no income at the time of the grant of the option. Upon exercise
of a non-qualified stock option, an optionee will recognize ordinary income in
an amount equal to the amount by which the fair market value of the shares on
the date of exercise exceeds the exercise price of the option (special rules may
apply in the case of an optionee who is subject to Section 16(b) of the Exchange
Act). Subject to the discussion below with respect to Section 162(m) of the
Code, if it complies with applicable withholding requirements, Biomedicals will
be entitled to a business expense deduction in the same amount and at the same
time as the optionee recognizes ordinary income.

Under certain circumstances, the accelerated vesting or the cashout of
options in connection with a Change in Control of Biomedicals might be deemed an
"excess parachute payment" for purposes of the golden parachute tax provisions
of Section 280G of the Code. To the extent it is so considered, the optionee may
be subject to a 20% excise tax and Biomedicals may be denied a tax deduction.

Section 162(m) of the Code generally disallows a federal income tax
deduction to any publicly held corporation for compensation paid in excess of $1
million in any taxable year beginning January 1, 1994 to the chief executive
officer and any of the four other most highly compensated executive officers who
are employed by Biomedicals on the last day of the taxable year. Section 162(m),
however, does not disallow a federal income tax deduction for qualified
"performance-based compensation," the material terms of which have been
disclosed to and approved by stockholders. The application of Section 162(m) to
compensation attributable to options granted under the Amended and Restated 1992
Biomedicals Non-Qualified Plan is not expected to have a material impact on the
federal income tax liability of Biomedicals.

Biomedicals-13
<PAGE> 199

SECURITIES SUBJECT TO THE AMENDED AND RESTATED 1992 BIOMEDICALS NON-QUALIFIED
PLAN

The maximum number of shares of Biomedicals Common Stock currently
available for issuance under the Amended and Restated 1992 Biomedicals
Non-Qualified Plan is 500,000 shares, except as described below under the
caption "Adjustment of Shares and Price." If the 1992 Biomedicals Non-Qualified
Plan is approved by stockholders, such maximum number will be increased to
1,000,000 shares and the maximum number which may be issued under the plan to
any individual during the term of the plan would be limited to 500,000 shares,
except as described below under the caption "Adjustment of Shares and Price."
The shares of Biomedicals Common Stock issued under the Amended and Restated
1992 Biomedicals Non-Qualified Plan may be either authorized and unissued shares
or shares previously issued and reacquired by Biomedicals. If an option expires
or terminates without having been exercised in full or if shares issued pursuant
to stock option agreements are repurchased by Biomedicals in accordance with the
terms thereof, the shares of Biomedicals Common Stock subject thereto shall
again be available for grant under the Amended and Restated 1992 Biomedicals
Non-Qualified Plan.

ADJUSTMENT OF SHARES AND PRICE

In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of Biomedicals's
stock, appropriate adjustment will be made of both the number of shares which
may be purchased under the Amended and Restated 1992 Biomedicals Non-Qualifed
Plan and the number and price per share of stock which may be purchased under
any outstanding options. In the case of a merger, sale of assets or similar
transaction which results in a replacement of Biomedicals' stock by stock of
another corporation, Biomedicals will make a reasonable effort to replace any
outstanding options granted under the Plan with comparable options to purchase
the stock of such other corporation, or will provide for immediate maturity of
all outstanding options and the termination of those options not exercised
within the time period specified by the Board of Directors.

ADMINISTRATION OF THE AMENDED AND RESTATED 1992 BIOMEDICALS NON-QUALIFIED PLAN

The 1992 Biomedicals Non-Qualified Plan is administered by the Biomedicals
Compensation Committee. The sole member of the Biomedicals Compensation
Committee is Mr. Lenagh as Mr. Dale, formerly a member of the Biomedicals
Compensation Committee, died in 1993. Due to the death of Mr. Dale in late 1993,
there is an opening on the Biomedicals Compensation Committee which will be
filled at the next regularly scheduled meeting of the Board (if the Merger is
not consummated).

No member of the Board receives additional compensation for his services in
administering the Amended and Restated 1992 Biomedicals Non-Qualified Plan
except insofar as such members receive $300 for each Biomedicals Compensation
Committee meeting attended. The Board shall from time to time appoint members of
the Biomedicals Compensation Committee who are disinterested persons and outside
directors for such terms as the Board shall determine, and members of the
Biomedicals Compensation Committee may be removed by the Board at any time with
or without cause.

Subject to the provisions of the Amended and Restated 1992 Biomedicals
Non-Qualified Plan, the Biomedicals Compensation Committee has full authority to
implement and carry out the Amended and Restated 1992 Biomedicals Non-Qualified
Plan, including, but not limited to, the following: to construe and interpret
the Amended and Restated 1992 Biomedicals Non-Qualified Plan and to make all
other determina-

Biomedicals-14
<PAGE> 200

tions necessary or advisable for the administration of the Amended and Restated
1992 Biomedicals Non-Qualified Plan.

ELIGIBILITY AND EXTENT OF PARTICIPATION

Non-qualified options may be granted and shares of Biomedicals Common Stock
may be acquired pursuant to stock option agreements under the Amended and
Restated 1992 Biomedicals Non-Qualified Plan for such number of shares and to
such employees, directors, advisors and consultants as the Biomedicals
Compensation Committee may from time to time determine. See "Administration of
the Amended and Restated 1992 Biomedicals Non-Qualified Plan." A grantee may be
granted more than one option under the Amended and Restated 1992 Biomedicals
Non-Qualified Plan. If the Amended and Restated 1992 Biomedicals Non-Qualified
Plan is approved, the maximum number of shares with respect to which options may
be granted to any individual during the term of the plan may not exceed 500,000
shares. All options are subject to the terms of non-qualified option agreements
executed by Biomedicals and the respective grantees. There are currently
approximately 105 individuals eligible to participate in the Amended and
Restated 1992 Biomedicals Non-Qualified Plan.

EXERCISE OF OPTIONS; DEATH, TERMINATION OF EMPLOYMENT

Options are granted by the Biomedicals Compensation Committee or the Board
at a price not less than one hundred percent of the fair market value of the
Biomedicals Common Stock on the date of grant.

Shares of Biomedicals Common Stock purchased pursuant to exercise of an
option are paid for in full at the time of exercise in cash or by certified
check or by surrender of previously acquired shares of Biomedicals Common Stock,
unless otherwise determined by the Biomedicals Compensation Committee.

The times at which non-qualified stock options are exercisable will be
determined by the Biomedicals Compensation Committee at the time of grant, which
shall in no event be more than ten years from the date of grant. The Biomedicals
Compensation Committee is authorized to determine the nature and extent of any
restrictions to be imposed on the shares of Biomedicals Common Stock which may
be acquired under the Amended and Restated 1992 Biomedicals Non-Qualified Plan,
including restrictions on the transferability of such shares.

If an optionee's employment is terminated for any reason, other than death
or disability, the option shall be exerciseable within three months after such
termination, but only to the extent it was exercisable on the date of
termination, provided that if such optionee should die during that three-month
period without having exercised his option, his personal representative, heirs
or legatees, as the case may be, shall have the right to exercise his option
within twelve (12) months of the date of death, but only to the extent it was
exercisable at the date of termination. If the optionee is disabled his options
shall terminate one year after the date of disability. In the event of the death
of an optionee while an employee, director, scientific advisor or consultant of
Biomedicals, his personal representatives, heirs or legatees, as the case may
be, shall have the right to exercise such option, to the extent it was
exercisable on the date of death, up to twelve (12) months from the date of
death of the optionee, but in no event after the expiration of the exercise
period.

The Biomedicals Compensation Committee shall determine all questions
regarding termination of employment and cause of termination, disability or
retirement.

FORM OF OPTIONS

Each non-qualified stock option under the Amended and Restated 1992
Biomedicals Non-Qualified Plan is evidenced by a written stock option agreement
in such form as the Biomedicals Compensation Committee shall have approved. The
holders of options shall have no rights as stockholders with respect to any
shares covered by options until the date of issuance of a stock certificate for
such shares.

Biomedicals-15
<PAGE> 201

NEW PLAN BENEFITS

AMENDED AND RESTATED 1992 BIOMEDICALS NON-QUALIFIED PLAN

The following table sets forth certain information concerning the number of
shares with respect to which options have been granted, subject to shareholder
approval, under the Amended and Restated 1992 Biomedicals Non-Qualified Plan to
the named executive officers.

Adam Jerney................................................. 51,765
Former Acting Chief Executive Officer and Director

Bill A. MacDonald........................................... --
President

Fred Andrea................................................. --
Retired President

Richard M. Fallis........................................... --
Senior Vice President of Operations

Executive Group............................................. 51,765

Non-Executive Director Group................................ --

Non-Executive Officer Employee Group........................ --
</TABLE>

Options which have been granted under the Amended and Restated 1992
Biomedicals Non-Qualified Plan are for a term of ten years, subject to earlier
termination under certain circumstances. The exercise price of the options is
100% of the fair market value of the underlying stock on the date of grant. The
per share exercise price of each option heretofore granted is $4.25. Options are
exercisable with respect to 25% of the underlying shares on each of the first
four anniversaries of the date of grant, provided that, on the relevant
anniversary, the optionee is and has been since the date of grant an employee,
director, scientific advisor or consultant of Biomedicals. In the event that the
optionee ceases to serve as an employee, director, scientific advisor or
consultant of Biomedicals for any reason, other than death or disability, the
option terminates three months after termination. The per share closing price of
Biomedicals Common Stock on September 23, 1994, as reported on the AMEX, was
$4.6875.

VOTE REQUIRED

Adoption of the Amended and Restated 1992 Biomedicals Non-Qualified Plan
requires the favorable vote of the holders of a majority of the shares of
Biomedicals Common Stock represented at the Biomedicals Meeting. Proxies
submitted by the Board of Directors will be voted for the proposal unless a vote
against the proposal or abstention is specifically indicated.

BIOMEDICALS PROPOSAL NO. 4

APPROVAL OF AMENDED AND RESTATED 1992 BIOMEDICALS INCENTIVE PLAN, WHICH
AMENDMENT AND RESTATEMENT INCREASED THE NUMBER OF SHARES AVAILABLE FOR GRANT
THEREUNDER FROM 500,000 TO 1,000,000 AND PROVIDED THAT THE MAXIMUM NUMBER OF
SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO ANY INDIVIDUAL DURING THE
TERM OF THE PLAN MAY NOT EXCEED 500,000 SHARES.

EFFECT OF THE MERGER ON THE 1992 BIOMEDICALS INCENTIVE PLAN

At the Effective Time, all Options then outstanding under the Amended and
Restated 1992 Biomedicals Incentive Plan will remain outstanding and will be
assumed by New ICN. Each such Option will be

Biomedicals-16
<PAGE> 202

exercisable upon the same terms and conditions as under the Amended and Restated
1992 Biomedicals Incentive Plan and the applicable option agreement issued
thereunder, except that (a) each such Option will be exercisable for that whole
number of New ICN Shares (to the nearest whole share) into which the number of
shares of Common Stock of Biomedicals under the unexercised portion of such
option, if then outstanding, would have been converted at the Effective Time,
and (b) the exercise price per New ICN Share will be an amount equal to the
exercise price per share subject to such Option prior to the Effective Time
divided by the Biomedicals Exchange Ratio (rounded upward to the nearest full
cent).

1992 BIOMEDICALS INCENTIVE PLAN

The 1992 Biomedicals Incentive Plan was originally adopted by the Board of
Directors and approved by shareholders in 1992. The 1992 Biomedicals Incentive
Plan provides for the granting options to key employees and officers of
Biomedicals.

At the Biomedicals Meeting, stockholders will be asked to consider and vote
on a proposal to approve the Amended and Restated 1992 Biomedicals Incentive
Plan.

THE BOARD OF DIRECTORS OF BIOMEDICALS RECOMMENDS A VOTE IN FAVOR OF THIS
PROPOSAL.

PROPOSED AMENDMENTS

The Biomedicals Compensation Committee has approved, effective as of May
10, 1994 and subject to approval of stockholders at the Biomedicals Meeting,
amendments to the 1992 Biomedicals Incentive Plan (i) to increase from 500,000
shares of Biomedicals Common Stock to 1,000,000 shares of Biomedicals Common
Stock, the number of shares authorized for issuance under the 1992 Biomedicals
Incentive Plan and (ii) to provide that the maximum number of shares with
respect to which options may be granted thereunder to any individual during the
term of such plan cannot exceed 500,000 shares.

The principal provisions of the Amended and Restated 1992 Biomedicals
Incentive Plan are summarized below. This summary, however, does not purport to
be complete and is qualified in its entirety by the terms of the Amended and
Restated 1992 Biomedicals Incentive Plan. All defined terms below have the
meaning set forth in the Amended and Restated 1992 Biomedicals Incentive Plan,
unless otherwise indicated.

PURPOSE OF THE AMENDED AND RESTATED 1992 BIOMEDICALS INCENTIVE PLAN

Biomedicals believes stock option plans advance the interests of
Biomedicals and further its growth and development by encouraging and enabling
key employees and officers of Biomedicals and its subsidiaries and parent to
acquire an increased personal and proprietary interest in its continued success
and progress. Biomedicals believes that the Amended and Restated 1992
Biomedicals Incentive Plan aids in attracting and retaining officers and other
key employees who are in a position to contribute materially to the successful
conduct of Biomedicals business and affairs.

STOCK OPTION RIGHTS

Options granted under the Amended and Restated 1992 Biomedicals Incentive
Plan are exercisable and expire in accordance with the specific terms and
conditions approved as to each option by the Biomedicals Compensation Committee
as set forth in a written stock option agreement. Under no circumstances may an
option be exercised later than ten years after the date it is granted (five
years in the case of an option granted to a Ten Percent Stockholder (as defined
below)). See "Federal Income Tax Consequences Relating to Incentive Stock
Options." Participation in the Amended and Restated 1992 Biomedicals Incentive
Plan does not confer any right of any participant to continue in the employ of
Biomedicals or affect any right or power of Biomedicals to terminate the
services of such participant at any time.

DURATION AND MODIFICATIONS

The Amended and Restated 1992 Biomedicals Incentive Plan shall remain in
effect until all options granted thereunder have been satisfied by the issuance
of shares or the payment of cash or shares, or

Biomedicals-17
<PAGE> 203

terminated under the terms of the Amended and Restated 1992 Biomedicals
Incentive Plan, provided that no incentive stock options may be granted under
the Amended and Restated 1992 Biomedicals Incentive Plan after January 21, 2002.
The Board of Directors and the Biomedicals Compensation Committee may, at any
earlier time, amend, alter, suspend or discontinue the Amended and Restated 1992
Biomedicals Incentive Plan as it may deem proper, except that no such action
shall impair the rights of any grantee under any option previously granted under
the Amended and Restated 1992 Biomedicals Incentive Plan without the consent of
the grantee. The Board of Directors may not, however, without further approval
by Biomedicals' shareholders, take any action for which stockholder approval is
required under Section 422 of the Code or any successor provision or under Rule
16b-3 under the Exchange Act, including, without limitation, any action which
would increase the total number of shares for which options may be issued under
the 1992 Biomedicals Incentive Plan, except as described under the caption
"Adjustment of Shares and Price," change the minimum exercise price, extend the
duration of the Amended and Restated 1992 Biomedicals Incentive Plan or extend
the period during and over which options may be exercised under the Amended and
Restated 1992 Biomedicals Incentive Plan.

FEDERAL INCOME TAX CONSEQUENCES RELATING TO INCENTIVE STOCK OPTIONS

Options granted under the Amended and Restated 1992 Biomedicals Incentive
Plan are intended to qualify as "Incentive Stock Options" within the meaning of
Section 422 and predecessor provisions of the Code. In general, an optionee will
not recognize taxable income upon the grant or exercise of an Incentive Stock
Option and Biomedicals will not be entitled to any business expense deduction
with respect to the grant or exercise of an Incentive Stock Option. (However,
upon the exercise of an Incentive Stock Option, the excess of the fair market
value on the date of the exercise of the shares received over the exercise price
of the shares will be treated as an adjustment to alternative minimum taxable
income). In order for the exercise of an Incentive Stock Option to qualify for
the foregoing tax treatment, the optionee generally must be an employee of
Biomedicals from the date the Incentive Stock Option is granted through the date
three months before the date of exercise, except in the case of death or
disability, where special rules apply.

If the optionee has held the shares acquired upon the exercise of an
Incentive Stock Option for at least two years after the date of grant and for at
least one year after the date of exercise, upon the disposition of the shares by
the optionee, the difference, if any, between the sale price of the shares and
the exercise price of the option will be treated as long-term capital gain or
loss. If the optionee does not satisfy these holding period requirements, the
optionee will recognize ordinary income at the time of the disposition of the
shares, generally in an amount equal to the excess of the fair market value of
the shares at the time the option was exercised over the exercise price of the
option. The balance of the gain realized, if any, will be long-term or
short-term capital gain, depending on whether or not the shares were sold more
than one year after the option was exercised. If the optionee sells the shares
prior to the satisfaction of the holding period requirements but at a price
below the fair market value of the shares at the time the option was exercised,
the amount of ordinary income will be limited to the excess of the amount
realized on the sale over the exercise price of the option. Biomedicals will
generally be allowed a business expense deduction to the extent the optionee
recognizes ordinary income.

SECURITIES SUBJECT TO THE AMENDED AND RESTATED 1992 BIOMEDICALS INCENTIVE PLAN

The maximum number of shares of Biomedicals Common Stock currently
available for issuance under the 1992 Biomedicals Incentive Plan is 500,000
shares, except as described below under the caption "Adjustment of Shares and
Price." If the Amended and Restated 1992 Biomedicals Incentive Plan is approved
by stockholders, such maximum number will be increased to 1,000,000 shares and
the maximum number which may be issued under the plan to any individual during
the term of the plan would be limited to 500,000 shares, except as described
below under the caption "Adjustment of Shares and Price." The shares of

Biomedicals-18
<PAGE> 204

Biomedicals Common Stock issued under the Amended and Restated 1992 Biomedicals
Incentive Plan may be either authorized and unissued shares or shares previously
issued and reacquired by Biomedicals. If an option expires or terminates without
having been exercised in full or if shares issued pursuant to stock option
agreements are repurchased by Biomedicals in accordance with the terms thereof,
the shares of Biomedicals Common Stock subject thereto shall again be available
for grant under the Amended and Restated 1992 Biomedicals Incentive Plan.

ADJUSTMENT OF SHARES AND PRICE

In the event of any stock split, stock dividend or similar transaction
which increases or decreases the number of outstanding shares of Biomedicals
Common Stock, appropriate adjustment will be made of both the number of shares
which may be purchased under the Amended and Restated 1992 Biomedicals Incentive
Plan and the number and price per share of stock which may be purchased under
any outstanding options. In the case of a merger, sale of assets or similar
transaction which results in a replacement of Biomedicals Common Stock by stock
of another corporation, Biomedicals will make a reasonable effort to replace any
outstanding options granted under the plan with comparable options to purchase
the stock of such other corporation, or will provide for immediate maturity of
all outstanding options and the termination of those options not exercised
within the time period specified by the Biomedicals Compensation Committee.

At the Effective Time, all Options then outstanding under the Amended and
Restated 1992 Biomedicals Incentive Plan will remain outstanding and will be
assumed by New ICN. Each such Option will be exercisable upon the same terms and
conditions as under the Amended and Restated 1992 Biomedicals Incentive Plan and
the applicable option agreement issued thereunder, except that (a) each such
Option will be exercisable for that whole number of New ICN Shares (to the
nearest whole share) into which the number of shares of Common Stock of
Biomedicals under the unexercised portion of such option, if then outstanding,
would have been converted at the Effective Time, and (b) the exercise price per
New ICN Share will be an amount equal to the exercise price per share subject to
such Option prior to the Effective Time divided by the Biomedicals Exchange
Ratio (rounded upward to the nearest full cent).

ADMINISTRATION OF THE AMENDED AND RESTATED 1992 BIOMEDICALS INCENTIVE PLAN

The 1992 Biomedicals Incentive Plan is administered by the Biomedicals
Compensation Committee. The sole member of the Biomedicals Compensation
Committee is Mr. Lenagh.

No member of the Board receives additional compensation for his services in
administering the Amended and Restated 1992 Biomedicals Incentive Plan except
insofar as such member receives $300 for each Biomedicals Compensation Committee
meeting attended. The Board shall from time to time appoint members of the
Biomedicals Compensation Committee who are disinterested persons and outside
directors for such terms as the Board shall determine, and members of the
Biomedicals Compensation Committee may be removed by the Board at any time with
or without cause.

Subject to the provisions of the Amended and Restated 1992 Biomedicals
Incentive Plan, the Biomedicals Compensation Committee has full authority to
implement and carry out the Amended and Restated 1992 Biomedicals Incentive Plan
including, but not limited to, the following: to construe and interpret the
Amended and Restated 1992 Biomedicals Incentive Plan and to make all other
determinations necessary or advisable for the administration of the Amended and
Restated 1992 Biomedicals Incentive Plan.

ELIGIBILITY AND EXTENT OF PARTICIPATION

Incentive Stock Options may be granted and shares may be acquired pursuant
to stock option agreements under the Amended and Restated 1992 Biomedicals
Incentive Plan for such number of shares and to such employees and directors who
are also employees, as the Biomedicals Compensation Committee may from time to
time determine. See "Administration of the Amended and Restated 1992 Biomedicals
Incentive Plan." A grantee may be granted more than one option under the Amended
and Restated 1992 Biomedicals Incentive Plan. If the Amended and Restated 1992
Biomedicals Incentive Plan is approved, the maximum number of shares with
respect to which options may be granted to any individual during the term of the
plan

Biomedicals-19
<PAGE> 205

may not exceed 500,000 shares. All options are subject to the terms of Incentive
Stock Option agreements executed by Biomedicals and the respective grantees.
There are currently approximately 100 individuals eligible to participate in the
Amended and Restated 1992 Biomedicals Incentive Plan.

EXERCISE OF OPTIONS; DEATH, TERMINATION OF EMPLOYMENT

Options are granted by the Biomedicals Compensation Committee at a price
not less than one hundred percent of the fair market value of the Biomedicals
Common Stock on the date of grant (not less than 110% in the case of options
granted to an employee who at the time of grant owns stock possessing more than
10% of the total combined voting power of all classes of capital stock of
Biomedicals (a "Ten Percent Stockholder")).

Shares of Biomedicals Common Stock purchased pursuant to exercise of an
option are paid for in full at the time of exercise in cash or by certified
check or by the surrender of previously acquired shares of Biomedicals Common
Stock, unless otherwise determined by the Board of Directors or the Biomedicals
Compensation Committee.

The times at which Incentive Stock Options are exercisable will be
determined by the Biomedicals Compensation Committee at the time of grant, which
shall in no event be more than ten years from the date of grant (five years in
the case of options granted to a Ten Percent Stockholder). The Biomedicals
Compensation Committee is authorized to determine the nature and extent of any
restrictions to be imposed on the shares of Biomedicals Common Stock which may
be acquired under the Amended and Restated 1992 Biomedicals Incentive Plan,
including restrictions on the transferability of such shares.

Options granted under the Amended and Restated 1992 Biomedicals Incentive
Plan are nonassignable and nontransferable other than by will or by the laws of
descent and distribution or pursuant to a qualified domestic relations order (as
defined in the Code). During the life of the recipient, the Incentive Stock
Option shall be exercisable only by the recipient.

If an optionee's employment is terminated for any reason, other than death
or disability, the option shall be exercisable within three months after such
termination, but only to the extent it was exercisable on the date of
termination, provided that if such employee should die during that three-month
period without having exercised his option, his personal representative, heirs
or legatees, as the case may be, shall have the right to exercise his option
within twelve (12) months of the date of death, but only to the extent it was
exercisable at the date of termination. If the optionee is disabled, his options
shall terminate one year after the date of disability. In the event of the death
of an optionee while an employee of Biomedicals, his personal representatives,
heirs or legatees, as the case may be, shall have the right to exercise such
option, to the extent it was exercisable on the date of death, up to twelve (12)
months from the date of death of the optionee, but in no event after the
expiration of the exercise period.

The Biomedicals Compensation Committee shall determine all questions
regarding termination of employment and cause of termination, permanent
disability or retirement.

FORM OF OPTIONS

Each Incentive Stock Option under the Amended and Restated 1992 Biomedicals
Incentive Plan is evidenced by a written stock option agreement in such form as
the Biomedicals Compensation Committee shall have approved. The holders of
options shall have no rights as stockholders with respect to any shares covered
by options until the date of issuance of a stock certificate for such shares.

VOTE REQUIRED

Adoption of the Amended and Restated 1992 Biomedicals Incentive Plan
requires the favorable vote of the holders of a majority of the shares of
Biomedicals Common Stock represented at the Biomedicals Meeting. Proxies
submitted by the Board of Directors will be voted for the proposal unless a vote
against the proposal or abstention is specifically indicated.

Biomedicals-20
<PAGE> 206

APPENDIX A
<PAGE> 207

CONFORMED COPY
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------

AGREEMENT AND PLAN OF MERGER

AMONG

SPI PHARMACEUTICALS, INC.,

ICN PHARMACEUTICALS, INC.,

VIRATEK, INC.,

ICN BIOMEDICALS, INC.

AND

ICN MERGER CORP.

DATED AS OF AUGUST 1, 1994, AS AMENDED

- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 208

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
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<S> <C>
ARTICLE 1
1. The Merger.......................................................................... 1
1.1. The Merger.................................................................. 1
1.2. The Closing................................................................. 1
1.3. Effective Time.............................................................. 1
ARTICLE 2
2. Restated Certificate of Incorporation, Bylaws and Directors of the Surviving
Corporation.......................................................................... 2
2.1. Restated Certificate of Incorporation....................................... 2
2.2. Bylaws...................................................................... 2
2.3. Directors................................................................... 2
ARTICLE 3
3. Conversion of Stock of ICN, SPI, Viratek and Biomedicals............................ 2
3.1. Conversion of Stock of ICN, SPI, Viratek and Biomedicals.................... 2
3.2. Exchange of Certificates Representing ICN Common Stock, SPI Common Stock,
Viratek
Common Stock or Biomedicals Common Stock.................................... 3
3.3. Adjustment of Exchange Ratios............................................... 5
ARTICLE 4
4. Representations and Warranties...................................................... 6
4.1. Existence; Good Standing; Corporate Authority; Compliance with Law.......... 6
4.2. Authorization, Validity and Effect of Agreements............................ 6
4.3. Capitalization.............................................................. 7
4.4. Subsidiaries................................................................ 7
4.5. Other Interests............................................................. 7
4.6. No Violation................................................................ 7
4.7. SEC Documents............................................................... 7
4.8. Litigation.................................................................. 8
4.9. Absence of Certain Changes.................................................. 8
4.10. Taxes....................................................................... 8
4.11. Employee Benefit Plans...................................................... 8
4.12. Labor Matters............................................................... 9
4.13. No Brokers.................................................................. 9
4.14. Opinion of Financial Advisors............................................... 9
4.15. Stock Ownership............................................................. 9
4.16. No Prior Activities......................................................... 9
ARTICLE 5
5. Covenants........................................................................... 9
5.1. Acquisition Proposals....................................................... 9
5.2. Conduct of Business......................................................... 10
</TABLE>

<TABLE>
<S> <C>
5.3. Meetings of Stockholders.................................................... 11
5.4. Filings; Other Action....................................................... 11
5.5. Inspection of Records....................................................... 11
5.6. Publicity................................................................... 11
5.7. Registration Statement...................................................... 11
5.8. Listing Application......................................................... 12
</TABLE>

A-(i)
<PAGE> 209

<TABLE>
<CAPTION>
PAGE
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<S> <C>
5.9. Further Action.............................................................. 12
5.10. Agreements by Affiliated Stockholders of the Companies...................... 12
5.11. Expenses.................................................................... 12
5.12. Indemnification and Insurance............................................... 12
5.13. Reorganization.............................................................. 13
5.14. Financing................................................................... 13
5.15. Alternative Structure....................................................... 13
5.16. Assumption of Employment Agreements......................................... 13
ARTICLE 6
6. Conditions.......................................................................... 13
ARTICLE 7
7. Termination......................................................................... 14
7.1. Termination by Mutual Consent............................................... 14
7.2. Termination by Any of the Companies and New ICN............................. 14
7.3. Effect of Termination and Abandonment....................................... 15
7.4. Extension; Waiver........................................................... 15
ARTICLE 8
8. General Provisions.................................................................. 15
8.1. Nonsurvival of Representations, Warranties and Agreements................... 15
8.2. Notices..................................................................... 15
8.3. Assignment; Binding Effect; Benefit......................................... 16
8.4. Entire Agreement............................................................ 16
8.5. Amendment................................................................... 16
8.6. Governing Law............................................................... 16
8.7. Counterparts................................................................ 16
8.8. Headings.................................................................... 16
8.9. Interpretation.............................................................. 16
8.10. Waivers..................................................................... 16
8.11. Incorporation of Exhibits................................................... 17
8.12. Severability................................................................ 17
8.13. Enforcement of Agreement.................................................... 17
8.14. Subsidiaries................................................................ 17
EXHIBIT A Form of ICN Merger Corp. Certificate of Incorporation
EXHIBIT B Affiliate Letter
</TABLE>

A-(ii)
<PAGE> 210

AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER (this "Agreement"), dated as of August 1,
1994, as amended, among SPI Pharmaceuticals, Inc., a Delaware corporation
("SPI"), ICN Pharmaceuticals, Inc., a Delaware corporation ("ICN"), Viratek,
Inc., a Delaware corporation ("Viratek"), ICN Biomedicals, Inc., a Delaware
corporation ("Biomedicals"; ICN, SPI, Viratek and Biomedicals are hereinafter
sometimes each referred to as a "Company" and collectively, as the "Companies")
and ICN Merger Corp., a Delaware corporation ("New ICN").

RECITALS

A. ICN owns 7,963,402 shares of common stock of SPI, equal to 39% of the
outstanding capital stock of SPI, 11,353,558 shares of common stock of Viratek,
equal to 63% of the outstanding capital stock of Viratek and 6,257,631 shares of
common stock of Biomedicals, equal to 69% of the outstanding common stock of
Biomedicals, and all of the outstanding preferred stock of Biomedicals.

B. The Boards of Directors of each of the Companies have determined that a
business combination among the Companies is in the best interests of their
respective companies and stockholders and presents an opportunity for their
respective Company to achieve long-term strategic and financial benefits, and
accordingly have agreed to effect the merger provided for herein upon the terms
and subject to the conditions set forth herein.

C. For federal income tax purposes, it is intended that the merger
provided for herein shall qualify as a reorganization within the meaning of
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").

D. Each of the Companies has received a fairness opinion relating to the
transactions contemplated hereby as more fully described herein.

E. Each of the Companies desires to make certain representations,
warranties and agreements in connection with the merger.

NOW, THEREFORE, in consideration of the foregoing, and of the
representations, warranties, covenants and agreements contained herein, the
parties hereto hereby agree as follows:

ARTICLE 1

1. THE MERGER.

1.1. The Merger. Subject to the terms and conditions of this
Agreement, at the Effective Time (as defined in Section 1.3), ICN, SPI, Viratek
and Biomedicals shall each be merged with and into New ICN in accordance with
this Agreement and the separate corporate existence of each of ICN, SPI, Viratek
and Biomedicals shall thereupon cease (the "Merger"). New ICN shall be the
surviving corporation in the Merger (sometimes hereinafter referred to as the
"Surviving Corporation"). The Merger shall have the effects specified in the
Delaware General Corporation Law (the "DGCL").

1.2. The Closing. Subject to the terms and conditions of this
Agreement, the closing of the Merger (the "Closing") shall take place (a) at the
offices of ICN, 3300 Hyland Avenue, Costa Mesa, California at 9:00 a.m., local
time, on the first business day immediately following the day on which the last
to be fulfilled or waived of the conditions set forth in Article 6 shall be
fulfilled or waived in accordance herewith or (b) at such other time, date or
place as the Companies may agree. The date on which the Closing occurs is
hereinafter referred to as the "Closing Date."

1.3. Effective Time. If all the conditions to the Merger set forth in
Article 6 shall have been fulfilled or waived in accordance herewith and this
Agreement shall not have been terminated as provided in Article 6, the parties
hereto shall cause a Certificate or Certificates of Merger meeting the
requirements of Section 251 of the DGCL to be properly executed and filed in
accordance with such Section on the Closing

A-1
<PAGE> 211

Date. The Merger shall become effective at the time of filing of the Certificate
of Merger with the Secretary of State of the State of Delaware in accordance
with the DGCL or at such later time which the parties hereto shall have agreed
upon and designated in such filing as the effective time of the Merger (the
"Effective Time").

ARTICLE 2

2. RESTATED CERTIFICATE OF INCORPORATION, BYLAWS AND DIRECTORS OF THE
SURVIVING CORPORATION.

2.1. Restated Certificate of Incorporation. The Restated Certificate
of Incorporation of New ICN in effect immediately prior to the Effective Time
(which shall be substantially in the form of Exhibit A hereto) shall be the
Certificate of Incorporation of the Surviving Corporation until duly amended in
accordance with applicable law except that Article First shall be amended to
change the name of the Surviving Corporation to "ICN Pharmaceuticals, Inc."

2.2. Bylaws. The Bylaws of New ICN in effect immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation, until duly
amended in accordance with applicable law.

2.3. Directors. The directors of the Surviving Corporation shall be
the directors of each of the Companies immediately prior to the Effective Time.

ARTICLE 3

3. CONVERSION OF STOCK OF ICN, SPI, VIRATEK AND BIOMEDICALS.

3.1. Conversion of Stock of ICN, SPI, Viratek and Biomedicals. (a) At
the Effective Time, each share of the Common Stock, $.01 par value (the "New ICN
Common Stock"), of New ICN outstanding immediately prior to the Effective Time
shall be canceled.

(b) Subject to paragraph (d) below, at the Effective Time by virtue of
the Merger and without any action on the part of the holder thereof, (i) each
share of the Common Stock, $1.00 par value (the "ICN Common Stock"), of ICN
issued and outstanding immediately prior to the Effective Time shall be
converted into the right to receive 0.512 shares of New ICN Common Stock (the
"ICN Exchange Ratio"); (ii) each share of the Common Stock, $.01 par value (the
"SPI Common Stock"), of SPI issued and outstanding immediately prior to the
Effective Time shall be converted into the right to receive 1.00 shares of New
ICN Common Stock (the "SPI Exchange Ratio"), (iii) each share of the Common
Stock, $.10 par value (the "Viratek Common Stock"), of Viratek issued and
outstanding immediately prior to the Effective Time shall be converted into the
right to receive 0.499 shares of New ICN Common Stock (the "Viratek Exchange
Ratio"); and (iv) each share of the Common Stock, $.01 par value (the
"Biomedicals Common Stock"), of Biomedicals issued and outstanding immediately
prior to the Effective Time shall be converted into the right to receive 0.197
shares of New ICN Common Stock (the "Biomedicals Exchange Ratio" and, together
with the ICN Exchange Ratio, the SPI Exchange Ratio and the Viratek Exchange
Ratio, the "Exchange Ratios").

(c) As a result of the Merger and without any action on the part of
the holders thereof, subject to paragraph (d) below, all shares of ICN Common
Stock, SPI Common Stock, Viratek Common Stock and Biomedicals Common Stock shall
cease to be outstanding and shall be cancelled and retired and shall cease to
exist, and each holder of a certificate (a "Certificate") representing any
shares of ICN Common Stock, SPI Common Stock, Viratek Common Stock or
Biomedicals Common Stock shall thereafter cease to have any rights with respect
to such shares of ICN Common Stock, SPI Common Stock, Viratek Common Stock or
Biomedicals Common Stock, as the case may be, except the right to receive,
without interest, the New ICN Common Stock and cash for fractional shares of New
ICN Common Stock in accordance with Sections 3.1(b) and 3.2(e) upon the
surrender of such Certificate.

(d) At the Effective Time, each share of (i) ICN Common Stock, SPI
Common Stock, Viratek Common Stock and Biomedicals Common Stock issued and held
in ICN's, SPI's, Viratek's or Biomedicals' treasury, as the case may be, (ii)
SPI Common Stock, Viratek Common Stock and Biomedicals Common Stock owned by
ICN, and (iii) Series A Preferred Stock, $.01 par value (the "Biomedicals Series
A Preferred

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Stock"), of Biomedicals and Series B Preferred Stock, $.01 par value (the
"Biomedicals Series B Preferred Stock"), of Biomedicals owned by ICN, shall, by
virtue of the Merger, cease to be outstanding and shall be cancelled and retired
without payment of any consideration therefor.

(e) At the Effective Time, all options (individually, an "Option" and
collectively the "Options") then outstanding under any stock option plan of any
of the Companies (the "Stock Option Plans") or under any stock option agreement
between any of the Companies, and any of the present or former employees,
consultants or advisors of any of them (the "Stock Option Agreements") shall
remain outstanding following the Effective Time. At the Effective Time, the
Options of ICN, SPI, Viratek and Biomedicals shall, by virtue of the Merger and
without any further action on the part of ICN, SPI, Viratek or Biomedicals or
the holder of any such Options, be assumed by New ICN in such manner that New
ICN (i) is a corporation "assuming a stock option in a transaction to which
Section 424(a) applied" within the meaning of Section 424 of the Code, or (ii)
to the extent that Section 424 of the Code does not apply to any such Options,
would be such a corporation were Section 424 applicable to such option. Each
Option assumed by New ICN shall be exercisable upon the same terms and
conditions as under the applicable Stock Option Plan and the applicable option
agreement issued thereunder or the applicable Stock Option Agreement, as the
case may be, except that (i) each such Option shall be exercisable for that
whole number of shares of New ICN Common Stock (to the nearest whole share) into
which the number of shares of ICN Common Stock, SPI Common Stock, Viratek Common
Stock or Biomedicals Common Stock, as the case may be, subject to such Option
immediately prior to the Effective Time would be converted under this Section
3.1 if such shares had been outstanding immediately prior to the Effective Time,
and (ii) the option price per share of New ICN Common Stock shall be an amount
equal to the option price per share of ICN Common Stock, SPI Common Stock,
Viratek Common Stock or Biomedicals Common Stock, as the case may be, subject to
such Option in effect immediately prior to the Effective Time divided by the
applicable Exchange Ratio (the price per share, as so determined, being rounded
upward to the nearest full cent). No payment shall be made for fractional
interests. From and after the date of this Agreement, no additional options
shall be granted by the Companies under the Stock Option Plans, the Stock Option
Agreements or otherwise.

(f) At the Effective Time, New ICN shall assume the rights and
obligations, if any, of each of the Companies under the convertible securities
(the "Convertible Securities") set forth in the Disclosure Schedule (as defined
in Section 4), including without limitation the rights conferred upon the
holders of the Convertible Securities to convert such securities into common
stock of any of the Companies, with respect to the Convertible Securities which
have not been redeemed or repaid pursuant to Section 5.14 hereof. New ICN shall
enter into such supplemental indentures or agreements, and shall take all
corporate and other action as may be required under the terms of the Convertible
Securities or otherwise to effect such assumption. New ICN shall reserve a
sufficient number of New ICN Common Stock for issuance upon exercise of such
conversion rights. Following such assumption, holders of the Convertible
Securities shall be entitled to receive New ICN Common Stock and cash pursuant
to the applicable Exchange Ratio.

3.2. Exchange of Certificates Representing ICN Common Stock, SPI
Common Stock, Viratek Common Stock or Biomedicals Common Stock. (a) As of the
Effective Time, New ICN shall deposit, or shall cause to be deposited, with an
exchange agent mutually selected by the Companies (the "Exchange Agent"), for
the benefit of the holders of shares of ICN Common Stock, SPI Common Stock,
Viratek Common Stock and Biomedicals Common Stock, for exchange in accordance
with this Article 3, certificates representing the shares of New ICN Common
Stock (such shares of New ICN Common Stock being hereinafter referred to as the
"Exchange Shares") to be issued pursuant to Section 3.1 and paid pursuant to
this Section 3.2 in exchange for outstanding shares of ICN Common Stock, SPI
Common Stock, Viratek Common Stock and Biomedicals Common Stock.

(b) Promptly after the Effective Time, New ICN shall cause the
Exchange Agent to mail to each holder of record of a Certificate or Certificates
(i) a letter of transmittal which shall specify that delivery shall be effected,
and risk of loss and title to the Certificates shall pass, only upon delivery of
the Certificates to the Exchange Agent and shall be in such form and have such
other provisions as New ICN may reasonably specify and (ii) instructions for use
in effecting the surrender of the Certificates in exchange for certificates
representing shares of New ICN Common Stock and cash in lieu of fractional
shares. Upon surrender of a

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Certificate for cancellation to the Exchange Agent together with such letter of
transmittal, duly executed and completed in accordance with the instructions
thereto, the holder of such Certificate shall be entitled to receive in exchange
therefor (x) a certificate representing that number of whole shares of New ICN
Common Stock and (y) a check representing the amount of cash in lieu of
fractional shares, if any, and unpaid dividends and distributions, if any, which
such holder has the right to receive in respect of the Certificate surrendered
pursuant to the provisions of this Article 3, after giving effect to any
required withholding tax, and the Certificate so surrendered shall forthwith be
cancelled. No interest will be paid or accrued on the cash in lieu of fractional
shares and unpaid dividends and distributions, if any, payable to holders of
Certificates. In the event of a transfer of ownership of ICN Common Stock, SPI
Common Stock, Viratek Common Stock or Biomedicals Common Stock which is not
registered in the transfer records of ICN, SPI, Viratek or Biomedicals, as the
case may be, a certificate representing the proper number of shares of New ICN
Common Stock, together with a check for the cash to be paid in lieu of
fractional shares, may be issued to such a transferee if the Certificate
representing such ICN Common Stock, SPI Common Stock, Viratek Common Stock or
Biomedicals Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence that any
applicable stock transfer taxes have been paid.

(c) Notwithstanding any other provisions of this Agreement, no
dividends on New ICN Common Stock shall be paid with respect to any shares of
ICN Common Stock, SPI Common Stock, Viratek Common Stock or Biomedicals Common
Stock represented by a Certificate until such Certificate is surrendered for
exchange as provided herein. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to the holder of the
certificates representing whole shares of New ICN Common Stock issued in
exchange therefor, without interest, (i) at the time of such surrender, the
amount of dividends or other distributions with a record date after the
Effective Time theretofore payable with respect to such whole shares of New ICN
Common Stock and not paid, less the amount of any withholding taxes which may be
required thereon, and (ii) at the appropriate payment date, the amount of
dividends or other distributions with a record date after the Effective Time but
prior to surrender and a payment date subsequent to surrender payable with
respect to such whole shares of New ICN Common Stock, less the amount of any
withholding taxes which may be required thereon.

(d) At or after the Effective Time, there shall be no transfers on the
stock transfer books of ICN, SPI, Viratek and Biomedicals of the shares of ICN
Common Stock, SPI Common Stock, Viratek Common Stock or Biomedicals Common Stock
which were outstanding immediately prior to the Effective Time. If, after the
Effective Time, Certificates are presented to New ICN, they shall be cancelled
and exchanged for certificates for shares of New ICN Common Stock and cash in
lieu of fractional shares, if any, deliverable in respect thereof pursuant to
this Agreement in accordance with the procedures set forth in this Article 3.
Certificates surrendered for exchange by any person constituting an "affiliate"
of ICN, SPI, Viratek or Biomedicals for purposes of Rule 145(c) under the
Securities Act of 1933, as amended (the "Securities Act"), shall not be
exchanged until New ICN has received a written agreement from such person as
provided in Section 5.10.

(e) No fractional shares of New ICN Common Stock shall be issued
pursuant hereto. In lieu of the issuance of any fractional share of New ICN
Common Stock pursuant to Section 3.1(b), holders of ICN Common Stock, SPI Common
Stock, Viratek Common Stock and Biomedicals Common Stock, as the case may be,
otherwise entitled to fractional shares of New ICN Common Stock shall be
entitled to receive upon the surrender of their Certificate(s) for ICN Common
Stock, SPI Common Stock, Viratek Common Stock and Biomedicals Common Stock, as
the case may be, a cash payment from the Exchange Agent or New ICN in an amount
equal to such holders' fractional interest in the net proceeds from the sale by
the Exchange Agent of shares of New ICN Common Stock as set forth below, less
any applicable withholding tax under the Code. As promptly as practicable
following the Effective Time, the Exchange Agent shall determine the excess of
the aggregate whole number of shares of New ICN Common Stock to be issued or
distributed to former holders of ICN Common Stock, SPI Common Stock, Viratek
Common Stock and Biomedicals Common Stock, as the case may be, in accordance
with Section 3.2(b) without giving effect to the elimination of fractional
interests as compared to the total number of Exchange Shares excluding
fractional

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interests. As promptly as practicable following the Effective Time, the Exchange
Agent, as agent for the holders of ICN Common Stock, SPI Common Stock, Viratek
Common Stock and Biomedicals Common Stock, as the case may be, shall sell the
excess shares of New ICN Common Stock at the then prevailing prices on the New
York Stock Exchange. The sale of such New ICN Common stock by the Exchange Agent
shall be executed through one or more firms of national standing which are
participants in the relevant markets for such securities and shall be executed
in round lots to the extent practicable. Until the net proceeds from such sale
or sales have been distributed to the former stockholders of ICN Common Stock,
SPI Common Stock, Viratek Common Stock or Biomedicals Common Stock entitled
thereto, the Exchange Agent will hold such proceeds in trust, without interest,
for such former stockholders (the "Trust"). New ICN shall pay all commissions,
transfer taxes and other out-of-pocket transaction costs, including the expenses
and compensation, of the Exchange Agent incurred in connection with such sale(s)
of New ICN Common Stock. The Exchange Agent shall determine the portion of the
Trust to which each such former holder of ICN Common Stock, SPI Common Stock,
Viratek Common Stock or Biomedicals Common Stock shall be entitled, if any, by
multiplying the amount of the aggregate net proceeds comprising that portion of
the Trust held in respect of each share of the New ICN Common Stock by a
fraction the numerator of which is the amount of the fractional interest in the
applicable security to which such former holder of ICN Common Stock, SPI Common
Stock, Viratek Common Stock or Biomedicals Common Stock is entitled and the
denominator of which is the sum of the fractional interests in such applicable
security to which all such former holders of ICN Common Stock, SPI Common Stock,
Viratek Common Stock or Biomedicals Common Stock are entitled. As soon as
practicable after the determination of the amount of cash, if any, to be paid to
former holders of ICN Common Stock, SPI Common Stock, Viratek Common Stock or
Biomedicals Common Stock in lieu of any fractional shares of New ICN Common
Stock, the Exchange Agent shall pay such amounts to such former stockholders who
have properly surrendered for exchange their Certificates.

(f) Any portion of the Exchange Fund (including the proceeds of any
investments thereof and any shares of New ICN Common Stock) that remains
unclaimed by the former stockholders of ICN, SPI, Viratek and Biomedicals one
year after the Effective Time shall be delivered to New ICN. Any former
stockholders of ICN, SPI, Viratek or Biomedicals who have not theretofore
complied with this Article 3 shall thereafter look only to New ICN for payment
of their shares of New ICN Common Stock, cash in lieu of fractional shares and
unpaid dividends and distributions on the New ICN Common Stock deliverable in
respect of each share of ICN Common Stock, SPI Common Stock, Viratek Common
Stock or Biomedicals Common Stock held by such stockholder as determined
pursuant to this Agreement, in each case, without any interest thereon.

(g) None of the Companies, New ICN, the Exchange Agent or any other
person shall be liable to any former holder of shares of ICN Common Stock, SPI
Common Stock, Viratek Common Stock or Biomedicals Common Stock for any amount
properly delivered to a public official pursuant to applicable abandoned
property, escheat or similar laws.

(h) In the event any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person claiming
such Certificate to be lost, stolen or destroyed and, if required by New ICN,
the posting by such person of a bond in such reasonable amount as New ICN may
direct as indemnity against any claim that may be made against it with respect
to such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the shares of New ICN Common Stock and cash in
lieu of fractional shares, and unpaid dividends and distributions on shares of
New ICN Common Stock as provided in Section 3.2(c), deliverable in respect
thereof pursuant to this Agreement.

3.3. Adjustment of Exchange Ratios. In the event that, subsequent to
the date of this Agreement but prior to the Effective Time, any of the Companies
changes the number of shares of its respective Common Stock issued and
outstanding as a result of a stock split, reverse stock split, stock dividend,
recapitalization or other similar transaction, the applicable Exchange Ratio
shall be appropriately adjusted.

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ARTICLE 4

4. REPRESENTATIONS AND WARRANTIES. Except as disclosed in the Disclosure
Schedule previously delivered to the other Companies and New ICN (the
"Disclosure Schedule") or as set forth in the Reports (as defined in Section
4.7), each of the Companies represents and warrants to each of the other
Companies and to New ICN and New ICN represents to each of the Companies as of
the date of this Agreement as follows:

4.1. Existence; Good Standing; Corporate Authority; Compliance with
Law. It is a corporation duly incorporated, validly existing and in good
standing under the laws of its jurisdiction of incorporation. It is duly
licensed or qualified to do business as a foreign corporation and is in good
standing under the laws of any other state of the United States in which the
character of the properties owned or leased by it therein or in which the
transaction of its business makes such qualification necessary, except where the
failure to be so qualified would not have a material adverse effect on the
business, results of operations or financial condition of it and its
Subsidiaries (as defined in Section 8.14) taken as a whole (a "Material Adverse
Effect"). It has all requisite corporate power and authority to own, operate and
lease its properties and carry on its business as now conducted. Each of its
Significant Subsidiaries (as defined in Section 8.14 hereof) is a corporation or
partnership duly organized, validly existing and in good standing under the laws
of its jurisdiction of incorporation or organization, has the corporate or
partnership power and authority to own its properties and to carry on its
business as it is now being conducted, and is duly qualified to do business and
is in good standing in each jurisdiction in which the ownership of its property
or the conduct of its business requires such qualification, except for
jurisdictions in which such failure to be so qualified or to be in good standing
would not have a Material Adverse Effect. Neither it nor any of its Subsidiaries
is in violation of any order of any court, governmental authority or arbitration
board or tribunal, or any law, ordinance, governmental rule or regulation to
which it or any of its Subsidiaries or any of their respective properties or
assets is subject, where such violation would have a Material Adverse Effect. It
and its Subsidiaries have obtained all licenses, permits and other
authorizations and have taken all actions required by applicable law or
governmental regulations in connection with their business as now conducted,
where the failure to obtain any such item or to take any such action would have
a Material Adverse Effect. The copies of its Certificate of Incorporation and
Bylaws previously delivered to each of the other Companies are true and correct.

4.2. Authorization, Validity and Effect of Agreements. It has the
requisite corporate power and authority to execute and deliver this Agreement
and all agreements and documents contemplated hereby. Subject only to the
approval of this Agreement and the transactions contemplated hereby by the
holders of the requisite number of its outstanding shares of Common Stock, the
consummation by it of the transactions contemplated hereby has been duly
authorized by all requisite corporate action. This Agreement constitutes, and
all agreements and documents contemplated hereby (when executed and delivered
pursuant hereto for value received) will constitute, its valid and legally
binding obligations, enforceable in accordance with their respective terms,
subject to applicable bankruptcy, insolvency, moratorium or other similar laws
relating to creditors' rights and general principles of equity.

4.3. Capitalization. (a) Its capitalization is set forth in the
Disclosure Schedule. Since March 31, 1994, no additional shares of its capital
stock have been issued. Other than as set forth in the Disclosure Schedule, it
has no bonds, debentures, notes or other obligations outstanding the holders of
which have the right to vote (or which are convertible into or exercisable for
securities having the right to vote) with its stockholders on any matter. All of
its issued and outstanding shares of Common Stock are duly authorized, validly
issued, fully paid, nonassessable and free of preemptive rights. In the case of
New ICN, the issuance and delivery by it of shares of its Common Stock in
connection with the Merger and this Agreement have been duly and validly
authorized by all necessary corporate action on its part and the shares of New
ICN Common Stock to be issued in connection with the Merger and this Agreement,
when issued in accordance with the terms of this Agreement, will be validly
issued, fully paid and nonassessable.

(b) Other than as contemplated by this Agreement or as set forth in
the Disclosure Schedule, there are at the date of this Agreement no existing
options, warrants, calls, subscriptions, convertible securities, or other
rights, agreements or commitments which obligate it or any of its Subsidiaries
to issue, transfer or sell any shares of its capital stock or of the capital
stock of any of its Subsidiaries and, except as set forth in the

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Disclosure Schedule it has no outstanding options, warrants or other securities
exercisable for, or convertible into, shares of its Common Stock, the terms of
which would require any anti-dilution adjustments by reason of the consummation
of the transactions contemplated hereby. In the case of the Companies, after the
Effective Time, except as set forth in the Disclosure Schedule New ICN will have
no obligation to issue, transfer or sell any shares of capital stock of ICN,
SPI, Viratek or Biomedicals pursuant to any Benefit Plan (as defined in Section
4.11).

4.4. Subsidiaries. It owns directly or indirectly each of the
outstanding shares of capital stock of each of its Subsidiaries. Each of the
outstanding shares of capital stock of each of its Subsidiaries is duly
authorized, validly issued, fully paid and nonassessable, and is owned, directly
or indirectly, by it free and clear of all liens, pledges, security interests,
claims or other encumbrances other than liens imposed by local law which are not
material. The following information for each of its Subsidiaries is set forth in
the Disclosure Schedule: (i) its name and jurisdiction of incorporation or
organization; (ii) its authorized capital stock or share capital; and (iii) the
number of issued and outstanding shares of capital stock or share capital.

4.5. Other Interests. Except for interests in its Subsidiaries,
neither it nor any of its Subsidiaries owns directly or indirectly any interest
or investment (whether equity or debt) in any corporation, partnership, joint
venture, business, trust or entity.

4.6. No Violation. Neither the execution and delivery by it of this
Agreement nor the consummation by it of the transactions contemplated hereby in
accordance with the terms hereof, will: (i) conflict with or result in a breach
of any provisions of its Certificate of Incorporation or Bylaws; (ii) result in
a breach or violation of, a default under, or the triggering of any payment or
other material obligations pursuant to, or accelerate vesting under, any of its
existing Stock Option Plans or Stock Option Agreements or any grant or award
made under any of the foregoing, (iii) violate, or conflict with, or result in a
breach of any provision of, or constitute a default (or an event which, with
notice or lapse of time or both, would constitute a default) under, or result in
the termination or in a right of termination or cancellation of, or accelerate
the performance required by, or result in the creation of any lien, security
interest, charge or encumbrance upon any of its material properties or the
material properties of its Subsidiaries under, or result in being declared void,
voidable, or without further binding effect, any of the terms, conditions or
provisions of any note, bond, mortgage, indenture, deed of trust or any material
license, franchise, permit, lease, contract, agreement or other instrument,
commitment or obligation to which it or any of its Subsidiaries is a party, or
by which it or any of its Subsidiaries or any of their properties is bound or
affected, except for any of the foregoing matters which would not have a
Material Adverse Effect; or (iv) other than the filings provided for in Article
1, certain federal, state and local regulatory filings, filings required under
the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), or applicable
state securities and "Blue Sky" laws or filings in connection with the
maintenance of qualification to do business in other jurisdictions
(collectively, the "Regulatory Filings"), require any material consent, approval
or authorization of, or declaration, filing or registration with, any domestic
governmental or regulatory authority, the failure to obtain or make which would
have a Material Adverse Effect.

4.7. SEC Documents. It has delivered to the other Companies each
registration statement, report, proxy statement or information statement
prepared by it since December 31, 1993, including, without limitation, (i) its
Annual Report on Form 10-K for the year ended December 31, 1993, (ii) its Form
10K/A amending its 1993 Form 10-K and (iii) its Quarterly Reports on Form 10-Q
for the period ended March 31, 1994, each in the form (including exhibits and
any amendments thereto) filed with the Securities and Exchange Commission (the
"SEC") (collectively, the "Reports"). As of their respective dates, the Reports
(i) were prepared in all material respects in accordance with the applicable
requirements of the Securities Act, the Exchange Act, and the rules and
regulations thereunder and (ii) did not contain any untrue statement of a
material fact or omit to state a material fact required to be stated therein or
necessary to make the statements made therein, in the light of the circumstances
under which they were made, not misleading. Each of its consolidated balance
sheets included in or incorporated by reference into the Reports (including the
related notes and schedules) fairly presents its consolidated financial position
as of its date and each of its consolidated statements of income, retained
earnings and cash flows included in or incorporated by reference into the
Reports (including any related notes and schedules) fairly presents its
consolidated results of

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operations, retained earnings or cash flow, as the case may be, for the periods
set forth therein (subject, in the case of unaudited statements, to normal
year-end audit adjustments which would not be material in amount or effect), in
each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except as may be noted
therein. Except as and to the extent set forth on its consolidated balance sheet
at December 31, 1993, including all notes thereto, or as set forth in the
Reports, neither it nor any of its Subsidiaries has any material liabilities or
obligations of any nature (whether accrued, absolute, contingent or otherwise)
that would be required to be reflected on, or reserved against in, a balance
sheet or in the notes thereto, prepared in accordance with generally accepted
accounting principles consistently applied, except liabilities arising in the
ordinary course of business since such date.

4.8. Litigation. There are no actions, suits or proceedings pending
against it or its Subsidiaries or, to the actual knowledge of its executive
officers, threatened against it or its Subsidiaries, at law or in equity, or
before or by any federal or state commission, board, bureau, agency or
instrumentality, that are reasonably likely to have a Material Adverse Effect.

4.9. Absence of Certain Changes. Since December 31, 1993, it has
conducted its business only in the ordinary course of such business and there
has not been (i) any Material Adverse Effect; (ii) any declaration, setting
aside or payment of any dividend or other distribution with respect to its
capital stock; or (iii) any material change in its accounting principles,
practices or methods.

4.10. Taxes. It and each of its Subsidiaries (i) has timely filed all
material federal, state and foreign tax returns required to be filed by any of
them for tax years ended prior to the date of this Agreement or requests for
extensions have been timely filed and any such request shall have been granted
and not expired and all such returns are complete in all material respects, (ii)
has paid or accrued all taxes shown to be due and payable on such returns, (iii)
has properly accrued all such taxes for such periods subsequent to the periods
covered by such returns, and (iv) has no "open" years for federal income tax
returns.

4.11. Employee Benefit Plans. All employee benefit plans and other
benefit arrangements covering its employees and the employees of its
Subsidiaries (the "Benefit Plans") are listed in the Reports, except Benefit
Plans which are not material. To the extent applicable, the Benefit Plans
comply, in all material respects, with the requirements of the Employee
Retirement Income Security Act of 1974, as amended ("ERISA"), and the Code, and
any Benefit Plan intended to be qualified under Section 401(a) of the Code has
been determined by the Internal Revenue Service (the "IRS") to be so qualified.
No Benefit Plan is covered by Title IV of ERISA or Section 412 of the Code.
Neither a Benefit Plan nor the Company has incurred any liability or penalty
under Section 4975 of the Code or Section 502(i) of ERISA. Each Benefit Plan has
been maintained and administered in all material respects in compliance with its
terms, ERISA and the Code to the extent applicable thereto. To the knowledge of
the executive officers of the Company, there are no pending or anticipated
material claims against or otherwise involving any of the Benefit Plans and no
suit, action or other litigation (excluding claims for benefits incurred in the
ordinary course of Benefit Plan activities) has been brought against or with
respect to any such Benefit Plan, except for any of the foregoing which would
not have a Material Adverse Effect. All material contributions required to be
made as of the date hereof to the Benefit Plans have been made or provided for.
Neither the Company nor any entity under "common control" with it within the
meaning of ERISA Section 4001 has contributed to, or been required to contribute
to, any "multi-employer plan" (as defined in Section 3(37) and 4001(a)(3) of
ERISA). The Company does not maintain or contribute to any plan or arrangement
which provides or has any liability to provide life insurance, medical or other
employee welfare benefits to any employee or former employee upon his retirement
or termination of employment and it has never represented, promised or
contracted (whether in oral or written form) to any employee or former employee
that such benefits would be provided. The execution of, and performance of the
transactions contemplated in, this Agreement will not (either alone or upon the
occurrence of any additional or subsequent events) constitute an event under any
Benefit Plan, policy, arrangement or agreement or any trust or loan that will or
may result in any payment (whether of severance pay or otherwise), acceleration,
forgiveness of indebtedness, vesting, distribution, increase in benefits or
obligations to fund benefits with respect to any employee.

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4.12. Labor Matters. Neither it nor any of its Subsidiaries is a party
to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. There is no
unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of its executive officers threatened against it or its Subsidiaries
relating to their business, except for any such proceeding which would not have
a Material Adverse Effect. To the knowledge of its executive officers, there are
no organizational efforts with respect to the formation of a collective
bargaining unit presently being made or threatened involving any of its
employees or employees of any of its Subsidiaries.

4.13. No Brokers. It has not entered into, and is not aware of, any
contract, arrangement or understanding with any person or firm which may result
in the obligation of any of the other Companies to pay any finder's fees,
brokerage or agent's commissions or other like payments in connection with the
negotiations leading to this Agreement or the consummation of the transactions
contemplated hereby, except that it has retained a financial advisor the
identity of which and the arrangements with which have been disclosed in writing
to the other Companies prior to the date hereof.

4.14. Opinion of Financial Advisors. Except in the case of New ICN, it
has received the opinion of the financial advisor referred to in Section 4.13,
to the effect that as of the date hereof, the Exchange Ratio applicable to it is
fair from a financial point of view to the holders of its common stock.

4.15. Stock Ownership. Except in the case of ICN, neither it nor any
of its Subsidiaries owns any shares of common stock or other securities
convertible into common stock of any of the other Companies. In the case of ICN,
ICN owns the shares of capital stock of the other Companies as set forth in the
first recital of this Agreement.

4.16. No Prior Activities. New ICN has been recently formed and has
not, except as contemplated by this Agreement, engaged, directly or through any
Subsidiary, in any business or activities of any type or kind whatsoever.

ARTICLE 5

5. COVENANTS.

5.1. Acquisition Proposals. Prior to the Effective Time, each of the
Companies agrees (a) that neither it nor any of its Subsidiaries shall, and each
of them shall direct and use its best efforts to cause its respective officers,
directors, employees, agents and representatives (including, without limitation,
any investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, initiate, solicit or encourage, directly or indirectly,
any inquiries or the making or implementation of any proposal or offer
(including, without limitation, any proposal or offer to its stockholders) with
respect to a merger, acquisition, consolidation or similar transaction
involving, or any purchase of all or any significant portion of the assets or
any equity securities of, it or any of its Significant Subsidiaries (any such
proposal or offer being hereinafter referred to as an "Acquisition Proposal") or
engage in any negotiations concerning, or provide any confidential information
or data to, or have any discussions with, any person relating to an Acquisition
Proposal, or otherwise facilitate any effort or attempt to make or implement an
Acquisition Proposal; and (b) that it will notify the other Companies
immediately if any such inquiries or proposals are received by, any such
information is requested from, or any such negotiations or discussions are
sought to be initiated or continued with, it; provided, however, that nothing
contained in this Section 5.1 shall prohibit its Board of Directors from (i)
furnishing information to or entering into discussions or negotiations with, any
person or entity that makes an unsolicited bona fide proposal to acquire it
pursuant to a merger, consolidation, share exchange, purchase of a substantial
portion of the assets, business combination or other similar transaction, if,
and only to the extent that, (A) its Board of Directors determines in good faith
that such action is required for the Board of Directors to comply with its
fiduciary duties to stockholders imposed by law, (B) prior to furnishing such
information to, or entering into discussions or negotiations with, such person
or entity, such Company provides written notice to the other Companies to the
effect that it is furnishing information to, or entering into discussions or
negotiations with, such person or entity, and (C) subject to any confidentiality
agreement with such person or entity (which such Company determined in good
faith was required to be executed in order for its Board of

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Directors to comply with its fiduciary duties to stockholders imposed by law),
such Company keeps the other Companies informed of the status (not the terms) of
any such discussions or negotiations; and (ii) to the extent applicable,
complying with Rule 14e-2 promulgated under the Exchange Act with respect to an
Acquisition Proposal. Nothing in this Section 5.1 shall (x) permit any Company
to terminate this Agreement (except as specifically provided in Article 7
hereof), (y) permit any Company to enter into any agreement with respect to an
Acquisition Proposal during the term of this Agreement (it being agreed that
during the term of this Agreement, no Company shall enter into any agreement
with any person that provides for, or in any way facilitates, an Acquisition
Proposal (other than a confidentiality agreement in customary form)), or (z)
affect any other obligation of any party under this Agreement.

5.2. Conduct of Business. Prior to the Effective Time, from the date
hereof, except as contemplated by any other provision of this Agreement, unless
the other Companies and New ICN have consented in writing thereto, each of the
Companies and New ICN agrees that it:

(a) Shall, and shall cause each of its Subsidiaries to, conduct their
operations according to their usual, regular and ordinary course in
substantially the same manner as heretofore conducted;

(b) Shall use its reasonable efforts, and shall cause each of its
respective Subsidiaries to use its reasonable efforts, to preserve intact
their business organizations and goodwill, keep available the services of
their respective officers and employees and maintain satisfactory
relationships with those persons having business relationships with them;

(c) Shall confer on a regular basis with one or more representatives
of each of the other Companies to report operational matters of materiality
and any proposals to engage in material transactions;

(d) Shall not amend its Certificate of Incorporation or Bylaws;

(e) Shall promptly notify each of the other Companies of any material
emergency or other material change in the condition (financial or
otherwise), business, properties, assets, liabilities, prospects or the
normal course of its business or in the operation of its properties, any
material litigation or material governmental complaints, investigations or
hearings (or communications indicating that the same may be contemplated),
or the breach in any material respect of any representation or warranty
contained herein;

(f) Shall promptly deliver to each of the other Companies true and
correct copies of any report, statement or schedule filed with the SEC
subsequent to the date of this Agreement;

(g) Shall not (i) except pursuant to the exercise of options,
warrants, conversion rights and other contractual rights existing on the
date hereof and disclosed pursuant to this Agreement, issue any shares of
its capital stock, effect any stock split or otherwise change its
capitalization as it existed on the date hereof, (ii) grant, confer or
award any option, warrant, conversion right or other right not existing on
the date hereof to acquire any shares of its capital stock, (iii) increase
any compensation or enter into or amend any employment agreement with any
of its present or future officers or directors, except for normal increases
consistent with past practice and the payment of cash bonuses to officers
pursuant to and consistent with existing plans or programs, or (iv) adopt
any new employee benefit plan (including any stock option, stock benefit or
stock purchase plan) or amend any existing employee benefit plan in any
material respect, except for changes which are less favorable to
participants in such plans or which apply to employees of each of the
Companies to the same extent such new plan or amendment would apply to such
employees if adopted by the Surviving Corporation after the Effective Time;

(h) Shall not (i) declare, set aside or pay any dividend or make any
other distribution or payment with respect to any shares of its capital
stock or (ii) except in connection with the use of shares of capital stock
to pay the exercise price or tax withholding in connection with stock-based
employee benefit plans, directly or indirectly redeem, purchase or
otherwise acquire any shares of its capital stock or capital stock of any
of its Subsidiaries, or make any commitment for any such action; and

(i) Shall not, and shall not permit any of its Subsidiaries to sell,
lease or otherwise dispose of any of their assets (including capital stock
of Subsidiaries) which are material, individually or in the aggregate,
except in the ordinary course of business.

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5.3. Meetings of Stockholders. Each of the Companies will take all
action necessary in accordance with applicable law and its Certificate of
Incorporation and Bylaws to convene a meeting of its stockholders as promptly as
practicable to consider and vote upon the approval of this Agreement and the
transactions contemplated hereby. The Board of Directors of each of the
Companies shall recommend such approval and each of the Companies shall take all
lawful action to solicit such approval; including, without limitation, timely
mailing the Proxy Statement/Prospectus (as defined in Section 5.7); provided,
however, that such recommendation or solicitation is subject to any action taken
by, or upon authority of, the Board of Directors of any of the Companies in the
exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law. The Companies shall coordinate and cooperate with
respect to the timing of such meetings and shall use their best efforts to hold
such meetings on the same day. It shall be a condition to the mailing of the
Proxy Statement/Prospectus that each of ICN, SPI, Viratek and Biomedicals shall
have received an opinion of the financial advisor referred to in Section 4.13,
dated the date of the Proxy Statement/Prospectus, to the effect that, as of the
date thereof, the applicable Exchange Ratio is fair to the holders of its common
stock. SPI, as sole stockholder of New ICN, shall take appropriate action to
approve this Agreement.

5.4. Filings; Other Action. Subject to the terms and conditions herein
provided, each of the Companies and New ICN shall: (a) promptly make their
respective filings, if any are required, and thereafter make any other required
submissions under the HSR Act with respect to the Merger; (b) use all reasonable
efforts to cooperate with one another in (i) determining which filings are
required to be made prior to the Effective Time with, and which consents,
approvals, permits or authorizations are required to be obtained prior to the
Effective Time from, governmental or regulatory authorities of the United
States, the several states and foreign jurisdictions in connection with the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby and (ii) timely making all such filings and
timely seeking all such consents, approvals, permits or authorizations; and (c)
use all reasonable efforts to take, or cause to be taken, all other action and
do, or cause to be done, all other things necessary, proper or appropriate to
consummate and make effective the transactions contemplated by this Agreement.
If, at any time after the Effective Time, any further action is necessary or
desirable to carry out the purpose of this Agreement, the proper officers and
directors of the Companies and New ICN shall take all such necessary action.

5.5. Inspection of Records. From the date hereof to the Effective
Time, each of the Companies and New ICN shall allow all designated officers,
attorneys, accountants and other representatives of the other Companies and New
ICN access at all reasonable times to the records and files, correspondence,
audits and properties, as well as to all information relating to commitments,
contracts, titles and financial position, or otherwise pertaining to the
business and affairs, of it and its Subsidiaries.

5.6. Publicity. Subject to their respective legal obligations
(including requirements of stock exchanges and other similar regulatory bodies),
the Companies and New ICN shall consult with each other, and use reasonable
efforts to agree upon the text of any press release, before issuing any such
press release or otherwise making public statements with respect to the
transactions contemplated hereby and in making any filings with any federal or
state governmental or regulatory agency or with any national securities exchange
with respect thereto.

5.7. Registration Statement. The Companies and New ICN shall cooperate
and promptly prepare and New ICN shall file with the SEC as soon as practicable
a Registration Statement on Form S-4 (the "Form S-4") under the Securities Act,
with respect to the New ICN Common Stock issuable in the Merger, a portion of
which Registration Statement shall also serve as the joint proxy statement with
respect to the meetings of the stockholders of each of the Companies in
connection with the Merger (the "Proxy Statement/ Prospectus"). The respective
parties will cause the Proxy Statement/Prospectus and the Form S-4 to comply as
to form in all material respects with the applicable provisions of the
Securities Act, the Exchange Act and the rules and regulations thereunder. New
ICN shall use all reasonable efforts, and the Companies will cooperate with New
ICN, to have the Form S-4 declared effective by the SEC as promptly as
practicable. New ICN shall use its best efforts to obtain, prior to the
effective date of the Form S-4, all necessary state securities law or "Blue Sky"
permits or approvals required to carry out the transactions contemplated by this
Agreement. New ICN agrees that the Proxy Statement/Prospectus and each amendment
or supplement thereto at the time of mailing thereof and at the time of the
respective meetings of stockholders of each of the

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Companies, or, in the case of the Form S-4 and each amendment or supplement
thereto, at the time it is filed or becomes effective, will not include an
untrue statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading; provided, however,
that the foregoing shall not apply to the extent that any such untrue statement
of a material fact or omission to state a material fact was made by New ICN in
reliance upon and in conformity with written information concerning ICN, SPI,
Viratek or Biomedicals furnished to New ICN by ICN, SPI, Viratek or Biomedicals,
as the case may be, specifically for use in the Proxy Statement/Prospectus. ICN,
SPI, Viratek and Biomedicals agree that the information provided by each
affiliate for inclusion in the Proxy Statement/Prospectus and each amendment or
supplement thereto, at the time of mailing thereof and at the time of the
respective meetings of stockholders of the Companies, or, in the case of
information provided by ICN, SPI, Viratek or Biomedicals for inclusion in the
Form S-4 or any amendment or supplement thereto, at the time it is filed or
becomes effective, will not include an untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they were
made, not misleading. No amendment or supplement to the Proxy
Statement/Prospectus will be made by any of the Companies without the approval
of the other parties. New ICN will advise ICN, SPI, Viratek and Biomedicals,
promptly after it receives notice thereof, of the time when the Form S-4 has
become effective or any supplement or amendment has been filed, the issuance of
any stop order, the suspension of the qualification of the New ICN Common Stock
issuable in connection with the Merger for offering or sale in any jurisdiction,
or any request by the SEC for amendment of the Proxy Statement/Prospectus or the
Form S-4 or comments thereon and responses thereto or requests by the SEC for
additional information.

5.8. Listing Application. New ICN shall promptly prepare and submit to
the New York Stock Exchange (the "NYSE") a listing application covering the
shares of New ICN Common Stock (including the shares presently outstanding)
issuable in the Merger, and shall use its best efforts to obtain, prior to the
Effective Time, approval for the listing of such New ICN Common Stock, subject
to official notice of issuance.

5.9. Further Action. Each of the Companies and New ICN shall, subject
to the fulfillment at or before the Effective Time of each of the conditions of
performance set forth herein or the waiver thereof, perform such further acts
and execute such documents as may be reasonably required to effect the Merger.

5.10. Agreements by Affiliated Stockholders of the Companies. To
ensure that the issuance of New ICN Common Stock in the Merger complies with the
Securities Act, prior to the Effective Time, each of the Companies shall cause
to be delivered to New ICN a list identifying each person who might at the time
of the respective meeting of the stockholders of ICN, SPI, Viratek or
Biomedicals be deemed to be an "affiliate" of ICN, SPI, Viratek or Biomedicals
for purposes of Rule 145 under the Securities Act (each, an "Affiliate"). Each
of the Companies shall use its best efforts to obtain from each person who is
identified as a possible Affiliate prior to the Effective Time a letter in the
form of Exhibit B hereto (an "Affiliate Letter").

5.11. Expenses. Whether or not the Merger is consummated, all costs
and expenses incurred in connection with this Agreement and the transactions
contemplated hereby shall be paid by the party incurring such expenses except as
expressly provided herein and except that (a) the filing fee in connection with
the HSR Act filing, (b) the filing fee in connection with the filing of the Form
S-4 or Proxy Statement/ Prospectus with the SEC, (c) all filing fees in
connection with any filings required under applicable blue sky laws, (d) the
expenses incurred in connection with printing and mailing the Form S-4 and the
Proxy Statement/Prospectus, (e) the fees and disbursements of Fried, Frank,
Harris, Shriver & Jacobson incurred in its capacity as transaction counsel and
not as advisor for one of the Companies, (f) the fees and expenses of Houlihan
Lokey incurred in connection with the preparation of an appraisal of the assets
of the Merging Companies, and (g) any other expenses not directly attributable
to any one of the Merging Companies shall be shared by the Companies on a
proportionate basis based on the numbers of shares of common stock of the
Surviving Corporation to be issued to, or to be retained by, the stockholders of
each Company.

5.12. Indemnification and Insurance. (a) From and after the Effective
Time, New ICN shall indemnify, defend and hold harmless to the fullest extent
permitted under applicable law each person who is

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now, or has been at any time prior to the date hereof, an officer, director,
employee, trustee or agent of ICN, SPI, Viratek or Biomedicals (or any of their
respective Subsidiaries), including, without limitation, each person controlling
any of the foregoing persons (individually, an "Indemnified Party" and
collectively, the "Indemnified Parties"), against all losses, claims, damages,
liabilities, costs or expenses (including attorneys' fees), judgments, fines,
penalties and amounts paid in settlement in connection with any claim, action,
suit, proceeding or investigation arising out of or pertaining to acts or
omissions, or alleged acts or omissions, by them in their capacities as such,
whether commenced, asserted or claimed before or after the Effective Time and
including, without limitation, liabilities arising under the Securities Act, the
Exchange Act and state corporation laws in connection with the Merger. In the
event of any such claim, action, suit, proceeding or investigation (an
"Action"), (i) New ICN shall pay the reasonable fees and expenses of counsel
selected by the Indemnified Party, which counsel shall be reasonably acceptable
to New ICN, in advance of the final disposition of any such action to the full
extent permitted by applicable law, upon receipt of any undertaking required by
applicable law, and (ii) New ICN will cooperate in the defense of any such
matter; provided, however, that New ICN shall not be liable for any settlement
effected without its written consent (which consent shall not be unreasonably
withheld) and provided, further, that New ICN shall not be obligated pursuant to
this Section to pay the fees and disbursements of more than one counsel for all
Indemnified Parties in any single Action except to the extent that, in the
opinion of counsel for the Indemnified Parties, two or more of such Indemnified
Parties have conflicting interests in the outcome of such action.

(b) The provisions of this Section shall survive the consummation of
the Merger and expressly are intended to benefit each of the Indemnified
Parties.

5.13. Reorganization. From and after the date hereof and until the
Effective Time, none of the Companies nor any of their respective Subsidiaries
or other affiliates shall (i) knowingly take any action, or knowingly fail to
take any action, that would jeopardize qualification of the Merger as a
reorganization within the meaning of Section 368(a) of the Code; or (ii) enter
into any contract, agreement, commitment or arrangement with respect to the
foregoing.

5.14. Financing. At the Effective Time, the proceeds of the Financing
(as defined in Section 6.8) shall be used to repay or redeem the obligations set
forth in the Disclosure Schedule (or, if under the terms of any of such
obligation, such obligation may not be repaid or redeemed at the Effective Time,
notice of repayment or redemption, as the case may be, of such obligation shall
be given at the earliest time permitted under the terms of such obligation and
sufficient funds to repay or redeem such obligation at the earliest time
permitted under the terms of such obligation shall be deposited into an escrow
account with a bank or trust company as escrow agent).

5.15. Alternative Structure. Notwithstanding anything to the contrary
herein, the parties to this Agreement may, by mutual consent, elect, in lieu of
merging any of the Merging Companies into New ICN, as provided for above, to
merge one or more of the Merging Companies into or with a wholly owned
subsidiary of New ICN. Such change in structure shall utilize only if it has no
effect on the rights of holders of Common Stock of any such Merging Company
provided for herein or on the applicable Exchange Ratio.

5.16. Assumption of Employment Agreements. At the Effective Time, New
ICN shall assume the obligations of the applicable Merging Companies under the
employment agreements set forth in the Disclosure Schedule.

ARTICLE 6

6. CONDITIONS. The obligation of each of the Companies and New ICN to
effect the Merger shall be subject to the fulfillment, or waiver, at or prior to
the Closing Date of the following conditions:

6.1. This Agreement and the transactions contemplated hereby shall
have been approved in the manner required by applicable law or by applicable
regulations of any stock exchange or other regulatory body by the requisite
number of holders of the issued and outstanding shares of capital stock of each
of the Companies and New ICN entitled to vote thereon.

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6.2. The waiting period applicable to the consummation of the Merger
under the HSR Act shall have expired or been terminated.

6.3. None of the parties hereto shall be subject to any order or
injunction of a court of competent jurisdiction which prohibits the consummation
of the transactions contemplated by this Agreement. In the event any such order
or injunction shall have been issued, each party agrees to use its reasonable
efforts to have any such injunction lifted.

6.4. The Form S-4 shall have become effective and no stop order with
respect thereto shall be in effect.

6.5. All consents, authorizations, orders and approvals of (or filings
or registrations with) any governmental commission, board or other regulatory
body required in connection with the execution, delivery and performance of this
Agreement shall have been obtained or made, except for filings in connection
with the Merger and any other documents required to be filed after the Effective
Time and except where the failure to have obtained or made any such consent,
authorization, order, approval, filing or registration would not have a Material
Adverse Effect following the Effective Time.

6.6. Each of the Companies and New ICN shall have performed its
agreements contained in this Agreement required to be performed by it on or
prior to the Closing Date and the representations and warranties of each of the
Companies and New ICN contained in this Agreement and in any document delivered
in connection herewith shall be true and correct as of the Closing Date;
provided however, that notwithstanding anything herein to the contrary, this
Section 6.6 shall be deemed to have been satisfied even if such representations
or warranties are not true and correct, unless the failure of any of the
representations or warranties to be so true and correct would have or would be
reasonably likely to have a Material Adverse Effect.

6.7. From the date of this Agreement through the Effective Time, there
shall not have occurred any change in the financial condition, business,
operations or prospects of any of the Companies and its Subsidiaries, taken as a
whole, that would have or would be reasonably likely to have a Material Adverse
Effect other than any such change that affects each of the Companies in a
substantially similar manner.

6.8. New ICN shall have received gross proceeds from the sale of
notes, debentures, common stock and preferred stock or a combination thereof
(the "Financing") of at least $150 million and the terms of the Financing shall
be mutually acceptable to each of the Companies and New ICN.

6.9. The New ICN Common Stock shall be approved for listing on the
NYSE or, if such listing cannot be obtained, the New ICN Common Stock shall be
approved for listing on the American Stock Exchange or the National Market
System of the National Association of Securities Dealers, Inc.

ARTICLE 7

7. TERMINATION.

7.1. Termination by Mutual Consent. This Agreement may be terminated
and the Merger may be abandoned at any time prior to the Effective Time, before
or after the approval of this Agreement by the stockholders of the Companies and
New ICN, by the consent of each of the Companies and New ICN.

7.2. Termination by Any of the Companies and New ICN. This Agreement
may be terminated and the Merger may be abandoned by action of the Board of
Directors of any of the Companies or New ICN if (a) the Merger shall not have
been consummated by December 31, 1994; or (b) the approval of the stockholders
of each of the Companies and New ICN required by Section 6.1 shall not have been
obtained at a meeting duly convened therefor or at any adjournment thereof; or
(c) a United States federal or state court of competent jurisdiction or United
States federal or state governmental, regulatory or administrative agency or
commission shall have issued an order, decree or ruling or taken any other
action permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement and such order, decree, ruling or
other action shall have become final and non-appealable; provided, that the
party seeking to

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terminate this Agreement pursuant to this clause (d) shall have used all
reasonable efforts to remove such injunction, order or decree; or (e) in
the exercise of its good faith judgment as to its fiduciary duties to its
stockholders imposed by law, the Board of Directors of such party determines
that such termination is required by reason of an Acquisition Proposal being
made; or (f) there has been a breach by any of the other parties of any
representation or warranty contained in this Agreement which would have or
would be reasonably likely to have a Material Adverse Effect; or (g) there
has been a material breach of any of the covenants or agreements set forth
in this Agreement on the part of any of the other parties, which breach is
not curable or, if curable, is not cured within 30 days after written notice
of such breach is given by the party desiring to terminate this Agreement
to such other party.

7.3. Effect of Termination and Abandonment. In the event of
termination of this Agreement and the abandonment of the Merger pursuant to this
Article 7, all obligations of the parties hereto shall terminate, except the
obligations of the parties pursuant to this Section 7.3 and Section 5.11 and
except for the provisions of Article 8. Moreover, in the event of termination of
this Agreement pursuant to Section 7.2(f) or (g), nothing herein shall prejudice
the ability of the non-breaching party from seeking damages from any other party
for any breach of this Agreement, including without limitation, attorneys' fees
and the right to pursue any remedy at law or in equity.

7.4. Extension; Waiver. At any time prior to the Effective Time, any
of the Companies or New ICN, by action taken by its Board of Directors, may, to
the extent legally allowed, (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties made to such Company or New
ICN contained herein or in any document delivered pursuant hereto and (c) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.

ARTICLE 8

8. GENERAL PROVISIONS.

8.1. Nonsurvival of Representations, Warranties and Agreements. All
representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall be deemed to the extent
expressly provided herein to be conditions to the Merger and shall not survive
the Merger, provided, however, that the agreements contained in Article 3 and in
Sections 5.11 and 5.12 and this Article 8 and the agreements delivered pursuant
to this Agreement shall survive the Merger.

8.2. Notices. Any notice required to be given hereunder shall be
sufficient if in writing, and sent by facsimile transmission and by courier
service (with proof of service), hand delivery or certified or registered mail
(return receipt requested and first-class postage prepaid), addressed as
follows:

<TABLE>
<S> <C>
If to SPI or to New ICN: If to ICN:

Milan Panic Milan Panic
Chairman of the Board Chairman of the Board
SPI Pharmaceuticals, Inc. ICN Pharmaceuticals, Inc.
3300 Hyland Avenue 3300 Hyland Avenue
Costa Mesa, CA 92626 Costa Mesa, CA 92626
Facsimile: (714) 641-7276 Facsimile:(714) 641-7276

With a copy to: With a copy to:

M'Liss Jones Kane David Watt
ICN Pharmaceuticals, Inc. ICN Pharmaceuticals, Inc.
3300 Hyland Avenue 3300 Hyland Avenue
Costa Mesa, CA 92626 Costa Mesa, CA 92626
Facsimile: (714) 641-7274 Facsimile: (714) 641-7206
</TABLE>

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<TABLE>
<S> <C>
If to Viratek: If to Biomedicals:

Milan Panic Milan Panic
Chairman of the Board Chairman of the Board
Viratek, Inc. ICN Biomedicals, Inc.
3300 Hyland Avenue 3300 Hyland Avenue
Costa Mesa, CA 92626 Costa Mesa, CA 92626
Facsimile: (714) 641-7276 Facsimile:(714) 641-7276

With a copy to: With a copy to:

M'Liss Jones Kane M'Liss Jones Kane
ICN Pharmaceuticals, Inc. ICN Pharmaceuticals, Inc.
3300 Hyland Avenue 3300 Hyland Avenue
Costa Mesa, CA 92626 Costa Mesa, CA 92626
Facsimile: (714) 641-7274 Facsimile: (714) 641-7274
</TABLE>

or to such other address as any party shall specify by written notice so given,
and such notice shall be deemed to have been delivered as of the date so
telecommunicated, personally delivered or mailed.

8.3. Assignment; Binding Effect; Benefit. Neither this Agreement nor
any of the rights, interests or obligations hereunder shall be assigned by any
of the parties hereto (whether by operation of law or otherwise) without the
prior written consent of the other parties. Subject to the preceding sentence,
this Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and assigns. Notwithstanding
anything contained in this Agreement to the contrary, except for the provisions
of Article 3 and Section 5.12, nothing in this Agreement, expressed or implied,
is intended to confer on any person other than the parties hereto or their
respective heirs, successors, executors, administrators and assigns any rights,
remedies, obligations or liabilities under or by reason of this Agreement.

8.4. Entire Agreement. This Agreement, the Exhibits, and any documents
delivered by the parties in connection herewith constitute the entire agreement
among the parties with respect to the subject matter hereof and supersede all
prior agreements and understandings among the parties with respect thereto. No
addition to or modification of any provision of this Agreement shall be binding
upon any party hereto unless made in writing and signed by all parties hereto.

8.5. Amendment. This Agreement may be amended by the parties hereto,
by action taken by their respective Boards of Directors, at any time before or
after approval of matters presented in connection with the Merger by the
stockholders of any of the Companies, but after any such stockholder approval,
no amendment shall be made which by law requires the further approval of
stockholders without obtaining such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.

8.6. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without regard to its rules
of conflict of laws.

8.7. Counterparts. This Agreement may be executed by the parties
hereto in separate counterparts, each of which when so executed and delivered
shall be an original, but all such counterparts shall together constitute one
and the same instrument. Each counterpart may consist of a number of copies
hereof each signed by less than all, but together signed by all of the parties
hereto.

8.8. Headings. Headings of the Articles and Sections of this Agreement
are for the convenience of the parties only, and shall be given no substantive
or interpretive effect whatsoever.

8.9. Interpretation. In this Agreement, unless the context otherwise
requires, words describing the singular number shall include the plural and vice
versa, and words denoting any gender shall include all genders and words
denoting natural persons shall include corporations and partnerships and vice
versa.

8.10. Waivers. Except as provided in this Agreement, no action taken
pursuant to this Agreement, including, without limitation, any investigation by
or on behalf of any party, shall be deemed to constitute a

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waiver by the party taking such action of compliance with any
representations, warranties, covenants or agreements contained in this
Agreement. The waiver by any party hereto of a breach of any provision hereunder
shall not operate or be construed as a waiver of any prior or subsequent breach
of the same or any other provision hereunder.

8.11. Incorporation of Exhibits. All Exhibits attached hereto and
referred to herein are hereby incorporated herein and made a part hereof for all
purposes as if fully set forth herein.

8.12. Severability. Any term or provision of this Agreement which is
invalid or unenforceable in any jurisdiction shall, as to that jurisdiction, be
ineffective to the extent of such invalidity or unenforceability without
rendering invalid or unenforceable the remaining terms and provisions of this
Agreement or affecting the validity or enforceability of any of the terms or
provisions of this Agreement in any other jurisdiction. If any provision of this
Agreement is so broad as to be unenforceable, the provision shall be interpreted
to be only so broad as is enforceable.

8.13. Enforcement of Agreement. The parties hereto agree that
irreparable damage would occur in the event that any of the provisions of this
Agreement was not performed in accordance with its specific terms or was
otherwise breached. It is accordingly agreed that the parties shall be entitled
to an injunction or injunctions to prevent breaches of this Agreement and to
enforce specifically the terms and provisions hereof in any Delaware Court, this
being in addition to any other remedy to which they are entitled at law or in
equity.

8.14. Subsidiaries. As used in this Agreement, the word "Subsidiary"
when used with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, of which such party directly or
indirectly owns or controls at least a majority of the securities or other
interests having by their terms ordinary voting power to elect a majority of the
board of directors or others performing similar functions with respect to such
corporation or other organization, or any organization of which such party is a
general partner; provided, however, that in the case of ICN, the word
"Subsidiary" shall not include SPI, Viratek, Biomedicals or any of the
Subsidiaries of SPI, Viratek or Biomedicals. When a reference is made in this
Agreement to Significant Subsidiaries, the words "Significant Subsidiaries"
shall refer to Subsidiaries (as defined above) which constitute "significant
subsidiaries" under Rule 405 promulgated by the SEC under the Securities Act.

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IN WITNESS WHEREOF, the parties have executed this Agreement and caused the
same to be duly delivered on their behalf on the day and year first written
above.

<TABLE>
<S> <C>
SPI PHARMACEUTICALS, INC.
ATTEST:
By: /s/ M'Liss Jones Kane By: /s/ Milan Panic
----------------------------- -------------------------------------
Name: M'Liss Jones Kane Name: Milan Panic
Title: Secretary Title: Chief Executive Officer
ICN PHARMACEUTICALS, INC.
ATTEST:
By: /s/ David C. Watt By: /s/ Milan Panic
----------------------------- -------------------------------------
Name: David C. Watt Name: Milan Panic
Title: Secretary Title: President and Chief Executive
Officer
VIRATEK, INC.
ATTEST:
By: /s/ Thomas Seoh By: /s/ Milan Panic
----------------------------- -------------------------------------
Name: Thomas Seoh Name: Milan Panic
Title: Secretary Title: Chief Executive Officer
ICN BIOMEDICALS, INC.
ATTEST:
By: /s/ M'Liss Jones Kane By: /s/ Milan Panic
----------------------------- -------------------------------------
Name: M'Liss Jones Kane Name: Milan Panic
Title: Secretary Title: Chief Executive Officer
ICN MERGER CORP.
ATTEST:
By: /s/ M'Liss Jones Kane By: /s/ Milan Panic
----------------------------- -------------------------------------
Name: M'Liss Jones Kane Name: Milan Panic
Title: Secretary Title: Chief Executive Officer
</TABLE>

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EXHIBIT A
TO APPENDIX A

RESTATED CERTIFICATE OF INCORPORATION
OF
ICN MERGER CORP.

PURSUANT TO SEC. 102 OF THE GENERAL CORPORATION LAW
OF THE STATE OF DELAWARE

The undersigned, in order to form a corporation pursuant to Section 102 of
the General Corporation Law of the State of Delaware, does hereby certify:

FIRST: The name of the Corporation is

ICN Merger Corp.

SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street in the City of
Wilmington, County of New Castle, Delaware 19801. The name of its registered
agent at such address is The Corporation Trust Company.

THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of the State of Delaware.

FOURTH: The total number of shares of all classes of capital stock
which the Corporation shall have the authority to issue is One Hundred and Ten
Million Shares (110,000,000) shares divided into two classes of which Ten
Million (10,000,000) shares, par value $.01 per share, shall be designated
Preferred Stock and One Hundred Million (100,000,000) shares, par value $.01 per
share, shall be designated Common Stock.

A. PREFERRED STOCK

1. ISSUANCE. The Board of Directors is authorized, subject to limitations
prescribed by law, to provide for the issuance of shares of Preferred Stock in
one or more series, to establish the number of shares to be included in each
such series, and to fix the designations, voting powers, preferences, and rights
of the shares of each such series, and any qualifications, limitations or
restrictions thereof.

2. SERIES A PREFERRED STOCK.

SECTION 1. Designation and Amount. One million (1,000,000) shares of the
Preferred Stock of the Corporation shall be designated as "Series A
Participating Preferred Stock", par value $.01 per share (the "Series A
Preferred Stock"). Such number of shares may be increased or decreased by
resolution of the Board of Directors; provided that no decrease shall reduce the
number of shares of Series A Preferred Stock to a number less than that of the
shares then outstanding plus the number of shares issuable upon exercise of
outstanding rights, options or warrants or upon conversion of outstanding
securities issued by the Corporation.

SECTION 2. Dividends and Distributions.

(A) Subject to the prior and superior rights of the holders of any shares
of any series of Preferred Stock of the Corporation ranking prior and superior
to the shares of Series A Preferred Stock with respect to dividends, the holders
of shares of Series A Preferred Stock shall be entitled to receive, when, as and
if declared by the Board of Directors out of assets legally available for the
purpose, quarterly dividends payable in cash on the first business day of
January, April, July and October in each year (each such date being referred to
herein as a "Quarterly Dividend Payment Date"), commencing on the first
Quarterly Dividend Payment Date after the first issuance of a share or fraction
of a share of Series A Preferred Stock, in an amount per share (rounded to the
nearest cent) equal to the greater of (a) $1.00 or (b) subject to the provision
for adjustment hereinafter set forth, 100 times the aggregate per share amount
of all cash dividends, and 100 times the aggregate per share amount (payable in
kind) of all non-cash dividends or other

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distributions other than a dividend payable in shares of Common Stock, par value
$.01 per share, of the Corporation (the "Common Stock") or a subdivision of the
outstanding shares of Common Stock (by reclassification or otherwise), declared
on the Common Stock since the immediately preceding Quarterly Dividend Payment
Date, or with respect to the first Quarterly Dividend Payment Date, since the
first issuance of any share or fraction of a share of Series A Preferred Stock.

(B) The Corporation shall declare a dividend or distribution on the Series
A Preferred Stock as provided in paragraph (A) above immediately after it
declares a dividend or distribution on the Common Stock (other than a dividend
payable in shares of Common Stock); provided that, in the event no dividend or
distribution shall have been declared on the Common Stock during the period
between any Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $1.00 per share on the Series A Preferred
Stock shall nevertheless by payable on such subsequent Quarterly Dividend
Payment Date.

(C) Dividends shall begin to accrue and be cumulative on outstanding shares
of Series A Preferred Stock from the Quarterly Dividend Payment Date next
preceding the date of issue of such shares of Series A Preferred Stock, unless
the date of issue of such shares is prior to the record date for the first
Quarterly Dividend Payment Date, in which case dividends on such shares shall
begin to accrue from the date of issue of such shares, or unless the date of
issue is a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock entitled
to receive a quarterly dividend and before such Quarterly Dividend Payment Date,
in either of which events such dividends shall begin to accrue and be cumulative
from such Quarterly Dividend Payment Date. Accrued but unpaid dividends shall
not bear interest. Dividends paid on the shares of Series A Preferred Stock in
an amount less than the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors may fix a
record date for the determination of holders of shares of Series A Preferred
Stock entitled to receive payment of a dividend or distribution declared
thereon, which record date shall be not more than 30 days prior to the date
fixed for the payment thereof.

SECTION 3. Voting Rights. The holders of shares of Series A Preferred Stock
shall have the following voting rights:

(A) Except as provided in paragraph C of this Section 3, and subject
to the provision for adjustment hereinafter set forth, each share of Series A
Preferred Stock shall entitle the holder thereof to 100 votes on all matters
submitted to a vote of the stockholders of Corporation.

(B) Except as otherwise provided herein or by law, the holders of
shares of Series A Preferred Stock and the holders of shares of Common Stock
shall vote together as one class on all matters submitted to a vote of
stockholders of the Corporation.

(C) (i) If, on the date used to determine stockholders of record for
any meeting of stockholders for the election of directors, a default in
preference dividends (as defined in subparagraph (v) below) on the Series A
Preferred Stock shall exist, the holders of the Series A Preferred Stock shall
have the right, voting as a class described in subparagraph (ii) below, to elect
two directors (in addition to the directors elected by holders of Common Stock
of the Corporation). Such right may be exercised (a) at any meeting of
stockholders for the election of directors or (b) at a meeting of the holders of
shares of Voting Preferred Stock (as hereinafter defined), called for the
purpose in accordance with the By-Laws of Corporation, until all such cumulative
dividends (referred to above) shall have been paid in full or until
non-cumulative dividends have been paid regularly for at least one year.

(ii) The right of the holders of Series A Preferred Stock to elect two
directors, as described above, shall be exercised as a class concurrently with
the rights of holders of any other series of any class of preferred stock of the
Corporation upon which voting rights to elect such directors have been conferred
and are then exercisable. The Series A Preferred Stock and any additional series
of such preferred stock which the Corporation may issue and which may provide
for the right to vote with the Series A Preferred Stock are collectively
referred to herein as "Voting Preferred Stock."

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(iii) Each director elected by the holders of shares of Voting
Preferred Stock shall be referred to herein as a "Preferred Director." A
Preferred Director so elected shall continue to serve as such director for a
term of one year, except that upon any termination of the right of all of such
holders to vote as a class for Preferred Directors, the term of office of such
directors shall terminate. Any Preferred Director may be removed, without cause,
by, and shall not be so removed except by, the vote of the holders of record of
a majority of the outstanding shares of Voting Preferred Stock then entitled to
vote for the election of directors, present (in person or by proxy) and voting
together as single class (a) at a meeting of the stockholders, or (b) at a
meeting of the holders of shares of such Voting Preferred Stock, called for that
purpose in accordance with the By-laws of the Corporation.

(iv) So long as a default in any preference dividends on the Series A
Preferred Stock shall exist or the holders of any other series of Voting
Preferred Stock shall be entitled to elect Preferred Directors, (a) any vacancy
in the office of a Preferred Director may be filled (except as provided in the
following clause (b)) by an instrument in writing signed by the remaining
Preferred Director and filed with the Corporation and (b) in the case of the
removal of any Preferred Director or in case there is no remaining Preferred
Director, the vacancy or vacancies may be filled by the vote of the holders of
the outstanding shares of Voting Preferred Stock then entitled to vote for the
election of directors, present (in person or by proxy) and voting together as a
single class, at such time as the removal shall be effected or such vacancies
exist, as the case may be. Each director appointed as aforesaid by the remaining
Preferred Director shall be deemed, for all purposes hereof, to be a Preferred
Director.

(v) For purposes hereof, a "default in preference dividends" on Series
A Preferred Stock shall be deemed to have occurred whenever the amount of
cumulative and unpaid dividends on the Series A Preferred Stock shall be
equivalent to six full quarterly dividends or more (whether or not consecutive),
and, having so occurred, such default shall be deemed to exist thereafter until,
but only until, all cumulative dividends on all shares of the Series A Preferred
Stock then outstanding shall have been paid through the last Quarterly Dividend
Payment Date or until, but only until, non-cumulative dividends have been paid
regularly for at least one year.

(D) Except as set forth herein (or as otherwise required by applicable
law), holders of Series A Preferred Stock shall have no general or special
voting rights and their consent shall not be required for taking any corporate
action.

SECTION 4. Certain Restrictions.

(A) Whenever quarterly dividends or other dividends or distributions
payable on the Series A Preferred Stock as provided in Section 2 are in arrears,
thereafter and until all accrued and unpaid dividends and distributions, whether
or not declared, on the shares of Series A Preferred Stock outstanding shall
have been paid in full, the Corporation shall not

(i) declare or pay dividends, or make any other distributions, on any
shares of Common Stock or any other stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred Stock;

(ii) declare or pay dividends, or make any other distributions, on any
shares of stock ranking on a parity (either as to dividends or upon liquidation,
dissolution or winding up) with the Series A Preferred Stock, except dividends
paid ratably on the Series A Preferred Stock and all such parity stock on which
dividends are payable or in arrears in proportion to the total amounts to which
the holders of all such shares are then entitled (based upon their respective
liquidation values);

(iii) redeem or purchase or otherwise acquire for consideration (except as
provided in (iv) below) shares of Common Stock or any other stock ranking junior
(either as to dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such junior stock in exchange for
shares of any stock of the Corporation ranking junior (both as to dividends and
upon dissolution liquidation, or winding up) to the Series A Preferred Stock;

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(iv) redeem or purchase or otherwise acquire for consideration any shares
of Series A Preferred Stock, or any shares of stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding up) with the Series
A Preferred Stock, except in accordance with a purchase offer made in writing or
by publication (as determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after consideration of the
respective annual dividend rates and other relative rights and preferences of
the respective series and classes, shall determine in good faith will result in
fair and equitable treatment among the respective series or classes.

(B) The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of stock of the
Corporation unless the Corporation could, under paragraph (A) of this Section 4,
purchase or otherwise acquire such shares at such time and in such manner.

SECTION 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and canceled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
subject to the conditions and restrictions on issuance set forth herein or in
any certificate of designation creating a series of Preferred Stock or as
otherwise required by law.

SECTION 6. Liquidation, Dissolution or Winding Up.

(A) Subject to the prior and superior rights of holders of any shares of
stock of the Corporation ranking prior and superior to the shares of Series A
Preferred Stock with respect to rights upon liquidation dissolution or winding
up (voluntary or otherwise), no distribution shall be made to the holders of
Common Stock or any other shares of stock ranking junior (either as to dividends
or upon liquidation, dissolution or winding up) to the Series A Preferred Stock
unless, prior thereto, the holders of shares of Series A Preferred Stock shall
have received $100 per share, plus an amount equal to accrued and unpaid
dividends and distributions thereon, whether or not declared to the date of such
payment (the "Series A Liquidation Preference"). Following the payment of the
full amount of the Series A Liquidation Preference, no additional distributions
shall be made to the holders of shares of Series A Preferred Stock unless, prior
thereto, the holders of shares of Common Stock shall have received an amount per
share (the "Capital Adjustment") equal to the quotient obtained by dividing (i)
the Series A Liquidation Preference by (ii) 100 (subject to the provision for
adjustment hereinafter set forth in subparagraph (C) below) (such number in
clause (ii), the "Adjustment Number"). Following the payment of the full amount
of the Series A Liquidation Preference and the Capital Adjustment in respect of
all outstanding shares of Series A Preferred Stock and Common Stock,
respectively, and subject to the rights of the holders of any other series of
Preferred Stock then outstanding, holders of Series A Preferred Stock and
holders of Common Stock shall receive their ratable and proportionate share of
the remaining assets to be distributed in the ratio of the Adjustment Number to
1 with respect to such Preferred Stock and Common Stock, on a per share basis,
respectively.

(B) In the event that there are not sufficient assets available to permit
payment in full of the Series A Liquidation Preference and the liquidation
preferences of all other series of preferred stock of the Corporation, if any,
which rank on a parity with the Series A Preferred Stock, then such remaining
assets shall be distributed ratably to the holders of Series A Preferred Stock
and the holders of such parity shares in proportion to their respective
liquidation preferences.

SECTION 7. Consolidation, Merger, etc. In case the Corporation shall enter
into any consolidation, merger, combination or other transaction in which the
shares of Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then, in any such case, the shares
of Series A Preferred Stock shall at the same time be similarly exchanged or
changed or changed in an amount per share (subject to the provision for
adjustment hereinafter set forth) equal to 100 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind), as the case
may be, into which or for which each share of Common Stock is changed or
exchanged.

SECTION 8. No Redemption. The shares of Series A Preferred Stock shall not
be redeemable.

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SECTION 9. Ranking. The Series A Preferred Stock shall rank junior to all
other series of Preferred Stock of the Corporation as to the payment of
dividends and the distribution of assets, unless the terms of any series of
Preferred Stock shall provide otherwise.

SECTION 10. Amendment. The Restated Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of a
majority or more of the outstanding shares of Series A Preferred Stock, voting
separately as a class.

SECTION 11. Adjustment. In the event the Corporation shall at any time
after November , 1994 (the "Rights Record Date") (i) declare any dividend on
Common Stock payable in shares of Common Stock, (ii) subdivide the outstanding
Common Stock, (iii) combine the outstanding Common Stock into a smaller number
of shares, or (iv) issue any shares of Common Stock in a reclassification or
change of the outstanding shares of Common Stock (including any such
reclassification or change in connection with a merger in which the Corporation
is the continuing or surviving Corporation), then in each such case (w) the
amount to which holders of shares of Series A Preferred Stock were entitled
immediately prior to such event under clause (b) of Section 2(A) above, (x) the
number of votes applicable to each share of Series A Preferred Stock immediately
prior to such event under Section 3(A) above, (y) the adjustment number (for
purposes of Section 6(A) above) and (z) the amount to which holders of shares of
Series A Preferred were entitled immediately prior to such event under Section 7
above, shall be adjusted by multiplying such amount or number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the number of
shares of Common Stock that were outstanding immediately prior to such event.

B. COMMON STOCK

1. Dividends. Subject to the preferential rights, if any, of the
holders of any series of Preferred Stock then outstanding, the holders of
shares of Common Stock shall be entitled to receive, when and if declared
by the Board of Directors, out of the assets of the Corporation which are
by law available therefor, dividends payable either in cash, in property or
in shares of Common Stock or other securities of the Corporation.

2. Voting Rights. Subject to the rights, if any, of the holders of any
series of Preferred Stock then outstanding at every annual or special
meeting of stockholders of the Corporation, every holder of Common Stock
shall be entitled to one vote, in person or by proxy, for each share of
Common Stock standing in his/her name on the books of the Corporation, on
each matter voted upon by stockholders.

3. Liquidation, Dissolution, or Winding Up. In the event of any
voluntary or involuntary liquidation, dissolution, or winding up of the
affairs of the Corporation, after payment or provision for payment of the
debts and other liabilities of the Corporation, and subject to the
preferential and other amounts, if any, to which the holders of any series
of Preferred Stock then outstanding shall be entitled, the holders of all
outstanding shares of Common Stock shall be entitled to share ratably in
the remaining net assets of the Corporation.

FIFTH: The business and affairs of the Corporation shall be managed
by or under the direction of the Board of Directors. The Board of Directors may
exercise all such authority and powers of the Corporation and do all such lawful
acts and things as are not by statute or this Restated Certificate of
Incorporation directed or required to be exercised or done by the stockholders.

A. Number of Directors. The number of directors of the Corporation
(exclusive of directors to be elected by the holders of any one or more series
of the Preferred Stock of the Corporation which may be outstanding, voting
separately as a series or class) shall be fixed from time to time by action of
not less than a majority of the members of the Board of Directors then in
office, but in no event shall be less than three nor more than twenty.

B. Classes. Except for any directors elected separately by the holders of
any one or more series of Preferred Stock, the directors shall be divided into
three classes, as nearly equal in number as reasonably

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possible, with the term of office of the first class to expire at the 1995
annual meeting of stockholders, the term of office of the second class to expire
at the 1996 annual meeting of stockholders and the term of office of the third
class to expire at the 1997 annual meeting of stockholders and at each annual
meeting of stockholders following adoption of this Restated Certificate of
Incorporation directors shall be elected to succeed those directors whose terms
expire for a term of office to expire at the third succeeding annual meeting of
stockholders after their election. Directors need not be stockholders. All
directors shall hold office until the expiration of the term for which elected
and until their successors are elected, except in the case of the death,
resignation, disqualification or removal of any director.

C. Vacancies. Subject to the rights, if any, of the holders of any series
of Preferred Stock then outstanding, newly created directorships resulting from
any increase in the authorized number of directors or any vacancies in the Board
of Directors resulting from death, resignation, disqualification or removal may
be filled only by a majority vote of the directors then in office, though less
than a quorum, and directors so chosen shall hold office for a term expiring at
the annual meeting of stockholders at which the term of office of the class to
which they have been elected expires. No decrease in the number of directors
constituting the Board of Directors shall shorten the term of any incumbent
director.

D. Removal. Except for any directors elected separately by the holders of
any one or more series of Preferred Stock, any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause and only
by the affirmative vote of the holders of at least 66 2/3% of the voting power
of all of the then outstanding shares of capital stock of the Corporation
entitled to vote generally in the election of directors, voting together as a
single class.

SIXTH: Subject to the rights of the holders of any series of Preferred
Stock, any action required or permitted to be taken at any annual or special
meeting of stockholders may be taken only upon the vote of the stockholders at
an annual or special meeting duly called and may not be taken by written consent
of the stockholders.

SEVENTH: Subject to the rights of the holders of any series of
Preferred Stock, special meetings of the stockholders, unless otherwise
prescribed by statute, may be called at any time only by the Board of Directors
or the Chairman of the Board of the Corporation.

EIGHTH: At an annual meeting of stockholders, only such business shall
be conducted, and only such proposals shall be acted upon, as shall have been
properly brought before the annual meeting of stockholders (a) by, or at the
direction of, the Board of Directors or (b) by a stockholder of the Corporation
who complies with the procedures set forth in this Article EIGHTH. For business
or a proposal to be properly brought before an annual meeting of stockholders by
a stockholder, the stockholder must have given timely notice thereof in writing
to the Secretary of the Corporation. To be timely, a stockholder's notice must
be delivered to or mailed and received at the principal executive offices of the
Corporation not less than 60 days nor more than 90 days prior to the scheduled
date of the annual meeting, regardless of any postponement, deferral or
adjournment of that meeting to a later date; provided, however, that if less
than 70 days' notice or prior public disclosure of the date of the annual
meeting is given or made to stockholders, notice by the stockholder to be timely
must be so delivered or received not later than the close of business on the
10th day following the earlier of (i) the day on which such notice of the date
of the meeting was mailed or (ii) the day on which such public disclosure was
made.

A stockholder's notice to the Secretary shall set forth as to each
matter the stockholder proposes to bring before an annual meeting of
stockholders (i) a description, in 500 words or less, of the business desired to
be brought before the annual meeting and the reasons for conducting such
business at the annual meeting, (ii) the name and address, as they appear on the
Corporation's books, of the stockholder proposing such business and any other
stockholders known by such stockholder to be supporting such proposal, (iii) the
class and number of shares of the Corporation which are beneficially owned by
such stockholder on the date of such stockholder's notice and by any other
stockholders known by such stockholder to be supporting such proposal on the
date of such stockholder's notice, (iv) a description, in 500 words or less, of
any interest of the stockholder in such proposal and (v) a representation that
the stockholder is a holder of record of stock of the Corporation and intends to
appear in person or by proxy at the meeting to present the proposal specified in
the

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notice. Notwithstanding anything in this Restated Certificate ofIncorporation
to the contrary, no business shall be conducted at a meeting of stockholders
except in accordance with the procedures set forth in this Article EIGHTH.

The chairman of the meeting shall, if the facts warrant, determine and
declare to the meeting that the business was not properly brought before the
meeting in accordance with the procedures prescribed by this Article EIGHTH, and
if he should so determine, he shall so declare to the meeting and any such
business not properly brought before the meeting shall not be transacted.
Notwithstanding the foregoing, nothing in this Article EIGHTH shall be
interpreted or construed to require the inclusion of information about any such
proposal in any proxy statement distributed by, at the direction of, or on
behalf of, the Board of Directors.

NINTH: Subject to the rights, if any, of the holders of any series of
Preferred Stock then outstanding, only persons nominated in accordance with the
procedures set forth in this Article NINTH shall be eligible for election as
directors. Nominations of persons for election to the Board may be made at an
annual meeting of stockholders or special meeting of stockholders called by the
Board of Directors for the purpose of electing directors (i) by or at the
direction of the Board or (ii) by any stockholder of the Corporation entitled to
vote for the election of directors at such meeting who complies with the notice
procedures set forth in this Article NINTH. Such nominations, other than those
made by or at the direction of the Board, shall be made pursuant to timely
notice in writing to the Secretary of the Corporation. To be timely, a
stockholder's notice must be delivered to or mailed and received at the
principal executive offices of the Corporation not less than 60 days nor more
than 90 days prior to the scheduled date of the meeting, regardless of any
postponement, deferral or adjournment of that meeting to a later date; provided,
however, that if less than 70 days' notice or prior public disclosure of the
date of the meeting is given or made to stockholders, notice by the stockholder
to be timely must be so delivered or received not later than the close of
business on the 10th day following the earlier of (i) the day on which such
notice of the date of the meeting was mailed or (ii) the day on which such
public disclosure was made.

A stockholder's notice to the Secretary shall set forth (i) as to each
person whom the stockholder proposes to nominate for election or reelection as a
director (a) the name, age, business address and residence address of such
person, (b) the principal occupation or employment of such person, (c) the class
and number of shares of the Corporation which are beneficially owned by such
person on the date of such stockholder's notice and (d) any other information
relating to such person that is required to be disclosed in solicitations of
proxies for election of directors, or is otherwise required, in each case
pursuant to Regulation 14A under the Securities Exchange Act of 1934, as
amended, or any successor statute thereto (the "Exchange Act") (including
without limitation such person's written consent to being named in the proxy
statement as a nominee and to serving as a director if elected); (ii) as to the
stockholder giving notice (a) the name and address, as they appear on the
Corporation's books, of such stockholder and any other stockholders known by
such stockholder to be supporting such nominee(s), (b) the class and number of
shares of the Corporation which are beneficially owned by such stockholder on
the date of such stockholder's notice and by any other stockholders known by
such stockholder to be supporting such nominee(s) on the date of such
stockholder's notice, (c) a representation that the stockholder is a holder of
record of stock of the Corporation entitled to vote at such meeting and intends
to appear in person or by proxy at the meeting to nominate the person or persons
specified in the notice; and (iii) a description of all arrangements or
understandings between the stockholder and each nominee and other person or
persons (naming such person or persons) pursuant to which the nomination or
nominations are to be made by the stockholder.

No person shall be eligible for election as a director of the
Corporation unless nominated in accordance with the procedures set forth in this
Article NINTH. The chairman of the meeting shall, if the facts warrant,
determine and declare to the meeting that a nomination was not made in
accordance with the procedures prescribed by this Article NINTH, and if he
should so determine, he shall so declare to the meeting and the defective
nomination shall be disregarded.

TENTH: The Board of Directors is expressly authorized to adopt, amend
or repeal the By-Laws of the Corporation. Any By-Laws made by the directors
under the powers conferred hereby may be amended or repealed by the directors or
by the stockholders. Notwithstanding the foregoing and anything contained in
this

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Restated Certificate of Incorporation to the contrary, the By-Laws shall
not be amended or repealed by the stockholders, and no provision inconsistent
therewith shall be adopted by the stockholders, without the affirmative vote
of the holders of at least 75% of the voting power of all shares of the
Corporation entitled to vote generally in the election of directors, voting
together as a single class.

ELEVENTH: Elections of directors need not be by written ballot unless
the By-Laws of the Corporation shall otherwise provide.

TWELFTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, provided, however, that the foregoing shall not
eliminate or limit the liability of a director (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct of a
knowing violation of law, (iii) under Section 174 of the General Corporation Law
of the State of Delaware, or (iv) for any transaction from which the director
derived an improper personal benefit. If the General Corporation Law of the
State of Delaware is hereafter amended to permit further elimination or
limitation of the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware as so amended.
Any repeal or modification of this Article TWELFTH shall not adversely affect
any right or protection of a director of the Corporation in respect of any act
or omission occuring prior to the time of such repeal or modification.

THIRTEENTH: Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them and/or between this
Corporation and its stockholders or any class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of this Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this Corporation under
the provisions of Section 291 of the General Corporation Law of the State of
Delaware or on the application of trustees in dissolution or of any receiver or
receivers appointed for this Corporation under the provisions of Section 279 of
the General Corporation Law of the State of Delaware order a meeting of the
creditors or class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be summoned in such
manner as the said court directs. If a majority in number representing
three-fourths in value of the creditors or class of creditors, and/or of the
stockholders or class of stockholders of this Corporation, as the case may be,
agree to any compromise or arrangement and to any reorganization of this
Corporation as a consequence of such compromise or arrangement, the said
compromise or arrangement and the same reorganization shall, if sanctioned by
the court to which said application has been made, be binding on all the
creditors or class of creditors, and/or on all of the stockholders or class of
stockholders, of this Corporation, as the case may be, and also on this
Corporation.

FOURTEENTH:

A. For purposes of this Article FOURTEENTH, the following terms shall be
defined as follows:

(1) The term "Business Combination" shall mean (a) any merger or
consolidation of the Corporation or a Subsidiary with a Related Person, (b)
any sale, lease, exchange, mortgage, pledge, transfer or other disposition
other than in the ordinary course of business to or with a Related Person
of any assets of the Corporation or a Subsidiary having an aggregate fair
market value of $25,000,000 or more, (c) the issuance or transfer by the
Corporation of any shares of Voting Stock or securities convertible into or
exercisable for such shares (other than by way of pro rata distribution to
all stockholders) to a Related Person, (d) any recapitalization, merger or
consolidation that would have the effect of increasing the voting power of
a Related Person, (e) the adoption of any plan or proposal for the
liquidation or dissolution of the Corporation or a Subsidiary proposed,
directly or indirectly, by or on behalf of a Related Person, (f) any merger
or consolidation of the Corporation with another Person proposed, directly
or indirectly, by or on behalf of a Related Person unless the entity
surviving or resulting from such merger or consolidation has a provision in
its certificate or articles of incorporation, charter or similar governing
instrument which is substantially identical to this Article FOURTEENTH or
(g) any agreement, contract or other arrangement or understanding
providing, directly or indirectly, for any of the transactions described in
this Paragraph A(1).

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(2) The term "Related Person" shall mean any individual, partnership,
corporation, trust or other Person which, together with its "affiliates"
and "associates", as defined in Rule 12b-2 under the Exchange Act as in
effect on January 1, 1993, and together with any other individual,
partnership, corporation, trust or other Person with which it or they have
any agreement, contract or other arrangement or understanding with respect
to acquiring, holding, voting or disposing of Voting Stock, "beneficially
owns" (within the meaning of Rule 13d-3 under the Exchange Act on said
date) an aggregate of 10% or more of the outstanding Voting Stock. A
Related Person, its affiliates and associates and all such other
individuals, partnerships, corporations and other Persons with whom it or
they have any such agreement, contract or other arrangement or
understanding, shall be deemed a single Related Person for purposes of this
Article FOURTEENTH; provided, however, that the members of the Board of
Directors of the Corporation shall not be deemed to be associates or
otherwise to constitute a Related Person solely by reason of their board
membership. A person who is a Related Person as of (i) the time any
definitive agreement relating to a Business Combination is entered into,
(ii) the record date for the determination of stockholders entitled to
notice of and to vote on a Business Combination or (iii) immediately prior
to the consummation of a Business Combination, shall be deemed a Related
Person for purposes of this Article FOURTEENTH.

(3) The term "Continuing Director" shall mean any member of the Board
of Directors of the Corporation who is not an "affiliate" or "associate" of
the Related Person referred to in Paragraph A(2) of this Article FOURTEENTH
and was a member of the Board of Directors prior to the time that such
Related Person became a Related Person, and any successor of a Continuing
Director who is unaffiliated with such Related Person and is recommended to
succeed a Continuing Director by a majority of the Continuing Directors.

(4) The term "Person" shall mean any individual, firm, corporation or
other entity.

(5) The term "Subsidiary" shall mean any corporation or other entity
of which the Person in question owns, directly or indirectly, not less than
50% of any class of equity securities or not less than 50% of the voting
power of all securities of the Corporation entitled to vote generally in
the election of directors.

(6) The term "Voting Stock" shall mean any shares of the Corporation
entitled to vote generally in the election of directors.

(7) The term "Entire Board of Directors" shall mean the total number
of directors which the Corporation would have if there were no vacancies or
unfilled newly created directorships.

(8) The term "Market Value" shall mean the average of the high-and
low-quoted sales price on the date in question (or, if there is no reported
sale on such date, on the last preceding date on which any reported sale
occurred) of a share on the Composite Tape for the New York Stock
Exchange -- Listed Stocks, or, if the shares are not listed or admitted to
trading on such exchange, on the principal United States securities
exchange registered under the Exchange Act on which the shares are listed
or admitted to trading, or, if the shares are not listed or admitted to
trading on any such exchange, the mean between the closing high bid and
low-asked quotations with respect to a share on such date as quoted on the
National Association of Securities Dealers Automated Quotations System, or
any similar system then in use, or, if no such quotations are available,
the fair market value on such date of a share as at least 66 2/3% of the
Continuing Directors shall determine.

B. In addition to any other vote required by this Restated Certificate of
Incorporation or the General Corporation Law of the State of Delaware, the
affirmative vote of the holders of not less than 85% of the outstanding Voting
Stock held by stockholders other than a Related Person by or with whom or on
whose behalf, directly or indirectly, a Business Combination is proposed, voting
as a single class, shall be required for the approval or authorization of such
Business Combination; provided, however, that the 85% voting requirement shall
not be applicable and such Business Combination may be approved by the vote
required by law, if any, or by any other provision of this Certificate of
Incorporation if either:

(1) The Business Combination is approved by the Board of Directors of
the Corporation by the affirmative vote of at least 66 2/3% of the
Continuing Directors, or

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(2) All of the following conditions are satisfied:

(a) The aggregate amount of cash and the fair market value of the
property, securities or other consideration to be received per share of
capital stock of the Corporation in the Business Combination by the
holders of capital stock of the Corporation, other than the Related
Person involved in the Business Combination, shall not be less than the
highest of (i) the highest per share price (including brokerage
commissions, soliciting dealers' fees, and dealer-management
compensation, and with appropriate adjustments for recapitalizations,
stock splits, stock dividends and like transactions and distributions)
paid by such Related Person in acquiring any of its holdings of such
class or series of capital stock, (ii) the highest per share Market
Value of such class or series of capital stock within the twelve-month
period immediately preceding the date the proposal for such Business
Combination was first publicly announced or (iii) the book value per
share of such class or series of capital stock, determined in accordance
with generally accepted accounting principles, as of the last day of the
month immediately preceding the date the proposal for such Business
Combination was first publicly announced;

(b) The consideration to be received in such Business Combination
by holders of capital stock other than the Related Person involved
shall, except to the extent that a shareholder agrees otherwise as to
all or part of the shares which he or she owns, be in the same form and
of the same kind as the consideration paid by the Related Person in
acquiring capital stock already owned by it, provided, however, that if
the Related Person has paid for capital stock with varying forms of
consideration, the form of consideration for shares of capital stock
acquired in the Business Combination by the Related Person shall either
be cash or the form used to acquire the largest number of shares of
capital stock previously acquired by it; and

(c) A proxy statement responsive to the requirements of the
Exchange Act and regulations promulgated thereunder, whether or not the
Corporation is then subject to such requirements, shall be mailed to the
stockholders of the Corporation for the purpose of soliciting
stockholder approval of such Business Combination and shall contain at
the front thereof, in a prominent place, (i) any recommendations as to
the advisability (or inadvisability) of the Business Combination which
the Continuing Directors may choose to state and (ii) the opinion of a
reputable investment banking firm selected by the Continuing Directors
as to the fairness of the terms of such Business Combination, from a
financial point of view, to the public stockholders (other than the
Related Person) of the Corporation.

C. A Related Person shall be deemed for purposes of this Article
FOURTEENTH to have acquired a share of the Corporation at the time when such
Related Person became the beneficial owner thereof (as such term is defined in
Paragraph A(2) of this Article FOURTEENTH). With respect to shares owned by
affiliates, associates and other Persons whose ownership is attributed to a
Related Person, if the price paid by such Related Person for such shares is not
determinable, the price so paid shall be deemed to be the higher of (i) the
price paid upon acquisition thereof by the affiliate, associate or other Person
or (ii) the Market Value of the shares in question at the time when the Related
Person became the beneficial owner thereof.

For purposes of this Article FOURTEENTH, in the event of a Business
Combination upon consummation of which the Corporation would be the surviving
corporation or would continue to exist (unless it is provided, contemplated or
intended that as part of such Business Combination a plan of liquidation or
dissolution of the Corporation will be effected), the term "other consideration
to be received" in Paragraph B(2)(a) shall include (without limitation) common
stock or other capital stock of the Corporation retained by stockholders of the
Corporation (other than Related Persons who are parties to such Business
Combination).

Nothing contained in this Article shall be construed to relieve any Related
Person from any fiduciary obligation imposed by law.

D. Notwithstanding any other provision of this Restated Certificate of
Incorporation or the By-Laws of the Corporation (and notwithstanding the fact
that a lesser percentage may be permitted by law), any amendment, addition,
alteration, change or repeal of this Article FOURTEENTH, or any other amendment
of

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this Restated Certificate of Incorporation inconsistent with or modifying or
permitting circumvention of this Article FOURTEENTH, must first be proposed by
the Board of Directors of the Corporation, upon the affirmative vote of at least
two-thirds of the directors then in office at a duly constituted meeting of the
Board of Directors called for such purpose, and thereafter approved by the
affirmative vote of the holders of not less than 85% of the then outstanding
Voting Stock held by stockholders other than a Related Person by or with whom or
on whose behalf, directly or indirectly, a Business Combination is proposed,
voting as a single class; provided, however, that this Paragraph D shall not
apply to, and such 85% vote shall not be required for, any such amendment,
addition, alteration, change or repeal recommended to stockholders of the
Corporation by the affirmative vote of not less than 66 2/3% of the Continuing
Directors. For the purposes of this Paragraph D only, if at the time when any
such amendment, addition, alteration, change or repeal is under consideration
there is no proposed Business Combination, the term "Continuing Directors" shall
be deemed to mean the Entire Board of Directors.

FIFTEENTH: The Board of Directors, each committee of the Board of
Directors and each individual director, in discharging their respective duties
under applicable law and this Restated Certificate of Incorporation and in
determining what they each believe to be in the best interests of the
Corporation and its stockholders, may consider the effects, both short-term and
long-term, of any action or proposed action taken or to be taken by the
Corporation, the Board of Directors or any committee of the Board on the
interests of (i) the employees, associates, associated physicians, distributors,
patients or other customers, suppliers and/or creditors of the Corporation and
its subsidiaries and (ii) the communities in which the Corporation and its
subsidiaries own or lease property or conduct business, all to the extent that
the Board of Directors or any committee of the Board of Directors or any
individual director deems pertinent under the circumstances (including the
possibility that the interests of the Corporation may best be served by the
continued independence of the Corporation); provided, however, that the
provisions of this Article FIFTEENTH shall not limit in any way the right of the
Board of Directors to consider any other lawful factors in making its
determinations, including, without limitation, the effects, both short-term and
long-term, of any action or proposed action on the Corporation or its
stockholders directly; and provided further that this Article FIFTEENTH shall be
deemed solely to grant discretionary authority to the Board of Directors, each
committee of the Board of Directors and each individual director and shall not
be deemed to provide to any specific constituency any right to be considered.

SIXTEENTH: Each person who was or is made a party or is threatened to
be made a party to or is involved (including, without limitation, as a witness)
in any actual or threatened action, suit or proceeding (or any part thereof),
whether civil, criminal, administrative or investigative (hereinafter a
"proceeding"), by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation or
of a partnership, joint venture, trust or other enterprise, including service
with respect to an employee benefit plan (hereinafter an "indemnitee"), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as
such director, officer, employee or agent, shall be indemnified and held
harmless by the Corporation to the full extent authorized by the General
Corporation Law of the State of Delaware, as the same exists or may hereafter be
amended (but, in the case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment), or by
other applicable law as then in effect, against all expense, liability and loss
(including attorneys' fees, judgments, fines, excise taxes under the Employee
Retirement Income Security Act of 1974, as amended from time to time ("ERISA"),
penalties and amounts to be paid in settlement) actually and reasonably incurred
or suffered by such indemnitee in connection therewith. The Corporation shall
not be required to indemnify any indemnitee in connection with a proceeding
initiated by such indemnitee unless the initiation of such proceedings by the
indemnitee was authorized by the Board of Directors of the Corporation.

A. Procedure. Any indemnification under this Article SIXTEENTH (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the director,
officer, employee or agent is proper in the circumstances because he/she has met
the applicable standard of conduct set forth in the General Corporation Law of
the State of Delaware, as the same exists or

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hereafter may be amended (but, in the case of any such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said law permitted the Corporation to provide prior
to such amendment). Such determination shall be made (a) by a majority vote of
the directors who were not parties to such action, suit or proceeding (the
"Disinterested Directors"), even if less than a quorum or (b) if there are no
Disinterested Directors or if the Disinterested Directors so direct, by
independent legal counsel in a written opinion, or (c) by the stockholders.

B. Advances for Expense. Costs, charges and expenses (including attorneys'
fees) incurred by a director or officer of the Corporation in defending a civil
or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director or officer to repay all
amounts so advanced in the event that it shall ultimately be determined that
such director or officer is not entitled to be indemnified by the Corporation as
authorized in this Article SIXTEENTH. Such costs, charges and expenses incurred
by other employees and agents may be so paid upon such terms and conditions, if
any, as the majority of the Disinterested Directors deems appropriate. The
majority of the Disinterested Directors may, in the manner set forth above, and
upon approval of such director, officer, employee or agent of the Corporation,
authorize the Corporation's counsel to represent such person, in any action,
suit or proceeding whether or not the Corporation is a party to such action,
suit or proceeding.

C. Procedure for Indemnification. Any indemnification or advance of costs,
charges and expenses under this Article SIXTEENTH, shall be made promptly, and
in any event with 60 days upon the written request of the director, officer,
employee or agent. The right to indemnification or advances as granted by this
Article SIXTEENTH shall be enforceable by the director, officer, employee or
agent in any court of competent jurisdiction, if the Corporation denies such
request, in whole or in part, or if no disposition thereof is made within 60
days. Such person's costs and expenses incurred in connection with successfully
establishing his/her right to indemnification, in whole or in part, in any such
action shall also be indemnified by the Corporation. It shall be a defense to
any such action (other than an action brought to enforce a claim under Section
145(c) of the General Corporation Law of the State of Delaware or for the
advance of costs, charges and expenses under this Article SIXTEENTH where the
required undertaking, if any, has been received by the Corporation) that the
claimant has not met the standard of conduct set forth in the General
Corporation Law of the State of Delaware, as the same exists or hereafter may be
amended (but, in case of any such amendment, only to the extent that such
amendment permits the Corporation to provide broader indemnification rights than
said law permitted the Corporation to provide prior to such amendment), but the
burden of proving such defense shall be on the Corporation. Neither the failure
of the Corporation (including its Board of Directors, its independent legal
counsel and its stockholder) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he/she has met the applicable standard of conduct set
forth in the General Corporation Law of the State of Delaware, as the same
exists or hereafter may be amended (but, in the case of any such amendment, only
to the extent that such amendment permits the Corporation to provide broader
indemnification rights that said law permitted the Corporation to provide prior
to such amendment), nor the fact that there has been an actual determination by
the Corporation (including its Board of Directors, its independent legal counsel
and its stockholders) that the claimant has not met such applicable standard of
conduct, shall be a defense to the action or create a presumption that the
claimant has not met the applicable standard of conduct.

D. Other Rights; Continuation of Rights to Indemnification. The
indemnification and advancement of expenses provided by this Article SIXTEENTH
shall not be deemed exclusive of any other rights to which a person seeking
indemnification or advancement of expenses may by entitled under any law (common
or statutory), by-law, agreement, vote of stockholders or disinterested
directors or otherwise, both as to action in his/her official capacity and as to
action in another capacity while holding office or while employed by or acting
as agent for the Corporation, and shall continue as to a person who has ceased
to be a director, officer, employee or agent, and shall inure to the benefit of
the estate, heirs, executors and administrators of such person. All rights to
indemnification under this Article SIXTEENTH shall be deemed to be a contract
between the Corporation and each director, officer, employee or agent of the
Corporation who serves or served in such capacity at any time while this Article
SIXTEENTH is in effect. Any repeal or modification of this

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Article SIXTEENTH or any repeal or modification of relevant provisions of the
General Corporation Law of the State of Delaware or any other applicable laws
shall not in any way diminish any rights to indemnification of such director,
officer, employee or agent or the obligation of the actions, transactions or
facts occurring prior to the final adoption of such modification or repeal. For
the purposes of this Article SIXTEENTH, references to "the Corporation" include
all constituent corporations absorbed in consolidation or merger as well as the
resulting or surviving corporation, so that any person who is or was a director,
officer, employee or agent of such a constituent corporation or is or was
serving at the request of such constituent corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise shall stand in the same position under the provisions of this
Article SIXTEENTH, with respect to the resulting or surviving corporation, as he
would if he/she had served the resulting or surviving corporation in the same
capacity.

E. Insurance. The Corporation shall have power to purchase and maintain
insurance on behalf of any person who is or was or has agreed to become a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him/her and incurred by him/her or on
his/her behalf in any such capacity, or arising out of his/her status as such,
whether or not the Corporation would have the power to indemnify him/her against
such liability under the provisions of this Article SIXTEENTH; provided,
however, that such insurance is available on acceptable terms which
determination shall be made by a vote of a majority of the Board of Directors.

F. Savings Clause. If this Article SIXTEENTH or any portion hereof shall
be invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each person entitled to indemnification
under the first paragraph of this Article SIXTEENTH as to all expense, liability
and loss (including attorneys' fees, judgments, fines, ERISA excise taxes,
penalties and amounts to be paid in settlement) actually and reasonable incurred
or suffered by such person and for which indemnification is available to such
person pursuant to this Article SIXTEENTH to the full extent permitted by any
applicable portion of this Article SIXTEENTH that shall not have been
invalidated and to the full extent permitted by applicable law.

SEVENTEENTH: In furtherance and not in limitation of the powers
conferred by law or in this Restated Certificate of Incorporation, the Board of
Directors (and any committee of the Board of Directors) is expressly authorized,
to the extent permitted by law, to take such action or actions as the Board or
such committee may determine to be reasonably necessary or desirable to (A)
encourage any person to enter into negotiations with the Board of Directors and
management of the Corporation with respect to any transaction which may result
in a change in control of the Corporation which is proposed or initiated by such
person or (B) contest or oppose any such transaction which the Board of
Directors or such committee determines to be unfair, abusive or otherwise
undesirable with respect to the Corporation and its business, assets or
properties or the stockholders of the Corporation, including, without
limitation, the adoption of such plans or the issuance of such rights, options,
capital stock, notes, debentures or other evidences of indebtedness or other
securities of the Corporation, which rights, options, capital stock, notes,
evidence of indebtedness and other securities (i) may be exchangeable for or
convertible into cash or other securities on such terms and conditions as may be
determined by the Board or such committee and (ii) may provide for the treatment
of any holder or class of holders thereof designated by the Board of Directors
or any such committee in respect of the terms, conditions, provisions and rights
of such securities which is different from, and unequal to, the terms,
conditions, provisions and rights applicable to all other holders thereof.

EIGHTEENTH: The Corporation reserves the right to amend, add, alter,
change, repeal or adopt any provision contained in this Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon stockholders herein are granted subject to this
reservation. In addition to any affirmative vote required by applicable law or
any other provision of this Restated Certificate of Incorporation or specified
in any agreement, and in addition to any voting rights granted to or held by the
holders of any series of Preferred Stock, the affirmative vote of the holders of
not less than 75% of the voting power of all securities of the Corporation
entitled to vote generally in the election of directors shall be required to
amend, add, alter, change, repeal or adopt any provisions inconsistent with
Articles FIFTH, SIXTH,

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SEVENTH, EIGHTH, NINTH, TENTH, TWELFTH, THIRTEENTH, FIFTEENTH,
SIXTEENTH, SEVENTEENTH, and EIGHTEENTH of this Restated Certificate of
Incorporation.

IN WITNESS WHEREOF, this Restated Certificate of Incorporation has been
signed under the seal of the Company this day of , 1994.

ICN MERGER CORP.
By:
------------------------------

[Seal]
Attest:
-----------------------------

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EXHIBIT B
TO APPENDIX A

FORM OF AFFILIATE LETTER

ICN Merger Corp.
330 Hyland Avenue
Costa Mesa, CA 92626

Ladies and Gentlemen:

I have been advised that as of the date of this letter I may be deemed to
be an "affiliate" of ICN Pharmaceuticals, Inc., a Delaware corporation ("ICN"),
SPI Pharmaceuticals, Inc., a Delaware corporation ("SPI"), Viratek, Inc. a
Delaware corporation ("Viratek"), and/or ICN Biomedicals, Inc., a Delaware
corporation ("Biomedicals"), as the term "affiliate" is defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules and
Regulations") of the Securities and Exchange Commission (the "Commission") under
the Securities Act of 1933, as amended (the "Act"). Subject to the terms and
conditions of the Agreement and Plan of Merger dated as of August 1, 1994 (the
"Agreement"), among ICN, SPI, Viratek, Biomedicals and ICN Merger Corp., a
Delaware corporation ("New ICN"), ICN, SPI and Viratek will be merged with and
into New ICN and Biomedicals will be merged with and into a wholly-owned
subsidiary of New ICN (the "Merger").

As a result of the Merger, I may receive shares of Common Stock, par value
$.01 per share, of New ICN (the "New ICN Shares") in exchange for shares owned
by me of Common Stock, par value $1.00 per share, of ICN and/or Common Stock,
par value $.01 per share of SPI, and/or Common Stock, par value $.10 per share,
of Viratek, and/or Common Stock, par value $.01 per share, of Biomedicals.

I represent, warrant and covenant to New ICN that in the event I receive
any new ICN Shares as a result of the Merger:

A. I shall not make any sale, transfer or other disposition of the
New ICN Shares in violation of the Act or the Rules and Regulations.

B. I have carefully read this letter and the Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of the New ICN Shares to the
extent I felt necessary, with my counsel or counsel for ICN, SPI, Viratek
or Biomedicals.

C. I have been advised that the issuance of New ICN Shares to me
pursuant to the Merger has been registered with the Commission under the
Act on a Registration Statement on Form S-4. However, I have also been
advised that, since at the time the Merger was submitted for a vote of the
stockholders of ICN, SPI, Viratek and/or Biomedicals, I may be deemed to
have been an affiliate of ICN, SPI, Viratek and/or Biomedicals and the
distribution by me of the New ICN Shares has not been registered under the
Act, I may not sell, transfer or otherwise dispose of the New ICN Shares
issued to me in the Merger unless (i) such sale, transfer or other
disposition has been registered under the Act, (ii) such sale, transfer or
under other disposition is made in conformity with Rule 145 promulgated by
the Commission under the Act, or (iii) in the opinion of counsel reasonably
acceptable to New ICN, or a "no action" letter obtained by the undersigned
from the staff of the Commission, such sale, transfer or other disposition
is otherwise exempt from registration under the Act.

D. I understand that New ICN is under no obligation to register the
sale, transfer or other disposition of the New ICN Shares by me or on my
behalf under the Act or to take any other action necessary in order to make
compliance with an exemption from such registration available.

A-B-1
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E. I also understand that stop transfer instructions will be given to
SPI's transfer agents with respect to the New ICN Shares and that there
will be placed on the certificates for the New ICN Shares issued to me, or
any substitutions therefor; a legend stating in substance:

"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES.
THE SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN
ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED BETWEEN THE REGISTERED
HOLDER HEREOF AND ICN MERGER CORP., A COPY OF WHICH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICES OF ICN MERGER CORP."

F. I also understand that unless the transfer by me of my New ICN
Shares has been registered under the Act or is a sale made in conformity
with the provisions of Rule 145, New ICN reserves the right to put the
following legend on the certificates issued to my transferee:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO
RECEIVED SUCH SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED
BY THE HOLDER NOT WITH A VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY
DISTRIBUTION THEREOF WITHIN THE MEANING OF THE SECURITIES ACT OF 1933
AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT IN
ACCORDANCE WITH AN EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE
SECURITIES ACT OF 1933."

It is understood and agreed that the legends set forth in paragraphs E and
F above shall be removed by delivery of substitute certificates without such
legend if such legend is not required for purposes of the Act or this Agreement.
It is understood and agreed that such legends and the stop orders referred to
above will be removed if (i) two years shall have elapsed from the date the
undersigned acquired the New ICN Shares received in the Merger and the
provisions of Rule 145(d)(2) are then available to the undersigned, (ii) three
years shall have elapsed from the date the undersigned acquired the New ICN
Shares received in the Merger and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, or (iii) New ICN has received either an opinion
of counsel, which opinion and counsel shall be reasonably satisfactory to New
ICN, or a "no action" letter obtained by the undersigned from the staff of the
Commission, to the effect that the restrictions imposed by Rule 145 under the
Act no longer apply to the undersigned.

Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of ICN, SPI, Viratek and/or Biomedicals as described in
the first paragraph of this letter or as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of this
letter.

Very truly yours,

Name:
-----------------------------
Accepted this day of
, 1994 by
ICN MERGER CORP.

By:
----------------------------------------

Name:
---------------------------------

Title:
--------------------------------

A-B-2
<PAGE> 244

APPENDIX B
<PAGE> 245

PRUDENTIAL SECURITIES
- --------------------------------------------------------------------------------

September 28, 1994

Board of Directors
ICN Pharmaceuticals, Inc.
3300 Hyland Avenue
Costa Mesa, California 92626

Dear Sirs:

ICN Pharmaceuticals, Inc. ("ICN"), Viratek, Inc. ("Viratek"), ICN
Biomedicals, Inc. ("Biomedicals"), SPI Pharmaceuticals, Inc. ("SPI"), and ICN
Merger Corp. ("New ICN"), a wholly-owned subsidiary of SPI, propose to enter
into an Agreement and Plan of Merger dated as of August 1, 1994, as amended,
(the "Merger Agreement") pursuant to which ICN, Viratek, Biomedicals and SPI
will be merged (the "Merger") with and into New ICN. Pursuant to the Merger
Agreement, upon completion of the Merger, each outstanding share of Common
Stock, $1.00 par value, of ICN (the "ICN Common Stock") will be converted into
the right to receive .512 shares of Common Stock, $.01 par value (the "Exchange
Ratio"), of New ICN (the "New ICN Common Stock"). In addition, each share of
common stock, $.01 par value, of SPI (the "SPI Common Stock") (other than SPI
Common Stock held by ICN) will be converted into the right to receive 1.000
shares of New ICN Common Stock, each share of Common Stock, $.10 par value, of
Viratek (the "Viratek Common Stock") (other than Viratek Common Stock held by
ICN) will be converted into the right to receive .499 shares of New ICN Common
Stock, and each share of Common Stock, $.01 par value, of Biomedicals (the
"Biomedicals Common Stock") (other than Biomedicals Common Stock held by ICN)
will be converted into the right to receive .197 shares of New ICN Common Stock.
After giving effect to the Merger, the holders of ICN Common Stock will own, in
the aggregate, 38.98% of the outstanding New ICN Common Stock.

You have asked us to render an opinion with respect to the fairness to the
ICN Common Stock holders, from a financial point of view, of the Exchange Ratio.

In conducting our analysis and arriving at the opinion stated herein, we
have reviewed such information and considered such financial data and other
factors as we deemed appropriate under the circumstances, including the
following: (i) ICN's, Viratek's, Biomedical's and SPI's historical financial
data and other publicly available information for the three years ended December
31, 1993 as well as interim financial results for the six months ended June 30,
1994; (ii) certain information, including financial projections, for ICN,
Viratek, Biomedicals, and SPI prepared, in each case, by the respective
managements of each company and financial projections for New ICN, prepared by
ICN management relating to the revenues, earnings and cash flow for each of the
ICN, Viratek, Biomedicals, SPI and New ICN businesses; (iii) the pro forma
statement of income for New ICN for the year ended December 31, 1993 and for the
six months ended June 30, 1994 and the pro forma balance sheet for New ICN as of
June 30, 1994 prepared by ICN in conjunction with ICN's outside auditors; (iv)
industry data relating to each of ICN's, Viratek's, Biomedical's, SPI's and New
ICN's businesses; (v) the financial terms of the Merger and the financial terms
of certain other transactions we deemed relevant; (vi) the trading history of
the ICN Common Stock, the Viratek Common Stock, the Biomedicals Common Stock and
the SPI Common Stock; (vii) publicly available information concerning certain
other companies we deemed reasonably similar to ICN, Viratek, Biomedicals, SPI
and New ICN and the common stock trading history for each such comparable
company; (viii) the Merger Agreement; (ix) the Registration Statement on Form
S-1 filed with the SEC by New ICN dated September 14, 1994, as amended, in
connection with New ICN's proposed convertible subordinated debenture financing;
and (x) such other studies, analyses and investigations as we deemed appropriate
for the purposes of this opinion. We have met

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with senior officers of ICN, Viratek, Biomedicals and SPI to discuss each
company's financial condition and prospects and such other matters as we deemed
relevant. We were not able to visit the operations of ICN Galenika, a subsidiary
of SPI located in The Federal Republic of Yugoslavia. Our opinion is based on
economic, financial and market conditions as they exist and can be evaluated on
the date hereof.

In connection with our review and analysis, we have relied upon the
accuracy and completeness of the financial data and other information provided
to us by ICN, Viratek, Biomedicals and SPI or is publicly available and have not
independently verified any such information. With respect to the financial
projections prepared by ICN management for New ICN, as well as the financial
projections for Viratek, Biomedicals and SPI, we made certain modifications to
such projections using assumptions less optimistic than those employed by ICN,
Viratek, Biomedicals and SPI managements. We have neither made nor obtained any
independent appraisals of the properties, facilities or other assets of ICN,
Viratek, Biomedicals or SPI. In addition, we have not been authorized by the ICN
Board of Directors or the ICN Special Committee to solicit, and have not
solicited, third party indications of interest for the acquisition of ICN or any
interest therein.

As you know, Prudential Securities Incorporated may, in the ordinary course
of business, trade the ICN Common Stock, the SPI Common Stock, the Viratek
Common Stock and the Biomedicals Common Stock for our own account and for the
accounts of customers, and, accordingly, may at any time hold a long or short
position in such securities.

Based upon and subject to the foregoing, we are of the opinion that the
Exchange Ratio is fair to the ICN Common Stock holders from a financial point of
view.

Very truly yours,

PRUDENTIAL SECURITIES INCORPORATED

- --------------------------------------------------------------------------------

PRUDENTIAL SECURITIES (LOGO)

B-2

<PAGE> 247

APPENDIX C
<PAGE> 248

WERTHEIM SCHRODER & CO. EQUITABLE CENTER
Incorporated 787 SEVENTH AVENUE
NEW YORK, NY 10019-6016

TELEPHONE 212-492-6000

September 28, 1994

The Board of Directors of:
SPI Pharmaceuticals, Inc.
3300 Hyland Avenue
Costa Mesa, CA 92626

Gentlemen:

It is our understanding that SPI Pharmaceuticals, Inc. ("SPI" or the
"Company") intends to enter into a merger transaction (the "Transaction")
whereby it would be combined with certain of its affiliated companies, namely
ICN Pharmaceuticals, Inc. ("ICN"), Viratek, Inc. ("Viratek") and ICN
Biomedicals, Inc. ("Biomedicals") (together, the "Affiliated Companies"). In
connection with the Transaction, the shares of common stock held by the
shareholders of the Company and each Affiliated Company would be converted into
shares of a newly formed holding company ("ICN Merger Corp."). We understand
further that a set of exchange ratios has been established to govern the
conversion of shares of the Company and each of the Affiliated Companies into
shares of ICN Merger Corp. and that, according to this plan, current holders of
SPI common stock (except ICN) would receive one (1) share of ICN Merger Corp.
common stock in exchange for each of their SPI shares (the "Exchange Ratio").
You have asked our opinion, as investment bankers, as to the fairness, from a
financial point of view, to the shareholders of SPI other than ICN, of the
proposed Exchange Ratio (the "Opinion").

It is currently contemplated that, in conjunction with the Transaction, ICN
Merger Corp. will offer to the public approximately $150 million of convertible
debt securities (the "Offering") with proceeds used primarily to retire certain
debt to be assumed by ICN Merger Corp. in the Transaction. It is expected that
Wertheim Schroder will serve as lead managing underwriter of the Offering.
Wertheim Schroder has also rendered and continues to render investment banking
services to the Company and its Affiliated Companies, for which it has received,
and will receive, customary fees.

It is understood that the Opinion shall be used by you solely in connection
with your consideration of the fairness of the Exchange Ratio to the
shareholders of SPI other than ICN and for no other purpose, and that the
Company will not furnish the Opinion or any other material prepared by Wertheim
Schroder to any other person or persons or use or refer to the Opinion for any
other purpose without Wertheim Schroder's prior written approval. It is
understood that this Opinion will be included in its entirety in proxy materials
to be sent to shareholders of the Company and its Affiliated Companies in
connection with the Transaction. Any reference to or description of the Opinion
in such proxy materials, however, shall be subject to Wertheim Schroder's prior
approval.

Wertheim Schroder, as part of its investment banking business, is regularly
engaged in the valuation of businesses and their securities in connection with
mergers and acquisitions, negotiated underwritings,

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secondary distributions of listed and unlisted securities, private placements
and valuations for estate, corporate and other purposes.

In arriving at our Opinion, we have:

(i) reviewed the Plan of Merger among SPI and its Affiliated
Companies dated as of August 1, 1994, as amended;

(ii) visited the principal operating facilities of the Company and
its Affiliated Companies, including the Costa Mesa facilities; the
manufacturing plants at Bryan, Ohio and Mexico City, Mexico; and, in 1992,
ICN-Galenika's principal operating facility in Belgrade, Yugoslavia;

(iii) reviewed the Annual Reports of Form 10-K and the audited
financial statements of the Company and each of its Affiliated Companies
for the three fiscal years ended December 31, 1993 and their quarterly
Reports on Form 10-Q for the quarter ended March 30, 1994 and June 30,
1994;

(iv) reviewed certain internal, unaudited financial analyses and
reports prepared by management of each of the Company and each of the
Affiliated Companies;

(v) reviewed the management forecasts of the operating and financial
results for the Company and each of the Affiliated Companies used in the
joint Boards of Directors meeting on June 14, 1994;

(vi) reviewed the internal financial statements for the Company for
the quarter ended June 30, 1994;

(vii) reviewed the pro forma (for the Transaction and Offering)
balance sheet and income statement for ICN Merger Corp. for the year ended
December 31, 1993 and for the six months ended June 30, 1994 prepared by
the Company's auditors;

(viii) conducted discussions with the senior management of the Company
and each of the Affiliated Companies concerning their respective historical
and forecasted financial and operating results;

(ix) reviewed the trading histories and relative trading values of
the Company and each of the Affiliate Companies in the public marketplace
over the five year period ended September 26, 1994;

(x) performed various valuation analyses, as deemed appropriate, of
the Company and of the Affiliated Companies using generally accepted
analytical methodologies, including: (i) discounted cash flow valuation
analyses; (ii) the application of the multiples reflected in recent mergers
and acquisitions for comparable businesses to the financial results of the
Company and each of the Affiliated Companies; (iii) the application of the
public trading multiples of comparable companies to the financial results
of the Company and the Affiliated Companies; (iv) a relative financial and
market value contribution analysis for the Company and each of the
Affiliated Companies; and (v) for ICN, a net asset valuation analysis;

(xi) reviewed the report, dated July 22, 1994, prepared by Houlihan,
Lokey, Howard & Zukin, Inc. regarding the valuation of certain research and
development related assets of Viratek; and

(xii) performed such other financial studies, analyses, inquiries and
investigations as we deemed appropriate.

In preparing our Opinion, we have assumed and relied on the accuracy and
completeness of all information supplied or otherwise made available to us by
the Company and each of the Affiliated Companies or obtained by us from other
sources, and we have not assumed any responsibility to independently verify such
information or to undertake an independent appraisal of any of the underlying
assets. We have not been asked to, and have not, sought or solicited any offers
for the Company or any of the Affiliated Companies. With respect to the
forecasts for the Company and each of the Affiliated Companies, we have been
advised by the management of each company, and have not assumed any
responsiblity for independent investigation, that they have been reasonably
prepared and reflect the best currently available estimates and judgment of the
management of each company. Our Opinion is necessarily based on economic, market
and other conditions as they exist, and the information made available to us, as
of the date hereof. We disclaim any undertaking or

C-2
<PAGE> 250

obligation to advise any person of any change in any fact or matter affecting
our Opinion which may come or be brought to our attention after the date of this
Opinion.

This Opinion does not constitute a recommendation to any holder of common
shares of SPI as to how such holder should vote, or as to any other action which
such holder should take, in connection with the Transaction. This Opinion
relates solely to the question of the fairness, from a financial point of view,
of the Exchange Ratio as currently proposed to the shareholders of SPI other
than ICN. Further, we express no opinion herein as to the structure, terms or
effect of any other aspect of the Transaction or Offering, including, without
limitation, any effects resulting from the application of any bankruptcy,
fraudulent conveyance or other federal or state insolvency law or of any pending
or threatened litigation affecting the Company or any of the Affiliated
Companies.

Based upon and subject to the foregoing, we are of the opinion, as
investment bankers, that the Exchange Ratio as currently proposed is fair, from
a financial point of view, to the shareholders of SPI other than ICN.

Very truly yours,

WERTHEIM SCHRODER & CO.
Incorporated

C-3
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APPENDIX D
<PAGE> 252

KEMPER SECURITIES, INC.
Corporate Finance Department
500 North Akard - 1515 Lincoln Plaza
Dallas, Texas 75201
(214) 740-3295
(800) 327-6861
FAX (214) 740-3297

September 28, 1994
The Board of Directors of
Viratek, Inc.
3300 Hyland Avenue
Costa Mesa, CA 92626

Dear Sirs:

We understand that Viratek, Inc. ("Viratek" or the "Company") intends to
enter into a combination transaction (the "Transaction") whereby its operations
would be merged with those of certain of its affiliated companies including ICN
Pharmaceuticals, Inc. ("ICN"), SPI Pharmaceuticals, Inc. ("SPI") and ICN
Biomedicals, Inc. ("Biomedicals") (together, the "Affiliated Companies"). To
effect the Transaction, shareholders of the Company and each Affiliated Company
would exchange their shares for shares of the newly formed company ("Newco"). We
understand that a set of exchange ratios has been established to govern the
conversion of shares of the Company and each of the Affiliated Companies into
shares of Newco such that: (i) current holders of Viratek common stock would
receive 0.499 shares of Newco common stock in exchange for each of their Viratek
shares (the "Viratek Exchange Ratio"), (ii) current holders of ICN common stock
would receive 0.512 shares of Newco common stock in exchange for each of their
ICN shares, (iii) current holders of SPI common stock would receive 1.00 shares
of Newco common stock in exchange for each of their SPI shares, and (iv) current
holders of Biomedicals common stock would receive 0.197 shares of Newco common
stock for each of their Biomedicals shares. It is currently contemplated that,
in conjunction with the Transaction, Newco will offer to the public
approximately $150 million of convertible or other debt securities (the
"Offering") with proceeds used primarily to retire certain debt to be assumed by
Newco. It is expected that Kemper Securities will serve as a co-managing
underwriter of the Offering.

You have requested our opinion as to whether the proposed Viratek Exchange
Ratio is fair to the shareholders of Viratek other than ICN (the "Viratek
Minority Shareholders") from a financial point of view.

For the purposes of the opinion set forth herein, we have, among other
things:

(i) reviewed the draft Joint Proxy Statement of the Merging Companies
dated September 21, 1994;

(ii) reviewed the Agreement and Plan of Merger among Viratek and its
Affiliated Companies dated August 1, 1994, as amended;

(iii) toured the principal operating facilities of the Company and its
Affiliated Companies, including the Costa Mesa facilities and the
manufacturing plants at Bryan, Ohio and Mexico City, Mexico;

(iv) reviewed the audited financial statements of the Company and each
of its Affiliated Companies for the three fiscal years ended December 31,
1993 and their unaudited statements for the quarters ended March 31, 1994
and June 30, 1994;

(v) reviewed certain internal, unaudited financial analyses and
reports prepared by management of the Company and each of the Affiliated
Companies;

(vi) reviewed management forecasts of the operating and financial
results for the Company, each of the Affiliated Companies and for Newco;

(vii) reviewed the pro forma (for the Transaction and Offering)
historical balance sheet and income statement for Newco for the year ended
December 31, 1993 and for the six months ended June 30, 1994 prepared by
the Company's auditors;

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<PAGE> 253

(viii) conducted discussions with the senior management of the Company
and each of the Affiliated Companies concerning the historical and
forecasted financial and operating results for each of the respective
companies;

(ix) reviewed the absolute and relative historical trading values of
the Company and each of the Affiliated Companies in the public marketplace
over the latest five year period;

(x) prepared and reviewed discounted cash flow valuations for the
Company, each of the Affiliated Companies and for Newco;

(xi) reviewed the financial terms, to the extent publicly available,
of certain mergers and acquisitions of publicly traded companies comparable
to the Company or the Affiliated Companies;

(xii) compared the financial performance and the price and trading
activity of the common stock of the Company and each of the Affiliated
Companies with those of certain other comparable publicly-traded companies
and their securities;

(xiii) reviewed the relative financial and market value contributions
of the Company and each of the Affiliated Companies to Newco;

(xiv) reviewed an appraisal prepared by Houlihan, Lokey, Howard &
Zukin dated July 25, 1994 regarding the research and development efforts
associated with various Viratek compounds; and

(xv) performed such other analyses as we deemed appropriate and have
considered such other information, financial studies, analyses and
investigations and financial, economic and market criteria and industry and
competitive trends, which we deem relevant.

We have assumed and relied upon, without independent verification, the
accuracy, completeness and fairness of the financial and other information
reviewed by us, the accuracy, completeness and fairness of oral statements made
to us, and the assurances of management of Viratek and each of the Affiliated
Companies that they do not know anything regarding Viratek or any of the
Affiliated Companies which would make the information provided us incomplete or
misleading for the purposes of this opinion. With respect to the financial
projections, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of the future
financial performance of each company. We have not been asked to, and have not,
sought or solicited any offers for the Company or any of the Affiliated
Companies. In addition, we have not made an independent evaluation or appraisal
of the assets of Viratek or any of the Affiliated Companies. Our opinion is
necessarily based on economic market, and other conditions as in effect on, and
the information made available to us as of, the date hereof. We disclaim any
undertaking or obligation to advise any person of any change in any fact or
matter affecting our opinion which may come or be brought to our attention after
the date of this opinion.

We have acted as financial advisor to the Board of Directors of Viratek in
connection with this opinion and will receive a fee for our services. It is
understood that this opinion shall be used by you solely in connection with your
consideration of the fairness of the Viratek Exchange Ratio to the Viratek
Minority Shareholders and for no other purpose, and the Company will not furnish
this opinion or any other material prepared by Kemper Securities to any other
person or persons or use or refer to this opinion for any other purpose without
the prior written approval of Kemper Securities. It is understood that this
opinion will be included in its entirety in proxy materials to be sent to
shareholders of the Company and its Affiliated Companies in connection with the
Transaction. Any reference to or description of this opinion in such proxy
materials, however, shall be subject to prior approval by Kemper Securities.

D-2
<PAGE> 254

This opinion does not constitute a recommendation to any shareholder of
Viratek as to how such shareholder should vote, or as to any other action which
such shareholder should take, in connection with the Transaction. This opinion
relates solely to the question of the fairness to the Viratek Minority
Shareholders, from a financial point of view, of the Viratek Exchange Ratio as
currently proposed. Further, we express no opinion herein as to the structure,
terms or effect of any other aspect of the Transaction or Offering, including,
without limitation, any effects resulting from the application of any
bankruptcy, fraudulent conveyance or other federal or state insolvency law or of
any pending or threatened litigation affecting the Company or any of the
Affiliated Companies.

Based upon the subject to the foregoing, we are of the opinion that the
Viratek Exchange Ratio is fair from a financial point of view to the Viratek
Minority Shareholders.

Very truly yours,

KEMPER SECURITIES, INC.

D-3
<PAGE> 255

APPENDIX E
<PAGE> 256

Jefferies & Company, Inc.
11100 Santa Monica Boulevard, 10th Floor
Los Angeles, California 90025
Telephone (310) 575-8200 (800) 933-6656
CORPORATE FINANCE FAX (310)575-5165

September 28, 1994

Board of Directors
ICN BIOMEDICALS, INC.
3300 Hyland Avenue
Costa Mesa, California 92626

Re: The proposed merger (the "Merger") of ICN Pharmaceuticals, Inc.
("ICN"), ICN Biomedicals, Inc. (the "Company"), Viratek, Inc.
("Viratek") and SPI Pharmaceuticals, Inc. ("SPI") with and into a
newly formed Delaware corporation and wholly owned subsidiary of SPI
("New ICN" and, together with ICN, the Company, Viratek, and SPI,
the "ICN Entities").

Gentlemen:

You have asked us to advise you on the fairness, from a financial point of
view, to the holders (other than ICN and its affiliates) of the outstanding
shares of common stock, par value $.01 per share (the "Common Stock"), of the
Company (the "Stockholders") of the Consideration (defined below) to be received
by such Stockholders in the Merger pursuant to the Agreement and Plan of Merger,
dated August 1, 1994, as amended, among the ICN Entities (the "Merger
Agreement"). The Merger Agreement provides for the Merger, pursuant to which
each issued and outstanding share of Common Stock will be converted into the
right to receive 0.197 shares of Common Stock, par value $.01 per share (the
"New ICN Common Stock"), of New ICN (the shares of New ICN Common Stock to be
received in respect of each share of Common Stock is referred to herein as the
"Consideration"). The terms and conditions of the Merger are more fully set
forth in the Merger Agreement.

Jefferies & Company, Inc. ("Jefferies"), as part of its investment banking
activities, is regularly engaged in the evaluation of capital structures and the
rendering of advice in financial restructuring and recapitalizations. In
addition, Jefferies performs valuations of businesses and their securities in
connection with mergers and acquisitions, negotiated underwritings, secondary
distributions of listed and unlisted securities, private placements, and other
financial services.

As you are aware, Jefferies has been engaged by the Company to render, and
has received a fee for rendering this opinion. In addition, ICN has engaged us
to, among other things, act as a managing underwriter for the public debt
offering of New ICN being made in connection with the Merger (the "Offering").
We express no opinion with respect to any matter relating to the Offering.

In connection with our opinion, we have, reviewed, among other things, the
draft of the Proxy Statement and Prospectus (the "Proxy Statement and
Prospectus"), dated September 21, 1994, to be filed with the Securities and
Exchange Commission, the form of Merger Agreement included in the Proxy
Statement and Prospectus and certain financial and other information that was
publicly available or furnished to us by the Company and the other ICN Entities,
including certain internal financial analyses, financial forecasts, reports and
other information prepared by their respective managements. We have held
discussions with various members of senior management of the Company and the
other ICN Entities concerning each company's historical and current operations,
financial conditions and prospects, as well as the strategic and operating
benefits anticipated from the business combination. In addition, we have
conducted such financial studies, analyses and investigations and reviewed such
other factors as we deemed appropriate for purposes of this opinion.

In rendering this opinion, we have relied, without independent
investigation or verification, on the accuracy, completeness and fairness of all
financial and other information reviewed by us and this opinion is conditioned
upon such information (whether written or oral), including, without limitation,
the information

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referred to in the preceding paragraph, being accurate, complete and fair in all
respects. With respect to the financial projections examined by us, you have
informed us that, although projecting future results of any company is
uncertain, projecting future results of the ICN Entities in particular is
inherentliy subject to vast uncertainties. However, you have further informed
us, and we have assumed, with your permission, that such projections were
reasonably prepared on bases reflecting the best currently available estimates
and good faith judgments of the respective managements of the Company and the
other ICN Entities as to the further performance of each company, in addition,
although we performed sensitivity analysis thereon, in rendering this opinion we
have assumed, with your permission and that each such company will perform in
accordance with such projections for all periods specified therein. Although
such projections did not form the principal basis for our opinion, but rather
was one among many items employed, changes thereto could affect the opinion
rendered herein. We have assumed, with your permission, that the Merger will be
a tax free reorganization and will be accounted for under the purchase
accounting method and that the Offering will be consummated simultaneously with
the Merger.

We note that the Merger has not yet been consumated. You have informed us
that the exchange rate will be 0.197 shares of New ICN Common Stock for each
outstanding share of Common Stock, 0.512 shares of New ICN Common Stock for each
outstanding share of common stock of ICN, 0.499 shares of New ICN Common Stock
for each outstanding share of common stock of Viratek and 1.000 shares of New
ICN Common Stock for each outstanding share of common stock of SPI; provided,
that all shares of capital stock of the ICN Entities owned by ICN will be
cancelled without the right to receive any consideration in exchange. Any change
in the foregoing exchange rates or in the final forms of the Merger Agreement or
the Proxy Statement and Prospectus could change the conclusions expressed
herein.

We have not been requested to, and did not: (a) participate in the
structuring or negotiating of the Merger; (b) solicit third party indications of
interest in acquiring all or any part of the Company; or (c) make any
independent evaluation or appraisal of the assets or liabilities (contingent or
otherwise) of the Company or any of the other ICN Entities, nor have we been
furnished with any such evaluation or appraisals other than the draft appraisal,
dated July 22, 1994, of certain assets of Viratek performed by Houlihan, Lokehy,
Howard & Zukin, Inc. Without limiting the foregoing, we note that (i) SPI, ICN
and Viratek have been named as defendants in certain class action lawsuits
alleging, among other things, violations of Federal securities laws, (ii) the
Company is not a party to these lawsuits, and (iii) upon consummation of the
Merger, the Company's stockholders, as stockholders of New ICN, will have
exposure to the potential risk that New ICN will be forced to pay damages in
connection therewith. We have assumed, with your permission, that the
disposition of such lawsuits, and the liabilities and expenses associated
therewith, if any, will not affect the value of any of the ICN Entities and we
express no opinion with respect to any matter relating to such lawsuits.

We have assumed, with your permission, that all consents and authorizations
necessary to consummate the Merger have been, or will be obtained, without
material expense. Our opinion is addressed solely to the fairness, from a
financial point of view, represented by the Consideration to be received in the
Merger by the Stockholders (other than ICN and its affiliates) on the assumption
that the Company and its Board of Directors have determined that, from the
standpoint of its business and prospects, it is appropriate and desirable to
consummate the Merger. Our opinion is based on economic, monetary and market
conditions prevailing, and other circumstances and conditions existing, on the
date of this letter, and we do not express any opinion as to the market value of
the Consideration to be received by the Stockholders upon, or the price or
trading range at which shares of New ICN Common Stock will trade following
consummation of the Merger. Without limiting the foregoing, we expressly
disclaim any undertaking or obligation to advise any person of any change in any
fact or matter affecting our opinion of which we become aware after the date
hereof.

In the ordinary course of our business, we may actively trade securities of
the Company and the other ICN Entities for our own account and for the accounts
of our customers and, accordingly, may at any time hold a long or short position
in such securities.

It is understood that this letter is for the use of the Board of Directors
of the Company only and may not be used for any other purpose without our prior
written consent. Without limiting the foregoing, this letter

E-2
<PAGE> 258

does not constitute a recommendation to any shareholder of the Company (or of
any of the other ICN Entities) as to how such shareholder should vote with
respect to the Merger.

Based upon and subject to the foregoing, it is our opinion that the
Consideration is fair, from a financial point of view, to the Stockholders
(other than ICN and its affiliates).

Very truly yours,

JEFFERIES & COMPANY, INC.

E-3
<PAGE> 259

APPENDIX F
<PAGE> 260

APPENDIX F

ICN PHARMACEUTICALS, INC.

1993 ANNUAL REPORT TO STOCKHOLDERS

FINANCIAL AND GENERAL INFORMATION
<PAGE> 261

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Business.............................................................................. F-1
Selected Consolidated Financial Data.................................................. F-13
Management's Discussion and Analysis of Financial Condition and Results of Operation
of ICN.............................................................................. F-14
Report of Independent Auditors........................................................ F-24
Financial Statements
Consolidated Balance Sheets......................................................... F-25
Consolidated Statements of Operations............................................... F-26
Consolidated Statements of Stockholders' Equity (Deficit)........................... F-27
Consolidated Statements of Cash Flows............................................... F-28
Notes to Consolidated Financial Statements.......................................... F-29
Financial Statements of SPI Pharmaceuticals, Inc.
Report of Independent Auditors...................................................... *
Consolidated Balance Sheets......................................................... *
Consolidated Statements of Income................................................... *
Consolidated Statements of Stockholders' Equity..................................... *
Consolidated Statements of Cash Flows............................................... *
Notes to Consolidated Financial Statements.......................................... *
Quarterly Stock Price and Dividend Data............................................... F-60
</TABLE>

- ---------------

* See Appendix G for the separate financial statements of SPI Pharmaceuticals,
Inc.

F-i
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BUSINESS
GENERAL

ICN Pharmaceuticals, Inc., its subsidiaries and a 39% owned equity
investment ("ICN" or the "Company") develop, manufacture, distribute and sell
pharmaceutical and nutritional products, research chemical and cell biology
products and related services, biomedical instrumentation and immunodiagnostic
reagents and instrumentation. ICN's pharmaceuticals group is composed of a
subsidiary and an equity investment: (i) Viratek, Inc. ("Viratek") (ICN's
63%-owned subsidiary, as of March 17, 1994), which conducts clinical research
and development on compounds derived from nucleic acids, including ribavirin
(Virazole(R)), a broad spectrum antiviral agent, and (ii) SPI Pharmaceuticals,
Inc. ("SPI") (ICN's 39%-owned equity investment, as of March 17, 1994), which
manufactures, distributes and sells over 1,000 pharmaceutical and nutritional
products, including anti-infectives, dermatologicals, medicated nutritionals and
vitamins, anticholinesterases and vision care products in the United States,
Yugoslavia, Mexico, Canada and Western Europe. The Company's biomedicals group
consists of ICN Biomedicals, Inc. ("Biomedicals") (ICN's 69%-owned subsidiary as
of March 17, 1994), which manufactures and distributes research chemicals, cell
biology products, chromatography materials, immunology instrumentation,
environmental technology products, precision liquid delivery instrumentation and
immunodiagnostic reagents and instrumentation in the United States, Canada,
Mexico, Europe, Australia and Japan. Biomedicals also purchases research
chemicals from other manufacturers, in bulk, for repackaging and distributes
biomedical instrumentation manufactured by others.

The shares of ICN's common stock, $1.00 par value ("Common Stock"), are
traded on the New York and Pacific Stock Exchanges under the symbol ICN. The
shares of common stock of Viratek, SPI and Biomedicals are traded on the
American Stock Exchange under the symbols VRA, SPI and BIM, respectively.

ICN and its then consolidated subsidiaries changed their fiscal year end
from November 30 to December 31, effective for the twelve months ended December
31, 1991. All fiscal years prior to 1991 have not been restated and are shown as
the twelve months ended November 30.

ICN controls Viratek and Biomedicals through stock ownership, voting
control and board representation and is affiliated with SPI. Certain officers of
ICN occupy similar positions with Viratek, SPI and Biomedicals. In addition,
certain officers and directors of ICN own common stock or have options to
purchase substantial numbers of shares of common stock of Viratek, SPI and
Biomedicals. ICN, Viratek, SPI and Biomedicals have engaged in, and will
continue to engage in, certain transactions with each other. Viratek and SPI
have entered into certain licensing and marketing agreements with each other.
Viratek, SPI and Biomedicals sublease space from ICN, and are parties to certain
financial arrangements with ICN. There are potential conflicts of interest
inherent in such relations and transactions. An Oversight Committee of the
Boards of Directors of ICN, Viratek, Biomedicals and SPI was formed to review
transactions between or among the four corporations to determine whether a
conflict of interest exists among them with respect to a particular transaction
and the manner in which such conflict should be resolved. The Oversight
Committee consists of one non-management director of each corporation and a
non-voting chairman. The Oversight Committee has advisory authority only. See
Notes 2, 3, 4, 5 and 6 of Notes to Consolidated Financial Statements.

During 1993, 1992 and 1991, ICN sold 272,500, 348,000 and 200,000 shares,
respectively, of Viratek common stock for an aggregate sales price of
$3,325,000, $5,243,000 and $2,790,000, respectively, in open market and
privately negotiated transactions. In addition, in February and March, 1993,
Viratek successfully completed an offering in which Viratek issued 1,581,250
shares (including the exercise of overallotments). In August 1993, a total of
1,366,642 shares were issued by Viratek upon the exercise of warrants. Due to
the above transaction and the exercise of employee stock options, ICN's
ownership of Viratek has been reduced from 83% at January 1, 1991 to 63% at
December 31, 1993.

As a result of sales by ICN of shares of SPI common stock during 1992 and
1993, its ownership has dropped from 57% at January 1, 1992, to 48% at December
31, 1992, and to 39% at December 31, 1993. Accordingly, SPI was deconsolidated
effective December 31, 1992, and the investment is accounted for by using the
equity method of accounting. The Statements of Operations for 1992 and 1991
include the results of

F-1
<PAGE> 263

SPI on a consolidated basis. See "Business -- Recent Events" and Note 18 of
Notes to Consolidated Financial Statements.

ICN has been named as a defendant in certain consolidated class action
lawsuits relating to ribavirin and the Company's businesses. See Note 9 of Notes
to Consolidated Financial Statements.

ICN was incorporated under the laws of California in 1960 and in October
1986 reincorporated under the laws of Delaware. ICN's principal executive
offices are located at 3300 Hyland Avenue, Costa Mesa, California 92626,
telephone (714) 545-0100.

RECENT EVENTS

During 1991, ICN sold 2,978,250 shares of SPI common stock for an aggregate
sales price of $50,863,000, resulting in a net gain of $27,239,000 and used
1,468,000 shares in the acquisition of Galenika (see Note 6 of Notes to
Consolidated Financial Statements). During 1992, ICN sold 690,400 shares of SPI
common stock and Galenika sold 1,200,000 shares of SPI common stock, transferred
in 1991, for an aggregate sales price of $44,608,000, resulting in a net gain to
ICN of $32,952,000. During 1993, ICN sold 1,618,200 shares of SPI common stock
for an aggregate sales price of $19,995,000. The above noted sales of SPI stock
have reduced ICN's ownership of SPI from 57% at January 1, 1992, to 39% at
December 31, 1993. Accordingly, SPI was deconsolidated from the Company as of
December 31, 1992, the approximate time ICN's ownership fell below 50%. The
continuing investment in SPI was classified in the consolidated balance sheet as
a long-term investment of the Company at December 31, 1992, and income or loss
was recognized using the equity method of accounting during 1993. Prior year
results have not been restated.

On October 21, 1992, SPI announced that it had concluded an agreement with
the Leningrad Industrial Chemical and Pharmaceutical Association to form a
pharmaceutical joint venture in Russia, ICN Oktyabr, in which SPI will have a
75% interest. The new joint venture was registered with the Russian Federation
on March 9, 1993. The joint venture represents a new business, and not the
acquisition of the existing business or assets of Oktyabr. Business operations
of the joint venture will commence on the completion of a business plan.
Oktyabr, which recently was privatized, will contribute output from its current
production facilities. SPI's contribution will be management expertise,
technology, equipment, intellectual property, training and technical assistance
to the new joint venture. Because of the transition of the Russian economy into
a free market oriented economy, SPI plans for a gradual phase-in of the joint
venture in 1994 and 1995. During this phase-in period, the joint venture will
develop training and marketing strategies and begin constructing a new
manufacturing facility in 1995 that is scheduled to be fully operational in
1996. Because of this phase-in period, SPI does not expect any current material
effects on its operating results, as well as, its capital resources and
liquidity.

In addition to the joint venture, on March 24, 1994, SPI entered into an
Agreement with the City of St. Petersburg to acquire 15% of the outstanding
shares of its joint venture partner, Oktyabr, in exchange for approximately
30,000 shares of SPI's common stock. As part of this Agreement, SPI may qualify
to receive newly issued shares of Oktyabr pursuant to Russian privatization
regulations that will raise its total investment in Oktyabr to 43%. The issuance
of these additional shares is subject to approval and completion of an
"investment plan." The completion of the investment plan will not require any
additional financial resources of SPI. SPI has also extended an offer to the
employees of Oktyabr to exchange their Oktyabr shares for SPI shares. The
Oktyabr employees currently own approximately 33% of the outstanding shares,
however, the number of employees that will exchange their shares is uncertain.
In the event that SPI qualifies under the investment plan to raise its
investment to 43%, it is possible that a sufficient number of employees might
exchange their Oktyabr shares for SPI shares so that total SPI investment in
Oktyabr would exceed 50%. If this event occurs, SPI would be required to
consolidate the financial results of Oktyabr into the financial statements of
SPI. 50% of the outstanding shares of Oktyabr, which would require consolidation
of Oktyabr into the financial statements of SPI.

Effective May 1, 1991, SPI formed a new joint company with Galenika
Pharmaceuticals headquartered in Belgrade, Yugoslavia. The joint company, ICN
Galenika ("Galenika") is 75%-owned by SPI and 25%-owned by Galenika Holding
("Galenika Holding"). In connection with the joint venture, SPI contrib-

F-2
<PAGE> 264

uted cash of $14,453,000, an obligation to pay $13,550,000 and ICN, on behalf of
SPI, contributed 1,468,000 shares of common stock of SPI, which was owned by
ICN, and intangible assets, including pharmaceutical compounds and related
patents and licenses. The fair value of the SPI shares transferred to Galenika
was $38,528,000, which was recorded as a liability due to the Company. The cost
basis of the SPI shares transferred to Galenika were $11,555,000.

During 1992 and 1991, Biomedicals initiated a restructuring program
designed to reduce costs and improve operating efficiencies. (See Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Note 14 of Notes to Consolidated Financial Statements.)

RIBAVIRIN

Ribavirin is a broad spectrum antiviral agent with demonstrated clinical
utility against a variety of both DNA-containing and RNA-containing viruses. As
of December 31, 1993, ribavirin has been approved for commercial sale in over 40
countries in various formulations for various indications. Within the United
States, Canada, and most of Europe, the approved form and use is presently
limited to aerosol treatment of hospitalized infants and young children with
severe lower respiratory tract infections due to respiratory syncytial virus
("RSV"). In other countries, ribavirin has been approved for treatment of one or
more of the following: herpes simplex virus, varicella zoster virus (which
causes both chicken pox and shingles), exanthemas diseases (chicken pox,
measles), influenza, hepatitis, human immuno-deficiency virus ("HIV"), and
hemorrhagic fever with renal syndrome.

The mechanism of action of ribavirin appears to involve more than one
process, the importance of which varies depending on the specific virus-host
interaction involved. In general, the action of ribavirin is virustatic, leading
to interruption of viral replication, rather than virucidal in which the virus
would be killed directly. Depending upon the virus involved, virustasis is
accomplished through inhibition of proper mRNA capping, direct inhibition of
certain virus-specific enzymes, or both.

Viral mRNA capping is required by many viruses for efficient binding of
viral genomic "message" to host cell polysomes and therefore for efficient mRNA
translation into proteins. Test results indicate that viral protein synthesis is
significantly reduced in the presence of ribavirin at therapeutic levels with no
observed effect on normal host cell protein synthesis.

Certain viruses encode enzymes in their genome which are required for the
virus to replicate. Direct inhibition of such enzymes without affecting host
cell enzymes prevents or inhibits viral replication. Examples of viral enzymes
inhibited by ribavirin are influenza encoded RNA dependent RNA polymerase, and
HIV encoded reverse transcriptase.

To date, ICN is aware of no reports of virus mutants that are resistant to
inhibition by ribavirin. The emergence of resistant strains of micro-organisms
and viruses to widely used therapeutic drugs is a common problem and the Company
believes that the apparent lack of this development is an important beneficial
feature of ribavirin, particularly when considering possible long-term therapy
for diseases such as hepatitis C.

Management believes that the most commercial potential for ribavirin in the
near term is in the treatment of hepatitis C, RSV, and influenza.

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<PAGE> 265

ACQUISITIONS

Since 1982, the Company has engaged in an ongoing review of potential
acquisitions of compatible businesses. The table below summarizes acquisitions
completed during the past five fiscal years by the Company. For additional
information regarding acquisitions, see Management's Discussion and Analysis of
Financial Condition and Results of Operation and Note 6 of Notes to Consolidated
Financial Statements.

<TABLE>
<CAPTION>
ACQUISITION
COMPANY ACQUIRED LOCATION DATE BUSINESS PURCHASE PRICE
---------------------------- ----------- ---------------- ------------------- --------------------------------------
<S> <C> <C> <C> <C>
Galenika Pharmaceuticals Belgrade, May 1991 Pharmaceuticals $58,301,000, consisting of cash of
Yugoslavia $14,453,000, an obligation to pay
$13,550,000, 1,200,000 unregistered
shares of SPI common stock issued to
employees, and 1,468,000 shares of
SPI common stock plus estimated
acquisition costs of $3,000,000.
Flow Laboratories, Inc. and McClean, November 1989 Biomedical products $37,700,000, including cash and bonds
subsidiaries; common Flow Virginia and 100,000 shares of Biomedicals
Laboratories B.V. and stock plus common Flow estimated
subsidiaries acquisition costs of $2,358,000.
</TABLE>

INDUSTRY SEGMENTS

ICN operates in two industry segments: pharmaceuticals and biomedicals. For
financial information about industry segments, see Note 12 of Notes to
Consolidated Financial Statements.

FOREIGN OPERATIONS

ICN operates in the United States, Yugoslavia, Mexico, Western Europe,
Canada and Asia Pacific. For financial information about domestic and foreign
operations and export sales, see Note 12 of Notes to Consolidated Financial
Statements.

Foreign operations are subject to certain risks, including price and
exchange controls, limitations on foreign participation in local enterprises,
possible nationalization or expropriation, potential default on the payment of
government obligations with attendant impact on private enterprise, political
instability, health-care regulation and other restrictive governmental actions.
Changes in the relative value of currencies take place from time to time and in
the past have affected ICN's results of operations and financial condition. The
future effects of these fluctuations on the operations of ICN and its
subsidiaries are not predictable. See Management's Discussion and Analysis of
Financial Condition and Results of Operation -- Foreign Currency Translation.

SPI has a 75% interest in ICN Galenika, a Yugoslav joint venture. A
substantial majority of ICN Galenika's business is conducted in the Federal
Republic of Yugoslavia (Serbia and Montenegro). The current political and
economic circumstances in Yugoslavia create certain risks particular to that
country. Yugoslavia has been operating under sanctions imposed by the United
Nations since May 1992, which have severely limited the ability to import raw
materials for manufacturing and have prohibited all exports. In addition,
certain risks such as hyperinflation, currency devaluations, wage and price
controls, potential government action and a rapidly deteriorating economy could
have a material effect on the Company's results of operations.

INVESTMENT ACCOUNTED FOR USING THE EQUITY METHOD OF ACCOUNTING:

SPI

SPI manufactures, distributes and sells over 1,000 pharmaceutical and
nutritional products, primarily in the United States, Yugoslavia, Mexico,
Western Europe and Canada through independent sales representatives and its own
marketing and sales staff. Major product lines as described below include
anti-infectives (including antibiotics), medicated nutritionals and vitamins,
anticholinesterases and dermatologicals. SPI was organized by ICN in November
1981. Effective January 1983, the Company transferred to SPI, in exchange for
all the outstanding shares of common stock of SPI, all the outstanding shares of
the Company's wholly-

F-4
<PAGE> 266

owned Canadian and Mexican subsidiaries and certain assets net of certain
liabilities of the Company's operating division in Covina, California. ICN
currently owns 39% of SPI.

PRODUCTS

Anti-Infectives

General. SPI currently sells approximately 65 anti-infective pharmaceutical
products primarily in North America, Latin America, Western Europe and Eastern
Europe. Anti-infective products are used primarily for the therapy of, or
prophylaxis against, infections resulting from viruses, bacteria and parasites.
SPI manufactures most of these products, and contracts with third parties for
the manufacture of the remainder. Anti-infectives constituted 31%, 37% and 36%
of SPI's consolidated net sales for the years ended December 31, 1993, 1992, and
1991, respectively. The more important anti-infective products and their major
market territories are as follows:

<TABLE>
<S> <C>
Virazole(R)........................................ USA, Canada and Europe
Virazid(R) (Virazole(R))........................... Mexico and Spain
Anapenil(R)........................................ Mexico
Dicorvin(R)........................................ Spain
Yectamicina(R)..................................... Mexico
Hidro(R)........................................... Mexico
Alfacet............................................ Yugoslavia
Pentrexyl.......................................... Yugoslavia
Palitrex........................................... Yugoslavia
Jugocillin......................................... Yugoslavia
</TABLE>

Virazole(R). Virazole(R) is currently approved for sale in various
pharmaceutical formulations in over 40 countries for the treatment of several
different human viral diseases. In North America, Virazole(R) has been approved
for hospital use in aerosolized form to treat infants and young children who
have severe lower respiratory infections caused by RSV. Substantially similar
approvals for Virazole(R) treatment of RSV have been granted by governmental
authorities in 22 other countries. The Virazole(R) trademark is used in North
America and certain European countries. The product is sold in Latin America as
Vilona(R) and Virazid(R), where it has been commercially available for over 14
years, and is approved for the treatment of hepatitis, herpes infections,
influenza, and exhanthemous viral diseases such as measles and chicken pox, as
well as RSV. In June 1990, Virazole(R) was approved in the Republic of Ireland
for the management of the early stages of human immunodeficiency virus ("HIV")
infection and in November 1991, the Hungarian government also approved
Virazole(R) for early management of the disease in HIV positive patients.

The commercial sale of Virazole(R) for other indications and presentations
will require regulatory authorization in the United States and other countries.
There can be no assurance that authorization of the commercial sale of
Virazole(R) for any other indication or presentation will be obtained in the
United States or any other country, or that, if such authorization is secured,
the drug will be commercially successful.

Virazole(R), Vilona(R) and Virazid(R) collectively constituted 7%, 6%, and
16% of SPI's consolidated net sales for the years ended December 31, 1993, 1992,
and 1991, respectively.

Other Anti-Infectives. Alfacet and Palitrex are cephalosporons manufactured
by SPI under license from Eli Lilly while Pentrexl (ampicillin) is licensed from
Bristol-Myers Squibb. Anapenil, Trimexazol, Hidro, Rofat, and Yectamicina(R) are
standard antibiotics while Dicorvin is a new macrolide antibiotic.

MEDICATED NUTRITIONALS AND VITAMINS

SPI manufactures, subcontracts, and markets approximately 870 nutritional
and vitamin products, in North America, Latin America, Western Europe and
Eastern Europe. In Mexico, SPI manufactures and markets injectable and oral
multi-vitamins and supplements under the Bedoyecta-Tri(R), Dextrevit(R),
M.V.I.(R), and Vi-Syneral(R) trade names. In Yugoslavia, Galenika manufactures
and markets Oligovit(R), Beviplex,

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<PAGE> 267

Bedoxin, and Chymoral 100 Forte. In the United States, SPI markets nutritional
and vitamin products under the RichLife(R), Plus(R), Nutri-dyn(R) and Dartell(R)
trade names.

Medicated nutritionals and vitamins constituted 9%, 8%, and 10% of SPI's
consolidated net sales for the years ended December 31, 1993, 1992, and 1991,
respectively.

ANTICHOLINESTERASES

SPI markets three anticholinesterase product lines under the trade names
Mestinon(R), Prostigmin(R) and Tensilon(R), in North America. These products are
used in treating myasthenia gravis, a disease characterized by muscle weakness
and atrophy, and in reversing the effects of certain muscle relaxants. These
products, for which SPI received a distribution sublicense from ICN in 1988, are
manufactured by Hoffmann-LaRoche, Inc. Mestinon(R), Prostigmin(R), and
Tensilon(R) collectively constituted 3%, 2%, and 3% of SPI's consolidated net
sales for the years ended December 31, 1993, 1992, and 1991, respectively.

DERMATOLOGICALS

SPI currently manufactures and markets approximately 75 dermatological
products, primarily in North America and Eastern Europe. SPI's dermatological
line, marketed under the ICN label, consists primarily of products used for the
treatment of psoriasis and bleaching agents indicated for the treatment of
hyperpigmented skin. These products include Oxsoralen-ultra(R), Solaquin(R),
Trisoralen(R) and Eldoquin(R). A related product introduced in fiscal 1988,
8-MOP(R), is indicated for the treatment of cutaneous T-cell lymphoma, a form of
skin cancer. Multi-tar(R) is a family of medicated shampoo products. Duonalc(R)
is a dermatological solution for the prevention of acne. Dermatological products
constituted 7%, 7%, and 6% of SPI's consolidated net sales for the years ended
December 31, 1993, 1992, and 1991, respectively.

VISION CARE PRODUCTS

SPI manufactures and markets the Unicare(R) line of contact lens and lens
care products primarily in Latin America and Western Europe. Vision care
products constituted 2%, 2%, and 2% of SPI's consolidated net sales for the
years ended December 31, 1993, 1992, and 1991, respectively.

OTHER PRODUCTS

SPI also manufactures and markets approximately 200 other pharmaceutical
products, including cardiovascular agents, antirheumatics, insulins, analgesics
and psychotropics in Eastern Europe, lithium-based products for the treatment of
manic depressive syndromes, anti-ulcer medicines, products for hormonal
supplementation and various generic pharmaceuticals and surgical products. These
products collectively constituted 48%, 44%, and 29% of SPI's consolidated net
sales for the years ended December 31, 1993, 1992, and 1991, respectively.

MARKETING AND CUSTOMERS

SPI has a marketing and sales staff of approximately 1,320 persons,
including sales representatives in North America, Latin America, Western Europe
and Eastern Europe, who call on physicians, pharmacists, distributors and other
health-care professionals. As part of its marketing program, SPI does direct
mailings, advertises in trade and medical periodicals, exhibits products at
medical conventions, sponsors medical education symposiums and sells through
distributors in countries where it does not have its own marketing staff.

In the United States, SPI sells its pharmaceutical products through
approximately 400 drug wholesalers who, in turn, distribute them to drug stores
and hospitals. SPI's nutritional product line is sold directly and through
distributors to various retail outlets and to certain health-care professionals.

In Mexico, SPI serves an estimated 18,000 pharmacies through a network of
105 distributors. It also sells directly to approximately 870 pharmacists and
160 hospitals in Mexico.

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<PAGE> 268

In Western Europe, SPI markets vision care products in the Netherlands
through hospitals and pharmacies and to retail customers through optical shops.
SPI's Spanish subsidiary sells pharmaceuticals and blood fractionation products
via its own sales force to approximately 530 hospitals and retail outlets, 5,000
pharmacies and 200 wholesalers.

In Canada, SPI sells Virazole(R) for RSV to approximately 1,300 hospitals
directly and through wholesalers. The other pharmaceutical products are sold to
approximately 5,000 drug stores and are distributed through multiple
wholesalers.

SPI's newest subsidiary, Galenika, is Yugoslavia's largest pharmaceutical
manufacturer with an estimated 43% share of the total pharmaceutical market in
that country. Galenika sells a broad range of approximately 250 human drugs and
approximately 200 veterinary, dental and other over the counter products.
Galenika sells products through approximately 30 wholesalers, 6 representative
offices and 85 sales representatives countrywide. Prior to the imposition of
sanctions in May 1992, over 10% of the total production was exported, mainly to
Russia and other Eastern European countries, as well as to many countries in
Africa, the Middle East and the Far East. (See Note 18 of Notes to Consolidated
Financial Statements.)

CONSOLIDATED SUBSIDIARIES

VIRATEK

Viratek is principally engaged in the development of therapeutic
pharmaceutical compounds derived from nucleic acids, including the broad
spectrum antiviral agent ribavirin that is marketed in the United States, Canada
and most of Europe under the trade name Virazole(R). Viratek was formed in
August 1980 for the purpose of continuing the Company's research and development
efforts on such compounds. In November 1980, the Company transferred to Viratek
all its rights to the compounds developed at a former division of the Company,
including the broad spectrum antiviral agent ribavirin. Management believes that
ribavirin is the most developed and promising of the many chemical compounds
owned by Viratek. See "Ribavirin" and "SPI" for additional information
concerning ribavirin.

Viratek will incur expenses over the next several years for clinical trials
in pursuit of FDA authorization of the commercial sale of ribavirin for various
indications or presentations, in addition to treatment in aerosolized form of
RSV in infants, as well as for foreign government authorizations. To fund these
expenditures, Viratek may use cash flow from operations, if available, and may
seek to raise additional capital through financing, licensing, joint venture or
other arrangements. In February and March 1993, Viratek successfully completed a
public offering in which it sold units consisting of one share of Common Stock
and one warrant to purchase one share of Common Stock. 1,375,000 units plus the
overallotment of 206,250 units were sold for net proceeds of approximately
$10,265,000. In August 1993, 1,366,642 warrants were exercised resulting in net
proceeds to Viratek of $13,472,000. The above transactions along with the sale
of ICN owned Viratek shares, reduced ICN's ownership percentage to 63% at
December 31, 1993. See Note 3 of Notes to Consolidated Financial Statements.

The only product marketed by Viratek was ribavirin. Prior to 1991, Viratek
sold ribavirin to SPI, who marketed it to third parties under various licensing
and supply agreements with Viratek. During 1991, Viratek transferred its
remaining ribavirin inventory to SPI for its net book value of $2,943,000. Since
1991, SPI has procured its ribavirin inventories from other manufacturers.
Effective December 1, 1990, SPI and Viratek entered into a new royalty
agreement. Under this agreement, SPI acts as Viratek's exclusive distributor of
ribavirin and pays Viratek a royalty of 20% on sales worldwide. SPI intends to
pursue its marketing efforts in most countries through existing or future
license or distribution arrangements which would minimize SPI's investment in
these countries and would generally provide for the sale of ribavirin in bulk or
finished form to the licensees or distributors for resale in the specified
country.

F-7
<PAGE> 269

the amount of funds available for research and development. In conjunction with
this decision, it was determined that the Company's only operating function
would be to receive royalties on worldwide sales of ribavirin. Accordingly, the
Company significantly reduced the number of its employees and the level of
management involvement. In 1992, Viratek made a decision to increase research
and development activities which included developing pharmaceutical products
derived from nucleic acids and the development of in vitro commercial
diagnostics products. Currently the Company is focusing on clinical testing of
Virazole(R) in the treatment of hepatitis C and initiating research to develop
new biomedical and diagnostic products.

During 1990 and 1991, two phase II studies were being performed by the
Karolinska Institute and the National Institutes of Health ("NIH") regarding the
efficacy of ribavirin in the treatment of chronic hepatitis C. Once the results
from the studies were completed, indicating positive results, the Company made
the decision to move forward with phase III studies. In addition, the amount of
funds available for research and development activities had increased and the
Company made the decision to increase these activities. This includes a new
research program focused on the detection and measurement of a group of human
peptide hormones or regulators and in vitro commercial diagnostics.

1993, Viratek substantially completed clinical testing of Virazole for the
treatment of chronic hepatitis C and started up a new discovery program using
gene specific technology to target diseases such as cancer, chronic viral
infections and psoriasis.

BIOMEDICALS

Biomedicals develops, manufactures and sells research chemical products,
cell biology products, biomedical instrumentation, diagnostic reagents and
radiation monitoring services. Major product lines of the research chemical
products group include biochemicals, radiochemicals and cell biology products
and chromatography materials. Major product lines of the biomedical
instrumentation group include microplate instrumentation, environmental
technology products and precision liquid delivery instrumentation. The
diagnostic reagents group provides diagnostic reagents and instrumentation,
including enzyme and radio-immunoassay kits and immunoassay systems. Biomedicals
also purchases research chemicals from other manufacturers, in bulk, for
repackaging and distributes biomedical instrumentation manufactured by others.
Biomedicals' principal customers are life science researchers, including those
engaged in molecular biology, genetic engineering and other areas of
biotechnology, biochemical research laboratories and clinical laboratories.
These customers are located in the United States, Canada, Mexico, South America,
Eastern and Western Europe, Australia and Japan. Biomedicals' products are sold
through Company-produced catalogs, direct mail advertising, a direct sales force
and selected independent distributors and agents.

Biomedicals was incorporated in September 1983 as a Delaware corporation by
ICN and has since operated as an ICN subsidiary. Effective January 1, 1984, ICN
transferred to Biomedicals, in exchange for all of the then outstanding shares
of common stock of Biomedicals, certain assets and liabilities comprising the
Life Sciences Group of ICN. Some of the operations of that group had been
conducted by ICN since ICN's inception in 1960. Since 1984, several businesses
and product lines have been acquired by ICN on behalf of Biomedicals and
subsequently transferred to Biomedicals.

PRODUCTS

RESEARCH CHEMICAL PRODUCTS GROUP

Biomedical's research products group markets more than 55,000 chemical,
radiochemical, biochemical and immunochemical compounds. These compounds result
from chemical synthesis, biochemical (enzymatic) synthesis, and/or are isolated
from natural sources such as micro-organisms, plant, and animal tissues. In
addition, the biomedical group offers laboratory plastic ware, medias for cell
culture, and materials for chromatography.

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mailings and telephone solicitation, approximately 35,000 chemical items
(including rare and fine chemicals) to customers in approximately 1,500
laboratories worldwide who are largely engaged in organic, inorganic and
biochemical experimentation and synthesis. Major products include ammonium
sulfate, cesium chloride, guanidine hydrochloride, L-glutamine and ultra-pure
tris.

In recent years, there has been an increasing demand for ultra-pure
biochemicals, particularly for use in molecular biology and medically-oriented
research work. Biomedicals has since further expanded its ultra-pure line
through the addition of modifying and restriction enzymes, reagents for gel
electrophoresis and other chemicals used in various phases of genetic
engineering. This includes materials used in recombinant technology such as
growth factors, restriction endonucleases (enzymes which "cut" DNA material at a
specific point) and polynucleotide "linkers" which are used to rejoin divided
segments of DNA molecules.

Under the K&K Laboratories trade name, Biomedicals offers 23,000 rare and
fine chemicals consisting principally of organic chemicals, inorganic chemicals,
organometallics, rare earth metals and specialty intermediates. These products
are used in the chemical, pharmaceutical, aerospace, electronic and educational
fields.

Radiochemicals. Radiochemicals are produced through the combination of
radioactive raw materials with non-radioactive chemical intermediates, the
resulting products, referred to as "labeled" or "tagged," possess one or more
radioactive atoms. These isotopes are used by researchers in conjunction with
sophisticated measuring instruments to follow or trace the chemical through a
biochemical system. Such work helps to determine the mechanisms by which
molecules are transformed within living systems, furthering knowledge of
genetics, biological and physiological disorders, including hormonal
deficiencies, physical abnormalities and a range of organ and endocrinological
disorders.

Using a variety of multi-step chemical and biochemical procedures,
Biomedicals produces in excess of 800 different "radioactive" or "labeled"
compounds. The Irvine, California facility uses phosphorus-32, Sulfur-35,
Tritium, and Carbon-14 to produce organic molecules for use in a large number of
biomedical research applications. Biomedicals produces and supplies
reactor-produced radionuclides but does not, at this time, refine such products
for human use radiopharmaceuticals.

CELL BIOLOGY PRODUCTS GROUP

Biomedicals sells a wide range of components for the culturing of cells in
an artificial environment under specially controlled conditions. Prior to the
sale of the Scottish manufacturing facility in April 1993, Biomedicals
manufactured most cell biology products in-house. Biomedicals now procures these
products at a lower cost from third party suppliers. Cell culture has become an
increasingly important technique for the study of cell behavior, the study of
viruses and viral infections, the development and production of vaccines and the
testing of new drugs, chemicals, food and toxic substances.

Biomedicals is a supplier of materials for cell culture and offers a
comprehensive range of media, growth factors and sera, as well as a variety of
disposable plastic labware and ancillary equipment. Biomedicals chemically
defined growth media, which nourish living cells, are used by customers in
maintaining or growing cells in the laboratory. Biomedicals also markets
processed animal sera (used to enrich media) and uses both raw and processed
sera to formulate other products. The availability and costs of raw animal sera
may vary and is largely beyond Biomedicals control.

Other cell biology products include the Titertek-Plus(TM) family of
pipettes and disposable plastic labware.

Chromatography Products. Chromatography products include chemicals known
as adsorbents as well as other consumable products, such as nylon membranes,
which are used for chromatography, (a scientific method employing sophisticated
instrumentation to separate chemical solutions in order to analyze their
components). Biomedicals distributes adsorbent products worldwide which are
produced for it in Germany.

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BIOMEDICAL INSTRUMENTATION GROUP

Biomedicals biomedical instrumentation group markets microplate
instruments, a wide range of precision liquid delivery systems, and gamma
counters.

Microplate Instrumentation. These products are laboratory instruments
serving the needs of all applications utilizing the microtitration plate
(microplate) format. Microplates are 96-well trays, about the size of a
postcard, that offer a convenient, economical space-saving alternative to test
tubes and have become the vessel of choice for biomedical tests. The preeminent
microplate application is immunoassays used in diagnostics, public health
screening, quality control and research. Biomedicals' Titertek(TM) product lines
offer instruments that address all steps in using microplates including
dispensing samples and reagents, reagent displacement (known as microplate
"washing"), and measurement calorimetric, fluorescent and luminescent test
results. The products range from hand operated pipettes to integrated analytical
systems.

Precision Liquid Delivery Systems. Biomedicals' instrument manufacturing
facility in Huntsville, Alabama, produces high precision liquid delivery systems
starting with general purpose bench-top stations and extending to customized
automated systems incorporating process control, test measurement and data
reduction. The liquid delivery products are all complimentary to, and compatible
with, the microplate instruments, (both those manufactured in Huntsville and
own-label products obtained from third-parties), and this integration of the
product lines enhances Biomedicals' ability to offer users a flexible system
approach to meeting their evolving laboratory equipment needs.

Gamma Counters. The Huntsville facility also produces gamma counters
(instruments that quantify the amount of radioactive "labels" incorporated into
a sample) used in diagnostics and research. Biomedicals offers a choice of
automatic sample-feed and manually loaded batch processing machines, all with a
common data analysis and reduction software package.

All instrumentation sold by Biomedicals is supported by field and factory
service capability. Service contracts are actively sold to the large customer
base of long-term users of Biomedicals' instruments. Biomedicals has entered
into a non-binding letter of intent with a third party to sell the instrument
business subject to numerous conditions to be enumerated in a contract between
Biomedicals and said third party.

DIAGNOSTIC REAGENTS GROUP

Biomedicals provides diagnostic reagents and instrumentation to hospitals,
clinics and biomedical research laboratories. Immunoassay is a diagnostic
technique used to determine the quantity of biological substances present in
very low concentrations in body fluids. In the United States alone, more than
5,000 laboratories use the technique in routine clinical diagnostic
applications. Biomedicals manufactures both Enzyme-Immunoassay and
Radio-Immunoassay kits at its Costa Mesa, California facility and markets these
kits under the IMMUCHEM product line. In 1993, Biomedicals developed a line of
non-isotopic enzyme-immunoassay used for screening newborns for inherited
genetic diseases ("Neonatal line"). Biomedicals' strategy is to develop a
complete line of reagents to address its strength in the endocrinology and
newborn screening product segments. Biomedicals has developed instruments which
allow their assays to be automated for moderate to high volume applications in
which ease of use and labor productivity are competitive advantages. Biomedicals
will continue to add more internally developed products to its Neonatal line in
1994 including a new fully-automated analyzer.

RADIATION MONITORING SERVICES GROUP

Biomedicals provides an analytical monitoring service to determine personal
occupational exposure to ionizing radiation.

Since 1973, ICN has provided dosimetry services to dentists, veterinarians,
chiropractors, podiatrists, hospitals, universities, governmental institutions,
and power plants. ICN's services include both film and Thermo Luminescent ("TL")
badges in several configurations to accommodate a broad scope of users. This
service includes the manufacture of badges, distribution to and from clients,
analysis of badges and a radiation report indicating the exposure.

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MARKETING AND CUSTOMERS

Biomedicals marketing operations are headquartered at the corporate offices
in Costa Mesa, California. Sales and marketing methods vary according to product
group and include direct sales through a field sales force, catalog sales,
direct mail campaigns and independent agents/distributors. Biomedicals has a
field sales and marketing organization of 141 persons in the United States and
Canada, 73 in Europe, 9 in Australia and 6 in Japan.

Biomedicals customer group for research products is principally composed of
biomedical research institutions, such as universities, the National Institutes
of Health, pharmaceutical companies, and, to a lesser extent, hospitals.
Customers for diagnostic reagents and instruments are generally clinics, medical
offices and hospitals. Customers for Biomedicals' other biomedical instruments
include both biomedical research institutions and clinics, medical offices and
hospitals. Biomedicals is not materially dependent upon any one customer or a
small group of customers and does not believe the loss of any one customer would
have a material adverse effect on Biomedicals. However, since a large portion of
medical research in both the United States and other countries is funded by
governmental agencies, Biomedicals results of operations could be adversely
affected by cancellation or curtailment of governmental expenditures for medical
research.

ICN currently owns approximately 69% of Biomedicals outstanding common
stock as of March 17, 1994.

COMPETITION

Both segments of ICN operate within highly competitive industries. The
competitive position of ICN's products is significantly affected by their
acceptance among physicians and scientists and by the development of new
products by competitors. A number of companies, both in the United States and
abroad, are actively engaged in marketing similar products and developing new
products similar to those currently under development or proposed for future
development by ICN. Most of these companies have substantially greater capital
resources, marketing capabilities and larger research and development staffs and
facilities than those of ICN. The pharmaceutical industry is characterized by
extensive and on-going research efforts. Others may succeed in developing
products superior to those presently marketed or proposed for development by
ICN. Progress by other researchers in areas similar to those being explored by
ICN may result in further competitive challenges.

BACKLOG

ICN does not consider backlog to be a material factor in its
pharmaceuticals segment because, as is customary in the industry, its products
are sold on an "open order" basis. Backlog is not a significant factor for the
biomedicals segment as most orders received are filled and shipped promptly
after receipt. No single customer accounted for more than 10% of ICN's
consolidated net sales during the year ended December 31, 1993.

RAW MATERIALS

In general, raw materials used by ICN in the manufacture of its products
are obtainable from multiple sources in the quantities desired. However, the
availability and costs of raw animal sera for distribution and for manufacturing
certain of Biomedicals cell biology products may vary from time to time and is
largely beyond Biomedicals' control. Additionally in the last decade, the number
of reactor sites producing radioactive raw materials has diminished.

During 1992, The United Nations Security Council and the United States
adopted a resolution that imposed economic sanctions on the Federal Republic of
Yugoslavia (Serbia and Montenegro). The sanctions specify that specific
authorization in the form of a license must be granted on a transaction by
transaction basis from the country of origin and the United Nations before the
shipment of raw materials and finished goods can be made into Yugoslavia.
Currently, few licenses have been granted for the import of raw materials. It is
the policy of the United Nations Sanctions Committee to grant licenses for
finished goods, but only for raw materials in exceptional cases. See
Management's Discussion and Analysis of Financial Condition and Results of
Operations.

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LICENSES PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS

ICN owns a number of domestic and foreign patents now in force, some of
which pertain to products currently being marketed by both the pharmaceuticals
and biomedicals segments. ICN may be materially dependent on the protection
afforded by their respective patents. No assurance can be given as to the
breadth or degree of protection which these patents will afford ICN.

In addition, ICN has filed applications for United States and foreign
patents based on inventions resulting from the development of its technology.
ICN expects to be issued patents in the future, although there can be no
assurance as to the breadth or the degree of protection which these patents, if
issued, will afford it. In addition to ICN, universities and other public and
private concerns have filed patent applications and may be issued patents on
inventions (or otherwise possess proprietary rights to technology) useful to
ICN. The extent to which ICN may be required to license such patents or other
proprietary rights, and the cost and availability of such licenses, are
presently unknown. In addition, ICN intends to rely to an extent on unpatented
proprietary know-how. However, there can be no assurance that others will not
independently develop such know-how or otherwise obtain access to ICN's
know-how.

SPI has acquired from Viratek the rights to market Virazole(R) in Mexico,
Canada, the United States and in other countries for all uses. The technology
related to these uses of Virazole(R) is broadly covered by a United States
patent expiring in 1999. Licensed technology from Viratek relating to
Virazole(R) is also covered by United States patents expiring between 1994 and
1999 and Canadian patents expiring between 1994 and 2006. ICN may be materially
dependent on the protection afforded by Viratek's patents relating to
Virazole(R), and no assurance can be given as to the breadth or degree of
protection which these patents will afford Viratek.

GOVERNMENT REGULATION

Prior to marketing or manufacturing new products for use by humans, ICN
must obtain United States Food and Drug Administration ("FDA") approval in the
United States and approval from comparable agencies in other countries.
Obtaining FDA approval for new products and manufacturing processes can take a
number of years and involve the expenditure of substantial resources. ICN must
satisfy numerous requirements, including preliminary testing programs on animals
and subsequent clinical testing programs on humans, to establish product safety
and efficacy. No assurance can be given that authorization of the commercial
sale by ICN or its affiliates of any new drugs or compounds for any application
will be secured in the United States or any other country, or that, if such
authorization is secured, those drugs or compounds will be commercially
successful. The FDA and other regulatory agencies in other countries also
periodically inspect manufacturing facilities.

ICN is subject to licensing and other regulatory control by the FDA, other
federal and state agencies and comparable foreign governmental agencies. In
addition, Biomedicals is subject to the regulatory control of the Nuclear
Regulatory Commission.

Provisions enacted or adopted by United States federal, state and local
agencies regulating the discharge of waste into the environment do not currently
have a material effect upon ICN's capital expenditures, earnings or competitive
position.

ICN has not experienced any material effect on the capital expenditures,
earnings or competitive position of ICN as a result of compliance with any
federal, state or local provisions regarding the protection of the environment.

EMPLOYEES

ICN currently employs approximately 5,969 persons, which includes 5,420 SPI
employees, 4,500 of whom are covered by collective bargaining agreements. ICN
has not experienced any significant work stoppage, slowdown or other serious
labor problems which have materially impeded its business operations. The
Company's management considers its relations with its employees to be
satisfactory.

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SELECTED CONSOLIDATED FINANCIAL DATA

The following table sets forth certain selected consolidated financial data
for the years ended December 31, 1993, 1992 and 1991, the one month ended
December 31, 1990, and for each of the years in the two-year period ended
November 30, 1990. The financial information set forth below should be read in
conjunction with, and is qualified in its entirety by, the detailed information
and financial statements contained elsewhere in this Form 10-K (in thousands,
except per share data).

<TABLE>
<CAPTION>
ONE MONTH
ENDED YEAR ENDED
YEAR ENDED DECEMBER 31, DECEMBER 31, NOVEMBER 30,
------------------------------ ------------- -------------------
1993(1) 1992 1991(2) 1990(3) 1990 1989
-------- -------- -------- ------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................. $ 62,556 $551,766 $460,365 $14,944 $271,975 $185,489
Cost of sales............................. 27,631 253,596 225,234 7,596 121,628 80,520
-------- -------- -------- ------------- -------- --------
Gross profit.............................. 34,925 298,170 235,131 7,348 150,347 104,969
Selling, general and administrative
expenses................................ 43,690 224,235 152,947 7,592 108,178 80,584
Research and development costs............ 5,571 10,718 6,588 407 5,048 14,322
Write-off of goodwill..................... -- 15,362 -- -- -- 56,551
Equity earnings in SPI.................... (11,646) -- -- -- -- --
Gains on sales of subsidiaries stock...... (8,345) (37,744) (29,797) -- -- --
Translation and exchange (gains) losses,
net..................................... (1,292) 21,648 4,517 -- 14,020 --
Interest expense, net..................... 18,962 25,563 34,321 2,507 27,075 17,524
Other expense, net(4)..................... 1,079 15,187 29,479 1,006 11,518 26,922
Restructuring costs(5).................... -- 63,032 6,087 -- -- --
Unrealized (gains) losses on marketable
securities.............................. (200) 446 (475) -- 614 (4,425)
Provision (benefit) for income taxes...... (474) 9,967 6,574 (394) 6,860 2,086
Minority interests........................ (523) 14,558 19,035 (336) 3,709 (1,898)
-------- -------- -------- ------------- -------- --------
Income (loss) before extraordinary
income.................................. (11,897) (64,802) 5,855 (3,434) (26,675) (86,697)
Extraordinary income...................... 627 -- -- -- 4,230 4,736
-------- -------- -------- ------------- -------- --------
Net income (loss)......................... (11,270) (64,802) 5,855 (3,434) (22,445) (81,961)
========= ========= ========= ============ ========= =========
Per share information:
Income (loss) before extraordinary
income.................................. (.60) (4.67) .40 (.29) (2.28) (6.36)
Extraordinary income...................... .03 -- -- -- .36 .35
Net income (loss) applicable to common
stockholders............................ (.57) (4.67) .40 (.29) (1.92) (6.01)
========= ========= ========= ============ ========= =========
Weighted average common stock outstanding
and dilutive common stock equivalents... 19,813 14,010 12,829 11,707 11,776 13,683
========= ========= ========= ============ ========= =========
</TABLE>

BALANCE SHEET DATA (IN THOUSANDS):

<TABLE>
<CAPTION>
AS OF DECEMBER 31, AS OF NOVEMBER 30,
----------------------------------------- -------------------
1993(1) 1992 1991 1990 1990 1989
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Total assets................................. $207,856 $223,568 $575,086 $402,975 $408,214 $436,439
Working capital(6)........................... 29,627 5,597 123,301 47,034 46,844 94,155
Long-term debt, less current maturities...... 139,047 160,011 188,587 217,130 217,863 240,430
Stockholders' equity (deficit)............... 4,020 (21,757) 16,456 8,094 12,082 33,226
</TABLE>

- ------------------------

(2) Includes the results of Galenika, a subsidiary of SPI, from the effective
date of acquisition.

(3) The Company changed its fiscal year end from November 30 to December 31,
effective December 31, 1991. For financial statement purposes, the Company's
separate results of operations for the month of December 1990 are not
reflected in the Statement of Operations but have been charged directly to
retained earnings.

(4) See Note 11 of Notes to Consolidated Financial Statements for details.

(5) See Note 14 of Notes to Consolidated Financial Statements for details.

(6) Includes, in 1993, $17,698,000 of cash and certificates of deposit which is
to be used exclusively Viratek for research and development and its general
working capital requirements.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF ICN

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO SIX MONTHS ENDED JUNE 30, 1993

Introduction. ICN reported net losses of $11,400,000 and $1,900,000 for the
six months ended June 30, 1994 and 1993, respectively. The net loss for the six
months ended June 30, 1994 included a non-cash, foreign exchange translation
loss of $3,400,000 compared to translation gains of $1,800,000 for the same
period in 1993. Additionally, included in 1993, was a gain on sale of SPI common
stock of $3,700,000, which did not recur in 1994.

Net Sales. Net sales were $30,658,000 for the six months ended June 30,
1994 compared to $31,224,000 for the same period in 1993. Sales declined 2% in
the first half of 1994 compared to the first half of 1993.

Net Royalties. Net royalties from the sale of Virazole(R) by SPI were
$3,570,000 for the six months ended June 30, 1994 compared to $1,984,000 for the
same period in 1993. The increase was primarily due to increased sales in the
United States, resulting from a combination of price increases and increased
unit sales of Virazole(R).

Cost of Sales. Product cost as a percentage of sales decreased to 44% from
46% for the six months ended June 30, 1994 and 1993. Biomedicals continues to
focus on the elimination of low margin products and on improving purchasing and
manufacturing processes.

Gross Profit. Gross profit as a percentage of sales was 56% for the six
months ended June 30, 1994 compared to 54% for the same period in 1993. The
discontinuance of low margin products and the introduction of new products with
higher margins have contributed to the improvement in gross profit margins.

Equity Earnings in SPI. Equity earnings in SPI increased to $6,683,000 for
the six months ended June 30, 1994 compared to $4,193,000 for the same period in
1993. The increase in net income at SPI resulting in increased equity earnings
by ICN is primarily due to increased sales of Virazole(R) in the United States
and higher income at Galenika primarily realized through decreases in selling,
general and administrative expenses.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses for the Biomedicals group were $13,750,000, or 45% of
net sales, for the six months ended June 30, 1994 compared to $13,277,000, or
43% of net sales, for the same period in 1993. The increase in expenses in 1994
primarily reflects the impact of catalogue amortization costs, partially offset
by certain reserve reevaluations. Management is continuing its efforts to reduce
selling, general administrative expenses (both in dollar value and as a
percentage of sales through consolidation of operations) and cost controls.
Selling, general and administrative expenses for the pharmaceutical group and
corporate for the six months ended June 30, 1994 increased $1,879,000 over the
same period in 1993. The increase was primarily due to an increase in legal fees
associated with the defense of a class action lawsuit, proxy fight expenses and
higher central services expenses.

Research and Development Costs. Research and development costs increased
$1,435,000 for the six months ended June 30, 1994 compared to the same period in
1993. The increase related to the higher costs incurred by Viratek for the
chronic hepatitis C clinical trials and submission of the NDA in 1994, and the
additional research and development activities which involve a new
pharmaceutical discovery program aimed at developing therapeutic drugs to
inhibit disease-causing genes. See Management's Discussion and Analysis of
Financial Condition and Results of Operation of Viratek -- Results of
Operations -- Six Months Ended June 30, 1994 Compared to Six Months Ended June
30, 1993, in Appendix H.

Translation and Exchange (Gains) Losses, Net. Translation and exchange
(gains) losses, net, were $3,380,000 for the six months ended June 30, 1994
compared to $(1,774,000) for the same period in 1993. The translation loss
recognized for the six months ended June 30, 1994 resulted primarily from the
conversion of ICN's Swiss Franc and Dutch Guilder denominated debts to a
weakening U.S. dollar equivalent.

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<PAGE> 276

Interest Expense, Net. Interest expense, net, was $8,734,000 for the six
months ended June 30, 1994 compared to $9,418,000 for the same period in 1993.
The decrease resulted primarily from the reduction in outstanding long-term debt
of ICN.

Extraordinary Income. During the second quarter of 1993, Biomedicals'
Italian operation negotiated settlements with certain of its suppliers and
banks, resulting in extraordinary income of $627,000, or $.03 per share.

Other, Net. A summary of other (income) and expense is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
----------------------------
1993 1994
----------- ----------
<S> <C> <C>
Realized (gains) losses on marketable
securities..................................... $ (139,000) $ 24,000
Amortization of goodwill......................... 1,024,000 1,037,000
Gain on lease terminations....................... (938,000) --
Favorable settlements on accrued liabilities..... (1,000,000) --
Other, net....................................... 732,000 (51,000)
----------- ----------
$ (321,000) $1,010,000
========== =========
</TABLE>

Gain on Lease Terminations. During 1993, Biomedicals' Italian operation
realized a gain on the favorable termination of certain leasing contracts.

Favorable Settlements on Accrued Liabilities. During 1993, Biomedicals
recognized a gain on the settlements of certain liabilities accrued during 1992
which were settled for less than the original estimate.

YEARS ENDED DECEMBER 31, 1991, 1992 AND 1993

INTRODUCTION

General. Effective December 31, 1992, ICN's ownership percentage of SPI
fell below 50% resulting in the deconsolidation of SPI in ICN's consolidated
financial statements effective as of December 31, 1992. The investment in SPI is
currently accounted for using the equity method of accounting. The prior year's
results of operations have not been restated. Unless otherwise indicated, all
references in this discussion to 1992 and 1991 include the consolidated results
of operations of SPI.

ICN has reported net losses for 1993 and 1992 of $11,270,000 and
$64,802,000, respectively, and net income for 1991 of $5,855,000. The loss in
1993 was lower than in 1992 primarily as a result of a restructuring charge
taken in 1992. The net loss in 1992 compared to net income in 1991 was primarily
due to restructuring charges of $63,032,000 in 1992 related to the write-off of
intangibles associated with the acquisition of Flow Laboratories, Inc. and Flow
Laboratories B.V. (together with their respective subsidiaries "Flow") and other
acquisitions and other charges associated with the Biomedicals restructuring,
including the increase in 1992 over 1991 of foreign translation losses of
$17,131,000.

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<PAGE> 277

Following are the 1993 results of operations and a pro forma ICN statement
of operations for 1992 as if SPI had been accounted for using the equity method
of accounting:

<TABLE>
<CAPTION>
1992 1993
----------- -----------
<S> <C> <C>
Net sales....................................... $78,328,000 $62,556,000
Cost of sales................................... 44,851,000 27,631,000
----------- -----------
Gross profit.................................... 33,477,000 34,925,000
Selling, general and administrative expenses.... 53,859,000 43,690,000
Restructuring costs............................. 63,032,000 --
Research and development costs.................. 2,882,000 5,571,000
Interest expense, net........................... 22,776,000 18,962,000
Translation and exchange gains.................. (3,391,000) (1,292,000)
Equity earnings in SPI.......................... (20,773,000) (11,646,000)
Gains on sale of subsidiaries common stock...... (37,744,000) (8,345,000)
Write off of goodwill........................... 15,362,000 --
Other expense, net.............................. 13,552,000 879,000
----------- -----------
Loss before income taxes, minority interest and
extraordinary income.......................... (76,078,000) (12,894,000)
Provision (benefit) for income taxes............ 872,000 (474,000)
Minority interest............................... (12,148,000) (523,000)
Extraordinary income............................ -- 627,000
----------- -----------
Net loss........................................ $(64,802,000) $(11,270,000)
=========== ===========
</TABLE>

The following discussion of the results of operations gives effect to the
deconsolidation of SPI as if it had occurred at January 1, 1992.

Equity Earnings in SPI. The equity earnings in SPI decreased to $11,646,000
in 1993 compared to $20,773,000 in 1992. This reduction was due to a reduction
in SPI's net income in 1993 compared to 1992 of $12,993,000 coupled with a
reduction in ICN's ownership interest in SPI, from 48% at December 31, 1992 to
39% at December 31, 1993. The reduction in the net income of SPI in 1993 was
primarily due to lower income at Galenika. The income before provision for
income taxes and minority interest of Galenika was $310,000 in 1993 compared to
$38,518,000 in 1992. The United Nations sanctions on Yugoslavia and price
controls imposed by the Yugoslavian government have impacted the sales at
Galenika, both in terms of a decrease in unit sales and a change in product mix.
Additionally, sales have been adversely impacted by inflation and by larger and
more frequent devaluations in 1993 compared to the prior year. The raw materials
that Galenika imports are primarily used in the production of drugs. Due to
shortages of these materials, Galenika has shifted its production and sales
efforts to its veterinary and OTC product lines. For the year ended December 31,
1993, sales of drugs represented 73% of Galenika total sales compared to 81% in
the prior year. Additionally, cost of sales and other expenses at Galenika have
increased as a percentage of sales due to the impact of price controls in
Yugoslavia, higher labor costs and hyperinflation. Consolidated net sales for
1992 rose to $476,118,000, an increase of $111,760,000, or 31%, over 1991. The
majority of this increase, $101,121,000, was due to a full year of operations
for Galenika compared to only eight months of operations in 1991. During 1991
and the first half of 1992, Galenika was able to increase its prices in
anticipation of inflation and currency devaluations, resulting in higher sales
levels when compared to the levels of inflation in Yugoslavia. Thus, during this
period, Galenika sales on a dollar basis were not significantly impacted.
However, beginning in the second half of 1992, sales at Galenika were depressed
due to the effects of sanctions and price controls in Yugoslavia. See Note 17 of
Notes to Consolidated Financial Statements of ICN. During 1992, most of SPI's
subsidiaries recorded improved sales over the prior year. Sales in Mexico
increased $6,963,000, or 17%, compared to 1991, primarily resulting from
improved sales of its injectable vitamin, Bedoyecta-Tri(R), and other key
products. Sales in Spain increased $3,526,000, or 16%, compared to 1991, due
primarily to the introduction of new product lines. Gross profit as a percentage
of SPI net sales increased to 56% in 1992 from 52% in 1991. While SPI
experienced gross profit increases in all of its

F-16
<PAGE> 278

major subsidiaries, the largest increase was recorded at Galenika whose gross
profit increased to 53% in 1992 from 47% in 1991. The 1991 Galenika gross profit
was adversely impacted by the increase in cost of sales resulting from a
purchase accounting adjustment to inventory. Without this item, Galenika's gross
profit percentage remained constant in 1992 and 1991 at 53%. Excluding the
results of Galenika, the gross profit increased to 62% in 1992 from 60% in 1991
due primarily from improved product mix resulting from increased Virazole(R)
sales.

Net Royalties. Net royalties from the sales of Virazole(R) by SPI were
$5,903,000 for the year 1993 compared to $5,448,000 for the year 1992. The
increase in royalty income was due to increased sales in Mexico resulting from
the introduction of ribavirin creme used for the treatment of herpes and
increased worldwide sales due to additional marketing efforts by SPI in 1993,
which included offering volume discounts.

Biomedicals.

At the time of the 1989 acquisition of Flow, Biomedicals believed that the
distribution outlets acquired would substantially increase Biomedicals' ability
to compete in international markets where it had no significant direct
representation. Following the acquisition, Biomedicals attempted to centralize
the European marketing and distribution, discontinue certain low margin product
lines and shut down excess manufacturing and distribution facilities. These
efforts continued in 1992, at which time Biomedicals completed a major
restructuring plan. See Restructuring Costs and Special Charges, below.

During the latter part of 1992 and throughout 1993, Biomedicals realigned
its European operations including the distribution network and manufacturing,
resulting in reductions in selling, general and administrative costs.
Integration of Biomedicals' higher margin "core" product lines and elimination
of lower gross margin products have contributed to the increase in the overall
gross profit margins; however, such actions have not fully mitigated the
continuing decline in European sales. As a result, the 1993 income (loss) before
the provision for income taxes and extraordinary item attributable to the
European operations was $(2,831,000) as compared to $(35,582,000). Biomedicals'
North American sales have remained stable.

The Company is actively working on the introduction of new products for its
Biomedicals division, primarily related to its diagnostic product line and will
be introducing its Dosimetry product line in Europe and Canada. Although the
introduction of these product lines was originally scheduled for Europe in 1993,
longer than anticipated timeframes for product development delayed such
introduction to 1994. Absent improvements in the 1994 European operating
results, this division will need to reassess its business strategy and prospects
for its European business.

Net Sales. Net sales were $59,076,000, $75,648,000, and $96,507,000 in
1993, 1992 and 1991, respectively. Net sales were 22% lower in 1993 than in 1992
and 22% lower in 1992 than in 1991. The continuing decline in sales can be
attributed primarily to Biomedicals' European operations. This declining trend
is due to a variety of factors including the transition from a marketing effort
focused on an agency/distributor network to one based upon catalogue
distribution, discontinuance of low gross profit margin product lines,
competitive pressures, delays in getting new products to markets due to longer
than anticipated timeframes for product development and a continuing weakness in
government funding for capital equipment purchases.

Cost of Sales. Product cost as a percentage of sales decreased to 47% in
1993 from 59% in 1992 and 54% in 1991. The decrease in product costs in 1993
reflects actions taken by Biomedicals to reduce costs beginning in the latter
part of 1992, as discussed further in Restructuring Costs and Special Charges,
below. Additionally during 1993, high cost products with lower margins were
eliminated, certain production facilities were consolidated or sold, other
excess manufacturing facilities were closed down and Biomedicals continued to
focus on improving purchasing and manufacturing processes. The increase in
product costs in 1992 as compared to 1991 is the result of a writedown of slow
moving inventory due to lower than anticipated sales volume. In addition, during
1992 the Biomedicals' production facilities and warehousing costs were spread
over a reduced sales volume thereby increasing cost of sales as a percentage of
sales.

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<PAGE> 279

as a percentage of sales during 1993. The impact of declining sales increasing
product costs, and a writedown of slow moving inventory, as described above,
reduced gross profit in 1992 as compared to 1991.

Restructuring Costs and Special Charges. During 1991, Biomedicals initiated
a restructuring program designed to reduce costs and improve operating
efficiencies. Accordingly, restructuring costs of $6,087,000 were recorded in
1991. The program included, among other items, the consolidation, relocation and
closure of certain manufacturing and distribution facilities, primarily in
Milan, Italy and Costa Mesa, California. Those measures, including a 15%
reduction in work force, were initiated in 1991 and continued through 1992.

Biomedicals' sales continued to decline during the first three quarters of
1992 over the same periods in 1991 despite the restructuring program initiated
in 1991. The significant decreases were primarily due to operations in Italy and
other European subsidiaries acquired as part of the Flow acquisition. A further
decline in sales of 19.3%, or $4,009,000, occurred in the fourth quarter of 1992
compared to the fourth quarter of 1991.

In prior years and the first three quarters of 1992, recoverability of
goodwill associated with the Flow acquisition was focused, to a major extent, on
the European operations, as Biomedicals had only a limited presence in Europe
prior to the Flow acquisition. Biomedicals considered the expected operating
income of the European operations in evaluating the recoverability of the Flow
goodwill.

During the fourth quarter of 1992, as a result of the continuing decline in
sales and other factors, Biomedicals reassessed its business plan and prospects
for 1993 and beyond which included, among other things, the decision to sell the
last remaining major European manufacturing facility and to restructure the
previously acquired distribution network and European operations in line with
the revised sales estimates. Consequently, based upon the continuing decline in
European revenue and profitability relating to Flow, Flow facility closures and
an ineffective distribution network, Biomedicals' management concluded that
there was no current or expected future benefit associated from the Flow
acquisition. Accordingly, Biomedicals wrote off goodwill and other intangibles,
primarily from the Flow acquisition, in the amount of $37,714,000.

In addition, Biomedicals determined that future benefit could be realized
if the distribution activities in Irvine, Scotland, Brussels, Belgium,
Cleveland, Ohio, and Horsham, Pennsylvania were consolidated with other
distribution centers in Europe and the United States, as these operations did
not support the costs of maintaining separate facilities. Estimated costs
associated with this consolidation effort were included in lease termination
costs of $1,434,000, employee termination costs of $1,961,000, facility shut
down costs of $357,000 and writedowns to net realizable value totalling
$1,106,000 of facilities held for disposition.

The Irvine, Scotland, facility was vacated in March 1993 and subsequently
sold for a gain of $278,000. During the first quarter of 1993 the Horsham,
Pennsylvania, and Cleveland, Ohio, facilities moved to Aurora, Ohio.

Additionally, Biomedicals reviewed the ability of the Flow product lines to
be effectively integrated into Biomedicals' "core" product lines and vice versa.
As a result, it was concluded that Flow's distribution network, product lines
and business operations were not effectively integrated into Biomedicals' global
strategy. Low margin product lines such as cell biology and instruments had
become technologically obsolete given the other competitive products on the
market. As sales continued to decline, the amount of slow moving and potentially
obsolete inventory increased. Accordingly in the fourth quarter in 1992,
Biomedicals recorded a provision for abnormal writedowns of inventory to
estimated realizable value of $9,924,000 and discontinued products of
$3,377,000.

In addition, Biomedicals determined that the unamortized costs of the
catalogue marketing program would not be recovered within a reasonable period of
time, therefore, costs totaling $6,659,000 were written off in the fourth
quarter of 1992. Despite the general shortfall in catalogue related sales, the
catalogue marketing approach has established Biomedicals' "core" products in the
European and Asian-Pacific markets. During 1993, Biomedicals' strategy to
redefine the form and use of the catalogue to specifically customer focused or
"product-line" catalogues is believed to be more effective in light of current
market conditions. Additionally, radiochemical and cell biology "mini"
catalogues have been developed. During 1993 and 1994, the Biomedicals division
of the Company used and will continue to use general catalogues and associated
direct mail programs for sales activities in biochemical, enzyme
immunobiological products and reagents for

F-18
<PAGE> 280

electrophoresis, but with more focus on product movement and customer needs. The
diagnostic instrument and reagent lines will be promoted by media advertising
and direct sales activities.

ICN

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $43,690,000 (70% of net sales), $224,235,000 (41%
of net sales) and $152,947,000 (33% of net sales) for 1993, 1992 and 1991,
respectively. Selling, general and administrative expenses (not including SPI)
decreased from $53,859,000 in 1992 to $43,690,000 in 1993. The decrease reflects
Biomedicals' efforts to reduce expenses through consolidation of operations and
distribution centers and cost controls. This was partially offset by the
increased legal costs in defense of the consolidated class action suit and costs
associated with a proxy fight initiated in 1993. The increased expenses for 1992
(including SPI) compared to 1991 were primarily a result of provisions for
doubtful accounts of $48,279,000 (described below) and termination of employees
and early retirement costs at Galenika of $21,065,000. Excluding these
provisions, selling, general and administrative costs in 1992 were 28% of net
sales. This decrease is primarily due to the lower selling costs and wages at
Galenika.

In countries experiencing hyperinflation, such as Yugoslavia, a devaluation
will result in a reduction of accounts receivable and a proportionate reduction
in the accounts receivable allowance. The reduction of accounts receivable is
recorded as a foreign currency translation loss and the reduction of the
allowance is recorded as a translation gain. After a devaluation the level of
accounts receivable will rise as a result of subsequent price increases. In
conjunction with the rise in receivables, additions to the allowance for
receivables will be made for existing doubtful accounts. This process will
repeat itself for each devaluation that occurs during the year. The effect of
this process results in a high level of bad debt expense that does not
necessarily reflect credit risk or difficulties in collecting receivables. In
1992, general and administrative expenses increased significantly due primarily
to provisions for doubtful accounts at Galenika of $48,279,000. The reduction of
the accounts receivable allowance from devaluations resulted in a translation
gain of $40,191,000 resulting in a net expense from bad debts and bad debt
translation gain of $8,088,000.

Research and Development Costs. Research and development costs were
$5,571,000, $10,718,000 and $6,588,000 for 1993, 1992 and 1991, respectively.
Research and development costs increased from $2,882,000 (not including SPI) in
1992 to $5,571,000 in 1993. The increase relates to the higher costs incurred
for the chronic hepatitis C clinical trials during 1993 and the additional
research and development activities which involve a new pharmaceutical discovery
program aimed at developing therapeutic drugs to inhibit disease-causing genes.
Research and development costs rose in 1992 (including SPI) compared to 1991 due
to expanded research at Galenika and, in 1992, the phase III clinical trials of
Viratek relating to chronic hepatitis C.

Write-off of Goodwill. During 1992, based upon the continuing evaluation of
the carrying value of goodwill, ICN made the determination to write off pre
November 1970 goodwill, relating primarily to Biomedicals, of $12,062,000. In
addition, as a result of the continuing decline in sales at Biomedicals, ICN
made the determination to write off $3,300,000 of goodwill relating to purchased
subsidiaries.

Gain on Sales of Subsidiaries Stock. During 1993, ICN sold 1,618,200 shares
of SPI common stock and 272,500 shares of Viratek common stock for an aggregate
sales price of $19,995,000 and $3,325,000, respectively, in open market and
privately negotiated transactions which resulted in a gain of $8,345,000. During
1992, ICN sold 1,890,000 shares of SPI common stock and 348,000 shares of
Viratek common stock for an aggregate sales price of $44,608,000 and $5,243,000,
respectively, in open market and privately negotiated transactions which
resulted in a gain of $37,744,000. During 1991, ICN sold 2,978,250 shares of SPI
common stock and 200,000 shares of Viratek common stock for an aggregate sales
price of $50,863,000 and $2,790,000, respectively, in open market and privately
negotiated transactions which resulted in a gain of $29,797,000.

Translation and Exchange (Gains) Losses, Net. Translation (gains) losses,
net, were $(1,292,000), $21,648,000 and $4,517,000 in 1993, 1992 and 1991,
respectively. Translation and exchange gains were $1,292,000 in 1993 compared to
$3,391,000 (without SPI) in 1992. The decrease is due primarily from ICN's

F-19
<PAGE> 281

conversion of Swiss Franc, Dutch Guilder and ECU debt. During 1992, translation
and exchange losses, net (including SPI) increased $17,131,000 over 1991 due to
Galenika operating in a highly inflationary economy, coupled with reductions in
the level of hard currency as a result of sanctions and political and economic
unrest.

Interest income and expense.

<TABLE>
<CAPTION>
1991 1992 1993
----------- ----------- -----------
<S> <C> <C> <C>
Interest income......................... $(1,550,000) $(6,844,000) $ (627,000)
Interest expense........................ 35,871,000 32,407,000 19,589,000
----------- ----------- -----------
Interest expense, net................... $34,321,000 $25,563,000 $18,962,000
========== ========== ==========
</TABLE>

Interest expense decreased from $23,406,000 (not including SPI) in 1992 to
$19,589,000 in 1993. The decrease resulted from a reduced level of outstanding
debt. Interest expense, remained fairly constant between 1992 and 1991
(including SPI) as a result of a decrease in debt at ICN and Biomedicals offset
by an increase in debt at SPI. Interest income (not including SPI) in 1992 was
$630,000 which was consistent with 1993. Interest income increased in 1992 from
1991 (including SPI) due primarily to Galenika's cash on deposit outside of
Yugoslavia.

Extraordinary Income. During the second quarter of 1993, Biomedicals'
Italian operation negotiated settlements with certain of its suppliers and banks
resulting in extraordinary income of $627,000 or $.03 per share.

Other, net. A summary of other (income) and expense is as follows (1991 and
1992 include SPI):

<TABLE>
<CAPTION>
1991 1992 1993
----------- ----------- -----------
<S> <C> <C> <C>
Realized (gains) losses from sale of
marketable securities, net............ $ 354,000 $ (228,000) $ (139,000)
Amortization of goodwill................ 3,944,000 4,216,000 2,102,000
Litigation settlements.................. 7,143,000 1,247,000 --
Write-down of assets and intangibles.... -- 2,000,000 --
Write-off of prepaid royalties.......... 1,503,000 -- --
Write-downs and other costs for domestic
nutrition group....................... 10,878,000 -- --
Facility relocation expenses in Spain... 2,198,000 -- --
Gain on lease termination............... -- -- (938,000)
Favorable settlement of a foreign
non-income tax related tax dispute and
accrued liabilities................... -- -- (1,680,000)
License fees............................ -- 2,187,000 --
Lease vacancy costs..................... -- -- 1,436,000
Other, net.............................. 3,459,000 5,765,000 298,000
----------- ----------- -----------
Other expense, net...................... $29,479,000 $15,187,000 $ 1,079,000
========== ========== ==========
</TABLE>

Litigation. Litigation settlement costs were $1,247,000 in 1992 and
$7,143,000 in 1991. The 1992 costs relate to an arbitration award to the Baylor
College of Medicine of $466,000 and additional costs of another arbitration
award. The 1991 charge is attributed to an arbitration award against ICN of
$7,143,000.

Write-Down of Assets. ICN consolidated certain of its operations which
resulted in ICN having several idle facilities which ICN intends to sell. The
facilities have been written down to their estimated net realizable value which
resulted in a charge to operations of $1,000,000 in 1992. In addition, in 1992
due to declining sales relating to Brown Pharmaceutical products, ICN wrote off
$1,000,000 relating to the Brown trademark.

Write-downs and Other Costs for Domestic Nutritional Group. During 1991,
SPI continued to reassess its domestic nutritional business, which had a sales
decline of 78% from 1988 to 1991. As a result, SPI wrote off $10,878,000 of
assets, principally goodwill and intangibles.

F-20
<PAGE> 282

Gain on Lease Termination. During 1993, Biomedicals' Italian operation
realized a gain of $938,000 on the favorable termination of certain leasing
contracts.

Favorable Settlement of a Foreign Non-Income Tax Related Tax Dispute and
Accrued Liabilities. During 1993, Biomedicals recognized a gain of $430,000
representing a favorable settlement of a foreign non-income tax related tax
dispute and a gain of $1,250,000 relating to certain liabilities accrued during
1992 which were settled for less than the original estimate.

Lease Vacancy Costs. During 1993, Biomedicals vacated its High Wycombe
facility in England and moved to a facility more suitable to Biomedicals'
operating needs in Thames, England. Biomedicals pursued various subleasing
agreements, none of which were completed as of December 31, 1993. Consequently,
Biomedicals accrued approximately $1,200,000 which represents management's best
estimate of the net present value of future leasing costs to be incurred for
High Wycombe. During 1993, Biomedicals expensed an additional $236,000 of
leasing costs related to High Wycombe.

Other, Net. Other net, for 1992, includes non-recurring costs related to
Biomedicals' foreign non-income related taxes of $1,171,000, an equity
investment write-off of Biomedicals of $1,031,000 and accrued expenses for
cleanup costs for certain property held for sale of $1,000,000. These costs did
not recur in 1993.

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

Cash and Marketable Securities. At June 30, 1994 and December 31, 1993, ICN
had cash, cash equivalents and restricted cash of $14,526,000 and $24,170,000,
respectively. Included in cash at June 30, 1994 was $11,564,000 which is to be
used exclusively by Viratek for research and development and general working
capital requirements. The restrictions will not apply after the consummation of
the Merger. At June 30, 1994, ICN had $5,010,000 of margin borrowings
collateralized by stock of ICN's subsidiaries owned by ICN. The margin
borrowings have an average interest rate of 8.3% for the six month period ended
June 30, 1994 and are payable on demand. Subsequent to June 30, 1994, ICN
entered into an additional margin borrowing collateralized by common stock of
SPI owned by ICN with a foreign bank in the principal amount of $5,067,500,
which loan matures on March 12, 1995. During the six months ended June 30, 1994,
ICN received cash payments from SPI totalling $16,419,000 for repayment of
advances. During the six months ended June 30, 1994, ICN's primary uses of cash
were the reduction of long-term debt, interest expense and Viratek's research
and development costs.

At December 31, 1993 and 1992, ICN had cash, including restricted cash and
certificates of deposit, and marketable securities of $24,170,000 and
$2,622,000, respectively, included in current assets. Included in cash at
December 31, 1993 is $17,698,000 which is to be used exclusively by Viratek for
research and development and its general working capital requirements. In
addition, included in non-current assets at December 31, 1993 and 1992 are
investments in non-current marketable securities of $201,000 and $198,000,
respectively. At December 31, 1993, ICN had $5,823,000 of margin borrowings
collateralized by stock of the ICN's subsidiaries owned by ICN.

On September 12, 1994, ICN sold 50,000 shares of common stock of SPI held
by ICN in a private placement transaction for gross proceeds of $1,231,250, of
which approximately $600,000 will be used by SPI to purchase an interest in
Oktyabr, the Company's recently privatized joint venture partner in Russia.
During 1993, ICN sold 1,618,200 shares of SPI common stock for an aggregate
sales price of $19,995,000. During 1992, ICN sold 690,400 shares of its SPI
common stock and Galenika sold 1,200,000 shares of SPI common stock, received by
Galenika in 1991, for an aggregate sales price of $44,608,000, resulting in a
net gain to ICN of $32,952,000. During 1993 and 1992, ICN sold 272,500 and
348,000 shares of Viratek common stock for an aggregate sales price of
$3,324,000 and $5,243,000, respectively, resulting in a gain of $2,647,000 and
$4,792,000, respectively.

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<PAGE> 283

has used a substantial portion of the net proceeds for research and development
activities to fund phase III clinical trials and related project costs to
evaluate Virazole(R) in the treatment of chronic hepatitis C and to continue
development of certain other anti-cancer and immune-stimulatory compounds. The
additional research and development involves a new pharmaceutical discovery
program aimed at developing therapeutic drugs to inhibit disease-causing genes.
This research activity, which involves 15 new scientists, is based on antisense
technology and is focused on designing new pharmaceuticals to combat cancer,
viral diseases and skin disorders. The warrants became separately transferable
on July 29, 1993 and were exercisable until August 30, 1993 and redeemable by
Viratek on August 31, 1993 at $.05 per warrant, if not previously exercised. Of
the total outstanding warrants, 1,366,642 were exercised resulting in net
proceeds to Viratek of $13,472,000. Of the total net proceeds of the offering of
the units and the exercise of the warrants, $11,201,000 has been spent on
research and development through June 30, 1994.

During 1993 and 1992, ICN issued 3,000,000 and 4,198,000 shares of its
common stock for net proceeds of $21,861,000 and $30,608,000, respectively.

During 1993 and 1992, ICN received cash payments from SPI totalling
$13,662,000 and $14,987,000, respectively, for repayment of advances.

During 1993, ICN's primary uses of cash were for the reduction of long-term
debt ($32,087,000), interest on its publicly traded debt ($15,628,000), legal
and proxy fight expenses ($7,136,000), payments to Biomedicals ($6,783,000),
representing Biomedicals' operating cash deficiency and Viratek's research and
development costs discussed above.

Capital Expenditures. Capital expenditures for property, plant and
equipment totaled $2,548,000 in 1993, $12,554,000 (including SPI) in 1992 and
$21,046,000 (including SPI) in 1991. The expenditures in 1992 primarily relate
to facility improvements of $2,556,000 at Galenika and facility expansion of
$4,700,000 at SPI's Mexican subsidiary. The expenditures in 1991 are primarily
related to the purchase and improvement of SPI's facility in Spain. ICN does not
expect significant capital expenditures through the end of 1994.

Taxes. ICN has not been required to pay regular federal income taxes in
recent years due to the availability of tax loss carryforwards. However, in
1992, ICN was required to pay alternative minimum tax ("AMT") due to limitations
on the utilization of net operating loss carryforwards for AMT purposes. See
Note 8 to Consolidated Financial Statements of ICN. ICN files its federal tax
return on a stand-alone basis. In prior years, ICN filed on a consolidated basis
with its subsidiaries until the following dates:

<TABLE>
<CAPTION>
1991 1992
------------- -------------
<S> <C> <C>
SPI............................................ Until 8-13-91 --
Biomedicals.................................... -- --
Viratek........................................ Entire Year Until 2-1-92
</TABLE>

Product Liability Insurance. In December 1985, after reviewing costs,
availability and related factors, management decided not to continue to maintain
product liability insurance in the United States subsequent to that time. While
ICN has never experienced a material adverse claim for personal injury resulting
from allegedly defective products, a substantial claim, if successful, could
have a material adverse effect on ICN's liquidity and financial performance.

INFLATION AND CHANGING PRICES

Foreign operations are subject to certain risks inherent in conducting
business abroad, including price and currency exchange controls, fluctuations in
the relative values of currencies, political instability and other restrictive
governmental actions. Changes in the relative value of currencies occur from
time to time and may, in certain instances, materially affect ICN's results of
operations.

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<PAGE> 284

FOREIGN CURRENCY TRANSLATION

ICN's Consolidated Statements of Operations reflect translation (gains)
losses of $(1,292,000), $21,648,000, and $4,517,000, in 1993, 1992 and 1991,
respectively, which are a result of ICN's foreign currency denominated
borrowings and investments and relative changes in the value of the U.S. Dollar
versus various European currencies. In addition to these currencies, 1992 and
1991 included the translation effects of the Yugoslavian Dinar.

QUARTERLY FINANCIAL DATA OF ICN (UNAUDITED)

Following is a summary of quarterly financial data for the years ended
December 31, 1992 and 1993 and the first six months of 1994 (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
1992(1)
Net sales..................................... $142,328 $170,136 $113,003 $126,299
Gross profit.................................. 74,120 93,403 64,326 66,321
Net income (loss)(2).......................... 6,590 3,206 (9,652) (64,946)
======== ======== ======== ========
Per share information:
Net income (loss)........................... $ .46 $ .21 $ (.69) $ (4.03)
======== ======== ======== ========
1993
Net sales..................................... $ 16,632 $ 15,723 $ 15,815 $ 14,386
Gross profit.................................. 9,256 8,766 9,307 7,596
Income (loss) before extraordinary income..... 1,063 (3,593) (2,343) (7,024)
Extraordinary income.......................... -- 627 -- --
-------- -------- -------- --------
Net income (loss)............................. 1,063 (2,966) (2,343) (7,024)
======== ======== ======== ========
Per share information:
Income (loss) before extraordinary income... .06 (.18) (.11) (.34)
Extraordinary income........................ -- .03 -- --
-------- -------- -------- --------
Net income (loss)........................... $ .06 $ (.15) $ (.11) $ (.34)
======== ======== ======== ========
1994
Net sales..................................... $ 17,202 $ 15,641
Gross profit.................................. 10,362 8,981
Net loss...................................... (4,545) (6,832)
======== ========
Per share information:
Net loss.................................... $ (.22) $ (.33)
======== ========
</TABLE>

- ---------------

(1) Consolidated results reflect the operations of SPI which was deconsolidated
effective December 31, 1992. Subsequent to that date, ICN accounted for SPI
on the equity method of accounting.

(2) Includes a pre-tax restructuring charge of $63,032,000 in the fourth quarter
1992.

F-23
<PAGE> 285

REPORT OF INDEPENDENT AUDITORS

To ICN Pharmaceuticals, Inc.:

We have audited the accompanying consolidated balance sheets of ICN
Pharmaceuticals, Inc. (a Delaware Corporation) and subsidiaries as of December
31, 1993 and 1992, the related consolidated statements of operations,
Stockholders' Equity (deficit), and cash flows and the financial statement
schedules (not separately included herein) for each of the three years in the
period ended December 31, 1993. These consolidated financial statements and
financial statement schedules are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

The Company has had certain transactions with its majority owned
subsidiaries and affiliates as more fully described in Notes 2, 3, 4, 5 and 6 to
the consolidated financial statements. Whether the terms of these transactions
would have been the same had they been between wholly unrelated parties cannot
be determined.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of ICN
Pharmaceuticals, Inc. and subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years in
the period ended December 31, 1993, in conformity with generally accepted
accounting principles. In addition, in our opinion, the financial statement
schedules referred to above, when considered in relation to the basic financial
statements taken as a whole, present fairly, in all material respects, the
information required to be included therein.

As discussed in Note 1, effective December 31, 1992, the Company changed to
the equity method of accounting for a previously consolidated subsidiary.

COOPERS & LYBRAND

Los Angeles, California
March 30, 1994

F-24
<PAGE> 286

ICN PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1993 AND 1992

ASSETS

1993 1992
------------- ---------------
(NOTE 1 AND 17)
---------------
<S> <C> <C>
Current assets:
Cash................................................................... $ 14,652,000 $ 2,333,000
Restricted cash........................................................ 1,518,000 262,000
Certificates of deposit................................................ 8,000,000 --
Receivables, less allowances of $2,400,000 in 1993 and $3,353,000 in
1992................................................................. 12,122,000 18,620,000
Receivables from SPI................................................... 18,313,000 20,160,000
Other receivables...................................................... -- 8,704,000
Inventories, net....................................................... 15,601,000 13,499,000
Prepaid expenses and other current assets.............................. 4,479,000 15,366,000
------------- ---------------
Total current assets.............................................. 74,685,000 78,944,000
Property, plant and equipment, net, at cost............................ 36,243,000 34,113,000
Receivables from SPI, less current portion............................. -- 10,273,000
Marketable securities.................................................. 201,000 198,000
Investment in SPI...................................................... 71,671,000 72,569,000
Investment in other equity securities.................................. 4,230,000 4,273,000
Other assets and deferred charges...................................... 7,594,000 9,607,000
Goodwill related to purchased businesses............................... 2,580,000 2,933,000
Goodwill related to publicly traded subsidiaries....................... 10,652,000 10,658,000
------------- ---------------
$ 207,856,000 $ 223,568,000
============= ===============
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable.......................................................... $ 4,226,000 $ 15,277,000
Current maturities of long-term debt................................... 12,093,000 12,499,000
Accounts payable....................................................... 7,342,000 13,055,000
Accrued liabilities.................................................... 21,397,000 32,516,000
------------- ---------------
Total current liabilities......................................... 45,058,000 73,347,000
Long-term debt, less current maturities:
Convertible into ICN common stock.................................... 22,023,000 39,507,000
Publicly-traded debentures and other long-term debt.................. 117,024,000 120,504,000
Other liabilities and deferred income taxes............................ 7,014,000 9,348,000
Minority interests..................................................... 12,717,000 2,619,000
Commitments and contingencies
Stockholders' equity (deficit):
Preferred stock, $1.00 par value; 3,000,000 shares authorized, none
outstanding.......................................................... -- --
Common stock, $1.00 par value; 100,000,000 shares authorized,
20,519,431 shares outstanding at December 31, 1993 and 16,452,313 at
December 31, 1992.................................................... 20,519,000 16,452,000
Additional capital..................................................... 180,897,000 145,928,000
Accumulated deficit.................................................... (193,711,000) (182,441,000)
Foreign currency translation adjustments............................... (3,685,000) (1,696,000)
------------- ---------------
Total stockholders' equity (deficit).............................. 4,020,000 (21,757,000)
------------- ---------------
$ 207,856,000 $ 223,568,000
============= ===============
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-25
<PAGE> 287

ICN PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Net sales................................................... $ 62,556,000 $551,766,000 $460,365,000
Cost of sales............................................... 27,631,000 253,596,000 225,234,000
------------ ------------ ------------
Gross profit................................................ 34,925,000 298,170,000 235,131,000
Selling, general and administrative expenses................ 43,690,000 224,235,000 152,947,000
Research and development costs.............................. 5,571,000 10,718,000 6,588,000
Interest expense............................................ 19,589,000 32,407,000 35,871,000
Interest income............................................. (627,000) (6,844,000) (1,550,000)
Translation and exchange (gains) losses, net................ (1,292,000) 21,648,000 4,517,000
Restructuring costs and special charges..................... -- 63,032,000 6,087,000
Other expense, net.......................................... 1,079,000 15,187,000 29,479,000
Equity earnings in SPI...................................... (11,646,000) -- --
Gains on sales of subsidiaries stock........................ (8,345,000) (37,744,000) (29,797,000)
Write-off of goodwill....................................... -- 15,362,000 --
Unrealized (gains) losses on marketable securities.......... (200,000) 446,000 (475,000)
------------ ------------ ------------
Income (loss) before provision for income taxes, minority
interest and extraordinary income......................... (12,894,000) (40,277,000) 31,464,000
Provision (benefit) for income taxes........................ (474,000) 9,967,000 6,574,000
Minority interests.......................................... (523,000) 14,558,000 19,035,000
------------ ------------ ------------
Income (loss) before extraordinary income................... (11,897,000) (64,802,000) 5,855,000
Extraordinary income........................................ 627,000 -- --
Net income (loss)........................................... $(11,270,000) $(64,802,000) $ 5,855,000
============ ============ ============
Per share information:
Income (loss) before extraordinary income................. $(0.60) $(4.67) $.40
Extraordinary income........................................ 0.03 -- --
------ ------ ----
Net income (loss)........................................... $(0.57) $(4.67) $.40
====== ====== ====
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-26
<PAGE> 288

ICN PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<TABLE>
<CAPTION>
FOREIGN
CURRENCY
COMMON ADDITIONAL ACCUMULATED TRANSLATION
STOCK CAPITAL DEFICIT ADJUSTMENTS TOTAL
---------- ----------- ------------ ---------- -----------
<S> <C> <C> <C> <C> <C>
BALANCE AT
NOVEMBER 30, 1990.................. $11,707,000 $117,059,000 $(120,060,000) $ 3,376,000 $12,082,000
Net loss for month of December,
1990............................... -- -- (3,434,000) -- (3,434,000)
Translation adjustments.............. -- -- -- (159,000) (159,000)
Proceeds from exercise of stock
options............................ 353,000 706,000 -- -- 1,059,000
Subsidiaries' stock transactions..... -- 1,053,000 -- -- 1,053,000
Net income........................... -- -- 5,855,000 -- 5,855,000
----------- ------------ ------------- ----------- -----------
BALANCE AT
DECEMBER 31, 1991.................. 12,060,000 118,818,000 (117,639,000) 3,217,000 16,456,000
Translation adjustments.............. -- -- -- (4,913,000) (4,913,000)
Proceeds from exercise of stock
options............................ 184,000 469,000 -- -- 653,000
Issuance of stock.................... 4,198,000 26,410,000 -- -- 30,608,000
Conversion of long-term debt......... 10,000 105,000 -- -- 115,000
Subsidiaries' stock transactions..... -- 126,000 -- -- 126,000
Net loss............................. -- -- (64,802,000) -- (64,802,000)
----------- ------------ ------------- ----------- -----------
BALANCE AT
DECEMBER 31, 1992.................. 16,452,000 145,928,000 (182,441,000) (1,696,000) (21,757,000)
Translation adjustments.............. -- -- -- (1,989,000) (1,989,000)
Proceeds from exercise of stock
options............................ 1,067,000 2,235,000 -- -- 3,302,000
Issuance of stock.................... 3,000,000 18,861,000 -- -- 21,861,000
Subsidiaries' stock transactions..... -- 13,873,000 -- -- 13,873,000
Net loss............................. -- -- (11,270,000) -- (11,270,000)
----------- ------------ ------------- ----------- -----------
BALANCE AT
DECEMBER 31, 1993.................. $20,519,000 $180,897,000 $(193,711,000) $(3,685,000) $ 4,020,000
=========== ============ ============= =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-27
<PAGE> 289

ICN PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991

<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)........................................... $(11,270,000) $(64,802,000) $ 5,855,000
Adjustments to reconcile net income (loss) to net cash
provided by (used in) operating activities:
Depreciation and amortization............................ 7,362,000 17,610,000 16,166,000
Loss on sales of fixed assets............................ 14,000 1,335,000 575,000
Gains on sale of subsidiaries' stock..................... (8,345,000) (37,744,000) (29,797,000)
Write-off of goodwill, intangibles and assets............ -- 17,362,000 1,664,000
Other realized and unrealized (gains) losses............. (339,000) 218,000 (121,000)
Extraordinary income..................................... (627,000) -- --
Provision for losses on accounts receivable.............. 168,000 50,563,000 6,760,000
Minority interests....................................... (523,000) 14,558,000 19,035,000
Exchange (gains) losses.................................. (1,292,000) 11,348,000 4,517,000
Restructuring costs and other charges.................... -- 63,032,000 6,087,000
Equity in earnings of SPI................................ (11,646,000) -- --
Lease vacancy costs...................................... 1,200,000 -- --
Gain on settlement of certain lease contracts............ (938,000) -- --
Gain on settlement of certain liabilities for less than
original estimate...................................... (1,250,000) -- --
Other non-cash items..................................... (855,000) (125,000) 345,000
Change in assets and liabilities net of effects from
deconsolidation of subsidiary:
(Increase) decrease in receivables....................... 13,271,000 14,684,000 (61,183,000)
(Increase) decrease in inventory......................... (2,102,000) (24,154,000) 18,935,000
(Increase) decrease in prepaid and other current
assets................................................. (739,000) (9,461,000) (12,592,000)
Increase (decrease) in accounts payable and accrued
expenses............................................... (17,897,000) (70,076,000) 24,277,000
------------ ------------ -----------
Net cash provided by (used in) operating activities...... (35,808,000) (15,652,000) 523,000
------------ ------------ -----------
Cash flows from investing activities:
Capital expenditures........................................ (2,548,000) (12,554,000) (21,046,000)
Proceeds from sale of assets................................ 5,207,000 1,342,000 805,000
Sale of subsidiaries' stock................................. 23,319,000 49,851,000 53,653,000
Issuance of subsidiary stock................................ 24,098,000 2,552,000 3,771,000
Purchase of certificate of deposit.......................... (8,000,000) -- --
Marketable securities sold, net............................. 139,000 733,000 4,147,000
Payment received from SPI................................... 13,662,000 -- --
Equity investment........................................... -- (53,254,000) --
Other, net.................................................. (219,000) 2,853,000 (799,000)
------------ ------------ -----------
Net cash provided by (used in) investing activities...... 55,658,000 (8,477,000) 40,531,000
------------ ------------ -----------
Cash flows from financing activities:
Proceeds from borrowings.................................... 954,000 26,665,000 19,843,000
Principal payments on debt.................................. (32,087,000) (42,235,000) (50,257,000)
Proceeds from stock issuances............................... 25,163,000 31,261,000 1,059,000
Dividends paid to minority shareholders..................... (351,000) (8,062,000) --
Increase in restricted cash................................. (1,256,000) -- --
Other, net.................................................. -- -- 4,221,000
------------ ------------ -----------
Net cash provided by (used in) financing activities...... (7,577,000) 7,629,000 (25,134,000)
------------ ------------ -----------
Effect of exchange rate on cash............................... 46,000 (272,000) 159,000
------------ ------------ -----------
Net increase (decrease) in cash............................... 12,319,000 (16,772,000) 16,079,000
Cash at beginning of year..................................... 2,333,000 19,105,000 3,026,000
------------ ------------ -----------
Cash at end of year........................................... $ 14,652,000 $ 2,333,000 $19,105,000
============ ============ ===========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

F-28
<PAGE> 290

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1993

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reclassifications

Certain prior year amounts have been reclassified to conform to the current
year presentation.

Principles of consolidation

The accompanying consolidated financial statements include ICN
Pharmaceuticals, Inc. ("ICN"), its 69%-owned subsidiary ICN Biomedicals, Inc.
("Biomedicals"), its 63%-owned subsidiary Viratek, Inc. ("Viratek") and its
39%-owned equity investment in SPI Pharmaceuticals, Inc. ("SPI"). The sale of
approximately 9% of SPI's common stock by ICN throughout 1992 reduced ICN's
ownership interest in SPI and resulted in the deconsolidation of SPI at December
31, 1992, the approximate time at which ICN's ownership fell below 50%. The
continuing investment in SPI was classified as a long-term asset in the
consolidated balance sheet and income or loss was, commencing January 1, 1993,
recognized using the equity method of accounting. Prior year results have not
been restated (see Note 17). All significant intercompany account balances and
transactions have been eliminated.

Goodwill

The difference between the purchase price and the fair value of net assets
purchased at the date of acquisition is included in the accompanying
consolidated balance sheets as Goodwill. Goodwill amortization periods range
from 5 to 40 years for acquired businesses and from 10 to 20 years for its
publicly-traded subsidiaries and is based on an estimate of future periods to be
benefitted. The Company periodically evaluates the carrying value of goodwill
including the amortization periods. The Company determines whether there has
been permanent impairment in goodwill, as well as, the amount of such
impairment, if any, by comparing the anticipated undiscounted future operating
income of the acquired entity with the carrying value of the Goodwill. During
1992, the Company wrote off a substantial portion of its goodwill, primarily
related to the acquisition by Biomedicals of Flow, as more fully described in
Note 14. In addition, on certain portions of goodwill, the amortization period
was reduced to primarily five years, which reflects the estimated recovery
period.

Accumulated amortization for goodwill related to purchased businesses was
$2,901,000 and $2,548,000 at December 31, 1993 and 1992, respectively.
Accumulated amortization for goodwill related to publicly traded subsidiaries
was $4,625,000 and $3,413,000 at December 31, 1993 and 1992, respectively.

Cash

For purposes of the statements of cash flows, the Company considers highly
liquid investments purchased with a maturity of three months or less to be cash
equivalents. The carrying amount of those assets approximates fair value due to
the short-term maturity of these instruments. Included in cash and certificates
of deposit at December 31, 1993, is $9,698,000 and $8,000,000, respectively,
which is to be used exclusively by Viratek for research and development and its
general working capital requirements.

Marketable securities

Marketable securities, which consist of investments in common stocks and
bonds, are carried at the lower of aggregate cost or market. The Company
realized net (gains) losses of $(139,000), $228,000, and $354,000 related to
marketable securities sold during 1993, 1992 and 1991, respectively. Unrealized
(gains) losses of $(200,000), $446,000 and $(475,000) were recorded in 1993,
1992 and 1991, respectively.

F-29
<PAGE> 291

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Inventories

Inventories, which include material, direct labor and factory overhead, are
stated at the lower of cost or market. Cost is determined based on a first-in,
first-out (FIFO) basis.

Catalog Costs

The initial costs of design, production and distribution of the Company's
product catalog are deferred and amortized over its service life, approximately
one year. However, for the year ended December 31, 1992, due to the lower than
expected sales results, Biomedicals wrote-off these costs in the fourth quarter
of 1992. (See Note 14.)

Property, plant and equipment

The Company uses primarily the straight-line method for depreciating
property, plant and equipment over their estimated useful lives. Buildings and
related improvements are depreciated from 20-40 years, machinery and equipment
over 2-10 years, furniture and fixtures over 1-10 years, and leasehold
improvements, including property under capital leases, are amortized over their
useful lives limited to the life of the lease.

The Company follows the policy of capitalizing expenditures that
significantly increase the life of the related assets and charging maintenance
and repairs to expense. Upon sale or retirement, the costs and related
accumulated depreciation or amortization are eliminated from the respective
accounts, and the resulting gain or loss is included in income.

Notes Payable

The Company classifies bank borrowings with initial terms of one year or
less as Notes Payable. These notes bear interest at rates of 6.0% to 16.2%. The
carrying amount of Notes Payable approximates fair value due to the short-term
maturity of these instruments.

Foreign Currency Translation

The assets and liabilities of the Company's foreign operations, except
those in highly inflationary economies, are translated at the end of period
exchange rates. Revenues and expenses are translated at the average exchange
rates prevailing during the period. The effects of unrealized exchange rate
fluctuations on translating foreign currency assets and liabilities into U.S.
dollars are accumulated in stockholders' equity. The monetary assets and
liabilities of foreign subsidiaries in highly inflationary economies are
remeasured into U.S. dollars at the year-end exchange rates and non-monetary
assets and liabilities at historical rates. In accordance with Statement of
Financial Accounting Standards No. 52, "Foreign Currency Translation," the
Company has included in operating income all foreign exchange gains and losses
arising from foreign currency transactions and the effects of foreign exchange
rate fluctuations on subsidiaries operating in highly inflationary economies.
The (gains) losses included in operations from foreign exchange translation and
transactions for 1993, 1992 and 1991 were $(1,292,000), $21,648,000 (including
SPI), and $4,517,000 (including SPI), respectively.

Income Taxes

F-30
<PAGE> 292

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

rates. Previously, the Company used the SFAS 96 asset and liability approach
that gave no recognition to future events other than the recovery of assets and
settlement of liabilities at their carrying amounts. The adoption of SFAS 109
did not result in a cumulative effect adjustment in the statement of operations.

Per share information

Per share information is based on the weighted average number of common
shares outstanding and dilutive common share equivalents (19,813,000 in 1993,
14,010,000 in 1992 and 12,829,000 in 1991). Common share equivalents in 1991
represent shares issuable for outstanding options and warrants, on the
assumption that the proceeds would be used to repurchase shares in the open
market. Shares issuable for outstanding options and warrants in 1993 and 1992
were excluded since the effect would have been antidilutive. For purposes of
calculating per share information, ICN's share of the income of subsidiaries has
been reduced to give effect to the dilution in earnings which would result upon
the exercise of options and warrants currently outstanding to purchase
subsidiaries' common shares.

2. SPI PHARMACEUTICALS, INC.

SPI develops, manufactures, sells and distributes pharmaceutical and
nutritional products and services in the United States, Yugoslavia, Canada,
Mexico and Western Europe.

During 1991, ICN sold 2,978,250 shares of SPI common stock for an aggregate
sales price of $50,863,000, resulting in a net gain of $27,239,000 and used
1,468,000 shares in the acquisition of Galenika (see Note 6). During 1992, ICN
sold 690,400 shares of SPI common stock and Galenika sold 1,200,000 shares of
SPI common stock, transferred in 1991, for an aggregate sales price of
$44,608,000, resulting in a net gain of $32,952,000. During 1993, ICN sold
1,618,200 shares of SPI common stock for an aggregate sales price of
$19,995,000, resulting in a net gain of $5,698,000. The above noted 1992 and
1993 sales of SPI stock have reduced ICN's ownership of SPI from 57% at December
31, 1991 to 48% at December 31, 1992 and 39% at December 31, 1993. As a result,
effective December 31, 1992, SPI is accounted for by using the equity method of
accounting.

At December 31, 1993, the investment in SPI exceeded the equity in net
assets of SPI by $11,024,000, which amount, is being amortized over 40 years.

On November 15, 1993, SPI exchanged $3,075,000 of debt owed to ICN for
200,000 shares of SPI's common stock issued to ICN at a price of $15.38 per
share which represented the closing market price of SPI's stock on that date.

SPI has granted options for the purchase of 2,508,315 shares of its common
stock. At December 31, 1993, ICN's percentage ownership of SPI would have
decreased from 39% to 35% if these options were exercised.

At December 31, 1993, ICN owned 7,853,454 shares of SPI common stock which
had an aggregate value of approximately $113,875,000, based upon the quoted
market price per share of SPI common stock at that date. This amount, however,
is not necessarily indicative of the realizable value in the open market.

3. VIRATEK, INC.

Viratek's primary purpose is to conduct research and development on
compounds derived from nucleic acids and to develop new biomedical and
diagnostic products.

During 1993, 1992 and 1991, ICN sold 272,500, 348,000 and 200,000 shares of
Viratek common stock for an aggregate sales price of $3,325,000, $5,243,000 and
$2,790,000, respectively, resulting in a gain of

F-31
<PAGE> 293

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

$2,647,000, $4,792,000 and $2,558,000, respectively. These sales, in addition to
shares issued in connection with the exercise of employee stock options and the
shares issued in the offering discussed below, have reduced ICN's ownership from
83% at January 1, 1991, to 63% at December 31, 1993.

In February 1993, Viratek successfully completed an offering in which it
sold 1,375,000 units for net proceeds of approximately $8,897,000. Each unit
consists of one share of common stock and one warrant to purchase one unit of
common stock at $10.075. On March 19, 1993, the underwriters exercised their
option to purchase the overallotment (206,250 units) in connection with the
public offering for net proceeds of $1,368,000. The warrants became separately
transferable on July 29, 1993 and were exercisable until August 30, 1993 and
redeemable by the Company on August 31, 1993 at $.05 per warrant if not
previously exercised. A total of 1,366,642 warrants were exercised resulting in
net proceeds to the Company of $13,472,000.

Goodwill related to publicly traded subsidiaries at December 31, 1993
includes $6,677,000, net of amortization, related to purchases of Viratek common
stock.

Viratek has granted options for the purchase of 877,222 shares of its
common stock. At December 31, 1993, ICN's percentage ownership of Viratek would
have decreased from 63% to 60% if these options were exercised. In December
1993, Viratek declared a stock distribution of 5%.

4. ICN BIOMEDICALS, INC.

Biomedicals manufactures and distributes research chemical products, cell
biology products, chromatography materials, immunology instrumentation,
environmental technology products, precision liquid delivery instrumentation and
immunodiagnostic reagents and instrumentation in the United States, Canada,
Mexico, South America, Eastern and Western Europe, Australia and Japan.
Biomedicals also purchases research chemicals from other manufacturers, in bulk,
for repackaging and distributes biomedical instrumentation manufactured by
others.

During the second quarter of 1993, Biomedicals' Italian operation
negotiated settlements with certain of its suppliers and banks resulting in an
extraordinary income of $627,000 or $.03 per share.

On December 31, 1992, Biomedicals exchanged, in a non-cash transaction,
$11,250,000 of debt owed to ICN in exchange for 3,214,286 shares of Biomedicals'
common stock issued to ICN at a price of $3.50 per share which represented the
closing market price of the stock at that date.

On December 31, 1992, Biomedicals transferred $5,747,000 of debt owed to a
major supplier to ICN. ICN became primarily liable for the debt and Biomedicals
became guarantor.

On April 1, 1992, Biomedicals transferred, in a non-cash transaction,
$13,072,000 of debt with First City Bank of Texas -- Houston N.A., to ICN.
Biomedicals, in exchange, issued 2,412,449 shares of Biomedicals' common stock
at a price of $5.42 per share which represented the closing market price of the
stock at that date less a discount of 15%.

On March 31, 1992, Biomedicals transferred, in a non-cash transaction,
$2,711,000 of debt owed to Skopbank of Finland to ICN. Biomedicals, in exchange,
issued 500,334 shares of Biomedicals' common stock at a price of $5.42 per share
which represented the closing market price of Biomedicals' stock on that date
less a discount of 15%. ICN became primarily liable for the debt and Biomedicals
became guarantor.

On March 31, 1992 Biomedicals exchanged, in a non-cash transaction,
$4,837,000 of debt owed to ICN for 892,703 shares of Biomedicals' common stock
issued to ICN at a price of $5.42 per share which represented the closing market
price of the stock at that date less a discount of 15%.

F-32
<PAGE> 294

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

On December 31, 1991, Biomedicals issued, in a non-cash transaction,
3,363,298 shares of Biomedicals' common stock to ICN at a price of $6.25 which
represented the fair market value of Biomedicals' stock at that date in exchange
for debt owed ICN in the amount of $18,167,523.

On March 1, 1991, Biomedicals, pursuant to a fairness opinion, exchanged,
in a non-cash transaction, $3,833,000 of advances due to ICN into 538,000 shares
of Biomedicals' common stock, issued at a price of $7.125 which represented the
fair market value of Biomedicals' stock at that date less a discount of 22%.

On August 30, 1993, Biomedicals issued 300,000 shares of a new series "A"
of its non-convertible, non-voting, preferred stock valued pursuant to a
fairness opinion, at $30,000,000 to the Company. In exchange, the Company
delivered 4,983,606 shares of Biomedicals' common stock that ICN owned and
exchanged intercompany debt owed to ICN by Biomedicals in the amount of
$11,000,000.

In addition, on August 30, 1993, Biomedicals issued 390,000 shares of a new
series "B" of its non-convertible, non-voting, preferred stock valued pursuant
to a fairness opinion, at $32,000,000 to the Company. In exchange, ICN delivered
to Biomedicals 8,384,843, shares of Biomedicals' common stock that ICN owned.

As a result of this exchange, Biomedicals had 9,033,623 common shares
issued and outstanding.

Subject to declaration by Biomedicals' 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 Biomedicals'
common stock as to voluntary or involuntary liquidation, dissolution or winding
up of the affairs of Biomedicals, after payment or provision for payment of the
debts and other liabilities of Biomedicals. 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 Biomedicals only, subject to approval by a vote of a majority of
the independent directors of Biomedicals. 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.

No dividends were declared on the series "A" or series "B" preferred stock
during 1993.

Goodwill related to publicly traded subsidiaries at December 31, 1993
includes $3,975,000, net of amortization, related to purchases of Biomedicals'
stock.

Biomedicals has granted options for the purchase of 2,419,830 shares of its
common stock. At December 31, 1992, ICN's percentage ownership of Biomedicals
would have decreased from 69% to 44%

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ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

assuming exercise of all options and exchange of all the Bio Capital Holding
Exchangeable Certificates (see Note 7).

5. RELATED PARTY TRANSACTIONS

General

ICN controls Biomedicals and Viratek through stock ownership, voting
control and board representation and is affiliated with SPI. Certain officers of
ICN occupy similar positions with SPI, Biomedicals and Viratek. ICN, SPI,
Biomedicals and Viratek (collectively, the "Affiliated Corporations") have
engaged in, and will continue to engage in, certain transactions with each
other.

An Oversight Committee of the Boards of Directors of the Affiliated
Corporations reviews transactions between or among the Affiliated Corporations
to determine whether a conflict of interest exists among the Affiliated
Corporations with respect to a particular transaction and the manner in which
such conflict can be resolved. The Oversight Committee has advisory authority
only and makes recommendations to the Boards of Directors of each of the
Affiliated Corporations. The Oversight Committee consists of one non-management
director of each Affiliated Corporation and a non-voting chairman. The
significant related party transactions have been reviewed and recommended for
approval by the Oversight Committee, and approved by the respective Boards of
Directors.

Royalty agreements

Effective December 1, 1990, SPI and Viratek entered into a new royalty
agreement. Under this agreement, SPI continued to act as Viratek's exclusive
distributor of ribavirin and pays Viratek a royalty of 20% on sales worldwide
for a term of 10 years with an option by either party to extend it for an
additional 10 years. Royalties to Viratek under this agreement for 1993, 1992
and 1991 were $5,903,000, $5,448,000 and $4,263,000, respectively. Included in
royalties for 1993, 1992 and 1991 are royalties earned on foreign sales by SPI
totalling $2,107,000, $1,472,000 and $1,189,000, respectively.

During 1991, SPI purchased $235,000 of ribavirin from Viratek and also
transferred $2,943,000 of Virazole(R) from Viratek at its cost.

Under an agreement between ICN and the employer of a director of Viratek,
SPI is required to pay a 2% royalty to the employer on all sales of Virazole(R)
in aerosolized form. Such royalties for 1993, 1992 and 1991 were $422,000,
$430,000, and $313,000, respectively.

In July 1988, SPI began marketing products under license from ICN for the
treatment of myasthenia gravis, a disease characterized by muscle weakness and
atrophy. ICN charged SPI royalties at 9% of net sales. Effective September 1,
1990, SPI prepaid royalties to ICN in the amount of $9,590,000. There are no
future royalties due to ICN for these products.

Beginning December 1986, SPI began selling Brown Pharmaceuticals, Inc.
products under license from ICN. ICN charges SPI royalties at 8 1/2% of net
sales. During 1993, 1992 and 1991 SPI paid ICN $218,000, $65,000 and $93,000,
respectively, in royalties under this arrangement.

Cost allocations

The Affiliated Corporations occupy ICN's facility in Costa Mesa,
California. In each of 1993, 1992 and 1991, ICN charged facility costs of
$279,000, $310,000 and $30,000 to SPI, Biomedicals and Viratek, respectively.
The costs of common services such as maintenance, purchasing and personnel are
paid by SPI and allocated to ICN, Biomedicals and Viratek based on services
utilized. The total of such costs were

F-34
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ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

$2,584,000 in 1993, $2,556,000 in 1992 and $2,617,000 in 1991 of which
$1,733,000, $1,679,000 and $1,568,000 were allocated to the Affiliated
Corporations, respectively. Effective January 1, 1993, ICN reimburses
Biomedicals for those allocations which are in excess of the amounts determined
by Biomedicals' management using competitive data, as reviewed and recommended
by the Oversight Committee, that would have been incurred by the Company if it
operated in a facility suited solely to its requirements. During 1993, such
reimbursements totalled $772,000.

During 1991, Viratek began renting certain office equipment to ICN for use
at the Costa Mesa facility. Rent is being charged at the rate of $20,000 per
month through 1993, renewable annually. During 1993, 1992 and 1991 Viratek
charged ICN $240,000, $240,000 and $120,000, respectively.

It is management's belief that the methods used and amounts allocated for
facility costs and common services are reasonable based upon the usage by the
respective companies.

Investment policy

ICN and its affiliates have a policy covering intercompany advances and
interest rates, and the types of investments (marketable equity securities,
high-yield bonds, etc.) to be made by ICN and its affiliates. As a result of
this policy, excess cash is transferred to ICN. The affiliates are credited with
interest income based on prime (6% at December 31, 1993) less 1/2% and are
charged interest at the prime rate plus 1/2% on the amounts invested or
advanced.

During the year ended December 31, 1993 and 1992, Biomedicals reclassified
its SPI intercompany payable of $2,333,000 and $3,631,000, and its Viratek
intercompany receivables of $272,000 and $536,000 to ICN, resulting in
intercompany payables of $5,932,000 and $8,414,000 to ICN as of December 31,
1993 and 1992, respectively. ICN charged (credited) $420,000, $314,000 and
($218,000) to Biomedicals for interest on the average balance outstanding during
1993, 1992 and 1991, respectively.

Other

Certain outside directors have provided legal and other consultation
services to ICN, which amounted to $148,000, $811,000 and $58,000 during 1993,
1992 and 1991, respectively.

During first quarter 1993, Biomedicals transferred its Dublin, Virginia,
facility to ICN in exchange for a reduction in the intercompany amounts due to
ICN of $586,000 representing the net book value at the date of the transfer.

F-35
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ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Biomedicals shall retain a right of first refusal to the marketing and
distribution rights for any product developed from the transferred assets and
pay a royalty to Viratek. Future royalties will be recognized as income when
earned. During 1993 and 1992 there have been no sales of product subject to this
royalty.

In 1991 SPI's 75%-owned subsidiary, Galenika, purchased equipment from
Viratek at its net book amount of $333,000.

In 1991, SPI's Mexican subsidiary purchased inventory from Biomedicals for
approximately $500,000, which was returned for credit in 1992.

During 1991, ICN transferred to SPI an idle manufacturing facility in
Brooksville, Mississippi at its net book amount of $3,114,000.

Since SPI assumed production and sales of Virazole, effective March 1,
1991, Viratek transferred to SPI all inventory at its net book amount of
$2,943,000.

During 1991, Biomedicals charged $250,000 to SPI representing costs
expended by Biomedicals for a product development program launched for SPI which
SPI determined not to pursue.

See Note 4 "ICN Biomedicals, Inc." concerning Biomedicals' preferred stock
transaction.

See Note 9 "Commitments and Contingencies -- Other" concerning transactions
with management.

6. ACQUISITIONS

Effective May 1, 1991, SPI formed a new joint company with Galenika
Pharmaceuticals headquartered in Belgrade, Yugoslavia. The joint company,
Galenika, is 75%-owned by SPI and 25%-owned by Galenika Holding ("Galenika
Holding"). Galenika, the leading pharmaceutical company in Yugoslavia, produces,
markets and distributes over 450 pharmaceutical, veterinary, dental and other
products in Yugoslavia, Eastern Europe and Russia.

In connection with the agreement, the Company contributed assets totaling
$58,301,000, consisting of $14,453,000 cash, an obligation to pay $13,550,000
and 1,200,000 unregistered shares of common stock of SPI issued to the employees
("owners" in Socialist Yugoslavia) of Galenika Holding with a fair value of
$9,000,000. On December 31, 1991, the Company, on behalf of SPI, contributed
1,468,000 shares of common stock of SPI to Galenika with a cost basis of
$11,555,000, the minority interest share of the excess of the fair value of the
common stock of the Company contributed by ICN and ICN's cost basis or
$6,743,000, and acquisition costs of $3,000,000. Under the terms of the Galenika
agreement, SPI had an obligation to contribute, in part, $50,000,000 in cash and
1,200,000 shares of SPI stock or $12,000,000 in cash. However, the agreement was
subsequently changed in December 1991 whereby the Company, on behalf of SPI,
contributed shares of SPI stock in lieu of the $40,000,000 (after a cash payment
of $10,000,000) and SPI issued 1,200,000 shares of SPI stock in lieu of cash to
comply with the original intent of the parties.

The Galenika transaction has been accounted for by the purchase method of
accounting, and accordingly, SPI's investment has been allocated, based on SPI's
ownership percentage, to the assets acquired and the liabilities assumed based
on the estimated fair values at the effective date of formation, May 1, 1991.

F-36
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ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Assuming that the acquisition of Galenika occurred at January 1, 1991, the
Company's 1991 pro forma revenues for the full year ended December 31, 1991,
would have been $548,467,000 with net income of $19,825,000. The pro forma
information presented does not purport to be indicative of the results that
would have been obtained if the operations were combined during the year
presented and is not intended to be a projection of future results or trends.

7. DEBT

Long-term debt and obligations under capital leases consist of the
following:

<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
ICN:
12 7/8% Sinking Fund Debentures due July 15,
1998.......................................... $ 70,697,000 $ 70,697,000
6% Dutch Guilder Subordinated Convertible
Bonds due 1990-1994........................ 6,143,000 13,086,000
Swiss Franc Subordinated Bonds due 1988-2001
with effective interest rate of 7.4%....... 15,559,000 17,214,000
12 1/2% Senior Subordinated Debentures due
1999....................................... 17,798,000 17,353,000
6 3/4% Subordinated Convertible Bonds due
2001....................................... 449,000 8,273,000
3 1/4% Subordinated Double Convertible Bonds
due 1997................................... 5,236,000 5,290,000
Zero Coupon ECU Subordinated Bonds due
1987-1996 with effective interest rate of
8.9%....................................... 3,408,000 4,745,000
Mortgages payable, with variable interest
rates from 9 1/2% to 11 1/2% and due
December 1990-2003......................... 13,353,000 13,839,000
Other long-term debt with variable interest
rates...................................... 6,551,000 8,241,000
------------ ------------
Total ICN.................................. 139,194,000 158,738,000
------------ ------------
Subsidiaries of ICN:
Zero Coupon Guaranteed Bonds with an effective
interest rate of 13.5%, maturing in 2002...... 8,441,000 9,112,000
Other long-term debt............................ 3,505,000 4,660,000
------------ ------------
Total subsidiaries of ICN.................. 11,946,000 13,772,000
------------ ------------
Total long-term debt and obligations under
capital leases................................ 151,140,000 172,510,000
Less: Current maturities........................ (12,093,000) (12,499,000)
------------ ------------
Total...................................... $139,047,000 $160,011,000
============ ============
</TABLE>

Other long-term debt includes notes payable, mortgages, margin borrowings
and the present value of capital lease obligations due in various installments
through 2002.

On March 25, 1987, the Company completed an underwritten public offering in
Switzerland of SFr. 60,000,000 principal amount (approximately $38,961,000) of
3 1/4% Subordinated Double Convertible Bonds due 1997 "Double Convertible
Bonds". These bonds are convertible at the option of the holder into one of the
following: (1) entirely into 1,500,000 shares of Common Stock of ICN at a
conversion price of $26.14 per share (at a fixed exchange rate of SFr. 1.53 per
$1.00); or (2) entirely into 15,000 shares of Common Stock of Ciba-Geigy Ltd. at
a conversion price of SFr. 4,000 per share; or (3) a combination of 750,000
shares of Common Stock of ICN and 7,500 shares of Common Stock of Ciba-Geigy
Ltd. at conversion prices of $26.14 and SFr. 4,000 per share, respectively,
subject to adjustment for dilutive issues. In connection with this

F-37
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ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

offering, the Company placed in escrow 15,000 shares of CibaGeigy Ltd. common
stock, of which 1,928 shares remain at December 31, 1993 which are reflected in
the Consolidated Balance Sheet as investment in other equity securities.
Conversions during 1992 and 1991 were not material and there were no conversions
during 1993. Fair value of these bonds was approximately $6,021,000 at December
31, 1993.

In 1987, Bio Capital Holding ("Bio Capital"), a trust established by ICN
and Biomedicals, completed a public offering in Switzerland of Swiss Francs
(SFr.) 70,000,000 principal amount of 5 1/2% Swiss Franc Exchangeable
Certificates ("Old Certificates"). At the option of the certificate holder, the
Old Certificates are exchangeable into shares of Biomedicals common stock. Net
proceeds were used by Bio Capital to purchase SFr. 70,000,000 face amount of
zero coupon Swiss Franc Debt Notes due 2002 of the Kingdom of Denmark (the
"Danish Bonds") for SFr. 33,772,000 and 15 series of zero coupon Swiss Franc
Guaranteed Bonds of the Company (the "Zero Coupon Guaranteed Bonds") for SFr.
32,440,000, which are guaranteed by ICN. Each series of the Zero Coupon
Guaranteed Bonds are in an aggregate principal amount of SFr. 3,850,000 maturing
in February of each year through 2002. ICN and Biomedicals have no obligation
with respect to the payment of the principal amount of the Old Certificates
since they will be paid upon maturity by the Danish bonds.

During 1990, Biomedicals offered to exchange, to all certificate holders,
the Old Certificates for newly issued certificates ("New Certificates"), the
terms of which remain the same except that 334 shares per SFr. 5,000 principal
certificate can be exchanged at $10.02 using a fixed exchange rate of SFr. 1.49
to U.S. $1.00. Substantially all of the outstanding Old Certificates were
exchanged for New Certificates (together referred to as "Certificates"). This
exchange was accounted for as an extinguishment of debt and the effect on net
income was not material.

During 1992, Biomedicals repurchased SFr. 5,640,000 of Bio Capital
Certificates, representing long-term debt of $1,859,000. During 1991, SFr.
1,245,000 ($918,000) principal amount of Certificates were exchanged into 83,166
shares of Biomedicals' common stock. No repurchases were made in 1993.

As of December 31, 1993, the consolidated financial statements include
outstanding debt of SFr. 12,534,000 ($8,441,000) which represents the present
value of the Company's obligation to pay the Zero Coupon Guaranteed Bonds. When
Certificates are exchanged into common stock, Biomedicals' obligation to pay the
Zero Coupon Guaranteed Bonds is reduced and the Danish Bonds are released by Bio
Capital to Biomedicals, both on a pro rata basis. As of December 31, 1993, SFr.
39,615,000 ($26,677,000) principal of Certificates were outstanding which, if
exchanged for common stock, would result in the issuance of 2,608,241 shares of
Biomedicals' common stock, a reduction of long-term debt of SFr. 11,330,000
($7,630,000), a reduction of SFr. 1,204,000 ($811,000) of current maturities of
long-term debt, and an increase in marketable securities of SFr. 20,204,000
($13,605,000) from the release of Bio Capital of the Danish Bonds to
Biomedicals. Fair value of these bonds was approximately $7,850,000 at December
31, 1993.

In October 1986, the Company completed an underwritten public offering of
$75,000,000 principal amount of 6 3/4% Subordinated Convertible Bonds Due 2001
(the "6 3/4% Bonds") convertible into 3,626,692 shares of ICN Common Stock at a
conversion price of $20.68 per share, subject to adjustment for dilutive issues.
During 1993, $7,824,000 principal amount of the bonds were redeemed at the
bondholder's option. Fair value of these bonds was approximately $442,000 at
December 31, 1993.

In October 1986, Pharma Capital Holdings ("Pharma Capital"), a trust
established by the Company, completed an underwritten public offering in Europe
of ECU 40,000,000 principal amount of 7 1/4% Exchangeable Certificates Due 1996
(the "Pharma Certificates") of which ECU 16,195,000 remain outstanding at
December 31, 1993. The Pharma Certificates are exchangeable into 1,936,000
shares of Common Stock of ICN at an initial exchange price of $21.1364 per
share, at a fixed exchange rate of ECU

F-38
<PAGE> 300

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

.9775 per $1.00. The net proceeds of approximately ECU 19,400,000 were used by
Pharma Capital to purchase nine series of Zero Coupon ECU Subordinated Bonds of
ICN (consisting of one series, payable in two installments, the first on May 30,
1987 in the amount of ECU 1,756,111 and the second on May 30, 1988 in the amount
of ECU 2,900,000, and eight series each in the aggregate principal amount of ECU
2,900,000 maturing on May 30 in each of the years 1989 to 1996) (the "ICN-ECU
Bonds") and ECU 40,000,000 aggregate principal amount of ECU 200,000,000 Zero
Coupon Guaranteed Bonds Due May 30, 1996, Series 119, of The Mortgage Bank and
Financial Agency of the Kingdom of Denmark (unconditionally guaranteed by the
Kingdom of Denmark). The Company has no obligation with respect to the payment
of the face amount of the Pharma Certificates since these are to be paid upon
maturity by the Kingdom of Denmark Zero Coupon Guaranteed Bonds (except for
payment of certain additional amounts in the event of the imposition of U.S.
withholding taxes on either the Pharma Certificates or ICN-ECU Bonds and funds
required for redemption of the Pharma Certificates in the event the Company
exercises its optional right to redeem). Fair value of these bonds was
approximately $3,204,000 at December 31, 1993.

In October 1986, Xr Capital Holding ("Xr Capital"), a trust established by
the Company, completed an underwritten public offering in Switzerland of Swiss
Francs 100,000,000 principal amount of 5 5/8% Swiss Franc Exchangeable
Certificates (the "Xr Certificates") of which SFr 66,510,000 remain outstanding
at December 31, 1993. The Xr Certificates are exchangeable through 2001 for
1,250,000 shares of Common Stock of ICN and 860,000 shares of Common Stock of
SPI owned by ICN at initial exchange prices of $24.10 and $35.02 per share,
respectively, at a fixed exchange rate of SFr. 1.66 per $1.00. The net proceeds
of the offering were used by Xr Capital to purchase from the Company 14 series
of Swiss Franc Subordinated Bonds due 1988-2001 (the "ICN-Swiss Franc Xr Bonds")
for approximately $27,944,000 and SFr. 45,700,000 principal amount of cumulative
coupon 5.4 percent Italian Electrical Agency Bonds due 2001 for approximately
$27,202,000. The Company has no obligation with respect to the payment of the
face amount of the Xr Certificates since these are to be paid upon maturity by
the Italian Bonds (except for payment of certain additional amounts in the event
of the imposition of U.S. withholding taxes on either the Xr Certificates or
ICN-Swiss Franc XR Bonds and funds required for redemption of the Xr
Certificates in the event the Company exercises its optional right to redeem).
Fair value of these bonds was approximately $14,314,000 at December 31, 1993.

In September 1986, the Company completed an underwritten public offering in
the Netherlands of Dutch Guilders 75,000,000 principal amount (approximately
$32,751,000 at date of issuance) of 6% Subordinated Convertible Bonds due
1990-1994 (the "Dutch Guilder Bonds"). These bonds are convertible into
1,259,657 shares of ICN Common Stock at a conversion price of $26 per share at a
fixed exchange rate of Dfl. 2.29 per $1.00, subject to adjustment for dilutive
issues. Fair value of these bonds was approximately $6,032,000 at December 31,
1993.

The Company has the optional right to redeem the 6 3/4% Bonds, ICN-ECU
Bonds, ICN-Swiss Franc Xr Bonds, Bio Certificates, Double Convertible Bonds, and
the Dutch Guilder Bonds in the event that the market price of ICN Common Stock
meets certain conditions.

In July 1986, the Company sold $115,000,000 principal amount of 12 7/8%
Sinking Fund Debentures (the "12 7/8% Debentures"), due July 15, 1998, in an
underwritten public offering. The 12 7/8% Debentures are redeemable, in whole or
in part, at the option of the Company, at any time on or after July 15, 1991, at
specified redemption prices, plus accrued interest. Mandatory annual sinking
fund payments, commencing on July 15, 1994, are calculated to retire 80% of the
issue prior to maturity. The indenture imposes limitations on, among other
things, (i) the issuance or assumption by the Company or its subsidiaries of
additional debt which is senior to the 12 7/8% Debentures, (ii) dividends and
distributions on, or repurchases and redemptions

F-39
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ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

of, Common Stock of the Company and (iii) the Company becoming an investment
company. The fair value of these debentures was approximately $72,641,000 at
December 31, 1993.

In May 1984, the Company completed a public offering of $30,000,000 of
12 1/2 percent Senior Subordinated Debentures (the "12 1/2% Debentures") due
1999. The 12 1/2% Debentures provide for annual sinking fund payments of
$3,215,000 commencing May 15, 1992. The 12 1/2% Debentures are redeemable at any
time after May 15, 1989 at the Company's option and are subordinated to all
senior indebtedness. The net proceeds from the 12 1/2% Debentures were
$21,390,000. The original issue discount and costs associated with the offering
are being amortized over the life of the 12 1/2% Debentures. This results in an
effective interest rate to the Company (exclusive of sinking fund requirements)
of 16.75%. The indenture agreement for the 12 1/2% Debentures is less
restrictive than the indenture relating to the 12 7/8% Debentures. The fair
value of these debentures was approximately $18,619,000 at December 31, 1993.

Annual aggregate maturities of long-term debt, including obligations under
capitalized leases subsequent to December 31, 1993 are as follows:

<TABLE>
<S> <C>
1994................................................... $ 12,093,000
1995................................................... 11,027,000
1996................................................... 36,427,000
1997................................................... 36,109,000
1998................................................... 30,733,000
Thereafter............................................. 24,751,000
------------
Total........................................ $151,140,000
============
</TABLE>

At December 31, 1993 and 1992, the Company had $7,600,000 and $16,584,000,
respectively, of margin borrowings and notes payable. At December 31, 1993,
1,107,898 and 402,000 shares of ICN-owned shares of SPI and Viratek,
respectively, collateralized these borrowings. The Company may use as collateral
or sell additional shares of its common stock or common stock of its
subsidiaries or equity investment in order to meet its short term cash
requirements or other corporate goals.

The fair value of the Company's debt is estimated based on quoted market
prices for the same or similar issues or on the current rates offered to the
Company for debt of the same remaining maturities. The carrying amount of all
short-term and variable interest rate borrowings approximates fair value.

8. INCOME TAXES

Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes" (SFAS 109). The new
statement supersedes the Company's previous policy of accounting for income
taxes under Statement of Financial Accounting Standards No. 96 "Accounting for
Income Taxes" (SFAS 96). Both statements require the use of the liability method
of accounting for income taxes, but the recognition of deferred tax assets was
limited under SFAS 96. Under SFAS 109, deferred tax liabilities and assets are
determined based on the difference between the financial statement and tax bases
of assets and liabilities, using enacted tax rates in effect for the year in
which the differences are expected to reverse. The change in the method of
accounting for income taxes from SFAS 96 to SFAS 109 resulted in no cumulative
effect adjustment.

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<PAGE> 302

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Income (loss) before provision for income taxes, minority interests and
extraordinary income for 1993, 1992 and 1991, consists of the following:

<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Domestic......................... $(10,964,000) $(51,269,000) $(19,342,000)
Foreign.......................... (1,930,000) 10,992,000 50,806,000
------------ ------------ ------------
$(12,894,000) $(40,277,000) $ 31,464,000
============ ============ ============
</TABLE>

The income tax (benefit) provision consists of the following:

<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Current:
Federal........................ $ (162,000) $ 5,928,000 $ 3,452,000
State.......................... -- 212,000 360,000
Foreign........................ (312,000) 1,801,000 3,072,000
----------- ----------- -----------
$ (474,000) $ 7,941,000 $ 6,884,000
----------- ----------- -----------
Deferred:
Federal........................ -- 841,000 103,000
State.......................... -- -- (39,000)
Foreign........................ -- 1,185,000 (374,000)
-- 2,026,000 (310,000)
----------- ----------- -----------
$ (474,000) $ 9,967,000 $ 6,574,000
=========== =========== ===========
</TABLE>

Of the 1992 current federal tax provision of $5,928,000, $956,000 relates
to the tax benefit from the exercise of stock options. Such amount was credited
to additional capital.

The primary components of temporary differences which give rise to the
Company's net deferred taxes are as follows:

<TABLE>
<CAPTION>
JANUARY 1, DECEMBER 31,
1993 1993
----------- ------------
<S> <C> <C>
Deferred tax assets:
Inventory and other reserves...................... $ 6,386 $ 5,378
Amortization differences.......................... 1,986 246
Compensation not currently deductible............. 1,029 873
Unrealized losses................................. 2,151 2,214
Other deferred items.............................. 1,750 1,750
Domestic NOL...................................... 40,012 50,983
Foreign NOL....................................... 12,635 13,311
Valuation reserve................................. (63,985) (72,733)
----------- ----------
Total deferred tax asset....................... 1,964 2,022
----------- ----------
Deferred tax liabilities:
Depreciation (tax over book)...................... (1,964) (2,022)
----------- ----------
Total deferred tax liability................... (1,964) (2,022)
----------- ----------
Net deferred tax liability..................... $ 0 $ 0
========== ==========
</TABLE>

F-41
<PAGE> 303

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

A reconciliation of the federal statutory income tax rate to the Company's
effective income tax rate is as follows:

<TABLE>
<S> <C> <C> <C>
Statutory rate....................................... (35)% (34)% 34%
Operating losses -- no tax benefit realized.......... 30 15 25
Write-off and amortization of goodwill............... 5 47 10
Provision to return adjustment....................... (1) -- --
Reduction in foreign tax liabilities................. (2) -- --
Utilization of domestic NOL.......................... -- (2) (28)
Utilization of foreign NOL........................... -- (3) (2)
Foreign source income taxed at different effective
rates, net......................................... -- 12 (45)
Transactions involving subsidiaries stock............ -- (12) 23
Alternative minimum tax.............................. -- 1 1
Other, net........................................... (1) 1 4
--- --- ---
(4)% 25% 22%
=== === ===
</TABLE>

The Company files its Federal income tax return on a stand-alone basis. In
years prior to 1993, tax sharing agreements allocated taxes for periods when a
subsidiary was included in the Company's consolidated tax return. The following
table indicates inclusion of subsidiaries in the Company's consolidated tax
return.

<TABLE>
<CAPTION>
1992 1991
-------------- --------------
<S> <C> <C>
SPI........................................ -- Until 8-13-91
Biomedicals................................ -- --
Viratek.................................... Until 2-1-92 Entire year
</TABLE>

The Company conducts business in a number of different tax jurisdictions.
Accordingly, losses sustained in one jurisdiction generally cannot be applied to
reduce taxable income in another jurisdiction. The income of certain foreign
subsidiaries is not subject to U.S. income taxes, except when such income is
paid to the U.S. parent company or one of its domestic subsidiaries. No U.S.
taxes have been provided on the Company's foreign subsidiaries since management
intends to reinvest those amounts in foreign operations. Included in
consolidated retained earnings (deficit) at December 31, 1993 is approximately
$1,820,000 of accumulated earnings of foreign operations that would be subject
to U.S. income taxes if and when repatriated.

The Company has domestic net operating loss carryforwards ("NOL") of
approximately $190,000,000 (of which $17,800,000 will be credited to additional
capital when utilized) at December 31, 1993, expiring at various dates from 1994
through the year 2008.

Included in the $190,000,000 NOL is approximately $47,500,000 of NOL
attributable to Viratek. Of the $47,500,000 NOL attributable to Viratek,
$10,900,000 will be credited to capital when utilized. Viratek's NOL can only be
utilized by the Company to offset Viratek taxable income generated on a separate
company basis.

Also included in the $190,000,000 NOL is approximately $39,000,000 of
domestic NOL and $38,000,000 of foreign NOL attributable to Biomedicals of which
$458,000 will be credited to additional capital when utilized. Biomedicals'
NOL's are restricted to utilization by that company. In connection with the
acquisition of Flow, Biomedicals acquired Flow's domestic net operating loss
carryforwards of $9,771,000. Biomedicals has agreed to pay Flow the first
$500,000 of any benefits realized. In the event this amount is not realized by
November 1994, it will become due and payable to Flow including interest at 10%.
Tax benefits realized in excess of $500,000 will be shared equally with Flow.

F-42
<PAGE> 304

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

The Company is currently under examination by the U.S. Internal Revenue
Service ("IRS") for the tax years ended November 30, 1989 and 1988. While the
proposed adjustments, if upheld, would not result in a significant additional
tax liability, they would result in significant reductions in the NOL
carryforwards available to the Company in the future.

9. COMMITMENTS AND CONTINGENCIES

Operating and capital leases

At December 31, 1993, the Company and its consolidated subsidiaries were
committed under noncancellable operating and capital leases for minimum
aggregate lease payments as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
--------- --------
<S> <C> <C>
1994................................................. $ 849,000 $155,000
1995................................................. 799,000 88,000
1996................................................. 625,000 88,000
1997................................................. 507,000 89,000
1998................................................. 534,000 --
Thereafter........................................... 4,782,000 --
---------
$8,096,000 420,000
--------- --------
Less amounts representing interest................... 62,000
Present value of net minimum lease payments.......... 358,000
Less current maturities.............................. 129,000
--------
$229,000
========
</TABLE>

Rental expense on operating leases was $870,000 in 1993, $2,934,000
(including SPI) in 1992 and $2,107,000 (including SPI) in 1991.

Post approval studies

By letter dated December 31, 1985, the FDA advised Viratek that the FDA had
approved Viratek's NDA for the hospital use of aerosolized ribavirin for the
treatment of RSV in infants. As a condition of the approval, Viratek agreed to
conduct certain additional studies. The future costs of such studies are not
expected to be significant.

Litigation

F-43
<PAGE> 305

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

the Commission. The alleged misstatements and omissions primarily concern
developments regarding Virazole(R), including the efficacy and safety of the
drug and the market for the drug. The plaintiffs allege that such
misrepresentations and omissions violate Section 10(b) of the Exchange Act of
1934 and Rule 10b-5 promulgated thereunder and constitute common law fraud and
misrepresentation. The plaintiffs seek an unspecified amount of monetary
damages, together with interest thereon, and their costs and expenses incurred
in the action, including reasonable attorneys' and experts' fees. The ICN
defendants moved to dismiss the consolidated complaint in March 1988, for
failure to state a claim upon which relief may be granted and for failure to
plead the allegations of fraud and misrepresentation with sufficient
particularity. On September 18, 1992, the Court denied the ICN defendants'
motion to dismiss and for summary judgment. The ICN defendants filed their
answer on February 17, 1993. On October 20, 1993, plaintiffs informed the Court
that they had reached an agreement to settle with codefendant Paine Webber, Inc.
and that they would submit a proposed settlement stipulation to the Court.
Expert discovery, which commenced in September 1993, is expected to conclude by
the end of April 1994. Plaintiffs' damages expert, utilizing assumptions and
methodologies that the ICN Defendants' damages experts find to be inappropriate
under the circumstances, has testified that, assuming that classes were
certified for purchasers of ICN, Viratek and SPI common stock for the entire
class periods alleged by plaintiffs, January 7, 1986 through April 15, 1987, and
further assuming that all of the plaintiffs' allegations were proven, potential
damages against ICN, Viratek and SPI would, in the aggregate, amount to
$315,000,000. The ICN Defendants' four damages experts have testified that
damages are zero. Management believes, having extensively reviewed the issues in
the above referenced matters, that there are strong defenses and that the
Company intends to defend the litigation vigorously. While the ultimate outcome
of these lawsuits cannot be predicted with certainty, and an unfavorable outcome
could have an adverse effect on the Company, at this time management does not
expect that these matters will have a material adverse effect on the financial
position, result of operations or liquidity of the Company. The attorney's fees
and other costs of the litigation are allocated equally between ICN and Viratek.

In August 1992, an action was filed in United States District Court for the
Southern District of New York, entitled Rossi v. ICN Pharmaceuticals, Inc. (Case
No. 92 Cir. 4819 (CL6)). The plaintiffs, citing theories of product liability,
negligence and strict liability in tort, allege that birth defects in an infant
were caused by the mother's exposure to ribavirin during pregnancy. The
plaintiff's counsel has agreed to place the case on the courts "suspense
calendar" pending completion of ICN's investigation of the underlying facts.
Based on such investigation, the case was dismissed with prejudice pursuant to
stipulation by the parties in December 1993. Pursuant to a license agreement,
SPI has indemnified Viratek and ICN for lawsuits involving the use of
Virazole(R).

On September 27, 1993, ICN and Biomedicals filed a complaint in the
California State Superior Court for Orange County, California, against GRC
International Inc., alleging fraud, negligent misrepresentation in the sale of
securities in California and violations of state and federal securities laws.
The precise amount of damages is unknown at this time. The lawsuit arises out of
the acquisition of all of the issued and outstanding shares of Flow
Laboratories, Inc. ("Flow") and Flow Laboratories B.V. by Biomedicals in
November 1989 from GRC International Inc., (formerly known as Flow General
Inc.). Defendant GRC's motion to compel arbitration was granted as to the
Biomedicals claims. The action is stayed until April 7, 1994, as to ICN's causes
of action.

On April 5, 1993, ICN and Viratek filed suit against Rafi Khan ("Khan") in
the United States District Court for the Southern District of New York. The
complaint alleges, inter alia, that Khan violated numerous provisions of the
securities laws and breached his fiduciary duty to ICN and Viratek by attempting
to effectuate a change in control of ICN while acting as an agent and fiduciary
of ICN and Viratek. As relief, ICN and Viratek, among other things, sought an
injunction enjoining Khan from effectuating a change in

F-44
<PAGE> 306

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

control of ICN and compensatory and punitive damages in the amount of
$25,000,000. Khan filed a counterclaim on April 12, 1993, naming the then ICN
directors and ICN, as a nominal defendant sued only in a derivative capacity.
The counterclaim contains causes of action for slander, interference with
economic relations, and a shareholders' derivative action for breach of
fiduciary duties. Khan seeks compensatory damages for interest in an unspecified
amount, and exemplary damages of $29,000,000. On December 22, 1993, Khan filed a
notice of appeal from a prior injunction granted by the court, to the Court of
Appeals for the Second Circuit. On March 13, 1994, that appeal was dismissed on
the grounds that Khan had defaulted for failure to comply with the Court's
scheduling order. Management believes that Khan's counterclaim is without merit
and the Company intends to vigorously defend this matter.

The Company is a party to a number of other pending or threatened lawsuits
arising out of, or incident to, its ordinary course of business. In the opinion
of management, these various other pending lawsuits will not have a material
adverse effect on the consolidated financial position or operations of the
Company.

Purchase Commitment

Biomedicals has a purchase commitment with a major supplier for which the
remaining purchase of inventory under agreement which will be due June 1994 in
the amount of approximately $1,727,000 (Finnish Markka 10,000,000).

Biomedicals is also a guarantor on a note payable to the same supplier for
which ICN is primarily liable. On June 30, 1993, ICN filed a claim in
arbitration alleging breach of agreement entered into with such supplier and
withheld final payment due on that date of approximately $1,295,000 (Finnish
Markka 7,500,000). In addition, ICN is seeking declaration and award that
Biomedicals is not obligated to honor the aforementioned purchase commitment or
installments on the note. Arbitration is set for October 4, 1994.

Acquisition Commitments

Under the terms of the Flow purchase agreement, Biomedicals issued 100,000
shares of common stock to the seller, which shares have a guaranteed value of
$20 per share on November 8, 1994. If the fair value, as defined, of
Biomedicals' common stock is less than $20 per share on that date, Biomedicals
must pay the difference in cash. Biomedicals may redeem such shares for the $20
guaranteed value prior to November 8, 1994. At December 31, 1993, Biomedicals
would have paid $1,575,000 to honor the guarantee.

Product Liability Insurance

Other

Milan Panic, the Company's Chairman of the Board, President and Chief
Executive Officer, is employed under a contract expiring November 30, 1994 that
provides for, among other things, certain retirement benefits. Mr. Panic, at his
option, may provide consulting services upon his retirement for $120,000 per
year for life, subject to annual cost-of-living adjustments from the base year
of 1967 currently estimated to be in excess of $520,000 per year. The consulting
fee shall not at any time exceed the annual compensation as adjusted, paid to
Mr. Panic. Upon Mr. Panic's retirement, the consulting fee shall not be subject
to further cost of living adjustments.

F-45
<PAGE> 307

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

The Board of Directors of the Company adopted Employment Agreements during
1993 which contain "change in control" benefits for six key senior executive
officers of the Company and its subsidiaries. Upon a "change in control" of the
Company or the respective subsidiary as defined in the Contract, the employee
shall receive severance benefits equal to three times salary and other benefits.
The executives include Mr. Jerney, Mr. Giordani, Mr. MacDonald and Mr. Watt,
officers of the Company, Mr. Phillips and Mr. Sholl, officers of SPI.

On April 1, 1992, the Board of Directors of the Company voted to grant to
Mr. Panic, a bonus of 200,000 shares of the common stock of SPI in consideration
of his extraordinary efforts in negotiating and closing the Galenika
transaction, which was paid in 1992.

In July 1992, Milan Panic, Chairman of the Board, President and Chief
Executive Officer of the Company, with the approval of the Company'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 the Company entered into a Leave of Absence and
Reemployment Agreement which contained mutual obligations, requiring, among
other things, that the Company reemploy Mr. Panic and that Mr. Panic return to
his previous positions with the Company. Mr. Panic was succeeded as Prime
Minister on March 4, 1993, and pursuant to the Leave of Absence and Reemployment
Agreement, returned to his duties at the Company. In addition to the salaries of
Mr. Panic and certain Company employees assisting him during his leave of
absence, the Company has incurred certain other expenses of which the net amount
outstanding totalled $103,000 at December 31, 1992 in connection with Mr.
Panic's transition to and return from his leave of absence. Mr. Panic reimbursed
the Company for expenses paid by the Company in 1992, subject to a review by an
independent outside party and the Audit Committee of the Board. Amounts incurred
by the Company during the first quarter of 1993 for approximately $362,000
remain unpaid at December 31, 1993. In addition, Mr. Panic reimbursed certain
withholding taxes due as of December 31, 1992, previously advanced by the
Company, in connection with the exercise of stock options, in the amount of
$1,351,000. Mr. Panic paid these amounts, during 1993, in the form of cash in
the amount of $678,000 and common stock of Viratek, Inc. in the amount of
$776,000 valued at fair market value.

Benefit plans

The Company adopted a 401(k) plan in 1988 that provides all U.S. employees
with the opportunity to defer a portion of their compensation for payout at a
subsequent date. The Company makes a contribution equal to one half of the
employee's contribution up to a maximum of approximately $4,000 per year. The
employer and employee contributions are given to a trustee on a monthly basis
and invested by the trustee in fixed or variable interest-bearing investments or
a common stock fund. The Company has made such matching contributions for 1993,
1992, 1991 of $447,000, $397,000 and $398,000, respectively.

Biomedical's United Kingdom subsidiary has a defined benefit retirement
plan which covers all eligible U.K. employees. The plan is actuarily reviewed
approximately every three years. Annual contributions are based on total
pensionable salaries. It is estimated that the plan's assets exceeded the
actuarial computed value of vested benefits as of December 31, 1993 and 1992.
The total expense under this plan for 1993, 1992 and 1991 was approximately
$248,000, $32,000 and $440,000, respectively.

The Company also has deferred compensation agreements with certain officers
and certain key employees, with benefits commencing at death or retirement. As
of December 31, 1993, the present value of the deferred compensation benefits to
be paid has been accrued in the amount of $2,481,000. Interest at 11.75% as of
December 31, 1993, accrues until all payments are made. No new contributions are
being made, however, interest continues to accrue on the present value of the
benefits expected to be paid. The expense for 1993, 1992 and 1991 was $217,000,
$309,000 and $453,000, respectively.

F-46
<PAGE> 308

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

10. COMMON STOCK

Under the Company's 1981 Employee Stock Option Plan, 700,000 shares of
common stock have been reserved for granting to key employees, officers and
directors of the Company. The exercise price of these options may not be less
than the fair market value of the stock at date of grant and may not have a term
exceeding ten years. At December 31, 1993, options under the 1981 Employee
Incentive Stock Option Plan for 35,878 shares were outstanding and exercisable
(at prices ranging from $3.00 to $9.25). The number of shares exercised were:
1993 -- 30,256; 1992 -- 2,250; 1991 -- 5,000, at average prices of $4.655, $3.00
and $6.375, respectively.

At December 31, 1993, options under the 1981 non-qualified stock option
agreements with key employees and officers of the Company for 215,863 shares
were outstanding (at prices ranging from $3.00 to $5.75) with 126,863 shares
exercisable. The number of shares exercised were: 1993 -- 153,808; 1992 --
181,855; 1991 -- 348,007, at average prices of $4.736, $3.55 and $3.00,
respectively.

During 1992, the stockholders of the Company approved the 1992
Non-Qualified Stock Option Plan ("1992 Option Plan") and the 1992 Employee
Incentive Stock Option Plan ("1992 Incentive Plan"), reserving 500,000 shares
per plan of the Company's common stock for issuance to employees and directors
of the Company. The Company has granted options for shares of its common stock
under both plans. Options under both plans are exercisable over a period to be
determined by the Compensation Committee, which shall not exceed ten years from
the date of grant and will expire at the end of the option period. At December
31, 1993, under the 1992 Option Plan, options of 85,000 were outstanding (at
prices ranging from $6.375 to $22.875), 11,000 shares were exercisable and none
have been exercised. At December 31, 1993, under the 1992 Incentive Plan,
options of 255,000 were outstanding (at prices ranging from $6.375 to $9.50),
26,250 shares were exercisable and none have been exercised.

In addition, the Company entered into non-qualified stock option agreements
with Mr. Panic pursuant to which he could purchase 932,000 shares of common
stock of the Company at $3.00 per share of which 832,000 shares were exercised
in 1993. There were no shares exercised in 1992 and 100,000 shares were
exercised in 1991. As of December 31, 1993, no shares were outstanding.

During 1993 and 1992, the Company sold, under various agreements, 3,000,000
and 4,198,000 shares of its common stock to a foreign bank for $21,861,000 and
$30,608,000, respectively, which is net of transaction fees and commissions.

11. DETAIL OF CERTAIN ACCOUNTS

<TABLE>
<CAPTION>
1993 1992
------------ -----------
<S> <C> <C>
Inventories, net:
Raw materials and supplies..................... $ 3,422,000 $ 3,898,000
Work-in-process................................ 610,000 2,439,000
Finished goods................................. 23,048,000 22,692,000
------------ -----------
$ 27,080,000 $29,029,000
Allowance for inventory obsolescence........... (11,479,000) (15,530,000)
------------ -----------
$ 15,601,000 $13,499,000
============ ===========
</TABLE>

F-47
<PAGE> 309

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

<TABLE>
<CAPTION>
1993 1992
------------ -----------
<S> <C> <C>
Property, plant and equipment, net:
Land........................................... $ 13,697,000 $11,852,000
Buildings...................................... 18,096,000 16,223,000
Machinery and equipment........................ 21,919,000 21,214,000
Furniture and fixtures......................... 3,464,000 3,972,000
Leasehold improvements......................... 2,709,000 2,440,000
Construction in progress....................... 78,000 78,000
------------ -----------
59,963,000 55,779,000
Accumulated depreciation....................... (23,720,000) (21,666,000)
------------ -----------
$ 36,243,000 $34,113,000
============ ===========
Other assets and deferred charges:
Deferred loan costs............................ $ 4,546,000 $ 6,021,000
Patents, trademarks and clinical trials,
net of amortization......................... 2,102,000 3,178,000
Other.......................................... 946,000 408,000
------------ -----------
$ 7,594,000 $ 9,607,000
============ ===========
Accrued liabilities:
Payroll and related items...................... $ 2,305,000 $ 1,939,000
Accrued interest............................... 6,909,000 7,129,000
Lease vacancy costs............................ 1,200,000 --
Income taxes payable........................... 1,227,000 333,000
Professional services.......................... 4,027,000 8,583,000
Outside sales commissions...................... 478,000 831,000
Deferred income................................ 2,397,000 2,294,000
Severance, restructuring and other liabilities
related to acquisitions..................... 478,000 4,509,000
Other.......................................... 2,376,000 6,898,000
------------ -----------
$ 21,397,000 $32,516,000
============ ===========
Other liabilities and deferred income taxes:
Deferred compensation plan..................... $ 2,191,000 $ 1,919,000
Deferred income -- Hoffmann.................... 3,791,000 4,147,000
Deferred income taxes.......................... 109,000 528,000
Other.......................................... 923,000 2,754,000
------------ -----------
$ 7,014,000 $ 9,348,000
============ ===========
</TABLE>

Prepaid expenses and other current assets include assets held for sale of
$1,218,000 at December 31, 1993 and $10,225,000 at December 31, 1992, which are
recorded at the lower of cost or net realizable value. During the fourth quarter
of 1993, Biomedicals moved its Italian operation from Cassina de Pecchi, Italy,
a leased facility, back to Opera, an owned facility. Therefore, the Opera
facility was reclassified from assets held for disposition to Property, Plant
and Equipment.

F-48
<PAGE> 310

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Other (income) expense, net:

<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Realized (gains) losses from sale of
marketable securities, net........ $ (139,000) $ (228,000) $ 354,000
Amortization of goodwill............ 2,102,000 4,216,000 3,944,000
Litigation settlements.............. -- 1,247,000 7,143,000
Write-down of assets and
intangibles....................... -- 2,000,000 --
Write-off prepaid royalties......... -- -- 1,503,000
Write-downs and other costs for
domestic nutrition group.......... -- -- 10,878,000
Facility relocation expense in
Spain............................. -- -- 2,198,000
Gain on lease termination........... (938,000) -- --
Favorable settlement of a foreign
non-income tax dispute and accrued
liability......................... (1,680,000) -- --
License fees........................ -- 2,187,000 --
Lease vacancy costs................. 1,436,000 -- --
Other, net.......................... 298,000 5,765,000 3,459,000
----------- ----------- -----------
$ 1,079,000 $15,187,000 $29,479,000
=========== =========== ===========
</TABLE>

12. BUSINESS SEGMENTS AND GEOGRAPHICAL DATA

The Company operates in two industry segments: pharmaceuticals (the
"Pharmaceuticals group") and biomedicals (the "Biomedicals group"). The
Pharmaceuticals group is composed of SPI (accounted for as an unconsolidated
equity investee effective December 31, 1992), which produces and markets
pharmaceutical products in the United States, Mexico, Canada and Europe; and
Viratek, which conducts the Company's research and development efforts on
compounds derived from nucleic acids. The Biomedicals group is composed of
Biomedicals, which markets research chemical and cell biology products and
related services, biomedical instrumentation and immunodiagnostic reagents and
instrumentation.

F-49
<PAGE> 311

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Information regarding the Company's business segments and geographic data
for the years ended 1993, 1992 and 1991 is as follows:

<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Net sales:(1)
Pharmaceuticals group............................ $ 3,480,000 $476,118,000 $364,358,000
Biomedicals group................................ 59,076,000 75,648,000 96,007,000
------------ ------------ ------------
Net sales........................................ $ 62,556,000 $551,766,000 $460,365,000
============ ============ ============
Income (loss) before interest, provision for income
taxes, minority interest and extraordinary
income:
Pharmaceuticals group(5)......................... $ 8,591,000 $ 55,610,000 $ 60,269,000
Biomedicals group................................ 2,847,000 (97,234,000) (6,471,000)
------------ ------------ ------------
11,438,000 (41,624,000) 53,798,000
Corporate(2)..................................... (5,370,000) 26,909,000 11,985,000
------------ ------------ ------------
Income (loss) before interest, provision for income
taxes, minority interest and extraordinary
income........................................... 6,068,000 (14,715,000) 65,783,000
Net interest expense............................... 18,962,000 25,562,000 34,321,000
------------ ------------ ------------
Income (loss) before provision for income taxes,
minority interest and extraordinary income....... $(12,894,000) $(40,277,000) $ 31,462,000
============ ============ ============
</TABLE>

<TABLE>
<CAPTION>
DEPRECIATION AND AMORTIZATION CAPITAL EXPENDITURES
-------------------------------------- --------------------------------------
1993 1992 1991 1993 1992 1991
---------- ----------- ----------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
Pharmaceuticals group... $1,770,000 $ 9,390,000 $ 9,536,000 $ 207,000 $11,610,000 $19,051,000
Biomedicals group....... 3,607,000 6,174,000 6,095,000 2,235,000 911,000 1,978,000
Corporate............... 1,985,000 2,046,000 535,000 106,000 33,000 17,000
---------- ----------- ----------- ---------- ----------- -----------
$7,362,000 $17,610,000 $16,166,000 $2,548,000 $12,554,000 $21,046,000
========== =========== =========== ========== =========== ===========
</TABLE>

<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
----------------------------------------------
1993 1992(4) 1991
------------ ------------ ------------
<S> <C> <C> <C>
Pharmaceuticals group.............................. $116,406,000 $111,768,000 $367,561,000
Biomedicals group.................................. 55,806,000 67,548,000 170,540,000
Corporate(3)....................................... 35,644,000 44,252,000 36,985,000
------------ ------------ ------------
$207,856,000 $223,568,000 $575,086,000
============ ============ ============
</TABLE>

<TABLE>
<CAPTION>
INCOME (LOSS) BEFORE INTEREST, PROVISION
FOR
TAXES AND MINORITY INTEREST, AND
NET SALES(1) EXTRAORDINARY INCOME
----------------------------------------- ----------------------------------------
1993 1992 1991 1993 1992 1991
----------- ------------ ------------ ----------- ------------ -----------
<S> <C> <C> <C> <C> <C> <C>
United States...... $39,696,000 $ 92,769,000 $ 95,917,000 $13,022,000 $(54,864,000) $(7,540,000)
Western Europe..... 16,311,000 62,311,000 74,225,000 (2,465,000) (29,315,000) 830,000
Yugoslavia......... -- 325,903,000 224,782,000 -- 37,692,000 57,190,000
Latin America...... -- 48,654,000 41,691,000 -- 3,772,000 1,249,000
Canada............. 2,381,000 16,779,000 18,148,000 157,000 1,234,000 1,813,000
Asia/Pacific....... 4,168,000 5,350,000 5,602,000 724,000 (143,000) 256,000
----------- ------------ ------------ ----------- ------------ -----------
$62,556,000 $551,766,000 $460,365,000 11,438,000 (41,624,000) 53,798,000
=========== ============ ============ ----------- ------------ -----------
Corporate(2)....... (5,370,000) 26,909,000 11,985,000
----------- ------------ -----------
$ 6,068,000 $(14,715,000) $65,783,000
=========== ============ ===========
</TABLE>

F-50
<PAGE> 312

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
-----------------------------
1993 1992(4) 1991
------------ ------------ ------------
<S> <C> <C> <C>
United States...................................... $152,301,000 $147,930,000 $169,747,000
Western Europe..................................... 17,928,000 29,298,000 115,329,000
Yugoslavia......................................... -- -- 218,284,000
Latin America...................................... -- -- 22,961,000
Canada............................................. 561,000 521,000 9,704,000
Asia/Pacific....................................... 1,422,000 1,567,000 2,076,000
------------ ------------ ------------
172,212,000 179,316,000 538,101,000
Corporate(3)....................................... 35,644,000 44,252,000 36,985,000
------------ ------------ ------------
$207,856,000 $223,568,000 $575,086,000
============ ============ ============
</TABLE>

- ---------------

(1) Sales between industry segments and geographic areas are not material.

(2) Corporate and other includes corporate general and administrative expenses,
net interest expense, other non-operating income and expense, and unrealized
gains and losses.

(3) Corporate assets exclude intercompany receivables, loans, advances and
investments.

(4) Excludes the amounts of SPI Pharmaceuticals, Inc. which was deconsolidated
at December 31, 1992, but includes ICN's investment in SPI in the
"Pharmaceuticals Group" and in the "United States".

(5) Included in Income (loss) before provision for taxes and minority interest
and extraordinary income for the United States and Pharmaceuticals group for
1993 is $11,646,000 representing the equity in earnings of SPI.

The following table sets forth the amount of net sales, income before
provision for income taxes and minority interest and identifiable assets of SPI
by geographical areas for 1993 (in thousands):

<TABLE>
<CAPTION>
1993
----------------
INCOME (LOSS)
BEFORE INTEREST,
PROVISION FOR
INCOME TAXES
AND MINORITY IDENTIFIABLE
SALES INTEREST ASSETS
-------- ---------------- -------------
<S> <C> <C> <C>
United States............................. $ 62,008 $ 25,756 $ 38,764
Yugoslavia................................ 239,832 11,828 180,055
Mexico.................................... 57,782 7,371 33,874
Western Europe............................ 30,601 4,079 33,284
Canada.................................... 13,734 851 6,155
Corporate................................. -- (7,101) 9,885
-------- -------- ---------
Income before interest, provision for
income tax and minority interest........ -- 42,784 --
Net interest expense...................... -- 15,717 --
--------
Income before provision for income taxes
and minority interest................... -- $ 27,067 --
========
Total........................... $403,957 $ 302,017
======== =========
</TABLE>

During the year ended December 31, 1993, approximately 68% of Galenika's
sales were to the Federal Republic of Yugoslavia or government sponsored
entities. At December 31, 1993, there were no significant receivables from the
Yugoslavian government, however future sales of Galenika could be dependent on
the

F-51
<PAGE> 313

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

ability of the Yugoslavian government to generate cash to purchase
pharmaceuticals and the continuation of its current policy to buy products from
Galenika. No other customer accounts for more than 10% of SPI's net sales.

Export sales shipped from the United States for 1993, 1992 and 1991 were
$3,892,000, $8,857,000 (including SPI) and $8,034,000 (including SPI),
respectively.

13. SUPPLEMENTAL CASH FLOWS DISCLOSURES:

Supplemental information

The following table sets forth the amounts of interest and income taxes
paid for the years ended 1993, 1992 and 1991.

<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Interest paid....................... $17,918,000 $26,545,000 $30,057,000
========== ========== ==========
Income taxes paid................... $ 488,000 $ 2,435,000 $ 2,793,000
========== ========== ==========
</TABLE>

On August 30, 1993, Biomedicals issued 300,000 and 390,000 shares of
preferred stock series "A" and "B", respectively, to ICN. In exchange, ICN
retired $11,000,000 of debt owed to ICN by Biomedicals and exchanged 13,368,449
shares of Biomedicals' common stock that ICN owned. See Note 4 "ICN Biomedicals,
Inc." concerning Biomedicals' preferred stock transaction.

During 1991, SPI acquired Galenika as follows:

Estimated fair value of net assets acquired:

<TABLE>
<S> <C>
Assets................................................ $ 162,581,000
Liabilities and minority interest..................... (104,280,000)
-------------
58,301,000
Less consideration given:
SPI Stock contributed by ICN........................ 11,555,000
Obligation to Galenika.............................. 13,550,000
Fees and expenses................................... 3,000,000
Issuance of SPI common stock to employees........... 9,000,000
Other consideration................................. 6,743,000
-------------
Net cash paid to Galenika........................ $ 14,453,000
============
</TABLE>

14. RESTRUCTURING COSTS AND SPECIAL CHARGES

In November 1989, Biomedicals acquired for $37,700,000 all of the issued
and outstanding common shares of Flow Laboratories, Inc. and Flow Laboratories
B.V. from GRC International, Inc. (formerly Flow General Inc.). These companies
together with their respective subsidiaries ("Flow"), constitutes the Biomedical
division of Flow General. The excess of the total purchase price (including
acquisition costs) over the fair value of net assets acquired was $35,245,000,
which was allocated to the excess of costs over net assets of purchased
subsidiaries and was being amortized over 40 years. Flow was a manufacturer and
distributor of several thousand biochemical products worldwide. At the time of
the acquisition, Biomedicals had concluded that Flow was a significant
complement to the company, since Flow had a major presence in the European
markets, which Biomedicals lacked at the time. Therefore, more than products,
Biomedicals acquired an international distribution network. Since 1990,
Biomedicals utilized this distribution network to introduce

F-52
<PAGE> 314

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

ICN products. At the same time, it decided to phase out or to eliminate Flow low
margin products, certain other product lines which did not fit Biomedicals'
long-term strategies and to close down inefficient operations.

In prior years and the first three quarters of 1992, recoverability of
goodwill associated with the Flow acquisition was focused on the European
operations as Biomedicals had only a limited presence in Europe prior to the
Flow acquisition. Accordingly, Biomedicals used the expected future operating
income of the European operations in evaluating the recoverability of the Flow
goodwill. During 1991, Biomedicals initiated a restructuring program designed to
reduce costs, and improve operating efficiencies. The program included, among
other items, the consolidation, relocation and closure of certain manufacturing
and distribution facilities within the U.S. and Europe, which were acquired in
the Flow acquisition. Those measures, including a fifteen percent reduction in
the work force, were largely enacted during 1991 and continued in 1992. Costs
incurred relating to this restructuring plan during 1991 were $6,087,000.

During the fourth quarter of 1992, as a result of a continued decline in
sales and other factors, Biomedicals reassessed their business plan and
prospects for 1993 and beyond which included, among other things, the decision
to sell the last remaining major European manufacturing facility and to
restructure the previously acquired distribution network and European operations
in line with the revised sales estimates. Consequently, based upon the
continuing decline in European revenue and profitability relating to Flow, Flow
facility closures and an ineffective distribution network, management concluded
that there was no current or expected future benefit associated from the Flow
acquisition. Accordingly, Biomedicals wrote off goodwill and other intangibles,
primarily from the Flow acquisition of $37,714,000.

The relocation of various U.S., and European operations was re-evaluated.
It was determined that many of the operations did not support the costs of
maintaining separate facilities. Therefore, estimated costs associated with
lease termination, employee termination, facility shut-down (of facilities held
for disposition) were expensed primarily in the fourth quarter of 1992, and
amounted to $4,858,000.

During the fourth quarter of 1992, Biomedicals reassessed the valuation of
inventory, given the decline in sales and lack of effective integration of
Biomedicals' and Flow's product lines. Accordingly, Biomedicals recorded a
provision for abnormal write-downs of inventory to estimated realizable value of
$9,924,000 and discontinued products of $3,377,000.

In addition, during the fourth quarter of 1992, Biomedicals determined that
the unamortized costs of the catalog marketing program would not be recovered
within a reasonable period, therefore, costs totaling $6,659,000 were written
off. In the future, specifically focused customer or "product line" catalogs
will be used for customer product lines and a more focused general catalog for
others.

F-53
<PAGE> 315

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Restructuring and special charges of $63,032,000 and $6,087,000 are shown
as a separate item in the Consolidated Statement of Operations and include the
following for the years 1992 and 1991, no similar charges were incurred during
1993:

<TABLE>
<CAPTION>
1992 1991
----------- ----------
<S> <C> <C>
Goodwill and other intangibles..................... $37,714,000 $ --
Catalog............................................ 6,659,000 --
Inventory allowances............................... 9,924,000 --
Discontinued products.............................. 3,377,000 1,550,000
Employee termination costs......................... 1,961,000 1,866,000
Lease termination costs............................ 1,434,000 737,000
Facility relocation costs.......................... 357,000 724,000
Reduction to net realizable value of vacant
facilities held for disposition.................. 1,106,000 800,000
Miscellaneous restructuring costs.................. 500,000 410,000
----------- ----------
Total......................................... $63,032,000 $6,087,000
========== =========
</TABLE>

15. CONCENTRATIONS OF CREDIT RISK

Financial instruments that potentially expose the Company to concentrations
of credit risk, as defined by SFAS No. 105, consist primarily of cash deposits
and trade receivables. The Company places its cash deposits with respected
financial institutions and limits the amount of credit exposure to any one
financial institution. Biomedicals has $3,506,000 and $7,013,000 of trade
receivables in Italy at December 31, 1993 and 1992, respectively. The ability to
collect these receivables is influenced by the general economic conditions in
that country.

16. LEASE VACANCY COSTS

During 1993, Biomedicals vacated its High Wycombe facility in England and
moved to a facility more suitable to Biomedicals' operating needs in Thame,
England. Biomedicals pursued various subleasing agreements for which none were
consummated as of December 31, 1993. Consequently, Biomedicals accrued
approximately $1,200,000 which represents management's best estimate of the net
present value of future leasing costs to be incurred for High Wycombe. During
1993, Biomedicals expensed an additional $236,000 of leasing costs related to
this facility.

17. EQUITY INVESTMENT

Effective December 31, 1992, the Company's ownership percentage of SPI fell
below 50%, resulting in the deconsolidation of SPI in the Company's consolidated
financial statements as of December 31, 1992. The investment is currently
accounted for using the equity method of accounting. During 1993, ICN received

F-54
<PAGE> 316

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

$2,159,000 in dividends from SPI. The condensed results of operations for the
year ended December 31, 1993 and the condensed financial position of SPI as of
December 31, 1993 and 1992 are summarized below.

<TABLE>
<CAPTION>
SPI FINANCIAL
POSITION
AS OF DECEMBER 31,
1993 AND 1992
---------------------
1993 1992
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Current assets......................................... $208,762 $235,963
Non-current assets..................................... 93,255 97,255
Current liabilities.................................... 73,362 115,021
Non-current liabilities................................ 32,347 41,530
Minority interest...................................... 41,429 41,240
Stockholders' equity................................... 155,879 135,427
</TABLE>

<TABLE>
<CAPTION>
SPI RESULTS OF OPERATIONS
FOR THE YEAR ENDED
DECEMBER 31, 1993
-------------------------
1993
-------------------------
(IN THOUSANDS)
<S> <C>
Net sales....................................... $ 403,957
Gross profit.................................... 192,034
Net income...................................... 21,510
</TABLE>

On October 21, 1992, SPI announced that it had concluded an agreement with
the Leningrad Industrial Chemical and Pharmaceutical Association to form a
pharmaceutical joint venture in Russia, ICN Oktyabr, in which SPI will have a
75% interest. The new joint venture was registered with the Russian Federation
on March 9, 1993. The joint venture represents a new business, and not the
acquisition of the existing business or assets of Oktyabr. Business operations
of the joint venture will commence on the completion of a business plan.
Oktyabr, which recently privatized, will contribute output from its current
production facilities until construction of a new facility is completed. SPI
will contribute management expertise, technology, equipment, intellectual
property, training and technical assistance to the new joint venture. Because of
the transition of the Russian economy into a free market oriented economy, SPI
plans for a gradual phase-in of the joint venture in 1994 and 1995. During this
phase-in period, the joint venture will develop training and marketing
strategies and begin constructing a new manufacturing facility in 1995 that is
scheduled to be fully operational in 1996. Because of this phase-in period, SPI
does not expect any current material effects on it operating results, as well
as, its capital resources and liquidity.

F-55
<PAGE> 317

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

The condensed financial position of Galenika, a consolidated 75% owned
Yugoslavian subsidiary of SPI, as of December 31, 1993 and 1992, and the
condensed statements of income before provision for income taxes and minority
interest for the years ended December 31, 1993 and 1992 are presented below.

GALENIKA FINANCIAL POSITION
AS OF DECEMBER 31, 1993 AND 1992
(IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Current assets......................................... $157,291 $190,874
Non-current assets..................................... 38,264 39,202
Current liabilities.................................... 18,400 41,258
Non-current liabilities................................ 40,802 53,034
Stockholders' equity................................... 136,353 135,784
</TABLE>

GALENIKA CONDENSED RESULTS OF OPERATIONS BEFORE
PROVISION FOR INCOME TAXES
FOR THE YEAR ENDED DECEMBER 31, 1993 AND 1992
(IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Net sales.............................................. $239,832 $325,903
Gross profit........................................... 83,643 173,985
Income before provision for income taxes............... 310 38,518
</TABLE>

Sanctions:

A substantial majority of Galenika's business is conducted in the Federal
Republic of Yugoslavia (Serbia and Montenegro). On May 30, 1992, the UNSC
adopted a resolution that imposed economic sanctions on the Federal Republic of
Yugoslavia and on April 17, 1993, the UNSC adopted a resolution that imposed
additional economic sanctions on the Federal Republic of Yugoslavia. On April
26, 1993, the United States issued an executive order that implemented the
additional sanctions pursuant to the United Nations resolution. The new
sanctions continue to specifically exempt certain medical supplies for
humanitarian purposes, a portion of which are distributed by Galenika.

Galenika continues to apply for, and has received, licenses under the new
sanctions. The renewed efforts to enforce sanctions will create additional
administrative burdens that will slow the shipments of licensed raw materials to
Yugoslavia. Shipments of imported raw materials declined in 1993 to 38% of prior
year levels. Additionally, the new sanctions have contributed to an overall
deteriorating business environment in which Galenika must operate.

The new sanctions provide for the freezing of bank accounts of Yugoslavian
commercial and industrial entities. The implementation of new sanctions may
create a restriction on Galenika's cash holdings that are maintained in a bank
outside of Yugoslavia. Management believes, however, that these funds will be
available for drawdowns on lines of credit for shipments specifically licensed
under the new and prior sanctions. As a result of continuing political and
economic instability within Yugoslavia, including the long-term impact of the
sanctions, wage and price controls and devaluations, there may be further limits
on the availability of hard and local currency and consequently, an adverse
impact on the future operating results of SPI.

F-56
<PAGE> 318

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

At December 31, 1992, Galenika had cash and cash equivalents of $44,700,000
of which $15,200,000 was restricted as to use, invested with a financial
institution outside of Yugoslavia. These funds have been used for letters of
guarantee on Galenika's raw material purchases and to collateralize the payment
of dividends. During the first quarter 1993, $731,000 was withdrawn under the
letters of guarantee. Before the implementation of additional sanctions in April
1993, approximately $9,885,000 was withdrawn under the letters of guarantee. In
October 1993, Galenika acquired marketable securities with these funds in order
to maximize their interest earned. The marketable securities are maintained at
the same financial institution. As of December 31, 1993, at this institution,
Galenika had $834,000 of hard currency and $32,587,000 of marketable securities
which are used to collateralize a $10,000,000 note payable.

In order to conserve operating cash, the wages of all Galenika employees
were reduced to Yugoslavian minimum wage levels beginning in the fourth quarter
1993. To help alleviate the burden of sanctions and wage reductions, SPI intends
to expend funds for humanitarian aid in the form of food assistance for Galenika
employees. This aid will be subject to approval and licensing required by UNSC
sanctions. In the first quarter 1994, SPI obtained licenses for approximately
$280,000 of aid. The expenditure of future aid will be dependent on the
conditions in Yugoslavia and will be subject to obtaining approval and licenses
under UNSC sanctions.

Hyperinflation and Price Controls:

Under existing Yugoslavian price controls imposed in July 1992, Galenika
can no longer continue the unrestricted practice of increasing selling prices in
anticipation of inflation. Rather, price increases must be approved by the
government prior to implementation. The imposition of price controls along with
the effect of sanctions and recurring currency devaluations resulted in reduced
sales levels in the last half of 1992 and for 1993. This trend of reduced sales
levels is expected to continue as long as sanctions are in place. As a result of
decreased sales levels, management expects that profit margins will decrease and
overall operating expenses as a percentage of sales will increase.

SPI is taking action to generate the dinar cash needed to acquire hard
currency to reduce its monetary exposure. Galenika has access to short-term
borrowings at interest rates below the level of inflation. Galenika plans to
maximize its borrowings under these arrangements and use the proceeds to acquire
hard currency for the purchase of inventory. This strategy will provide hard
currency, accelerate the purchase of inventory to minimize the effects of
inflation, and reduce future transaction losses. This strategy will also
increase Galenika's monetary liabilities, and lower its risk of loss from
devaluations. This strategy, however, has resulted in increased interest expense
in 1993 and will result in high levels of interest expense in 1994.

F-57
<PAGE> 319

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

purchases of hard currency must be made through the National Bank of Yugoslavia
based on government approved allocations. This action could possibly limit the
availability of hard currency in the future for Galenika. However, if the
government is successful in controlling access to hard currency, SPI's
operations in Yugoslavia may benefit through increased allocations of hard
currency. Due to the strategic nature of pharmaceutical drugs in Yugoslavia,
Galenika has, in the past, received relatively favorable allocations of hard
currency from the government. For the year ended December 31, 1993, Galenika
received $12,744,000 in currency allocations.

As required by Generally Accepted Accounting Principles ("GAAP"), SPI
translates Galenika financial results at the dividend payment rate established
by the National Bank of Yugoslavia. To the extent that changes in this rate lag
behind the level of inflation, sales and expenses will, at times, tend to be
inflated. Future sales and expenses can substantial increase if the timing of
future devaluations falls significantly behind the level of inflation. While the
impact of sanctions, price controls, and devaluations on the future sales and
net income cannot be determined with certainty, they may, under the present
political and economic environment, result in an adverse impact in the future.

At December 31, 1993, Galenika has U.S. $33,421,000 invested with a
financial institution outside of Yugoslavia. These funds came from the initial
cash investment made by SPI of $14,453,000 and from the sale of SPI's stock
transferred to Galenika by ICN, also in conjunction with the acquisition. Under
the terms of the acquisition agreement, these funds were originally intended to
finance business expansion. However, in light of the current economic conditions
in Yugoslavia, these funds are used for letters of guarantee on Galenika's raw
material purchases and to collateralize the payment of dividends. These funds
are encumbered by a letter of guarantee for raw material purchases, of which no
amount was outstanding at December 31, 1993, and $5,200,000 was outstanding at
December 31, 1992, and as collateral for $10,000,000 of loans included in Notes
Payable bearing interest at 4.5%, that were issued to pay the 1992 dividend of
the same amount. Other uses of these funds in the future, such as capital
investment, additional letters of guarantee, or future dividends are subject to
review and licensing under the UNSC sanctions. At December 31, 1993, these funds
have been invested in bonds and are recorded as marketable securities which were
used to collateralize a $10,000,000 notes payable. At December 31, 1992, these
funds are included in cash with $15,200,000 reflected as restricted cash.

As noted above, Galenika paid a $10,000,000 dividend in 1992 of which SPI
received 75% or $7,500,000. Yugoslavian law allows free distribution of earnings
whether to domestic (Yugoslavian) or international investors. Galenika is
allowed to pay dividends out of earnings calculated under Yugoslavian Accounting
Practices ("YAP"), not earnings calculated under GAAP. As a result of the
current level of inflation, the accumulated YAP earnings of ICN Galenika are
insignificant when stated in dollars. Future dividends from Galenika will depend
heavily on future earnings. Under GAAP, Galenika had accumulated earnings, which
are not available for distributions, of approximately $61,787,000 at December
31, 1993. However, additional repatriation of cash could be declared from
contributed capital as provided for in the original purchase agreement. In 1992,
SPI made the decision to no longer repatriate the earnings of Galenika and
instead will use these earnings for local operations and reduction of debt.

F-58
<PAGE> 320

ICN PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

The current political and economic conditions in Yugoslavia could continue
to deteriorate to the point that SPI's investment in Galenika would be
threatened. Worsening political and economic conditions could also result in a
situation where SPI may be unable to exercise control over Galenika's operations
or be unable to receive dividends from Galenika. Under these conditions, SPI
would no longer be able to continue to consolidate the financial information of
Galenika. In this situation, SPI would be required to deconsolidate Galenika and
account for its investment using the cost method of accounting and the
investment in Galenika would be carried at the lower of cost or realizable
value.

F-59
<PAGE> 321

QUARTERLY STOCK PRICE AND DIVIDEND DATA

The Common Stock is listed and traded on the New York Stock Exchange
(Symbol: ICN) and the Pacific Stock Exchange. The following table sets forth the
high and low sale prices of the Common Stock for the periods indicated, as
reported by the New York Stock Exchange -- Composite Tape.

<TABLE>
<CAPTION>
HIGH LOW
---- ----
<S> <C> <C>
CALENDAR 1993
First Quarter.............................................. $15 3/4 $5 7/8
Second Quarter............................................. 13 3/4 8 7/8
Third Quarter.............................................. 12 7 5/8
Fourth Quarter............................................. 11 7/8 7 3/8
CALENDAR 1992
First Quarter.............................................. $25 3/8 $14 1/2
Second Quarter............................................. 15 7/8 9 3/4
Third Quarter.............................................. 12 7/8 6 5/8
Fourth Quarter............................................. 10 1/4 5 3/4
</TABLE>

As of March 30, 1994, there were 5,383 record holders of the Company's
Common Stock.

The Company has never paid cash dividends on the Common Stock. The Company
anticipates that for the foreseeable future its earnings, if any, will be
retained for use in its business and no cash dividends will be paid on the
Common Stock. The Board of Directors of the Company will continue to review its
dividend policy, and the amount and timing of any future dividends will depend
on profitability, the need to retain earnings for use in the development of its
business and other factors.

The Indentures pursuant to which the 12 7/8% Sinking Fund Debentures due
July 15, 1998 (the "12 7/8% Debentures") and the 12 1/2% Senior Subordinated
Debentures due in 1999 (the "12 1/2% Debentures") were issued, restrict the
ability of ICN to declare cash dividends on, and to repurchase, shares of Common
Stock and future issuances of Preferred Stock. Under the most restrictive
provisions of the Indentures (related to the 12 7/8% Debentures) the Company may
not pay dividends or make distributions on its stock (other than dividends or
distributions payable solely in shares of its stock), or purchase, redeem or
otherwise acquire or retire any of its stock or permit any of its publicly owned
subsidiaries to purchase, redeem or otherwise acquire any of the Company's stock
(a) if an event of default (as defined in the Indenture) exists under the
Indenture, or (b) if, after giving effect thereto, the aggregate amount of all
such dividends, distributions, purchases and payments declared or made after
July 24, 1986 would exceed the sum of (i) 20% of the Company's consolidated net
income (as defined in the Indenture) subsequent to May 31, 1986, (ii) the net
proceeds to the Company from the issuance or sale after July 24, 1986, of any
shares of its Common Stock and capital stock of its subsidiaries and of any
convertible securities which have been converted into its Common Stock, and
(iii) $10,000,000.

F-60
<PAGE> 322

APPENDIX G
<PAGE> 323

APPENDIX G

SPI PHARMACEUTICALS, INC.

1993 ANNUAL REPORT TO STOCKHOLDERS

FINANCIAL AND GENERAL INFORMATION
<PAGE> 324

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Business............................................................................. G-1
Selected Consolidated Financial Data of SPI.......................................... G-9
Management's Discussion and Analysis of Financial Condition and Results of Operations
of SPI............................................................................. G-10
Report of Independent Auditors....................................................... G-19
Financial Statements
Consolidated Balance Sheets........................................................ G-20
Consolidated Statements of Income.................................................. G-21
Consolidated Statements of Stockholders' Equity.................................... G-22
Consolidated Statements of Cash Flows.............................................. G-23
Notes to Consolidated Financial Statements......................................... G-24
Quarterly Stock Price and Dividend Data.............................................. G-45
</TABLE>

G-i
<PAGE> 325

BUSINESS

INTRODUCTION

SPI Pharmaceuticals, Inc. ("SPI" or the "Company"), 39% owned by ICN
Pharmaceuticals, Inc. ("ICN") as of February 18, 1994, manufactures, distributes
and sells pharmaceutical and nutritional products, primarily in North America,
Latin America, Western Europe and Eastern Europe. The Company was incorporated
by ICN in November 1981 and, effective January 1, 1983, became the successor to
certain of ICN's North American pharmaceutical operations, part of which had
been operated by ICN or its predecessors for more than 50 years. Major product
lines include anti-infectives, medicated nutritionals and vitamins,
anticholinesterases, dermatologicals and vision care products.

ICN develops, manufactures, distributes and sells pharmaceutical products
and biomedical products and services. In addition to the Company, ICN's
pharmaceuticals group consists of Viratek, Inc. ("Viratek"), ICN's 63% owned
subsidiary as of February 18, 1994, which conducts research and development on
compounds derived from nucleic acids. ICN's biomedicals group consists of ICN
Biomedicals, Inc. ("Biomedicals"), ICN's 69% owned subsidiary as of February 18,
1994, which manufactures and distributes research products and services,
biomedical instrumentation and diagnostic reagents and instrumentation. ICN
controls Viratek and Biomedicals through stock ownership, voting control and
board representation and is affiliated with the Company. Certain officers of ICN
occupy similar positions with the Company, Biomedicals, and Viratek.

Viratek was formed in August 1980 for the purpose of continuing ICN's
research and development of compounds related to nucleic acids. ICN transferred
to Viratek in November 1980 all its rights to the compounds developed at a
former division of ICN, including the broad spectrum antiviral agent ribavirin
(Virazole(R)). Effective December 1, 1990, the Company entered into a License
Agreement with Viratek, granting the Company the worldwide rights to market
Virazole(R) for all indications for a period of five years. The Company pays a
20% royalty on all sales of Virazole(R) for all indications. The Company may
grant licenses to, or enter into marketing arrangements with, unaffiliated third
parties for other applications of Virazole(R) in the United States or other
countries.

As of February 18, 1994, ICN owned approximately 39% of the outstanding
shares of the Company's common stock, $.01 par value ("common stock"). During
1993, ICN sold 1,618,200 shares of the Company's common stock for an aggregate
sales price of $19,995,000 and during 1992, ICN sold 690,000 shares of the
Company's common stock for an aggregate sales price of $13,786,000, in open
market transactions and privately negotiated sales. In 1991, ICN, on behalf of
the Company, contributed 1,468,000 shares of the Company's common stock in
connection with the formation of a new joint company, ICN Galenika, discussed
below.

In August 1989, the Company paid a 20% stock dividend on the outstanding
shares of common stock, accounted for as a six-for-five stock split. In March
and July 1991, the Company issued 10% and 15% stock distributions, respectively,
which resulted in a 26% stock split, on the outstanding shares of common stock.
In January 1993, the Company issued a fourth quarter 1992 stock dividend of 2%.
During 1993, the Company issued quarterly stock dividends which totaled 6%. In
January 1994, the Company declared a first quarter 1994 stock dividend of 1.4%.
All share and per share information in this Form 10-K has been adjusted for
these stock splits and dividends. The Company's common stock is traded on the
American Stock Exchange under the symbol SPI. The Company is incorporated under
the laws of Delaware. The principal executive offices of the Company are located
at 3300 Hyland Avenue, Costa Mesa, California 92626, telephone (714) 545-0100.

PRODUCTS

Anti-Infectives

General. The Company currently sells approximately 65 anti-infective
pharmaceutical products primarily in North America, Latin America, Western
Europe and Eastern Europe. The Company manufactures most of these products, and
contracts with third parties for the manufacture of the remainder.
Anti-infectives

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constituted 31%, 37% and 36% of the Company's consolidated net sales for the
years ended December 31, 1993, 1992, and 1991, respectively. The more important
anti-infective products and their major market territories are as follows:

<TABLE>
<CAPTION>
PRODUCT MARKET
--------------------- -----------------------
<S> <C>
Virazole(R) USA, Canada and Europe
Virazid(R) Mexico and Spain
(Virazole(R))
Anapenil(R) Mexico and Spain
Dicorvin(R) Spain
Yectamicina(R) Mexico
Hidro(R) Mexico
Alfacet Yugoslavia
Pentrexyl Yugoslavia
Palitrex Yugoslavia
Jugocillin Yugoslavia
</TABLE>

Virazole(R). Virazole(R) is currently approved for sale in various
pharmaceutical formulations in over 40 countries for the treatment of several
different human viral diseases. In North America, Virazole(R) has been approved
for hospital use in aerosolized form to treat infants and young children who
have severe lower respiratory infections caused by respiratory syncytial virus
("RSV"). Similar approvals for Virazole(R) treatment of RSV have been granted by
governmental authorities in 22 other countries. The Virazole(R) trademark is
used in North America and certain European countries. The product is sold as
Vilona(R) and Virazid(R) in Latin America, where it has been commercially
available for over 14 years and is approved for the treatment of hepatitis,
herpes infections, influenza, and exhanthemous viral diseases such as measles
and chicken pox, as well as RSV. In June 1990, Virazole(R) was approved in the
Republic of Ireland for the management of the early stages of human
immunodeficiency virus ("HIV") infection and, in November 1991, the Hungarian
government also approved Virazole(R) for early management of the disease in HIV
positive patients.

Virazole(R), Vilona(R) and Virazid(R) collectively constituted 7%, 6% and
6% of the Company's consolidated net sales for the years ended December 31,
1993, 1992 and 1991, respectively.

Other Anti-Infectives.

Alfacet and Palitrex are cephalosporons manufactured by the Company under
license from Eli Lilly while Pentrexl (ampicillin) is licensed from
Bristol-Myers Squibb. Anapenil(R), Trimexazol, Hidro(R), Rofat, and
Yectamicina(R) are standard antibiotics while Dicorvin(R) is a new macrolide
antibiotic.

Medicated Nutritionals and Vitamins

The Company manufactures, subcontracts, and markets approximately 870
nutritional and vitamin products in North America, Latin America, Western Europe
and Eastern Europe. In Mexico, the Company manufactures and markets injectable
and oral multi-vitamins and supplements under the Bedoyecta-Tri(R),
Dextrevit(R), M.V.I.(R), and Vi-Syneral(R) trade names. In Yugoslavia, ICN
Galenika manufactures and markets Oligovit(R), Beviplex, Bedoxin, and Chymoral
100 Forte. In the United States, the Company markets nutritional and vitamin
products under the RichLife(R) Plus(R), Nutri-dyn(R), and Dartell(R) trade
names.

Medicated nutritionals and vitamins constituted 9%, 8% and 10% of the
Company's consolidated net sales for the years ended December 31, 1993, 1992,
and 1991, respectively.

Anticholinesterases

The Company markets three anticholinesterase product lines under the trade
names, Mestinon(R), Prostigmin(R) and Tensilon(R), in North America. These
products are used in treating myasthenia gravis, and in reversing the effects of
certain muscle relaxants. These products, for which the Company received a

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<PAGE> 327

distribution sublicense from ICN in 1988, are manufactured by Hoffman-LaRoche,
Inc. Mestinon(R), Prostigmin(R), and Tensilon(R) collectively constituted 3%,
2%, and 3% of the Company's consolidated net sales for the years ended December
31, 1993, 1992, and 1991, respectively.

Dermatologicals

The Company currently manufactures and markets approximately 75
dermatological products, primarily in North America and Eastern Europe. The
Company's dermatological line, marketed under the ICN label, consists primarily
of products for the treatment of psoriasis and bleaching agents indicated for
the treatment of hyperpigmented skin. These products include Oxsoralen-ultra(R),
Solaquin(R), Trisoralen(R) and Eldoquin(R). A related product introduced in
fiscal 1988, 8-MOP(R), is indicated for the treatment of cutaneous T-cell
lymphoma, a form of skin cancer. Multi-tar(R) is a family of medicated shampoo
products. Duonalc(R) is a dermatological solution for the prevention of acne.
Dermatological products constituted 7%, 7% and 6% of the Company's consolidated
net sales for the years ended December 31, 1993, 1992, and 1991, respectively.

Vision Care Products

The Company manufactures and markets the Unicare(R) line of contact lens
and lens care products primarily in Latin America and Western Europe. Vision
care products constituted 2%, 2% and 2% of the Company's consolidated net sales
for the years ended December 31, 1993, 1992, and 1991, respectively.

Other Products

The Company also manufactures and markets approximately 200 other
pharmaceutical products, including cardiovascular agents, antirheumatics,
insulin, analgesics and psychotropic products for the treatment of manic
depressive syndromes, anti-ulcer medicines, products for hormonal
supplementation and various generic pharmaceuticals and surgical products. These
products collectively constituted 48%, 44% and 29% of the Company's consolidated
net sales for the years ended December 31, 1993, 1992, and 1991, respectively.

ACQUISITIONS

The table below summarizes acquisitions by the Company during the last five
years. For additional information regarding ICN Galenika, see Management's
Discussion and Analysis of Financial Condition and Results of Operations and
Notes 11 and 12 of Notes to Consolidated Financial Statements.

<TABLE>
<CAPTION>
COMPANY ACQUIRED AND
LOCATION ACQUISITION DATE TYPE OF BUSINESS
- ----------------------------- ----------------- -----------------
<S> <C> <C>
Galenika Pharmaceuticals
Belgrade, Yugoslavia May 1991 Pharmaceuticals
</TABLE>

In addition to the acquisition of the above business, the Company also
acquired in 1988, pursuant to a fifteen-year sublicensing agreement with ICN,
the right to produce and market three anticholinesterases, Mestinon(R),
Prostigmin(R) and Tensilon(R), in North America. Effective September 1, 1990,
the Company prepaid royalties to ICN of $9,590,000. There are no future
royalties due to ICN for these products.

FOREIGN OPERATIONS

The Company operates in North America, Latin America, Western Europe and
Eastern Europe. For financial information about domestic and foreign operations
and export sales, see Note 9 of Notes to Consolidated Financial Statements.

Foreign operations are subject to certain risks inherent in conducting
business abroad, including possible nationalization or expropriation, price and
exchange controls, limitations on foreign participation in local enterprises,
health-care regulation and other restrictive governmental actions. Changes in
the relative values of currencies take place from time to time and may
materially affect the Company's results of operation. Their

G-3
<PAGE> 328

effects on the Company's future operations are not predictable. The current
political and economic circumstances in Yugoslavia create certain risks
particular to that country. Yugoslavia has been operating under sanctions
imposed by the United Nations since May 1992, which have severely limited the
ability to import raw materials for manufacturing and have prohibited all
exports. In addition, certain risks such as hyperinflation, currency
devaluations, wage and price controls, potential government action and a rapidly
deteriorating economy could have a material effect on the Company's results of
operations. See Management's Discussion and Analysis of Financial Condition and
Results of Operations.

MARKETING AND CUSTOMERS

The Company has a marketing and sales staff of approximately 1,320 persons,
including sales representatives in North America, Latin America, Western Europe
and Eastern Europe, who call on physicians, pharmacists, distributors and other
health-care professionals. As part of its marketing program, the Company does
direct mailings, advertises in trade and medical periodicals, exhibits products
at medical conventions, sponsors medical education symposia and sells through
distributors in countries where it does not have its own marketing staff.

In the United States, the Company sells its pharmaceutical products through
approximately 400 drug wholesalers who, in turn, distribute them to drug stores
and hospitals. The Company's nutritional product line is sold directly and
through distributors to various retail outlets and to certain health-care
professionals.

In Mexico, the Company serves an estimated 18,000 pharmacies through a
network of 105 distributors. It also sells directly to approximately 870
pharmacists and 160 hospitals within Mexico.

In Western Europe, the Company markets vision care products in the
Netherlands through hospitals and pharmacies and to retail customers through
optical shops. The Company's Spanish subsidiary sells pharmaceutical products
via its own sales force to approximately 530 hospitals and retail outlets, 5,000
pharmacies and 200 wholesalers.

In Canada, the Company sells Virazole(R) for RSV to approximately 1,300
hospitals directly and through wholesalers. The other pharmaceutical products
are sold to approximately 5,000 drug stores and are distributed through multiple
wholesalers.

The Company's newest subsidiary, ICN Galenika ("ICN Galenika" or
"Galenika"), one of Yugoslavia's largest pharmaceutical manufacturers with an
estimated 43% share of the total pharmaceutical market in the country. ICN
Galenika sells a broad range of approximately 250 human drugs and approximately
200 veterinary, dental and other over-the-counter products. ICN Galenika sells
products through approximately 30 wholesalers, 6 representative offices and 85
sales representatives countrywide. Prior to the imposition of sanctions in May
1992, over 10% of the total production was exported, mainly to Russia and other
Eastern European countries, as well as to many countries in Africa, the Middle
East and the Far East.

During the year ended December 31, 1993, approximately 68% of ICN
Galenika's sales were to the Federal Republic of Yugoslavia or government
sponsored entities. At December 31, 1993, there were no significant receivables
from the Yugoslavian government, however future sales of ICN Galenika could be
dependent on the ability of the Yugoslavian government to generate cash to
purchase pharmaceuticals and the continuation of its current policy to buy
products from ICN Galenika. No other customer accounts for more than 10% of the
Company's net sales.

RESEARCH AND DEVELOPMENT

The Company has exclusive marketing rights for Virazole(R) from Viratek. A
royalty of 20% is paid to Viratek on all sales of Virazole.(R) During 1993,
Viratek completed a public offering to raise capital principally to fund
clinical trials to evaluate Virazole(R) for the treatment of hepatitis C. If
Viratek succeeds and Virazole(R) is approved for treatment of hepatitis C, the
Company expects increases in Virazole(R) sales in the future. The following
disclosure presents the status of Viratek's efforts in establishing Virazole(R)
as a treatment of hepatitis C.

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<PAGE> 329

Hepatitis is a family of diseases characterized by inflammation of the
liver. Although there are several causes of hepatitis, some of the most frequent
and difficult to manage are of viral origin. Presently, there are five distinct
viruses known to cause hepatitis. These have been designated hepatitis A, B, C,
D and E. The disease caused by hepatitis types A and E is acute, while types B,
C and D can be either acute or chronic. Acute hepatitis caused by types B, C,
and D viruses often progresses to chronic forms of the disease. The prognosis in
this case is much more severe, particularly in the case of hepatitis C, in which
15%-25% of the patients experience ongoing liver damage (chronic active
hepatitis). As many as 20% of chronic hepatitis C patients develop cirrhosis of
the liver and a significant but presently unknown percentage will advance to
hepatocellular carcinoma ("HCC"), a form of liver cancer. The progression of
hepatitis C is slow; as many as 20 years may elapse between initial infection
and the development of severe life-threatening conditions, such as cirrhosis of
the liver or HCC, and during most of this period the patient may be completely
asymptomatic.

The degree of liver damage in hepatitis patients is estimated through
quantification of serum levels of a liver enzyme ("ALT"). When liver damage is
taking place, liver cells (hepatocytes) are releasing ALT into circulation.
Thus, an increased level of serum ALT is generally indicative of hepatocyte
disruption and, consequently, of liver damage. Physicians may also choose to
assess liver damage directly through visualization of liver biopsy samples, but
such measurement requires significantly more invasive procedures.

Chronic active hepatitis represents a progressive inflammatory disease of
the liver with continued elevation of liver enzymes. Chronic active hepatitis is
defined by the persistence of elevated ALT for periods exceeding six months. In
chronic hepatitis C, ALT levels may exceed normal by a factor of 10 or more.
Rapid diagnostic tests have been available to detect antibody to the hepatitis C
virus in a patient's blood. The presence of antibody to HCV indicates that the
patient has at some time been exposed to the virus but not necessarily that the
patient is currently infected. Recently, direct assessment of the viral titre in
serum HCV-RNA has been made possible via polymerase chain reaction technology.

Based on published reports, the prevalence of antibody to hepatitis C among
volunteer blood donors is approximately 0.75% in the United States, or a
projected 1,800,000 antibody positive individuals. The incidence of new
infections is estimated at 170,000 annually. The Company estimates that the
total number of patients within the United States with chronic active hepatitis
C is approximately 275,000. Based on published reports on the prevalence of
antibody of hepatitis C among volunteer blood donors in various European
countries, the Company estimates that there are an equivalent number of patients
with chronic active hepatitis C in Europe.

At present, the only products known by the Company to be approved in the
United States, Japan, and Europe for treatment of hepatitis C are several forms
of interferons. Different manufacturers have received authorization to
commercialize their respective brands of interferon for treatment of hepatitis C
in various countries, but, in the United States, the only approved form known by
the Company is alpha interferon, marketed by Schering Corporation. Treatment of
hepatitis C with interferon is associated with improvement in hepatocellular
injury as measured by a reduction in ALT levels and visualization of biopsy
specimens. However, interferon is not universally effective and is limited by
side effects such as flu-like symptoms, fatigue, depression, bone marrow
suppression and autoimmune thyroid disease. Further, interferon must be
administered by subcutaneous injection three times weekly for six months or
more. The Company believes that such limitations make the development of a
treatment with greater safety and ease of administration highly desirable.

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<PAGE> 330

been completed and both indicate that administration of Virazole(R) was
associated with a significant reduction of ALT in all patients treated. The NIH
trial also demonstrated a reduction in hepatitis C virus titers in all treated
patients. This measurement was not included in the study conducted at the
Karolinska Institute. In both of these studies, as well as the earlier pilot
studies, administration of Virazole(R) was not associated with any clinically
relevant or therapy limiting side effects. The results of these studies were
considered by both Viratek and the NIH to be sufficiently promising that both
have undertaken phase III clinical studies in chronic hepatitis C. The NIH has
undertaken one phase III trial in the United States and Viratek has undertaken
two phase III trials, one in the United States and one in Europe.

Viratek has full access to the results of the NIH study. That study,
together with the Company-sponsored studies, if positive (as to which there can
be no assurance), could form the basis for a New Drug Application to the Food
and Drug Administration ("FDA") for the approval of the drug for commercial sale
in the treatment of hepatitis C.

Respiratory Syncytial Virus (RSV)

RSV is a seasonal disease which occurs primarily during the months of
November through April and is a common cause of respiratory infection in infants
and young children. Virtually all young children are exposed to the virus and
most exhibit relatively mild symptoms; however, in some cases the resulting
infection becomes more severe causing lower respiratory tract disease such as
bronchiolitis and pneumonia. In the United States, the resulting infection is
sufficiently severe to require hospitalization of an estimated 100,000 children
annually.

Aerosolized Virazole(R) is the only pharmaceutical product known by the
Company to be commercially available in the United States, Canada and most of
Europe to treat hospitalized infants and young children with severe lower
respiratory tract infection due to RSV. In treating RSV, the drug is
administered by a small particle aerosol generator, an advanced delivery system
that permits direct delivery of Virazole(R) to the site of infection in the
lungs.

The Committee of Infectious Diseases of the American Academy of Pediatrics
recommends that infants hospitalized with lower respiratory tract disease caused
by RSV be considered for Virazole(R) aerosol therapy in infants at risk for
severe or complicated respiratory syncytial virus infections (e.g., congenital
heart disease, chronic lung conditions, immunodeficiency); infants of young age
(less than six weeks); or infants where prolonged illness may exacerbate
underlying conditions (e.g., multiple congenital anomalies).

Influenza and Other Indications

Clinical studies using aerosolized Virazole(R) for treatment of influenza A
and B in adults and infants led to an approved health registration in Belgium in
1992 for the marketing of aerosolized Virazole(R) to treat infants and adults
hospitalized with severe influenza A or B. Aerosolized Virazole(R) for the
treatment of influenza A and B is also being sold in 20 other countries
including Mexico, and countries in Central and South America, and Asia and the
Far East.

Clinical studies have also been conducted with Virazole(R) in other
pharmaceutical formulations for treatment of several other viral diseases. Among
those diseases with respect to which clinical studies have been conducted and
for which at least one governmental health regulatory agency has approved
commercialization of Virazole(R) are herpes zoster; genital herpes; hemorrhagic
fever with renal syndrome; Lassa fever; measles; chicken pox; and HIV. Viratek
presently has no plans to initiate new clinical studies for any of these
indications. Viratek plans, where appropriate, to utilize the existing clinical
documentation to serve as the basis for any future submission of health
registration dossiers to various additional governmental health authorities to
expand the use of Virazole(R).

Other Compounds

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<PAGE> 331

naturally occurring DNA and RNA building blocks have been synthesized and
characterized in vitro and in animal models. In evaluating any potential
therapeutic value, efficacy has to be balanced against toxicity, and any good
drug candidate should be devoid of or have a low level of induction of drug
resistance.

A promising line of research has been sulfur-substituted purines.
Sulfasine(TM), a nucleoside analog, has been shown to possess a favorable ratio
of efficacy versus toxicity, and to be active against several multi-drug
resistant tumor cell lines. Sulfasine(TM) has been shown to be active against
experimental leukemias resistant to treatment with widely used conventional
therapies. Sulfasine(TM) also showed significant antimetastatic activity in mice
implanted with reticulum cells in the liver, lung and kidney. A preclinical
study of Sulfasine(TM) has demonstrated important pharmacological properties.

Another promising candidate is Immusine(TM) which has been shown to
stimulate specific parts of the immune defense relevant for eradication of
tumors. By stimulating macrophages and natural killer cells, Immusine(TM), when
introduced in mice exposed to melanoma and reticulum cell carcinoma, reduced
metastasis compared to control animals. Hence, Immusine(TM) could be a useful
tool in the treatment of disseminated cancer of various types.

COMPETITION

The industry in which the Company operates is highly competitive. The
Company's competitors, many of whom have substantially greater capital resources
and marketing capabilities and larger research and development staffs and
facilities than the Company, are actively engaged in marketing products similar
to those of the Company and in developing new products similar to those proposed
to be developed and sold by the Company. The Company does business in an
industry characterized by extensive and ongoing research efforts. Others may
succeed in developing products more efficacious than those presently marketed or
proposed for development by the Company. Progress by other researchers in areas
similar to those being explored by the Company may result in further competitive
challenges.

ORDER BACKLOG

As is customary in the pharmaceutical industry, all the Company's products
are sold on an "open order" basis. Consequently, order backlog is not considered
a significant factor.

RAW MATERIALS

During 1992, The United Nations Security Council ("UNSC") and the United
States adopted a resolution that imposed economic sanctions on the Federal
Republic of Yugoslavia (Serbia and Montenegro). The sanctions specify that
specific authorization in the form of a license must be granted on a
transaction-by-transaction basis from the country of origin and the United
Nations before the shipment of raw materials and finished goods can be made into
Yugoslavia. Currently, few licenses have been granted for the import of raw
materials. It is the policy of the United Nations Sanctions Committee to grant
licenses for finished goods, but only for raw materials in exceptional cases.
See Management's Discussion and Analysis of Financial Condition and Results of
Operations and Note 12 of Notes to Consolidated Financial Statements.

LICENSES, PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS

The Company has acquired from Viratek the rights to market Virazole(R) in
Mexico, Canada, the United States and in other countries for all uses. The
technology related to these uses of Virazole(R) is broadly covered by a United
States patent expiring in 1999. Licensed technology from Viratek relating to
Virazole(R) is also covered by United States patents expiring between 1994 and
1999 and Canadian patents expiring between 1994 and 2006. The Company may be
materially dependent on the protection afforded by Viratek's patents relating to
Virazole(R), and no assurance can be given as to the breadth or degree of
protection which these patents will afford Viratek.

As a general policy, the Company expects to seek patents, where available,
on inventions concerning novel drugs, techniques, processes or other products
which it may develop in the future. However, there can be

G-7
<PAGE> 332

no assurance that any patents applied for will be granted or that, if granted,
they will have commercial value or as to the breadth or the degree of protection
which these patents, if issued, will afford the Company. The Company intends to
rely substantially on its unpatented proprietary know-how, but there can be no
assurance that others will not develop substantially equivalent proprietary
information or otherwise obtain access to the Company's know-how. Patents for
pharmaceutical compounds are not available in Mexico.

Many of the names of the Company's products are registered trademarks in
the United States, Mexico, Canada, Spain and other countries. The Company
anticipates that the names of future products will be registered as trademarks
in the United States, Mexico, Canada and elsewhere. Other organizations may in
the future apply for and be issued patents or own proprietary rights covering
technology which may become useful to the Company's business. The extent to
which the Company at some future date may need to obtain licenses from others is
not known.

GOVERNMENT REGULATION

Prior to marketing or manufacturing new products for use by humans, the
Company must obtain FDA approval in the United States and approval from
comparable agencies in other countries. Obtaining FDA approval for new products
and manufacturing processes can take a number of years and involve the
expenditure of substantial resources. The Company must satisfy numerous
requirements, including preliminary testing programs on animals and subsequent
clinical testing programs on humans, to establish product safety and efficacy.
No assurance can be given that authorization of the commercial sale by the
Company of any new drugs or compounds for any application will be secured in the
United States or any other country, or that, if such authorization is secured,
those drugs or compounds will be commercially successful. The FDA in the United
States and other regulatory agencies in other countries also periodically
inspect manufacturing facilities.

The Company has not experienced any material impact on the capital
expenditures, earnings or competitive position of the Company and its
subsidiaries as a result of compliance with any federal, state or local
provisions regarding the protection of the environment.

EMPLOYEES

The Company and its subsidiaries currently employ approximately 5,420
persons, 4,500 of whom are covered by collective bargaining agreements. The
Company has not experienced any significant work stoppage, slowdown or other
serious labor problems which have materially impeded its business operations.
The Company considers its relations with its employees to be satisfactory.

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SELECTED CONSOLIDATED FINANCIAL DATA OF SPI

The following table sets forth certain consolidated financial data for the
years ended December 31, 1993, 1992 and 1991, the one month ended December 31,
1990, and for the years ended November 30, 1990 and 1989. This information
should be read in conjunction with Management's Discussion and Analysis of
Financial Condition and Results of Operations and the financial statements
included elsewhere in this proxy (amounts in thousands, except per share
information).

<TABLE>
<CAPTION>
ONE
MONTH
ENDED
DECEMBER 30,
DECEMBER 31, 1990(6) NOVEMBER 30,
---------------------------------- ------------ ---------------------
1993 1992 1991(3) 1990 1990 1989
-------- -------- -------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales................................ $403,957 $476,118 $364,358 $ 7,471 $140,716 $124,007
Cost of sales............................ 211,923 208,745 173,554 3,231 56,101 52,551
-------- -------- -------- ------------ -------- --------
Gross profit............................. 192,034 267,373 190,804 4,240 84,615 71,456
Selling, general and administrative
expenses............................... 131,069 170,313 99,942 4,074 55,437 51,472
Royalties to (from) affiliates, net...... 6,121 5,511 4,377 -- 3,781 (1,603)
Other, net(1)............................ 27,777 38,343 33,642 676 2,535 5,380
-------- -------- -------- ------------ -------- --------
Income (loss) before provision for income
taxes and minority interest............ 27,067 53,206 52,843 (510) 22,862 16,207
Provision (benefit) for income taxes..... 5,368 9,095 10,852 (460)(5) 7,942 3,294
Minority interest........................ 189 9,608 11,865 -- -- --
-------- -------- -------- ------------ -------- --------
Net income (loss)........................ $ 21,510 $ 34,503 $ 30,126 $ (50) $ 14,920 $ 12,913
========= ========= ========= ============== ========= =========
Per Share Information: (2)
Net income............................. $1.07 $1.74 $1.55 -- $.86 $.74
----- ----- ----- ------- --- ---
----- ----- ----- ------- --- ---
Cash dividends paid.................... $ .23 $ .77 $ .88 -- $.07 $.06
----- ----- ----- ------- --- ---
----- ----- ----- ------- --- ---
Historical dividends declared(4)....... $1.12 $1.06 $1.00 -- $.09 $.08
----- ----- ----- ------- --- ---
----- ----- ----- ------- --- ---
BALANCE SHEET DATA:
Working capital.......................... $127,259 $120,942 $123,367(3) $ 38,351 $ 40,630 $ 46,533
Total assets............................. 302,017 333,218 336,905(3) 148,041 152,326 122,475
Long-term debt........................... 16,980 21,016 16,519(3) 10,943 11,257 6,039
Stockholders' equity..................... 155,879 135,427 88,134(3) 96,010 95,935 80,467
</TABLE>

- ---------------

(1) Other, net for 1993, 1992 and 1991 includes research and development costs;
translation and exchange losses, net; interest (income) expense, net; other
(income) expense, net; and write-downs and other costs for the domestic
nutritional group.

(2) On June 26, 1989, the Company's Board of Directors issued a 20% stock
dividend, which has been accounted for as a six-for-five stock split. In
March and July 1991, the Company issued 10% and 15% stock distributions,
respectively, which resulted in a 26% stock split. In January 1993, the
Company issued a fourth quarter 1992 stock dividend of 2%. During 1993, the
Company issued additional stock dividends which totaled 6%. In January 1994,
the Company declared a first quarter 1994 stock dividend of 1.4%. All share
and per share amounts have been restated to reflect these stock splits and
dividends, except for historical dividends issued which are unadjusted for
stock splits, dividends, and distributions.

(3) Financial data for 1991 includes the results of ICN Galenika from the
effective date of acquisition, May 1, 1991. See Note 11 of Notes to
Consolidated Financial Statements.

(4) Dividends for 1993 include cash dividends of $.25 on a historical basis and
stock dividends equivalent to $.87. The dividends in 1992 include cash
dividends of $.86 on a historical basis and a January 1993 stock dividend
equivalent to $.20 per share. The stock dividends are based upon the market
value of the Company's common stock at the declaration date. For 1991 and
prior years the dividends were paid in cash.

(5) Includes $240,000 tax refund in Mexico.

(6) For financial statement purposes, the Company's separate results of
operations for the month of December 1990 are not reflected in the Statement
of Income but have been included in retained earnings.

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MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OF SPI

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO SIX MONTHS ENDED JUNE 30, 1993

Net Sales. Net sales for the six months ended June 30, 1994 were
$151,094,000 compared to $186,058,000 for the same period in 1993. This decrease
in net sales of $34,964,000, or 19%, is primarily a result of lower sales at
Galenika during the first quarter of 1994 compared to the same period in 1993.
Net sales at Galenika were $63,826,000 for the six months ended June 30, 1994
compared to $108,964,000 for the same period in 1993. The decline in Galenika
sales of $45,138,000, or 41%, is primarily due to a 27% decline in unit sales
resulting from the impact of United Nations sanctions on Yugoslavia.
Additionally, the sales of Galenika have been adversely affected by the size and
timing of devaluations in the first quarter of 1994 compared to the first
quarter of 1993, which has been partially offset by an improvement in second
quarter Galenika sales compared to last year's second quarter. Net sales in
SPI's Spanish subsidiary also decreased $3,447,000, or 27%, during the first six
months of 1994 as compared to the first six months of 1993 primarily due to
government mandated price controls and changes in government health insurance
reimbursement policies. This decrease in overall net sales was partially offset
by sales increases of $10,174,000 in SPI's operating units excluding Galenika
and the Spanish subsidiary. This increase is primarily due to increased sales of
Virazole(R) (resulting from a combination of price increases and increased unit
sales) and the myasthenia gravis and dermatological product lines.

Gross Profit. Gross profit as a percentage of sales was 49% for the six
months ended June 30, 1994, compared to 48% for the same period in 1993. The
increase in the gross profit margin for the six months ended June 30, 1994,
reflects improved gross margins in most of SPI's subsidiaries located outside of
Yugoslavia. The gross margin in SPI's United States operations increased from
80% to 84% primarily due to increased sales of Virazole(R). At Galenika, the
gross profit margin was 22% for the six months ended June 30, 1994, compared to
38% for the same period in 1993. The decrease in gross profit margin at Galenika
is primarily due to higher inventory costs in Yugoslavia.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of sales were 29% for the six months
ended June 30, 1994, compared to 35% for the same period in 1993. Selling,
general and administrative expenses have decreased $21,708,000, or 33%, for the
six months ended June 30, 1994 as compared to the same period in 1993, due
primarily to expense reductions at Galenika resulting from a lower provision for
bad debts, lower wages and the impact of differences in the exchange rates.

Royalties to Affiliates, Net. For the six months ended June 30, 1994,
Virazole(R) royalties to Viratek were $3,570,000 compared to royalties of
$1,984,000 for the same period in 1993. The increase in royalties is due to
increased sales of Virazole(R) in the United States.

Translation and Exchange Losses, Net. Translation and exchange (gains)
losses, net, for the six months ended June 30, 1994 were $2,254,000 compared to
$(597,000) for the same period in 1993. The increase in losses for the six
months ended June 30, 1994 is primarily due to translation and exchange losses
at Galenika resulting from the devaluations of the dinar prior to the
implementation of the Yugoslavian monetary stabilization program discussed under
"-- Liquidity and Capital Resources -- Galenika's Operations" below.

Interest Expense. Interest expense for the six months ended June 30, 1994
was $3,046,000, compared to $10,098,000 for the same period in 1993. The
decrease in interest expense is due to lower interest rates in Yugoslavia
resulting from the efforts of the Yugoslavian government to control inflation
and lower levels of debt in the United States.

Research and Development. Research and development costs for the six months
ended June 30, 1994, decreased $2,786,000, or 53%, compared to the same period
in 1993, due to reductions in expenses at Galenika resulting from lower wages
and differences in exchange rates in 1994 compared to 1993. Research and

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development costs at Galenika were $1,245,000 for the six months ended June 30,
1994 compared to $3,719,000 for the same period in 1993.

YEAR ENDED DECEMBER 31, 1993 COMPARED TO YEAR ENDED DECEMBER 31, 1992

Net Sales. Net sales for 1993 declined to $403,957,000 from $476,118,000
for 1992, primarily due to lower sales at Galenika. Sales at Galenika were
$239,832,000 for 1993 compared to sales of $325,903,000 for 1992. The United
Nations sanctions imposed on Yugoslavia and price controls imposed by the
Yugoslavian government have impacted the sales at Galenika, both in terms of a
decrease in unit sales and a change in product mix. Additionally, sales were
adversely impacted by higher inflation and by larger and more frequent
devaluations in 1993 compared to the prior year. The raw materials that Galenika
imports are primarily used in the production of human prescription drugs. Due to
restrictions on Galenika's ability to obtain these materials, Galenika has
shifted its production and sales efforts to its veterinary and non-prescription
product lines. For 1993, sales of human prescription drugs represented 73% of
Galenika's total sales compared to 81% in the prior year.

Sales in SPI's operating units, excluding Galenika, increased $13,910,000,
or 9%, in 1993 to $164,125,000 compared to the prior year sales of $150,215,000.
SPI's United States operations reported increased sales of $8,906,000, or 17%,
for the year compared to 1992, primarily due to increased sales of
dermatological products. SPI's Mexican subsidiaries recorded an increase in
sales of $9,129,000 or 19%, for the year compared to 1992, primarily due to
increased unit sales and price increases for its injectable vitamin, Bedoyecta,
along with increased sales of Virazole(R). SPI's Spanish subsidiary recorded a
decrease in sales or $3,153,000, or 12%, primarily due to a 23% devaluation of
the Spanish Peseta against the U.S. dollar, which was partially offset by
increased unit sales.

Gross Profit. Gross profit as a percentage of sales was 48% for 1993
compared to 56% in 1992. The decrease in the gross profit margin primarily
reflects the impact of price controls in Yugoslavia and higher labor costs per
unit at Galenika. The decrease in gross margins at Galenika was partially offset
by the aggregate improvement in the gross profit margins of SPI's subsidiaries
outside Yugoslavia. The combined gross margins of the subsidiaries outside
Yugoslavia were 66% for 1993 compared to 62% for 1992.

At Galenika, gross profit as a percentage of sales was 35% in 1993 compared
to 53% for 1992. The overall rate of inflation in Yugoslavia has exceeded the
rate at which Galenika could increase selling prices. This was compounded by
more frequent currency devaluations, which together resulted in lower revenues
and gross profits when stated in U.S. dollars. Additionally, the cost of
manufacturing inventory has increased as a result of declining unit production
while maintaining the same work force that existed before sanctions began.
United Nations sanctions have contributed to shortages of raw materials and a
deteriorating business environment, resulting in unit production in 1993 that
was 49% of what was produced the prior year.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of sales were 32% for 1993 compared to
36% for 1992. The 1992 results include provisions at Galenika for training
employees, redundancy and early retirement costs of $21,065,000. Excluding these
provisions, selling, general and administrative costs for 1992 were 32% of net
sales. The resulting increase in 1993 selling, general and administrative
expenses as a percentage of net sales is primarily a result of lower sales at
Galenika combined with overall increases in operating expenses due to
inflationary pressures in Yugoslavia, partially offset by lower provisions for
doubtful accounts.

In countries experiencing hyperinflation, such as Yugoslavia, a devaluation
results in a reduction of accounts receivable and a proportionate reduction in
the accounts receivable allowance. The reduction of accounts receivable is
recorded as a foreign currency translation loss, and the reduction of the
allowance is recorded as a translation gain. Shortly after a devaluation, the
level of accounts receivable will rise as a result of subsequent price
increases. In conjunction with the rise in receivables, additions to the
allowance for receivables will be made for existing doubtful accounts. This
process will repeat itself for each devaluation that occurs during the year. The
effect of this process results in a high level of bad debt expense that does not
necessarily reflect credit risk or difficulties in collecting receivables. For
1993, Galenika recorded provisions for doubtful accounts of $10,968,000 compared
to $48,279,000 for 1992. The timing of devaluations has a

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material impact on the size of the provision for doubtful accounts. The decrease
in the 1993 provision is primarily a result of devaluations occurring more
frequently in 1993, smaller price increases in 1993 compared to 1992 and lower
levels of accounts receivable in 1993 compared to the prior year. The reduction
of the accounts receivable allowance from devaluation resulted in a translation
gain of $9,118,000 and $40,191,000 resulting in a net expense from bad debts and
bad debt translation gain of $1,850,000 and $8,088,000 for 1993 and 1992,
respectively.

Royalties to Affiliates, Net. Royalties to affiliates, net were $6,121,000
for 1993 compared to $5,511,000 for 1992. The increase in royalties was
primarily due to increased sales in Mexico resulting from the introduction of
Ribavirin cream used for the treatment of herpes and increased worldwide sales
due to additional marketing efforts by SPI in 1993, which included offering
volume discounts.

Research and Development Costs. Research and development costs rose from
$7,836,000 in 1992 to $11,516,000 in 1993, or by 47% due to expanded research
and development efforts at Galenika.

Translation and Exchange (Gains) Losses, Net. In 1993, SPI recognized
translation and exchange gains of $3,282,000 compared to translation and
exchange losses of $25,039,000 in 1992. In 1993, SPI recognized foreign exchange
gains of $3,143,000 at SPI's Spanish subsidiary and reduced translation losses
at Galenika by $27,790,000 as a result of planned reduction in its monetary
exposure.

Interest Expense. Interest expense for 1993 was $23,750,000 compared to
$13,065,000 for 1992. The increase in interest in 1993 was principally a result
of Galenika's strategy to manage its monetary position by maintaining higher
levels of short-term debt compared to the prior year. During 1993, Galenika was
charged interest at hyperinflationary rates. The high level of interest expense
in 1993 does not necessarily reflect a high level of debt burden on SPI or a
high level of cash paid for interest. From the time that Galenika accrues its
hyperinflationary interest expense liability to the time that it actually pays
the interest, significant devaluation in the translation rate will occur. The
devaluation will result in a payment of interest stated in U.S. dollars that is
significantly below what was originally accrued. In 1993, Galenika had
$16,774,000 of interest expense and interest payments of $7,149,000 resulting in
estimated translation gains on accrued interest devaluations of $9,625,000.

Other Expense, Net. A summary of certain other items included in other
(income) expense is as follows:

<TABLE>
<CAPTION>
1992 1993
---------- ----------
<S> <C> <C>
Litigation settlements and damages(1)............... $ 447,000 $ 988,000
Profit sharing plan expense in Mexico............... 419,000 557,000
Amortization of goodwill............................ 677,000 248,000
Employee severance in Spain(2)...................... -- 1,000,000
(Gain) loss on sale of fixed assets................. 151,000 (194,000)
Unrealized loss on marketable securities............ -- 1,312,000
Other, net.......................................... 388,000 (85,000)
---------- ----------
Other expense, net................................ $2,082,000 $3,826,000
========= =========
</TABLE>

- ---------------

(1) The 1993 litigation costs represent an accrual for estimated damages
relating to a breach of contract suit. See "Business -- Litigation,
Government Investigations and Other Matters." The 1992 litigation costs
relate primarily to damages assessed against Viratek in a breach of contract
suit against which SPI indemnified Viratek under its licensing agreement for
Virazole(R).

(2) During 1993, SPI provided for costs associated with the planned layoff of
employees at its Spanish subsidiary.

Provision for Income Taxes. SPI's effective income tax rates were 20% and
17% for 1993 and 1992, respectively. SPI's effective tax rates in 1993 and 1992
were significantly less than the U.S. statutory rate primarily due to the
utilization of foreign and alternative minimum tax credits and other deferred
tax benefits for which a valuation reserve existed at January 1, 1993.

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YEAR ENDED DECEMBER 31, 1992 COMPARED TO YEAR ENDED DECEMBER 31, 1991

Net Sales. Net sales for 1992 rose to $476,118,000, an increase of
$111,760,000, or 31%, over 1991. The majority of this increase, $101,121,000,
was due to inclusion of a full year of Galenika results in 1992 compared to only
eight months in 1991. In addition, most of SPI's subsidiaries recorded improved
sales in 1992 compared to 1991. Sales in Mexico increased $6,963,000, or 17%,
primarily resulting from improved sales of its injectable vitamin,
Bedoyecta-Tri(R), and other significant products. Sales in Spain increased
$3,526,000, or 16%, in 1992 over the prior year primarily due to the
introduction of new product lines.

Gross Profit. Gross profit as a percentage of net sales increased to 56% in
1992 from 52% in 1991. While SPI experienced gross profit increases in all of
its major subsidiaries, the largest increase was recorded at Galenika whose
gross profit increased to 53% in 1992 from 47% in 1991. The 1991 Galenika gross
profit was adversely impacted by the increase in cost of sales resulting from a
purchase accounting adjustment to inventory. Excluding this adjustment,
Galenika's gross profit percentage remained constant in 1992 and 1991 at 53%.
Excluding the results of Galenika, gross profit increased to 62% in 1992 from
60% in 1991 primarily due to an improved product mix resulting from increased
Virazole(R) sales.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of net sales were 36% in 1992 compared
to 27% in 1991. The increased expenses for 1992 were a result of provisions for
doubtful accounts of $48,279,000 (described above) and termination of employees
and early retirement costs at Galenika of $21,065,000. Excluding these
provisions, selling, general and administrative expenses in 1992 were 31% of net
sales.

Royalties to Affiliates, Net. Royalties to affiliates, net, were $5,511,000
for 1992 compared to $4,377,000 for 1991. The increase in royalties was
primarily due to increased sales of Virazole(R) in the United States.

Research and Development Costs. Research and development costs rose from
$4,901,000 in 1991 to $7,836,000 in 1992, principally due to increased research
and development expenditures at Galenika resulting from the inclusion of a full
year of operations in 1992 compared to eight months of operations in 1991.

Translation and Exchange (Gains) Losses, Net. In 1992, SPI recognized
translation and exchange gains of $25,039,000 compared to translation losses of
$6,697,000 in 1991. Translation and exchange (gains) losses, net, increased
$18,342,000 in 1992 due to Galenika operating in a highly inflationary economy,
coupled with reductions in the level of hard currency as a result of sanctions
and the political and economic unrest.

Interest Expense. The increase in interest expense to $13,065,000 in 1992
from $8,965,000 in 1991 is primarily due to the increased intercompany debt due
to ICN from SPI, partially offset by lower levels of debt outstanding at
Galenika.

Other Expense, Net. A summary of certain other items included in other
(income) expense is as follows:

<TABLE>
<CAPTION>
1991 1992
----------- ----------
<S> <C> <C>
Litigation costs, settlements and damages.......... $ 621,000 $ 447,000
Profit sharing plan expenses in Mexico............. 222,000 419,000
Amortization of goodwill........................... 818,000 677,000
Write-downs and other costs for domestic
nutritionals group(1)............................ 10,878,000 --
(Gain) loss on sale of fixed assets................ (356,000) 151,000
Write-off of prepaid royalties of discontinued
products......................................... 1,503,000 --
Facility relocation expenses in Spain.............. 2,198,000 --
Other, net......................................... 873,000 388,000
----------- ----------
Other expense, net............................... $16,757,000 $2,082,000
========== =========
</TABLE>

- ---------------

(1) During 1992, SPI reassessed its domestic nutritional business, which had a
sales decline of 78% from 1988 to 1991. As a result, SPI wrote off
$10,878,000 of assets, principally goodwill and intangibles.

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Provision for Income Taxes. SPI's effective tax rates were 17% and 21% for
1992 and 1991, respectively. SPI's effective tax rates for 1992 and 1991 were
significantly less than the U.S. statutory rate due to an increase in SPI's
accumulated foreign earnings which were taxed at relatively low effective
foreign rates.

LIQUIDITY AND CAPITAL RESOURCES

WORKING CAPITAL

Balance sheet changes. During the first six months of 1994, working capital
decreased by $23,108,000 to $104,151,000. The decrease is primarily due to SPI
reclassifying its bond investments as long-term assets compared to its
short-term classification at December 31, 1993. On January 1, 1994, SPI adopted
SFAS No. 115 ("Accounting for Certain Investments in Debt and Equity
Securities"). Based on the guidelines in this new pronouncement and the expected
working capital requirements of SPI in 1994, SPI's bond investments have been
categorized as investments that are "available for sale," and, correspondingly,
are classified as long-term assets. Additionally, inventory decreased primarily
at Galenika resulting from the sale of older inventory with high unit costs
which is being replaced with inventory with lower unit costs.

The decrease in working capital is partially offset by increases in cash
and accounts receivable at Galenika due to the positive effects of the
stabilization program and the absence of large and frequent devaluations.
Prepaid expenses also increased primarily at Galenika due to commitments for
purchases of raw materials from suppliers.

Working capital increased $6,317,000 in 1993 compared to 1992. The increase
was primarily due to the increase in inventory balances at Galenika resulting
from the higher costs of obtaining raw materials from foreign suppliers,
partially offset by lower levels of accounts receivable at Galenika caused by
the effects of changes in the remeasurement rate and shorter collection periods
on the receivables.

Working capital decreased $2,425,000 in 1992 compared to 1991, principally
due to reductions in receivables at Galenika caused by currency devaluations,
sanctions and price controls, which were partially offset by the sale of SPI
stock by Galenika.

The increase in inflation levels in Yugoslavia has impacted the manner in
which Galenika conducts its business. Galenika has shortened its accounts
receivable terms and, in some cases, requires cash payment upon delivery of its
products. Its dinar cash balances are kept at low levels through a combination
of immediate purchases of inventory, hard currency and plant expansion. The
decreases in receivables and dinar cash balances from the beginning of 1993 are
a result of these actions to deal with inflation. During 1993, Galenika used
approximately $2,670,000 of its dinar cash balances for facility improvements.
Depending on available dinar cash balances, Galenika expects to continue to
invest excess cash in facility improvements and modernization.

During 1992, Galenika sold 1,200,000 shares of SPI stock for proceeds of
$30,822,000. Those shares had been contributed to Galenika on May 1, 1991 as
part of the original acquisition purchase price. Net of amounts attributable to
minority interest, the sale of the stock increased paid-in capital and reduced
treasury stock by $28,628,000.

Capital expenditures totaled $8,431,000 in 1993, $11,610,000 in 1992 and
$19,051,000 in 1991. The expenditures in 1993 primarily relate to plant
expansion in Mexico and facility improvements in Yugoslavia. The expenditures in
1992 primarily relate to facility improvements of $2,556,000 at Galenika and
plant expansion of $4,700,000 at SPI's Mexican subsidiaries. The expenditures in
1991 primarily related to the purchase and improvement of SPI's Spanish
subsidiary's facility.

Investment Policy. Effective December 1, 1986, ICN adopted an investment
policy covering intercompany advances and interest rates, and the types of
investments (such as acquisitions, marketable equity securities and high yield
bonds) to be made by ICN and its subsidiaries. As a result of this policy,
excess cash held by SPI would be transferred to ICN and, in turn, cash advances
have been made by ICN to SPI to fund acquisitions and 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. ICN has also agreed to
reimburse SPI at higher

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market interest rates for lines of credit drawn in Mexico and Canada, for funds
advances to ICN, and for an $11,000,000 loan from SPI's Spanish subsidiary. In
October 1993, SPI issued 200,000 shares of its common stock as payment of debt
on SPI's liability to ICN in the amount of $3,075,000. During the six months
ended June 30, 1994, SPI reduced its liability to ICN by $13,088,000, net of
dividends declared, resulting in a remaining payable to ICN (which is classified
as short-term) of $5,225,000 at June 30, 1994.

Investment in Russia. On October 21, 1992, SPI announced that it has
concluded an agreement with the Leningrad Industrial Chemical and Pharmaceutical
Association ("Oktyabr") to form a pharmaceutical joint venture in Russia,
Oktyabr, in which SPI has a 75% interest.

Effects of Possible Increased Demand for Virazole.(R) On June 1, 1994,
Viratek submitted a NDA to the FDA for the approval of Virazole(R) for the
treatment of chronic hepatitis C. If approved, SPI expects a significant
increase in sales of Virazole(R) which will require SPI to expend funds to
produce and market Virazole(R). SPI intends to finance these efforts internally,
and through joint venture agreements with third party manufacturers.

GALENIKA'S OPERATIONS

SANCTIONS

Virtually all of Galenika's business is conducted in Yugoslavia. On May 30,
1992, the United Nations adopted a resolution that imposed economic sanctions on
Yugoslavia and on April 17, 1993, the United Nations adopted a resolution that
imposed additional economic sanctions on Yugoslavia. On April 26, 1993, a United
States executive order was issued which implemented the additional sanctions
pursuant to the United Nations resolution. The sanctions specifically exempt
certain medical supplies for humanitarian purposes, a portion of which are
distributed by Galenika.

Galenika continues to apply for, and has received, import licenses under
the sanctions. Compliance with the sanctions will continue to impose
administrative burdens that will slow the shipments of licensed raw materials to
Yugoslavia. Shipments of imported raw materials declined in 1993 to 38% of prior
year levels. The sanctions have also contributed to an overall deteriorating
business environment in Yugoslavia in which Galenika must operate.

The sanctions also provide for the freezing of bank accounts of Yugoslavian
commercial and industrial entities. The implementation of sanctions restricts
Galenika's use of its cash holdings that are maintained with a financial
institution outside Yugoslavia. These funds have been, and management believes
will continue to be, available for drawdowns on lines of credit for payment for
shipments of certain products and materials which are specifically licensed
under the sanctions. As a result of continuing political and economic
instability within Yugoslavia, including the long-term impact of the sanctions,
wage and price controls and devaluations, there may be further limits on the
availability of hard and local currency and, consequently, an adverse impact on
the future operating results of Galenika and SPI.

At December 31, 1992, Galenika had cash and cash equivalents of
$44,700,000, of which $15,200,000 was restricted as to use and invested with a
major financial institution outside Yugoslavia. These funds have been used for
letters of guarantee on Galenika's raw material purchases and to collateralize
the payment of dividends. During the first quarter of 1993, $731,000 was
withdrawn under the letters of guarantee. Before the implementation of
additional sanctions in April 1993, approximately $9,885,000 was withdrawn under
the letters of guarantee. In October 1993, Galenika acquired marketable debt
securities with these funds in order to maximize the interest earned. All of
these marketable securities are maintained at the same financial institution. As
of December 31, 1993, Galenika had $834,000 in hard currency deposits and
$32,587,000 in marketable debt securities at this institution. As of June 30,
1994, Galenika had $9,273,000 in hard currency deposits and $29,826,000 in
marketable debt securities at this institution. A portion of these securities
are being used to collateralize a $10,000,000 note payable to the financial
institution.

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HYPERINFLATION AND PRICE CONTROLS

Since price controls were imposed in July 1992 by the government of
Yugoslavia, Galenika has been unable to increase selling prices in an
unrestricted manner in anticipation of inflation. Rather, price increases must
be approved by the government prior to implementation. The imposition of price
controls along with the effect of sanctions and recurring currency devaluations
resulted in reduced sales levels since the middle of 1992. Reduced sales levels
are expected to continue as long as sanctions are in place. As a result of
decreased sales levels, management expects that profit margins will decrease and
overall operating expenses as a percentage of sales will increase.

As a result of the hyperinflation in Yugoslavia, the Yugoslavian government
devalued the dinar on several occasions during 1993 and, on October 1, 1993,
changed the denomination of the currency. The effect of the devaluations,
adjusted for the change in currency denominations, was to increase the exchange
rate from significantly less than one dinar per $1 U.S. at the beginning of 1993
to over one trillion dinars per $1 U.S. at the end of 1993. In anticipation of
devaluations in 1993, SPI implemented a plan, described below, to minimize its
monetary exposure. In 1993, annual inflation was over one billion percent. As a
result of the devaluations and subsequent exchange losses from obtaining hard
currencies, Galenika experienced net translation losses of $173,000. While SPI
cannot predict with any certainty the actual remeasurement and exchange gains or
losses that may occur in 1994, such amounts may be substantial. At December 31,
1993, and June 30, 1994, Galenika had a net monetary liability position of
$2,093,000 and a net monetary asset position of $14,000,000, respectively. The
change in Galenika's net monetary position from the liability position at
December 31, 1993, to a net asset position at June 30, 1994, is a result of the
Yugoslavian stabilization program that was initiated in January of 1994 (which
is described below) along with absence of large and frequent devaluations since
the stabilization program began. The increase in the accounts receivable and
cash balances from the beginning of 1994 reflect an increase in Galenika's net
monetary asset position. Galenika's net monetary asset exposure would be subject
to foreign exchange loss if a devaluation of the dinar were to occur.

SPI is taking actions to generate the dinar cash needed to acquire hard
currency to reduce its monetary exposure. Galenika has access to short-term
borrowings at interest rates below the level of inflation. Galenika plans to
maximize its borrowings under these arrangements and use the proceeds to acquire
hard currency for the purchase of inventory or the payment of hard currency
debt. This strategy is intended to provide hard currency, accelerate the
purchase of inventory to minimize the effects of inflation and reduce future
translation losses. This strategy is also intended to increase Galenika's
monetary liabilities and lower its risk of loss from devaluations. However, this
strategy has resulted in increased interest expense in 1993 and may result in
high levels of interest expense in 1994.

In conjunction with a currency devaluation on July 23, 1993, the
Yugoslavian government announced that businesses in Yugoslavia can no longer buy
and sell hard currency in privately negotiated transactions. All purchases of
hard currency must be made through the National Bank of Yugoslavia based on
government-approved allocations. This action could possibly limit the
availability of hard currency in the future for Galenika. However, if the
government is controlling access to hard currency, SPI's operations in
Yugoslavia may benefit through increased allocations of hard currency in view of
the strategic nature of pharmaceutical drugs in Yugoslavia. For 1993, Galenika
received $12,744,000 in hard currency allocations as compared to $30,200,000 in
1992.

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operating successfully is significant given that past attempts at monetary
control by the Yugoslavian government have generally been short-lived. In the
near term, the effects of the stabilization program could be reversed, and a
return to prior levels of hyperinflation could occur. The success of this
stabilization program is dependent upon improvement in the Yugoslavian economy,
which is in part dependent upon the lifting of United Nations sanctions.

As required by generally accepted accounting principles, SPI translates
Galenika financial results at the dividend payment rate established by the
National Bank of Yugoslavia. To the extent that changes in this rate lag behind
the level of inflation, sales and expenses will, at times, tend to be inflated.
Future sales and expenses can substantially increase if the timing of future
devaluations falls significantly behind the level of inflation. Since the impact
of sanctions, price controls and devaluations on future sales and net income
cannot be determined with certainty, they may, in the present political and
economic environment, result in an adverse impact.

The current political and economic conditions in Yugoslavia could continue
to deteriorate to the point that SPI's investment in Galenika would be
threatened. Worsening political and economic conditions could also result in a
situation where the Company may be unable to exercise control over Galenika's
operations or be prohibited by Yugoslavian law from receiving dividends from
Galenika. Under these conditions, SPI would be required to deconsolidate
Galenika for financial reporting purposes and account for its investment using
the cost method of accounting. The investment in Galenika would be carried at
the lower of cost or realizable value and this could result in a substantial
writedown of the carrying value of the assets of Galenika.

For additional information regarding the impact of Galenika on SPI's
results of operations and financial condition, see Note 12 of Notes to
Consolidated Financial Statements of SPI.

INFLATION, CURRENCY FLUCTUATIONS AND CHANGING PRICES

SPI is subject to certain risks as a result of currency fluctuations in the
countries in which SPI operates. The foreign subsidiaries of SPI maintain U.S.
dollar denominated intercompany balances that represent unhedged monetary assets
and liabilities. At December 31, 1993, SPI's Mexican subsidiary had a net
intercompany liability of $1,007,000. SPI's Spanish and Canadian subsidiaries
have net intercompany receivables of $17,680,000 and $2,237,000, respectively,
at December 31, 1993.

The effects of inflation are experienced by SPI through increases in the
costs of labor, service and raw materials. In general, other than in Yugoslavia,
these costs have been offset and/or anticipated by periodic increases in the
prices of its products sold. This policy applies to all geographical areas in
which SPI is operating.

G-17
<PAGE> 342

QUARTERLY FINANCIAL DATA OF SPI (UNAUDITED):

Following is a summary of quarterly financial data for the years ended
December 31, 1992 and 1993 and the first six months of 1994 (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- ------- --------
<S> <C> <C> <C> <C>
1992
Net Sales...................................... $121,106 $150,911 $94,621 $109,480
Gross profit................................... 64,298 84,165 56,051 62,859
Net Income..................................... 7,691 8,132 9,733 8,947
======== ======== ======= ========
Net Income per share(1)........................ $ .40 $ .42 $ .48 $ .44
======== ======== ======= ========
1993
Net sales(2)................................... $119,636 $ 66,422 $70,214 $147,685
Gross Profit................................... 58,946 31,159 41,322 60,607
Net Income..................................... 5,736 1,091 6,918 7,765
======== ======== ======= ========
Net income per share(1)........................ $ .29 $ .05 $ .34 $ .39
======== ======== ======= ========
1994
Net sales...................................... $ 72,167 $ 78,927
Gross Profit................................... 39,552 33,759
Net Income..................................... 8,364 5,245
======== ========
Net Income per share(1)........................ $ .40 $ .25
======== ========
</TABLE>

- ---------------

(1) Net income per share has been restated to reflect a fourth quarter 1992
stock dividend of 2%, 1993 quarterly stock dividends which totaled 6%, a
first quarter 1994 dividend of 1.4% and a second quarter 1994 dividend of
1.3%.

(2) The decrease in sales from the first quarter of 1993 to the second quarter
of 1993 and the increase in sales from the third quarter 1993 to the fourth
quarter 1993 are primarily due to changes in sales levels at Galenika
resulting from the timing of devaluations and price increases and the level
of inflation during these quarters. The changes in sales levels for these
quarters do not represent significant decreases or increases in unit sales
from quarter to quarter.

G-18
<PAGE> 343

REPORT OF INDEPENDENT AUDITORS

To SPI Pharmaceuticals, Inc.:

We have audited the consolidated balance sheets of SPI Pharmaceuticals,
Inc. (a Delaware corporation) and subsidiaries, the related consolidated
statements of income, stockholders' equity and cash flows and the financial
statement schedules for each of the three years in the period ended December 31,
1993. These consolidated financial statements and financial statement schedules
(not separately included herein) are the responsibility of the Company's
Management. Our responsibility is to express an opinion on these consolidated
financial statements and financial statement schedules based on our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the consolidated financial statements are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the consolidated financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by Management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

The Company has had certain transactions with its parent and Affiliated
Corporations as more fully described in Notes 1, 3 and 4 to the consolidated
financial statements. Whether the terms of these transactions would have been
the same had they been between wholly unrelated parties cannot be determined.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
SPI Pharmaceuticals, Inc. and subsidiaries as of December 31, 1993 and 1992, the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statement schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included herein.

COOPERS & LYBRAND

Los Angeles, California
February 24, 1994, except
for Note 15, as to which
the date is March 24, 1994

G-19
<PAGE> 344

SPI PHARMACEUTICALS, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1993 AND 1992

ASSETS

<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Current Assets:
Cash and cash equivalents..................................... $ 14,777,000 $ 38,054,000
Restricted cash............................................... -- 15,200,000
Marketable securities (used to collateralize
$10,000,000 note payable).................................. 32,587,000 --
Receivables, net.............................................. 43,277,000 78,032,000
Inventories, net.............................................. 107,196,000 91,109,000
Prepaid expenses and other current assets..................... 10,925,000 13,568,000
------------ ------------
Total current assets....................................... 208,762,000 235,963,000
Property, plant and equipment, net.............................. 78,718,000 81,494,000
Other assets.................................................... 12,873,000 13,749,000
------------ ------------
Goodwill........................................................ 1,664,000 2,012,000
------------ ------------
$302,017,000 $333,218,000
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable................................................. $ 14,360,000 $ 16,322,000
Current portion of long-term debt............................. 3,866,000 4,292,000
Trade payables................................................ 13,951,000 37,526,000
Accrued liabilities........................................... 17,700,000 23,581,000
Current portion of payable to ICN............................. 18,313,000 20,160,000
Income taxes payable.......................................... 13,313,000 13,140,000
------------ ------------
Total current liabilities.................................. 81,503,000 115,021,000
Long-term debt, less current portion.......................... 16,980,000 21,016,000
Payable to ICN, less current portion.......................... -- 10,273,000
Other liabilities and deferred income taxes................... 6,226,000 10,241,000
Minority interest............................................. 41,429,000 41,240,000
Commitments and Contingencies Stockholders' equity:
Common stock, $.01 par value; 38,000,000 shares authorized;
20,101,000 and 17,890,000 shares issued and outstanding at
December 31, 1993 and 1992, respectively................... 202,000 179,000
Additional capital............................................ 91,449,000 62,403,000
Retained earnings............................................. 70,973,000 74,787,000
Foreign currency translation adjustment....................... (6,745,000) (1,942,000)
------------ ------------
Total stockholders' equity................................. 155,879,000 135,427,000
------------ ------------
$302,017,000 $333,218,000
=========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

G-20
<PAGE> 345

SPI PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF INCOME

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Net sales........................................ $403,957,000 $476,118,000 $364,358,000
Cost of sales.................................... 211,923,000 208,745,000 173,554,000
------------ ------------ ------------
Gross profit................................ 192,034,000 267,373,000 190,804,000
Selling, general and administrative expenses..... 131,069,000 170,313,000 99,942,000
Royalties to affiliates, net..................... 6,121,000 5,511,000 4,377,000
Research and development costs................... 11,516,000 7,836,000 4,901,000
Translation and exchange (gains) losses, net..... (3,282,000) 25,039,000 6,697,000
Interest income.................................. (8,033,000) (9,679,000) (3,678,000)
Interest expense................................. 23,750,000 13,065,000 8,965,000
Other expense, net............................... 3,826,000 2,082,000 16,757,000
------------ ------------ ------------
Income before provision for income taxes and
minority interest........................... 27,067,000 53,206,000 52,843,000
Provision for income taxes....................... 5,368,000 9,095,000 10,852,000
Minority interest................................ 189,000 9,608,000 11,865,000
------------ ------------ ------------
Net income....................................... $ 21,510,000 $ 34,503,000 $ 30,126,000
------------ ------------ ------------
Net income per share............................. $ 1.08 $ 1.76 $ 1.57
=========== =========== ===========
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

G-21
<PAGE> 346

SPI PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<TABLE>
<CAPTION>
COMMON STOCK
---------------------- FOREIGN CURRENCY
NUMBER OF ADDITIONAL TRANSLATION
SHARES AMOUNT CAPITAL RETAINED EARNINGS ADJUSTMENTS TOTAL
----------- -------- ------------ ----------------- ---------------- ------------
<S> <C> <C> <C> <C> <C> <C>
BALANCE AT NOVEMBER 30, 1990........ 15,638,000 $156,000 $ 50,062,000 $ 43,652,000 $ 2,065,000 $ 95,935,000
December 1990 net loss.............. -- -- -- (50,000) -- (50,000)
Proceeds from the exercise of stock
options........................... 594,000 6,000 3,086,000 -- -- 3,092,000
Translation adjustments............. -- -- -- -- (78,000) (78,000)
Temporary treasury stock holdings in
connection with the acquisition of
ICN Galenika...................... (1,101,000) (11,000) (35,627,000) -- -- (35,638,000)
Common stock issued in connection of
ICN Galenika ..................... 1,200,000 12,000 8,988,000 -- -- 9,000,000
Acquisition of intangibles from an
affiliate......................... -- -- (1,600,000) -- -- (1,600,000)
Tax benefit of stock options
exercised......................... -- -- 2,308,000 -- -- 2,308,000
Cash dividends ($.89 per share)..... -- -- -- (14,961,000) -- (14,961,000)
Net income.......................... -- -- -- 30,126,000 -- 30,126,000
----------- -------- ------------ ----------------- ---------------- ------------
BALANCE AT DECEMBER 31, 1991........ 16,331,000 163,000 27,217,000 58,767,000 1,987,000 88,134,000
Proceeds from the exercise of stock
options........................... 327,000 3,000 2,175,000 -- -- 2,178,000
Translation adjustments............. -- -- -- -- (3,929,000) (3,929,000)
Sale of temporary treasury stock
holdings in connection with the
acquisition of ICN Galenika....... 900,000 9,000 28,619,000 -- -- 28,628,000
Tax benefit of stock options
exercised......................... -- -- 956,000 -- -- 956,000
Cash dividends ($.78 per share)..... -- -- -- (15,043,000) -- (15,043,000)
Effect of stock dividend issued in
January 1993...................... 332,000 4,000 3,436,000 (3,440,000) -- --
Net income.......................... -- -- -- 34,503,000 -- 34,503,000
----------- -------- ------------ ----------------- ---------------- ------------
BALANCE AT DECEMBER 31, 1992........ 17,890,000 179,000 62,403,000 74,787,000 (1,942,000) 135,427,000
Proceeds from the exercise of stock
options........................... 461,000 5,000 2,410,000 -- -- 2,415,000
Translation adjustments............. -- -- -- -- (4,803,000) (4,803,000)
Tax benefit of stock options
exercised......................... -- -- 727,000 -- -- 727,000
Cash dividends ($.25 per share)..... -- -- -- (4,690,000) -- (4,690,000)
Effect of 1993 quarterly stock
dividends......................... 1,121,000 11,000 16,106,000 (16,117,000) -- --
Effect of stock dividend issued in
January 1994...................... 276,000 3,000 4,514,000 (4,517,000) -- --
Common stock issued for payment of
ICN debt.......................... 200,000 2,000 3,073,000 -- -- 3,075,000
Common stock issued for
acquisition....................... 153,000 2,000 2,216,000 -- -- 2,218,000
Net income.......................... -- -- -- 21,510,000 -- 21,510,000
----------- -------- ------------ ----------------- ---------------- ------------
BALANCE AT DECEMBER 31, 1993........ 20,101,000 $202,000 $ 91,449,000 $ 70,973,000 $ (6,745,000) $155,879,000
============ ========= ============= ============== ============== =============
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

G-22
<PAGE> 347

SPI PHARMACEUTICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<TABLE>
<CAPTION>
1993 1992 1991
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income.................................................... $ 21,510,000 $ 34,503,000 $ 30,126,000
Adjustments to reconcile net income to net cash provided by
operating activities:
Depreciation and amortization............................... 8,513,000 6,770,000 7,928,000
Allowance for losses on accounts receivable................. 11,261,000 48,312,000 6,740,000
Write-off of goodwill and intangibles....................... -- -- 9,102,000
Write-off of fixed assets................................... -- -- 1,664,000
Foreign exchange (gains) losses, net........................ (3,282,000) 14,739,000 6,697,000
(Gain) loss on sale of fixed assets......................... (194,000) 151,000 (356,000)
Increase in inventory allowances............................ 4,252,000 2,456,000 2,608,000
Income taxes contributed by ICN............................. -- -- 2,308,000
Other non-cash losses....................................... 1,312,000 -- 95,000
Minority interest........................................... 189,000 9,608,000 11,865,000
Change in assets and liabilities net of effects from
purchase of acquired companies:
Receivables................................................. 19,968,000 19,151,000 (74,017,000)
Inventories................................................. (15,388,000) (37,491,000) 10,192,000
Prepaid expenses and other current assets................... 3,164,000 (4,640,000) (13,591,000)
Deferred income taxes....................................... (1,673,000) 1,741,000 16,560,000
Trade payables and accrued liabilities...................... (29,331,000) (25,448,000) 37,966,000
Income taxes payable........................................ 1,795,000 5,711,000 342,000
Other liabilities........................................... (3,889,000) (45,845,000) 566,000
------------ ------------ ------------
Net cash provided by operating activities................... 18,207,000 29,718,000 56,795,000
------------ ------------ ------------
Cash flows from investing activities:
Capital expenditures.......................................... (8,431,000) (11,610,000) (19,051,000)
Proceeds from sale of fixed assets............................ 1,131,000 1,252,000 801,000
Purchase of marketable securities............................. (33,899,000) -- --
Utilization of net operating loss carryforwards from
acquired subsidiaries....................................... -- -- 1,174,000
(Increase) decrease in restricted cash........................ 15,200,000 (15,200,000) --
Payments for purchase of acquired companies and product
lines....................................................... -- -- (14,453,000)
Other, net.................................................... 205,000 222,000 (104,000)
------------ ------------ ------------
Net cash used in investing activities....................... (25,794,000) (25,336,000) (31,633,000)
------------ ------------ ------------
Cash flows from financing activities:
Net increase (decrease) in borrowings under line of
credit arrangements......................................... (1,487,000) 4,270,000 5,860,000
Proceeds from issuance of long-term debt...................... 4,207,000 9,588,000 1,891,000
Payments on long-term debt.................................... (4,644,000) (7,285,000) (322,000)
Payments to ICN............................................... (13,662,000) (14,987,000) (19,278,000)
Proceeds from stock issuances................................. 2,415,000 32,994,000 3,092,000
Dividends paid to minority stockholders....................... (2,531,000) (7,525,000) (4,180,000)
------------ ------------ ------------
Net cash provided by (used in) financing activities......... (15,702,000) 17,055,000 (12,937,000)
------------ ------------ ------------
Effect of exchange rate changes on cash......................... 12,000 (54,000) (322,000)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents............ (23,277,000) 21,383,000 11,903,000
Cash and cash equivalents at beginning of year.................. 38,054,000 16,671,000 4,768,000
------------ ------------ ------------
Cash and cash equivalents at end of year........................ $ 14,777,000 $ 38,054,000 $ 16,671,000
============= ============= =============
</TABLE>

The accompanying notes are an integral part of these consolidated statements.

G-23
<PAGE> 348

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1993

1. RELATIONSHIP WITH ICN PHARMACEUTICALS, INC., ICN BIOMEDICALS, INC. AND
VIRATEK, INC.:

SPI Pharmaceuticals, Inc. ("SPI" or the "Company") was incorporated on
November 30, 1981, as a wholly-owned subsidiary of ICN Pharmaceuticals, Inc.
("ICN") and is 39%-owned by ICN at December 31, 1993. ICN Biomedicals, Inc.
("Biomedicals") is 69%-owned by ICN and Viratek, Inc. ("Viratek") is 63%-owned
by ICN at December 31, 1993.

During 1993, ICN sold 1,618,200 shares of the Company's common stock for an
aggregate sales price of $19,995,000 in open market transactions and privately
negotiated sales. During 1992, ICN sold 690,000 shares of the Company's common
stock for an aggregate sales price of $13,786,000 in open market transactions
and privately negotiated sales and in 1991 used 1,468,000 shares in the
formation of ICN Galenika, of which 1,200,000 shares were sold for cash during
1992 by ICN Galenika.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Reclassifications

Certain prior year items have been reclassified to conform with the current
year presentation.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company and all subsidiaries after elimination of all significant
intercompany account balances and transactions. ICN Galenika has been
consolidated since the effective date of acquisition, May 1, 1991 (see Note 11
of Notes to Consolidated Financial Statements).

Goodwill

The difference between the purchase price and the fair value of net assets
purchased at the date of acquisition is included in the accompanying
Consolidated Balance Sheets as Goodwill. Goodwill amortization periods are five
years for single product line businesses acquired through November 30, 1986, and
10 to 23 years for certain businesses acquired in 1987, which have other
intangibles (patents, trademarks, etc.), and whose values and lives can be
reasonably estimated. The Company periodically evaluates the carrying value of
goodwill including the related amortization periods. The Company determines
whether there has been impairment, if any, by comparing the anticipated
undiscounted future operating income of the acquired entity with the carrying
value of the goodwill. In 1991, goodwill was reduced by $1,174,000 due to the
utilization for federal income tax purposes of net operating loss ("NOL")
carryforwards from domestic subsidiaries acquired in 1987 (see Note 4 of Notes
to Consolidated Financial Statements).

Cash and Cash Equivalents

Cash and cash equivalents at December 31, 1993 and 1992, includes
$1,247,000 and $45,362,000, respectively, of commercial paper and bonds, both of
which have maturities of three months or less. For purposes of the Statements of
Cash Flows, the Company considers highly liquid investments purchased with a
maturity of three months or less to be cash equivalents. The carrying amount of
those assets approximates fair value due to the short-term maturity of these
instruments. Of the above cash and cash equivalents at December 31, 1992,
$15,200,000 was utilized to guarantee ICN Galenika's raw material purchases and
to collateralize notes payable, and is reflected as restricted cash.

G-24
<PAGE> 349

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Marketable Securities

Marketable securities, which consist of bond investments, are stated at the
lower of cost of market, based upon quoted market prices. Unrealized gains and
losses on marketable securities are charged to income. Realized gains or losses
are determined on the specific identification method and are reflected in
income. Marketable securities had an aggregate cost at December 31, 1993, of
$33,899,000. A valuation allowance in the amount of $1,312,000 has been recorded
to reduce the carrying amount of the portfolio to fair value, which represents
the net unrealized loss included in the determination of net income for 1993.
These investments are used to collateralize a note payable of $10,000,000.

Inventories

Inventories, which include material, direct labor and factory overhead, are
stated at the lower of cost or market. Cost is determined on a first-in,
first-out ("FIFO") basis.

Property, Plant and Equipment

The Company primarily uses the straight-line method for depreciating
property, plant and equipment over their estimated useful lives. Buildings and
related improvements are depreciated from 7-50 years, machinery and equipment
from 5-15 years, furniture and fixtures from 5-10 years, and leasehold
improvements are amortized over their useful lives, limited to the life of the
lease.

The Company follows the policy of capitalizing expenditures that materially
increase the lives of the related assets and charges maintenance and repairs to
expense. Upon sale or retirement, the costs and related accumulated depreciation
or amortization are eliminated from the respective accounts, and the resulting
gain or loss is included in income.

Notes Payable

The Company classifies bank borrowings with initial terms of one year or
less as Notes Payable. At December 31, 1993, these notes had average interest
rates of 10% in Spain and 4% to 25% in Yugoslavia. The comparatively low
year-end interest rates in Yugoslavia are a result of the favorable effect on
variable interest rates arising from the Yugoslavian "Stabilization Program"
that was started in January 1994. See Note 12 of Notes to Consolidated Financial
Statements for information on the "Stabilization Program." The carrying amount
of notes payable approximates fair value due to the short-term maturity of these
instruments.

Foreign Currency Translation

The assets and liabilities of the Company's foreign operations, except
those in highly inflationary economies, are translated at the end of period
exchange rates. Revenues and expenses are translated at the average exchange
rates prevailing during the period. The effects of unrealized exchange rate
fluctuations on translating foreign currency assets and liabilities into U.S.
dollars are accumulated in Stockholders' equity. The monetary assets and
liabilities of foreign subsidiaries in highly inflationary economies are
remeasured into U.S. dollars at the year-end exchange rates and non-monetary
assets and liabilities at historical rates. In accordance with Statement of
Financial Accounting Standards ("SFAS") No. 52, "Foreign Currency Translation,"
the Company has included in operating income all foreign exchange (gains) and
losses arising from foreign currency transactions and the effects of foreign
exchange rate fluctuations on subsidiaries operating in highly inflationary
economies. The (gains) losses included in operations from foreign exchange
translation and transactions for 1993, 1992 and 1991, were ($3,282,000),
$25,039,000, and $6,697,000, respectively.

G-25
<PAGE> 350

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Income Taxes

In January 1993, the Company adopted SFAS 109, Accounting for Income Taxes.
SFAS 109 requires an asset and liability approach be used in the recognition of
deferred tax assets and liabilities for the expected future tax consequence of
events that have been recognized in the Company's financial statements or tax
returns.

Per Share Information

In March and July 1991, the Company declared 10% and 15% stock
distributions, respectively, which resulted in a 26% stock split. In January
1993, the Company issued a fourth quarter 1992 stock dividend of 2%. During
1993, the Company issued quarterly stock dividends which totaled 6%. In January
1994, the Company declared a first quarter 1994 stock dividend of 1.4%. All
share and per share amounts used in computing earnings per share have been
restated to reflect these stock splits and dividends. The number of shares used
in the per share computations were 19,898,000 in 1993, 19,594,000 in 1992, and
19,131,000 in 1991.

3. RELATED PARTY TRANSACTIONS:

General

ICN controls Biomedicals and Viratek through stock ownership, voting
control and board representation and is affiliated with the Company. Certain
officers of ICN occupy similar positions with SPI, Biomedicals and Viratek and
are affiliated with the Company. ICN, SPI, Biomedicals and Viratek
(collectively, the "Affiliated Corporations") have engaged in, and will continue
to engage in, certain transactions with each other.

An Oversight Committee of the Boards of Directors of ICN, SPI, Biomedicals
and Viratek reviews transactions between or among the affiliated corporations to
determine whether a conflict of interest exists with respect to a particular
transaction and the manner in which such a conflict can be resolved. The
Oversight Committee has advisory authority only and makes recommendations to the
Boards of Directors of each of the Affiliated Corporations. The Oversight
Committee consists of one non-management director of each Affiliated Corporation
and a non-voting chairman. The significant related party transactions have been
reviewed and recommended for approval by the Oversight Committee, and approved
by the respective Boards of Directors.

Royalty Agreements

Effective December 1, 1990, the Company entered into a royalty agreement
with Viratek whereby a royalty of 20% on all sales of Virazole is paid to
Viratek. Sales of Virazole for 1993, 1992 and 1991 were $29,515,000, $27,240,000
and $21,315,000, respectively, which generated royalties to Viratek for 1993,
1992 and 1991 of $5,903,000, $5,448,000 and $4,263,000, respectively.

During 1991, the Company purchased $235,000 of Virazole from Viratek and
received $2,943,000 of Virazole from Viratek at its cost.

Under an agreement between ICN and the employer of a director of Viratek,
the Company is required to pay a 2% royalty to the employer on all sales of
Virazole in aerosolized form. Such royalties for 1993, 1992 and 1991 were
$422,000, $430,000 and $313,000, respectively.

G-26
<PAGE> 351

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

The Company markets products under license from ICN for the treatment of
myasthenia gravis, a disease characterized by muscle weakness and atrophy. ICN
charged the Company royalties at the rate of 9% of net sales. Effective
September 1, 1990, SPI prepaid royalties to ICN in the amount of $9,590,000,
which has been recorded in Other Assets and is being amortized using the
straight-line method over fifteen years. There are no future royalties due to
ICN for these products.

Beginning in December 1986, the Company began selling Brown
Pharmaceuticals, Inc. products under license from ICN. ICN charges the Company
royalties at the rate of 8 1/2% of net sales. During 1993, 1992 and 1991, the
Company paid ICN $218,000, $65,000 and $93,000, respectively, in royalties under
this agreement.

Cost Allocations

The Affiliated Corporations occupy ICN's facility in Costa Mesa,
California. The accompanying consolidated statements of income include charges
for rent and property taxes from ICN of $279,000 for each of the last three
years. In addition, the costs of common services such as maintenance, purchasing
and personnel are incurred by the Company and allocated to ICN, Viratek and
Biomedicals based on services utilized. The total of such costs were $2,584,000
in 1993, $2,556,000 in 1992 and $2,617,000 in 1991 of which $1,733,000,
$1,679,000 and $1,568,000, were allocated to the Affiliated Corporations,
respectively. It is Management's belief that the methods used and amounts
allocated for facility costs and common services are reasonable based upon the
usage by the respective companies.

Investment Policy

ICN and the Company have a policy covering intercompany advances and
interest rates, and the types of investments (marketable equity securities, high
yield bonds, etc.) to be made by ICN and its subsidiaries. Under this policy
excess cash held by ICN's subsidiaries is transferred to ICN and, in turn, cash
advances are made to ICN's subsidiaries to fund certain transactions. ICN
charges or credits interest based on the amounts invested or advanced, current
interest rates and the cost of capital. During 1993, 1992 and 1991, the Company
was (charged) or credited interest of ($800,000), ($1,195,000), and $2,486,000
respectively. During 1993 and 1992, the Company reclassified its Biomedicals
intercompany receivable of $2,333,000 and $3,631,000 and its Viratek
intercompany payable of $5,228,000 and $6,332,000, respectively, to the
Company's ICN intercompany account resulting in a net increase in the Company's
liability to ICN of $2,041,000 and $2,701,000, respectively.

Debt and Equity Transactions

In accordance with its investment policy, ICN has advanced funds to the
Company for acquisitions, certain investments and to provide working capital.
Interest is charged on these advances at prime (6% at December 31, 1993) plus
1/2%.

On November 15, 1993, the Company issued 200,000 shares of common stock to
ICN in exchange for reducing its debt outstanding to ICN by $3,075,000. The
value of the shares issued was based on the quoted share price on the
transaction date.

On December 31, 1991, in connection with the ICN Galenika agreement, ICN,
on behalf of the Company, contributed 1,468,000 shares of common stock of the
Company to ICN Galenika. The transfer of the stock resulted in a liability of
the Company to ICN based on the stock's fair value of $38,528,000. ICN's cost
basis in the stock of $11,555,000 was used to record the Company's investment in
ICN Galenika. In consolidation, the Company recorded 1,101,000 shares of stock
for $8,665,000 as treasury stock which represents its 75% interest in ICN
Galenika. The remaining 367,000 shares for $2,890,000 were recorded as a

G-27
<PAGE> 352

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

component of minority interest and are considered issued and outstanding.
Pending sale of the stock to third parties, the $26,973,000 difference between
the fair value of the stock and the predecessor basis (ICN's cost) was recorded
as a reduction of paid-in capital. As the stock is sold, the excess of the stock
proceeds over the predecessor basis represents an additional investment by SPI,
resulting in an increase in paid-in capital. During 1992, ICN Galenika sold
1,200,000 shares of SPI stock for proceeds of $30,822,000. Net of amounts
attributable to minority interest, the sale of the stock increased paid-in
capital and decreased treasury stock by $28,628,000.

Other

During 1991, the Company's Mexican subsidiary purchased inventory from
Biomedicals for approximately $500,000 which was returned to Biomedicals for
credit in 1992.

During 1991, the Company acquired a manufacturing facility in Mississippi
from ICN at ICN's cost of $3,114,000.

During 1991, the Company acquired various licenses and patents from ICN and
Viratek which it has contributed to ICN Galenika as part of the acquisition
agreement. The Company incurred a liability to ICN and Viratek totaling
$1,600,000 and a corresponding reduction of paid-in-capital.

Following is a summary of transactions, as described above, between the
Company and ICN and its subsidiaries for 1993, 1992 and 1991 (in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
------- ------- --------
<S> <C> <C> <C>
Transactions
Cash payments to ICN, net.......................... $13,662 $14,987 $ 19,278
Royalties to affiliates, net....................... (6,121) (5,511) (4,377)
Purchases of Virazole from Viratek................. -- -- (235)
Allocation of common service costs to ICN and its
subsidiaries.................................... 1,733 1,679 1,568
Rent and property taxes charged by ICN............. (279) (279) (279)
Interest income (expense) with affiliates.......... (800) (1,195) 2,486
Dividends payable to ICN........................... (1,857) (7,518) (10,781)
Transfer of Mississippi plant from ICN............. -- -- (3,114)
Debt to ICN arising from ICN Galenika
transaction..................................... -- -- (52,831)
Transfer of intangibles and inventory from ICN and
Viratek......................................... -- -- (4,543)
Return (purchase) of inventory from Biomedicals.... -- 500 (500)
Purchase of equipment from Viratek................. -- -- (333)
Common stock issued for payment of ICN debt........ 3,075 -- --
Federal income taxes payable to ICN................ -- -- (876)
Payments of Viratek royalties...................... -- 819 --
Allocation of payroll costs........................ -- 507 754
December 1990 transactions, net.................... -- -- (865)
Other, net......................................... 2,707 465 2,251
------- ------- --------
$12,120 $ 4,454 $(52,397)
======= ======= ========
</TABLE>

G-28
<PAGE> 353

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

The average balances due to (from) ICN were $26,439,000, $29,289,000, and
$(18,326,000) for 1993, 1992 and 1991, respectively.

4. INCOME TAXES:

In January 1993, the Company adopted SFAS 109, Accounting for Income Taxes.
SFAS 109 is an asset and liability approach that requires the recognition of
deferred tax assets and liabilities for the expected future tax consequence of
events that have been recognized in the Company's financial statements or tax
returns. In estimating future tax consequences, SFAS 109 generally considers all
expected future events other than enactment of changes in the tax law or rates.
Previously, the Company used the SFAS 96 asset and liability approach that gave
no recognition to future events other than the recovery of assets and settlement
of liabilities at their carrying amounts. The adoption of SFAS 109 did not
result in a cumulative effect adjustment in the consolidated statements of
income.

Pretax income from continuing operations before minority interest for the
years ended December 31 consists of the following:

<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Domestic.................................... $17,322,000 $ 6,371,000 $(1,246,000)
Foreign..................................... 9,745,000 46,835,000 54,089,000
----------- ----------- -----------
$27,067,000 $53,206,000 $52,843,000
========== ========== ==========
The income tax provisions consist of the following:
Current
Foreign................................... $ 1,929,000 $ 1,493,000 $ 2,809,000
Federal................................... 4,197,000 5,876,000 4,331,000
State..................................... 100,000 100,000 150,000
----------- ----------- -----------
6,226,000 7,469,000 7,290,000
Deferred
Foreign................................... (858,000) 1,185,000 472,000
Federal................................... -- 441,000 3,090,000
State..................................... -- -- --
(858,000) 1,626,000 3,562,000
----------- ----------- -----------
Total............................. $ 5,368,000 $ 9,095,000 $10,852,000
========== ========== ==========
</TABLE>

The current federal tax provision has not been reduced for the tax benefit
associated with the exercise of employee stock options. The tax benefit from the
exercise of employee stock options was credited to paid-in capital in 1993,
1992, and 1991, in the amounts of $727,000, $956,000, and $2,308,000,
respectively.

The 1993 foreign deferred tax provision benefit relates primarily to the
tax effect of litigation reserves. The 1991 federal deferred tax provision
relates primarily to U.S. taxes provided on the undistributed earnings of ICN
Galenika.

During 1991, the Company provided U.S. deferred tax on the undistributed
earnings of ICN Galenika due to the Company's intention to repatriate (rather
than permanently reinvest) the earnings of this foreign subsidiary. However in
1992, the Company reversed the previously provided U.S. deferred tax. The U.S.
deferred tax on the undistributed earnings of ICN Galenika was reversed due to
the Company's intention to use these earnings to fund the Company's planned
Eastern European expansion. In the future, U.S. tax will

G-29
<PAGE> 354

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

only be provided on ICN Galenika's earnings when such earnings are repatriated
via dividend or are deemed distributed to the Company under U.S. tax law.

In 1987, the Company acquired certain domestic corporations with existing
net operating loss ("NOL") carryforwards. On November 30, 1989, these
corporations were merged into the Company and the NOL carryforwards from these
subsidiaries were utilized by the Company to partially offset domestic taxable
income for 1991 and 1990. The federal tax benefit of $1,174,000 related to the
utilization of the NOL for 1991 was credited to goodwill.

The primary components of the Company's net deferred tax liability at
December 31, 1993, and January 1, 1993, are as follows:

<TABLE>
<CAPTION>
DECEMBER 31, 1993 JANUARY 1, 1993
------------------ ----------------
<S> <C> <C>
Deferred tax assets:
Inventory and other reserves............... $ 1,421 $ 1,830
Compensation not currently deductible...... 330 242
Foreign tax credit carryover............... 700 1,400
Alternative minimum tax credit carryover... -- 413
Reserve for litigation loss................ 368 --
Promotional expenditures................... 528 --
Work force reductions...................... 345 --
Other...................................... 733 1,080
Valuation reserve.......................... (2,307) (4,682)
---------- -------------
Total deferred tax asset................ 2,118 283
Deferred tax liabilities:
Inventory temporary differences............ 1,500 2,401
Unrealized currency gains.................. 1,100 --
Other...................................... 988 616
---------- -------------
Total deferred tax liability............... 3,588 3,017
---------- -------------
Net deferred tax liability................. $ 1,470 $ 2,734
============== ============
</TABLE>

The Company's effective tax rate differs from the applicable U.S. statutory
federal income tax rate due to the following:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory rate.................................................. 35% 34 % 34%
Foreign source income taxed at lower effective rates............ (5) (23 ) (18 )
Foreign dividend distributions.................................. -- 10 --
Utilization of foreign NOL...................................... (1) (2 ) (1 )
Recognition of fully reserved deferred tax debits............... (2) -- --
Utilization of foreign/AMT credits.............................. (4) (1 ) --
Favorable audit settlement...................................... (3) -- --
Amortization of goodwill........................................ -- -- 4
Other, net...................................................... -- (1 ) 2
---- ---- ----
Effective rate.................................................. 20% 17 % 21%
==== ==== ====
</TABLE>

G-30
<PAGE> 355

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

The Company files its federal tax return on a stand-alone basis. Prior to
August 1991, the Company filed a consolidated tax return with ICN and was
subject to a tax sharing agreement. In accordance with the terms of the tax
sharing agreement, the Company was required to pay ICN for federal taxes
otherwise payable on a stand-alone basis. The federal tax sharing agreement and
consolidated federal filing terminated in August 1991 when ICN's ownership of
the Company dropped below 80 percent.

Upon leaving the consolidated group, the Company was allocated $17,000,000
of NOLs which represents the Company's share of the consolidated NOL
carryforward at deconsolidation. The allocated NOL was utilized for book
purposes in 1991 to reduce deferred tax liabilities resulting in a reduction of
income tax expense. For tax purposes, the Company's net operating loss
carryforward at December 31, 1993, is $4,279,000. The utilization of this NOL
carryforward is limited to $540,000 per year until the year 2003.

During 1993, no U.S. income or foreign withholding taxes were provided on
the undistributed earnings of the Company's foreign subsidiaries with the
exception of the Company's Panamanian subsidiary, Alpha Pharmaceutical, since
Management intends to reinvest those amounts in the foreign operations. Included
in consolidated retained earnings at December 31, 1993, is approximately
$49,000,000 of accumulated earnings of foreign operations that would be subject
to U.S. income or foreign withholding taxes if and when repatriated.

5. DEBT:

Long-term debt consists of the following:

<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Bank loans payable in Yugoslavian dinars due in
1994
with interest ranging from 13% to 170%.......... $ 77,000 $ 90,000
Interest-free option payable in Spanish pesetas
to Spanish government, due in 1994.............. 599,000 1,483,000
Mortgage payable in Spanish pesetas, with interest
at
14.25% adjusted annually, interest and
principal payable monthly through 2000.......... 2,461,000 3,340,000
Bank credit lines and long-term loans with
interest at
14%-16% adjusted annually, payable in Spanish
pesetas, principal due in installments through
1999............................................ 12,221,000 14,460,000
Mortgage payable to bank in Dutch guilders with
interest
at 9.4%, due in 2001 ........................... 615,000 744,000
Bank loan payable in Mexican pesos with a variable
interest rate currently at 27%, interest and
principal
payable monthly through 1998.................... 3,530,000 3,753,000
U.S. mortgage with interest at 8.125%, interest
and
principal payable monthly through 2003.......... 1,295,000 1,382,000
Industrial revenue bond, with interest at 10%,
interest and principal payable annually through
1999............................................ 48,000 56,000
----------- -----------
20,846,000 25,308,000
Less current portion.............................. 3,866,000 4,292,000
----------- -----------
Total........................................ $16,980,000 $21,016,000
========== ==========
</TABLE>

Annual aggregate maturities of long-term debt, subsequent to December 31,
1993, are as follows: 1994 -- $3,866,000; 1995 -- $3,628,000;
1996 -- $4,604,000; 1997 -- $1,996,000; 1998 -- $1,084,000 and $5,668,000
thereafter.

G-31
<PAGE> 356

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

The Spanish mortgage and bank credit lines and long-term loans totaling
$14,682,000, which approximates fair value, are collateralized by accounts
receivable totaling $3,909,000 and land and building with a net book value
totaling $11,252,000.

The mortgage payable of $615,000 in Dutch guilders is collateralized by
land and buildings with a net book value of $895,000. The fair value of this
note payable at December 31, 1993, was $736,000. The Mexican bank variable
interest rate loan payable of $3,530,000 is collateralized by fixed assets with
a net book value of $11,432,000. The U.S. mortgage of $1,295,000 is
collateralized by land and buildings with a net book value of $3,590,000. The
U.S. mortgage amount of $1,295,000 represents its fair value.

The fair value of the Company's debt is estimated based on current rates
available to the Company for debt of the same remaining maturities. The carrying
amount of all short-term and variable interest rate borrowings approximates fair
value.

Subsidiaries of the Company have short and long-term lines of credit
aggregating $17,147,000, of which $7,220,000 was outstanding at December 31,
1993.

6. COMMITMENTS AND CONTINGENCIES:

Litigation

The Company is a defendant in certain consolidated class actions pending in
the United States District Court for the Southern District of New York entitled
In re Paine Webber Securities Litigation (Case No. 86 Civ. 6776 (VLB); In re
ICN/Viratek Securities Litigation (Case No. 87 Civ. 4296 (VLB)). The plaintiffs
represent alleged classes of persons who purchased ICN, Viratek or SPI common
stock during the period January 7, 1986 to and including April 15, 1987. In
their memorandum of law, dated February 4, 1994, the ICN defendants argue that
class certification may only be granted for purchasers of ICN common stock for
the period August 12, 1986 through February 20, 1987 and for purchasers of
Viratek common stock for the period December 9, 1986 through February 20, 1987.
The ICN defendants assert that no class should be certified for purchasers of
common stock of SPI for any period. The plaintiffs allege that during such
period the defendants made, or aided and abetted other defendants in making,
misrepresentations of material fact and omitted to state material facts
concerning the business, financial condition and future prospects of ICN,
Viratek and SPI in certain public announcements, Paine Webber, Inc. research
reports and filings with the Commission. The alleged misstatements and omissions
primarily concern developments regarding Virazole, including the efficacy and
safety of the drug and the market for the drug. The plaintiffs allege that such
misrepresentations and omissions violate Section 10(b) of the Securities
Exchange Act of 1934 (the "Exchange Act") and Rule 10b-5 promulgated thereunder
and constitute common law fraud and misrepresentation. The plaintiffs seek an
unspecified amount of monetary damages, together with interest thereon, and
their costs and expenses incurred in the action, including reasonable attorneys'
and experts' fees. The ICN defendants moved to dismiss the consolidated
complaint in March 1988, for failure to state a claim upon which relief may be
granted and for failure to plead the allegations of fraud and misrepresentation
with sufficient particularity. In June 1991, the Court granted the ICN
defendants' motion to dismiss the Amended Consolidated Complaint and provided
the plaintiffs 30 days to replead. In July 1991, plaintiffs filed a Third
Amended Complaint which contained the same substantive allegations as the
Amended Consolidated Complaint. In September 1991, the ICN defendants moved to
dismiss the Third Amended Complaint on the same grounds as stated above, and
also moved for summary judgment. On September 18, 1992, the Court denied the ICN
defendants' motion to dismiss and for summary judgment. The ICN defendant's
filed their answer on February 19, 1993. On October 20, 1993, plaintiffs
informed the Court that they had reached an agreement to settle with
co-defendant Paine Webber, Inc. and that they would submit a proposed settlement
stipulation to the Court. Expert discovery, which commenced in September 1993,
is expected to conclude by

G-32
<PAGE> 357

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

the end of April 1994. Plaintiffs' damages expert, utilizing assumptions and
methodologies that the ICN defendants' damages experts find inappropriate under
the circumstances has testified that, assuming that classes were certified for
purchasers of ICN, Viratek and SPI common stock for the entire class periods
alleged by plaintiffs, January 7, 1986 through April 15, 1987, and further
assuming that all the plaintiff's allegations were proven, potential damages
against ICN, Viratek and SPI would, in the aggregate, amount to $315,000,000.
The ICN defendants' four damages experts have testified that damages are zero.
Management believes, having extensively reviewed the issues in the above
referenced matters, that there are strong defenses and that the Company intends
to defend the litigation vigorously. While the ultimate outcome of these
lawsuits cannot be predicted with certainty and an unfavorable outcome could
have an adverse effect on the Company, at this time Management does not expect
that these matters will have a material adverse effect on the financial
position, results of operations or liquidity of the Company. All of the
Company's attorney fees and other costs of this litigation are borne by ICN
pursuant to an agreement between ICN and Viratek.

In August 1992, an action was filed in United States District Court for the
Southern District of New York, entitled Rossi v. ICN Pharmaceuticals, Inc. (Case
No. 92 Cir. 4819 (CL6)). The plaintiffs, citing theories of product liability,
negligence and strict liability in tort, alleged that birth defects in an infant
were caused by the mother's exposure to Virazole during pregnancy. The case was
placed on the court's "suspense calendar" pending completion of the parties'
investigation of the underlying facts. Based on such investigation, the case was
dismissed without prejudice pursuant to stipulation by the parties in December
1993. Per the License Agreement, SPI has indemnified Viratek and ICN for
lawsuits involving the use of Virazole.

In February 1992, an action was filed in California Superior Court for the
County of Orange by Gencon Pharmaceuticals, Inc. ("Gencon") against ICN Canada
Limited ("ICN Canada"), its parent, the Company, and ICN alleging breach of
contract and related claims arising out of a manufacturing contract between
Gencon and ICN Canada. ICN and the Company were dismissed from the action in
March 1993 based on the Company's agreement to guarantee any judgment against
ICN Canada. Following trial in October and November 1993, the judge signed a
decision granting judgment in favor of Gencon for breach of contract in the
amount of approximately $2,100,000 plus interest, costs and attorney's fees.
Trial counsel has advised the Company that the decision contains serious errors
of law and fact. ICN Canada intends to prosecute vigorously its post-trial
motions and any necessary appeal. The Company's December 31, 1993 financial
statements includes an accrual amount equivalent to what the Company believes is
the maximum exposure with regard to this contingency.

The Company is a party to a number of other pending or threatened lawsuits
arising out of, or incident to, its ordinary course of business. In the opinion
of Management, neither the lawsuits discussed above nor various other pending
lawsuits will have a material adverse effect on the consolidated financial
position or operations of the Company.

Product Liability Insurance

The Company could be exposed to possible claims for personal injury
resulting from allegedly defective products. While to date no material adverse
claim for personal injury resulting from allegedly defective products has been
successfully maintained against the Company, a substantial claim, if successful,
could have a material adverse effect on the Company.

7. COMMON STOCK:

At December 31, 1993, 1,369 shares of common stock were reserved for
issuance to officers, directors and key employees under the Company's 1982
Employee Incentive Stock Option Plan. The option price may not be less than fair
market value at date of grant and may not have a term exceeding 10 years. At
December 31,

G-33
<PAGE> 358

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

1993, options for 1,369 shares were outstanding under this plan (at a price of
$4.84 per share), of which 1,369 shares were exercisable. No shares were
exercised during 1993. The number of shares exercised were: 1992 -- 2,322 and
1991 -- 7,000 at average prices of $5.16 and $5.27, respectively.

In addition, at December 31, 1993, a total of 856,232 shares of common
stock were reserved for issuance to officers, directors, key employees,
scientific advisors and consultants under the Company's 1982 Non-Qualified Stock
Option Plan. The option price may not be less than fair market value at date of
grant and may not have a term exceeding 10 years. At December 31, 1993, options
for 856,232 shares were outstanding under this plan (at an average price of
$11.59), of which 456,887 shares were exercisable. The number of shares
exercised were: 1993 -- 180,446; 1992 -- 229,153; 1991 -- 587,000, at average
prices of $5.10, $7.16, and $5.16, respectively.

At December 31, 1993, 541,292 shares of common stock were reserved for
issuance to officers, directors and key employees under the Company's 1992
Employee Incentive Stock Option Plan. The option price may not be less than fair
market value at date of grant and may not have a term exceeding 10 years. At
December 1993, 505,838 shares were outstanding under this plan (at an average
price of $16.78 per share), of which 89,899 shares were exercisable.

In addition, at December 31, 1993, a total of 1,483,007 shares of common
stock had been granted to officers, directors, key employees, scientific
advisors and consultants under the Company's 1992 Non-Qualified Stock Option
Plan. The option price per share may not be less than the fair value at date of
grant and may not have a term exceeding 10 years. Of these shares, a total of
1,082,586 shares were reserved and outstanding under this plan and 400,421
shares were not reserved and outstanding under this plan at the time of grant,
but were granted to key employees pursuant to authorization by the Board of
Directors, subject to the approval of the shareholders at the next meeting of
shareholders' to be held in 1994. At December 31, 1993, the average price per
share of the shares granted was $21 and 551,438 options were exercisable.

In addition to those shares reserved for the above noted plans, 342,422
shares were reserved for certain officers of the Company. At December 31, 1993,
options for 62,290 were outstanding and exercisable at an average price of
$4.84. The number of shares exercised were: 1993 -- 280,132 and 1992 -- 102,000,
at an average price of $4.84 and $5.13, respectively.

On January 13, 1993, the Company's Board of Directors approved a fourth
quarter 1992 stock dividend of 2%. During 1993, the Company issued quarterly
stock dividends which totaled 6%. In January, 1994, the Company declared a first
quarter 1994 stock dividend of 1.4%. Accordingly, all numbers of common shares,
except shares authorized, stock option data and per share data have been
restated to reflect the dividends. Fractional shares resulting from the
dividends will be settled in cash.

G-34
<PAGE> 359

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

8. DETAIL OF CERTAIN ACCOUNTS:

<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
RECEIVABLES, NET:
Trade accounts receivable..................... $ 47,956,000 $ 81,331,000
Other receivables............................. 2,954,000 6,889,000
------------ ------------
50,910,000 88,220,000
Allowance for doubtful accounts............... (7,633,000) (10,188,000)
------------ ------------
$ 43,277,000 $ 78,032,000
=========== ===========
INVENTORIES, NET:
Raw materials and supplies.................... $ 57,148,000 $ 27,297,000
Work-in-process............................... 12,541,000 11,284,000
Finished goods................................ 37,507,000 52,528,000
------------ ------------
$107,196,000 $ 91,109,000
=========== ===========
PROPERTY, PLANT AND EQUIPMENT:
Land.......................................... $ 4,891,000 $ 5,392,000
Buildings..................................... 46,477,000 47,955,000
Machinery and equipment....................... 44,385,000 41,521,000
Furniture and fixtures........................ 7,403,000 6,995,000
Leasehold improvements........................ 1,269,000 1,127,000
Construction in progress...................... 4,490,000 3,052,000
------------ ------------
108,915,000 106,042,000
Accumulated depreciation and amortization..... (30,197,000) (24,548,000)
------------ ------------
$ 78,718,000 $ 81,494,000
=========== ===========
OTHER ASSETS:
Prepaid royalties............................. $ 6,395,000 $ 6,883,000
Patents and trademarks, net of accumulated
amortization............................... 2,346,000 2,139,000
Other......................................... 4,132,000 4,727,000
------------ ------------
$ 12,873,000 $ 13,749,000
=========== ===========
ACCRUED LIABILITIES:
Payroll and related items..................... $ 8,278,000 $ 9,045,000
Professional fees............................. 387,000 758,000
Royalties..................................... 810,000 828,000
Interest...................................... 111,000 1,935,000
Taxes......................................... 139,000 1,786,000
Other......................................... 7,975,000 9,229,000
------------ ------------
$ 17,700,000 $ 23,581,000
=========== ===========
</TABLE>

G-35
<PAGE> 360

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
OTHER LIABILITIES AND DEFERRED INCOME TAXES:
Deferred income taxes......................... $1,470,000 $ 2,734,000
Redundancy cost............................... -- 4,854,000
Accrued litigation settlements and damages.... 988,000 --
Other......................................... 3,768,000 2,653,000
----------- ------------
$6,226,000 $10,241,000
----------- ------------
----------- ------------
</TABLE>

<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
INTEREST:
Interest (income)................. $(5,983,000) $(6,599,000) $ (41,000)
Interest (income) -- affiliates... (2,050,000) (3,080,000) (3,637,000)
----------- ----------- -----------
$(8,033,000) $(9,679,000) $(3,678,000)
========== ========== ==========
Interest expense.................. $20,900,000 $ 8,790,000 $ 7,814,000
Interest expense -- affiliates.... 2,850,000 4,275,000 1,151,000
----------- ----------- -----------
$23,750,000 $13,065,000 $ 8,965,000
========== ========== ==========
</TABLE>

It is the Company's policy to segregate significant non-operating items and
report them separately as Other expense, net, as follows:

<TABLE>
<CAPTION>
1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Litigation settlements and
damages........................... $ 988,000 $ 447,000 $ 621,000
Profit sharing plan expense in
Mexico............................ 557,000 419,000 222,000
Amortization of goodwill............ 248,000 677,000 818,000
Employee severance in Spain......... 1,000,000 -- --
Write-down and other costs for
domestic Nutritional Group........ -- -- 10,878,000
(Gain) loss on sale of fixed
assets............................ (194,000) 151,000 (356,000)
Write-off of prepaid royalties...... -- -- 1,503,000
Facility relocation expenses in
Spain............................. -- -- 2,198,000
Unrealized loss on marketable
securities........................ 1,312,000 -- --
Other, net.......................... (85,000) 388,000 873,000
----------- ----------- -----------
$ 3,826,000 $ 2,082,000 $16,757,000
========== ========== ==========
</TABLE>

G-36
<PAGE> 361

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

9. GEOGRAPHIC DATA:

The Company operates in the pharmaceutical industry, which includes the
production and marketing of proprietary pharmaceutical products, nutritional
supplements and optical products.

The following tables set forth the amounts of net sales, income before
provision for income taxes and minority interest and identifiable assets of the
Company by geographical areas for 1993, 1992 and 1991 (in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
SALES
United States(1)............................... $ 62,008 $ 53,102 $ 51,543
Yugoslavia..................................... 239,832 325,903 224,782
Mexico......................................... 57,782 48,654 41,691
Western Europe................................. 30,601 34,290 31,353
Canada......................................... 13,734 14,169 14,989
-------- -------- --------
Total.................................. $403,957 $476,118 $364,358
======== ======== ========
INCOME (LOSS) BEFORE INTEREST, PROVISION FOR
INCOME TAXES AND MINORITY INTEREST
United States.................................. $ 25,756 $ 17,593 $ 3,045(2)
Yugoslavia..................................... 11,828 37,692 57,190
Mexico......................................... 7,371 3,772 1,249(3)
Western Europe................................. 4,079 3,871 513(4)
Canada......................................... 851 1,869 1,427
Corporate(5)................................... (7,101) (8,205) (5,294)
-------- -------- --------
Income before interest, provision for income
taxes and minority interest................. 42,784 56,592 58,130
Net interest expense........................... 15,717 3,386 5,287
-------- -------- --------
Income before provision for income
taxes and minority interest.......... $ 27,067 $ 53,206 $ 52,843
======== ======== ========
IDENTIFIABLE ASSETS:
United States.................................. $ 38,764 $ 34,775 $ 44,203
Yugoslavia..................................... 180,055 215,282 217,330
Mexico......................................... 33,874 32,085 21,535
Western Europe................................. 33,284 40,719 45,519
Canada......................................... 6,155 6,818 8,318
Corporate...................................... 9,885 3,539 --
-------- -------- --------
Total.................................. $302,017 $333,218 $336,905
======== ======== ========
</TABLE>

- ------------------------

(1) Export sales shipped from the United States for 1993, 1992 and 1991 were
$6,166,000, $4,824,000, and $3,576,000, respectively.

(2) During 1991, the Company wrote off goodwill, inventory and other assets
totaling $13,124,000, of which $10,878,000 relates to the domestic
nutritional group.

(3) During 1991, the Mexico subsidiary wrote off $909,000 of inventory.

(4) During 1991, the Western European group wrote off $1,051,000 in inventory
and receivables.

G-37
<PAGE> 362

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

(5) Corporate includes corporate general and administrative expenses and other
non-operating income and expense. Corporate identifiable assets are not
determinable for 1991.

10. SUPPLEMENTAL CASH FLOWS DISCLOSURES:

Non-cash Transactions

In September 1993, the Company issued 200,000 shares of common stock to ICN
in exchange for reducing its debt outstanding to ICN by $3,075,000.

During 1993 and 1992, the Company issued common stock dividends of
$20,634,000 and $3,440,000, respectively.

Cash and non-cash financing activities consisted of the following in 1991
(in thousands):

ICN GALENIKA

<TABLE>
<S> <C>
Assets................................................. $ 162,581
Liabilities and minority interest...................... (104,280)
---------
58,301
Stock contributed by ICN............................... (11,555)
Obligation to ICN Galenika............................. (13,550)
Fees and expenses...................................... (3,000)
Issuance of stock to employees......................... (9,000)
Other consideration.................................... (6,743)
---------
Cash paid.................................... $ 14,453
=========
</TABLE>

The following table sets forth the amounts of interest and income taxes
paid during 1993, 1992 and 1991 (in thousands):

<TABLE>
<CAPTION>
1993 1992 1991
------- ------ ------
<S> <C> <C> <C>
Interest paid........................... $11,203 $5,565 $6,729
======= ====== ======
Income taxes paid....................... $ 3,156 $1,730 $2,324
======= ====== ======
</TABLE>

11. ACQUISITION:

Effective May 1, 1991, SPI formed a new joint company with Galenika
Pharmaceuticals headquartered in Belgrade, Yugoslavia. The joint company, ICN
Galenika, is 75%-owned by the Company and 25%-owned by Galenika Holding
("Galenika Holding"). Galenika, the leading pharmaceutical company in
Yugoslavia, produces, markets and distributes over 450 pharmaceutical,
veterinary, dental and other products in Yugoslavia, Eastern Europe and Russia.

G-38
<PAGE> 363

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Company issued to the employees ("owners" in Socialist Yugoslavia) of Galenika
Holding with a fair value of $9,000,000. On December 31, 1991, ICN, on behalf of
SPI, contributed: 1,468,000 shares of SPI common stock to ICN Galenika with a
cost basis of $11,555,000; the minority interest share of the excess of the fair
value of the common stock of the Company contributed by ICN and ICN's cost basis
equaling $6,743,000; and acquisition costs of $3,000,000. Under the terms of the
ICN Galenika agreement, SPI had an obligation to contribute, in part,
$50,000,000 in cash and either 1,200,000 shares of SPI stock or $12,000,000 in
cash. However, the agreement was subsequently changed in December 1991 whereby
ICN, on behalf of SPI, contributed shares of SPI stock in lieu of the
$40,000,000 (after a cash payment of $10,000,000) and SPI issued 1,200,000
shares of SPI stock in lieu of cash, to comply with the original intent of the
parties.

The ICN Galenika transaction has been accounted for by the purchase method
of accounting, and accordingly, the Company's investment has been allocated,
based on the Company's ownership percentage, to the assets acquired and the
liabilities assumed based on the estimated fair values at the effective date of
formation, May 1, 1991. Assuming that the acquisition of ICN Galenika occurred
at the beginning of the year, the Company's 1991 pro forma revenues for the full
year ended December 31, 1991, would have been $452,460,000 with net income of
$44,096,000. The pro forma information presented does not purport to be
indicative of the results that would have been obtained if the operations were
combined during the year presented and is not intended to be a projection of
future results or trends.

In connection with the ICN Galenika transaction, the Company changed its
fiscal year end from November 30 to December 31, which conforms to ICN
Galenika's year end. The Company's separate results of operation for the month
of December 1990, therefore, are not reflected in the statement of income but
have been charged directly to retained earnings.

G-39
<PAGE> 364

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

12. ICN GALENIKA:

The summary balance sheets of ICN Galenika as of December 31, 1993 and
1992, and the summary income statements for the years ended December 31, 1993,
1992 and the eight months ended December 31, 1991, are presented below.

ICN GALENIKA SUMMARY BALANCE SHEETS

AS OF DECEMBER 31, 1993 AND 1992
(IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Cash................................................... $ 7,542 $ 34,787
Restricted cash........................................ -- 15,200
Marketable securities (used to collateralize
$10,000,000 note payable)............................ 32,587 --
Receivables, net....................................... 7,650 41,549
Inventories, net....................................... 88,392 74,033
Other current assets................................... 21,120 25,305
Long-term assets....................................... 38,264 39,202
-------- --------
$195,555 $230,076
======== ========
Current liabilities.................................... $ 18,400 $ 41,258
Non-current liabilities................................ 40,802 53,034
Stockholders' Equity................................... 136,353 135,784
-------- --------
$195,555 $230,076
======== ========
</TABLE>

ICN GALENIKA SUMMARY STATEMENTS OF INCOME
BEFORE PROVISION FOR INCOME TAXES
AND MINORITY INTEREST

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND
EIGHT MONTHS ENDED DECEMBER 31, 1991
(IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Sales...................................... $239,832 $325,903 $224,782
Cost of sales.............................. 156,189 151,918 118,456
-------- -------- --------
Gross profit............................... 83,643 173,985 106,326
Operating expenses......................... 83,160 107,504 49,134
Translation and exchange losses, net....... 173 27,963 6,434
-------- -------- --------
Income before provision for income taxes
and minority interest.................... $ 310 $ 38,518 $ 50,758
======== ======== ========
</TABLE>

Sanctions

A substantial majority of ICN Galenika's business is conducted in the
Federal Republic of Yugoslavia (Serbia and Montenegro). On May 30, 1992, the
UNSC adopted a resolution that imposed economic

G-40
<PAGE> 365

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

sanctions on the Federal Republic of Yugoslavia and on April 17, 1993, the UNSC
adopted a resolution that imposed additional economic sanctions on the Federal
Republic of Yugoslavia. On April 26, 1993, the United States issued an executive
order that implemented the additional sanctions pursuant to the United Nations
resolution. The new sanctions continue to specifically exempt certain medical
supplies for humanitarian purposes, a portion of which are distributed by ICN
Galenika.

ICN Galenika continues to apply for, and has received, licenses under the
new sanctions. The renewed efforts to enforce sanctions will create additional
administrative burdens that will slow the shipments of licensed raw materials to
Yugoslavia. Shipments of imported raw materials declined in 1993 to 38% of prior
year levels. Additionally, the new sanctions have contributed to an overall
deteriorating business environment in which ICN Galenika must operate.

The new sanctions provide for the freezing of bank accounts of Yugoslavian
commercial and industrial entities. The implementation of new sanctions may
create a restriction on ICN Galenika's cash holdings that are maintained in a
bank outside of Yugoslavia. Management believes, however, that these funds will
be available for drawdowns on lines of credit for shipments specifically
licensed under the new and prior sanctions. As a result of continuing political
and economic instability within Yugoslavia, including the long-term impact of
the sanctions, wage and price controls, and devaluations, there may be further
limits on the availability of hard and local currency and consequently, an
adverse impact on the future operating results of the Company.

At December 31, 1992, ICN Galenika had cash and cash equivalents of
$44,700,000, of which $15,200,000 was restricted as to use, invested with a
financial institution outside of Yugoslavia. These funds have been used for
letters of guarantee on ICN Galenika's raw material purchases and to
collateralize the payment of dividends. During the first quarter 1993, $731,000
was withdrawn under the letters of guarantee. Before the implementation of
additional sanctions in April 1993, approximately $9,885,000 was withdrawn under
the letters of guarantee. In October 1993, ICN Galenika acquired marketable
securities with these funds in order to maximize their interest earned. The
marketable securities are maintained at the same financial institution. As of
December 31, 1993, at this institution, ICN Galenika had $834,000 of hard
currency and $32,587,000 of marketable securities which are used to
collateralize a $10,000,000 note payable.

In order to conserve operating cash, the wages of all ICN Galenika
employees were reduced to Yugoslavian minimum wage levels beginning in the
fourth quarter 1993. To help alleviate the burden of sanctions and wage
reductions, the Company intends to expend funds for humanitarian aid in the form
of food assistance for ICN Galenika employees. This aid will be subject to
approval and licensing required by UNSC sanctions. In the first quarter 1994,
the Company obtained licenses for approximately $280,000 of aid. The expenditure
of future aid will be dependent on the conditions in Yugoslavia and will be
subject to obtaining approval and licenses under UNSC sanctions.

Hyperinflation and Price Controls

Under existing Yugoslavian price controls imposed in July 1992, ICN
Galenika can no longer continue the unrestricted practice of increasing selling
prices in anticipation of inflation. Rather, price increases must be approved by
the government prior to implementation. The imposition of price controls along
with the effect of sanctions and recurring currency devaluations resulted in
reduced sales levels in the last half of 1992 and for 1993. This trend of
reduced sales levels is expected to continue as long as sanctions are in place.
As a result of decreased sales levels, Management expects that profit margins
will decrease and overall operating expenses as a percentage of sales will
increase.

G-41
<PAGE> 366

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

devaluations, adjusted for the change in currency denomination, was to increase
the exchange rate from less than one dinar per $1 U.S. at the beginning of 1993
to over one trillion dinars per $1 U.S. at the end of 1993. In anticipation of
devaluations in 1993, the Company implemented a plan described below, to
minimize its monetary exposure. As a result of the devaluations and subsequent
exchange losses from obtaining hard currencies, ICN Galenika experienced
translation losses of $173,000. While the Company cannot predict with any
certainty the actual remeasurement and exchange gains or losses that may occur
in 1994, such amounts may be substantial. Annual inflation is very high with
some estimates of over 1 billion percent. Future devaluations are likely in the
near term. At December 31, 1993, ICN Galenika's net monetary liability exposure
was $2,093,000. As a result of the non-tradability of the dinar, the Company is
unable to effectively hedge against the loss from devaluation.

The Company is taking action to generate the dinar cash needed to acquire
hard currency to reduce its monetary exposure. ICN Galenika has access to
short-term borrowings at interest rates below the level of inflation. ICN
Galenika plans to maximize its borrowings under these arrangements and use the
proceeds to acquire hard currency for the purchase of inventory. This strategy
will provide hard currency, accelerate the purchase of inventory to minimize the
effects of inflation, and reduce future transaction losses. This strategy will
also increase ICN Galenika's monetary liabilities, and lower its risk of loss
from devaluations. This strategy, however, has resulted in increased interest
expense in 1993 and may result in high levels of interest expense in 1994.

In conjunction with a currency devaluation on July 23, 1993, the
Yugoslavian government announced that businesses in Yugoslavia can no longer buy
and sell hard currency in privately negotiated transactions. All purchases of
hard currency must be made through the National Bank of Yugoslavia based on
government approved allocations. This action could possibly limit the
availability of hard currency in the future for ICN Galenika. However, if the
government is successful in controlling access to hard currency, the Company's
operations in Yugoslavia may benefit through increased allocations of hard
currency. Due to the strategic nature of pharmaceutical drugs in Yugoslavia, ICN
Galenika has, in the past, received relatively favorable allocations of hard
currency from the government. For the year ended December 31, 1993, ICN Galenika
received $12,744,000 in currency allocations.

As required by GAAP, the Company translates ICN Galenika financial results
at the dividend payment rate established by the National Bank of Yugoslavia. To
the extent that changes in this rate lag behind the level of inflation, sales
and expenses will, at times, tend to be inflated. Future sales and expenses can
substantially increase if the timing of future devaluations falls significantly
behind the level of inflation. While the impact of sanctions, price controls,
and devaluations on future sales and net income cannot be determined with
certainty, they may, under the present political and economic environment,
result in an adverse impact in the future.

At December 31, 1993, ICN Galenika has U.S. $33,421,000 invested with a
financial institution outside of Yugoslavia. These funds came from the initial
cash investment made by the Company of $14,453,000 and from the sale of the
Company's stock transferred to ICN Galenika by ICN, also in conjunction with the
acquisition. Under the terms of the acquisition agreement, these funds were
originally intended to finance business expansion. However, in light of the
current economic conditions in Yugoslavia, these funds are used

G-42
<PAGE> 367

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

for letters of guarantee on ICN Galenika's raw material purchases and to
collateralize the payment of dividends. These funds are encumbered by a letter
of guarantee for raw material purchases, of which no amount was outstanding at
December 31, 1993, and $5,200,000 was outstanding at December 31, 1992, and as
collateral for $10,000,000 of loans, included in Notes Payable bearing interest
at 4.5% that were issued to pay the 1992 dividend of the same amount. Other uses
of these funds in the future, such as capital investment, additional letters of
guarantee, or future dividends are subject to review and licensing under the
UNSC sanctions. At December 31, 1993, these funds have been invested in bonds
and are recorded as marketable securities which are used to collateralize a
$10,000,000 notes payable. At December 31, 1992, these funds were included in
cash with $15,200,000 reflected as restricted cash.

As noted above, ICN Galenika paid a $10,000,000 dividend in 1992 of which
the Company received 75% or $7,500,000. Yugoslavian law allows free distribution
of earnings whether to domestic (Yugoslavian) or international investors. ICN
Galenika is allowed to pay dividends out of earnings calculated under
Yugoslavian Accounting Practices ("YAP"), not earnings calculated under GAAP. As
a result of the current level of inflation, the accumulated YAP earnings of ICN
Galenika are insignificant when stated in dollars. Future dividends from ICN
Galenika will depend heavily on future earnings. Under GAAP, ICN Galenika had
accumulated earnings, which are not available for distributions, of
approximately $61,787,000 at December 31, 1993. However, additional repatriation
of cash could be declared from contributed capital as provided for in the
original purchase agreement. In 1992, the Company made the decision to no longer
repatriate the earnings of ICN Galenika and instead will use these earnings for
local operations and reduction of debt.

The current political and economic conditions in Yugoslavia could continue
to deteriorate to the point that the Company's investment in ICN Galenika would
be threatened. Worsening political and economic conditions could also result in
a situation where the Company may be unable to exercise control over ICN
Galenika's operations or be unable to receive dividends from ICN Galenika. Under
these conditions, the Company would no longer be able to continue to consolidate
the financial information of ICN Galenika. In this situation the Company would
be required to deconsolidate ICN Galenika and account for its investment using
the cost method of accounting and the investment in ICN Galenika would be
carried at the lower of cost or realizable value.

13. CONCENTRATIONS OF CREDIT RISK:

Financial instruments that potentially expose the Company to concentrations
of credit risk, as defined by SFAS No. 105, consist primarily of cash deposits.
The Company places its cash deposits with respected financial institutions and
limits the amount of credit exposure to any one financial institution, however,
in connection with the acquisition of ICN Galenika, the cash contributed to ICN
Galenika was required, under the terms of the agreement, to be placed on deposit
in a single high credit quality financial institution outside of Yugoslavia. At
December 31, 1993, ICN Galenika had hard currency of $834,000 and marketable
securities of $32,587,000 on deposit with this financial institution.

14. INVESTMENT IN RUSSIA

On October 21, 1992, the Company announced that it had concluded an
agreement with the Leningrad Industrial Chemical and Pharmaceutical Association
("Oktyabr") to form a pharmaceutical joint venture in Russia, ICN Oktyabr, in
which the Company will have a 75% interest. The new joint venture was registered
with the Russian Federation on March 9, 1993. The joint venture represents a new
business, and not the acquisition of the existing business or assets of Oktyabr.
Business operations of the joint venture will commence on the completion of a
business plan. Oktyabr, which recently was privatized, will contribute output
from its current production facilities. The Company's contribution will be
management expertise, technology, equipment, intellectual property, training and
technical assistance to the new joint venture.

G-43
<PAGE> 368

SPI PHARMACEUTICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Because of the transition of the Russian economy into a free market oriented
economy, the Company plans for a gradual phase-in of the joint venture in 1994
and 1995. During this phase-in period, the joint venture will develop training
and marketing strategies and begin constructing a new manufacturing facility in
1995 that is scheduled to be fully operational in 1996. Because of this phase-in
period, the Company does not expect any current material effects on it operating
results, as well as, its capital resources and liquidity.

15. SUBSEQUENT EVENT

In addition to the joint venture in Russia, on March 24, 1994, SPI entered
into an Agreement with the City of St. Petersburg to acquire 15% of the
outstanding shares of its joint venture partner, Oktyabr, in exchange for
approximately 30,000 shares of the Company's stock. As part of this Agreement,
SPI may qualify to receive newly issued shares of Oktyabr pursuant to Russian
privatization regulations that will raise its total investment in Oktyabr to
43%. The issuance of these additional shares is subject to approval and
completion of an "investment plan." The completion of the investment plan will
not require any additional financial resources of the Company. The Company has
also extended an offer to the employees of Oktyabr to exchange their Oktyabr
shares for SPI shares. The Oktyabr employees currently own approximately 33% of
the outstanding shares, however, the number of employees that will exchange
their shares is uncertain. In the event that SPI qualifies under the investment
plan to raise its investment to 43%, it is possible that a sufficient number of
employees might exchange their Oktyabr shares for SPI shares so that the total
SPI investment in Oktyabr would exceed 50%. If this event occurs, the Company
would be required to consolidate the financial results of Oktyabr into the
financial statements of the Company.

G-44
<PAGE> 369

QUARTERLY STOCK PRICE AND DIVIDEND DATA

The common stock is traded on the American Stock Exchange (Symbol: SPI).
The common stock was first listed on NASDAQ (National Association of Securities
Dealers Automated Quotation System) on October 7, 1983, and was first listed on
the American Stock Exchange on July 22, 1988.

The following table sets forth, for the periods shown, the high and low
closing sales prices on the American Stock Exchange. In January 1993, the
Company issued a fourth quarter 1992 stock dividend of 2%. During 1993, the
Company issued quarterly stock dividends which totaled 6%. In January and May
1994, the Company declared a first quarter and second quarter 1994 stock
dividend of 1.4% and 1.3%, respectively. The market prices set forth below have
been retroactively adjusted for these stock dividends.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
1992
First Quarter................................................. 333/4 24 /16
Second Quarter................................................ 26 17 /16
Third Quarter................................................. 203/4 15 /16
Fourth Quarter................................................ 1711/16 91/2
1993
First Quarter................................................. 209/16 9 /16
Second Quarter................................................ 1511/16 11 /16
Third Quarter................................................. 173/16 111/8
Fourth Quarter................................................ 1411/16 12 /16
</TABLE>

As of February 18, 1994, there were 5,150 holders of record of the
Company's common stock.

The Board of Directors will continue to review the Company's dividend
policy. The amount and timing of any future dividends will depend upon the
profitability of the Company, the need to retain earnings for use in the
development of the Company's business and other factors.

G-45
<PAGE> 370

APPENDIX H
<PAGE> 371

APPENDIX H

VIRATEK INC.

1993 ANNUAL REPORT TO STOCKHOLDERS

FINANCIAL AND GENERAL INFORMATION
<PAGE> 372

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
Business........................................................................... H-1
Selected Financial Data of Viratek................................................. H-8
Management's Discussion and Analysis of Financial Condition and Results of
Operation........................................................................ H-9
Report of Independent Auditors..................................................... H-12
Financial Statements
Balance Sheets................................................................... H-13
Statements of Operations......................................................... H-14
Statements of Stockholders' Equity (Deficit)..................................... H-15
Statements of Cash Flows......................................................... H-16
Notes to Financial Statements.................................................... H-17
Quarterly Stock Price and Dividend Data.......................................... H-25
</TABLE>

H-i
<PAGE> 373

BUSINESS

INTRODUCTION

Viratek, Inc. ("Viratek" or "the Company") is principally engaged in the
development of therapeutic pharmaceutical compounds derived from nucleic acids,
including the broad spectrum antiviral agent ribavirin that is marketed in the
United States, Canada and most of Europe under the trade name Virazole.(R)

Beginning in fiscal 1990, management made the decision to substantially
reduce the research and development activities to support the goal of a
reduction in the number of research projects and a concentration on compounds
and indications showing the most promise for commercial development, such as
ribavirin and certain anticancer and immune stimulator agents. This decision was
due in part to a reduction in the amount of funds available for research and
development. In conjunction with this decision, it was determined that Viratek's
only operating function would be to receive royalties on worldwide sales of
ribavirin. Accordingly, Viratek significantly reduced the number of its
employees and the level of management involvement. In 1992, Viratek accelerated
its research and development activities and focused on clinical testing of
Virazole(R) in the treatment of hepatitis C and initiating research to develop
new biomedical and diagnostic products.

During 1991 and 1990, two additional phase II studies were being performed
by the Karolinska Institute and the National Institutes of Health ("NIH")
regarding the efficacy of ribavirin in the treatment of chronic hepatitis C.
Once the results from the studies were completed, indicating positive results,
Viratek made the decision to move forward with phase III studies. In addition,
as a result of Viratek's public offering in 1993, the amount of funds available
for research and development activities had increased and Viratek made the
decision to increase these activities. This includes a new research program
focused on the detection and measurement of a group of human peptide hormones or
regulators and in vitro commercial diagnostics.

During 1993, Viratek substantially completed clinical testing of Virazole
for the treatment of chronic hepatitis C and started up a new discovery program
using gene specific technology to target diseases such as cancer, chronic viral
infections and psoriasis.

VIRAZOLE(R) (RIBAVIRIN)

Virazole(R) (ribavirin) is a broad spectrum antiviral agent with
demonstrated clinical utility against a variety of both DNA-containing and
RNA-containing viruses. As of December 31, 1993, Virazole(R) has been approved
for commercial sale in over 40 countries in various formulations for various
indications. Within the United States, Canada, and most of Europe, the approved
form and use is presently limited to aerosol treatment of hospitalized infants
and young children with severe lower respiratory tract infections due to
respiratory syncytial virus ("RSV"). In other countries, Virazole(R) has been
approved for treatment of one or more of the following: herpes simplex virus,
varicella zoster virus (which causes both chicken pox and shingles), exanthemas
diseases (chicken pox, measles), influenza, hepatitis, human immuno-deficiency
virus ("HIV"), and hemorrhagic fever with renal syndrome.

The mechanism of action of Virazole(R) appears to involve more than one
process, the importance of which varies depending on the specific virus-host
interaction involved. In general, the action of Virazole(R) is virustatic,
leading to interruption of viral replication, rather than virucidal in which the
virus would be killed directly. Depending upon the virus involved, virustasis is
accomplished through inhibition of proper mRNA capping, direct inhibition of
certain virus-specific enzymes, or both.

Viral mRNA capping is required by many viruses for efficient binding of
viral genomic "message" to host cell polysomes and therefore for efficient mRNA
translation into proteins. Test results indicate that viral protein synthesis is
significantly reduced in the presence of Virazole(R) at therapeutic levels with
no observed effect on normal host cell protein synthesis.

H-1
<PAGE> 374

of viral enzymes inhibited by Virazole(R) are influenza encoded RNA dependent
RNA polymerase, and HIV encoded reverse transcriptase.

To date, Viratek is aware of no reports of virus mutants that are resistant
to inhibition by Virazole(R). The emergence of resistant strains of
micro-organisms and viruses to widely used therapeutic drugs is a common problem
and Viratek believes that the apparent lack of this development is an important
beneficial feature of Virazole(R), particularly when considering possible
long-term therapy for diseases such as hepatitis C.

Management believes that the most commercial potential for Virazole(R) in
the near term is in the treatment of hepatitis C, RSV, and influenza.

HEPATITIS C

Viratek is currently finalizing phase III clinical trials to evaluate
Virazole(R) in the treatment of hepatitis C, a potentially life threatening
disease in the chronic, active state.

Hepatitis is a family of diseases characterized by inflammation of the
liver. Although there are several causes of hepatitis, some of the most frequent
and difficult to manage are of viral origin. Presently, there are five distinct
viruses known to cause hepatitis. These have been designated hepatitis A, B, C,
D and E. The disease caused by hepatitis types A and E is acute. The disease
caused by types B, C and D can be either acute or chronic. Although the symptoms
of acute hepatitis A and E can be quite severe, the overall prognosis is good
and patients generally recover fully without significant medical intervention.
Acute hepatitis caused by types B, C, and D viruses is generally less severe
than that of types A and E but often progresses to chronic forms of the disease.
Chronic hepatitis may initially present milder symptoms such as flu-like
illness, malaise, fatigue, chills and drowsiness, but can, over time, progress
insidiously. The prognosis in this case is much more severe, particularly in the
case of hepatitis C, in which about half of those initially infected advance to
chronic hepatitis and of those with the chronic disease 15%-25% experience
ongoing liver damage (chronic active hepatitis). As many as 20% of chronic
hepatitis C patients have cirrhosis and a significant but presently unknown
percentage will advance to hepatocellular carcinoma ("HCC"), a form of liver
cancer. The progression of hepatitis C is slow; as many as 20 years may elapse
between initial infection and the development of severe life-threatening
disease, such as cirrhosis or HCC, and during most of this period the patient
may be completely asymptomatic.

The degree of liver damage in hepatitis patients is estimated through
quantification of liver enzymes ("ALT") circulating in the blood. When liver
damage is taking place, liver cells (hepatocytes) are releasing ALT into
circulation. Thus, an increased level of serum ALT is generally indicative of
hepatocyte disruption and, consequently, of liver damage. Measurement of ALT
levels can be performed with minimal discomfort to the patient, requiring only a
blood sample. Physicians may also choose to assess liver damage directly through
visualization of liver biopsy samples, but such measurement requires a
significant invasive procedure.

Chronic active hepatitis represents a progressive inflammatory disease of
the liver with continued elevation of liver enzymes. Chronic active hepatitis is
defined by the persistence of elevated ALT for periods exceeding six months. In
chronic hepatitis C, ALT levels may exceed normal by a factor of 10 or more.
Recently, rapid diagnostic tests have become available to detect antibody to the
hepatitis C virus in patient's blood. The presence of antibody to HCV indicates
that the patient has at some time been exposed to the virus but not necessarily
that the patient is currently infected. In a patient with both a positive
antibody test and elevated ALT, the probability of infection with hepatitis C is
very high and virtually certain if other potential causes of hepatitis have been
ruled out.

Based on published reports, the prevalence of antibody to hepatitis C among
volunteer blood donors is approximately one percent in the United States, or a
projected 1,800,000 antibody positive individuals. The incidence of new
infections is estimated at 170,000 annually. Viratek estimates that the total
number of patients within the United States with chronic active hepatitis C is
approximately 275,000. Based on published reports on the prevalence of antibody
to hepatitis C among volunteer blood donors in various European countries,
Viratek estimates that there are an equivalent number of patients with chronic
active hepatitis C in Europe.

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At present, the only product known to Viratek approved in the United
States, Japan, and Europe for treatment of hepatitis C is interferon. Several
different manufacturers have received authorization to commercialize their
respective brands of interferon for treatment of hepatitis C in different
countries, but in the United States only a form of alpha interferon marketed by
Schering Corporation is known by Viratek to have received such authorization.
Treatment of hepatitis C with interferon is associated with improvement in
hepatocellular injury as measured by a reduction in ALT levels and visualization
of biopsy specimens. However, interferon is not universally effective and is
limited by side effects such as flu-like symptoms, fatigue, depression, bone
marrow suppression and autoimmune thyroid disease. Further, interferon must be
administered by subcutaneous injection three times weekly for six months or
more. Management believes that such limitations make the development of a
treatment with more universal effectiveness, greater safety and ease of
administration highly desirable.

In 1989, Viratek completed two pilot phase II clinical studies in chronic
active hepatitis types B and C. These studies were designed to assess the use of
orally-administered Virazole(R) in those infections, at a dose of 1,200 mg daily
for four weeks. One study was conducted at Huntington Memorial Hospital in
Pasadena, California and the other at the Veteran Administration Hospital in
Taipei, Taiwan. The results of these studies were sufficiently encouraging that
additional phase II studies involving a longer duration of treatment were
undertaken. The first of these was conducted at the Karolinska Institute in
Stockholm, Sweden, and involved a 12-week course of oral Virazole(R) treatment
for chronic active hepatitis C. The second was conducted by the NIH and involved
a 24-week course of oral Virazole(R) for treatment of chronic active hepatitis B
and C. Both the Karolinska Institute and NIH studies in hepatitis C have been
completed and both indicate that administration of Virazole(R) was associated
with a significant reduction of ALT in all patients treated. The NIH trial also
demonstrated a reduction in hepatitis C virus titers in all treated patients.
This measurement was not included in the study conducted at the Karolinska
Institute. In both of these studies, as well as the earlier pilot studies,
administration of Virazole(R) was not associated with any clinically relevant or
therapy limiting side effects. The results of these studies were considered by
both Viratek and the NIH to be sufficiently promising that both Viratek and NIH
have undertaken phase III clinical studies in chronic hepatitis C. NIH has
undertaken one phase III trial in the United States and Viratek has undertaken
three phase III trials, one in the United States and two in Europe.

Viratek has full access to the results of the NIH study. That study,
together with Viratek-sponsored studies, if positive (as to which there can be
no assurance), could form the basis for a New Drug Application ("NDA") to the
Food and Drug Administration ("FDA") to approve the drug for commercial sale in
the treatment of hepatitis C. Viratek has allocated approximately $4,700,000 of
the proceeds of a recent public stock offering to fund Viratek's phase III
clinical trials evaluating Virazole(R) in the treatment of hepatitis C and
related project costs.

RESPIRATORY SYNCYTIAL VIRUS (RSV)

Aerosolized Virazole(R) is the only pharmaceutical compound known to
Viratek to be commercially available for the treatment of this infection, and
has been approved by the FDA and comparable foreign agencies for sale in the
United States, Canada and most of Europe to treat hospitalized infants and young
children with severe lower respiratory tract infection due to RSV. In treating
RSV, the drug is administered by a small particle aerosol generator, an advanced
delivery system that permits direct delivery of Virazole(R) to the site of the
infection.

The Committee on Infectious Diseases of the American Academy of Pediatrics
recommends that the following infants hospitalized with lower respiratory tract
disease caused by RSV, be considered for ribavirin

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aerosol therapy: infants at risk for severe or complicated respiratory syncytial
virus infections (e.g., congenital heart disease, chronic lung conditions,
immunodeficiency); infants who are severely ill; infants with lower respiratory
tract disease, that is not initially severe, but may be at some increased risk
of progressing to a more complicated course as a result of their young age (less
than six weeks); or infants where prolonged illness may exacerbate underlying
conditions (e.g., multiple congenital anomalies).

INFLUENZA AND OTHER INDICATIONS

Clinical studies using Virazole(R) aerosol for treatment of influenza A and
B in adults and infants led to an approved health registration in Belgium in
1992 for marketing of Virazole(R) aerosol to treat infants and adults
hospitalized with severe influenza A or B. Aerosolized Virazole(R) for the
treatment of influenza A and B is also being sold in 20 other countries
including Mexico, and countries in Central and South America, and Asia and the
Far East.

Clinical studies have also been conducted with Virazole(R) in other
formulations for treatment of several other viral diseases. Among those diseases
with respect to which clinical studies have been conducted and for which at
least one governmental health regulatory agency has approved commercialization
of Virazole(R) are herpes zoster; genital herpes; hemorrhagic fever with renal
syndrome; Lassa Fever; measles; chicken pox; and HIV. While Viratek presently
has no plans to initiate new clinical studies for any of these indications,
Viratek plans, where appropriate, to utilize the existing clinical documentation
to serve as the basis for any future submission of health registration dossiers
to various additional governmental health authorities to expand the use of
Virazole.(R)

OTHER NUCLEOSIDE COMPOUNDS

Viratek is also seeking to develop several of its other proprietary
compounds with promising profiles as anticancer and immunestimulatory agents.
Based on in-house know-how, several thousand analogues of naturally occurring
DNA and RNA building blocks have been synthesized and characterized in vitro and
in animal models. In evaluating any potential therapeutic, efficacy has to be
balanced against toxicity, and any good drug candidate should be devoid of or
have a low level of induction of drug resistance.

A promising line of research has been Viratek's study of
sulphur-substituted purines, and Sulfasine(TM), a nucleoside analog which has
been shown to possess a favorable ratio of efficacy versus toxicity, and to be
active against several multi-drug resistant tumor cell lines. Sulfasine(TM) has
been shown to be active against experimental leukemias resistant to treatment
with widely used conventional therapies. Sulfasine(TM) also showed significant
antimetastatic activity in mice implanted with reticulum cell sarcoma cells in
the liver, lung and kidney. A preclinical study of Sulfasine(TM) has
demonstrated important pharmacological properties.

Viratek intends to continue development of Sulfasine(TM) and Immusine(TM).

Viratek announced during 1993 that a discovery program targeting genetic
material implicated in cancer, chronic viral infections, and psoriasis was
initiated. Leading scientists in the field of oligonucleotides are under
recruitment to the research facility in Costa Mesa. This "antisense" technology
is broadly enabling as therapeutics, as well as diagnostics.

DIAGNOSTIC PRODUCTS

Recently, Viratek and ICN Biomedicals, Inc. ("Biomedicals"), an affiliate
of Viratek, made certain strategic decisions concerning a new program of
research and development to be pursued by Viratek. Current development
activities under the new program are focused on the detection and measurement of
a group of human peptide hormones or regulators. The blood levels of such
hormones are of vital interest to the

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management of ovarian function and fertility, contraception, lactation, growth
and development, and steroid regulation. Other areas of emphasis include
neonatal testing, childhood disease states, and male and female hormone levels.
For information concerning the marketing and distribution rights, and research
and development expenses incurred in connection with products from the new
program, see Note 3 of Notes to Financial Statements for December 31, 1993.

MARKETING AND PRODUCTION

Currently, Virazole(R) is the only product generating royalty revenues to
Viratek. Viratek has granted an exclusive license to SPI Pharmaceuticals, Inc.
("SPI"), an affiliate of Viratek, to manufacture, distribute, and market
Virazole(R). Under an agreement with SPI dated as of December 1, 1990 (the
"License Agreement"), Viratek has granted SPI an exclusive worldwide license to
make, use and sell ribavirin for all indications and presentations. The License
Agreement includes the right to sublicense and is for a term of 10 years with an
option by either party to extend it for an additional 10 years. The License
Agreement also assigns to SPI Viratek's exclusive license from Baylor College of
Medicine covering the aerosol device used to deliver ribavirin to the lungs and
further licenses SPI to use all of Viratek's trademarks under which ribavirin is
sold worldwide. Under the License Agreement, SPI has agreed to pay Viratek a
royalty equal to 20% of worldwide sales of ribavirin, to assume Viratek's
obligations under the Baylor license of the aerosol device and to assume, and to
indemnify Viratek from, product liability claims arising from the manufacture
and sale of ribavirin. SPI has further agreed to use its best efforts to
commercialize ribavirin and the License Agreement provides that if royalties
paid to Viratek do not exceed $3,500,000 per year in each of the five years from
the effective date of the License Agreement, or if royalties paid to Viratek do
not exceed $20,000,000 per year beginning December 1, 1996, Viratek shall have
the option to convert the SPI license into a nonexclusive license. This
agreement includes the right to sublicense, which SPI has undertaken in
geographic areas where it does not, or does not immediately intend, to have a
presence.

Viratek is informed that SPI has subcontracted some of the manufacture of
both bulk and finished Virazole(R) to third party suppliers. While the
capacities of these manufacturers are sufficient to meet current demand for
Virazole(R), it is anticipated that sales of the product for hepatitis C, if
approved, would exceed currently available bulk Virazole(R) production capacity.
In such event, Viratek anticipates that substantial funds to expand bulk
Virazole(R) production capacity will be required to meet future demand.

COMPETITION

Viratek faces intense competition in each of the areas in which it focuses
its research. Because the development of antiviral agents, such as Virazole(R),
is still in a relatively early stage worldwide, competition is focused on
research and development, and obtaining governmental approval of new compounds
and therapies. There are many pharmaceutical companies and institutions engaged
in activities relating to research and development concerning antiviral agents,
and competition is expected to increase. Many of these companies and
institutions have substantially greater resources, research and development
staffs and facilities than Viratek, as well as greater experience in obtaining
regulatory approval of the commercial sale of pharmaceutical products. There can
be no assurance that Viratek's competitors will not succeed in developing
technologies and products that are more effective than those being developed by
Viratek or that would render Viratek's current and future products obsolete or
noncompetitive.

At present, Viratek generates all of its operating revenue from royalties
on the sale of Virazole(R) by SPI. In this limited area Viratek believes there
is presently no competition. However, Viratek is aware of several ongoing
research programs which are attempting to develop new prophylactic and
therapeutic products directed to RSV. Although Viratek follows publicly
disclosed developments in this field, on the basis of currently available data
it is unable to evaluate whether the technology being developed in these
programs poses a threat to its current market position in the treatment of RSV
or its revenue streams.

Viratek believes that the largest potential market for its technology will
be in the treatment of hepatitis C. In this market segment, Viratek will
experience intense competition from several pharmaceutical manufacturers who
have previously received approval for products containing interferon. Such
manufacturers include

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Schering-Plough Corporation, F. Hoffmann-La Roche & Company, Burroughs Wellcome,
Takeda Chemical Industries Ltd., and others, all of which have substantially
greater resources at their disposal than does Viratek and all of which have
already begun to market their respective brands of interferon products for
treatment of hepatitis C. In addition, Viratek believes that research programs
are ongoing at a number of laboratories, including government, industry, and
private, to develop new prophylactic and therapeutic products for hepatitis C.
See "BUSINESS -- Licenses, Patents and Trademarks."

GOVERNMENT REGULATION

Prior to marketing or manufacturing new products for use by humans, Viratek
must obtain FDA approval in the United States and approval from comparable
agencies in other countries. Obtaining FDA approval for new products and
manufacturing processes can take a number of years and involve the expenditure
of substantial resources. To obtain FDA approval for the commercial sale of a
therapeutic agent, the potential product must undergo testing programs on
animals, the data from which is used to file an Investigational New Drug
application ("IND") with the FDA. In addition, there are three phases of human
testing. Phase I: safety tests for human clinical experiments generally in
normal, healthy people; phase II: expanded safety tests conducted in people who
are sick with the particular disease condition that the drug is designed to
treat; phase III: greatly expanded clinical trials to determine the
effectiveness of the drug at a particular dosage level in the affected patient
population. The data from these tests is combined with data regarding chemistry,
manufacturing and animal toxicology and is then submitted in the form of an NDA
to the FDA. The preparation of an NDA requires the expenditure of substantial
funds and the commitment of substantial resources. The review by the FDA
requires several months to several years. If the FDA determines that the drug is
safe and effective the NDA is approved. No assurance can be given that
authorization of the commercial sale by Viratek of any new drugs or compounds
for any application will be secured in the United States or any other country,
or that, if such authorization is secured, those drugs or compounds will be
commercially successful. The FDA in the United States and other regulatory
agencies in other countries periodically inspect manufacturing facilities.

Viratek and the NIH are currently performing phase III clinical trials on
the use of Virazole(R) in the treatment of chronic active hepatitis C which, if
successful, could be used to prepare a NDA and other registration documents in
order to receive approval from FDA and other regulatory agencies. For a summary
of the history and status of Viratek's testing with respect to the effect of
Virazole(R) in the treatment of chronic active hepatitis C, see
"BUSINESS -- Virazole(R) (ribavirin)."

Virazole(R) has been approved for commercial sale in over 40 countries in
various formulations for various indications. In December 1985, the FDA approved
Viratek's application for the hospital use of aerosolized ribavirin for the
treatment of RSV in infants. In 1986, the Canadian Health Protection Branch
("HPB") delivered a Notice of Compliance permitting the hospital use of
aerosolized ribavirin for the treatment of RSV. Viratek has received approval of
the FDA, the HPB, the Department of Health and Social Services in the United
Kingdom, the Department of Community Services and Health in Australia and the
Ministry of Health in Spain for the hospital use of aerosolized ribavirin for
the treatment of RSV (approved only for infants and young children by the FDA
and similarly restricted by such other agencies). For information concerning the
history and status of Viratek's testing with respect to the effect of
Virazole(R) in the treatment of influenza, see "BUSINESS -- Virazole(R)
(ribavirin)". There can be no assurance that authorization for the commercial
sale of ribavirin for any other indication or presentation will be obtained in
the United States or any other country where such authorization is required.

United States federal, state and local provisions which have been enacted
or adopted regulating the discharge of waste into the environment do not
currently have a material effect upon Viratek's capital expenditures, earnings
or competitive position.

LICENSES, PATENTS AND TRADEMARKS

Pursuant to a licensing agreement with Viratek, SPI sells ribavirin under
the trade name Virazole(R) in the United States, Canada, United Kingdom,
Australia, Spain and other countries. Ribavirin is broadly covered by

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a United States patent expiring in 1999 relating to its use in humans to treat
specified antiviral diseases. In December 1985, the FDA approved Viratek's
application for the hospital use of aerosolized ribavirin for the treatment of
RSV in infants. In 1986, the Canadian HPB delivered a Notice of Compliance
permitting the hospital use of aerosolized ribavirin for the treatment of RSV.
The technology related to this use of ribavirin is covered by a United States
patent, expiring in 1999. Viratek believes that its patent position is soundly
based but there can be no assurance that Viratek's patent rights will afford
adequate commercial protection. Moreover, while Viratek has foreign patents in
certain countries covering ribavirin, Viratek has no limited patent rights with
respect to ribavirin in a number of countries where ribavirin is currently, or
in the future may be, approved for commercial sale, including France, Germany
and Great Britain.

As a general policy, Viratek expects to seek patents, where available, on
inventions concerning novel drugs, techniques, processes or other products which
it may develop in the future. Viratek intends to rely substantially on its
unpatented proprietary know-how, but there can be no assurance that others will
not develop substantially equivalent proprietary information or otherwise obtain
access to Viratek's know-how.

Many of the names of Viratek's products are registered trademarks in the
United States, Mexico, Canada, Spain and other countries. Viratek anticipates
that the names of future products will be registered as trademarks in the United
States, Mexico, Canada and elsewhere. Other organizations may in the future
apply for and be issued patents or own proprietary rights covering technology
which may become useful to Viratek's business. The extent to which Viratek may
need at some future date to obtain licenses from others is not known.

PRODUCT LIABILITY

Viratek could be exposed to possible claims for personal injury resulting
from allegedly defective products. New drugs require extensive testing and
lengthy government approvals for safety and efficacy prior to commercial sale.
Nevertheless, even if a drug were approved for commercial use by an appropriate
governmental agency, there can be no assurance that users will not claim that
effects other than those intended may result from Viratek's products. In the
United States, Viratek self-insures against potential product liability exposure
with respect to their marketed products, including Virazole(R). Management
reviews Viratek's product liability insurance requirements on a continuing
basis. Viratek has not set aside more than nominal cash reserves against product
liability claims. While to date no material adverse claim for personal injury
resulting from allegedly defective products, including ribavirin, has been
successfully maintained against Viratek, a substantial claim, if successful,
could have a material adverse effect on Viratek. See Note 7 to Notes of
Financial Statements for information concerning a product liability lawsuit
involving ribavirin.

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SELECTED FINANCIAL DATA OF VIRATEK

The following table sets forth certain financial data for the years ended
December 31, 1993, 1992 and 1991, the one month ended December 31, 1990, and for
each of the years in the two-year period ended November 30, 1990. This
information should be read in conjunction with the financial statements included
elsewhere in this Joint Proxy Statement/Prospectus (in thousands, except per
share amounts).

<TABLE>
<CAPTION>
YEARS ENDED ONE MONTH YEARS ENDED
DECEMBER 31, ENDED NOVEMBER 30,
---------------------------- DEC. 31, ------------------
1993 1992 1991 1990(1) 1990 1989
------- ------- ------ ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Total revenues(4).................. $ 5,903 $ 5,448 $4,498 $ 250 $4,926 $ 2,609
Research and development costs..... 5,193 2,299 -- -- 1,198 8,192
Net income (loss).................. (822) 1,817 3,587 165 1,339 (17,102)
Per share information:(5)
Net income (loss) applicable to
common shareholders........... (.05) .12 .24 -- .10 (1.76)
Cash dividends paid to common
shareholders.................. -- -- -- -- -- --
</TABLE>

<TABLE>
<CAPTION>
DECEMBER 31, NOVEMBER 30,
------------------------------------------ ------------------
1993 1992 1991 1990(1) 1990 1989
------- ------- ------ ---------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(3)................. $16,805 $ 8,828 $6,187 $ 370 $ 146 $ 5,630
Total assets....................... 35,248 11,640 9,347 7,009 6,953 12,878
Advances from ICN and other long-
term liabilities................. 260 270 299 673 658 19,860
Stockholders' equity
(deficit)(2)..................... 34,075 10,803 8,871 3,601 3,434 (9,905)
</TABLE>

- ---------------

(1) Viratek changed year end from November 30 to December 31. Results of
operations for the month of December 1990 are included in Stockholders'
Equity.

(2) In February 1990, ICN exchanged $12,000,000 of advances due from Viratek for
4,705,882 shares of its common stock.

(3) Working capital includes net amounts due (to) from affiliate of $9,325,
$6,343 and ($1,538) as of December 31, 1992, 1991 and November 30, 1990,
respectively.

(4) See Note 3 of Notes to Financial Statements for December 31, 1993 regarding
royalty arrangements with SPI.

(5) In December 1993, Viratek declared a fourth quarter 1993 stock distribution
of 5%. All share and per share amounts have been restated to reflect this
stock dividend.

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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATION

RESULTS OF OPERATION

SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO SIX MONTHS ENDED JUNE 30, 1993

Royalties. Effective December 1, 1990, SPI and Viratek entered into a
royalty agreement. Under this agreement, SPI acts as Viratek's exclusive
distributor of ribavirin, and pays Viratek a royalty of 20% on sales worldwide.
During the six months ended June 30, 1994, the royalties earned from SPI were
$3,570,000 compared to $1,984,000 for the same period in 1993. The increase in
royalties was primarily due to increased Virazole(R) sales in the United States,
resulting from a combination of price increases and increased unit sales of
Virazole(R).

General and Administrative Expenses. General and administrative expenses
increased for the six months ended June 30, 1994 over the same period in 1993 by
$972,000. The increases relate primarily to increased legal costs in defense of
the class action lawsuit and the higher central services and rent allocation
from affiliates in 1994, due to expanded research and development activities.

Research and Development Costs. Research and development costs increased
for the six months ended June 30, 1994 over the same period in 1993 by
$1,419,000. During the second quarter 1994, Viratek completed a review of data
from phase III multicenter trials and on June 1, 1994, Viratek submitted a New
Drug Application ("NDA") to the U.S. Food and Drug Administration for
Virazole(R) capsules for the treatment of chronic hepatitis C. The NDA includes
five clinical studies of Virazole(R) capsules, three phase III and two phase II
trials; two human pharmacokinetic studies and eleven new animal toxicity
studies, in addition to other required data. The increases relate to the higher
costs incurred for the chronic hepatitis C clinical trials and submission of the
NDA during 1994 and the additional research and development activities which
involve a new pharmaceutical discovery program aimed at developing therapeutic
drugs to inhibit disease-causing genes.

Interest Income, Net. Interest income, net, increased for the six months
ended June 30, 1994 over the same period in 1993 by $453,000 as a result of the
higher average outstanding receivable from ICN and the interest earned on the
cash received from Viratek's public offering and warrants exercised.

YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

Royalties. Royalties under this agreement from SPI were $5,903,000,
$5,448,000 and $4,263,000, for 1993, 1992 and 1991. Included in royalties for
1993, 1992 and 1991, are royalties earned on foreign sales by SPI totalling
$2,017,000, $1,472,000 and $1,189,000, respectively.

The increase in royalty income in 1993 compared to 1992 is due to increased
sales in Mexico resulting from the introduction of ribavirin cream used for the
treatment of herpes and additional marketing efforts by SPI in 1993, which
included offering volume discounts. The increase in royalty income in 1992
compared to 1991, is due to increased sales of Virazole(R) in the United States.

General and Administrative Expenses. General and administrative expenses
increased in 1993 compared to 1992 by $1,200,000. The increase relates primarily
to increased legal costs in defense of the consolidated class action suit.

General and administrative expenses increased in 1992 compared to 1991 by
$571,000. The increase results from an increased level of operations in 1992,
increased legal fees associated with the consolidated class action suit, and
additional costs of stockholders' communications.

Research and Development Costs. The research and development activities of
Viratek were substantially reduced in 1990. As a result, there were no research
and development expenses incurred in 1991. In 1992, Viratek made a decision to
increase research and development activities which included developing
pharmaceutical products derived from nucleic acids and the development of in
vitro commercial diagnostic products. The 1993 research and development expenses
include $4,201,000 for phase III clinical trials relating

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to Hepatitis C, $793,000 for other biomedical product development and $192,000
for new pharmaceutical discovery programs aimed at developing therapeutic drugs
to inhibit disease-causing genes. The 1992 research and development expenses
included $1,785,000 for phase III clinical trials relating to hepatitis C and
$514,000 for other product development resulting from the transfer of
Biomedicals' research and development to Viratek.

Interest Income, Net. Interest income increased in 1993 compared to 1992 by
$663,000. The increase was the result of the higher average outstanding
receivable from ICN and the interest earned on the cash received from Viratek's
public offering and warrants exercised. Interest income, net in 1992 and 1991
represents interest on amounts due from ICN.

Other Income, Net. In 1991, other (income) expense included a $325,000
contribution to the University of California, San Diego, for the unrestricted
support of Dr. Roland Robins' research at the U.C.S.D. School of Medicine and a
$200,000 reversal of an accrual for certain patent and trademarks legal fees and
governmental investigations. Dr. Robins was a director of the Company.

A summary of other (income) expense is as follows:

<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Contribution to the UC San Diego........ $ -- $ -- $ 325,000
Equipment rental income................. (240,000) (240,000) (120,000)
Legal expense reversal.................. -- -- (200,000)
Other................................... 8,000 (45,000) (57,000)
--------- --------- ---------
$(232,000) $(285,000) $ (52,000)
========= ========= =========
</TABLE>

WORKING CAPITAL, LIQUIDITY AND CAPITAL RESOURCES

The amount of funds available for research and development was dependent,
to a large extent, on the amount of funds received from SPI in connection with
the royalty agreements as well as funding from ICN. In addition to such funding,
the level of research and development activities has been and will be dependent
upon Viratek's ability to seek additional financing through the sale of its
securities, licensing and joint venture agreements and other arrangements in
order to complete the pursuit of governmental approval or to sustain business
operations pending approval of Viratek's products for sale. Viratek intends to
review the advantages of cooperative research and development arrangements with
other parties and may elect to obtain partners for its products and product
areas when it appears that product development, marketing or other operating
advantages may result.

In February 1993, Viratek successfully completed an offering in which it
sold 1,375,000 units for net proceeds of $8,897,000. Each unit consisted of one
share of common stock and one warrant to purchase one share of common stock at
$10.075. In March 1993, the underwriters exercised their option to purchase the
overallotment (206,250 units) in connection with the public offering for net
proceeds of $1,368,000. Viratek has used a substantial portion of the net
proceeds for research and development activities to fund phase III clinical
trials and related project costs to evaluate Virazole(R) in the treatment of
chronic hepatitis C and to continue development of certain other anti-cancer and
immune-stimulatory compounds. The additional research and development involves a
new pharmaceutical discovery program aimed at developing therapeutic drugs to
inhibit disease-causing genes. This research activity, which involves 15 new
scientists, is based on antisense technology and is focused on designing new
pharmaceuticals to combat cancer, viral diseases and skin disorders. The
warrants became separately transferable on July 29, 1993 and were exercisable
until August 30, 1993 and redeemable by Viratek on August 31, 1993 at $.05 per
warrant, if not previously exercised. Of the total outstanding warrants,
1,366,642 were exercised resulting in net proceeds to Viratek of $13,472,000. Of
the total net proceeds of the offering of the units and the exercise of the
warrants, $11,201,000 has been spent on research and development through June
30, 1994.

Management believes that the proceeds from the offering, noted above, and
revenues from operations will be sufficient to fund currently planned clinical
trials and development projects relating to the evaluation of Virazole(R) in the
treatment of chronic hepatitis C and normal working capital requirements through
1994.

H-10
<PAGE> 383

During 1991, 1992 and 1993, ICN advanced to Viratek $1,006,000, $580,000
and $254,000, respectively. As of December 31, 1993 and June 30, 1994, Viratek
had a demand receivable from ICN of $15,528,000 and $19,911,000, respectively.
Interest is credited on outstanding balances at prime (7 1/4% at June 30, 1994)
plus 1/2%.

Viratek's effective tax rate was 0%, 3% and (2)% for 1991, 1992, and 1993,
respectively. The income tax benefit in 1993 of $14,000 is primarily
attributable to the difference between the 1992 provision for income taxes
accrued in the financial statements and the liability as finally determined upon
filing of Viratek's 1992 tax return. Viratek's effective rate for 1992 and 1991
was significantly less than the U.S. statutory rate due to the utilization of
net operating loss ("NOL") carryforwards. Viratek has net operating loss
carryforwards of $47,500,000 which expire in varying amounts from 1995 through
2005. The NOL carryforwards include $10,900,000 of stock option deductions. For
financial statement purposes, the tax benefit from the utilization of stock
option deductions are credited to paid-in capital. Viratek has research and
development tax credit carryovers of $800,000 which expire in varying amounts
from 1996 to 2002.

Capital expenditures totaled $889,000 and $207,000 for the six months ended
June 30, 1994 and year ended December 31, 1993, respectively. There were no
capital expenditures for property, plant and equipment in 1992 and 1991.

During 1985, after reviewing costs, availability and related factors,
management decided not to continue to maintain product liability insurance.
While to date no material adverse claim for personal injury resulting from
allegedly defective products, including Virazole(R), has been successfully
maintained against Viratek, a substantial claim, if successful, could have a
material adverse effect on Viratek. SPI has agreed to indemnify Viratek from
product liability claims, including attorney's fees, arising from the
manufacture and sale of ribavirin, pursuant to the license and royalty agreement
dated December 1, 1990.

QUARTERLY FINANCIAL DATA OF VIRATEK (UNAUDITED):

Following is a summary of quarterly financial data for the years ended
December 31, 1992 and 1993 and for the first six months of 1994 (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
1992 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
- ---- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues.............................. $ 1,993 $ 265 $ 1,948 $1,242
Research and development expenses and
other, net.......................... 605 113 1,269 1,644
--------- ----------- ---------- -------
Net income (loss)..................... $ 1,388 $ 152 $ 679 $ (402)
========= =========== ========== ========
Net income (loss) per share(1)........ $ .09 $ .01 $ .04 $ (.03)
========= =========== ========== ========
1993
- ----
Revenues.............................. $ 1,444 $ 540 $ 2,048 $1,871
Research and development expenses and
other, net.......................... 1,157 1,649 1,799 2,119
------------- -------------- ------------- -------
Net income (loss)..................... $ 287 $ (1,109) $ 249 $ (249)
========= =========== ========== ========
Net income (loss) per share(1)........ $ .02 $ (.07) $ .01 $ (.01)
========= =========== ========== ========
1994
- ----
Revenues.............................. $ 2,812 $ 758
Research and development expenses and
other, net.......................... 1,660 2,079
------------- --------------
Net income (loss)..................... $ 471 $ (1,802)
========= ===========
Net income (loss) per share........... $ .03 $ (.10)
========= ===========
</TABLE>

- ---------------

(1) Net income (loss) per share has been restated to reflect a fourth quarter
1993 stock dividend of 5%.

H-11
<PAGE> 384

REPORT OF INDEPENDENT AUDITORS

To Viratek, Inc.:

We have audited the accompanying balance sheets of Viratek, Inc. (a
Delaware corporation) as of December 31, 1993 and 1992, and the related
statements of operations, stockholders' equity (deficit) and cash flows for each
of the three years in the period ended December 31, 1993. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.

The Company has had certain transactions with its parent and affiliated
companies as more fully described in Notes 1 and 3 to the financial statements.
Whether the terms of these transactions would have been the same had they been
between wholly unrelated parties cannot be determined.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Viratek, Inc. as of December
31, 1993 and 1992, and the results of its operations and its cash flows for each
of the three years in the period ended December 31, 1993, in conformity with
generally accepted accounting principles.

COOPERS & LYBRAND

Los Angeles, California
March 4, 1994

H-12
<PAGE> 385

VIRATEK, INC.

BALANCE SHEETS

DECEMBER 31, 1993 AND 1992

ASSETS

<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents....................................... $ 9,698,000 $ 5,000
Certificates of deposit......................................... 8,000,000 --
Receivables from affiliate...................................... -- 9,325,000
Prepaid expenses and other current assets....................... 20,000 65,000
----------- -----------
Total current assets......................................... 17,718,000 9,395,000
Receivables from affiliate........................................ 15,503,000 --
Property, plant and equipment, net................................ 204,000 118,000
Patents, clinical trials and trademarks, net...................... 1,823,000 2,127,000
----------- -----------
$35,248,000 $11,640,000
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable................................................ $ 405,000 $ 23,000
Accrued liabilities............................................. 508,000 544,000
----------- -----------
Total current liabilities.................................... 913,000 567,000
----------- -----------
Deferred compensation............................................. 260,000 270,000
----------- -----------
Commitments and contingencies Stockholders' equity:
Preferred stock: $.10 par value; 1,000,000 shares authorized;
none outstanding............................................. -- --
Common stock: $.10 par value; 30,000,000 shares authorized;
18,113,149 shares outstanding at December 31, 1993 and
14,145,870 shares outstanding at December 31, 1992........... 1,811,000 1,415,000
Additional capital.............................................. 73,465,000 41,789,000
Accumulated deficit............................................. (41,201,000) (32,401,000)
----------- -----------
Total stockholders' equity................................... 34,075,000 10,803,000
----------- -----------
$35,248,000 $11,640,000
========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

H-13
<PAGE> 386

VIRATEK, INC.

STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<TABLE>
<CAPTION>
1993 1992 1991
--------- --------- ---------
<S> <C> <C> <C>
Revenues:
Royalties from SPI (an affiliate).................... $5,903,000 $5,448,000 $4,263,000
Net sales to SPI..................................... -- -- 235,000
--------- --------- ---------
Total revenues.................................... 5,903,000 5,448,000 4,498,000
Costs and expenses:
Cost of sales........................................ -- -- 235,000
General and administrative expense................... 2,226,000 1,026,000 455,000
Research and development costs....................... 5,193,000 2,299,000 --
Interest income, net................................. (873,000) (210,000) (239,000)
Depreciation and amortization........................ 425,000 738,000 515,000
Other income, net.................................... (232,000) (285,000) (52,000)
--------- --------- ---------
Income (loss) before provision (benefit) for income
taxes............................................. (836,000) 1,880,000 3,584,000
Provision (benefit) for income taxes................... (14,000) 63,000 (3,000)
--------- --------- ---------
Net income (loss).................................... $(822,000) $1,817,000 $3,587,000
========= ========= =========
Per share information:
Net income (loss).................................... $ (.05) $ .12 >$ .24
========= ========= =========
</TABLE>

The accompanying notes are an integral part of these financial statements.

H-14
<PAGE> 387

VIRATEK, INC.

STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<TABLE>
<CAPTION>
COMMON STOCK
-----------------------
NUMBER OF ADDITIONAL ACCUMULATED
SHARES AMOUNT CAPITAL DEFICIT TOTAL
--------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Balance at November 30,
1990.................. 13,946,002 $1,394,000 $40,010,000 $(37,970,000) $ 3,434,000
December 1990 net
income................ -- -- -- 165,000 165,000
Proceeds from exercise
of stock options...... 157,022 16,000 319,000 -- 335,000
Transfer of intangible
assets................ -- -- 1,350,000 -- 1,350,000
Net income.............. -- -- -- 3,587,000 3,587,000
--------- --------- ---------- ----------- -----------
Balance at December 31,
1991.................. 14,103,024 1,410,000 41,679,000 (34,218,000) 8,871,000
Proceeds from exercise
of stock options...... 42,846 5,000 110,000 -- 115,000
Net income.............. -- -- -- 1,817,000 1,817,000
--------- --------- ---------- ----------- -----------
Balance at December 31,
1992.................. 14,145,870 1,415,000 41,789,000 (32,401,000) 10,803,000
Stock offering and
warrants exercised.... 2,947,892 294,000 23,443,000 -- 23,737,000
Proceeds from exercise
of stock options...... 156,856 16,000 341,000 -- 357,000
Effect of stock
distribution issued in
January 1994.......... 862,531 86,000 7,892,000 (7,978,000 ) --
Net loss................ -- -- -- (822,000 ) (822,000)
--------- --------- ---------- ----------- -----------
Balance at December 31,
1993.................. 18,113,149 $1,811,000 $73,465,000 $(41,201,000) $34,075,000
========== ========= ========== ============ ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

H-15
<PAGE> 388

VIRATEK, INC.

STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

<TABLE>
<CAPTION>
1993 1992 1991
--------- ---------- ----------
<S> <C> <C> <C>
Cash flows used in operating activities:
Net income (loss).................................. $(822,000) $1,817,000 $3,587,000
Adjustments to reconcile net income (loss) to net
cash used in operating activities:
Depreciation and amortization................... 425,000 738,000 515,000
Deferred taxes.................................. -- 8,000 (3,000)
Other non cash items............................ -- -- (6,000)
Change in assets and liabilities:
Other receivables............................... -- -- 6,000
Inventories..................................... -- -- 174,000
Prepaid expenses and other current assets....... 45,000 (48,000) (2,000)
Accounts payable................................ 382,000 (5,000) (560,000)
Accrued liabilities............................. (36,000) 367,000 (351,000)
Deferred compensation........................... (10,000) (9,000) 56,000
Intercompany receivables........................ (6,432,000) (3,562,000) (4,727,000)
--------- ---------- ----------
Net cash used in operating activities........... (6,448,000) (694,000) (1,311,000)
--------- ---------- ----------
Cash flows provided by (used in) investing
activities:
Disposals (additions) of property, plant and
equipment....................................... (207,000) -- 7,000
Purchase of certificates of deposit................ (8,000,000) -- --
--------- ---------- ----------
Net cash provided by (used in) investing
activities...................................... (8,207,000) -- 7,000
--------- ---------- ----------
Cash flows provided by financing activities:
Proceeds from ICN advances......................... 254,000 580,000 1,006,000
Net proceeds from stock offering and warrants...... 23,737,000 -- --
Proceeds from stock options........................ 357,000 115,000 335,000
--------- ---------- ----------
Net cash provided by financing activities.......... 24,348,000 695,000 1,341,000
--------- ---------- ----------
Net increase in cash and cash equivalents............ 9,693,000 1,000 37,000
Cash and cash equivalents at beginning of year....... 5,000 4,000 (33,000)
--------- ---------- ----------
Cash and cash equivalents at end of year............. $9,698,000 $ 5,000 $ 4,000
========= ========== ==========
</TABLE>

The accompanying notes are an integral part of these financial statements.

H-16
<PAGE> 389

VIRATEK, INC.

NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 1993

1. RELATIONSHIP WITH ICN PHARMACEUTICALS, INC., SPI PHARMACEUTICALS, INC. AND
ICN BIOMEDICALS, INC.

Viratek, Inc. was incorporated on August 1, 1980 as a wholly-owned
subsidiary of ICN Pharmaceuticals, Inc. ("ICN") and at December 31, 1993 is
63%-owned by ICN. At December 31, 1993, SPI Pharmaceuticals, Inc. ("SPI") is
39%-owned by ICN and ICN Biomedicals, Inc. ("Biomedicals") is 69%-owned by ICN.
The Company was organized primarily to develop compounds derived from or related
to the components of nucleic acids which are to be used in the treatment of
viral diseases.

Viratek operates in one business segment and geographic region whose
revenues are dependent upon sales of ribavirin by SPI.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reclassifications

Certain prior year items have reclassified to conform with the current year
presentation.

Cash and Cash Equivalents

Property, Plant and Equipment

The Company uses the straight-line method for depreciating property, plant
and equipment over their estimated useful lives. Machinery and equipment are
depreciated over 10 years and furniture and fixtures over 5-10 years.

Repairs and maintenance which are not considered betterments and do not
extend the useful life of the property are charged to expense as incurred. Upon
sale or retirement, the costs and related accumulated depreciation are
eliminated from the respective accounts, and the resulting gain or loss is
recorded in income.

Patents, Clinical Trials and Trademarks

The Company expenses research and development costs as incurred. Costs
associated with clinical trials conducted prior to FDA approval are expensed as
research and development, unless approval is considered routine and is expected
to occur in a short period of time.

At December 31, 1993 and 1992, costs associated with previous clinical
trials of RSV and post approval follow-up studies of RSV have been capitalized.
Patents, clinical trials and trademarks are amortized over their estimated
useful lives of 17 years which, based upon a reevaluation beginning in 1991,
have a remaining useful life at December 31, 1993 of 6 years.

Income Taxes

H-17
<PAGE> 390

VIRATEK, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Earnings per share

Per share information is based on the weighted average number of common
shares outstanding and dilutive common share equivalents. Common equivalent
shares represent shares issuable for outstanding options, on the assumption that
the proceeds would be used to repurchase shares in the open market. In December
1993, the Company declared a fourth quarter 1993 stock distribution of 5%. All
share and per share amounts used in computing earnings per share have been
restated to reflect this stock distribution. The number of shares used in the
per share computation was 16,937,000 in 1993, 15,249,000 in 1992, and 15,102,000
in 1991.

3. RELATED PARTY TRANSACTIONS

General

ICN controls Biomedicals and Viratek through stock ownership, voting
control and board representation and is affiliated with SPI. Certain officers of
ICN occupy similar positions with SPI, Biomedicals and Viratek. ICN, SPI,
Biomedicals and Viratek (collectively, the "Affiliated Corporations") have
engaged in, and will continue to engage in, certain transactions with each
other.

An Oversight Committee and the Boards of Directors of the Affiliated
Corporations reviews transactions between or among the Affiliated Corporations
to determine whether a conflict of interest exists with respect to a particular
transaction and the manner in which such conflict can be resolved. The Oversight
Committee has advisory authority only and makes recommendations to the Board of
Directors of each of the Affiliated Corporations. The Oversight Committee
consists of one non-management director of each Affiliated Corporation and a
non-voting chairman. The significant related party transactions have been
reviewed and recommended for approval by the Oversight Committee, and approved
by the respective Boards of Directors.

Ribavirin agreements

Effective December 1, 1990, SPI and Viratek entered into a royalty
agreement. Under this agreement, SPI acts as Viratek's exclusive distributor of
ribavirin, and pays Viratek a royalty of 20% on sales worldwide for a term of 10
years with an option by either party to extend it for an additional 10 years.

Royalties under this agreement with SPI were $5,903,000, $5,448,000, and
$4,263,000 for 1993, 1992 and 1991, respectively. Included in royalties for
1993, 1992 and 1991 are royalties earned on foreign sales by SPI totalling
$2,107,000, $1,472,000 and $1,189,000, respectively.

During 1991, SPI purchased $235,000 of ribavirin from the Company.

Cost allocations

The Affiliated Corporations occupy ICN's facility in Costa Mesa,
California. During 1993, 1992 and 1991, ICN charged facility costs of $30,000
per year to the Company. The facility cost is determined using a formula based
upon the proportionate usage of the facilities by the Affiliated Corporations.
The costs of common services such as maintenance, purchasing and personnel are
incurred by SPI and allocated to the Affiliated Corporations based on the
services utilized. These common service costs were $2,584,000, $2,556,000, and
$2,617,000 for 1993, 1992 and 1991, respectively, of which SPI allocated
$47,000, $26,000 and $30,000 to the Company, respectively. It is management's
belief that the methods used and amounts allocated for facility costs and common
services are reasonable based upon the usage by the Company.

During 1991, the Company began renting certain office equipment to ICN for
use at the Costa Mesa Facility. Rent is being charged at $20,000 per month
through 1993, renewable annually.

H-18
<PAGE> 391

VIRATEK, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Investment policy and intercompany transactions

ICN and the Company have adopted a policy covering intercompany advances
and interest rates and the types of investments (marketable equity securities,
high-yield bonds, etc.) to be made by ICN and its subsidiaries whereby excess
cash held by ICN's subsidiaries is transferred to ICN and cash advances are made
to ICN's subsidiaries to fund short-term cash requirements. ICN charges or
credits interest expense or income based on the amount invested, current
interest rates and the cost of capital.

During 1993, Viratek reclassified $272,000 of intercompany payables to
Biomedicals to ICN and reclassified $5,228,000 of intercompany receivable from
SPI to ICN, which resulted in a receivable of $15,528,000 due from ICN at
December 31, 1993. Interest is credited on outstanding ICN balances at prime (6%
at December 31, 1993) plus 1/2%. Viratek earned interest income of $714,000
from ICN on the average balance outstanding during 1993.

During 1992, Viratek reclassified $536,000 of intercompany payables to
Biomedicals to ICN and reclassified $6,332,000 of intercompany receivable from
SPI to ICN, which resulted in a receivable of $9,325,000 due from ICN at
December 31, 1992. Interest is credited on outstanding ICN balances at prime (6%
at December 31, 1992) plus 1/2%. Viratek earned interest income of $239,000
from ICN on the average balance outstanding during 1992.

During 1991, advances from ICN totalled $1,006,000. During the year,
Viratek reclassified $5,515,000 of intercompany receivables from SPI to ICN,
which resulted in a receivable of $3,767,000 due from ICN at December 31, 1991.
Interest is credited on outstanding balances at prime (6.5% at December 31,
1991) plus 1/2%. Viratek earned interest income of $271,000 from ICN on the
average balance outstanding during 1991. In addition, Viratek had a receivable
from SPI of $2,576,000 at December 31, 1991, upon which interest was not earned.

Other

Effective January 1, 1992, Viratek and Biomedicals entered into an
agreement whereby Biomedicals agreed to transfer rights, title and interest in
certain of its research and development assets to Viratek. Biomedicals shall
retain a right of first refusal to the marketing and distribution rights for any
product developed from the transferred assets and pay a royalty to the Company.
Accordingly, Viratek incurred $793,000 and $514,000 of expenses relating to
biomedical research and development for the years ended December 31, 1993 and
1992.

Effective March 1, 1991, Viratek transferred all inventory, consisting of
ribavirin in bulk, work-in-process and finish goods form, to SPI at its recorded
book value of $2,943,000. Viratek no longer supplies ribavirin to SPI. Viratek
then reclassified the intercompany receivable from SPI to a receivable due from
ICN in the amount of $2,943,000.

Effective May 1, 1991, Viratek transferred the rights to three compounds,
in various stages of development, to SPI for $1,350,000 plus a royalty of 6.8%
of future sales. The amount has been credited to additional capital. Future
royalties will be recognized as income when earned. However, during 1993, 1992
and 1991, there have been no sales of product subject to the 6.8% royalty. The
Company reclassified the intercompany receivable from SPI to a receivable due
from ICN in the amount of $1,350,000.

During 1991, the Company transferred equipment to ICN Galenika, a 75% owned
subsidiary of SPI, at its net book value of $333,000.

H-19
<PAGE> 392

VIRATEK, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Following is a summary of transactions, as described above, between the
Company and ICN and its subsidiaries for each of the three years ended December
31, 1993, 1992 and 1991:

<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Transactions:
Royalties from SPI............................. $5,903,000 $5,448,000 $4,263,000
Sales of ribavirin to SPI...................... -- -- 235,000
Facility costs charged by ICN.................. (30,000) (30,000) (30,000)
Allocation of common services from SPI......... (47,000) (26,000) (30,000)
Interest charged to (by) ICN, net.............. 714,000 239,000 (271,000)
Equipment rents charged to ICN................. 240,000 240,000 120,000
Transfer of inventory to SPI................... -- -- 2,943,000
Transfer of compounds to SPI................... -- -- 1,350,000
Transfer of equipment to SPI................... -- -- 333,000
</TABLE>

In addition to the above transactions, the Affiliated Corporations paid
certain of the Company's liabilities in lieu of making cash payments to the
Company, totalling $602,000 and $1,791,000, for the year ended December 31, 1993
and 1992.

4. COMMON STOCK

On April 22, 1992, the stockholders of the Company approved the 1992
Non-Qualified Stock Option Plan ("1992 Option Plan") and the 1992 Employee
Incentive Stock Option Plan ("1992 Incentive Plan"), reserving 525,000 shares
per plan of the Company's Common Stock for issuance to employees and directors
of the Company and its affiliates (including ICN). In addition, the Company had
reserved and issued 1,292,000 shares of the Company's common stock under the
1980 Employee Stock Option Plan ("1980 Option Plan").

The Company has granted options for shares of its common stock under the
Company's 1992 Option Plan and 1980 Option Plan. Options under the 1992 Option
Plan are exercisable over a period to be determined by the Compensation
Committee, which shall not exceed ten years from the date of grant and will
expire at the end of the option period. Options under the 1980 Option Plan are
exercisable during a four year period beginning one year after the date of grant
and expire five years after the date of grant. At December 31, 1993, options of
141,750 and 31,314 were outstanding (with exercise prices ranging from $2.024 to
$13.214) of which 5,250 and 20,816 shares were exercisable under the 1992 Option
Plan and the 1980 Option Plan, respectively. During 1993, 22,483 shares were
exercised under the 1980 Option Plan at an average price of $3.03 and no shares
were exercised under the 1992 Option Plan.

As of December 31, 1993, 425,250 options were outstanding at prices ranging
from $7.619 to $21.190 and none were exercisable under the 1992 Incentive Plan.

During fiscal 1981, 1984 and 1986, the Board of Directors of the Company
reserved for its President and certain directors non-qualified stock options to
purchase 735,000 shares of common stock at a price of $2.024 per share. At
December 31, 1993 options to purchase 278,908 shares were outstanding and
exercisable. Options to purchase 420,000 shares were outstanding and exercisable
during 1992 and 1991. 134,373 shares were exercised during 1993 and no options
were exercised during 1992 and 1991.

H-20
<PAGE> 393

VIRATEK, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

overallotment (206,250 units) in connection with the public offering for net
proceeds of $1,368,000. The warrants became separately transferable on July 29,
1993 and were exercisable until August 30, 1993 and redeemable by the Company on
August 31, 1993 at $.05 per warrant if not previously exercised. A total of
1,366,642 warrants were exercised resulting in net proceeds to the Company of
$13,472,000.

In December 1993, the Company declared a fourth quarter 1993 stock
distribution of 5%. Accordingly, all numbers of common shares, except shares
authorized, stock option data and per share data have been restated to reflect
the distribution. Fractional shares resulting from the dividend were settled in
cash.

5. INCOME TAXES

In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109 (SFAS 109), Accounting for Income Taxes. SFAS 109 is an asset
and liability approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequence of events that have been
recognized in the Company's financial statements or tax returns. The adoption of
SFAS 109 did not result in a cumulative effect adjustment.

The Company's income tax benefit for 1993 of $14,000 is primarily
attributable to the difference between the 1992 provision for income taxes
accrued in the financial statements and the liability as finally determined upon
the filing of the Company's 1992 tax return. The Company's 1992 tax provision of
$63,000 was based primarily on the Company's estimated alternative minimum tax
liability.

The Company's effective tax rate differs from the applicable U.S. statutory
federal income tax rate due to the following:

<TABLE>
<CAPTION>
1993 1992 1991
--- --- ---
<S> <C> <C> <C>
Statutory rate................................................... (34)% 34% 34%
NOL utilization/limitation....................................... 34 (34) (34)
Alternative minimum tax.......................................... -- 2 --
Other............................................................ -- 1 --
Provision to return adjustment................................... (2)
--- --- ---
(2) 3 0
=== === ===
</TABLE>

The Company files its federal tax return on a stand-alone basis. Prior to
January 1992, the Company filed a consolidated tax return with ICN and was
subject to a tax sharing agreement. In accordance with the terms of the tax
sharing agreement, the Company was required to pay ICN for federal taxes
otherwise payable on a stand-alone basis. The federal tax sharing agreement and
consolidated federal filing terminated in January 1992 when ICN's ownership of
the Company dropped below 80 percent.

The Company has net operating loss carryforwards of $47,500,000 which
expire in varying amounts from 1995 through 2005. The NOL carryforwards include
$10,900,000 of stock option deductions. For financial statement purposes, the
tax benefit from the utilization of stock option deductions are credit to
paid-in-capital. The Company has research and development tax credit carryovers
of $800,000 which expire in varying amounts from 1996 to 2002.

The Company's net operating loss carryforward differs from the Company's
accumulated deficit primarily due to the portion of the NOL carryforward
attributable to stock option deductions.

The primary component which gives rise to the Company's net deferred tax
position is the tax benefit associated with the Company's NOL carryforward
position. At December 31, 1993, and January 1, 1993, the future tax benefit
associated with the Company's NOL carryforward was approximately $12,800,000 and

H-21
<PAGE> 394

VIRATEK, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

$12,100,000, respectively. A full valuation reserve has been established against
this deferred tax asset in accordance with SFAS 109.

6. RSV CLINICAL TRIALS

As of December 31, 1993, the Company had net amounts capitalized of
$1,823,000, related to patents, trademarks and outside studies requested by the
FDA to obtain and maintain approval for the use of ribavirin in treating RSV. As
of December 31, 1993, accumulated amortization applicable to all patents,
clinical trials and trademarks costs was $2,270,000.

7. COMMITMENTS AND CONTINGENCIES

Post approval studies

By letter dated December 31, 1985, the FDA advised the Company that the FDA
had approved the Company's NDA for the hospital use of aerosolized ribavirin for
the treatment of RSV in infants. As a condition of the approval, the Company
agreed to conduct certain additional studies. The future costs of such studies
are not expected to be significant.

Deferred compensation

During fiscal 1985, the Company adopted deferred compensation agreements
with its officers and certain key employees, with benefits commencing at death
or retirement. As of December 31, 1993, the present value of the deferred
compensation benefits to be paid to a former officer of the Company, has been
accrued in the amount of $269,000. Payments are made monthly over a 15 year
period with interest at a rate of 12.4%. The interest expense for the year ended
December 31, 1993, was $38,000. The Deferred Compensation Plan was terminated in
May 1990 and no other amounts are due thereunder.

Litigation

H-22
<PAGE> 395

VIRATEK, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

September 18, 1992, the Court denied the ICN defendants' motion to dismiss and
for summary judgment. The ICN defendants filed their answer on February 17,
1993. On October 20, 1993, plaintiffs informed the Court that they had reached
an agreement to settle with co-defendant Paine Webber, Inc. and that they would
submit a proposed settlement stipulation to the Court. Expert discovery, which
commenced in September 1993, is expected to conclude by the end of April 1994.
Plaintiffs' damages expert, utilizing assumptions and methodologies that the ICN
Defendants' damages experts find to be inappropriate under the circumstances,
has testified that, assuming that classes were certified for purchasers of ICN,
Viratek and SPI common stock for the entire class periods alleged by plaintiffs,
January 7, 1986 through April 15, 1987, and further assuming that all of the
plaintiffs' allegations were proven, potential damages against ICN, Viratek and
SPI would, in the aggregate, amount to $315,000,000. The ICN Defendants' four
damages' experts have testified that damages are zero. Management believes that,
having extensively reviewed the issues in the above referenced matters, there
are strong defenses and that the Company intends to defend the litigation
vigorously. While the ultimate outcome of these lawsuits cannot be predicted
with certainty, and an unfavorable outcome could have an adverse effect on the
Company, at this time management does not expect that these matters will have a
material adverse effect on the financial position, result of operations or
liquidity of the Company. The attorney's fees and other costs of the litigation
are allocated equally between ICN and Viratek.

In August 1992, an action was filed in United States District Court for the
Southern District of New York, entitled Rossi v. ICN Pharmaceuticals, Inc. (Case
No. 92 Cir. 4819 (CL6)). The plaintiffs, citing theories of product liability,
negligence and strict liability in tort, allege that birth defects in an infant
were caused by the mother's exposure to ribavirin during pregnancy. The
plaintiff's counsel agreed to place the case on the courts "suspense calendar"
pending completion of ICN's investigation of the underlying facts. Based on such
investigations, this case was dismissed without prejudice pursuant to
stipulation by the parties in December 1993. Per the License Agreement, SPI
indemnified Viratek and ICN for lawsuits involving the use of Virazole(R).

The Company, from time to time, is a party to a number of other pending or
threatened lawsuits arising out of, or incident to, its ordinary course of
business. In the opinion of management, neither the lawsuits discussed above nor
various other pending lawsuits will have a material adverse effect on the
consolidated financial position or operations of the Company.

Product Liability Insurance

8. SUPPLEMENTAL CASH FLOW DISCLOSURES

The Company made cash payments for interest of $38,000, $29,000 and $0
during 1993, 1992, and 1991, respectively. Income taxes paid during 1993, net of
refunds, were $17,000. No income taxes were paid during 1992 and 1991.

In December 1993, the Company declared a 5% common stock dividend amounting
to 862,531 shares of common stock for $7,978,000.

In 1991, Viratek transferred all inventory, three compounds and certain
equipment, to SPI and its subsidiaries in the amount of $4,626,000.

H-23
<PAGE> 396

VIRATEK, INC.

NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

9. DETAIL OF CERTAIN ACCOUNTS

<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Property, plant and equipment, net:
Machinery and equipment........................... $1,424,000 $1,263,000
Autos and trucks.................................. 84,000 59,000
Furniture and fixtures............................ 54,000 33,000
---------- ----------
1,562,000 1,355,000
---------- ----------
Less: Accumulated depreciation...................... 1,358,000 1,237,000
---------- ----------
$ 204,000 $ 118,000
========= =========
</TABLE>

<TABLE>
<CAPTION>
1993 1992
---------- ----------
<S> <C> <C>
Accrued liabilities:
Professional Fees................................. $ 291,000 $ 231,000
Accrued communications expenses................... 88,000 197,000
Other............................................. 129,000 116,000
---------- ----------
$ 508,000 $ 544,000
========= =========
</TABLE>

<TABLE>
<CAPTION>
1993 1992 1992
--------- ---------- ----------
<S> <C> <C> <C>
Other (income) expense, net:
Contribution to the UC San Diego..... $ -- $ -- $ 325,000
Equipment rental income.............. (240,000) (240,000) (120,000)
Legal expense reversal............... -- -- (200,000)
Other................................ 8,000 (45,000) (57,000)
--------- ---------- ----------
$(232,000) $ (285,000) $ (52,000)
========= ========= =========
</TABLE>

10. QUARTERLY FINANCIAL DATA (UNAUDITED)

Following is a summary of quarterly financial data for each of the quarters
ended March 31, June 30, September 30 and December 31 for the years ended
December 31, 1993 and 1992.

<TABLE>
<CAPTION>
1993 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------------------------ ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues...................... $ 1,444,000 $ 540,000 $ 2,048,000 $1,871,000
Research and development
expenses and other, net..... 1,157,000 1,649,000 1,799,000 2,119,000
Net income (loss)............. 287,000 (1,109,000) 249,000 (249,000)
Net income (loss) per
share(1).................... $ .02 $ (.07) $ .01 $ (.01)
</TABLE>

<TABLE>
<CAPTION>
1992 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
------------------------------ ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Revenues...................... $ 1,993,000 $ 265,000 $ 1,948,000 $1,242,000
Research and development
expenses and other, net..... 605,000 113,000 1,269,000 1,644,000
Net income (loss)............. 1,388,000 152,000 679,000 (402,000)
Net income (loss) per
share(1).................... $ .09 $ .01 $ .04 $ (.03)
</TABLE>

- ---------------

(1) Net income (loss) per share has been restated to reflect a fourth quarter
1993 stock distribution of 5%.

H-24
<PAGE> 397

QUARTERLY STOCK PRICE AND DIVIDEND DATA

The common stock is traded on the American Stock Exchange (Symbol: VRA).

The following table sets forth, for the periods shown, the high and low
closing sales prices on the American Stock Exchange.

<TABLE>
<CAPTION>
HIGH LOW
------ ------
<S> <C> <C>
1993
First Quarter............................................ $13 21/64 $ 5 61/64
Second Quarter........................................... 13 29/64 8 37/64
Third Quarter............................................ 14 11/64 10
Fourth Quarter........................................... 13 11/16 7 1/32
1992
First Quarter............................................ $24 17/32 $10 23/32
Second Quarter........................................... 13 37/64 7 5/8
Third Quarter............................................ 10 5 15/64
Fourth Quarter........................................... 9 49/64 5 15/32
</TABLE>

As of March 30, 1994, there were approximately 713 holders of record of the
Company's common stock.

During the fourth quarter of 1993, Viratek declared a 5% common stock
distribution. All of the above per share amounts have been retroactively
adjusted to reflect this distribution. No other cash or stock distributions were
declared during 1992 or 1993.

H-25
<PAGE> 398

APPENDIX I
<PAGE> 399

APPENDIX I

ICN BIOMEDICALS, INC.

1993 ANNUAL REPORT TO STOCKHOLDERS

FINANCIAL AND GENERAL INFORMATION
<PAGE> 400

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
------
<S> <C>
Business.............................................................................. I-1
Selected Financial Data of Biomedicals................................................ I-7
Management's Discussion and Analysis of Financial Condition and Results of
Operations.......................................................................... I-8
Report of Independent Auditors........................................................ I-16
Financial Statements
Consolidated Balance Sheets......................................................... I-17
Consolidated Statements of Operations............................................... I-18
Consolidated Statements of Stockholders' Equity..................................... I-19
Consolidated Statements of Cash Flows............................................... I-20
Notes to Consolidated Financial Statements.......................................... I-21
Quarterly Stock Price and Dividend Data............................................... I-37
</TABLE>

I-i
<PAGE> 401

BUSINESS

ICN Biomedicals, Inc. and its subsidiaries ("Biomedicals" or the "Company")
develop, manufacture and sell research chemical products, biomedical
instrumentation, diagnostic reagents, and radiation monitoring services. Major
product lines of the research chemical products group include biochemicals,
radiochemicals and cell biology products, and chromatography materials. Major
product lines of the biomedical instrumentation group include microplate
instrumentation, environmental technology products and precision liquid delivery
instrumentation. The diagnostic reagents group provides reagents and
instrumentation, including enzyme-and radioimmunoassay kits and immunoassay
systems. Biomedicals also purchases research chemicals from other manufacturers,
in bulk, for repackaging and distributes biomedical instrumentation manufactured
by others. Biomedicals' principal customers are life science researchers,
including those engaged in molecular biology, genetic engineering and other
areas of biotechnology, biochemical research laboratories, and clinical
laboratories. Major markets are located in the United States, Canada, Mexico,
South America, Eastern and Western Europe, Australia and Japan. The Company's
products are sold through Biomedicals-produced catalogs, direct mail
advertising, direct sales force, and selected independent distributors and
agents.

Biomedicals was incorporated in September 1983 as a Delaware corporation by
its parent, ICN Pharmaceuticals, Inc. ("ICN"), and has since operated as an ICN
subsidiary. Effective January 1, 1984, ICN transferred to Biomedicals, in
exchange for all of the then outstanding shares of common stock of Biomedicals,
certain assets and liabilities comprising the Life Sciences Group of ICN. Some
of the operations of that group had been conducted by ICN since ICN's inception
in 1960. Since 1984, several businesses and product lines have been acquired by
ICN on behalf of the Company and subsequently transferred to Biomedicals.

Biomedicals changed its fiscal year end from November 30 to December 31,
effective for the twelve months ended December 31, 1991.

In November 1989, Biomedicals acquired, for $37,700,000, all of the issued
and outstanding common shares of Flow Laboratories, Inc., and Flow Laboratories
B.V., from GRC International, Inc. (formerly Flow General, Inc.). These
companies, together with their respective subsidiaries ("Flow") constituted the
Biomedical Division of Flow General. Funds for the purchase consisted of cash
and bonds with a value of $35,700,000 (of which $27,000,000 was financed by bank
borrowings, and 100,000 shares of the common stock of Biomedicals, with a
guaranteed value of $20 per share on November 8, 1994. Flow was a manufacturer
and distributor of several thousand biomedical products worldwide, including
cell biology products, laboratory plastics, enzyme linking immunosorbent assay
(ELISA), diagnostic instrumentation and environmental technology products.

At the time of the acquisition of Flow, Biomedicals believed that the
distribution outlets acquired would substantially increase Biomedicals' ability
to compete in international markets where it had no significant direct
representation. Following the acquisition, the Company attempted to centralize
the European marketing and distribution, discontinue certain low margin product
lines and shut down excess manufacturing and distribution facilities. These
efforts continued into 1992, at which time Biomedicals completed a major
restructuring plan. (See Management's Discussion and Analysis of Financial
Condition and Results of Operations, Restructuring Costs and Special charges).

On August 30, 1993, Biomedicals issued 300,000 shares of a new series "A"
of Biomedicals' 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 Biomedicals' common stock that ICN owned and exchanged intercompany
debt owed to ICN by Biomedicals in the amount of $11,000,000.

In addition, on August 30, 1993, Biomedicals issued 390,000 shares of a new
series "B" of Biomedicals' non-convertible, non-voting, preferred stock valued
pursuant to a fairness opinion, at $32,000,000 to ICN. In exchange, ICN
delivered to Biomedicals 8,384,843 shares of Biomedicals' common stock that ICN
owned.

As a result of the series "A" and "B" exchanges, ICN's ownership was
reduced from 88% to 69% of the outstanding common stock of Biomedicals.

I-1
<PAGE> 402

In addition to the business of Biomedicals, ICN develops, manufactures,
distributes and sells pharmaceutical and related products and services. ICN's
pharmaceuticals group is composed of Viratek, Inc. ("Viratek", a 63%-owned
subsidiary at March 26, 1994) and SPI Pharmaceuticals, Inc. ("SPI", a 39%-owned
investment at March 26, 1994, which, effective from January 1, 1993, is
accounted for on the equity method of accounting by ICN.)

Viratek conducts research and develops compounds derived from nucleic
acids, the basic genetic material. Viratek's principal product is the compound
Virazole (registered trademark) (ribavirin), a broad spectrum anti-viral agent.
The Company has no financial interest in Virazole. In addition, Viratek has
initiated a new research program focused on the detection and measurement of a
group of human peptide hormones or regulators and in vitro commercial
diagnostics. Viratek also conducts certain biomedical research and development
for the Company (see Research and Development).

SPI and its subsidiaries manufacture, distribute and sell pharmaceutical
and nutritional products, primarily in the United States, Yugoslavia, Mexico,
Western and Eastern Europe and Canada.

Biomedicals' principal executive offices are located at 3300 Hyland Avenue,
Costa Mesa, California 92626, telephone (714) 545-0113.

PRODUCTS

Research Chemical Products Group

Biomedicals' research products group markets more than 55,000 chemical,
radiochemical, biochemical and immunochemical compounds. These compounds result
from chemical synthesis, biochemical (enzymatic) synthesis, and/or are isolated
from natural sources such as micro-organisms, plant, and animal tissues. In
addition, the biomedical group offers laboratory plasticware, media for cell
culture, and materials for chromatography.

Biochemicals. Biochemicals are chemicals that occur in or result from any
life process. The major biochemicals in the research laboratory market include
proteins, peptides, amino acids, carbohydrates, enzymes, nucleic acids and their
derivatives. Biomedicals repackages and sells, primarily through a catalog, spot
mailings and telephone solicitation, approximately 35,000 chemical items
(including rare and fine chemicals) to customers in approximately 1,500
laboratories worldwide who are largely engaged in organic, inorganic and
biochemical experimentation and synthesis. Major products include ammonium
sulfate, cesium chloride, guanidine hydrochloride, L-glutamine and ultra-pure
tris.

In recent years, there has been an increasing demand for ultra-pure
biochemicals, particularly for use in molecular biology and medically-oriented
research work. Biomedicals has expanded its molecular biology line through the
addition of modifying and restriction enzymes, reagents for gel electrophoresis
and other chemicals used in various phases of genetic engineering. This includes
materials used in recombinant technology such as growth factors, restriction
endonucleases (enzymes which "cut" DNA material at a specific point) and
polynucleotide "linkers" which are used to rejoin divided segments of DNA
molecules.

Under the K&K Laboratories trade name Biomedicals offers 23,000 rare and
fine chemicals consisting principally of organic chemicals, inorganic chemicals,
organometallics, rare earth metals and specialty intermediates. These products
are used in the chemical, pharmaceutical, aerospace, electronic, and educational
fields.

Radiochemicals. Radiochemicals are produced through the combination of
radioactive raw materials with non-radioactive chemical intermediates, the
resulting products, referred to as "labeled" or "tagged", possess one or more
radioactive atoms. These isotopes are used by researchers in conjunction with
sophisticated measuring instruments to follow or trace the chemical through a
biochemical system. Such work helps to determine the mechanisms by which
molecules are transformed within living systems, furthering knowledge of
genetic, biological and physiological disorders, including hormonal
deficiencies, physical abnormalities and a range of organ and endocrinological
disorders.

I-2
<PAGE> 403

Using a variety of multi-step chemical and biochemical procedures,
Biomedicals produces in excess of 800 different "radioactive" or "labeled"
compounds. The Irvine, California facility uses Phosphorus-32, Sulfur-35,
Tritium and Carbon-14 to produce organic molecules for use in a large number of
biomedical research applications. The Company offers reactor-produced
radionuclides but does not, at this time, refine such products for human use as
radiopharmaceuticals.

Cell Biology. Biomedicals sells a wide range of components for the
culturing of cells in an artificial environment under specially controlled
conditions. Prior to the sale of the Irvine, Scotland manufacturing facility in
April 1993, Biomedicals manufactured most cell biology products in-house.
Biomedicals now procures these products at a lower cost from third party
suppliers. Cell culture has become an increasingly important technique for the
study of cell behavior, the study of viruses and viral infections, the
development and production of vaccines and the testing of new drugs, chemicals,
food and toxic substances.

Biomedicals is a supplier of materials for cell culture and offers a
comprehensive range of media, growth factors and sera as well as a variety of
disposable plastic labware and ancillary equipment. Biomedicals' chemically
defined growth media, which nourish living cells, are used by customers in
maintaining or growing cells in the laboratory. Biomedicals also markets
processed animal sera (used to enrich media) and uses both raw and processed
sera to formulate other products. The availability and costs of raw animal sera
varies and is largely beyond Biomedicals' control.

Other cell biology products include the Titertek-Plus (registered
trademark) family of pipettes and disposable plastic labware.

Chromatography Products. Chromatography products include chemicals known
as adsorbents as well as other consumable products, such as nylon membranes,
which are used for chromatography (a scientific method employing sophisticated
instrumentation to separate chemical mixtures in order to analyze their
components). Biomedicals distributes adsorbents worldwide which are produced by
its German subsidiary.

Biomedical Instrumentation Group

Biomedicals' biomedical instrumentation group markets microplate
instruments, a wide range of precision liquid delivery systems and gamma
counters.

Microplate Instrumentation. These products are laboratory instruments
serving the needs of all applications utilizing the microtitration plate
(microplate) format. Microplates are 96-well trays, about the size of a
postcard, that offer a convenient, economical space-saving alternative to test
tubes and have become the vessel of choice for biomedical tests. The preeminent
microplate application is immunoassays used in diagnostics, public health
screening, quality control and research. Biomedicals' Titertek (registered
trademark) product lines offer instruments that address all steps in using
microplates including dispensing samples and reagents, reagent displacement
(known as microplate "washing"), and measurement of calorimetric, fluorescent
and luminescent test results. The products range from hand operated pipettes to
integrated analytical systems.

Precision Liquid Delivery Systems. Biomedicals' instrument manufacturing
facility in Huntsville, Alabama, produces high precision liquid delivery systems
starting with general purpose bench-top stations and extending to customized
automated systems incorporating process control, test measurement and data
reduction. The liquid delivery products are all complimentary to, and compatible
with, the microplate instruments, (both those manufactured in Huntsville and
own-label products obtained from third-parties). This integration of the product
lines enhances Biomedicals' ability to offer users a flexible system approach to
meeting their evolving laboratory equipment needs.

Gamma Counters. The Huntsville facility also produces gamma counters
(instruments that quantify the amount of radioactive "labels" incorporated into
a sample). Gamma counters are mainly used in diagnostics and research.
Biomedicals offers a choice of automatic sample-feed and manually loaded batch
processing machines, all with a common data analysis and reduction software
package.

All instrumentation sold by Biomedicals is supported by field and factory
service capability. Service contracts are actively sold to a large customer base
of long-term users of Biomedicals' instruments. Biomedicals has entered into a
non-binding letter of intent with a third party to sell the instrument business
subject to numerous conditions to be enumerated in a contract between
Biomedicals and said third party.

I-3
<PAGE> 404

Diagnostic Reagents Group

Biomedicals provides diagnostic reagents and instrumentation to hospitals,
clinics and biomedical research laboratories. Immunoassay is a diagnostic
technique used to determine the quantity of biological substances present in
very low concentrations in body fluids. In the United States alone, more than
5,000 laboratories use the technique in routine clinical diagnostic
applications. Biomedicals manufactures both Enzyme-Immunoassay and
Radio-Immunoassay kits at its Costa Mesa, California facility and markets these
kits under the IMMUCHEM product line. In 1993, Biomedicals developed a line of
non-isotopic enzyme-immunoassay used for screening newborns for inherited
genetic diseases ("Neonatal line"). Biomedicals' strategy is to develop a
complete line of reagents to address its strength in the endocrinology and
newborn screening product segments. Biomedicals has developed instruments which
allow assays to be automated for moderate to high volume applications in which
ease of use and labor productivity are competitive advantages. Biomedicals will
continue to add more internally developed products to its Neonatal line in 1994
including a new fully-automated analyzer.

Radiation Monitoring Services Group

Biomedicals provides an analytical monitoring service to determine personal
occupational exposure to ionizing radiation.

Since 1973, ICN has provided dosimetry services to dentists, veterinarians,
chiropractors, podiatrists, hospitals, universities, governmental institutions
and power plants. ICN's service include both film and Thermo Luminescent ("TL")
badges in several configurations to accommodate a broad scope of users. This
service includes the manufacture of badges, distribution to and from clients,
analysis of badges and a radiation report indicating the exposure. The marketing
strategy in 1993 was geared towards the small office practitioner both
domestically and in an initial entry into the international market. Fiscal 1994
will be a year of intense effort to upgrade and streamline internal operations
and computer software related to Dosimetry services. Two new badge
configurations are planned to enhance Dosimetry's product offering: A CR39
neutron monitor and a Thermo Luminescent Dosimeter ("TLD") wallet card monitor.
These new products, coupled with the software enhancements will allow
Biomedicals to continue its aggressive marketing campaign both in the domestic
and international areas.

MARKETING

Biomedicals' marketing operations are headquartered at the corporate
offices in Costa Mesa, California. Sales and marketing methods vary according to
product group and include direct sales through a field sales force, catalog
sales, direct mail campaigns and independent agents/ distributors. Biomedicals
has a field sales and marketing organization of 141 persons in the United States
and Canada, 73 in Europe, 9 in Australia and 6 in Japan.

CUSTOMERS

Biomedicals' customer group for research products is principally composed
of biomedical research institutions such as universities, the National
Institutes of Health, pharmaceutical companies, and, to a lesser extent,
hospitals. Customers for diagnostic reagents and instruments are generally
clinics, medical offices and hospitals. Customers for Biomedicals' other
biomedical instruments include both biomedical research institutions and
clinics, medical offices and hospitals. Biomedicals is not materially dependent
upon any one customer or a small group of customers and does not believe the
loss of any one customer would have a material adverse effect on Biomedicals.
However, since a large portion of medical research in both the United States and
other countries is funded by governmental agencies, Biomedicals' results of
operations could be adversely affected by cancellation or curtailment of
governmental expenditures for medical research.

I-4
<PAGE> 405

FOREIGN OPERATIONS

Biomedicals operates in the United States, Canada, Europe and Asia/Pacific.
For financial information about domestic and foreign operations and export
sales, see Note 10 of Notes to Consolidated Financial Statements.

Foreign operations are subject to certain risks inherent to conducting
business abroad, including price and currency exchange control, fluctuations in
the relative value of currencies, political instability and restrictive
governmental actions. Changes in the relative value of currencies occur from
time to time and may, in certain instances, materially affect Biomedicals'
results of operations. Biomedicals does not hedge foreign currency risks. The
effects of these risks are difficult to predict.

LICENSES, PATENTS, TRADEMARKS AND PROPRIETARY RIGHTS

Biomedicals has 7 United States patents and 5 foreign patents expiring from
1994 to 2008. Although no assurance can be given as to the breadth or degree of
protection which these patents will afford Biomedicals, the Biomedicals'
business is not materially dependent on the protection afforded by its patents.

Many of the Company's product names are registered trademarks in the United
States, Canada and other countries. Other organizations may in the future apply
for and be issued patents or may obtain proprietary rights covering technology
which may become useful to the Company's business. The extent to which
Biomedicals may need, at some future date, to obtain licenses from others is not
known. In addition, Biomedicals intends to rely on unpatented proprietary
know-how. However, there can be no assurance that others will not independently
develop such know-how or otherwise obtain access to the Biomedicals' know-how.
Each employee of Biomedicals is required to enter into an agreement holding
proprietary information confidential and agreeing that such obligation will
survive the termination of his or her employment with Biomedicals.

BACKLOG

Backlog is not a significant factor since most orders received are filled
and shipped promptly after receipt. No single customer accounted for more than
10% of Biomedicals' net sales during the year ended December 31, 1993.

RAW MATERIALS AND MANUFACTURING

In general, raw materials used by Biomedicals in the manufacture of its
products are obtainable from multiple sources in the quantities desired.
However, the availability and costs of raw animal sera for distribution as part
of the Biomedicals' cell biology products may vary from time to time and is
largely beyond Biomedicals' control. Additionally, in the last decade, the
number of reactor sites producing radioactive raw materials has diminished.

Product manufacturing is chiefly carried out by Biomedicals in three
domestic facilities and one foreign facility: Costa Mesa, California
(radioimmunoassay kits and immunobiologic products); Huntsville, Alabama
(diagnostic and microplate instrumentation); Irvine, California (radiochemicals)
and Eschwege, Germany (chromatography products). Some manufacturing and
repackaging is also carried out at the Biomedicals' facility in Aurora, Ohio.

RESEARCH AND DEVELOPMENT

The research and development group conducts its new product development
activities in its production departments, an approach that has proven most
effective in this specialized high technology segment of molecular biology.
Biomedicals conducts research and development activities for diagnostic reagents
in Costa Mesa, California, and for the instrument product line in Huntsville,
Alabama.

Effective January 1, 1992, Biomedicals entered into an agreement with
Viratek, whereby Biomedicals transferred right, title and interest in research
and development projects related to the development of new

I-5
<PAGE> 406

assay methods utilizing various non-isotopic and other immunoassay techniques as
well as universal immunohistology kits for specific immunogen localization in
cellular structures to Viratek. Biomedicals retains the right of first refusal
to the marketing and distribution rights of any products developed under this
agreement.

GOVERNMENT REGULATION

Biomedicals is subject to licensing and other regulatory control by the
United States Food and Drug Administration, the Nuclear Regulatory Commission,
other Federal and state agencies and comparable foreign governmental agencies.
Biomedicals has not in the past experienced any significant difficulty in
complying with the regulations of those agencies.

Provisions enacted or adopted by United States federal, state and local
agencies regulating the discharge of waste into the environment do not currently
have a material effect upon Biomedicals' capital expenditures, earnings or
competitive position.

COMPETITION

The industry in which Biomedicals operates is highly competitive.
Biomedicals' competitors, many of which have substantially greater capital
resources, marketing capabilities and larger staffs and facilities than
Biomedicals, are actively engaged in marketing products similar to those of
Biomedicals and developing new products similar to those being developed and
sold by Biomedicals. Competitive factors vary by product line and customer and
include service, product availability and performance, price and technical
capabilities. Competitors of Biomedicals' diagnostic reagent and instrumentation
group include LKB Instruments, Abbott Laboratories, Diagnostic Products Corp.
and Smith Kline/Beckman. Sigma Aldrich, Amersham and New England Nuclear, a
subsidiary of Dupont, are the market leaders in their segments of the research
products business. Competitors of Biomedicals' cell biology products group
include Life Technologies (Gibco/BRL) and Whittaker/MBA. Biomedicals'
competitors in the biological instrumentation group for its microplate
instrumentation business include Labsystems, Dynatech and Bio-tek Instruments.
The possibility of product obsolescence and product substitution is highest in
the Company's immunodiagnostic business where radioimmunoassay methods are being
replaced by assay techniques utilizing nonradioactive components such as enzymes
or fluorescent chemicals. Although the Company believes that the
radioimmunoassay technique is not under immediate threat, due to its superior
sensitivity and low cost, the Company has a research program in non-isotopic
based systems which could replace some of its radioimmunoassay kits at some time
in the future.

EMPLOYEES

Biomedicals employs approximately 505 persons, of whom 77 are engaged in
general and administrative matters, 229 in marketing and sales, 195 in
production and 4 in research and development. There are no collective bargaining
agreements between the Company and any of its employees, except for
approximately 39 employees of the Company's German subsidiary. Biomedicals
considers its relations with its employees to be satisfactory.

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<PAGE> 407

SELECTED FINANCIAL DATA OF BIOMEDICALS

The following table sets forth certain selected consolidated financial data
for the years ended December 31, 1993, 1992 and 1991, the one-month ended
December 31, 1990, and for each of the years in the two-year period ended
November 30, 1990. This information should be read in conjunction with the
consolidated financial statements included elsewhere in this Form 10-K (in
thousands, except per share information).

<TABLE>
<CAPTION>
DECEMBER 31, ONE MONTH NOVEMBER 30,
----------------------------- ENDED -------------------
1993 1992 1991 DECEMBER 31, 1990 1990 1989
------- -------- -------- ----------------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales............................................... $59,076 $ 75,648 $ 96,507 $ 7,473 $131,259 $ 61,442
Cost of sales........................................... 27,631 44,851 51,917 4,365 66,394 28,687
------- -------- -------- -------- -------- --------
Gross profit............................................ 31,445 30,797 44,590 3,108 64,865 32,755
Selling, general and administrative expenses............ 28,455 43,509 39,922 3,130 43,358 21,347
Research and development costs.......................... 378 583 1,687 193 2,052 1,469
Amortization of goodwill and other intangibles.......... 502 1,486 1,829 144 1,609 1,130
Interest expense, net................................... 2,250 4,567 7,073 848 3,773 84
Lease vacancy costs..................................... 1,436 -- -- -- -- --
Restructuring costs and special charges(1).............. -- 63,032 6,087 -- -- --
Other (income) expense, net............................. (2,399) 4,731 1,268 235 160 322
------- -------- -------- -------- -------- --------
Income (loss) before provision for income taxes and
extraordinary income.................................. 823 (87,111) (13,276) (1,442) 13,913 8,403
Provision (benefit) for income taxes.................... (312) 309 (384) 66 5,111 2,762
------- -------- -------- -------- -------- --------
Income (loss) before extraordinary income............... 1,135 (87,420) (12,892) (1,508) 8,802 5,641
Extraordinary income.................................... 627 -- -- -- -- 506
------- -------- -------- -------- -------- --------
Net income (loss)....................................... $ 1,762 $(87,420) $(12,892) $ (1,508) $ 8,802 $ 6,147
======= ======== ======== ================= ======== ========
Per Share Information(2):
Income (loss) before extraordinary income............... $ .07 $ (4.80) $ (1.09) $ (.13) $ .80 $ .52
Extraordinary income(3)................................. .03 -- -- -- -- .05
------- -------- -------- -------- -------- --------
Net income (loss)....................................... $ .10 $ (4.80) $ (1.09) $ (.13) $ .80 $ .57
======= ======== ======== ================= ======== ========
Average shares outstanding.............................. 17,464 18,224 11,790 11,400 10,963 10,697
======= ======== ======== ================= ======== ========
Shares outstanding at end of period(5).................. 9,034 19,183 15,305 11,251 11,250 10,538
======= ======== ======== ================= ======== ========
Dividends per common share(4)........................... $ .17 $ .17 $ .15 $ -- $ .18 $ .13
======= ======== ======== ================= ======== ========
BALANCE SHEET DATA:
Total assets............................................ $51,831 $ 63,342 $152,658 $ 178,233 $179,857 $177,913
Working capital......................................... 10,756 8,676 19,294 21,881 26,235 40,359
Long-term debt and capital lease obligations, less
current maturities.................................... 10,567 11,709 18,315 33,635 40,076 51,322
Total stockholders' equity(5)........................... 12,641 3,816 66,863 57,344 60,800 45,358
</TABLE>

- ------------------------

(1) See Note 12 of Notes to Consolidated Financial Statements, for a discussion
of the 1991 and 1992 restructuring plans.

(2) All per share information has been restated to reflect the 20% stock
dividend, accounted for as a six-for-five stock split, paid on July 31,
1989.

(3) Extraordinary income in 1993 of $627,000 or $.03 per share results from
negotiated settlements with certain suppliers and banks. Extraordinary
income in 1989 pertains to gains resulting from the purchase of a portion of
the 5 1/2% Swiss Franc Exchangeable Certificates.

(4) Reflects annual cash dividends for each of the years presented. During the
one-month ended December 31, 1990, the Company declared a one-time special
dividend of $.035, in addition to the regular quarterly dividend. This
dividend was actually paid in January 1991 and is included in the annual
total of $.15 at December 31, 1991.

(5) On August 30, 1993, 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.

In addition, 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.

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<PAGE> 408

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

SIX MONTHS ENDED JUNE 30, 1994 COMPARED TO SIX MONTHS ENDED JUNE 30, 1993

Net Sales. Net sales were $30,658,000 for the six months ended June 30,
1994, compared to $31,224,000 for the same period in 1993. As compared to 1993,
sales have declined 2% for the six months ended June 30, 1994.

Cost of Sales. Product cost as a percentage of sales decreased to 44% from
46% for the six months ended June 30, 1994 and 1993, respectively. Biomedicals
continues to focus on the elimination of high cost products and on improving
purchasing and manufacturing processes.

Gross Profit. Gross profit as a percentage of sales was 56% for the six
months ended June 30, 1994 compared to 54% for the same period in 1993. The
discontinuance of low gross profit margin products and the introduction of new
products with higher margins contributed to the improvement in gross profit
margins.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses were $13,750,000, or 45%, of net sales for the six
months ended June 30, 1994, compared to $13,277,000, or 43%, of net sales for
the same period in 1993. The increase in expenses in 1994 reflects primarily the
impact of catalogue amortization costs, partially offset by certain reserve
reevaluations.

Interest Expense, Net. Interest expense, net, was $1,066,000 for the six
months ended June 30, 1994, compared to $1,266,000 for the same period in 1993.
The net decrease for the six months ended June 30, 1994 compared to the same
period in 1993 resulted primarily from the reduction in short and long term debt
of Biomedicals.

Foreign Currency Translation Losses (Gains). Translation losses (gains)
were $802,000 for the six months ended June 30, 1994 and $(328,000) for the six
months ended June 30, 1993. Biomedicals has a SFr. liability of SFr. 11,488,000
($8,615,000), which is not hedged and subject to foreign exchange translation
gains or losses during the year.

Other (Income) Expense, Net. Other (income) expense, net, was $592,000 for
the six months ended June 30, 1994, compared to $(1,259,000) for the same period
in 1993.

Other (income) expense, net, for the six months ended June 30, 1994
includes a $(210,000) gain on settlement of an escrow account related to the
sale of Biomedicals' Irvine, Scotland facility in 1993, costs incurred in
connection with the closure of a foreign facility of $204,000, amortization of
goodwill of $251,000, severance and termination costs of $250,000, and
reevaluation of certain foreign allowances, primarily related to accounts
receivable of $(300,000).

Other (income) expense for the six months ended June 30, 1993, includes a
gain of $(938,000) realized by Biomedicals' Italian operation on the favorable
termination of certain leasing contracts, a gain of $(1,000,000) representing
certain liabilities accrued during 1992 which were settled for less than the
original estimate and a gain of $(278,000) on the sale of Biomedicals' Irvine,
Scotland facility.

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<PAGE> 409

YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991

Introduction. At the time of the 1989 acquisition of Flow Laboratories,
Inc. and Flow Laboratories B.V., (together with their respective subsidiaries
"Flow"), Biomedicals believed that the distribution outlets acquired would
substantially increase Biomedicals' ability to compete in international markets
where it had no significant direct representation. Following the acquisition,
Biomedicals attempted to centralize the European marketing and distribution,
discontinue certain low margin product lines and shut down excess manufacturing
and distribution facilities. These efforts continued into 1992, at which time
Biomedicals completed a major restructuring plan. (See Restructuring Costs and
Special Charges, below).

During the latter part of 1992 and throughout 1993, Biomedicals realigned
its European operations including the distribution network and manufacturing,
resulting in reductions in selling, general and administrative costs.
Integration of Biomedicals' higher margin "core" product lines and elimination
of lower gross margin products have contributed to the increase in the overall
gross profit margins; however, such actions have not fully mitigated the
continuing decline in European sales. As a result, the 1993 income (loss) before
provision for income taxes and extraordinary item attributable to the European
operations was $(2,831,000) as compared to $(35,582,000) in 1992. Biomedicals'
North American sales have remained stable.

Biomedicals is actively working on the introduction of new products,
primarily related to its diagnostic and instrumentation product lines and will
be introducing its Dosimetry product line in Europe and Canada. Although the
introduction of these product lines was originally scheduled for Europe in 1993,
longer than anticipated timeframes for product development delayed such
introduction to 1994. Absent improvements in the 1994 European operating
results, Biomedicals will need to reassess its business strategy and prospects
for its European business.

Net Sales. Net sales were $59,076,000, $75,648,000 and $96,507,000 in 1993,
1992 and 1991, respectively. Net sales were 22% lower in 1993 than in 1992 and
22% lower in 1992 than in 1991. The continuing decline in sales can be
attributed primarily to Biomedicals' European operations. This declining trend
is due to a variety of factors including the transition from a marketing effort
focused on an agency/distributor network to one based upon catalog distribution,
discontinuance of low gross profit margin product lines, competitive pressures,
delays in getting new products to markets due to longer than anticipated
timeframes for product development and a continuing weakness in government
funding for capital equipment purchases.

Cost of Sales. Product cost as a percentage of sales decreased to 47% in
1993 from 59% in 1992 and 54% in 1991. The decrease in product costs in 1993
reflects actions taken by Biomedicals to reduce costs beginning in the latter
part of 1992, as discussed further in Restructuring Costs and Special Charges,
below. Additionally, during 1993, high cost products with lower margins were
eliminated, certain production facilities were consolidated or sold, other
excess manufacturing facilities were closed down and Biomedicals continued to
focus on improving purchasing and manufacturing processes. The increase in
product costs in 1992 as compared to 1991 is the result of a writedown of slow
moving inventory due to lower than anticipated sales volume. In addition, during
1992, Biomedicals' production facilities and warehousing costs were spread over
a reduced sales volume thereby increasing cost of sales as a percentage of
sales.

Gross Profit. Gross profit as a percentage of sales was 53%, 41% and 46% in
1993, 1992 and 1991, respectively. Actions taken by Biomedicals in 1992, as
described above, resulted in an increase in gross profit as a percentage of
sales during 1993. The impact of declining sales, increasing product costs and a
writedown of slow moving inventory, as described above, reduced gross profit in
1992 as compared to 1991.

Selling, General and Administrative Expenses. Selling, general and
administrative expenses as a percentage of sales were 48%, 58% and 41% in 1993,
1992 and 1991, respectively. The decrease in 1993 reflects management's
continuing efforts to reduce expenses through consolidation of operations and
distribution centers and other cost controls. Additionally, during 1993,
Biomedicals renegotiated certain common services allocations from ICN, which
reduced selling, general and administrative expense by $969,000 compared to
1992. The increase in expenses in 1992 over 1991 was due, in part, to increased
allowances for estimated uncollectible accounts plus other costs related to
increased level of catalog amortization and accruals for legal expenses. The
increase in these costs as a percentage of sales was due primarily to a
significantly greater decline in sales in the markets related to the Flow
acquisition than in the

I-9
<PAGE> 410

markets in which Biomedicals has traditionally done business. Although costs in
1994 will reflect increased catalog expenses of at least $2,295,000, Biomedicals
expects selling, general and administrative expenses to remain stable.

Research and Development Costs. Research and development expenses were
$378,000, $583,000, and $1,687,000 during 1993, 1992 and 1991, respectively.
Effective January 1, 1992, Biomedicals entered into an agreement with Viratek
whereby Biomedicals transferred to Viratek right, title and interest in certain
of its research and development projects. Biomedicals retains a right of first
refusal to the marketing and distribution rights for any product developed in
accordance with the agreement. Viratek conducts biomedical research related to
the development of non-isotopic diagnostic test kits and associated hardware.
Biomedicals continues to perform research and development activities for
diagnostic reagents and the instrument product line manufactured in Huntsville,
Alabama.

Amortization of Goodwill and Other Intangibles. Amortization expense was
$502,000, $1,486,000, and $1,829,000, in 1993, 1992, and 1991, respectively. The
reduction in goodwill amortization in 1993, reflects the write-off of a major
portion of Biomedicals' goodwill during the fourth quarter of 1992, as described
below under Restructuring Costs and Special Charges. Biomedicals continually
evaluates the continued carrying value and amortization periods for goodwill and
other intangibles.

Interest (income) expense, net. Interest (income) expense, net is comprised
of the following:

<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
Interest expense............................... $2,256,000 $4,779,000 $7,585,000
Interest income................................ (6,000) (212,000) (512,000)
---------- ---------- ----------
Interest expense, net.......................... $2,250,000 $4,567,000 $7,073,000
========= ========= =========
</TABLE>

The net interest expense decline in 1993 compared to 1992 and 1992 compared
to 1991 results from a reduced level of outstanding debt both to third parties
and ICN.

Lease Vacancy Costs. During 1993, Biomedicals vacated its High Wycombe
facility in England and moved to a facility more suitable to Biomedicals'
operating needs in Thame, England. Biomedicals pursued various subleasing
agreements, none of which were completed as of December 31, 1993. Consequently,
Biomedicals accrued approximately $1,200,000 which represents management's best
estimate of the net present value of future leasing costs to be incurred for
High Wycombe. During 1993, Biomedicals expensed an additional $236,000 of
leasing costs related to High Wycombe.

Other (Income) Expense, Net. Other (income) expense, net, was $(2,399,000),
$4,731,000 and $1,268,000 in 1993, 1992 and 1991, respectively. In 1993, Other
(income) expense, net, includes a gain of $430,000 representing a favorable
settlement of a foreign non-income tax related tax dispute, a gain of $278,000
on the sale of Biomedicals' Irvine, Scotland facility, a gain of $938,000
realized by the Company's Italian operation on the favorable termination of
certain leasing contracts, and a gain of $1,250,000 relating to certain
liabilities accrued during 1992 which were settled for less than the original
estimates. In 1992, Biomedicals expensed $2,187,000 for a non-exclusive license
fee for the purpose of marketing certain laboratory equipment in the U.S.,
Canada and South America. Other charges in 1992 include certain foreign
non-income related taxes and an equity investment write-off totaling $2,202,000.
Other (income) expense, net in 1991 included $1,286,000 of costs relating to the
introduction of Biomedicals' catalog.

Provision for Income Taxes. Biomedicals' effective income tax rate was
(38)%, 1% and (3)% for 1993, 1992 and 1991, respectively. Biomedicals' effective
rate of (38)% in 1993 was due primarily to a reduction in the estimate of
required U.S. and foreign tax contingency allowances. Such contingency
allowances were established in prior years to cover certain tax exposures in the
U.S. and certain foreign jurisdictions. Biomedicals' effective tax rate for 1992
and 1991 was significantly less than the U.S. statutory rate due to the
utilization of net operating losses.

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<PAGE> 411

Restructuring Costs and Special Charges. During 1991, Biomedicals initiated
a restructuring program designed to reduce costs and improve operating
efficiencies. Accordingly, restructuring program costs of $6,087,000 were
recorded in 1991. The program included, among other items, the consolidation,
relocation and closure of certain manufacturing and distribution facilities,
primarily in Milan, Italy and Costa Mesa, California. Those measures, including
a 15% reduction in work force, were initiated in 1991 and continued through
1992.

Sales continued to decline during the first three quarters of 1992 over the
same periods in 1991 despite the restructuring program initiated in 1991. The
significant decreases were primarily due to operations in Italy and other
European subsidiaries acquired as part of the Flow acquisition. A further
decline in sales of 19.3% or $4,009,000, occurred in the fourth quarter of 1992
compared to the fourth quarter of 1991.

In prior years and the first three quarters of 1992, recoverability of
goodwill associated with the Flow acquisition was focused on the European
operations, as Biomedicals had only a limited presence in Europe prior to the
Flow acquisition. Accordingly, Biomedicals used the expected operating income of
the European operations in evaluating the recoverability of the Flow goodwill.

During the fourth quarter of 1992, as a result of the continued decline in
sales and other factors, Biomedicals reassessed their business plan and
prospects for 1993 and beyond which included, among other things, the decision
to sell the last remaining major European manufacturing facility and to
restructure the previously acquired distribution network and European operations
in line with the revised sales estimates. Consequently, based upon the
continuing decline in European revenue and profitability relating to Flow, Flow
facility closures and an ineffective distribution network, management concluded
that there was no current or expected future benefit associated from the Flow
acquisition. Accordingly, Biomedicals wrote off goodwill and other intangibles,
primarily from the Flow acquisition of $37,714,000.

In addition, the Company determined that future benefit could be realized
if the distribution activities in Irvine, Scotland, Brussels, Belgium,
Cleveland, Ohio, and Horsham, Pennsylvania, were consolidated with other
distribution centers in Europe and the U.S., as these operations did not support
the costs of maintaining separate facilities. Estimated costs included in the
1992 results associated with this consolidation effort were included in lease
termination costs of $1,434,000, employee termination costs of $1,961,000,
facility shut down costs of $357,000 and writedowns to net realizable value
totaling $1,106,000 of facilities held for disposition.

The Irvine, Scotland facility was vacated in March 1993 and subsequently
sold for a gain of $278,000. During the first quarter of 1993, the Horsham,
Pennsylvania, and Cleveland, Ohio facilities moved to Aurora, Ohio.

Additionally, Biomedicals reviewed the ability of the Flow product lines to
be effectively integrated into Biomedicals' "core" product lines and vice versa.
As a result, it was concluded that Flow's distribution network, product lines
and business operations were not effectively integrated into Biomedicals' global
strategy. Low margin product lines such as cell biology and instruments had
become technologically obsolete given the other competitive products on the
market. As sales continued to decline, the amount of slow moving and potentially
obsolete inventory increased. Accordingly, during the fourth quarter of 1992,
Biomedicals recorded a provision for abnormal writedowns of inventory to
estimated realizable value of $9,924,000 and discontinued products of
$3,377,000.

In addition, Biomedicals determined that the unamortized costs of the
catalog marketing program would not be recovered within a reasonable period of
time, therefore, catalog costs totaling $6,659,000 were written off in the
fourth quarter of 1992. Despite the general shortfall in catalog related sales,
the catalog marketing approach has firmly established Biomedicals' "core"
products in the European and Asian-Pacific markets. During 1993, Biomedicals'
strategy to redefine the form and use of the catalog to specifically customer
focused or "product-line" catalogs is believed to be more effective in light of
current market conditions. Additionally, radiochemical and cell biology "mini"
catalogs have been developed. During 1993 and into 1994, Biomedicals will
continue to use general catalogs and associated direct mail programs for sales
activities in biochemical, enzyme immunobiological products and reagents for
electrophoresis, but with more focus on product

I-11
<PAGE> 412

movement and customer needs. The diagnostic instrument and reagent lines are
promoted by media advertising and direct sales activities.

Diagnostic product development activities are organized to provide an
enhanced range of non-isotopic tests, complementing the existing
radioimmunoassays and microplate instrumentation. Biomedicals intends to remain
a leader in neonatal screening, and as a significant supplier of endocrinology
assay kits, test reagents and infectious disease diagnostics.

LIQUIDITY AND CAPITAL RESOURCES

Working Capital. Working capital was $13,659,000 at June 30, 1994, an
increase of $2,903,000 from December 31, 1993. The increase is primarily due to
an increase in accounts receivable and a reduction in accounts payable and
accrued liabilities, partially offset by reductions in other current assets.

Debt. Total debt (current maturities, notes payable and long-term debt)
during the six month period ending June 30, 1994 decreased to $13,867,000 from
$13,872,000 on December 31, 1993, as a result of principal payments which were
offset by an increase of $844,000 due to foreign exchange, on Biomedicals' Swiss
Franc debt.

Product Liability Insurance. Biomedicals and certain of its subsidiaries do
not maintain product liability insurance. While Biomedicals has never
experienced a material adverse claim for personal injury resulting from
allegedly defective products, a successful claim could have a material adverse
effect on the Biomedicals' liquidity and financial performance.

Cash and cash equivalents decreased from $2,204,000 at December 31, 1992 to
$509,000 at December 31, 1993. Cash and cash equivalents were $850,000 at June
30, 1994.

Net cash used in operations increased from $6,207,000 in 1992 to $6,676,000
in 1993. The slight increase in net cash used in operations can be attributed
primarily to Biomedicals' payments of trade payables and accrued liabilities in
the normal course of business and an increase in inventory available for sale
resulting from a contractual purchase of inventory, partially offset by a
decrease in trade receivables.

Net cash (used in) provided by investing activities was $(821,000) in 1992
compared to $2,308,000 in 1993. The increase in cash provided by investing
activities is a result of the sale of Biomedicals' Irvine, Scotland facility,
which occurred in April 1993.

Net cash provided by financing activities was $7,445,000 in 1992 compared
to $2,627,000 in 1993. The decrease is primarily attributed to less cash
received from ICN and less cash proceeds from issuance of long-term debt and
notes payable.

Cash and cash equivalents increased from $2,005,000 at December 31, 1991 to
$2,204,000 at December 31, 1992.

Net cash (used in) provided by operations was $8,357,000 in 1991 as
compared to $(6,207,000) in 1992. The increase in cash used in operations in
1992 compared to 1991 can be attributed to a decrease in sales and higher
operating expenses. Additionally, lower collection on trade receivables in 1992
as compared to 1991 were partially offset by decreases in inventory over the
same periods.

Net cash (used in) provided by investing activities was $1,275,000 in 1991
compared to $(821,000) in 1992. During 1991, Biomedicals sold ICN debentures for
approximately $3,503,000 which were acquired for investment purposes.

Net cash (used in) provided by financing activities was $(8,004,000) in
1991 compared to $7,445,000 in 1992. During 1992, Biomedicals made principal
payments on long-term debt and notes payable of $11,736,000 which were offset by
borrowings from ICN and issuance of other long-term debt and notes payable.
During

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<PAGE> 413

1991, Biomedicals made principal payments on long-term debt and notes payable of
$38,765,000 which were partially offset by borrowings from ICN and issuance of
other long-term debt and notes payable, however, such borrowings did not fully
fund total principal payments on long-term debt and notes payable.

Management believes that cash generated from operations, reductions in
working capital, and, if needed, additional borrowings from ICN will provide
sufficient cash to meet its normal operating requirements.

Biomedicals has obtained a written agreement from ICN that ICN is prepared,
if needed, to provide financial support to Biomedicals in order to meet its
financial obligations through April 15, 1995.

Other

Included in total debt is $8,441,000 of debt related to the issuance of
5 1/2% Swiss Franc Exchangeable Certificates (the "Certificates"). Each
Certificate is exchangeable into 334 shares of Biomedicals' Common Stock at an
exchange price of $10.02 per share, based on a fixed exchange rate of SFr. 1.49
per $1.00. (These terms are as adjusted in April 1990. See Note 6 of Notes to
Consolidated Financial Statements of Biomedicals.) The Certificates, if
converted, would result in the issuance of 2,608,241 shares of Biomedicals'
common stock, and an increase in marketable securities of approximately
$13,605,000, resulting in an increase in stockholders' equity of approximately
$21,582,000.

Effective December 1, 1986, ICN and its affiliates adopted an investment
policy covering intercompany advances and interest rates, and the type of
investments (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 Biomedicals is transferred to ICN and, in turn, cash advances have been
made by ICN to Biomedicals to fund acquisitions and 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. ICN provided $6,783,000 of
cash to Biomedicals during 1993. Total loans and advances from ICN were
$5,932,000 as of December 31, 1993. Such advances have been classified as a
long-term payable.

On August 30, 1993, Biomedicals issued to ICN 300,000 shares of a new
series "A" of Biomedicals' non-convertible, non-voting, preferred stock valued,
pursuant to a fairness opinion, at $30,000,000. In exchange, ICN delivered
4,983,606 shares of Biomedicals' common stock that ICN owned and exchanged
intercompany debt owed to ICN by Biomedicals in the amount of $11,000,000.

In addition, on August 30, 1993, Biomedicals issued to ICN 390,000 shares
of a new series "B" of Biomedicals' non-convertible, non-voting, preferred stock
valued, pursuant to a fairness opinion, at $32,000,000. In exchange, ICN
delivered to Biomedicals 8,384,843 shares of Biomedicals' common stock that ICN
owned. Subsequent to the exchange, Biomedicals had 9,033,623 common shares
issued and outstanding.

Subject to declaration by Biomedicals' Board of Directors, the new series
"A" preferred stock pays an annual dividend of $8 per share, 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 Biomedicals'
common stock as to voluntary or involuntary liquidation, dissolution or winding
up of the affairs of Biomedicals, after payment or provision for payment of the
debts and other liabilities of Biomedicals. 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 $104.50 per share in voluntary liquidation prior to
August 31, 1995, which amount declines ratably each year to $100 per share after
August 31, 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.

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<PAGE> 414

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 Biomedicals only, subject to approval by a vote of a majority of
the independent directors of Biomedicals. The series "A" preferred shares are
redeemable at $104.50 per share prior to August 31, 1995, which amount declines
ratably each year to $100 after August 31, 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.

Under the terms of the Flow purchase agreement, Biomedicals issued 100,000
shares of its common stock to the seller, which shares have a guaranteed value
of $20 per share on November 8, 1994. If the fair value, as defined, of
Biomedicals' common stock is less than $20 per share on that date, Biomedicals
must pay the difference in cash. Biomedicals may redeem such shares for the $20
guaranteed value prior to November 8, 1994. At August 31, 1994, Biomedicals
would have paid $1,562,500 to honor the guarantee.

Biomedicals has a purchase commitment with a major supplier for which the
remaining purchase of inventory under agreement was due in June 1994 in the
amount of approximately $1,727,000 (Finnish Markka 10,000,000).

Biomedicals is also a guarantor on a note payable to the same supplier for
which ICN is primarily liable. On June 30, 1993, ICN filed a claim in
arbitration alleging breach of agreement entered with such supplier and withheld
final payment due on that date of approximately $1,295,000 (Finnish Markka
7,500,000). In addition, ICN is seeking declaration and award that Biomedicals
is not obligated to honor the aforementioned purchase commitment or installments
on the note. Arbitration is set for October 4, 1994.

Net property, plant and equipment increased from $13,155,000 at December
31, 1992 to $15,728,000 at December 31, 1993. The transfer of the Opera, Italy
facility from assets held for disposition to property, plant and equipment for
$3,816,000 accounted for the increase which was partially offset by depreciation
of approximately $2,790,000. Capital expenditures for property, plant and
equipment totaled $1,978,000 in 1991, $911,000 in 1992 and $2,235,000 in 1993.
Biomedicals does not anticipate any significant capital expenditures through the
end of 1994.

INFLATION AND CHANGING PRICES

The effects of inflation are experienced by Biomedicals through increases
in the cost of labor, services and raw materials. In general, these costs have
been offset and/or anticipated, by periodic increases in the prices of its
products sold.

I-14
<PAGE> 415

SELECTED QUARTERLY FINANCIAL DATA OF BIOMEDICALS (UNAUDITED)

Following is a summary of quarterly financial data for the years ended
December 31, 1993 and 1992 and the first six months of 1994 (in thousands,
except per share amounts):

<TABLE>
<CAPTION>
1992 FIRST QUARTER SECOND QUARTER THIRD QUARTER FOURTH QUARTER
---- ------------- -------------- ------------- --------------
<S> <C> <C> <C> <C>
Net sales..................... $21,222 $19,225 $18,382 $ 16,819
Gross profit.................. 9,822 9,238 8,275 3,462
------ -------- ------- --------
Net (loss).................... $ (781) $ (669) $(7,550) $(78,420)
======= ======== ======= ========
Per share information:
Net (loss) per share........ $ (.05) $ (.03) $ (.39) $ (4.09)
======= ======== ======= ========
</TABLE>

<TABLE>
<CAPTION>
1993
----
<S> <C> <C> <C> <C>
Net sales..................... $15,809 $ 15,415 $14,607 $ 13,245
Gross profit.................. 8,433 8,458 8,099 6,455
Net income (loss) before
extraordinary income........ 1,016 2,757 866 (3,504)
Extraordinary income.......... -- 627 -- --
------- -------- ------- ---------
Net income (loss)............. $ 1,016 $ 3,384 $ 866 $ (3,504)
======= ======== ======= ========
Per share information:
Income (loss) before
extraordinary income..... $ .05 $ .12 $ .05 $ (.38)
Extraordinary income........ -- .03 -- --
------- -------- ------- --------
Net income (loss)........... $ .05 $ .15 $ .05 $ (.38)
======= ======== ======= ========
</TABLE>

<TABLE>
<CAPTION>
1994
----
<S> <C> <C> <C> <C>
Net sales..................... $15,487 $15,171
Gross profit.................. 8,647 8,511
------- --------
Net income.................... $ 514 $ 536
======= ========
Per share information:
Net income.................. $ .06 $ .06
======= ========
</TABLE>

I-15
<PAGE> 416

REPORT OF INDEPENDENT AUDITORS

TO ICN BIOMEDICALS, INC.:

We have audited the accompanying consolidated balance sheets, financial
statements and financial statement schedules of ICN Biomedicals, Inc. (a
Delaware corporation) and subsidiaries as of December 31, 1993 and 1992, and the
related consolidated statements of operations, stockholders' equity and cash
flows and financial statement schedules (not separately included herein) for
each of the three years in the period ended December 31, 1993. These
consolidated financial statements and financial statement schedules are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements and financial statement
schedules based on our audits.

The Company has had certain transactions with its parent and affiliated
companies as more fully described in Notes 3, 4, 6, 7 and 11 to the consolidated
financial statements. Whether the terms of these transactions would have been
the same had they been between wholly unrelated parties cannot be determined.

In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
ICN Biomedicals, Inc. and subsidiaries as of December 31, 1993 and 1992 and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1993 in conformity with generally
accepted accounting principles. In addition, in our opinion, the financial
statements schedules referred to above, when considered in relation to the basic
financial statements taken as a whole, present fairly, in all material respects,
the information required to be included therein.

COOPERS & LYBRAND

Los Angeles, California
March 30, 1994

I-16
<PAGE> 417

ICN BIOMEDICALS, INC.

CONSOLIDATED BALANCE SHEETS

DECEMBER 31, 1993 AND 1992
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

ASSETS

<TABLE>
<CAPTION>
1993 1992
-------- --------
<S> <C> <C>
Current assets:
Cash and equivalents................................................... $ 509 $ 2,204
Restricted cash........................................................ 256 --
Receivables, net....................................................... 11,574 16,270
Inventories, net....................................................... 15,601 13,499
Prepaid expenses and other current assets.............................. 3,241 3,587
Assets held for disposition............................................ -- 8,959
-------- --------
Total current assets......................................... 31,181 44,519
Property, plant and equipment, net..................................... 15,728 13,155
Other assets and deferred charges, net................................. 2,342 2,735
Excess of cost over net assets of purchased subsidiaries, net.......... 2,580 2,933
-------- --------
$ 51,831 $ 63,342
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable.......................................................... $ 1,926 $ 4,223
Current maturities of long-term debt and capital lease obligations..... 1,379 2,064
Accounts payable....................................................... 6,404 12,808
Accrued liabilities.................................................... 10,716 16,748
-------- --------
Total current liabilities.................................... 20,425 35,843
Long-term debt and capital lease obligations, less current
maturities........................................................... 10,567 11,709
Deferred income taxes and other liabilities............................ 2,266 3,560
Payable to ICN......................................................... 5,932 8,414
Commitments and contingencies (Note 7) Stockholders' equity:
Preferred stock, $.01 par value; 1,000,000 shares authorized; Series A,
300,000 shares ($30,000,000 involuntary liquidation preference)...... 3 --
Series B, 390,000 shares ($39,000,000 involuntary liquidation
preference).......................................................... 4 --
Common stock, $.01 par value: 30,000,000 shares authorized; 9,033,623
and 22,397,272 shares issued and outstanding at December 31, 1993 and
1992, respectively................................................... 90 224
Additional capital: Preferred.......................................... 61,928 --
Additional capital: Common............................................. 43,072 93,934
Deficit................................................................ (89,540) (89,014)
Foreign currency translation adjustments............................... (2,916) (1,328)
-------- --------
Total stockholders' equity................................... 12,641 3,816
-------- --------
$ 51,831 $ 63,342
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

I-17
<PAGE> 418

ICN BIOMEDICALS, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)

<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
<S> <C> <C> <C>
Net sales................................................ $ 59,076 $ 75,648 $ 96,507
Cost of sales............................................ 27,631 44,851 51,917
-------- -------- --------
Gross profit............................................. 31,445 30,797 44,590
Selling, general and administrative expenses............. 28,455 43,509 39,922
Research and development costs........................... 378 583 1,687
Amortization of goodwill and other intangibles........... 502 1,486 1,829
Interest income (including $218 from ICN in 1991)........ (6) (212) (512)
Interest expense (including $420 and $314 to ICN in 1993
and 1992), respectively................................ 2,256 4,779 7,585
Lease vacancy costs...................................... 1,436 -- --
Restructuring costs and special charges.................. -- 63,032 6,087
Other (income) expense, net.............................. (2,399) 4,731 1,268
-------- -------- --------
Income (loss) before provision (benefit) for income taxes
and extraordinary income............................... 823 (87,111) (13,276)
Provision (benefit) for income taxes..................... (312) 309 (384)
-------- -------- --------
Income (loss) before extraordinary income................ 1,135 (87,420) (12,892)
Extraordinary income..................................... 627 -- --
-------- -------- --------
Net income (loss)........................................ $ 1,762 $(87,420) $(12,892)
======== ======== ========
Per share information:
Net income (loss) before extraordinary income............ $ .07 $ (4.80) $ (1.09)
Extraordinary income..................................... .03 -- --
-------- -------- --------
Net income (loss)........................................ $ .10 $ (4.80) $ (1.09)
======== ======== ========
Dividends per common share............................... $ .17 $ .17 $ .15
======== ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

I-18
<PAGE> 419

ICN BIOMEDICALS, INC.

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS,
EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
PREFERRED STOCK
SERIES "A" AND "B" COMMON STOCK ADDITIONAL
---------------------- ----------------------- CAPITAL
NUMBER OF NUMBER OF PREFERRED AND
SHARES AMOUNT SHARES AMOUNT COMMON
---------- ------- ----------- ------ -------------
<S> <C> <C> <C> <C> <C>
Balance at November 30, 1990.............................. -- -$- 11,249,913 $113 $ 38,882
December 1990 net loss.................................... -- -- -- -- --
Dividends declared ($.15 per share)....................... -- -- -- -- --
Translation adjustments................................... -- -- -- -- --
Exercise of stock options................................. -- -- 89,083 1 343
Conversion of debt into common stock...................... -- -- 3,984,464 39 25,816
Net loss.................................................. -- -- -- -- --
---------- ---- ----------- ------ -----------
Balance at December 31, 1991.............................. -- -- 15,323,460 153 65,041
Dividends declared ($.17 per share)....................... -- -- -- -- --
Translation adjustments................................... -- -- -- -- --
Exercise of stock options................................. -- -- 54,040 1 245
Conversion of debt into common stock...................... -- -- 7,019,772 70 28,648
Net loss.................................................. -- -- -- -- (87,420)
---------- ---- ----------- ------ -----------
Balance of December 31, 1992.............................. -- -- 22,397,272 224 93,934
Dividends declared ($.17 per share)....................... -- -- -- -- --
Translation adjustments................................... -- -- -- -- --
Exercise of stock options................................. -- -- 4,800 -- 4
Conversion of common stock and debt into Preferred stock
series "A" and "B"...................................... 690,000 7 (13,368,449) (134) 11,062
Net income................................................ -- -- -- -- --
---------- ---- ----------- ------ -----------
Balance at December 31, 1993.............................. 690,000 $7 9,033,623 $ 90 $105,000
========== ==== =========== ====== ===========

<CAPTION>
RECEIVABLE
FOREIGN FROM
RETAINED CURRENCY PARENT FOR
EARNINGS TRANSLATION ISSUANCE OF
(DEFICIT) ADJUSTMENTS STOCK TOTAL
--------- ------------ ------------ -----
<S> <C> <C> <C> <C>
Balance at November 30, 1990.............................. $ 18,507 $ 3,298 $ -- $60,800
December 1990 net loss.................................... (1,508) -- -- (1,508)
Dividends declared ($.15 per share)....................... (1,738) -- -- (1,738)
Translation adjustments................................... -- (1,145) -- (1,145)
Exercise of stock options................................. -- -- -- 344
Conversion of debt into common stock...................... -- -- (2,853) 23,002
Net loss.................................................. (12,892) -- -- (12,892)
-------- ---------- -------- -------
Balance at December 31, 1991.............................. 2,369 2,153 (2,853) 66,863
Dividends declared ($.17 per share)....................... (3,963) -- -- (3,963)
Translation adjustments................................... -- (3,481) -- (3,481)
Exercise of stock options................................. -- -- -- 246
Conversion of debt into common stock...................... -- -- 2,853 31,571
Net loss.................................................. -- -- (87,420)
------- ---------- -------- -------
Balance of December 31, 1992.............................. (89,014) (1,328) -- 3,816
Dividends declared ($.17 per share)....................... (2,288) -- -- (2,288)
Translation adjustments................................... -- (1,588) -- (1,588)
Exercise of stock options................................. -- -- -- 4
Conversion of common stock and debt into Preferred stock
series "A" and "B"...................................... -- -- -- 10,935
Net income................................................ 1,762 -- -- 1,762
------- ---------- -------- -------
Balance at December 31, 1993.............................. $(89,54) $(2,916) $ -- $12,641
======= =========== ======== =======
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

I-19
<PAGE> 420

ICN BIOMEDICALS, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 1993, 1992 AND 1991 (DOLLARS IN THOUSANDS)

<TABLE>
<CAPTION>
1993 1992 1991
------- -------- --------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss) before extraordinary income........... $ 1,762 $(87,420) $(12,892)
Adjustments to reconcile net income (loss) to net
cash provided by operating activities:
Lease vacancy costs.................................. 1,200 -- --
Gain on settlements of certain lease contracts....... (938) -- --
Gain on settlement of foreign non-income tax related
dispute............................................ (430) -- --
Gain on settlement of certain liabilities for less
than original estimate............................. (1,250) -- --
Extraordinary income................................. (627) -- --
Depreciation and amortization........................ 3,381 6,076 6,045
Allowance for losses on receivables.................. 168 2,251 20
Loss (gain) on disposition of assets................. (271) 1,184 931
Foreign exchange gains, net.......................... (178) (730) (744)
Restructuring costs and special charges.............. -- 63,032 6,087
Other non-cash gains................................. (147) (125) (98)
Change in assets and liabilities, net:
Decrease in receivables................................. 4,528 5,540 12,141
Decrease (increase) in inventories, net................. (2,102) 10,881 8,569
Decrease (increase) in prepaid expenses and other....... 726 (3,615) (2,032)
Decrease in accounts payable and accrued liabilities.... (12,498) (3,281) (9,670)
------- -------- --------
Net cash (used in) provided by operating
activities......................................... (6,676) (6,207) 8,357
------- -------- --------
Cash flows from investing activities:
Capital expenditures.................................... (2,235) (911) (1,978)
Proceeds from the sale of asset held for disposition.... 4,543 -- --
Other, net.............................................. -- 90 3,253
------- -------- --------
Net cash (used in) provided by investing
activities......................................... 2,308 (821) 1,275
------- -------- --------
Cash flows from financing activities:
Proceeds from issuance of long-term debt and notes
payable.............................................. $ 661 $ 2,733 $ 17,952
Principal payments on long-term debt and notes
payable.............................................. (4,214) (11,736) (38,765)
Proceeds from exercise of stock options................. 4 246 344
Increase in restricted cash............................. (256) -- --
Cash dividends paid..................................... (351) (537) (411)
Cash received from ICN, net............................. 6,783 16,739 13,444
Other, net.............................................. -- -- (568)
------- -------- --------
Net cash provided by (used in) financing
activities......................................... 2,627 7,445 (8,004)
------- -------- --------
Effect of exchange rate changes on cash................... 46 (218) 481
------- -------- --------
Net increase (decrease) in cash and equivalents........... (1,695) 199 2,109
Cash and equivalents at beginning of year................. 2,204 2,005 (104)
------- -------- --------
Cash and equivalents at end of year....................... $ 509 $ 2,204 $ 2,005
======= ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated financial
statements.

I-20
<PAGE> 421

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

DECEMBER 31, 1993

1. FORMATION AND HISTORY

ICN Biomedicals, Inc. (the "Company") was incorporated in September 1983 as
a Delaware corporation by ICN Pharmaceuticals, Inc. ("ICN") and operated as a
wholly-owned subsidiary of ICN until the Company completed its initial public
offering during 1986. The Company is a 69%-owned subsidiary of ICN at December
31, 1993. The Company conducts its business in research chemical products,
diagnostics products, biomedical instrumentation, and radiation monitoring
services.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Reclassifications

Certain prior year items have been reclassified to conform with the current
year presentation.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of
the Company and its wholly-owned subsidiaries. All significant intercompany
account balances and transactions have been eliminated.

Cash Equivalents

The Company considers all highly liquid instruments purchased with a
maturity of less than three months to be cash equivalents.

Excess of Cost Over Net Assets of Purchased Subsidiaries

The difference between the purchase price and the fair value of net assets
at the date of acquisition is included in the consolidated balance sheets as
"Excess of cost over net assets of purchased subsidiaries, net" ("Goodwill").
Goodwill has been amortized primarily over forty years through 1992. The Company
evaluates the carrying value of goodwill including the amortization periods on a
quarterly basis to determine whether events and circumstances warrant revised
estimates of useful lives. The recoverability of goodwill is assessed based on
the expected undiscounted future operating income of the acquired entity. During
the fourth quarter of 1992, the Company wrote-off a substantial portion of its
goodwill, primarily related to its Flow acquisition, as more fully described in
Note 12. Additionally, of the remaining goodwill, the Company revised the
remaining amortization period to primarily five years, which reflects the
estimated recovery period of the remaining goodwill. Accumulated amortization
totaled $2,901,000 and $2,548,000 at December 31, 1993 and 1992, respectively.

Foreign Currency Translation

The assets and liabilities of the Company's foreign operations are
translated at the end of period exchange rates. Revenues and expenses are
translated at the average exchange rates prevailing during the period. The
effects of unrealized exchange rate fluctuations on translating foreign currency
assets and liabilities into U.S. dollars are accumulated in stockholders'
equity. The Company has included in operating income all foreign exchange gains
and losses arising from foreign currency transactions. Gains included in other
expenses, net from foreign exchange transactions for 1993, 1992 and 1991 were
$178,000, $730,000 and $744,000, respectively.

I-21
<PAGE> 422

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Inventories

Inventories, which include material, direct labor and overhead, are stated
at the lower of cost or market. Cost is determined on a first-in, first-out
(FIFO) basis.

Catalog Costs

The initial costs of design, production and distribution of the Company's
product catalog are deferred and amortized over its estimated service life,
approximately one year. However, for the year ended December 31, 1992, due to
lower than expected sales results, the Company wrote-off these costs in the
fourth quarter of 1992 (See Note 12).

Property, Plant and Equipment

The Company primarily uses the straight-line method for depreciating
property, plant and equipment over their estimated useful lives. Buildings and
related improvements are depreciated over 20-40 years, machinery and equipment
over 2-10 years, furniture and fixtures over 3-10 years, and leasehold
improvements are amortized over their useful lives, limited to the life of the
lease.

The Company follows the policy of capitalizing expenditures that materially
extend the life or increase the value of the related assets. Repair and
maintenance costs are charged to expense. Upon sale or retirement, the costs and
related accumulated depreciation or amortization are eliminated from the
respective accounts, and the resulting gain or loss is included in income.

Patents and Other Intangible Assets

The costs of patents, license rights and other intangible assets acquired
primarily through acquisitions are included in other assets and deferred
charges, net and are being amortized over approximately 5 to 10 years. Such
costs totaled $871,000 and $1,024,000, net of accumulated amortization of
$803,000 and $654,000 as of December 31, 1993 and 1992, respectively. In
addition, certain patents and intangible assets which were acquired in
connection with the Flow and other acquisitions were re-evaluated during the
fourth quarter 1992. The Company wrote-off a portion of its patents and
intangible assets, as more fully described in Note 12. Additionally, of the
remaining patents and other intangible assets, the Company revised the remaining
amortization period to primarily five years which reflects the estimated
recovery period of the remaining patents and other intangible assets.

Income Taxes

In January 1993, the Company adopted Statement of Financial Accounting
Standards No. 109, (SFAS 109) "Accounting for Income Taxes". SFAS 109 is an
asset and liability approach that requires the recognition of deferred tax
assets and liabilities for the expected future tax consequence of events that
have been recognized in the Company's financial statements or tax returns. In
estimating future tax consequences, SFAS 109 generally considers all expected
future events other than enactment of changes in the tax law or rates.
Previously, the Company used the SFAS 96 asset and liability approach that gave
no recognition to future events other than the recovery of assets and settlement
of liabilities at their carrying amounts. The adoption of SFAS 109 did not
result in a cumulative effect adjustment in the statement of operations.

I-22
<PAGE> 423

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Notes Payable

The Company classifies bank borrowings with initial terms of one year or
less as Notes Payable. These notes, originating in the Italian subsidiary, bear
interest at average rates of 16%. The carrying amount of Notes Payable
approximates fair value due to the short-term maturity of these instruments.

Per Share Information

Per share information is based on the weighted average number of shares
outstanding and dilutive common share equivalents. Common share equivalents
represent shares issuable for outstanding options and warrants on the assumption
that the proceeds would be used to repurchase shares on the open market. The
Swiss Franc Exchangeable Certificates debt issue (see Note 6) is not a common
share equivalent. Fully dilutive earnings per share is not shown because the
computation was antidilutive or the difference from primary earnings per share
was not material. The number of shares used in the per share computation was
17,964,000, 18,224,000 and 11,790,000 in 1993, 1992 and 1991, respectively.

Concentrations of Credit Risk

The Company has approximately $3,506,000 of accounts receivables related to
its Italian subsidiary for which a significant portion of the balance relates to
local government entities. The ability and timing to collect these receivables
is influenced by the general economics in that country.

3. ASSETS HELD FOR DISPOSITION

During January 1993, the Company transferred its Dublin, Virginia, facility
to ICN in exchange for a reduction in the intercompany amounts due ICN of
$586,000 representing the net book value at the date of transfer.

During April 1993, the Company sold certain assets of its manufacturing
business, producing liquid and powder media, located in Irvine, Scotland. The
resulting gain of approximately $278,000 is included in other (income) expense,
net. Additionally, the Company has deferred approximately $256,000 of the sales
proceeds for certain environmental contingencies related to the Irvine, Scotland
property. This obligation is funded and included in restricted cash and held in
an escrow trust account. In the event such contingencies do not utilize the
escrow balance, remaining funds, if any, will be remitted to the Company.

During the fourth quarter of 1993, the Company moved its Italian operation
from Cassina de Pecchi, a leased facility, back to Opera, an owned facility. The
Opera facility was transferred from assets held for disposition to property,
plant and equipment during December 1993.

4. RELATED PARTY TRANSACTIONS

General

As of December 31, 1993, ICN owned 69% of the outstanding common stock of
the Company. ICN controls the Company through stock ownership, voting control
and board representation. The Company, ICN, SPI Pharmaceuticals, Inc. (a
39%-owned equity investment of ICN at December 31, 1993 -- "SPI") and Viratek,
Inc. (a 69%-owned subsidiary of ICN at December 31, 1993 -- "Viratek") have
engaged in, and will continue to engage in, certain transactions with each
other.

The Company has obtained a written agreement from ICN that ICN is prepared,
if needed, to provide financial support to the Company in order to meet its
financial obligations through April 15, 1995.

I-23
<PAGE> 424

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

An Oversight Committee of the Boards of Directors of ICN, SPI, Viratek and
the Company reviews transactions between or among the Company, ICN, SPI and
Viratek (collectively, the "Affiliated Corporations") to determine whether a
conflict of interest exists with respect to a particular transaction and the
manner in which such conflict can be resolved. The Oversight Committee has
advisory authority only and makes recommendations to the Board of Directors of
each of the Affiliated Corporations. The Oversight Committee consists of one
non-management director of each Affiliated Corporation and a non-voting
chairman. The significant related party transactions have been reviewed and
recommended for approval by the Oversight Committee, and approved by the
respective Boards of Directors.

Cost Allocations

The Company subleases space on a year-to-year basis in Costa Mesa,
California from ICN. The costs of common services used by the Company, SPI,
Viratek and ICN are allocated by SPI based upon various formulas. Effective
January 1, 1993, ICN reimburses the Company for those allocations which are in
excess of the amounts determined by management using competitive data, as
reviewed and recommended by the Oversight Committee, that would have been
incurred by the Company if it operated in a facility suited solely to its
requirements. It is management's belief that the methods used and amounts
allocated for facility costs and common services are reasonable based upon the
usage by the respective Companies.

Rent and common services charged to the Company were as follows:

<TABLE>
<CAPTION>
1993 1992 1991
-------- ---------- ----------
<S> <C> <C> <C>
Rent............................................ $310,000 $ 310,000 $ 310,000
Common services................................. 528,000 1,497,000 1,475,000
-------- ---------- ----------
$838,000 $1,807,000 $1,785,000
======== ========= =========
</TABLE>

Investment Policy

Effective December 1, 1986, ICN and its affiliates have adopted an
investment policy covering intercompany advances and interest rates, and the
types 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.

During the year ended December 31, 1993 and 1992, the Company reclassified
its SPI intercompany payable of $2,333,000 and $3,631,000, and its Viratek
intercompany receivable of $272,000 and $536,000 to the Company's ICN
intercompany account resulting in a net increase in the Company's liability to
ICN of $2,061,000 and $3,095,000, respectively. Total loans and advances from
ICN were $5,932,000 and $8,414,000 as of December 31, 1993 and 1992,
respectively. Such advances have been classified as a long-term payable.

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 were payable to the Company
by ICN in Swiss Francs. At March 1, 1991 the Company converted 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 exchange
gains of $159,000, $758,000 and $170,000 in 1993, 1992 and 1991, respectively.

I-24
<PAGE> 425

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Debt and Equity Transactions

On August 30, 1993, 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.

In addition, 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.

As a result of 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.

No dividends were declared on the Series "A" or Series "B" preferred stock
during 1993.

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 April 1, 1992, the Company transferred $13,072,000 of debt with First
City Bank of Texas-Houston N.A., to ICN. The Company, in exchange, issued
2,412,449 shares of the Company's common stock at a price of $5.42 per share
which represents the closing market price of the stock at that date less a
discount of 15%. ICN became primarily liable for the debt. The Company's
domestic inventories and receivables remained as collateral. The outstanding
debt was repaid in full by ICN on December 3, 1992 and all pledges were
extinguished.

I-25
<PAGE> 426

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

On March 31, 1992, the Company transferred $2,711,000 of debt owed to
Skopbank of Finland to ICN. The Company, in exchange, issued 500,334 shares of
the Company's common stock at a price of $5.42 per share which represents the
closing market price of the Company's stock on that date less a discount of 15%.
ICN became primarily liable for the debt and the Company became guarantor.

On March 31, 1992, the Company exchanged $4,837,000 of debt owed to ICN for
892,703 shares of the Company's common stock issued to ICN at a price of $5.42
per share which represents the closing market price of the stock on that date
less a discount of 15%.

On December 31, 1991, the Company issued 3,363,298 shares of the Company's
common stock to ICN at a price of $6.25 which represents the fair market value
of the Company's stock on that date in exchange for debt owed ICN in the amount
of $18,167,523.

On March 1, 1991, the Company exchanged $3,833,000 of advances due to ICN
into 538,000 shares of the Company's common stock, issued at a price of $7.125
which represented the fair market value of the Company's stock on that date less
a discount of 22%.

In March 1987 and October 1988, the Company purchased ICN 12 7/8%
debentures due 1998 and ICN 12 1/2% debentures due 1999 on the open market. The
debentures had a book value of $3,567,250. On December 30, 1991 the Company sold
all the debentures to ICN for a loss of $64,250.

Research and Development

Effective January 1, 1992, the Company entered into an agreement with
Viratek, whereby the Company transferred right, title, and interest in certain
of its research and development projects to Viratek. The Company retains a right
of first refusal to the marketing and distribution rights for any products
developed. Viratek conducts biomedical research related to the development of
non-isotopic diagnostic test kits and associated hardware. The Company continues
to perform research and development in reagents and instrumentation.

Other

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 June 30, 1993, ICN filed a claim in arbitration alleging
breach of agreement entered with such supplier and withheld final payment due on
that date of approximately, $1,295,000 (Finnish Markka 7,500,000). Arbitration
is set for October 11, 1994.

5. INCOME TAXES

I-26
<PAGE> 427

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

adoption of SFAS 109 did not result in a cumulative effect adjustment in the
statement of operations. Prior years' amounts are presented as previously
reported.

Income (loss) before provision for income taxes and extraordinary income
(1993) for the years ended December 31 consists of the following:

<TABLE>
<CAPTION>
1993 1992 1991
----------- ------------ ------------
<S> <C> <C> <C>
Domestic.................................. $ 2,753,000 $(51,267,000) $ (9,993,000)
Foreign................................... (1,930,000) (35,844,000) (3,283,000)
----------- ------------ ------------
$ 823,000 $(87,111,000) $(13,276,000)
========== =========== ===========
</TABLE>

The income tax provision (benefit) consists of the following:

<TABLE>
<CAPTION>
1993 1992 1991
-------------------- ------------------- --------------------
CURRENT DEFERRED CURRENT DEFERRED CURRENT DEFERRED
--------- -------- -------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
Federal.................... $ -- $ -- $ -- $ -- $ -- $ 139,000
State...................... -- -- -- -- 60,000 --
Foreign.................... (312,000) -- 309,000 -- 263,000 (846,000)
--------- -------- -------- -------- -------- ---------
$(312,000) $ -- $309,000 $ -- $323,000 $(707,000)
========= ======= ======== ======= ======== =========
</TABLE>

The components of the deferred income tax provision relate primarily to the
net tax effects of the differences arising as the result of utilizing different
depreciation and amortization methods for income tax purposes than for financial
reporting purposes and establishing inventory allowances for financial reporting
purposes which are not currently deductible for income tax purposes.

A reconciliation of the Federal statutory income tax rates to the effective
income tax rates is as follows:

<TABLE>
<CAPTION>
1993 1992 1991
---- ---- ----
<S> <C> <C> <C>
Statutory rate.......................................... 35 % (34)% (34)%
Goodwill amortization................................... 15 15 2
Operating loss -- no tax benefit........................ -- 20 36
Net operating loss -- tax benefit....................... (50) -- --
Reduction -- foreign income tax liabilities............. (38) -- (7)
---- ---- ----
Effective rate.......................................... (38)% 1 % (3)%
==== ==== ====
</TABLE>

The Company has domestic and foreign operating loss carryforwards (NOL) of
approximately $39,000,000 and $38,000,000, respectively, at December 31, 1993.
Such NOLs expire in varying amounts from 1994 until 2008. Of the $77,000,000
NOL, $458,000 will be credited to additional paid in capital when utilized. In
connection with the acquisition of Flow, the Company acquired Flow's net
operating loss carryforwards of $9,771,000. The Company has agreed to pay Flow
the first $500,000 of any benefits realized. In the event this amount is not
realized by November 1994, it will become due and payable to Flow including

I-27
<PAGE> 428

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

interest at 10%. Tax benefits related to the NOL existing at the date of
acquisition realized in excess of $500,000 will be shared equally with Flow.

The primary temporary differences which give rise to the Company's net
deferred tax liability, at December 31, 1993 and January 1, 1993, are as
follows: (in thousands)

<TABLE>
<CAPTION>
DECEMBER 31, JANUARY 1,
1993 1993
------------- -----------
<S> <C> <C>
Deferred tax assets:
Inventory and other allowances.................. $ 3,734 $ 4,789
Amortization differences........................ 417 2,157
Compensation not currently deductible........... 363 533
Other........................................... 1,750 1,750
Domestic NOL.................................... 11,958 10,024
Foreign NOL..................................... 13,311 12,635
Valuation reserve............................... (29,511) (29,924)
------------- -----------
Total deferred tax asset..................... 2,022 1,964
------------- -----------
Deferred tax liabilities:
Depreciation.................................... (2,022) (1,964)
------------- -----------
Total deferred tax liability................. (2,022) (1,964)
------------- -----------
Net deferred tax liability................... $ -- $ --
========== ========
</TABLE>

6. DEBT

Long-term debt and obligations under capital leases due non-affiliates
consists of the following:

<TABLE>
<CAPTION>
1993 1992
----------- -----------
<S> <C> <C>
Zero Coupon Guaranteed Bonds with an effective
interest rate of 13.5%, maturing in 2002.......... $ 8,441,000 $ 9,112,000
Notes payable to banks, collateralized by land and
buildings, due in various installments through the
year 2000 with interest at 5.75% to 10%........... 2,712,000 3,093,000
Bank loans from Italian Government agency with
interest rate of 2% maturing in 2002.............. 435,000 504,000
Loans from the Scottish Development Agency,
collateralized by real property, at an average
interest rate of 11.9% (paid upon sale of
underlying real property in 1993)................. -- 382,000
Obligations under capital leases.................... 358,000 682,000
----------- -----------
Total long-term debt and capital leases............. 11,946,000 13,773,000
Less -- current maturities.......................... 1,379,000 2,064,000
----------- -----------
Total.......................................... $10,567,000 $11,709,000
========== ==========
</TABLE>

All of the long-term debt noted above (other than $1,555,000 and $1,670,000
of notes payable to banks, collateralized by land and buildings in 1993 and
1992, respectively), is denominated in currencies other than the U.S. Dollar.

In 1987, Bio Capital Holding ("Bio Capital"), a trust established by ICN
and the Company, completed a public offering in Switzerland of Swiss Francs
(SFr.) 70,000,000 principal amount of 5 1/2% Swiss Franc Exchangeable
Certificates ("Old Certificates"). At the option of the certificate holders, the
Old Certificates

I-28
<PAGE> 429

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

are exchangeable into shares of common stock of the Company. Net proceeds were
used by Bio Capital to purchase SFr. 70,000,000 face amount of zero coupon Swiss
Franc Debt Notes due 2002 of the Kingdom of Denmark (the "Danish Bonds") for
SFr. 33,772,000 and 15 series of zero coupon Swiss Franc Guaranteed Bonds of the
Company (the "Zero Coupon Guaranteed Bonds") for SFr. 32,440,000, which are
guaranteed by ICN. Each series of the Zero Coupon Guaranteed Bonds are in an
aggregate principal amount of SFr. 3,850,000 maturing in February of each year
through 2002. The Company has no obligation with respect to the payment of the
principal amount of the Old Certificates since they will be paid upon maturity
by the Danish bonds.

During 1990, the Company offered, to all certificate holders, to exchange
the Old Certificates for newly issued certificates ("New Certificates"), the
terms of which remain the same except that 334 shares per SFr. 5,000 principal
certificate can be exchanged at $10.02 using a fixed exchange rate of SFr. 1.49
to U.S. $1.00. Substantially all of the outstanding Old Certificates were
exchanged for New Certificates (together referred to as "Certificates"). The
deferred loan costs associated with the exchange are included in other assets
and deferred charges, net in the accompanying consolidated balance sheets. This
exchange was accounted for as an extinguishment of debt and the effect on net
income was not material.

During 1992, the Company repurchased SFr. 5,640,000 of Certificates,
representing long-term debt of $1,859,000.

During 1991, SFr. 1,245,000 ($918,000) principal amount of New Certificates
were exchanged into 83,166 shares of common stock. These transactions resulted
in a reduction of debt of SFr. 434,000 ($312,000) during 1991. There were no
Certificates exchanged during 1992 or 1993.

As of December 31, 1993, the accompanying consolidated financial statements
include total outstanding debt of SFr. 12,534,000 ($8,441,000) which represents
the present value of the Company's obligation to pay the Zero Coupon Guaranteed
Bonds. When Certificates are exchanged into common stock, the Company's
obligation to pay the Zero Coupon Guaranteed Bonds is reduced and the Danish
Bonds are released by Bio Capital to the Company, both on a pro rata basis. As
of December 31, 1993, SFr. 39,615,000 ($26,677,000) principal of Certificates
were outstanding which, if exchanged for common stock, would result in the
issuance of 2,608,241 shares of common stock, a reduction of long-term debt of
SFr. 11,330,000 ($7,630,000), a reduction of SFr. 1,204,000 ($811,000) of
current maturities of long-term debt, and an increase in marketable securities
of SFr. 20,204,000 ($13,605,000) from the release by Bio Capital of the Danish
Bonds to the Company.

Annual aggregate maturities of long-term debt including obligations under
capital leases are as follows:

<TABLE>
<S> <C>
1994............................................ $ 1,379,000
1995............................................ 1,344,000
1996............................................ 1,419,000
1997............................................ 1,510,000
1998............................................ 1,513,000
Thereafter...................................... 4,781,000
-----------
Total................................. $11,946,000
==========
</TABLE>

The average month-end balances of aggregate short-term borrowings due to
non-affiliates were $2,933,000, and $6,059,000, at weighted average interest
rates of 16.2% and 20.9%, for 1993 and 1992, respectively. Maximum total
month-end borrowings during 1993 and 1992 were $4,204,000, and $7,712,000,
respectively. The weighted average interest rates of total short-term debt due
to non-affiliates at the end of 1993 and 1992, approximated the weighted average
rate on average month-end balances.

I-29
<PAGE> 430

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

7. COMMITMENTS AND CONTINGENCIES

Commitments

At December 31, 1993, the Company was committed under noncancellable leases
with non-affiliates for minimum aggregate lease payments as follows:

<TABLE>
<CAPTION>
OPERATING CAPITAL
LEASES LEASES
---------- --------
<S> <C> <C>
1994............................................... $ 849,000 $155,000
1995............................................... 799,000 88,000
1996............................................... 625,000 88,000
1997............................................... 507,000 89,000
1998............................................... 534,000 --
Thereafter......................................... 4,782,000 --
---------- --------
$8,096,000 420,000
=========
Less -- amount representing interest............... 62,000
--------
Present value of net minimum lease payments........ 358,000
Less -- current maturities......................... 129,000
--------
$229,000
========
</TABLE>

Rental expense on operating leases was $870,000, $1,066,000 and $1,426,000
in 1993, 1992 and 1991, respectively.

Purchase Commitment

The Company has a purchase commitment with a major supplier for which the
remaining purchase of inventory under agreement will be due June 1994 in the
amount of approximately $1,727,000 (Finnish Markka 10,000,000).

The Company is also a guarantor on a note payable to the same supplier for
which ICN is primarily liable. On June 30, 1993, ICN filed a claim in
arbitration alleging breach of agreement entered with such supplier and withheld
final payment due on that date of approximately $1,295,000 (Finnish Markka
7,500,000). In addition, ICN is seeking declaration and award that the Company
is not obligated to honor the aforementioned purchase commitment or installments
on the note. Arbitration is set for October 4, 1994.

Acquisition Commitments

Under the terms of the Flow purchase agreement, the Company issued 100,000
shares of common stock to the seller, which shares have a guaranteed value of
$20 per share on November 8, 1994. If the fair value, as defined, of the
Company's common stock is less than $20 per share on that date, the Company must
pay the difference in cash. The Company may redeem such shares for the $20
guaranteed value prior to November 8, 1994. At December 31, 1993, the Company
would have paid $1,575,000 to honor the guarantee.

Litigation

The Company is party to a number of pending or threatened lawsuits arising
out of, or incidental to, its ordinary course of business. In the opinion of
management, the resolution of these matters will not have a material adverse
effect upon the consolidated financial position of the Company.

I-30
<PAGE> 431

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Product Liability Insurance

The Company is self-insured for potential product liability with respect to
currently marketed products. The Company could be exposed to possible claims for
personal injury resulting from allegedly defective products. While to date no
material adverse claim for personal injury resulting from allegedly defective
products has been successfully maintained against the Company, a substantial
claim, if successful, could have a material adverse effect upon the consolidated
financial position of the Company.

Benefit Plans

The Company has several benefit plans covering substantially all of their
employees.

All eligible U.S. employees may elect to participate in an ICN sponsored
401(k) plan. The Company partially matches employee contributions.

The Company's United Kingdom subsidiary has a defined benefit retirement
plan which covers all eligible U.K. employees. The plan is actuarially reviewed
approximately every three years. Annual contributions are based on total
pensionable salaries. It is estimated that the plan's assets exceeded the
actuarial computed value of vested benefits as of December 31, 1993 and 1992,
respectively.

The total expense under the U.S. and U.K. plans was approximately $452,000
in 1993, $260,000 in 1992, and $440,000 in 1991.

The Company also had deferred compensation agreements for certain of its
officers and certain key employees, with benefits commencing at death or
retirement. The present value of the benefits expected to be paid was accrued
from 1985 through 1989 at which time the agreements were terminated. Interest
continues to accrue on the amounts due until all payments are made.

8. COMMON STOCK

The Company has reserved a total of 2,140,000 shares for issuance under its
1983 Employee Incentive Stock Option Plan and its 1983 Non-Qualified Stock
Option Plan and 1,000,000 shares for issuance under its 1992 Employee Incentive
Stock Option Plan and 1992 Non-Qualified Stock Option Plan (the "Plans"). Under
the terms of the plans, participants may receive options to purchase common
stock in such amounts as may be established by the Compensation Committee of the
Board of Directors. Options are granted at a price not less than 100 percent of
the fair market value on the date of grant and may be granted for a term of up
to ten years. Options have been granted at prices ranging from $.83 to $10.50
per share. Options for 1,819,830, 1,192,130 and 1,137,258 shares were
outstanding at December 31, 1993, 1992 and 1991, respectively. Shares available
for grant under the Plans were 169,750, 789,120 and 343,860 at December 31,
1993, 1992 and 1991, respectively. Shares remaining under grant were 1,819,830
and 1,192,130 at December 31, 1993 and 1992, respectively. Shares of 843,135 and
592,310, were exercisable as of December 31, 1993 and 1992, respectively.
Options totaling 4,800, 54,040, and 89,083 shares were exercised during 1993,
1992 and 1991, at average prices of $.83, $4.55 and $3.86, respectively. The
Company's 1983 Plans expired on September 1, 1993 and the Company's 1992 Plans
expire in 2002.

At December 31, 1993, options for 600,000 shares at prices ranging from
$6.125 to $7.00 per share of the Company's common stock were outstanding, which
had been granted during 1988 and 1992 to Milan Panic, Chairman of the Board of
Directors and Chief Executive Officer of the Company.

The Company issued 83,166 shares of common stock upon the exchange of
Certificates in 1991. There were no certificates exchanged during 1992 or 1993.

I-31
<PAGE> 432

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

9. DETAIL OF CERTAIN ACCOUNTS

<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Receivables:
Trade......................................... $ 13,527,000 $ 19,181,000
Other......................................... 447,000 442,000
------------ ------------
13,974,000 19,623,000
Allowance for doubtful accounts............ (2,400,000) (3,353,000)
------------ ------------
$ 11,574,000 $ 16,270,000
=========== ===========
Inventories:
Raw materials and supplies.................... $ 3,422,000 $ 3,898,000
Work-in-process............................... 610,000 2,439,000
Finished goods................................ 23,048,000 22,692,000
------------ ------------
27,080,000 29,029,000
Allowance for slow moving and obsolete
inventory................................ (11,479,000) (15,530,000)
------------ ------------
$ 15,601,000 $ 13,499,000
=========== ===========
Prepaid expenses and other current assets:
Prepaid inventory............................. $ -- $ 2,874,000
Catalog costs................................. 2,295,000 --
Other......................................... 946,000 713,000
------------ ------------
$ 3,241,000 $ 3,587,000
=========== ===========
Property, plant and equipment, at cost:
Land.......................................... $ 2,839,000 $ 995,000
Buildings..................................... 6,655,000 4,782,000
Machinery and equipment....................... 19,612,000 19,149,000
Furniture and fixtures........................ 2,163,000 2,704,000
Leasehold improvements........................ 1,659,000 1,390,000
------------ ------------
32,928,000 29,020,000
Accumulated depreciation...................... (17,200,000) (15,865,000)
------------ ------------
$ 15,728,000 $ 13,155,000
=========== ===========
Other assets and deferred charges, net:
Deferred loan costs........................... $ 1,118,000 $ 1,304,000
Patents, trademarks and other intangibles..... 871,000 1,024,000
Other......................................... 353,000 407,000
------------ ------------
$ 2,342,000 $ 2,735,000
=========== ===========
</TABLE>

I-32
<PAGE> 433

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

<TABLE>
<CAPTION>
1993 1992
------------ ------------
<S> <C> <C>
Accrued liabilities:
Payroll and related items..................... $ 1,027,000 $ 1,717,000
Deferred income............................... 2,397,000 2,294,000
Restructuring accruals........................ 478,000 4,509,000
Lease vacancy accrual......................... 1,200,000 --
Professional services......................... 1,133,000 1,620,000
Taxes other than income taxes................. 557,000 1,304,000
Interest...................................... 1,147,000 1,004,000
Commissions................................... 477,000 831,000
Other......................................... 2,300,000 3,469,000
------------ ------------
$ 10,716,000 $ 16,748,000
=========== ===========
</TABLE>

10. GEOGRAPHICAL DATA

The following tables set forth the amounts of net sales, income (loss)
before provision for income taxes and extraordinary income and identifiable
assets by geographical area for 1993, 1992 and 1991.

<TABLE>
<CAPTION>
1993 1992 1991
----------- ------------ ------------
<S> <C> <C> <C>
Net sales:
United States........................... $36,216,000 $ 39,668,000 $ 44,874,000
Canada.................................. 2,381,000 2,610,000 3,159,000
Europe.................................. 16,311,000 28,020,000 42,872,000
Asia/Pacific............................ 4,168,000 5,350,000 5,602,000
----------- ------------ ------------
Total................................ $59,076,000 $ 75,648,000 $ 96,507,000
========== =========== ===========
Income (loss) before provision for income
taxes and extraordinary income:
United States(1)(2)..................... $ 2,753,000 $(51,267,000) $ (9,993,000)
Canada.................................. 157,000 (99,000) 386,000
Europe(2)............................... (2,831,000) (35,582,000) (3,859,000)
Asia/Pacific(2)......................... 744,000 (163,000) 190,000
----------- ------------ ------------
Total................................ $ 823,000 $(87,111,000) $(13,276,000)
========== =========== ===========
Identifiable assets:
United States........................... $31,920,000 $ 31,957,000 $ 80,875,000
Canada.................................. 561,000 520,000 850,000
Europe.................................. 17,928,000 29,298,000 68,857,000
Asia/Pacific............................ 1,422,000 1,567,000 2,076,000
----------- ------------ ------------
Total................................ $51,831,000 $ 63,342,000 $152,658,000
========== =========== ===========
</TABLE>

- ---------------

(1) Includes net interest (income) expense related to the Company's consolidated
operations of $2,250,000, $4,567,000 and $7,073,000 for 1993, 1992 and 1991,
respectively.

(2) Amounts include restructuring charges of $63,032,000 and $6,087,000 for 1992
and 1991, respectively. These amounts consist of $38,064,000 and $2,296,000
for the U.S. for 1992 and 1991, respectively, and $24,608,000 and $3,791,000
for Europe for 1992 and 1991, respectively and $360,000 for Asia/Pacific for
1992.

I-33
<PAGE> 434

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

Export sales made by United States operations amounted to $3,893,000
$4,033,000 and $4,458,000 for 1993, 1992 and 1991, respectively. These sales
were made primarily to Europe and Asia/Pacific.

11. SUPPLEMENTAL CASH FLOW DISCLOSURES

The Company paid interest charges of $1,478,000, $3,168,000 and $5,483,000
in 1993, 1992 and 1991, respectively. The Company also paid income taxes of
$164,000, $706,000 and $469,000 in 1993, 1992 and 1991, respectively.

On August 30, 1993, the Company issued 300,000 and 390,000 shares of
preferred stock series "A" and "B", respectively, to ICN. In exchange, ICN
retired $11,000,000 of debt owed to ICN by the Company and delivered 13,368,449
shares of the Company's common stock that ICN owned (see Note 3 -- "Preferred
Stock").

See Note 4 regarding debt converted into the Company's common stock during
1992 and 1991.

12. RESTRUCTURING COSTS AND SPECIAL CHARGES

The following is a summary regarding the Company's 1992 and 1991
Restructuring Costs and Special Charges.

In November 1989, the Company acquired for $37,700,000 all of the issued
and outstanding common shares of Flow Laboratories, Inc. and Flow Laboratories
B.V. from GRC International, Inc. (formerly Flow General Inc.). These companies
together with their respective subsidiaries ("Flow"), constituted the Biomedical
division of Flow General. The excess of the total purchase price (including
acquisition costs) over the fair value of net assets acquired was $35,245,000,
which was allocated to the excess of cost over net assets of purchased
subsidiaries and was being amortized over 40 years. Flow was a manufacturer and
distributor of several thousand biochemical products worldwide. At the time of
the acquisition, the Company had concluded that Flow was a significant
complement to the Company, since Flow had a major presence in the European
markets, which the Company lacked at the time. Therefore, more than products,
the Company acquired an international distribution network. Since 1990, the
Company utilized this distribution network to introduce ICN products. At the
same time, it decided to phase out or to eliminate Flow low margin products,
certain other product lines which did not fit the Company's long-term strategies
and to close down inefficient operations.

During 1991, the Company initiated a restructuring program designed to
reduce costs, and improve operating efficiencies. The program included, among
other items, the consolidation, relocation and closure of certain manufacturing
and distribution facilities within the U.S. and Europe, which were acquired in
the Flow acquisition. Those measures, including a 15% reduction in the work
force, were largely enacted during 1991 and continued in 1992. Costs incurred
relating to this restructuring plan during 1991 were $6,087,000.

During the fourth quarter 1992, as a result of a continued decline in sales
and other factors, the Company reassessed their business plan and prospects for
1993 and beyond which included, among other things, the

I-34
<PAGE> 435

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

decision to sell the last remaining major European manufacturing facility and to
restructure the previously acquired distribution network and European operations
in line with the revised sales estimates. Consequently, based upon the
continuing decline in European revenue and profitability relating to Flow, Flow
facility closures and an ineffective distribution network, management concluded
that there was no current or expected future benefit associated from the Flow
acquisition. Accordingly, the Company wrote off goodwill and other intangibles,
primarily from the Flow acquisition of $37,714,000.

The relocation of various U.S. and European operations was also
re-evaluated. It was determined that many of the operations did not support the
costs of maintaining separate facilities. Therefore, estimated costs associated
with lease termination, employee termination, facility shut-down (of facilities
held for disposition) were expensed primarily in the fourth quarter of 1992 and
amounted to $4,858,000.

During the fourth quarter of 1992, the Company reassessed the valuation of
inventory, given the decline in sales and lack of effective integration of the
Company's and Flow's product lines. Accordingly, the Company recorded a
provision for abnormal writedowns of inventory to estimated realizable value of
$9,924,000 and discontinued products of $3,377,000.

In addition, during the fourth quarter of 1992, the Company determined that
the unamortized costs of the catalog marketing program would not be recovered
within a reasonable period; therefore, costs totaling $6,659,000 were written
off. In the future, specifically focused customer or "product line" catalogs
will be used for customer product lines and a more focused general catalog for
others.

Restructuring costs and special charges of $63,032,000 and $6,087,000 for
the years ended December 31, 1992 and 1991, respectively, are shown as a
separate item in the Consolidated Statements of Operations and include the
following:

<TABLE>
<CAPTION>
1992 1991
----------- ----------
<S> <C> <C>
Goodwill and other intangibles..................... $37,714,000 $ --
Catalog............................................ 6,659,000 --
Inventory allowances............................... 9,924,000 --
Discontinued products.............................. 3,377,000 1,550,000
Employee termination costs......................... 1,961,000 1,866,000
Lease termination costs............................ 1,434,000 737,000
Facility relocation costs.......................... 357,000 724,000
Reduction to net realizable value of vacant
facilities held for disposition.................. 1,106,000 800,000
Miscellaneous restructuring cost................... 500,000 410,000
----------- ----------
Total......................................... $63,032,000 $6,087,000
========== =========
</TABLE>

13. LEASE VACANCY COSTS

During 1993, the Company vacated its High Wycombe facility in England and
moved to a facility more suitable to the Company's operating needs in Thames
England. The Company pursued various subleasing agreements for which none were
consummated as of December 31, 1993. Consequently, the Company accrued
approximately $1,200,000 which represents management's best estimate of the net
present value of future leasing costs to be incurred for High Wycombe. During
1993, the Company expensed an additional $236,000 of leasing costs related to
High Wycombe.

I-35
<PAGE> 436

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31, 1993

14. OTHER (INCOME) EXPENSE, NET

Other (income) expense, net was $(2,399,000), $4,731,000 and $1,268,000 in
1993, 1992 and 1991, respectively. In 1993, Other (income) expense, net,
includes a gain of $430,000 representing a favorable settlement of a foreign
non-income related tax dispute, a gain of $278,000 on the sale of the Company's
Irvine, Scotland facility, a gain of $938,000 realized by the Company's Italian
operation on the favorable termination of certain leasing contracts, and a gain
of $1,250,000 relating to certain liabilities accrued during 1992 which were
settled for less than the original estimates. In 1992, the Company expensed
$2,187,000 for a non-exclusive license fee for the purpose of marketing certain
laboratory equipment in the U.S., Canada and South America. Other charges in
1992 include certain non-income related taxes and an equity investment write-off
totaling $2,202,000. Other (income) expense, net in 1991 included $1,286,000 of
one-time costs relating to the introduction of the Company's catalog.

15. EXTRAORDINARY INCOME

During the second quarter of 1993, the Company's Italian operation
negotiated settlements with certain of its suppliers and banks resulting in an
extraordinary income of $627,000 or $.03 per share.

I-36
<PAGE> 437

QUARTERLY STOCK PRICE AND DIVIDEND DATA

The common stock is traded on the American Stock Exchange (Symbol: BIM).

The following table sets forth, for the periods shown, the high and low
closing sales prices on the American Stock Exchange.

<TABLE>
<CAPTION>
HIGH LOW
---- ---
<S> <C> <C>
Fiscal 1993
First Quarter............................................... $ 5 1/4 $3 1/4
Second Quarter.............................................. 4 3/8 3 1/8
Third Quarter............................................... 4 3/8 3
Fourth Quarter.............................................. 5 1/2 3 5/8
Fiscal 1992
First Quarter............................................... $ 11 $ 6
Second Quarter.............................................. 6 3/8 4 1/2
Third Quarter............................................... 5 1/4 3 3/4
Fourth Quarter.............................................. 4 1/4 3 3/8
</TABLE>

As of March 29, 1994, there were approximately 386 holders of record of the
Company's common stock.

For the years ended December 31, 1993, 1992, and 1991, the Company declared
per share dividends of $.17, $.17 and $.15, respectively. Dividends are
generally declared and paid each quarter. The Company's Board of Directors will
continue to review the Company's dividend policy, and the amount and timing of
any future dividends will depend upon the profitability of the Company, the need
to retain earnings for use in the development of the Company's business and
other factors.

I-37
<PAGE> 438

APPENDIX J
<PAGE> 439

REVIEW REPORT OF INDEPENDENT AUDITORS

The Board of Directors of
ICN Pharmaceuticals, Inc.

We have reviewed the accompanying consolidated condensed balance sheet of
ICN Pharmaceuticals, Inc. and subsidiaries (the Company) as of June 30, 1994,
and the related consolidated condensed statements of operations for the three
and six month periods ended June 30, 1994 and 1993, and the consolidated
condensed statements of cash flows for the six-month periods then ended. These
consolidated condensed financial statements are the responsibility of the
Company's management.

We conducted our review in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, the objective of which is
the expression of an opinion regarding the financial statements taken as a
whole. Accordingly, we do not express such an opinion.

Based on our review, we are not aware of any material modifications that
should be made to the consolidated condensed financial statements referred to
above for them to be in conformity with generally accepted accounting
principles.

We have previously audited, in accordance with generally accepted auditing
standards, the consolidated balance sheet as of December 31, 1993, and the
related consolidated statements of operations, stockholders' equity, and cash
flows for the year then ended (included in Appendix F, in this document); and in
our report dated March 31, 1994, which included an emphasis of a matter
paragraph relating to certain transactions between the Company and its majority
owned subsidiaries as more fully described in the notes to the consolidated
financial statements, we expressed an unqualified opinion on those consolidated
financial statements. In our opinion, the information set forth in the
consolidated balance sheet as of December 31, 1993, is fairly stated, in all
material respects, in relation to the consolidated balance sheet from which it
has been derived.

COOPERS & LYBRAND L.L.P.

Los Angeles, California
August 4, 1994

J-1
<PAGE> 440

ICN PHARMACEUTICALS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

DECEMBER 31, 1993 AND JUNE 30, 1994
(000'S OMITTED)

ASSETS

<TABLE>
<CAPTION>
(UNAUDITED)
DECEMBER 31, JUNE 30,
1993 1994
------------ -----------
<S> <C> <C>
Current assets:
Cash and cash equivalents......................................... $ 14,652 $ 13,264
Restricted cash................................................... 1,518 1,262
Certificates of deposit........................................... 8,000 --
Receivables, net.................................................. 12,122 14,134
Receivables from SPI.............................................. 18,313 5,225
Inventories, net.................................................. 15,601 15,473
Prepaid expenses and other current assets......................... 4,479 3,846
------------ -----------
Total current assets...................................... 74,685 53,204
Property, plant and equipment, net, at cost......................... 36,243 36,439
Investment in SPI................................................... 71,671 75,407
Other assets and deferred charges, net.............................. 12,025 11,140
Goodwill related to purchased businesses, net....................... 2,580 2,404
Goodwill related to publicly traded subsidiaries, net............... 10,652 10,046
------------ -----------
$207,856 $ 188,640
========== =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Notes payable..................................................... $ 4,226 $ 3,456
Current maturities of long-term debt.............................. 12,093 17,942
Accounts payable.................................................. 7,342 5,770
Accrued liabilities............................................... 21,397 17,910
------------ -----------
Total current liabilities................................. 45,058 45,078
Long-term debt, less current maturities:
Convertible into ICN Common Stock................................. 22,023 20,238
Publicly-traded debentures and other debt......................... 117,024 111,762
Other liabilities and deferred income taxes......................... 7,014 6,867
Minority interests.................................................. 12,717 12,720
Commitments and contingencies
Stockholders' equity (deficit):
Common stock, $1.00 par value; 100,000,000 shares authorized;
20,519,431 and 20,529,181 shares issued and outstanding at
December 31, 1993 and June 30, 1994, respectively.............. 20,519 20,529
Additional capital................................................ 180,897 180,911
Accumulated deficit............................................... (193,711) (205,088)
Foreign currency translation adjustments.......................... (3,685) (4,377)
------------ -----------
Total stockholders' equity (deficit)...................... 4,020 (8,025)
------------ -----------
$207,856 $ 188,640
========== =========
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

J-2
<PAGE> 441

ICN PHARMACEUTICALS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1993 AND 1994
(UNAUDITED -- 000'S OMITTED EXCEPT FOR PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- --------------------
1993 1994 1993 1994
------- ------- -------- -------
<S> <C> <C> <C> <C>
Net sales........................................ $15,723 $15,641 $ 32,355 $32,843
Cost of sales.................................... 6,957 6,660 14,333 13,500
------- ------- -------- -------
Gross profit..................................... 8,766 8,981 18,022 19,343
Selling, general and administrative expenses..... 9,554 10,297 18,202 20,554
Research and development costs................... 1,459 2,166 2,495 3,930
Interest expense, net............................ 4,421 4,365 9,418 8,734
Foreign Currency translation and exchange (gains)
losses......................................... (1,138) 1,486 (1,774) 3,380
Equity in earnings of SPI........................ (1,010) (2,278) (4,193) (6,683)
Gain on sales of subsidiaries common stock owned
by ICN......................................... -- -- (3,732) --
Other (income) expense, net...................... (1,137) 395 (321) 1,010
------- ------- -------- -------
Loss before income taxes, minority interests
and extraordinary income.................... (3,383) (7,450) (2,073) (11,582)
Income taxes..................................... 127 6 162 (32)
Minority interests............................... 83 (624) 295 (173)
------- ------- -------- -------
Net loss before extraordinary income........... (3,593) (6,832) (2,530) (11,377)
Extraordinary income............................. 627 -- 627 --
------- ------- -------- -------
Net loss.................................... $(2,966) $(6,832) $ (1,903) $(11,377)
======= ======= ======== =======
Per share information:
Loss before extraordinary income............ $ (.18) $ (.33) $ (.13) $ (.55)
Extraordinary income........................ .03 -- .03 --
------- ------- -------- -------
Net loss per share.......................... $ (.15) $ (.33) $ (.10) $ (.55)
======= ======= ======== =======
Shares used in per share computation........ 20,416 20,529 19,135 20,526
======= ======= ======== =======
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

J-3
<PAGE> 442

ICN PHARMACEUTICALS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 1993 AND 1994
(UNAUDITED -- 000'S OMITTED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
---------------------
1993 1994
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................. $ (1,903) $(11,377)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization..................................... 3,539 3,457
Equity earnings of SPI............................................ (4,193) (6,683)
Gain on sales of ICN owned subsidiaries Common Stock.............. (3,732) --
Gain on settlements of leasing contracts.......................... (938) --
Foreign currency translation and exchange losses (gains).......... (1,774) 3,380
Minority interests................................................ 295 (173)
Extraordinary income.............................................. (627) --
Other, net........................................................ (283) (129)
Change in assets and liabilities.................................. (5,424) (8,492)
-------- --------
Net cash used in operating activities........................... (15,040) (20,017)
-------- --------
Cash flows from investing activities:
Capital expenditures................................................. (792) (1,190)
Proceeds from sales of assets held for disposal...................... 4,534 --
Sales of marketable securities....................................... 139 203
Payment received from SPI............................................ 2,900 16,419
Maturity of certificate of deposit................................... -- 8,000
Sales of ICN owned subsidiaries common stock......................... 11,726 --
-------- --------
Net cash provided by investing activities....................... 18,507 23,432
-------- --------
Cash flows from financing activities:
Proceeds from issuance of stock...................................... 24,642 24
Payment of debt, net................................................. (14,696) (4,965)
Proceeds from issuance of common stock by subsidiaries............... 10,570 --
Decrease in restricted cash.......................................... -- 256
Dividend paid by subsidiaries........................................ (117) (118)
-------- --------
Net cash provided by (used in) financing activities............. 20,399 (4,803)
-------- --------
Net increase (decrease) in cash and cash equivalents................... 23,866 (1,388)
Cash and cash equivalents at beginning of period....................... 2,595 14,652
-------- --------
Cash and cash equivalents at end of period............................. $ 26,461 $ 13,264
======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

J-4
<PAGE> 443

ICN PHARMACEUTICALS, INC.

MANAGEMENT'S STATEMENT REGARDING UNAUDITED FINANCIAL STATEMENTS

The consolidated condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. The results of operations presented
herein are not necessarily indicative of the results to be expected for a full
year. Although the Company believes that all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the interim
periods presented are included and that the disclosures are adequate to make the
information presented not misleading, these consolidated condensed financial
statements should be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K and 10K/A Amendment No. 1 for the year ended December 31, 1993.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 1994
(UNAUDITED)

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated condensed financial statements, as of June
30, 1994, include the accounts of ICN Pharmaceuticals, Inc. ("ICN" or the
"Company"), its 69 percent owned subsidiary, ICN Biomedicals,Inc.
("Biomedicals") and its 63 percent owned subsidiary, Viratek, Inc. ("Viratek").
ICN currently owns 38 percent of SPI Pharmaceuticals, Inc. (SPI), and accounts
for the investment using the equity method of accounting. Under such method, the
Company's share of net income (or losses) is included as a separate item in the
consolidated condensed statement of operations. All significant intercompany
account balances and transactions have been eliminated.

Per share information

For the three and six months ended June 30, 1993 and 1994, per share
information is based on the weighted average number of common shares
outstanding.

ICN's share of the income of Biomedicals has been reduced to give effect to
the dilution in ownership which would result upon the exercise of dilutive
options and warrants outstanding to purchase Biomedical common shares.

Reclassification

Certain prior year amounts have been reclassified to conform to the current
period presentation.

2. RELATED PARTY TRANSACTIONS

Royalty agreements

During the three and six months ended June 30, 1994, SPI sold $3,790,000
and $17,850,000 of ribavirin resulting in royalties to Viratek of $758,000 and
$3,570,000, respectively. For the same periods in 1993, SPI sold $2,700,000 and
$9,920,000 of ribavirin resulting in royalties to Viratek of $540,000 and
$1,984,000, respectively. These royalties are based on a license agreement
whereby 20% of the sales of ribavirin by SPI are payable to Viratek. Included in
royalties for the three and six months ended June 30, 1994 are royalties earned
on foreign sales by SPI totaling $499,000 and $1,110,000, respectively. For the
same periods in 1993, royalties earned on foreign sales by SPI were $449,000 and
$1,122,000, respectively.

J-5
<PAGE> 444

ICN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1994
(UNAUDITED)

Cost allocations

ICN, SPI, Viratek and Biomedicals occupy ICN's facility in Costa Mesa,
California. During the three and six months ended June 30, 1994, ICN charged
facility costs of $70,000 and $140,000 to SPI, $60,000 and $120,000 to Viratek,
and $78,000 and $155,000 to Biomedicals, respectively. For the same periods in
1993, ICN charged facility costs of $70,000 and $140,000 to SPI, $8,000 and
$15,000 to Viratek, and $78,000 and $155,000 to Biomedicals, respectively.

The costs of common services such as maintenance, purchasing and personnel
are incurred by SPI and allocated to ICN, Viratek and Biomedicals based on
various formulas. During the three and six months ended June 30, 1994 the total
of such costs were $643,000 and $1,377,000 of which $460,000 and $955,000 were
allocated to ICN, Viratek and Biomedicals, respectively. For the same periods in
1993, the total of such costs were $594,000 and $1,299,000 of which $386,000 and
$832,000 were allocated to ICN, Viratek, and Biomedicals, respectively.

3. OTHER ASSETS AND DEFERRED CHARGES, NET

At June 30, 1994, "Other assets and deferred charges, net" includes
$4,110,000 of deferred loan costs related to successfully completed financings
and $1,911,000 of patents, trademarks and clinical trials, net of amortization.

4. PREPAID EXPENSES AND OTHER CURRENT ASSETS

As of June 30, 1994, "Prepaid expenses and other current assets" includes
$1,218,000 of assets held for disposition which are recorded at the lower of
cost or net realizable value.

5. INVENTORIES, NET

Inventories, net consist of the following components (000's omitted):

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1994
------------ --------
<S> <C> <C>
Raw materials and supplies............................ $ 3,422 $ 3,461
Work-in-progress...................................... 610 488
Finished goods, net................................... 11,569 11,777
------------ --------
$ 15,601 $ 15,726
========== =======
</TABLE>

6. SUPPLEMENTAL CASH FLOWS DISCLOSURES

The following table sets forth the amount of cash paid for interest and
income taxes. (000's omitted):

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1993 1994
------ ------
<S> <C> <C>
Interest................................................... $9,737 $8,797
Income taxes............................................... $ 316 $ 329
</TABLE>

J-6
<PAGE> 445

ICN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1994
(UNAUDITED)

7. OTHER EXPENSE, NET

The following table summarizes other (income) expense, net. (000's
omitted):

<TABLE>
<CAPTION>
THREE MONTHS
ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
----------------- ------------------
1993 1994 1993 1994
------- ----- ------- ------
<S> <C> <C> <C> <C>
Realized (gains) losses on marketable securities...... $ -- $ -- $ (139) $ 24
Amortization of goodwill.............................. 509 518 1,024 1,037
Gain on lease terminations............................ (938) -- (938) --
Reversal of legal settlement accrual.................. (1,000) -- (1,000) --
Other, net............................................ 292 (123) 732 (51)
------- ----- ------- ------
Other (income) expense, net......................... $(1,137) $ 395 $ (321) $1,010
======= ===== ======= ======
</TABLE>

8. SALES OF SUBSIDIARIES COMMON STOCK OWNED BY ICN

For the six months ended June 30, 1993, ICN sold 918,200 shares of SPI
Common Stock for $11,726,000 in cash, net of commission expenses. The company
did not sell subsidiaries common stock owned by ICN during 1994.

9. COMMITMENTS AND CONTINGENCIES

Class Actions -- In Re Viratek, In Re Paine Webber. The Company is a
defendant in certain consolidated class actions pending in the United States
District Court for the Southern District of New York entitled In re Paine Webber
Securities Litigation (Case No. 86 Civ. 6776 (VLB); In re ICN/Viratek Securities
Litigation (Case No. 87 Civ. 4296 (VLB)). In the Third Amended Consolidated
Class Action Complaint plaintiffs allege that the ICN Defendants made, or aided
and abetted Paine Webber in making, misrepresentations of material fact and
omitted to state material facts concerning the business, financial condition and
future prospects of ICN, Viratek and SPI in certain public announcements, Paine
Webber, Inc. research reports and filings with the Commission. The alleged
misstatements and omissions primarily concern developments regarding Virazole(R)
including the efficacy and safety of the drug and the market for the drug. The
plaintiffs allege that such misrepresentations and omissions violate Section
10(b) of the Exchange Act of 1934 and Rule 10b-5 promulgated thereunder and
constitute common law fraud and misrepresentation. The ICN Defendants filed
their Answer, containing affirmative defenses, on February 15, 1993. Plaintiffs
seek the certification of classes of persons who purchased ICN, Viratek, or SPI
common stock during the period January 7, 1986 through April 15, 1987. In their
memorandum of law, dated February 4, 1994, the ICN Defendants argue that class
certification may only be granted for purchasers of ICN common stock for the
period August 12, 1986 through February 20, 1987 and for purchasers of Viratek
common stock for the period December 9, 1986 through February 20, 1987. The ICN
Defendants assert that no class should be certified for purchasers of the common
stock of SPI for any period. Oral argument on plaintiffs' motion for class
certification was held on June 2, 1994. To date, no decision has been rendered.
On October 20, 1993, plaintiffs informed the Court that they had reached an
agreement to settle with co-defendant Paine Webber. On May 6, 1994 plaintiffs
submitted their Stipulation of Settlement to the Court. The Court hearing on the
Stipulation of Settlement was held on July 27, 1994. The Court approved the
proposed settlement (in the amount of $6.5 million) and requested additional
information in connection with plaintiffs' counsel's application for attorney
fees and costs. Fact discovery is complete and expert discovery is virtually
complete. Plaintiff's damages expert, utilizing assumptions and methodologies
that the ICN Defendants' damages experts find to be inappropriate under the
circumstances, has testified that assuming that classes were certified for
purchasers of

J-7
<PAGE> 446

ICN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1994
(UNAUDITED)

ICN, Viratek, and SPI common stock for the entire class periods alleged by
plaintiffs, January 7, 1986 through April 15, 1987 and further assuming that all
of the plaintiffs' allegations were proven, potential damages against ICN,
Viratek, and SPI would, in the aggregate, amount to $315,000,000. The ICN
Defendants' four damages' experts have testified that damages are zero. On May
4, 1994, plaintiffs' counsel agreed to stipulate to the dismissal of the aiding
and abetting claim asserted against the ICN Defendants and a formal stipulation
will be submitted to the Court in the near future. Management believes that,
having extensively reviewed the issues in the above referenced matters, there
are strong defenses and the Company intends to defend the litigation vigorously.
While the ultimate outcome of these lawsuits cannot be predicted with certainty,
and an unfavorable outcome could have an adverse effect on the Company, at this
time management does not expect that these matters will have a material adverse
effect on the financial position, result of operations or liquidity of the
Company. The attorney's fees and other costs of the litigation are allocated
equally between ICN and Viratek.

Rafi M. Khan v. ICN Pharmaceuticals, Inc. On April 5, 1993, ICN and Viratek
filed suit against Rafi Khan ("Khan") in the United States District Court for
the Southern District of New York. The complaint alleges, inter alia, that Khan
violated numerous provisions of the securities laws and breached his fiduciary
duty to ICN and Viratek by attempting to effectuate a change in control of ICN
while acting as an agent and fiduciary of ICN and Viratek. As relief, ICN and
Viratek, among other things, sought an injunction enjoining Khan from
effectuating a change in control of ICN and compensatory and punitive damages in
the amount of $25,000,000. Khan filed a counterclaim on April 12, 1993, naming
the then ICN directors and ICN, as a nominal defendant sued only in a derivative
capacity. The counterclaim contains causes of action for slander, interference
with economic relations, and a shareholders' derivative action for breach of
fiduciary duties. Khan seeks compensatory damages for interest in an unspecified
amount, and exemplary damages of $29,000,000. On December 22, 1993, Khan filed a
notice of appeal from a prior injunction granted by the court, to the Court of
Appeals for the Second Circuit. On March 13, 1994, that appeal was dismissed on
the grounds that Khan had defaulted for failure to comply with the Court's
scheduling order. The Company has been advised by Mr. Khan that he intends to
represent himself pro se in this matter. With the consent of the parties, the
Court ordered all discovery stayed until September 6, 1994. Management believes
that Khan's counterclaim is without merit and the company intends to vigorously
defend these counterclaims.

10. EQUITY INVESTMENT

The following tables set forth the condensed financial position of SPI as
of December 31, 1993 and June 30, 1994 and the condensed results of its
operations for the quarter ended June 30, 1993 and 1994.

SPI FINANCIAL POSITION
(IN 000'S)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1994
------------ --------
<S> <C> <C>
Current assets....................................... $208,762 $178,865
Non-current assets................................... 93,255 126,266
Current liabilities.................................. 81,503 74,714
Non-current liabilities.............................. 23,206 23,155
Minority interest.................................... 41,429 41,862
Stockholders' equity................................. 155,879 165,400
</TABLE>

J-8
<PAGE> 447

ICN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1994
(UNAUDITED)

SPI RESULTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1994
(IN 000'S)

The condensed results of operations of ICN Galenika, a consolidated 75%
owned Yugoslavian subsidiary of SPI, for the three and six months ended June 30,
1993 and 1994 are presented below: (000's omitted)

ICN GALENIKA

ICN Galenika operates in a highly inflationary economy and uses the dollar
as the functional currency rather than the Yugoslavian dinar. At December 31,
1993, the rate used to remeasure ICN Galenika's results was over one trillion
dinars per $1 U.S. On January 1, 1994, the Yugoslavian government changed the
denomination of its currency by dropping nine zeros. The effect of this
redenomination on the Yugoslavian dinar resulted in an exchange rate of 1,053
dinars to $1 U.S. Subsequent to the redenomination and prior to the enactment of
the stabilization program described below, the dinar had devalued to 12,563,000
dinars per $1 U.S.

On January 24, 1994, the Yugoslavian government enacted a "Stabilization
Program" designed to strengthen its currency. Under this program the official
exchange rate of the dinar is fixed at a ratio of one dinar to one Deutsche
mark. The Yugoslavia government guarantees the conversion of dinars to Deutsche
marks by exercising restraint in the amount of dinars that it prints, thereby
restricting cash in circulation to correspond to hard currency reserves in
Yugoslavia. Since the inception of this program the exchange rate of dinars to
Deutsche marks has remained stable. The trading of dinars at other than official
rates has been virtually eliminated and inflation and interest rates have
declined from over 1 billion percent a year to a current rate of approximately
14% since January 24, 1994, based on information currently available to the
Company. The Company believes that the period of time that the stabilization
program has been operating successfully is significant given that past attempts
at monetary control by the Yugoslavian government have generally been temporary.
In the near term, the positive effects of the stabilization program could
reverse and a return to prior levels of hyperinflation could occur. The success
of this stabilization program is dependent upon improvement in the Yugoslavian
economy, which is in part dependent upon the lifting of United Nations
sanctions.

J-9
<PAGE> 448

ICN PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1994
(UNAUDITED)

SPI has recently entered into an agreement with the City of St. Petersburg
to acquire 15% of the outstanding shares of SPI's recently privatized joint
venture partner, Oktyabr, for approximately $600,000. Under the terms of the
agreement, SPI has the option to pay for the shares by using privatization
vouchers or cash. As a result of this investment, and as part of the
privatization of Oktyabr, SPI submitted an "investment plan" which, if approved,
will allow SPI to purchase additional outstanding shares of Oktyabr. These
shares along with the shares purchased from the City of St. Petersburg would
increase SPI's ownership to 43%. The "investment plan" does not contemplate any
significant additional cash investment by SPI but gives effect to SPI's past
assistance provided to Oktyabr. SPI has also recently completed a transaction
whereby SPI purchased 26% of the outstanding shares from the employees of
Oktyabr in exchange for rights to acquire SPI common stock. Should SPI complete
the transaction to acquire 43% of the outstanding shares of Oktyabr together
with the 26% acquired from the employees, SPI would own 61% of the outstanding
shares of Oktyabr, in which case SPI may be required to consolidate the
financial statements of Oktyabr with those of SPI.

11. SUBSEQUENT EVENTS

On August 1, 1994, the Company and its three affiliated corporations (SPI
Pharmaceuticals, Inc., Viratek, Inc. and ICN Biomedicals, Inc.) entered into a
merger agreement to combine the four companies into a newly formed corporation
(which will be renamed ICN Pharmaceuticals, Inc.) (the "Merger"). Under the
terms of the merger agreement, all outstanding shares of common stock of the
four companies (other than shares held by ICN) will be exchanged for shares of
common stock of the new Company pursuant to the following exchange ratios: ICN:
1 to .512; SPI: 1 to 1; Viratek: 1 to .499; and Biomedicals: 1 to .197. The
proposed Merger is subject to various conditions, including approval by the
stockholders of each of the four companies, issuance of $150 million of
convertible debentures to refinance a substantial portion of the long-term
indebtedness of the four companies (a waivable condition), appropriate
regulatory approvals and certain other conditions. Assuming these conditions are
satisfied, the transaction is expected to close during the fall of 1994.

Three lawsuits have been filed by stockholders of SPI and, in one of these
lawsuits, Viratek, with respect to the Merger in the Court of Chancery of the
State of Delaware against ICN, SPI, Viratek (with respect to one of such
lawsuits) and certain directors and officers of ICN, SPI and/or Viratek
(including Milan Panic). The lawsuits, entitled Helmut Kling v. Milan Panic, et
al., Jallath v. Milan Panic, et al., and Amy Hoffman v. Milan Panic, et al.
purport to be class actions on behalf of all persons who hold shares of SPI
Common Stock and, in one lawsuit, Viratek Common Stock. These suits allege that
the consideration to be provided to the public stockholders of SPI and Viratek
(with respect to one of such lawsuits) in the Merger is unfair and inadequate,
and that the defendants have breached their fiduciary duties in approving the
proposed Merger and otherwise. The Company believes that these suits are without
merit.

J-10
<PAGE> 449

APPENDIX K
<PAGE> 450

SPI PHARMACEUTICALS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

DECEMBER 31, 1993 AND JUNE 30, 1994
(000'S OMITTED)

ASSETS

<TABLE>
<CAPTION>
UNAUDITED
DECEMBER 31, JUNE 30,
1993 1994
------------ --------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 14,777 $ 19,238
Marketable securities (used to collateralize $10,000 note
payable)........................................................ 32,587 --
Receivables, net................................................... 43,277 50,279
Inventories, net................................................... 107,196 91,883
Prepaid expenses and other current assets.......................... 10,925 17,465
------------ --------
Total current assets....................................... 208,762 178,865
Marketable securities (used to collateralize $10,000 note
payable)........................................................ -- 29,826
Property, plant and equipment, net................................. 78,718 80,183
Goodwill, net...................................................... 1,664 1,571
Other assets....................................................... 12,873 14,686
------------ --------
$302,017 $305,131
========== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade payables..................................................... $ 13,951 $ 15,277
Payable to ICN..................................................... 18,313 5,225
Accrued liabilities................................................ 17,700 20,827
Notes payable...................................................... 14,360 15,006
Current portion of long-term debt.................................. 3,866 4,207
Income taxes payable............................................... 13,313 14,172
------------ --------
Total current liabilities.................................. 81,503 74,714
Long-term debt, less current portion............................... 16,980 16,154
Other liabilities and deferred income taxes........................ 6,226 7,001
Minority interest.................................................. 41,429 41,862
Stockholders' equity:
Common stock, $.01 par value; 38,000 shares authorized; 20,101 and
20,494 shares outstanding at December 31, 1993 and June 30,
1994, respectively.............................................. 202 204
Additional capital................................................. 91,449 97,496
Retained earnings.................................................. 70,973 77,389
Unrealized loss on marketable securities, net...................... -- (2,761)
Foreign currency translation adjustments........................... (6,745) (6,928)
------------ --------
Total stockholders' equity................................. 155,879 165,400
------------ --------
$302,017 $305,131
========== ========
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

K-1
<PAGE> 451

SPI PHARMACEUTICALS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF INCOME

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1993 AND 1994
(UNAUDITED -- 000'S OMITTED EXCEPT FOR PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- ---------------------
1993 1994 1993 1994
------- ------- -------- --------
<S> <C> <C> <C> <C>
Net sales......................................... $66,422 $78,927 $186,058 $151,094
Cost of sales..................................... 35,263 45,168 95,953 77,783
------- ------- -------- --------
Gross profit............................ 31,159 33,759 90,105 73,311
Selling, general and administrative expenses...... 27,492 22,916 65,705 43,997
Royalties to affiliates, net...................... 720 842 2,164 3,749
Research and development costs.................... 1,743 1,630 5,262 2,476
Translation and exchange (gains) losses, net...... (1,598) (245) (597) 2,254
Interest income................................... (1,586) (1,241) (2,424) (2,206)
Interest expense.................................. 3,549 1,623 10,098 3,046
Other expense, net................................ 730 335 1,648 1,099
------- ------- -------- --------
Income before provision for income taxes
and minority interest................. 109 7,899 8,249 18,896
Provision for income taxes........................ 14 2,395 1,578 4,854
Minority interest................................. (996) 259 (156) 433
------- ------- -------- --------
Net income.............................. $ 1,091 $ 5,245 $ 6,827 $ 13,609
------- ------- -------- --------
PER SHARE INFORMATION:
Net income per share............................ $ .05 $ .25 $ .34 $ .65
======= ======= ======== ========
Shares used in per share computation............ 20,114 20,978 19,998 20,815
======= ======= ======== ========
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

K-2
<PAGE> 452

SPI PHARMACEUTICALS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 1993 AND 1994
(UNAUDITED -- 000'S OMITTED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
--------------------
1993 1994
------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................ $ 6,827 $ 13,609
Adjustments to reconcile net income to net cash provided by operating
activities:
Allowances for losses on accounts receivable....................... 7,212 2,996
Depreciation and amortization...................................... 3,853 3,770
Translation and exchange (gains) losses, net....................... (597) 2,254
Change in assets and liabilities...................................... (9,332) 4,243
------- --------
Net cash provided by operating activities.......................... 7,963 26,872
------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.................................................. (8,750) (3,846)
Decrease in restricted cash........................................... 5,200 --
------- --------
Net cash used in investing activities.............................. (3,550) (3,846)
------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net issues (payments) under line of credit arrangements............... (4,501) 570
Net payments of long-term debt........................................ (36) (1,690)
Net payments to ICN................................................... (2,900) (16,419)
Proceeds from exercise of stock options............................... 849 374
Dividends paid to minority shareholders............................... (1,259) (1,435)
------- --------
Net cash used in financing activities.............................. (7,847) (18,600)
------- --------
Effect of exchange rate changes on cash................................. (44) 35
------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS.................... (3,478) 4,461
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD........................ 38,054 14,777
------- --------
CASH AND CASH EQUIVALENTS AT END OF THE PERIOD.......................... $34,576 $ 19,238
======= ========
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

K-3
<PAGE> 453

SPI PHARMACEUTICALS, INC.
MANAGEMENT'S STATEMENT REGARDING UNAUDITED FINANCIAL STATEMENTS

The consolidated condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles ("GAAP") have been condensed or
omitted pursuant to such rules and regulations. The results of operation
presented herein are not necessarily indicative of the results to be expected
for a full year. Although the Company believes that all adjustments (consisting
only of normal, recurring adjustments) necessary for a fair presentation of the
interim period presented are included and that the disclosures are adequate to
make the information presented not misleading, these consolidated condensed
financial statements should be read in conjunction with the consolidated
financial statements and notes thereto included in the Company's Annual Report
on Form 10-K and Form 10-K/A Amendment No. 1 for the year ended December 31,
1993.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

JUNE 30, 1994
(UNAUDITED)

1. RELATIONSHIP WITH ICN PHARMACEUTICALS, INC., ICN BIOMEDICALS, INC. AND
VIRATEK, INC.

SPI Pharmaceuticals, Inc. ("SPI" or the "Company") was incorporated on
November 30, 1981, as a wholly-owned subsidiary of ICN Pharmaceuticals, Inc.
("ICN") and was 38%-owned by ICN at June 30, 1994. ICN Biomedicals, Inc.
("Biomedicals") was 69%-owned by ICN, and Viratek, Inc. ("Viratek") was
63%-owned by ICN at June 30, 1994.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The accompanying consolidated condensed financial statements include the
accounts of the Company and all of its subsidiaries. All significant
intercompany account balances and transactions have been eliminated.

Per Share Information

Per share information is based on the weighted average number of common
shares outstanding and dilutive common share equivalents. Common equivalent
shares represent shares issuable for outstanding options computed using the
treasury stock method. This method assumes that the proceeds from stock options
are used to repurchase shares on the open market.

On January 13, 1994, the Company's Board of Directors declared a first
quarter cash dividend of $.065 per share and a stock dividend of 1.4%, payable
on February 28, 1994, to shareholders of record on February 1, 1994. On May 20,
1994, the Company's Board of Directors declared a second quarter cash dividend
of $.065 per share and a stock dividend of 1.3%, payable on June 15, 1994, to
shareholders of record on June 1, 1994. All relevant share and per share data
have been restated to reflect these stock dividends.

Reclassifications

Certain prior year items have been reclassified to conform with the current
year presentation.

K-4
<PAGE> 454

SPI PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
(UNAUDITED)

Inventories

Inventories, net, consists of the following components: (000's omitted)

<TABLE>
<CAPTION>
DECEMBER 31, JUNE 30,
1993 1994
------------ --------
<S> <C> <C>
Raw materials and supplies............................ $ 57,148 $ 34,331
Work-in-process....................................... 12,541 13,379
Finished goods, net................................... 37,507 44,173
------------ --------
$107,196 $ 91,883
========== =======
</TABLE>

3. RELATED PARTY TRANSACTIONS

Royalty Agreements

During the three and six months ended June 30, 1994, the Company sold
$3,790,000 and $17,850,000 of Virazole(R), respectively, generating royalties to
Viratek of $758,000 and $3,570,000, respectively. For the same periods in 1993,
the Company sold $2,700,000 and $9,920,000 of Virazole(R), respectively,
generating royalties to Viratek of $540,000 and $1,984,000, respectively. These
royalties are based on a royalty agreement whereby 20% of net sales of
Virazole(R) are payable to Viratek.

Cost Allocations

ICN, SPI, Viratek and Biomedicals occupy ICN's facility in Costa Mesa,
California. ICN charged facility costs to the Company of $69,000 per quarter in
1994 and 1993. The costs of common services such as maintenance, purchasing and
personnel are incurred by the Company, a portion of which are allocated to ICN,
Viratek and Biomedicals based on services utilized. These common services costs
were $1,377,000 for the six months ended June 30, 1994, of which $955,000 was
allocated to ICN, Viratek and Biomedical. During the same period in 1993, common
services costs were $1,299,000, of which $832,000 was allocated to the same
group.

4. SUPPLEMENTAL CASH FLOW INFORMATION

Cash paid for income taxes was $3,915,000 for the six months ended June 30,
1994, and $1,949,000 for the same period in 1993.

Cash paid for interest was $1,803,000 for the six months ended June 30,
1994, and $7,044,000 for the same period in 1993.

5. RESULTS EXCLUDING ICN GALENIKA

The results of ICN Galenika and the results of SPI Pharmaceuticals, Inc.,
excluding ICN Galenika, for the six months ended June 30, 1993 and 1994 are
presented below: (000's omitted)

<TABLE>
<CAPTION>
SPI WITHOUT
ICN GALENIKA ICN GALENIKA
------------------- --------------------
1993 1994 1993 1994
------- ------- -------- -------
<S> <C> <C> <C> <C>
Sales.............................. $77,094 $87,268 $108,964 $63,826
Gross Profit....................... 48,935 58,951 41,170 14,360
Net income (loss).................. $ 7,294 $12,311 $ (467) $ 1,298
</TABLE>

K-5
<PAGE> 455

SPI PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
(UNAUDITED)

The results of ICN Galenika and the results of SPI Pharmaceuticals, Inc.,
excluding ICN Galenika, for the three months ended June 30, 1993 and 1994 are
presented below: (000's omitted)

<TABLE>
<CAPTION>
SPI WITHOUT
ICN GALENIKA ICN GALENIKA
------------------- -------------------
1993 1994 1993 1994
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales............................. $37,766 $41,256 $28,656 $37,671
Gross Profit...................... 23,922 26,537 7,237 7,222
Net income (loss)................. $ 3,879 $ 4,468 $(2,788) $ 777
</TABLE>

6. ICN GALENIKA

On January 24, 1994, the Yugoslavian government enacted a "Stabilization
Program" designed to strengthen its currency. Under this program the official
exchange rate of the dinar is fixed at a ratio of one dinar to one Deutsche
mark. The Yugoslavian government guarantees the conversion of dinars to Deutsche
marks by exercising restraint in the amount of dinars that it prints, thereby
restricting cash in circulation to correspond to hard currency reserves in
Yugoslavia. Since the inception of this program the exchange rate of dinars to
Deutsche marks has remained stable. The trading of dinars at other than official
rates has been virtually eliminated and inflation and interest rates have
declined from over 1 billion percent a year to a current annual rate of
approximately 14% since January 24, 1994, based on information currently
available to the Company. The Company believes that the period of time that the
stabilization program has been operating successfully is significant given that
past attempts at monetary control by the Yugoslavian government have generally
been temporary. In the near term, the positive effects of the stabilization
program could reverse and a return to prior levels of hyperinflation could
occur. The success of this stabilization program is dependent upon improvement
in the Yugoslavian economy, which is in part dependent upon the lifting of
United Nations sanctions.

7. JOINT VENTURE IN RUSSIA

The Company has recently entered into an agreement with the City of St.
Petersburg to acquire 15% of the outstanding shares of the Company's recently
privatized joint venture partner, Oktyabr, for approximately $600,000. Under the
terms of the agreement, the Company has the option to pay for the shares by
using privatization vouchers or cash. As a result of this investment, and as
part of the privatization of Oktyabr, the Company submitted an "investment plan"
which, if approved, will allow the Company to purchase additional outstanding
shares of Oktyabr. These shares along with the shares purchased from the City of
St. Petersburg would increase the Company's ownership to 43%. The "investment
plan" does not contemplate any significant additional cash investment by the
Company but gives effect to the Company's past assistance provided to Oktyabr.
The Company has also recently completed a transaction whereby the Company
purchased 26% of the outstanding shares from the employees of Oktyabr in
exchange for rights to acquire SPI common stock. Should the Company complete the
transaction to acquire 43% of the outstanding shares of Oktyabr together

K-6
<PAGE> 456

SPI PHARMACEUTICALS, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 1994
(UNAUDITED)

with the 26% acquired from the employees, the Company would own 61% of the
outstanding shares of Oktyabr, in which case the Company may be required to
consolidate the financial statements of Oktyabr with those of the Company.

8. MARKETABLE SECURITIES

In January 1994, the Company adopted SFAS No. 115 ("Accounting for Certain
Investments in Debt and Equity Securities"). This statement addresses the
accounting and reporting for investments in equity securities that have readily
determinable fair values and for all investments in debt securities. Those
investments are to be classified as either held-to-maturity, trading securities,
or available-for-sale. The Company has classified its investment in corporate
bond securities, with maturities ranging from 1999 to 2003, as
available-for-sale. Unrealized holding gains and losses are calculated on the
specific identification method. Changes in market values of equity securities
are reflected as unrealized gains or losses directly in Shareholders' Equity, as
required, and accordingly have no effect on net income. The adoption of SFAS No.
115 did not result in a cumulative effect adjustment in the consolidated
statements of income.

9. SUBSEQUENT EVENTS

On August 1, 1994, the Company and its three affiliated corporations (ICN
Pharmaceuticals Inc., Viratek, Inc. and ICN Biomedicals, Inc.) entered into a
merger agreement to combine the four companies into a newly formed corporation
(which will be renamed ICN Pharmaceuticals, Inc. the "Merger"). Under the terms
of the merger agreement, all outstanding shares of common stock of the four
companies (other than shares held by ICN) will be exchanged for shares of common
stock of the new Company pursuant to the following exchange ratios: ICN: 1 to
.512; SPI: l to l; Viratek: l to .499; and Biomedicals: 1 to .197. The proposed
Merger is subject to various conditions, including approval by the stockholders
of each of the four companies, issuance of $150 million of convertible
debentures to refinance a substantial portion of the long-term indebtedness of
the four companies (a waivable condition), appropriate regulatory approvals and
certain other conditions. Assuming these conditions are satisfied, the
transaction is expected to close during the fall of 1994.

Three lawsuits have been filed by stockholders of SPI and, in one lawsuit,
Viratek, with respect to the Merger in the Court of Chancery of the State of
Delaware against ICN, SPI, Viratek (with respect to one of such lawsuits) and
certain directors and officers of ICN, SPI and/or Viratek (including Milan
Panic). The lawsuits, entitled Helmut Kling v. Milan Panic, et al., Jallath v.
Milan Panic, et al., and Amy Hoffman v. Milan Panic, et al. purport to be class
actions on behalf of all persons who hold shares of SPI common stock and, in one
lawsuit, Viratek common stock. These suits allege that the consideration to be
provided to the public stockholders of SPI and Viratek (with respect to one of
such lawsuits) in the Merger is unfair and inadequate, and the defendants have
breached their fiduciary duties in approving the proposed Merger and otherwise.
The Company believes that these suits are without merit.

K-7
<PAGE> 457

APPENDIX L
<PAGE> 458

VIRATEK, INC.

CONDENSED BALANCE SHEETS

JUNE 30, 1994 AND DECEMBER 31, 1993
(000'S OMITTED)

A S S E T S

The accompanying notes are an integral part of these financial statements.

L-1
<PAGE> 459

VIRATEK, INC.

CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(UNAUDITED -- 000'S OMITTED, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Royalties from SPI.............................. $ 758 $ 540 $ 3,570 $ 1,984
Costs and expenses:
General and administrative expenses............. 792 449 1,753 781
Research and development........................ 2,079 1,359 3,717 2,298
Depreciation and amortization................... 137 109 252 212
Interest income, net............................ (453) (210) (826) (373)
Other income, net............................... -- (58) -- (112)
------- ------- ------- -------
Loss before income tax expense.................. (1,797) (1,109) (1,326) (822)
Income tax expense.............................. 5 -- 5 --
------- ------- ------- -------
Net loss........................................ $(1,802) $(1,109) $(1,331) $ (822)
======= ======= ======= =======
Per share information:
Net loss........................................ $ (.10) $ (.07) $ (.07) $ (.05)
======= ======= ======= =======
Shares used in per share computation.............. 18,113 16,655 18,113 16,228
======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

L-2
<PAGE> 460

VIRATEK, INC.

CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(UNAUDITED -- 000'S OMITTED)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1994 1993
------- -------
<S> <C> <C>
Cash flows from operating activities:
Net loss............................................................... $(1,331) $ (822)
Adjustments to reconcile net loss to net cash used in operating
activities:
Depreciation and amortization....................................... 252 212
Change in asset and liabilities:
Increase in receivables from affiliates, net...................... (4,408) (2,227)
Decrease in prepaid expenses and other current assets............. (6) 54
Increase (decrease) in accounts payable and accrued liabilities... 262 (177)
Deferred compensation............................................. (5) (5)
------- -------
Net cash used in operating activities............................... (5,236) (2,965)
------- -------
Cash flows from investing activities:
Capital expenditures................................................... (889) (138)
Maturity of certificate of deposit..................................... 8,000 --
------- -------
Net cash used in investing activities............................... 7,111 (138)
------- -------
Cash flows from financing activities:
Proceeds from ICN advances............................................. -- 254
Redemption of warrants................................................. (9) --
Proceeds from stock options............................................ -- 297
Net proceeds from stock offering....................................... -- 10,269
------- -------
Net cash provided by (used in) financing activities................. (9) 10,820
------- -------
Net increase in cash..................................................... 1,866 7,717
Cash and cash equivalents at beginning of period......................... 9,698 5
------- -------
Cash and cash equivalents at end of period............................... $11,564 $ 7,722
======= =======
</TABLE>

The accompanying notes are an integral part of these financial statements.

L-3
<PAGE> 461

VIRATEK, INC.

MANAGEMENT'S STATEMENT REGARDING UNAUDITED FINANCIAL STATEMENTS

The condensed financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted pursuant to such
rules and regulations. The results of operations for the periods presented
herein are not necessarily indicative of the results to be expected for a full
year. Although the Company believes that all adjustments (consisting only of
normal recurring adjustments) necessary for a fair presentation of the interim
periods presented are included and that the disclosures are adequate to make the
information presented not misleading, these condensed financial statements
should be read in conjunction with the financial statements and notes thereto
included in the Company's Annual Report on Form 10-K and Form 10K/A Amendment
No. 1 for the year ended December 31, 1993.

L-4
<PAGE> 462

VIRATEK, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS

JUNE 30, 1994
(UNAUDITED)

1. RELATIONSHIP WITH ICN PHARMACEUTICALS, INC., SPI PHARMACEUTICALS, INC.
AND ICN BIOMEDICALS, INC. --

Viratek, Inc. ("Viratek" or the "Company") was incorporated on August 1,
1980, as a wholly-owned subsidiary of ICN Pharmaceuticals, Inc. ("ICN"). As of
June 30, 1994, Viratek was 63 percent owned by ICN. SPI Pharmaceuticals, Inc.
("SPI") was 38 percent owned by ICN and ICN Biomedicals, Inc. ("Biomedicals")
was 69 percent owned by ICN.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES --

Per share information

For the three and six months ended June 30, 1994 and 1993 per share
information is based on the weighted average number of common shares
outstanding. In December 1993, the Company declared a fourth quarter 1993 stock
distribution of 5%. All relevant share and per share amounts used in computing
earnings per share have been restated to reflect this stock distribution.

Reclassification

Certain prior period amounts have been reclassified to conform to the
current period presentation.

3. RELATED PARTY TRANSACTIONS --

Royalty agreements

During the three and six months ended June 30, 1994, SPI sold $3,790,000
and $17,850,000 of ribavirin resulting in royalties to Viratek of $758,000 and
$3,570,000, respectively. For the same periods in 1993, SPI sold $2,700,000 and
$9,920,000 of ribavirin resulting in royalties to Viratek of $540,000 and
$1,984,000, respectively. These royalties are based on a license agreement
whereby 20% of the sales of ribavirin by SPI are payable to Viratek. Included in
royalties for the three and six months ended June 30, 1994, are royalties earned
on foreign sales by SPI totaling $499,000 and $1,110,000, respectively. For the
same periods in 1993, royalties earned on foreign sales by SPI were $449,000 and
$1,122,000, respectively.

Cost Allocation

ICN, SPI, Viratek and Biomedicals occupy ICN's facility in Costa Mesa,
California. During the three and six months ended June 30, 1994 ICN charged
facility costs of $60,000 and $120,000, respectively, to the Company. For the
same periods in 1993, ICN charged facility costs of $8,000 and $15,000,
respectively. The costs of common services such as maintenance, purchasing and
personnel are incurred by SPI and allocated to ICN, Viratek and Biomedicals
based on the services utilized. The common services costs for the three and six
months ended June 30, 1994 were $156,000 and $199,000, respectively. For the
same periods in 1993, these common services costs were $10,000 and $23,000,
respectively.

Debt and equity transactions

At June 30, 1994, Viratek had $19,911,000 of receivables due from ICN.
During the three and six months ended June 30, 1994, Viratek charged $345,000
and $616,000 respectively, to ICN for interest on the average balances owed to
Viratek. For the same periods in 1993, Viratek charged $171,000 and $318,000,
respectively, to ICN for interest on the average balances owed to Viratek.

L-5
<PAGE> 463

VIRATEK, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1994
(UNAUDITED)

Charges for the usage of equipment

For the three and six months ended June 30, 1993 Viratek charged $60,000
and $120,000 to ICN for the usage of equipment owned by Viratek. None were
incurred in 1994.

4. CLINICAL TRIALS --

As of June 30, 1994, the Company had net amounts capitalized of $1,498,000
related to outside studies requested by the FDA in order to obtain approval of
the use of ribavirin in treating RSV. These costs are being amortized on a
straight-line basis over their useful lives.

5. COMMON STOCK --

In December 1993, the Company declared a fourth quarter 1993 stock dividend
of 5%. Accordingly, all numbers of common shares, except shares authorized,
stock option data and per share data have been restated to reflect the dividend.
Fractional shares resulting from the dividend were settled in cash.

6. SUPPLEMENTAL CASH FLOW DISCLOSURES --

The following table sets forth the amount of cash paid for interest and
income taxes.

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1994 1993
------- -------
<S> <C> <C>
Interest................................................. $18,000 $16,000
Income taxes............................................. 13,000 50,000
</TABLE>

7. COMMITMENTS AND CONTINGENCIES --

L-6
<PAGE> 464

VIRATEK, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1994
(UNAUDITED)

On October 20, 1993, plaintiffs informed the Court that they had reached an
agreement to settle with co-defendant Paine Webber. On May 6, 1994 plaintiffs
submitted their Stipulation of Settlement to the Court. The hearing on the
Stipulation of Settlement was held on July 27, 1994. The Court approved the
proposed settlement (in the amount of $6.5 million) and requested additional
information in connection with Plaintiffs' counsel's application for attorney
fees and costs. Fact discovery is complete and expert discovery is virtually
complete. Plaintiffs' damages expert, utilizing assumptions and methodologies
that the ICN Defendants' damages experts find to be inappropriate under the
circumstances, has testified that assuming that classes were certified for
purchasers of ICN, Viratek, and SPI common stock for the entire class periods
alleged by plaintiffs, January 7, 1986 through April 15, 1987, and further
assuming that all of the plaintiffs' allegations were proven, potential damages
against ICN, Viratek, and SPI would, in the aggregate, amount to $315,000,000.
The ICN Defendants' four damages' experts have testified that damages are zero.
On May 4, 1994, plaintiffs' counsel agreed to stipulate to the dismissal of the
aiding and abetting claim asserted against the ICN Defendants and a formal
stipulation will be submitted to the Court in the near future. Management
believes that, having extensively reviewed the issues in the above referenced
matters, there are strong defenses and the Company intends to defend the
litigation vigorously. While the ultimate outcome of these lawsuits cannot be
predicted with certainty, and an unfavorable outcome could have an adverse
effect on the Company, at this time management does not expect that these
matters will have a material adverse effect on the financial position, result of
operations or liquidity of the Company. The attorney's fees and other costs of
the litigation are allocated equally between ICN and Viratek.

Rafi M. Khan v. ICN Pharmaceuticals, Inc. On April 5, 1993, ICN and Viratek
filed suit against Rafi Khan ("Khan") in the United States District Court for
the Southern District of New York. The complaint alleges, inter alia, that Khan
violated numerous provisions of the securities laws and breached his fiduciary
duty to ICN and Viratek by attempting to effectuate a change in control of ICN
while acting as an agent and fiduciary of ICN and Viratek. As relief, ICN and
Viratek, among other things, sought an injunction enjoining Khan from
effectuating a change in control of ICN and compensatory and punitive damages in
the amount of $25,000,000. Khan filed a counterclaim on April 12, 1993, naming
the then ICN directors and ICN, as a nominal defendant sued only in a derivative
capacity. The counterclaim contains causes of action for slander, interference
with economic relations, and a shareholders' derivative action for breach of
fiduciary duties. Khan seeks compensatory damages for interest in an unspecified
amount, and exemplary damages of $29,000,000. On December 22, 1993, Khan filed a
notice of appeal from a prior injunction granted by the court, to the Court of
Appeals for the Second Circuit. On March 13, 1994, that appeal was dismissed on
the grounds that Khan had defaulted for failure to comply with the Court's
scheduling order. The Company has been advised by Mr. Khan that he intends to
represent himself pro se in this matter. With the consent of the parties, the
Court ordered all discovery stayed until September 6, 1994. Management believes
that Khan's counterclaim is without merit and the Company intends to vigorously
defend these counterclaims.

8. SUBSEQUENT EVENTS --

On August 1, 1994, the Company and its three affiliated corporations (ICN
Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc., Viratek, Inc. and ICN
Biomedicals, Inc.) entered into a merger agreement to combine the four companies
into a newly formed corporation (which will be renamed ICN Pharmaceuticals,
Inc.) (the "Merger"). Under the terms of the merger agreement, all outstanding
shares of common stock of the four companies (other than shares held by ICN)
will be exchanged for shares of common stock of the new Company pursuant to the
following exchange ratios: ICN: 1 to .512, SPI: 1 to 1; Viratek: 1 to .499; and
Biomedicals: 1 to .197. The proposed Merger is subject to various conditions,
including approval by the stockholders of each of the four companies, issuance
of $150 million of convertible debentures to refinance a

L-7
<PAGE> 465

VIRATEK, INC.

NOTES TO CONDENSED FINANCIAL STATEMENTS (CONTINUED)

JUNE 30, 1994
(UNAUDITED)

substantial portion of the long-term indebtedness of the four companies (a
waivable condition), appropriate regulatory approvals and certain other
conditions. Assuming these conditions are satisfied, the transaction is expected
to close during the fall of 1994.

Three lawsuits have been filed by stockholders of SPI and, in one of these
lawsuits, Viratek, with respect to the Merger in the Court of Chancery of the
State of Delaware against ICN, SPI, Viratek (with respect to one of such
lawsuits) and certain directors and officers of ICN, SPI and/or Viratek
(including Milan Panic). The lawsuits, entitled Helmut Kling v. Milan Panic, et
al., Jallath v. Milan Panic, et al., and Amy Hoffman v. Milan Panic, et al.
purport to be class actions on behalf of all persons who hold shares of SPI
Common Stock and, in one lawsuit, Viratek Common Stock. These suits allege that
the consideration to be provided to the public stockbrokers of SPI and Viratek
(with respect to one of such lawsuits) in the Merger is unfair and inadequate,
and that the defendants have breached their fiduciary duties in approving the
proposed Merger and otherwise. The Company believes that these suits are without
merit.

L-8
<PAGE> 466

APPENDIX M
<PAGE> 467

ICN BIOMEDICALS, INC.

CONSOLIDATED CONDENSED BALANCE SHEETS

JUNE 30, 1994 AND DECEMBER 31, 1993
(000'S OMITTED EXCEPT FOR PER SHARE AMOUNTS)

ASSETS

<TABLE>
<CAPTION>
UNAUDITED
JUNE 30, DECEMBER 31,
1994 1993
-------- ------------
<S> <C> <C>
Current assets:
Cash and cash equivalents.......................................... $ 850 $ 509
Restricted cash.................................................... -- 256
Receivables, net................................................... 13,173 11,574
Inventories, net................................................... 15,473 15,601
Prepaid expenses and other current assets.......................... 2,602 3,241
-------- ------------
Total current assets....................................... 32,098 31,181
Property, plant and equipment, net................................... 15,388 15,728
Other assets and deferred charges.................................... 2,305 2,342
Excess of cost over net assets of purchased businesses, net.......... 2,404 2,580
-------- ------------
Total assets............................................... $ 52,195 $ 51,831
======== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Notes payable...................................................... $ 1,845 $ 1,926
Current maturities of capital lease obligations and long-term
debt............................................................ 1,254 1,379
Accounts payable and accrued liabilities........................... 15,340 17,120
-------- ------------
Total current liabilities.................................. 18,439 20,425
Long-term debt and capital lease obligations......................... 10,768 10,567
Deferred income taxes and other liabilities.......................... 2,339 2,266
Payable to ICN....................................................... 7,738 5,932
Stockholders' equity:
Preferred stock, $.01 par value:
1,000,000 shares authorized; issued:
Series A, 300,000 shares ($30,000,000 involuntary liquidation
preference).................................................. 3 3
Series B, 390,000 shares ($39,000,000 involuntary
liquidation preference).................................... 4 4
Common Stock, $.01 par value:
30,000,000 shares authorized; 9,033,873 shares issued and
outstanding
at June 30, 1994 and December 31, 1993, respectively.......... 90 90
Additional capital: Preferred........................................ 61,928 61,928
Additional capital: Common........................................... 43,072 43,072
Deficit.............................................................. (88,875) (89,540)
Foreign currency translation adjustments............................. (3,311) (2,916)
-------- ------------
Total stockholders' equity................................. 12,911 12,641
-------- ------------
$ 52,195 $ 51,831
======== ==========
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

M-1
<PAGE> 468

ICN BIOMEDICALS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS

FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(UNAUDITED -- 000'S OMITTED EXCEPT FOR PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------- -------------------
1994 1993 1994 1993
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net sales........................................... $15,171 $15,415 $30,658 $31,224
Cost of sales....................................... 6,660 6,957 13,500 14,333
------- ------- ------- -------
Gross profit................................... 8,511 8,458 17,158 16,891
Selling, general and administrative expenses........ 6,848 6,745 13,750 13,277
Interest expense, net............................... 580 532 1,066 1,266
Foreign currency transaction losses (gains)......... 389 (106) 802 (328)
Other (income) expense, net......................... 247 (1,597) 592 (1,259)
------- ------- ------- -------
Income before provision for income taxes and
extraordinary income......................... 447 2,884 948 3,935
Provision (benefit) for income taxes................ (89) 127 (102) 162
------- ------- ------- -------
Income before extraordinary income............. 536 2,757 1,050 3,773
Extraordinary income................................ -- 627 -- 627
------- ------- ------- -------
Net income..................................... $ 536 3,384 1,050 4,400
======= ======= ======= =======
Per share information:
Income before extraordinary income................ $ .06 $ .12 $ .12 $ .17
Extraordinary income.............................. -- .03 -- .03
------- ------- ------- -------
Net income........................................ $ .06 $ .15 $ .12 $ .20
======= ======= ======= =======
Shares used in computing per share information...... 9,061 22,461 9,128 22,440
======= ======= ======= =======
Dividends per common share.......................... $ -- $ .0425 $ -- $ .085
======= ======= ======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

M-2
<PAGE> 469

ICN BIOMEDICALS, INC.

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 1994 AND 1993
(UNAUDITED -- 000'S OMITTED)

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1994 1993
--------- ---------
<S> <C> <C>
Cash flows from operating activities:
Net income............................................................. $ 1,050 $ 4,400
Adjustments to net income:
Depreciation and amortization.......................................... 1,629 1,518
Foreign currency transaction losses (gains)............................ 802 (328)
Gain on sale of assets held for disposition............................ -- (278)
Gain on settlement of certain leasing contracts........................ -- (938)
Extraordinary income................................................... -- (627)
Change in assets and liabilities, net.................................. (4,059) (9,249)
--------- ---------
Net cash used in operations......................................... (578) (5,502)
--------- ---------
Cash flows from investing activities:
Capital expenditures................................................... (300) (610)
Proceeds from sale of asset held for disposition....................... -- 4,543
Other, net............................................................. -- 65
--------- ---------
Net cash (used in) provided by investing activities................. (300) 3,998
--------- ---------
Cash flows from financing activities:
Repayments of long-term debt, net...................................... (726) (785)
Repayments of short-term debt, net..................................... (81) (1,260)
Decrease in restricted cash............................................ 256 --
Cash dividends paid.................................................... (118) (117)
Cash received from ICN, net............................................ 1,806 3,600
--------- ---------
Net cash provided by financing activities........................... 1,137 1,438
--------- ---------
Effect of exchange rate changes on cash.................................. 82 (87)
--------- ---------
Increase (decrease) in cash and equivalents.............................. 341 (153)
Cash and equivalents at beginning of period.............................. 509 2,204
--------- ---------
Cash and equivalents at end of period.................................... $ 850 $ 2,051
======= =======
</TABLE>

The accompanying notes are an integral part of these consolidated condensed
financial statements.

M-3
<PAGE> 470

ICN BIOMEDICALS, INC.

MANAGEMENT'S STATEMENT REGARDING
UNAUDITED CONSOLIDATED CONDENSED FINANCIAL STATEMENTS

The consolidated condensed financial statements included herein have been
prepared by the Company, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been omitted pursuant to such
rules and regulations. The results of operations presented herein are not
necessarily indicative of the results to be expected for a full year. Although
the Company believes that all adjustments necessary (consisting only of normal
recurring adjustments) for a fair presentation of the interim periods presented
are included and that the disclosures are adequate to make the information
presented not misleading, it is suggested that these consolidated condensed
financial statements be read in conjunction with the consolidated financial
statements and notes thereto included in the Company's Annual Report on Form
10-K and Form 10-K/A Amendment Number 1 for the year ended December 31, 1993.

M-4
<PAGE> 471

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)

1. RELATIONSHIP WITH ICN PHARMACEUTICALS, INC., SPI PHARMACEUTICALS, INC. AND
VIRATEK, INC.

ICN Biomedicals, Inc. (the "Company") was incorporated in September, 1983
as a wholly-owned subsidiary of ICN Pharmaceuticals, Inc. ("ICN"). As of June
30, 1994, the Company was a 69%-owned subsidiary of ICN. SPI Pharmaceuticals,
Inc. ("SPI") and Viratek, Inc. ("Viratek") were 38% and 63%-owned by ICN,
respectively.

2. INVENTORIES

Inventories are carried at the lower of cost or market using the first-in
first-out (FIFO) method and are comprised of the following: (000's omitted)

<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1994 1993
-------- ------------
<S> <C> <C>
Raw materials and supplies......................... $ 3,461 $ 3,422
Work-in-process.................................... 488 610
Finished goods, net................................ 11,524 11,569
-------- ------------
Inventories, net................................... $15,473 $ 15,601
======= ============
</TABLE>

3. RELATED PARTY TRANSACTIONS

General

The Company has obtained a written agreement from ICN that ICN is prepared,
if needed, to provide financial support to the Company in order to meet its
financial obligations through April 15, 1995.

Cost Allocations

The Company subleases space on a year-to-year basis in Costa Mesa,
California, from ICN. The cost of common services used by the Company, SPI,
Viratek and ICN are allocated by SPI based upon various formulas. Effective
January 1, 1993, ICN reimburses the Company for those allocations which are in
excess of the amounts determined by management using competitive data, as
approved by the Oversight Committee, that would have been incurred by the
Company if it operated in a facility suited solely to its requirements. Rent and
common services charges for the three and six months ended June 30, 1994 and
1993 were $213,000 and $425,000, and $213,000 and $426,000, respectively.

4. LONG-TERM DEBT

As of June 30, 1994, the accompanying consolidated condensed financial
statements include total outstanding Swiss Franc convertible debt of SFr.
11,488,000, ($8,615,000) which represents the present value of the Company's
obligation to pay the Zero Coupon Guaranteed Bonds. As of June 30, 1994, SFr.
39,615,000 principal of the Company's 5 1/2% Exchangeable Certificates were
outstanding which, if exchanged for common stock, would result in the issuance
of 2,608,241 shares of common stock, a reduction of long-term debt of SFr.
10,201,000 ($7,650,000) a reduction of SFR 1,286,000 ($965,000) of current
maturities of long-term debt, and an increase in marketable securities of SFr.
20,204,000 ($15,150,000) from the release by Bio Capital of the Danish Bonds to
the Company. The Company does not hedge the exchange risk associated to the
Swiss Franc convertible debt. Consequently, the Company incurred approximately
$451,000 and $844,000 of exchange losses related to the Swiss Franc convertible
debt during the three and six months periods ended June 30, 1994, respectively,
as compared to gains of $136,000 and $334,000 for the same periods in 1993.

M-5
<PAGE> 472

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

5. COMMON STOCK

As of June 30, 1994, there were 2,608,241 shares of common stock issuable
upon conversion of the Company's 5 1/2% Exchangeable Certificates, and 1,961,485
shares of common stock issuable upon the exercise of stock options, of which
1,102,025 options are exercisable at June 30, 1994 at prices ranging from $.83
to $10.50 per share.

6. SUPPLEMENTAL CASH FLOW DISCLOSURES

Supplemental disclosures required by Statement of Financial Accounting
Standards No. 95, "Statement of Cash Flows" are as follows: (000's omitted)

<TABLE>
<CAPTION>
SIX MONTHS ENDED
-------------------
JUNE JUNE
30, 30,
1994 1993
------ ------
<S> <C> <C>
Interest paid............................................ $1,043 $1,121
Taxes paid............................................... $ 194 $ 177
</TABLE>

7. OTHER (INCOME) EXPENSE, NET

Other (income) expense, net was $247,000 and $592,000 for the three and six
months ended June 30, 1994, respectively, compared to $(1,597,000) and
$(1,259,000) for the same periods in 1993.

Other (income) expense for the three months ended June 30, 1994 includes a
$(210,000) gain on settlement of an escrow account related to the sale of the
Company's Irvine, Scotland facility in 1993, offset by costs incurred in
connection with the closure of a foreign facility of $204,000. Other (income)
expense for the three months ended June 30, 1994, also includes $125,000 of
amortization of goodwill and other intangibles.

For the six months ended June 30, 1994, other (income) expense includes the
aforementioned gain on settlement of an escrow account of $(210,000), foreign
facility closure costs of $204,000 and amortization of goodwill of $251,000.
Additionally, other (income) expense for the six months ended June 30, 1994
includes severance and termination costs of $250,000, offset by a reevaluation
of certain foreign allowances, primarily related to accounts receivable of
$(300,000).

Other (income) expense for the three and six months ended June 30, 1993,
includes a gain of $(938,000) realized by the Company's Italian operation on the
favorable termination of certain leasing contracts, a gain of $(1,000,000)
representing certain liabilities accrued during 1992 which were settled for less
than the original estimate and a gain of $(278,000) on the sale of the Company's
Irvine, Scotland facility.

Amortization of goodwill and other intangibles was $129,000 and $251,000
for the three and six months ended June 30, 1993, respectively.

8. SUBSEQUENT EVENT

On August 1, 1994, the Company and its three affiliated corporations (ICN,
SPI and Viratek, entered into a merger agreement to combine the four companies
into a newly formed corporation (which will be renamed ICN Pharmaceuticals,
Inc.) (the "Merger"). Under the terms of the merger agreement, all outstanding
shares of common stock of the four companies (other than shares held by ICN)
will be exchanged for shares of common stock of the new company pursuant to the
following exchange ratios: ICN: 1 to .512; SPI: 1 to 1; Viratek: 1 to .499; and
Biomedicals: 1 to .197. The proposed merger is subject to various conditions,
including approval by the stockholders of each of the four companies, issuance
of $150 million of convertible debenture to refinance a substantial portion of
the long-term indebtedness of the four companies

M-6
<PAGE> 473

ICN BIOMEDICALS, INC.

NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS (CONTINUED)
(UNAUDITED)

(a waivable condition), appropriate regulatory approvals and certain other
conditions. Assuming these conditions are satisfied, the transaction is expected
to close during the fall of 1994.

Three lawsuits have been filed by stockholders of SPI and, in one of these
lawsuits, Viratek, with respect to the Merger in the Court of Chancery of the
State of Delaware against ICN, SPI, Viratek (with respect to one of such
lawsuits) and certain directors and officers of ICN, SPI and/or Viratek
(including Milan Panic). The lawsuits, entitled HELMUT KLING v. MILAN PANIC, ET
AL., JALLATH v. MILAN PANIC, ET AL., and AMY HOFFMAN v. MILAN PANIC, ET AL.,
purport to be class actions on behalf of all persons who hold shares of SPI
Common Stock and, in one lawsuit, Viratek Common Stock. These suits allege that
the consideration to be provided to the public stockholders of SPI and Viratek
(with respect to one of such lawsuits) in the Merger is unfair and inadequate,
and that the defendants have breached their fiduciary duties in approving the
proposed merger and otherwise.

M-7
<PAGE> 474

PART II

INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Section 145 of the General Corporation Law of Delaware empowers a
corporation to indemnify any person who was or is a party or is threatened to be
made a party to any threatened, pending or completed action, suit or proceeding,
whether civil, criminal, administrative or investigative by reason of the fact
that he or she is or was a director, officer, employee or agent of the
corporation or is or was serving at the request of the corporation as a
director, officer, employee or agent of another corporation or enterprise.
Depending on the character of the proceeding, a corporation may indemnify
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with such action,
suit or proceeding if the person indemnified acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the corporation, and with respect to any criminal action or proceeding, had no
cause to believe his or her conduct was unlawful. In the case of an action by or
in the right of the corporation, no indemnification may be made other than for
expenses (including attorneys' fees), and no indemnification for expenses may be
made in respect to any claim, issue or matter as to which such person shall have
been adjudged to be liable to the corporation unless and only to the extent that
the Court of Chancery or the court in which such action or suit was brought
shall determine that despite the adjudication of liability such person is fairly
and reasonably entitled to indemnity for such expenses which the court shall
deem proper.

Section 145 further provides that to the extent a director or officer of a
corporation has been successful in the defense of any action, suit or proceeding
referred to above or in the defense of any claim, issue or matter therein, he or
she shall be indemnified against expenses (including attorneys' fees) actually
and reasonably incurred by him or her in connection therewith. However, if the
director or officer is not successful in the defense of any claim, issue or
matter therein, he shall only be indemnified by the corporation as authorized in
the specific case upon a determination that indemnification is proper because he
or she met the applicable standard set forth above as determined by a majority
of the disinterested Board of Directors or by the stockholders.

The Registrant's form of bylaws, to be adopted, provide indemnification to
its officers and directors against liability they may incur in their capacity as
such, which indemnification is similar to that provided by Section 145, unless a
determination is reasonably and promptly made by a majority of the disinterested
Board of Directors that the indemnitee acted in bad faith and in a manner that
the indemnitee did not believe to be in or not opposed to the best interests of
the Registrant, or, with respect to any criminal proceeding, that the indemnitee
believed or had reasonable cause to believe that his or her conduct was
unlawful.

The Registrant carries directors' and officers' liability insurance,
covering losses up to $5,000,000 (subject to a $500,000 deductible).

The Registrant, as a matter of policy, enters into indemnification
agreements with its directors and officers indemnifying them against liability
they may incur in their capacity as such. The indemnification agreements require
no specific standard of conduct for indemnification and make no distinction
between civil and criminal proceedings, except in proceedings where the
dishonesty of an indemnitee is alleged. Such indemnification is not available if
an indemnitee is adjudicated to have acted in a deliberately dishonest manner
with actual dishonest purpose and intent where such acts were material to the
adjudicated proceeding. Additionally, the indemnity agreements provide
indemnification for any judgment or amount paid in settlement of claims by or in
the right of the Company. The indemnification agreements provide that the
Company is not required to provide indemnification for any claim against an
indemnitee where the claim is based upon the indemnitee obtaining personal
advantage or profit to which he or she was not legally entitled, the claim is
for an accounting of profits made in connection with a violation of Section
16(b) of the Securities Exchange Act of 1934, or similar state law provision, or
the claim was brought about or contributed to by the dishonesty of the
indemnitee.

II-1
<PAGE> 475

Section 102(b)(7) of the Delaware General Corporation Law, as amended,
permits a corporation to include in its certificate of incorporation a provision
eliminating or limiting the personal liability of a director to the corporation
or its stockholders for monetary damages for breach of fiduciary duty as a
director, provided that such provision shall not eliminate or limit the
liability of a director (i) for any breach of the director's duty of loyalty to
the corporation or its stockholders, (ii) for acts or omissions not in good
faith or which involve intentional misconduct or a knowing violation of law,
(iii) under Section 174 of the Delaware General Corporation Law (relating to
unlawful payment of dividend and unlawful stock purchase and redemption), or
(iv) for any transaction from which the director derived an improper personal
benefit. The Registrant has provided in its form of amended certificate of
incorporation, to be adopted, that its directors shall be exculpated from
liability as provided under Section 102(b)(7).

ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(A) EXHIBITS

<TABLE>
<C> <S>
2 Agreement and Plan of Merger, as amended (attached as Appendix A to the
Proxy Statement/Prospectus)
3.1 Form of Amended Certificate of Incorporation of the Registrant attached as
Exhibit A to the Agreement and Plan of Merger
3.2 Form of Bylaws of the Registrant
4 Form of Right Agreement
5 Opinion of M'Liss Jones Kane, General Counsel of SPI, regarding legality
8 Opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel to the
Registrant, regarding tax treatment of transaction
10.1 Agreement between ICN Pharmaceuticals, Inc. and Milan Panic, dated October
1, 1988 previously filed as Exhibit 10.51 to ICN's Annual Report on Form
10-K for the year ended November 30, 1989.
10.2 Agreement among ICN Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc. and
Adam Jerney, dated March 18, 1993 previously filed as Exhibit 10.49 to SPI's
Amendment No. 2 to the Annual Report on Form 10-K filed on March 31, 1993.
10.3 Agreement among ICN Pharmaceuticals, Inc. Viratek, Inc. and John Giordani,
dated March 18, 1993
10.4 Agreement among ICN Pharmaceuticals, Inc., ICN Biomedicals, Inc., SPI
Pharmaceuticals, Inc. and Bill MacDonald, dated March 18, 1993
10.5 Agreement among ICN Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc. and
John Phillips, dated March 18, 1993 previously filed as Exhibit 10.49 to
Amendment No. 2 to SPI's Annual Report on Form 10-K filed on March 31, 1993.
10.6 Agreement among ICN Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc. and
Jack Sholl, dated March 18, 1993 previously filed as Exhibit 10.49 to
Amendment No. 2 to SPI's Annual Report on Form 10-K filed on March 31, 1993.
10.7 Agreement among ICN Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc. and
David Watt, dated March 18, 1993 previously filed as Exhibit 10.49 to
Amendment No. 2 to SPI's Annual Report on Form 10-K filed on March 31, 1993.
10.8 Foundation Agreement between SPI Pharmaceuticals, Inc. and ICN Galenika
dated November 22, 1990 previously filed as Exhibit 10.35 to SPI's Annual
Report on Form 10-K for the year ended November 30, 1990, which is
incorporated herein by reference.
10.9 Amendment to Foundation Agreement between SPI Pharmaceuticals, Inc. and ICN
Galenika dated December 31, 1991, previously filed as Exhibit 10.39 to SPI's
Annual Report on Form 10-K for the year ended December 31, 1991, which is
incorporated herein by reference.
</TABLE>

II-2
<PAGE> 476

<TABLE>
<C> <S>
10.10 Additional Amendment to Foundation Agreement between SPI Pharmaceuticals,
Inc. and ICN Galenika dated February 27, 1992, previously filed as Exhibit
10.40 to SPI's Annual Report on Form 10-K for the year ended December 31,
1991, which is incorporated herein by reference.
10.11 Indenture between ICN Pharmaceuticals, Inc. and J. Henry Schroeder Bank &
Trust Company, previously filed as Exhibit 4.1 to Registration Statement No.
33-5919 on Form S-3, which is incorporated herein by reference. First
Supplemental Indenture dated as of October 1, 1986, between ICN
Pharmaceuticals, Inc. and J. Henry Schroeder Bank & Trust Company.
10.12 Public Bond Issue Agreement dated as of June 13, 1986 between ICN
Pharmaceuticals, Inc. and Banque Gutzwiller, Kurz, Bungener S.A., previously
filed as Exhibit 10 to ICN's Form of Amendment of Quarterly Report on Form
10-Q for the quarter ended August 31, 1985, which is incorporated herein by
reference.
10.13 Purchase Agreement dated as of September 5, 1986, for an issue by ICN
Pharmaceuticals, Inc., of Dfl. 75,000,000 Subordinated Convertible Bonds due
1990/1994 convertible into Shares of Common Stock, between ICN
Pharmaceuticals, Inc. and Van Haften & Co. N.V. and the other Managers named
therein; Trust Deed dated as of September 15, 1986, between ICN
Pharmaceuticals, Inc. and B.V. Algemeen Administratieen Trustkantoor, and
Paying Agency Agreement dated as of September 15, 1986 for an issue by ICN
Pharmaceuticals, Inc. of Dfl. 75,000,000 Subordinated Convertible Bonds due
1990/1994 Convertible into Shares of Common Stock among ICN Pharmaceuticals,
Inc., Nederlands Credietbank N.V., Kredietbank S.A. Luxembourgeoise, and
Banque Gutzwiller, Kurz, Bungener S.A., previously filed as Exhibit 10 to
Registration Statement No. 33-10706 on Form S-3, which is incorporated
herein by reference.
10.14 Xr Capital Holding Trust Instrument between ICN Pharmaceuticals, Inc. and
Ansbacher (C.I.) Limited dated as of September 17, 1986; Subscription
Agreement between Ansbacher (C.I.) Limited, ICN Pharmaceuticals, Inc., SPI
Pharmaceuticals, Inc., and Banque Gutzwiller, Kurz, Bungener S.A. and the
other financial institutions named therein dated as of September 17, 1986;
Bond Issue Agreement between ICN Pharmaceuticals, Inc. and Ansbacher (C.I.)
Limited dated as of September 17, 1986; and Exchange Agency Agreement
between ICN Pharmaceuticals, Inc., SPI Pharmaceuticals Inc., Banque
Gutzwiller, Kurz, Bungener S.A., and the other financial institutions named
therein dated as of September 17, 1986 previously filed as Exhibit 10.36 to
ICN's Annual Report on Form 10-K for the fiscal year ended November 30,
1987, which is incorporated herein by reference.
10.15 Indenture dated as of October 30, 1986 between ICN Pharmaceuticals, Inc. and
Citibank, N.A.; and Subscription Agreement dated as of October 8, 1986
between ICN Pharmaceuticals, Inc., J. Henry Schroder Wagg and Co. Ltd. and
the other financial institutions named therein previously filed as of
Exhibit 10.37 to ICN's Annual Report on Form 10-K for the fiscal year ended
November 30, 1987, which is incorporated herein by reference.
10.16 Pharma Capital Holdings Trust Instrument between ICN Pharmaceuticals, Inc.
and Ansbacher (C.I.) Limited, dated as of October 16, 1986; Subscription
Agreement between Ansbacher (C.I.) Limited, ICN Pharmaceuticals, Inc. and
the Managers named therein, dated as of October 16, 1986; Paying Agency
Agreement between ICN Pharmaceuticals, Inc., Ansbacher (C.I.) Limited,
Banque Paribas (Luxembourg) S.A. and the other financial institutions named
therein dated as of October 22, 1986; and the Exchange Agency Agreement
between ICN Pharmaceuticals, Inc., Banque Paribas (Luxembourg) S.A. and the
other Exchange Agents named therein dated as of October 22, 1986 previously
filed as Exhibit 10.38 to ICN's Annual Report on Form 10-K for the fiscal
year ended November 30, 1987, which is incorporated herein by reference.
</TABLE>

II-3
<PAGE> 477

<TABLE>
<C> <S>
10.17 Bio Capital Holding Trust Instrument between ICN Biomedicals, Inc, Ansbacher
(C.I.) Limited and ICN Pharmaceuticals, Inc. dated as of January 26, 1987;
Subscription Agreement between ICN Biomedicals, Inc., Ansbacher (C.I.)
Limited, ICN Pharmaceuticals, Inc., Banque Gutzwiller, Kurz, Bungener S.A.
and the other financial institutions named therein dated as of January 26,
1987; Bond Issue Agreement between ICN Biomedicals, Inc., ICN
Pharmaceuticals, Inc. and Ansbacher (C.I.) Limited dated as of January 26,
1987; Exchange Agency Agreement between ICN Biomedicals, Inc., Banque
Gutzwiller, Kurz, Bungener, S.A., and the other financial institutions named
therein dated as of January 26, 1987; and Guaranty between ICN
Pharmaceuticals, Inc. and ICN Biomedicals, Inc. dated as of February 17,
1987, previously filed as Exhibit 10.1 to Registrant's Quarterly Report on
Form 10-Q for the quarter ended February 28, 1987, which is incorporated
herein by reference.
10.18 Public Bond Issue Agreement dated as of February 20, 1987, between ICN
Pharmaceuticals, Inc. and Fintrelex, S.A. and the other banks named therein;
Conversion Agency Agreement dated as of February 20, 1987 between ICN
Pharmaceuticals, Inc., E. Gutzwiller & Cie, and other financial institutions
named therein; and Escrow Agreement dated as of February 20, 1987 between
ICN Pharmaceuticals, Inc., Fintrelex, S.A. and E. Gutzwiller & Cie,
previously filed as Exhibit 10.2 to ICN's Quarterly Report on Form 10-Q for
the quarter ended February 28, 1987, which is incorporated herein by
reference.
10.19 ICN Pharmaceuticals, Inc. 1992 Employee Incentive Stock Option Plan
previously filed as Exhibit 10.56 to ICN's Form 10-K for the year ended
December 31, 1992, which is incorporated herein by reference.
10.20 ICN Pharmaceuticals, Inc. 1992 Non-Qualified Stock Option Plan previously
filed as Exhibit 10.57 to ICN's Form 10-K for the year ended December 31,
1992, which is incorporated herein by reference.
10.21 SPI Pharmaceuticals, Inc. 1992 Employee Incentive Stock Option Plan
previously filed as Exhibit 10.42 to SPI's Form 10-K for the year ended
December 31, 1992, which is incorporated herein by reference.
10.22 SPI Pharmaceuticals, Inc. 1992 Non-Qualified Stock Option Plan previously
filed as Exhibit 10.43 to SPI's Form 10-K for the year ended December 31,
1992, which is incorporated herein by reference.
10.23 Viratek, Inc. 1992 Employee Incentive Stock Option Plan previously filed as
Exhibit 10.22 to Viratek's Registration Statement No. 33-54678 on Form S-2,
which is incorporated herein by reference.
10.24 Viratek, Inc. 1992 Non-Qualified Stock Option Plan previously filed as
Exhibit 10.23 to Viratek's Registration Statement No. 33-54678 on Form S-2,
which is incorporated herein by reference.
10.25 ICN Biomedicals, Inc. 1992 Employee Incentive Stock Option Plan previously
filed as Exhibit 10.22 to Biomedical's Form 10-K for the year ended December
31, 1992, which is incorporated herein by reference.
10.26 ICN Biomedicals, Inc. 1992 Non-Qualified Stock Option Plan previously filed
as Exhibit 10.23 to Biomedical's Form 10-K for the year ended December 31,
1992, which is incorporated herein by reference.
10.27 ICN Pharmaceuticals, Inc. 1981 Employee Incentive Stock Option Plan, as
amended, previously filed as an exhibit to Registration Statement No.
33-60866 on Form S-3 dated April 9, 1993, which is incorporated herein by
reference.
10.28 SPI Pharmaceuticals, Inc. 1982 Employee Incentive Stock Option Plan, as
amended and restated as of January 21, 1992, previously filed on Form S-8
dated April 9, 1993 on Registration Statement No. 33-60872, which is
incorporated herein by reference.
</TABLE>

II-4
<PAGE> 478

<TABLE>
<C> <S>
10.29 SPI Pharmaceuticals, Inc. 1982 Non-Qualified Stock Option Plan, as amended
and restated as of January 21, 1992, previously filed on Form S-8 dated
April 9, 1993 on Registration Statement No. 33-60872, which is incorporated
herein by reference.
10.30 Viratek, Inc. 1982 FDA Employee Special Stock Option Plan previously filed
as Exhibit 10.14 to Viratek's Form 10-K for the year ended November 30,
1982, which is incorporated herein by reference.
10.31 Viratek, Inc. 1981 Employee Incentive Stock Option Plan, as amended on
January 21, 1992, previously filed on Form S-8 dated April 9, 1993 on
Registration Statement No. 33-60876, which is incorporated herein by
reference.
10.32 Viratek, Inc. 1980 Employee Stock Option Plan, as amended, previously filed
on Form S-8 dated April 9, 1993 Registration Statement No. 33-60876, which
is incorporated herein by reference.
10.33 ICN Biomedicals, Inc. 1993 Employee Incentive Stock Option Plan previously
filed as Exhibit 10.3 to Registration Statement No. 33-60862, which is
incorporated herein by reference.
10.34 ICN Biomedicals, Inc. 1983 Non-Qualified Stock Option Plan and 1983
Incentive Stock Option Plan, as amended and restated as of January 21, 1992,
previously filed on Form S-8 dated April 9, 1993, which is incorporated
herein by reference.
11.1 Statement Re Computation of Per Share Earnings ICN Merger Corp.
11.2 Statement Re Computation of Per Share Earnings SPI Pharmaceuticals, Inc.
11.3 Statement Re Computation of Per Share Earnings ICN Pharmaceuticals, Inc.
11.4 Statement Re Computation of Per Share Earnings Viratek, Inc.
11.5 Statement Re Computation of Per Share Earnings ICN Biomedicals, Inc.
15 Letter from Coopers & Lybrand, L.L.P. concerning unaudited interim financial
information
21 Subsidiaries of the Registrant
23.1 Consent of Coopers & Lybrand
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit 8)
23.3 Consent of Prudential Securities Incorporated
23.4 Consent of Wertheim Schroder & Co. Incorporated
23.5 Consent of Kemper Securities, Inc
23.6 Consent of Jefferies & Co
23.7 Consent of Houlihan, Lokey, Howard & Zukin, Inc
23.8.1 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Michael Smith
23.8.2 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Stephen Moses
23.8.3 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Norman Barker
23.8.4 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Roger Guillermin
23.8.5 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Birch Bayh
23.8.6 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Vernon Knight
</TABLE>

II-5
<PAGE> 479

<TABLE>
<C> <S>
23.8.7 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Weldon Jolley
23.8.8 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Jean-Francois Kurz
23.8.9 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Thomas Lenagh
23.8.10 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Charles Manatt
23.8.11 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Milan Panic
23.8.12 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Roberts A. Smith
23.8.13 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Robert Finch
23.8.14 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Adam Jerney
23.8.15 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) James Miscoll
23.8.16 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Alan Charles
23.8.17 Consent of Persons who will become directors of the Registrant (as required
by Rule 438) Richard Starr
23.9 Consent of M'Liss Jones Kane (included in Exhibit 5)
24 Power of Attorney included elsewhere in this Registration Statement)
27 Financial Data Schedules for ICN Pharmaceuticals, Inc., for year ended
December 31, 1993 and for the six month period ended June 30, 1994
27.1 Financial Data Schedule for SPI, for year ended December 31, 1993 and for
the six month period ended June 30, 1994
27.2 Financial Data Schedule for Viratek, Inc., for year ended December 31, 1993
and for the six month period ended June 30, 1994
27.3 Financial Data Schedule for ICN Biomedicals Inc., for year ended December
31, 1993 and for the six month period ended June 30, 1994
99.1 Proxy Cards for ICN Pharmaceuticals, Inc
99.2 Proxy Cards for SPI Pharmaceuticals, Inc
99.3 Proxy Cards for Viratek, Inc
99.4 Proxy Cards for ICN Biomedicals, Inc
</TABLE>

ITEM 22. UNDERTAKINGS

The undersigned Registrant hereby undertakes:

(1) To file, during any period in which offers or sales are being made, a
post effective amendment to this Registration Statement.

(i) To include any prospectus required by section 10(a)(3) of the
Securities Act of 1933;

II-6
<PAGE> 480

(ii) To reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the aggregate,
represent a fundamental change in the information set forth in the
Registration Statement; and

(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or any
material change to such information in the Registration Statement;
provided, however, that paragraphs (i) and (ii) do not apply if the
Registration Statement is on Form S-3 or Form S-9, and the information
required to be included in a post-effective amendment by those paragraphs
is contained in periodic reports filed by the Registrant pursuant to
section 13 or section 15(d) of the Securities Exchange Act of 1934 that are
incorporated by reference in the Registration Statement.

(2) That, for the purpose of determining any liability under the Securities
Act of 1933, each such post-effective amendment shall be deemed to be a new
registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.

(3) To remove from registration by means of a post effective amendment any
of the securities being registered which remain unsold at the termination of the
offering.

(4) That, for purposes of determining any liability under the Securities
Act of 1933, each of the Registrant's annual report pursuant to section 13(a) or
section 15(d) of the Securities Exchange Act of 1934 (and, where applicable,
each filing of an employee benefit plan's annual report pursuant to section
15(d) of the Securities Exchange Act of 1934) that is incorporated by reference
in the Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(5) That prior to any public reoffering of the securities registered
hereunder through the use of a prospectus which is a part of this Registration
Statement, by any person or party who is deemed to be an underwriter within the
meaning of Rule 145(c), the Registrant undertakes that such reoffering
prospectus will contain the information called for by Form S-4 with respect to
reofferings by persons who may be deed underwriters, in addition to the
information called for by the other items of Form S-4.

(6) That every prospectus (i) that is filed pursuant to paragraph (5)
immediately preceding, or (ii) that purports to meet the requirements of Section
10(a)(3) of the Act and is used in connection with an offering of securities
subject to Rule 415, will be filed as a part of an amendment to the Registration
Statement and will not be used until such amendment is effective, and that, for
purposes of determining any liability under the Securities Act of 1933, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.

(7) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the Registrant pursuant to the foregoing provisions, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.

(8) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this Form,
within one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information

II-7
<PAGE> 481

contained in documents filed subsequent to the effective date of the
Registration Statement through the date of responding to the request.

(9) To supply by means of post-effective amendment all information
concerning a transaction, and the company being acquired involved therein, that
was not the subject of and included in the Registration Statement when it became
effective.

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<PAGE> 482

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant has duly caused this Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Costa Mesa,
State of California, on September 28, 1994.

ICN MERGER CORP.

By: /s/ MILAN PANIC
--------------------------------
Milan Panic

POWER OF ATTORNEY

Each person whose signature appears below constitutes and appoints Milan
Panic or David C. Watt, and each of them, as his or her true and lawful
attorney-in-fact and agent, with full power of substitution and resubstitution,
for him or her and in his or her name, place and stead, in any and all
capacities, to sign any and all amendments (including post-effective amendments)
to this Registration Statement and all documents relating thereto, and to file
the same, with all exhibits thereto, and other documents in connection
therewith, with the Securities and Exchange Commission granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing necessary or advisable to be done in
and about the premises, as fully to all intents and purposes as he or she might
or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.

Pursuant to the requirements of the Securities Act of 1933, as amended,
this Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
---------- ----- ----
<S> <C> <C>
/s/ MILAN PANIC Chairman of the Board, President and September 28, 1994
- ------------------------------------- Chief Executive Officer (Principal
Milan Panic Executive Officer) and Director

/s/ JOHN E. GIORDANI Executive Vice President, Chief September 28, 1994
- ------------------------------------- Financial Officer and Corporate
John E. Giordani Controller (Principal Financial and
Accounting Officer)

/s/ BILL A. MACDONALD Director September 28, 1994
- -------------------------------------
Bill A. MacDonald
</TABLE>

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<PAGE> 483

EXHIBIT INDEX

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------ ------------
<C> <S> <C>
2 Agreement and Plan of Merger, as amended (attached as Appendix A to the
Proxy Statement/Prospectus).............................................
3.1 Form of Amended Certificate of Incorporation of the Registrant attached
as Exhibit A to the Agreement and Plan of Merger........................
3.2 Form of Bylaws of the Registrant........................................
4 Form of Right Agreement.................................................
5 Opinion of M'Liss Jones Kane, General Counsel of SPI, regarding
legality................................................................
8 Opinion of Fried, Frank, Harris, Shriver & Jacobson, special counsel to
the Registrant, regarding tax treatment of transaction..................
10.1 Agreement between ICN Pharmaceuticals, Inc. and Milan Panic, dated
October 1, 1988 previously filed as Exhibit 10.51 to ICN's Annual Report
on Form 10-K for the year ended November 30, 1989.......................
10.2 Agreement among ICN Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc. and
Adam Jerney, dated March 18, 1993 previously filed as Exhibit 10.49 to
SPI's Amendment No. 2 to the Annual Report on Form 10-K filed on March
31, 1993................................................................
10.3 Agreement among ICN Pharmaceuticals, Inc. Viratek, Inc. and John
Giordani, dated March 18, 1993..........................................
10.4 Agreement among ICN Pharmaceuticals, Inc., ICN Biomedicals, Inc., SPI
Pharmaceuticals, Inc. and Bill MacDonald, dated March 18, 1993..........
10.5 Agreement among ICN Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc. and
John Phillips, dated March 18, 1993 previously filed as Exhibit 10.49 to
Amendment No. 2 to SPI's Annual Report on Form 10-K filed on March 31,
1993....................................................................
10.6 Agreement among ICN Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc. and
Jack Sholl, dated March 18, 1993 previously filed as Exhibit 10.49 to
Amendment No. 2 to SPI's Annual Report on Form 10-K filed on March 31,
1993....................................................................
10.7 Agreement among ICN Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc. and
David Watt, dated March 18, 1993 previously filed as Exhibit 10.49 to
Amendment No. 2 to SPI's Annual Report on Form 10-K filed on March 31,
1993....................................................................
10.8 Foundation Agreement between SPI Pharmaceuticals, Inc. and ICN Galenika
dated November 22, 1990 previously filed as Exhibit 10.35 to SPI's
Annual Report on Form 10-K for the year ended November 30, 1990, which
is incorporated herein by reference.....................................
10.9 Amendment to Foundation Agreement between SPI Pharmaceuticals, Inc. and
ICN Galenika dated December 31, 1991, previously filed as Exhibit 10.39
to SPI's Annual Report on Form 10-K for the year ended December 31,
1991, which is incorporated herein by reference.........................
10.10 Additional Amendment to Foundation Agreement between SPI
Pharmaceuticals, Inc. and ICN Galenika dated February 27, 1992,
previously filed as Exhibit 10.40 to SPI's Annual Report on Form 10-K
for the year ended December 31, 1991, which is incorporated herein by
reference...............................................................
</TABLE>
<PAGE> 484

<TABLE>
<CAPTION>
SEQUENTIALLY
NUMBERED
NUMBER DESCRIPTION PAGE
- ------- ------------------------------------------------------------------------ ------------
<C> <S> <C>
10.11 Indenture between ICN Pharmaceuticals, Inc. and J. Henry Schroeder Bank
& Trust Company, previously filed as Exhibit 4.1 to Registration
Statement No. 33-5919 on Form S-3, which is incorporated herein by
reference. First Supplemental Indenture dated as of October 1, 1986,
between ICN Pharmaceuticals, Inc. and J. Henry Schroeder Bank & Trust
Company, which is incorporated herein by reference......................
10.12 Public Bond Issue Agreement dated as of June 13, 1985 between ICN
Pharmaceuticals, Inc. and Banque Gutzwiller, Kurz, Bungener S.A.,
previously filed as Exhibit 10 to ICN's Form of Amendment of Quarterly
Report on Form 10-Q for the quarter ended August 31, 1985, which is
incorporated herein by reference........................................
10.13 Purchase Agreement dated as of September 5, 1986, for an issue by ICN
Pharmaceuticals, Inc., of Dfl. 75,000,000 Subordinated Convertible Bonds
due 1990/1994 convertible into Shares of Common Stock, between ICN
Pharmaceuticals, Inc. and Van Haften & Co. N.V. and other Managers named
therein; Trust Deed dated as of September 15, 1986, between ICN
Pharmaceuticals, Inc. and B.V. Algemeen Administratieen Trustkantoor,
and Paying Agency Agreement dated as of September 15, 1986, for an issue
by ICN Pharmaceuticals, Inc. of Dfl. 75,000,000 Subordinated Convertible
Bonds due 1990/1994 Convertible into Shares of Common Stock among ICN
Pharmaceuticals, Inc., Nederlands Credietbank N.V., Kredietbank S.A.
Luxembourgeoise, and Banque Gutzwiller, Kurz, Bungener S.A., previously
filed as Exhibit 10 to Registration Statement No. 33-10706 on Form S-3,
which is incorporated herein by reference...............................
10.14 Xr Capital Holding Trust Instrument between ICN Pharmaceuticals, Inc.
and Ansbacher (C.I.) Limited dated as of September 17, 1986;
Subscription Agreement between Ansbacher (C.I.) Limited, ICN
Pharmaceuticals, Inc., SPI Pharmaceuticals, Inc., and Banque Gutzwiller,
Kurz, Bungener S.A. and the other financial institutions named therein
dated as of September 17, 1986; Bond Issue Agreement between ICN
Pharmaceuticals, Inc. and Ansbacher (C.I.) Limited dated as of September
17, 1986; and Exchange Agency Agreement between ICN Pharmaceuticals,
Inc., SPI Pharmaceuticals, Inc., Banque Gutzwiller, Kurz, Bungener S.A.,
and the other financial institutions named therein dated as of September
17, 1986 previously filed as Exhibit 10.36 to ICN's Annual Report on
Form 10-K for the fiscal year ended November 30, 1987, which is
incorporated herein by reference........................................
10.15 Indenture dated as of October 30, 1986 between ICN Pharmaceuticals, Inc.
and Citibank, N.A.; and Subscription Agreement dated as of October 8,
1986 between ICN Pharmaceuticals, Inc., J. Henry Schroder Wagg and Co.
Ltd. and the other financial institutions named therein previously filed
as of Exhibit 10.37 to ICN's Annual Report on Form 10-K for the fiscal
year ended November 30, 1987, which is incorporated herein by
reference...............................................................
</TABLE>
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10.16 Pharma Capital Holdings Trust Instrument between ICN Pharmaceuticals,
Inc. and Ansbacher (C.I.) Limited, dated as of October 16, 1986;
Subscription Agreement between Ansbacher (C.I.) Limited, ICN
Pharmaceuticals, Inc. and the Managers named therein, dated as of
October 16, 1986; Paying Agency Agreement between ICN Pharmaceuticals,
Inc., Ansbacher (C.I.) Limited, Banque Paribas (Luxembourg) S.A. and the
other financial institutions named therein dated as of October 22, 1986;
and the Exchange Agency Agreement between ICN Pharmaceuticals, Inc.,
Banque Paribas (Luxembourg) S.A. and the other Exchange Agents named
therein dated as of October 22, 1986 previously filed as Exhibit 10.38
to ICN's Annual Report on Form 10-K for the fiscal year ended November
30, 1987, which is incorporated herein by reference.....................
10.17 Bio Capital Holding Trust Instrument between ICN Biomedicals, Inc.,
Ansbacher (C.I.) Limited and ICN Pharmaceuticals, Inc. dated as of
January 26, 1987; Subscription Agreement between ICN Biomedicals, Inc.,
Ansbacher (C.I.) Limited, ICN Pharmaceuticals, Inc., Banque Gutzwiller,
Kurz, Bungener S.A. and the other financial institutions named therein
dated as of January 26, 1987; Bond Issue Agreement between ICN
Biomedicals, Inc., ICN Pharmaceuticals, Inc. and Ansbacher (C.I.)
Limited dated as of January 26, 1987; Exchange Agency Agreement between
ICN Biomedicals, Inc., Banque Gutzwiller, Kurz, Bungener, S.A., and the
other financial institutions named therein dated as of January 26, 1987;
and Guaranty between ICN Pharmaceuticals, Inc. and ICN Biomedicals, Inc.
dated as of February 17, 1987, previously filed as Exhibit 10.1 to
Registrant's Quarterly Report on Form 10-Q for the quarter ended
February 28, 1987, which is incorporated herein by reference............
10.18 Public Bond Issue Agreement dated as of February 20, 1987, between ICN
Pharmaceuticals, Inc. and Fintrelex, S.A. and the other banks named
therein; Conversion Agency Agreement dated as of February 20, 1987
between ICN Pharmaceuticals, Inc., E. Gutzwiller & Cie, and other
financial institutions named therein; and Escrow Agreement dated as of
February 20, 1987 between ICN Pharmaceuticals, Inc., Fintrelex, S.A. and
E. Gutzwiller & Cie, previously filed as Exhibit 10.2 to ICN's Quarterly
Report on Form 10-Q for the quarter ended February 28, 1987, which is
incorporated herein by reference........................................
10.19 ICN Pharmaceuticals, Inc. 1992 Employee Incentive Stock Option Plan
previously filed as Exhibit 10.56 to ICN's Form 10-K for the year ended
December 31, 1992, which is incorporated herein by reference............
10.20 ICN Pharmaceuticals, Inc. 1992 Non-Qualified Stock Option Plan
previously filed as Exhibit 10.57 to ICN's Form 10-K for the year ended
December 31, 1992, which is incorporated herein by reference............
10.21 SPI Pharmaceuticals, Inc. 1992 Employee Incentive Stock Option Plan
previously filed as Exhibit 10.42 to SPI's Form 10-K for the year ended
December 31, 1992, which is incorporated herein by reference............
10.22 SPI Pharmaceuticals, Inc. 1992 Non-Qualified Stock Option Plan
previously filed as Exhibit 10.43 to SPI's Form 10-K for the year ended
December 31, 1992, which is incorporated herein by reference............
10.23 Viratek, Inc. 1992 Employee Incentive Stock Option Plan previously filed
as Exhibit 10.22 to Viratek's Registration Statement No. 33-54678 on
Form S-2, which is incorporated herein by reference.....................
</TABLE>
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10.24 Viratek, Inc. 1992 Non-Qualified Stock Option Plan previously filed as
Exhibit 10.23 to Viratek's Registration Statement No. 33-54678 on Form
S-2, which is incorporated herein by reference..........................
10.25 ICN Biomedicals, Inc. 1992 Employee Incentive Stock Option Plan
previously filed as Exhibit 10.22 to Biomedical's Form 10-K for the year
ended December 31, 1992, which is incorporated herein by reference......
10.26 ICN Biomedicals, Inc. 1992 Non-Qualified Stock Option Plan previously
filed as Exhibit 10.23 to Biomedical's Form 10-K for the year ended
December 31, 1992, which is incorporated herein by reference............
10.27 ICN Pharmaceuticals, Inc. 1981 Employee Incentive Stock Option Plan, as
amended, previously filed as an Exhibit to Registration Statement
No. 33-60866 on Form S-3 dated April 9, 1993, which is incorporated
herein by reference.....................................................
10.28 SPI Pharmaceuticals, Inc. 1982 Employee Incentive Stock Option Plan, as
amended and restated as of January 21, 1992, previously filed on Form
S-8 dated April 9, 1993 on Registration Statement No. 33-60872, which is
incorporated herein by reference........................................
10.29 SPI Pharmaceuticals, Inc. 1982 Non-Qualified Stock Option Plan, as
amended and restated as of January 21, 1992, previously filed on Form
S-8 dated April 9, 1993 on Registration Statement No. 33-60872, which is
incorporated herein by reference........................................
10.30 Viratek, Inc. 1982 FDA Employee Special Stock Option Plan previously
filed as Exhibit 10.14 to Viratek's Form 10-K for the year ended
November 30, 1982, which is incorporated herein by reference............
10.31 Viratek, Inc. 1981 Employee Incentive Stock Option Plan, as amended on
January 21, 1992, previously filed on Form S-8 dated April 9, 1993 on
Registration Statement No. 33-60876, which is incorporated herein by
reference...............................................................
10.32 Viratek, Inc. 1980 Employee Stock Option Plan, as amended, previously
filed on Form S-8 dated April 9, 1993 Registration Statement
No. 33-60876, which is incorporated herein by reference.................
10.33 ICN Biomedicals, Inc. 1983 Employee Incentive Stock Option Plan
previously filed as Exhibit 10.3 to Registration Statement No. 33-60862,
which is incorporated herein by reference...............................
10.34 ICN Biomedicals, Inc. 1983 Non-Qualified Stock Option Plan and 1983
Incentive Stock Option Plan, as amended and restated as of January 21,
1992, previously filed on Form S-8 dated April 9, 1993, which is
incorporated herein by reference........................................
11.1 Statement Re Computation of Per Share Earnings ICN Merger Corp..........
11.2 Statement Re Computation of Per Share Earnings SPI Pharmaceuticals,
Inc.....................................................................
11.3 Statement Re Computation of Per Share Earnings ICN Pharmaceuticals,
Inc.....................................................................
11.4 Statement Re Computation of Per Share Earnings Viratek, Inc.............
11.5 Statement Re Computation of Per Share Earnings ICN Biomedicals, Inc.....
15 Letter from Coopers & Lybrand, L.L.P. concerning unaudited interim
financial information...................................................
21 Subsidiaries of the Registrant..........................................
23.1 Consent of Coopers & Lybrand............................................
23.2 Consent of Fried, Frank, Harris, Shriver & Jacobson (included in Exhibit
8)......................................................................
23.3 Consent of Prudential Securities Incorporated...........................
23.4 Consent of Wertheim Schroder & Co. Incorporated.........................
</TABLE>
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23.5 Consent of Kemper Securities, Inc. .....................................
23.6 Consent of Jefferies & Co. .............................................
23.7 Consent of Houlihan, Lokey, Howard & Zukin, Inc. .......................
23.8.1 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Michael Smith.....................................
23.8.2 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Stephen Moses.....................................
23.8.3 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Norman Barker.....................................
23.8.4 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Roger Guillermin..................................
23.8.5 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Birch Bayh........................................
23.8.6 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Vernon Knight.....................................
23.8.7 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Weldon Jolley.....................................
23.8.8 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Jean-Francois Kurz................................
23.8.9 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Thomas Lenagh.....................................
23.8.10 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Charles Manatt....................................
23.8.11 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Milan Panic.......................................
23.8.12 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Roberts A. Smith..................................
23.8.13 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Robert Finch......................................
23.8.14 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Adam Jerney.......................................
23.8.15 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) James Miscoll.....................................
23.8.16 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Alan Charles......................................
23.8.17 Consent of Persons who will become directors of the Registrant (as
required by Rule 438) Richard Starr.....................................
23.9 Consent of M'Liss Jones Kane (included in Exhibit 5)....................
24 Power of Attorney (included elsewhere in this Registration Statement)...
27 Financial Data Schedules for ICN Pharmaceuticals, Inc., for year ended
December 31, 1993 and for the six month period ended June 30, 1994......
27.1 Financial Data Schedule for SPI, for year ended December 31, 1993 and
for the six month period ended June 30, 1994............................
</TABLE>
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27.2 Financial Data Schedule for Viratek, Inc., for year ended December 31,
1993 and for the six month period ended June 30, 1994...................
27.3 Financial Data Schedule for ICN Biomedicals Inc., for year ended
December 31, 1993 and for the six month period ended June 30, 1994......
99.1 Proxy Cards for ICN Pharmaceuticals, Inc................................
99.2 Proxy Cards for SPI Pharmaceuticals, Inc................................
99.3 Proxy Card for Viratek, Inc.............................................
99.4 Proxy Card for ICN Biomedicals, Inc.....................................
</TABLE>

<PAGE> 1

EXHIBIT 3.2

BY-LAWS OF

ICN MERGER CORP

(A DELAWARE CORPORATION)

ARTICLE I

OFFICES

SECTION 1. Registered Office. The registered office of the Corporation
within the State of Delaware shall be in the City of Wilmington, County of New
Castle.

SECTION 2. Other Offices. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.

ARTICLE II

MEETINGS OF STOCKHOLDERS

SECTION 1. Place of Meetings. All meetings of the stockholders for the
election of directors or for any other purpose shall be held at any such place,
either within or without the State of Delaware, as shall be designated from time
to time by the Board of Directors and stated in the notice of meeting or in a
duly executed waiver thereof.

SECTION 2. Annual Meeting. The annual meetings of the stockholders,
commencing with the year 1995, shall be held at such time as shall be designated
from time to time by the Board of Directors and stated in the notice of meeting.
At such annual meeting, the stockholders shall elect, by a plurality vote, a
Board of Directors and transact such other business as may properly be brought
before the meeting.

SECTION 3. Special Meetings. Subject to the rights of the holders of any
class or series of Preferred Stock, special meetings of stockholders, unless
otherwise prescribed by statute, may only be called, at any time, by the Board
of Directors or the Chairman of the Board, if one shall have been elected.

SECTION 4. Notice of Meetings. Except as otherwise expressly required by
statute, written notice of each annual and special meeting of stockholders
stating the date, place and hour of the meeting, and, in the case of a special
meeting, the purpose or purposes for which the meeting is called, shall be given
to each stockholder of record entitled to vote thereat not less than ten nor
more than sixty days before the date of the meeting. Business transacted at any
special meeting of stockholders shall be limited to the purposes stated in the
notice. Notice shall be given personally or by mail and, if by mail, shall be
sent in a postage prepaid envelope, addressed to the stockholder at his address
as it appears on the records of the Corporation. Notice by mail shall be deemed
given at the time when the same shall be deposited in the United States mail,
postage prepaid. Notice of any meeting shall not be required to be given to any
person who attends such meeting, except when such person attends the meeting in
person or by proxy for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened, or who, either before or after the meeting, shall submit a
signed written waiver of notice, in person or by proxy. Neither the business to
be transacted at, nor the purpose of, an annual or special meeting of
stockholders need be specified in any written waiver of notice.

SECTION 5. List of Stockholders. The officer who has charge of the stock
ledger of the Corporation shall prepare and make, at least ten days before each
meeting of stockholders, a complete list of the stockholders entitled to vote at
the meeting, arranged in alphabetical order, showing the address of and the
number of shares registered in the name of each stockholder. Such list shall be
open to the examination of any stockholder, for any purpose germane to the
meeting, during ordinary business hours, for a period of at least ten days prior
to the meeting, either at a place within the city, town or village where the
meeting is to be held,
<PAGE> 2

which place shall be specified in the notice of meeting, or, if not specified,
at the place where the meeting is to be held. The list shall be produced and
kept at the time and place of the meeting during the whole time thereof, and may
be inspected by any stockholder who is present.

SECTION 6. Quorum, Adjournments. The holders of a majority of the voting
power of the issued and outstanding stock of the Corporation entitled to vote
thereat, present in person or represented by proxy, shall constitute a quorum
for the transaction of business at all meetings of stockholders, except as
otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented by proxy at any meeting
of stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented by proxy. At such adjourned meeting at which a
quorum shall be present or represented by proxy, any business may be transacted
which might have been transacted at the meeting as originally called. If the
adjournment is for more than thirty days, or, if after adjournment a new record
date is set, a notice of the adjourned meeting shall be given to each
stockholder of record entitled to vote at the meeting.

SECTION 7. Organization. At each meeting of stockholders, the Chairman of
the Board, if one shall have been elected, or, in his absence or if one shall
not have been elected, the President shall act as chairman of the meeting. The
Secretary or, in his absence or inability to act, the person whom the chairman
of the meeting shall appoint secretary of the meeting shall act as secretary of
the meeting and keep the minutes thereof.

SECTION 8. Order of Business. The order of business at all meetings of the
stockholders shall be as determined by the chairman of the meeting.

SECTION 9. Voting. Except as otherwise provided by statute or the
Certificate of Incorporation, each stockholder of the Corporation shall be
entitled at each meeting of stockholders to one vote for each share of capital
stock of the Corporation standing in his name on the record of stockholders of
the Corporation:

(a) on the date fixed pursuant to the provisions of Section 7 of
Article V of these By-Laws as the record date for the determination of the
stockholders who shall be entitled to notice of and to vote at such
meeting; or

(b) if no such record date shall have been so fixed, then at the close
of business on the day next preceding the day on which notice thereof shall
be given, or, if notice is waived, at the close of business on the date
next preceding the day on which the meeting is held.

Each stockholder entitled to vote at any meeting of stockholders may
authorize another person or persons to act for him by a proxy signed by such
stockholder or his attorney-in-fact, but no proxy shall be voted after three
years from its date, unless the proxy provides for a longer period. Any such
proxy shall be delivered to the secretary of the meeting at or prior to the time
designated in the order of business for so delivering such proxies. When a
quorum is present at any meeting, the vote of the holders of a majority of the
voting power of the issued and outstanding stock of the Corporation entitled to
vote thereon, present in person or represented by proxy, shall decide any
question brought before such meeting, unless the question is one upon which by
express provision of statute or of the Certificate of Incorporation or of these
By-Laws, a different vote is required, in which case such express provision
shall govern and control the decision of such question. Unless required by
statute, or determined by the chairman of the meeting to be advisable, the vote
on any question need not be by ballot. On a vote by ballot, each ballot shall be
signed by the stockholder voting, or by his proxy, if there by such proxy, and
shall state the number of shares voted.

SECTION 10. Inspectors. The Board of Directors may, in advance of any
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If any of the inspectors so appointed shall fail to
appear or act, the chairman of the meeting shall, or if inspectors shall not
have been appointed, the chairman of the meeting may, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the

2
<PAGE> 3

number of shares of capital stock of the Corporation outstanding and the voting
power of each, the number of shares represented at the meeting, the existence of
a quorum, the validity and effect of proxies, and shall receive votes, ballots
or consents, hear and determine all challenges and questions arising in
connection with the right to vote, count and tabulate all votes, ballots or
consents, determine the results, and do such acts as are proper to conduct the
election or vote with fairness to all stockholders. On request of the chairman
of the meeting, the inspectors shall make a report in writing of any challenge,
request or matter determined by them and shall execute a certificate of any fact
found by them. No director or candidate for the office of director shall act as
an inspector of an election of directors. Inspectors need not be stockholders.

SECTION 11. No Action by Consent. Whenever the vote of stockholders at a
meeting thereof is required or permitted to be taken for or in connection with
any corporate action, by any provision of statute or of the Certificate of
Incorporation or of these By-Laws, such vote may be taken only upon the vote of
the stockholders at an annual or special meeting duly called and may not be
taken by written consent of the stockholders.

ARTICLE III

BOARD OF DIRECTORS

SECTION 1. General Powers. The business and affairs of the Corporation
shall be managed by or under the direction of the Board of Directors. The Board
of Directors may exercise all such authority and powers of the Corporation and
do all such lawful acts and things as are not by statute or the Certificate of
Incorporation directed or required to be exercised or done by the stockholders.

SECTION 2. Number, Classes, Qualifications, Election and Term of
Office. The number of directors constituting the initial Board of Directors
shall be three. Thereafter, the number of directors may be fixed, from time to
time, by the affirmative vote of a majority of the entire Board of Directors.
The directors shall be divided into three classes, as nearly equal in number as
reasonably possible, with the term of office of the first class to expire at the
1995 annual meeting of stockholders, the term of office of the second class to
expire at the 1996 annual meeting of stockholders and the term of office of the
third class to expire at the 1997 annual meeting of stockholders. Any decrease
in the number of directors shall be effective at the time of the next succeeding
annual meeting of stockholders unless there shall be vacancies in the Board of
Directors, in which case such decrease may become effective at any time prior to
the next succeeding annual meeting to the extent of the number of such
vacancies. Directors need not be stockholders. Except as otherwise provided by
statute or these By-Laws, at each annual meeting of stockholders following
adoption of these By-Laws, directors shall be elected to succeed those directors
whose terms expire for a term of office to expire at the third succeeding annual
meeting of stockholders after their election. Each director shall hold office
until his successor shall have been elected and qualified, or until his death,
or until he shall have resigned, or have been removed, as hereinafter provided
in these By-Laws.

SECTION 3. Place of Meetings. Meetings of the Board of Directors shall be
held at such place or places, within or without the State of Delaware, as the
Board of Directors may from time to time determine or as shall be specified in
the notice of any such meeting.

SECTION 4. Annual Meeting. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
other time or place (within or without the State of Delaware) as shall be
specified in a notice thereof given as hereinafter provided in Section 7 of this
Article III.

SECTION 5. Regular Meetings. Regular meetings of the Board of Directors
shall be held at such time and place as the Board of Directors may fix. If any
day fixed for a regular meeting shall be a legal holiday at the place where the
meeting is to be held, then the meeting which would otherwise be held on that
day shall be

3
<PAGE> 4

held at the same hour on the next succeeding business day. Notice of regular
meetings of the Board of Directors need not be given except as otherwise
required by statute or these By-Laws.

SECTION 6. Special Meetings. Special meetings of the Board of Directors
may be called by the Chairman of the Board, if one shall have been elected, or
by two or more directors of the Corporation or by the President.

SECTION 7. Notice of Meetings. Notice of each special meeting of the Board
of Directors (and of each regular meeting for which notice shall be required)
shall be given by the Secretary as hereinafter provided in this Section 7, in
which notice shall be stated the time and place of the meeting. Except as
otherwise required by these By-Laws, such notice need not state the purposes of
such meeting. Notice of each such meeting shall be mailed, postage prepaid, to
each director, addressed to him at his residence or usual place of business, by
first class mail, at least two days before the day on which such meeting is to
be held, or shall be sent addressed to him at such place by telegraph, cable,
telex, telecopier or other similar means, or be delivered to him personally or
be given to him by telephone or other similar means, at least twenty-four hours
before the time at which such meeting is to be held. Notice of any such meeting
need not be given to any director who shall, either before or after the meeting,
submit a signed waiver of notice or who shall attend such meeting, except when
he shall attend for the express purpose of objecting, at the beginning of the
meeting, to the transaction of any business because the meeting is not lawfully
called or convened.

SECTION 8. Quorum and Manner of Acting. A majority of the entire Board of
Directors shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, and, except as otherwise expressly required
by statute or the Certificate of Incorporation or these By-Laws, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat
may adjourn such meeting to another time and place. Notice of the time and place
of any such adjourned meeting shall be given to all of the directors unless such
time and place were announced at the meeting at which the adjournment was taken,
in which case such notice shall only be given to the directors who were not
present thereat. At any adjourned meeting at which a quorum is present, any
business may be transacted which might have been transacted at the meeting as
originally called. The directors shall act only as a Board and the individual
directors shall have no power as such.

SECTION 9. Organization. At each meeting of the Board of Directors, the
Chairman of the Board, if one shall have been elected, or, in the absence of the
Chairman of the Board or if one shall not have been elected, the President (or,
in his absence, another director chosen by a majority of the directors present)
shall act as chairman of the meeting and preside thereat. The Secretary or, in
his absence, any person appointed by the chairman shall act as secretary of the
meeting and keep the minutes thereof.

SECTION 10. Resignations. Any director of the Corporation may resign at
any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt. Unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.

SECTION 11. Vacancies. Subject to the rights, if any, of the holders of
any series of Preferred Stock then outstanding, any vacancy in the Board of
Directors, whether arising from death, resignation, removal, an increase in the
number of directors or any other cause, may be filled only by the vote of a
majority of the directors then in office, though less than a quorum, or by the
sole remaining director. Each director so chosen shall hold office for a term
expiring at the annual meeting of stockholders at which the term of office of
the class to which they have been elected expires, or in the case of newly
created directorships, shall hold office until such time as determined by the
directors electing such new director.

SECTION 12. Removal of Directors. Subject to the rights, if any, of the
holders of any class or series of Preferred Stock then outstanding, any director
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least 66 2/3% of the voting power of all
of the then outstanding capital stock of the Corporation entitled to vote at an
election of directors, voting together as a single class.

4
<PAGE> 5

SECTION 13. Compensation. The Board of Directors shall have authority to
fix the compensation, including fees and reimbursement of expenses, of directors
for services to the Corporation in any capacity.

SECTION 14. Committees. The Board of Directors may, by resolution passed
by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
addition, in the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.

Except to the extent restricted by statute or the Certificate of Incorporation,
each such committee, to the extent provided in the resolution creating it, shall
have and may exercise all the powers and authority of the Board of Directors and
may authorize the seal of the Corporation to be affixed to all papers which
require it. Each such committee shall serve at the pleasure of the Board of
Directors and have such name as may be determined from time to time by
resolution adopted by the Board of Directors. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors.

SECTION 15. Action by Consent. Unless restricted by the Certificate of
Incorporation, any action required or permitted to be taken by the Board of
Directors or any committee thereof may be taken without a meeting if all members
of the Board of Directors or such committee, as the case may be, consent thereto
in writing, and the writing or writings are filed with the minutes of the
proceedings of the Board of Directors or such committee, as the case may be.

SECTION 16. Telephonic Meeting. Unless restricted by the Certificate of
incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting.

ARTICLE IV

OFFICERS

SECTION 1. Number and Qualifications. The officers of the Corporation
shall be elected by the Board of Directors and shall include the President, one
or more Vice-Presidents, the Secretary and the Treasurer. If the Board of
Directors wishes, it may also elect as an officer of the Corporation a Chairman
of the Board and may elect other officers (including one or more Assistant
Treasurers and one or more Assistant Secretaries) as may be necessary or
desirable for the business of the Corporation. Any two or more offices may be
held by the same person, and no officer except the Chairman of the Board need be
a director. Each officer shall hold office until his successor shall have been
duly elected and shall have qualified, or until his death, or until he shall
have resigned or have been removed, as hereinafter provided in these By-Laws.

SECTION 2. Resignations. Any officer of the Corporation may resign at any
time by giving written notice of his resignation to the Corporation. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon
receipt. Unless otherwise specified therein, the acceptance of any such
resignation shall not be necessary to make it effective.

SECTION 3. Removal. Any officer of the Corporation may be removed, either
with or without cause, at any time, by the Board of Directors at any meeting
thereof.

SECTION 4. Chairman of the Board. The Chairman of the Board, if one shall
have been elected, shall be a member of the Board, an officer of the Corporation
and, if present, shall preside at each meeting of the Board of Directors or the
stockholders. He shall advise and counsel with the President, and in his absence
with other executives of the Corporation, and shall perform such other duties as
may from time to time be assigned to him by the Board of Directors.

5
<PAGE> 6

SECTION 5. The President. The President shall be the chief executive
officer of the Corporation. He shall, in the absence of the Chairman of the
Board or if a Chairman of the Board shall not have been elected, preside at each
meeting of the Board of Directors or the stockholders. He shall perform all
duties incident to the office of President and chief executive officer and such
other duties as may from time to time be assigned to him by the Board of
Directors.

SECTION 6. Vice-President. Each Vice-President shall perform all such
duties as from time to time may be assigned to him by the Board of Directors or
the President. At the request of the President or in his absence or in the event
of his inability or refusal to act, the Vice-President, or if there shall be
more than one, the Vice-Presidents in the order determined by the Board of
Directors (or if there be no such determination, then the Vice-Presidents in the
order of their election), shall perform the duties of the President, and, when
so acting, shall have the powers of and be subject to the restrictions placed
upon the President in respect of the performance of such duties.

SECTION 7. Treasurer. The Treasurer shall

(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation;

(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;

(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated by the Board of
Directors or pursuant to its direction;

(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;

(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefore;

(f) render to the Board of Directors, whenever the Board of Directors
may require, an account of the financial condition of the Corporation; and

(g) in general, perform all duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the
Board of Directors.

SECTION 8. Secretary. The Secretary shall

(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors and the stockholders;

(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;

(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;

(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and

(e) in general, perform all duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the
Board of Directors.

SECTION 9. The Assistant Treasurer. The Assistant Treasurer, or if there
shall be more than one, the Assistant Treasurers in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Treasurer or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Treasurer and shall perform such other duties as from time to time may be
assigned by the Board of Directors.

6
<PAGE> 7

SECTION 10. The Assistant Secretary. The Assistant Secretary, or if there
be more than one, the Assistant Secretaries in the order determined by the Board
of Directors (or if there be no such determination, then in the order of their
election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.

SECTION 11. Officers' Bonds or Other Security. If required by the Board of
Directors, any officer of the Corporation shall give a bond or other security
for the faithful performance of his duties, in such amount and with such surety
as the Board of Directors may require.

SECTION 12. Compensation. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he is also a director of
the Corporation.

ARTICLE V

STOCK CERTIFICATES AND THEIR TRANSFER

SECTION 1. Stock Certificates. Every holder of stock in the Corporation
shall be entitled to have a certificate, signed by, or in the name of the
Corporation by, the Chairman of the Board or the President or a Vice-President
and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant
Secretary of the Corporation, certifying the number of shares owned by him in
the Corporation. If the Corporation shall be authorized to issue more than one
class of stock or more than one series of any class, the designations,
preferences and relative, participating, optional or other special rights of
each class of stock or series thereof and the qualifications, limitations or
restriction of such preferences and/or rights shall be set forth in full or
summarized on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, provided that, except as
otherwise provided in Section 202 of the General Corporation Law of the State of
Delaware, in lieu of the foregoing requirements, there may be set forth on the
face or back of the certificate which the Corporation shall issue to represent
such class or series of stock, a statement that the Corporation will furnish
without charge to each stockholder who so requests the designations, preferences
and relative, participating, optional or other special rights of each class of
stock or series thereof and the qualifications, limitations or restrictions of
such preferences and/or rights.

SECTION 2. Facsimile Signatures. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or registrar
who has signed or whose facsimile signature has been placed upon a certificate
shall have ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer, transfer agent or registrar at the date of issue.

SECTION 3. Lost Certificates. The Board of Directors may direct a new
certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen, or
destroyed certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct sufficient to indemnify it
against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.

SECTION 4. Transfers of Stock. Upon surrender to the Corporation or the
transfer agent of the Corporation of a certificate for shares duly endorsed or
accompanied by proper evidence of succession, assignment or authority to
transfer, it shall be the duty of the Corporation to issue a new certificate to
the person entitled thereto, cancel the old certificate and record the
transaction upon its records; provided, however, that the Corporation shall be
entitled to recognize and enforce any lawful restriction on transfer. Whenever
any transfer of stock shall be made for collateral security, and not absolutely,
it shall be so expressed in the entry of transfer if, when the certificates are
presented to the Corporation for transfer, both the transferor and the
transferee request the Corporation to do so.

7
<PAGE> 8

SECTION 5. Transfer Agents and Registrars. The Board of Directors may
appoint, or authorize any officer or officers to appoint, one or more transfer
agents and one or more registrars.

SECTION 6. Regulations. The Board of Directors may make such additional
rules and regulations, not inconsistent with these By-Laws, as it may deem
expedient concerning the issue, transfer and registration of certificates for
shares of stock of the Corporation.

SECTION 7. Fixing the Record Date. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of or
to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.

SECTION 8. Registered Stockholders. The Corporation shall be entitled to
recognize the exclusive right of a person registered on its records as the owner
of shares of stock to receive dividends and to vote as such owner, shall be
entitled to hold liable for calls and assessments a person registered on its
records as the owner of shares of stock, and shall not be bound to recognize any
equitable or other claim to or interest in such share or shares of stock on the
part of any other person, whether or not it shall have express or other notice
thereof, except as otherwise provided by the laws of Delaware.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS AND OFFICERS

SECTION 1. General. The Corporation shall indemnify any person who was or
is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding if he acted
in good faith and in a manner he reasonably believed to be in or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, had no reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.

SECTION 2. Derivative Actions. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action or suit by or in the right of the Corporation to
procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection with the defense or settlement of such action or suit if he
acted in good faith and in a manner he reasonably believed to be in or not
opposed to the best interests of the Corporation, provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in

8
<PAGE> 9

view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Court of Chancery or such
other court shall deem proper.

SECTION 3. Indemnification in Certain Cases. To the extent that a
director, officer, employee or agent of the Corporation has been successful on
the merits or otherwise in defense of any action, suit or proceeding referred to
in Sections 1 and 2 of this Article VI, or in defense of any claim, issue or
matter therein, he shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by him in connection therewith.

SECTION 4. Procedure. Any indemnification under Sections 1 and 2 of this
Article VI (unless ordered by a court) shall be made by the Corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in such Sections 1 and 2.
Such determination shall be made (a) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding, or (b) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (c) by the stockholders.

SECTION 5. Advances for Expenses. Expenses incurred in defending a civil
or criminal action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding upon receipt of an
undertaking by or on behalf of the director, officer, employee or agent to repay
such amount if it shall be ultimately determined that he is not entitled to be
indemnified by the Corporation as authorized in this Article VI.

SECTION 6. Rights Not-Exclusive. The indemnification and advancement of
expenses provided by, or granted pursuant to, the other subsections of this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.

SECTION 7. Insurance. The Corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise against any liability
asserted against him and incurred by him in any such capacity, or arising out of
his status as such, whether or not the Corporation would have the power to
indemnify him against such liability under the provisions of this Article VI.

SECTION 8. Definition of Corporation. For the purposes of this Article VI,
references to "the Corporation" include all constituent corporations absorbed in
a consolidation or merger as well as the resulting or surviving corporation so
that any person who is or was a director, officer, employee or agent of such a
constituent corporation or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise shall stand in the same
position under the provisions of this Article VI with respect to the resulting
or surviving corporation as he would if he had served the resulting or surviving
corporation in the same capacity.

SECTION 9. Survival of Rights. The indemnification and advancement of
expenses provided by, or granted pursuant to this Article VI shall continue as
to a person who has ceased to be a director, officer, employee or agent and
shall inure to the benefit of the heirs, executors and administrators of such a
person.

ARTICLE VII

GENERAL PROVISIONS

SECTION 1. Dividends. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of stock of the
Corporation, unless otherwise provided by statute or the Certificate of
Incorporation.

9
<PAGE> 10

SECTION 2. Reserves. Before payment of any dividend, there may be set
aside out of any funds of the Corporation available for dividends such sum or
sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may modify
or abolish any such reserves in the manner in which it was created.

SECTION 3. Seal. The seal of the Corporation shall be in such form as
shall be approved by the Board of Directors.

SECTION 4. Fiscal Year. The fiscal year of the Corporation shall be fixed,
and once fixed, may thereafter be changed, by resolution of the Board of
Directors.

SECTION 5. Checks, Notes, Drafts, Etc. All checks, notes, drafts or other
orders for the payment of money of the Corporation shall be signed, endorsed or
accepted in the name of the Corporation by such officer, officers, person or
persons as from time to time may be designated by the Board of Directors or by
an officer or officers authorized by the Board of Directors to make such
designation.

SECTION 6. Execution of Contracts, Deeds, Etc. The Board of Directors may
authorize any officer or officers, agent or agents, in the name and on behalf of
the Corporation to enter into or execute and deliver any and all deeds, bonds,
mortgages, contracts and other obligations or instruments, and such authority
may be general or confined to specific instances.

SECTION 7. Voting of Stock in Other Corporations. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board or
the President, from time to time, may (or may appoint one or more attorneys or
agents to) cast the votes which the Corporation may be entitled to cast as a
shareholder or otherwise in any other corporation, any of whose shares or
securities may be held by the Corporation, at meetings of the holders of the
shares or other securities of such other corporation. In the event one or more
attorneys or agents are appointed, the Chairman of the Board or the President
may instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent. The Chairman of the Board or the President may, or
may instruct the attorneys or agents appointed to, execute or cause to be
executed in the name and on behalf of the Corporation and under its seal or
otherwise, such written proxies, consents, waivers or other instruments as may
be necessary or proper in the circumstances.

ARTICLE VIII

AMENDMENTS

These By-Laws may be amended or repealed or new by-laws adopted (a) by the
affirmative vote of the holders of not less than 75% of the voting power of all
securities of the Corporation entitled to vote generally in the election of
directors or (b) if the Certificate of Incorporation so provides, by action of
the Board of Directors at a regular or special meeting thereof. Any by-law made
by the Board of Directors may be amended or repealed by action of the
stockholders upon the affirmative vote of the holders of not less than 75% of
the voting power of all securities of the Corporation entitled to vote generally
in the election of directors.

<PAGE> 1

EXHIBIT 4

FORM OF RIGHTS AGREEMENT

----------------------------------------

ICN MERGER CORP.
AND
[ ],
RIGHTS AGENT
RIGHTS AGREEMENT
DATED AS OF , 1994

----------------------------------------
<PAGE> 2

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
Section 1. Certain Definitions........................................................
Section 2. Appointment of Rights Agent................................................
Section 3. Issuance of Right Certificates.............................................
Section 4. Form of Right Certificate..................................................
Section 5. Countersignature and Registration..........................................
Section 6. Transfer, Split-Up, Combination and Exchange of Right Certificates;
Mutilated, Destroyed, Lost or Stolen Right Certificate.....................
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights..............
Section 8. Cancellation and Destruction of Right Certificates.........................
Section 9. Reservation and Availability of Preferred Stock............................
Section 10. Preferred Stock Record Date................................................
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of
Rights.....................................................................
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.................
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power.......
Section 14. Fractional Rights and Fractional Shares....................................
Section 15. Rights of Action...........................................................
Section 16. Agreement of Right Holders.................................................
Section 17. Right Certificate Holder Not Deemed a Stockholder..........................
Section 18. Concerning the Rights Agent................................................
Section 19. Merger or Consolidation or Change of Name of Rights Agent..................
Section 20. Duties of Rights Agent.....................................................
Section 21. Change of Rights Agent.....................................................
Section 22. Issuance of New Right Certificates.........................................
Section 23. Redemption and Termination.................................................
Section 24. Notice of Certain Events...................................................
Section 25. Notices....................................................................
Section 26. Supplements and Amendments.................................................
Section 27. Determination and Actions by the Board of Directors, etc. .................
Section 28. Successors.................................................................
Section 29. Benefits of this Agreement.................................................
Section 30. Severability...............................................................
Section 31. Governing Law..............................................................
Section 32. Counterparts...............................................................
Section 33. Descriptive Headings.......................................................
Signatures.................................................................
Exhibit A -- Relative rights, preferences and limitations of the Series A Participating
Preferred Stock........................................................................
Exhibit B -- Form of Right Certificate...................................................
</TABLE>

i
<PAGE> 3

DEFINED TERM CROSS REFERENCE SHEET

<TABLE>
<S> <C>
Acquiring Person............................................................ Section 1(a)
Act......................................................................... Section 1(b)
Adjustment Shares........................................................... Section 11(a)(ii)
Adjusted Number of Shares................................................... Section 11(a)(iii)
Adjusted Purchase Price..................................................... Section 11(a)(iii)
Affiliate................................................................... Section 1(c)
Agreement................................................................... Preface
Associate................................................................... Section 1(c)
Beneficial Owner............................................................ Section 1(d)
Beneficially Own............................................................ Section 1(d)
Business Day................................................................ Section 1(e)
capital stock equivalent.................................................... Section 11(a)(iii)
close of business........................................................... Section 1(f)
Common Stock................................................................ Section 1(g)
Corporation................................................................. Recitals
current per share market price.............................................. Section 11(d)(i)
Distribution Date........................................................... Section 3(a)
Exchange Act................................................................ Section 1(c)
Final Expiration Date....................................................... Section 7(a)
Permitted Offer............................................................. Section 1(j)
Person...................................................................... Section 1(k)
Preferred Stock............................................................. Section 1(l)
preferred stock equivalents................................................. Section 11(b)
Principal Party............................................................. Section 13(b)
Proration Factor............................................................ Section 11(a)(iii)
Purchase Price.............................................................. Section 4(a)
Redemption Date............................................................. Section 7(a)
Redemption Price............................................................ Section 23
Right....................................................................... Recitals
Right Certificate........................................................... Section 3(a)
Rights Agent................................................................ Recitals
Rights Agreement............................................................ Section 3
Section 11(a)(ii) Event..................................................... Section 11(a)(ii)
Section 13 Event............................................................ Section 13(a)
Security.................................................................... Section 11(d)(i)
Stock Acquisition Date...................................................... Section 1(p)
Subsidiary.................................................................. Section 1(q)
then outstanding............................................................ Section 1(d)(iii)
Trading Day................................................................. Section 11(d)(i)
Triggering Event............................................................ Section 1(r)
voting securities........................................................... Section 13(a)
</TABLE>

ii
<PAGE> 4

RIGHTS AGREEMENT

RIGHTS AGREEMENT, dated as of , 1994 (the "Agreement"), between
ICN MERGER CORP., a Delaware corporation (the "Corporation"), and
[ ], a banking and trust corporation organized under the laws of
[ ] (the "Rights Agent").

The Board of Directors of the Corporation has authorized and declared a
dividend of one preferred stock purchase right (a "Right") for each share of
common stock, par value $.01 per share, of the Corporation (the "Common Stock")
distributed on November , 1994 and for each share of Common Stock issued
between November , 1994 and the earliest of the Distribution Date, the
Redemption Date and the Final Expiration Date (as such terms are hereinafter
defined), each Right representing the right to purchase one one-hundredth of a
share of Preferred Stock (as hereinafter defined), upon the terms and subject to
the conditions herein set forth.

Accordingly, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:

Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:

(a) "Acquiring Person" shall mean any Person who or which, together with
all Affiliates and Associates of such Person, shall be the Beneficial Owner of
15% or more of the then outstanding shares of Common Stock (other than as a
result of a Permitted Offer (as hereinafter defined)) or was such a Beneficial
Owner at any time after the date hereof, whether or not such Person continues to
be the Beneficial Owner of 15% or more of the then outstanding shares of Common
Stock. Notwithstanding the foregoing, (A) the term "Acquiring Person" shall not
include (i) the Corporation, (ii) any Subsidiary of the Corporation, (iii) any
employee benefit plan of the Corporation or of any Subsidiary of the
Corporation, (iv) any Person or entity organized, appointed or established by
the Corporation for or pursuant to the terms of any such plan or (v) any Person
who or which, together with all Affiliates and Associates of such Person,
becomes the Beneficial Owner of 15% or more of the then outstanding shares of
Common Stock as a result of the acquisition of shares of Common Stock directly
from the Corporation and (B) no Person shall be deemed to be an "Acquiring
Person" either (x) as a result of the acquisition of shares of Common Stock by
the Corporation which, by reducing the number of shares of Common Stock
outstanding, increases the proportional number of shares beneficially owned by
such Person; except that if (i) a Person would become an Acquiring Person (but
for the operation of this subclause (x)) as a result of the acquisition of
shares of Common Stock by the Corporation and (ii) after such share acquisition
by the Corporation, such Person becomes the Beneficial Owner of any additional
shares of Common Stock, then such Person shall be deemed an Acquiring Person or
(y) if (i) within 5 days after such Person would otherwise have become an
Acquiring Person (but for the operation of this subclause (y)), such Person
notifies the Board of Directors that such Person did so inadvertently and (ii)
within 2 days after such notification, such Person is the Beneficial Owner of
less than 15% of the outstanding shares of Common Stock.

(b) "Act" shall mean the Securities Act of 1933, as amended and as in
effect on the date of this Agreement.

(c) "Affiliate" and "Associate" shall have the respective meanings ascribed
to such terms in Rule 12b-2 of the General Rules and Regulations under the
Securities Exchange Act of 1934, as amended and in effect on the date of this
Agreement (the "Exchange Act").

(d) A Person shall be deemed the "Beneficial Owner" of and shall be deemed
to "beneficially own" any securities:

(i) which such Person or any of such Person's Affiliates or Associates
beneficially owns, directly or indirectly;

(ii) which such Person or any of such Person's Affiliates or
Associates has: (A) the right to acquire (whether such right is exercisable
immediately or only after the passage of time) pursuant to any agreement,
arrangement or understanding, or upon the exercise of conversion rights,
exchange rights,
<PAGE> 5

rights (other than the Rights), warrants or options, or otherwise;
provided, however, that a Person shall not be deemed the Beneficial Owner
of, or to beneficially own, securities tendered pursuant to a tender or
exchange offer made by or on behalf of such Person or any of such Person's
Affiliates or Associates until such tendered securities are accepted for
purchase or exchange; or (B) the right to vote pursuant to any agreement,
arrangement or understanding; provided, however, that a Person shall not be
deemed the Beneficial Owner of, or to beneficially own, any security if the
agreement, arrangement or understanding to vote such security (1)(x) arises
solely from a revocable proxy or consent given to such Person in response
to a public proxy or consent solicitation made pursuant to, and in
accordance with, the applicable rules and regulations promulgated under the
Exchange Act and (y) is not also then reportable on Schedule 13D under the
Exchange Act (or any comparable or successor report) or (2) arises solely
from actions of such Person which are within the exemption set forth in
paragraph (b)(1) of Rule 14a-2 under the Exchange Act (or any comparable or
successor provision); or

(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (other than customary agreements with and
between underwriters and selling group members with respect to a bona fide
public offering of securities) relating to the acquisition, holding, voting
(except to the extent contemplated by the proviso to Section l(d)(ii)(B))
or disposing of any securities of the Corporation.

Notwithstanding anything in this definition of Beneficial Ownership to the
contrary, the phrase "then outstanding," when used with reference to a Person's
Beneficial Ownership of securities of the Corporation, shall mean the number of
such securities then issued and outstanding together with the number of such
securities not then actually issued and outstanding which such Person would be
deemed to own beneficially hereunder.

(e) "Business Day" shall mean any day other than a Saturday, Sunday or
United States federal holiday.

(f) "close of business" on any given date shall mean 5:00 P.M., New York
time, on such date; provided, however, that if such date is not a Business Day
it shall mean 5:00 P.M., New York time, on the next succeeding Business Day.

(g) "Common Stock" when used with reference to the Corporation shall mean
the shares of Common Stock of the Corporation referred to in the recitals hereof
or, in the event of a subdivision, combination or consolidation with respect to
such shares of Common Stock, the shares of Common Stock resulting from such
subdivision, combination or consolidation. "Common Stock" when used with
reference to any Person other than the Corporation shall mean the capital stock
(or equity interest) with the greatest voting power of such other Person or, if
such other Person is a Subsidiary of another Person, the Person or Persons which
ultimately control such first-mentioned Person.

(h) "Distribution Date" shall have the meaning set forth in Section 3
hereof.

(i) "Final Expiration Date" shall have the meaning set forth in Section 7
hereof.

(j) "Permitted Offer" shall mean a tender or exchange offer which is for
all outstanding shares of Common Stock at a price and on terms determined, prior
to the purchase of shares under such tender or exchange offer, by at least a
majority of the members of the Board of Directors who are not officers of the
Corporation and who are not Acquiring Persons or Affiliates, Associates,
nominees or representatives of an Acquiring Person, to be adequate (taking into
account all factors that such directors deem relevant including, without
limitation, prices that could reasonably be achieved if the Corporation or its
assets were sold on an orderly basis designed to realize maximum value) and
otherwise in the best interests of the Corporation and its stockholders (other
than the Person or any Affiliate or Associate thereof on whose behalf the offer
is being made) taking into account all factors that such directors may deem
relevant.

(k) "Person" shall mean any individual, firm, partnership, corporation,
trust, association, joint venture or other entity, and shall include any
successor (by merger or otherwise) of such entity.

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<PAGE> 6

(l) "Preferred Stock" shall mean the shares of Series A Participating
Preferred Stock, par value $.01 per share, of the Corporation, having the
relative rights, preferences and limitations set forth in the Restated
Certificate of Incorporation of the Corporation.

(m) "Redemption Date" shall have the meaning set forth in Section 7 hereof.

(n) "Section 11(a)(ii) Event" shall mean any event described in Section
11(a)(ii) hereof.

(o) "Section 13 Event" shall mean any event described in clause (x), (y) or
(z) of Section 13(a) hereof.

(p) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to the Exchange Act) by the Corporation or
an Acquiring Person that an Acquiring Person has become such; provided, that, if
such Person is determined not to have become an Acquiring Person pursuant to
Section 1(a)(B)(y) hereof, then no Stock Acquisition Date shall be deemed to
have occurred.

(q) "Subsidiary" of any Person shall mean any corporation or other Person
of which a majority of the voting power of the voting equity securities or
equity interests is owned, directly or indirectly, by such Person.

(r) "Triggering Event" shall mean any Section 11(a)(ii) Event or any
Section 13 Event.

Section 2. Appointment of Rights Agent. The Corporation hereby appoints
the Rights Agent to act as agent for the Corporation and the holders of the
Rights (who, in accordance with Section 3 hereof, shall prior to the
Distribution Date also be the holders of shares of Common Stock) in accordance
with the terms and conditions hereof, and the Rights Agent hereby accepts such
appointment. The Corporation may from time to time appoint such co-Rights Agents
as it may deem necessary or desirable.

Section 3. Issuance of Right Certificates. (a) Until the earlier of (i)
the Stock Acquisition Date or (ii) the close of business on the tenth day (or
such later date as may be determined by action of the Corporation's Board of
Directors) after the date of the commencement by any Person (other than the
Corporation, any Subsidiary of the Corporation, any employee benefit plan of the
Corporation or of any Subsidiary of the Corporation or any Person or entity
organized, appointed or established by the Corporation for or pursuant to the
terms of any such plan) of, or of the first public announcement of the intention
of any Person (other than the Corporation, any Subsidiary of the Corporation,
any employee benefit plan of the Corporation or of any Subsidiary of the
Corporation or any Person or entity organized, appointed or established by the
Corporation for or pursuant to the terms of any such plan) to commence (which
intention to commence remains in effect for five Business Days after such
announcement), a tender or exchange offer the consummation of which would result
in any Person becoming an Acquiring Person (including, in the case of both (i)
and (ii), any such date which is after the date of this Agreement and prior to
the issuance of the Rights), the earlier of such dates being herein referred to
as the "Distribution Date," (x) the Rights will be evidenced by the certificates
for shares of Common Stock registered in the names of the holders thereof (which
certificates shall also be deemed to be Right Certificates) and not by separate
Right Certificates and (y) the right to receive Right Certificates will be
transferable only in connection with the transfer of the underlying shares of
Common Stock (including a transfer to the Corporation); provided, however, that
if a tender offer is terminated prior to the occurrence of a Distribution Date,
then no Distribution Date shall occur as a result of such tender offer. As soon
as practicable after the Distribution Date, the Corporation will prepare and
execute, the Rights Agent will countersign, and the Corporation will send or
cause to be sent by first-class, postage-prepaid mail, to each record holder of
shares of Common Stock as of the close of business on the Distribution Date, at
the address of such holder shown on the records of the Corporation, a Right
Certificate, substantially in the form of Exhibit B hereto (a "Right
Certificate" ), evidencing one Right for each share of Common Stock so held. As
of and after the Distribution Date, the Rights will be evidenced solely by such
Right Certificates.

(b) Certificates for shares of Common Stock which are distributed on
November , 1994 or which become outstanding (including, without limitation,
reacquired shares of Common Stock referred to in the last sentence of this
paragraph (b)) after November , 1994 but prior to the earliest of the
Distribution Date, the

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<PAGE> 7

Redemption Date and the Final Expiration Date, shall be deemed also to be
certificates for Rights, and shall bear the following legend:

This certificate also evidences and entitles the holder
hereof to certain rights as set forth in a Rights Agreement
between ICN Merger Corp. and , as Rights
Agent, dated as of November , 1994 (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference
and a copy of which is on file at the principal executive
offices of ICN Merger Corp. Under certain circumstances, as
set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be
evidenced by this certificate. ICN Merger Corp. will mail to
the holder of this certificate a copy of the Rights Agreement
without charge after receipt of a written request therefor.
Under certain circumstances set forth in the Rights Agreement,
Rights issued to, or held by, any Person who is, was or
becomes an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement) and certain
related persons, whether currently held by or on behalf of
such Person or by any subsequent holder, may become null and
void.

With respect to such certificates containing the foregoing legend, until the
Distribution Date, the Rights associated with the shares of Common Stock
represented by such certificates shall be evidenced by such certificates alone,
and the surrender for transfer of any such certificate shall also constitute the
transfer of the Rights associated with the shares of Common Stock represented
thereby. In the event that the Corporation purchases or acquires any shares of
Common Stock after November , 1994 but prior to the Distribution Date, any
Rights associated with such shares of Common Stock shall be deemed cancelled and
retired so that the Corporation shall not be entitled to exercise any Rights
associated with the shares of Common Stock which are no longer outstanding.

Section 4. Form of Right Certificate. (a) The Right Certificates (and the
forms of election to purchase and of assignment to be printed on the reverse
thereof) shall be substantially in the form set forth in Exhibit B hereto and
may have such marks of identification or designation and such legends, summaries
or endorsements printed thereon as the Corporation may deem appropriate and as
are not inconsistent with the provisions of this Agreement, as may be required
to comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Right Certificates shall
entitle the holders thereof to purchase such number of one-hundredths of a share
of Preferred Stock as shall be set forth therein at the price per one
one-hundredth of a share of Preferred Stock set forth therein (the "Purchase
Price" ), but the amount and type of securities purchasable upon the exercise of
each Right and the Purchase Price thereof shall be subject to adjustment as
provided herein.

(b) Any Right Certificate issued pursuant to Section 3(a) or Section 22
hereof that represents Rights which are null and void pursuant to Section 7(e)
of this Agreement and any Right Certificate issued pursuant to Section 6 or
Section 11 hereof upon transfer, exchange, replacement or adjustment of any
other Right Certificate referred to in this sentence, shall contain (to the
extent feasible) the following legend:

The Rights represented by this Right Certificate are or were
beneficially owned by a Person who was or became an Acquiring
Person or an Affiliate or Associate of an Acquiring Person (as
such terms are defined in the Rights Agreement). Accordingly,
this Right Certificate and the Rights represented hereby are
null and void.

The provisions of Section 7(e) of this Rights Agreement shall be operative
whether or not the foregoing legend is contained on any such Right Certificate.

Section 5. Countersignature and Registration. The Right Certificates
shall be executed on behalf of the Corporation by its Chairman of the Board, its
Chief Executive Officer, its President, any of its Vice Presidents, or its
Treasurer, either manually or by facsimile signature, shall have affixed thereto
the Corporation's seal or a facsimile thereof, and shall be attested by the
Secretary or an Assistant Secretary of the Corporation, either manually or by
facsimile signature. The Right Certificates shall be countersigned by the

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<PAGE> 8

Rights Agent and shall not be valid for any purpose unless so countersigned. In
case any officer of the Corporation who shall have signed any of the Right
Certificates shall cease to be such officer of the Corporation before
countersignature by the Rights Agent and issuance and delivery by the
Corporation, such Right Certificates may nevertheless be countersigned by the
Rights Agent and issued and delivered by the Corporation with the same force and
effect as though the person who signed such Right Certificates had not ceased to
be such officer of the Corporation; and any Right Certificate may be signed on
behalf of the Corporation by any person who, at the actual date of the execution
of such Right Certificate, shall be a proper officer of the Corporation to sign
such Right Certificate, although at the date of the execution of this Rights
Agreement any such person was not such an officer.

Following the Distribution Date, the Rights Agent will keep or cause to be
kept, at its principal office or offices designated as the appropriate place for
surrender or transfer of such Right Certificate, books for registration and
transfer of the Right Certificates issued hereunder. Such books shall show the
names and addresses of the respective holders of the Right Certificates, the
number of Rights evidenced on its face by each of the Right Certificates and the
certificate number and the date of each of the Right Certificates.

Section 6. Transfer, Split-Up, Combination and Exchange of Right
Certificates; Mutilated, Destroyed, Lost or Stolen Right Certificate. Subject
to the provisions of Section 4(b), Section 7(e) and Section 14 hereof, at any
time after the close of business on the Distribution Date, and at or prior to
the close of business on the earlier of the Redemption Date or the Final
Expiration Date, any Right Certificate or Right Certificates may be transferred,
split up, combined or exchanged for another Right Certificate or Right
Certificates, entitling the registered holder to purchase a like number of one
one-hundredths of a share of Preferred Stock (or, following a Triggering Event,
other securities, as the case may be) as the Right Certificate or Right
Certificates surrendered then entitled such holder (or former holder in the case
of a transfer) to purchase. Any registered holder desiring to transfer, split
up, combine or exchange any Right Certificate or Right Certificates shall make
such request in writing delivered to the Rights Agent, and shall surrender the
Right Certificate or Right Certificates to be transferred, split up, combined or
exchanged at the principal office or offices of the Rights Agent designated for
such purpose. Neither the Rights Agent nor the Corporation shall be obligated to
take any action whatsoever with respect to the transfer of any such surrendered
Right Certificate until the registered holder shall have completed and signed
the certificate contained in the form of assignment on the reverse side of such
Right Certificate and shall have provided such additional evidence of the
identity of the Beneficial Owner (or former Beneficial Owner) or Affiliates or
Associates thereof as the Corporation shall reasonably request. Thereupon the
Rights Agent shall, subject to Section 4(b), Section 7(e) and Section 14 hereof,
countersign and deliver to the Person entitled thereto a Right Certificate or
Right Certificates, as the case may be, as so requested. The Corporation may
require payment of a sum sufficient to cover any tax or governmental charge that
may be imposed in connection with any transfer, split up, combination or
exchange of Right Certificates.

Upon receipt by the Corporation and the Rights Agent of evidence reasonably
satisfactory to them of the loss, theft, destruction or mutilation of a Right
Certificate, and, in case of loss, theft or destruction, of indemnity or
security reasonably satisfactory to them, and, at the Corporation's request,
reimbursement to the Corporation and the Rights Agent of all reasonable expenses
incidental thereto, and upon surrender to the Rights Agent and cancellation of
the Right Certificate if mutilated, the Corporation will make and deliver a new
Right Certificate of like tenor to the Rights Agent for countersignature and
delivery to the registered holder in lieu of the Right Certificate so lost,
stolen, destroyed or mutilated.

Section 7. Exercise of Rights; Purchase Price; Expiration Date of
Rights. (a) Subject to Section 7(e) hereof, the registered holder of any Right
Certificate may exercise the Rights evidenced thereby (except as otherwise
provided herein) in whole or in part at any time after the Distribution Date
upon surrender of the Right Certificate, with the form of election to purchase
and the certificate on the reverse side thereof duly executed, to the Rights
Agent at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price for the total
number of one one-hundredths of a share of Preferred Stock (or other securities,
as the case may be) as to which such surrendered Rights are exercised, at or
prior to the earliest of (i) the close of business on November 1, 2004 (the
"Final Expiration

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<PAGE> 9

Date" ) and (ii) the time at which the Rights are redeemed as provided in
Section 23 hereof (the "Redemption Date" ).

(b) The Purchase Price for each one one-hundredth of a share of Preferred
Stock pursuant to the exercise of a Right shall initially be $125, shall be
subject to adjustment from time to time as provided in the next sentence and in
Sections 11 and 13(a) hereof and shall be payable in accordance with paragraph
(c) below. Anything in this Agreement to the contrary notwithstanding, in the
event that at any time after the date of this Agreement and prior to the
Distribution Date, the Corporation shall (i) declare or pay any dividend on the
Common Stock payable in shares of Common Stock or (ii) effect a subdivision,
combination or consolidation of the Common Stock (by reclassification or
otherwise than by payment of dividends in shares of Common Stock) into a greater
or lesser number of shares of Common Stock, then in any such case, each share of
Common Stock outstanding following such subdivision, combination or
consolidation shall continue to have a Right associated therewith and the
Purchase Price following any such event shall be proportionately adjusted to
equal the result obtained by multiplying the Purchase Price immediately prior to
such event by a fraction the numerator of which shall be the total number of
shares of Common Stock outstanding immediately prior to the occurrence of the
event and the denominator of which shall be the total number of shares of Common
Stock outstanding immediately following the occurrence of such event. The
adjustment provided for in the preceding sentence shall be made successively
whenever such a dividend is declared or paid or such a subdivision, combination
or consolidation is effected.

(c) Upon receipt of a Right Certificate representing exercisable Rights,
with the form of election to purchase and the certificate duly executed,
accompanied by payment of the Purchase Price for the shares of Preferred Stock
(or other securities, as the case may be) to be purchased and an amount equal to
any applicable transfer tax required to be paid by the holder of such Right
Certificate in accordance with Section 6 hereof by certified check, cashier's
check or money order payable to the order of the Corporation, the Rights Agent
shall thereupon promptly (i) (A) requisition from any transfer agent of the
shares of Preferred Stock certificates for the number of shares of Preferred
Stock to be purchased and the Corporation hereby irrevocably authorizes its
transfer agent to comply with all such requests, or (B) if the Corporation, in
its sole discretion, shall have elected to deposit the shares of Preferred Stock
issuable upon exercise of the Rights hereunder into a depositary, requisition
from the depositary agent depositary receipts representing such number of one
one-hundredths of a share of Preferred Stock as are to be purchased (in which
case certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Corporation will direct the depositary agent to comply with such requests, (ii)
when appropriate, requisition from the Corporation the amount of cash to be paid
in lieu of issuance of fractional shares in accordance with Section 14 hereof,
(iii) after receipt of such certificates or depositary receipts, cause the same
to be delivered to or upon the order of the registered holder of such Right
Certificate, registered in such name or names as may be designated by such
holder and (iv) when appropriate, after receipt thereof, deliver such cash to or
upon the order of the registered holder of such Right Certificate. In the event
that the Corporation is obligated to issue other securities (including Common
Stock) of the Corporation pursuant to Section 11(a) hereof, the Corporation will
make all arrangements necessary so that such other securities are available for
distribution by the Rights Agent, if and when appropriate.

In addition, in the case of an exercise of the Rights by a holder pursuant
to Section 11(a)(ii), the Rights Agent shall return such Right Certificate to
the registered holder thereof after imprinting, stamping or otherwise indicating
thereon that the rights represented by such Right Certificate no longer include
the rights provided by Section 11(a)(ii) of the Rights Agreement and if less
than all the Rights represented by such Right Certificate were so exercised, the
Rights Agent shall indicate on the Right Certificate the number of Rights
represented thereby which continue to include the rights provided by Section
11(a)(ii).

(d) In case the registered holder of any Right Certificate shall exercise
less than all the Rights evidenced thereby, a new Right Certificate evidencing
Rights equivalent to the Rights remaining unexercised shall be issued by the
Rights Agent to the registered holder of such Right Certificate or to his duly
authorized assigns, subject to the provisions of Section 14 hereof, or the
Rights Agent shall place an appropriate notation on the Right Certificate with
respect to those Rights exercised.

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<PAGE> 10

(e) Notwithstanding anything in this Agreement to the contrary, from and
after the first occurrence of a Section 11(a)(ii) Event, any Rights beneficially
owned by (i) an Acquiring Person or an Affiliate or Associate of an Acquiring
Person, (ii) a transferee of an Acquiring Person (or of any Affiliate or
Associate thereof) who becomes a transferee after the Acquiring Person becomes
such or (iii) a transferee of an Acquiring Person (or of any Affiliate or
Associate thereof) who becomes a transferee prior to or concurrently with the
Acquiring Person becoming such and receives such Rights pursuant to either (A) a
transfer (whether or not for consideration) from the Acquiring Person to holders
of equity interests in such Acquiring Person or to any Person with whom the
Acquiring Person has a continuing agreement, arrangement or understanding
regarding the transferred Rights or (B) a transfer which the Board of Directors
of the Corporation has determined is part of a plan, arrangement or
understanding which has as a primary purpose or effect the avoidance of this
Section 7(e), shall become null and void without any further action and no
holder of such Rights shall have any rights whatsoever with respect to such
Rights, whether under any provision of this Agreement or otherwise. The
Corporation shall use all reasonable efforts to insure that the provisions of
this Section 7(e) and Section 4(b) hereof are complied with, but shall have no
liability to any holder of Right Certificates or other Person as a result of its
failure to make any determinations with respect to an Acquiring Person or its
Affiliates, Associates or transferees hereunder.

(f) Notwithstanding anything in this Agreement to the contrary, neither the
Rights Agent nor the Corporation shall be obligated to undertake any action with
respect to a registered holder upon the occurrence of any purported exercise as
set forth in this Section 7 unless such registered holder shall have (i)
completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Right Certificate surrendered for
such exercise and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Corporation shall reasonably request.

Section 8. Cancellation and Destruction of Right Certificates. All Right
Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Corporation or to any of
its agents, be delivered to the Rights Agent for cancellation or in cancelled
form, or, if surrendered to the Rights Agent, shall be cancelled by it, and no
Right Certificates shall be issued in lieu thereof except as expressly permitted
by any of the provisions of this Agreement. The Corporation shall deliver to the
Rights Agent for cancellation and retirement, and the Rights Agent shall so
cancel and retire, any other Right Certificate purchased or acquired by the
Corporation otherwise than upon the exercise thereof. The Rights Agent shall
deliver all cancelled Right Certificates to the Corporation, or shall, at the
written request of the Corporation, destroy such cancelled Right Certificates,
and in such case shall deliver a certificate of destruction thereof to the
Corporation.

Section 9. Reservation and Availability of Preferred Stock. The
Corporation covenants and agrees that at all times prior to the occurrence of a
Section 11(a)(ii) Event it will cause to be reserved and kept available out of
its authorized and unissued shares of Preferred Stock, or any authorized and
issued shares of Preferred Stock held in its treasury, the number of shares of
Preferred Stock that will be sufficient to permit the exercise in full of all
outstanding Rights and, after the occurrence of a Section 11(a)(ii) Event,
shall, to the extent reasonably practicable, so reserve and keep available a
sufficient number of shares of Common Stock (and/or other securities) which may
be required to permit the exercise in full of the Rights pursuant to this
Agreement.

So long as the shares of Preferred Stock (and, after the occurrence of a
Section 11(a)(ii) Event, Common Stock or any other securities) issuable upon the
exercise of the Rights may be listed on any national securities exchange, the
Corporation shall use its best efforts to cause, from and after such time as the
Rights become exercisable, all shares reserved for such issuance to be listed on
such exchange upon official notice of issuance upon such exercise.

The Corporation covenants and agrees that it will take all such action as
may be necessary to ensure that all shares of Preferred Stock (or Common Stock
and/or other securities, as the case may be) delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares or other
securities (subject to

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<PAGE> 11

payment of the Purchase Price), be duly and validly authorized and issued and
fully paid and non-assessable shares or securities.

The Corporation further covenants and agrees that it will pay when due and
payable any and all United States federal and state transfer taxes and charges
which may be payable in respect of the issuance or delivery of the Right
Certificates or of any shares of Preferred Stock (or Common Stock and/or other
securities, as the case may be) upon the exercise of Rights. The Corporation
shall not, however, be required to pay any transfer tax which may be payable in
respect of any transfer or delivery of Right Certificates to a person other
than, or the issuance or delivery of certificates or depositary receipts for the
shares of Preferred Stock (or Common Stock and/or other securities, as the case
may be) in a name other than that of, the registered holder of the Right
Certificate evidencing Rights surrendered for exercise, or to issue or to
deliver any certificates or depositary receipts for shares of Preferred Stock
(or Common Stock and/or other securities, as the case may be) upon the exercise
of any Rights, until any such tax shall have been paid (any such tax being
payable by the holder of such Right Certificate at the time of surrender) or
until it has been established to the Corporation's reasonable satisfaction that
no such tax is due.

The Corporation shall use its best efforts to (i) file, as soon as
practicable following the Stock Acquisition Date, a registration statement under
the Act, with respect to the securities purchasable upon exercise of the Rights
on an appropriate form, (ii) cause such registration statement to become
effective as soon as practicable after such filing and (iii) cause such
registration statement to remain effective (with a prospectus at all times
meeting the requirements of the Act and the rules and regulations thereunder)
until the date of the expiration of the rights provided by Section 11(a)(ii).
The Corporation shall also take such action as may be appropriate under the blue
sky laws of the various states.

Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for shares of Preferred Stock (or Common Stock and/or other
securities, as the case may be) is issued upon the exercise of Rights shall for
all purposes be deemed to have become the holder of record of the shares of
Preferred Stock (or Common Stock and/or other securities, as the case may be)
represented thereby on, and such certificate shall be dated, the date upon which
the Right Certificate evidencing such Rights was duly surrendered and payment of
the Purchase Price (and any applicable transfer taxes) was made; provided,
however, that, if the date of such surrender and payment is a date upon which
the Preferred Stock (or Common Stock and/or other securities, as the case may
be) transfer books of the Corporation are closed, such person shall be deemed to
have become the record holder of such shares on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the
Corporation are open.

Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.

(a) (i) In the event the Corporation shall at any time after the date of
this Agreement (A) declare a dividend on the shares of Preferred Stock payable
in Preferred Stock, (B) subdivide the outstanding shares of Preferred Stock, (C)
combine the outstanding shares of Preferred Stock into a smaller number of
shares of Preferred Stock or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Corporation is the
continuing or surviving corporation), except as otherwise provided in this
Section 11(a) and Section 7(e) hereof, the Purchase Price in effect at the time
of the record date for such dividend or of the effective date of such
subdivision, combination or reclassification, and the number and kind of shares
of capital stock issuable on such date, shall be proportionately adjusted so
that the holder of any Right exercised after such time shall be entitled to
receive the aggregate number and kind of shares of capital stock which, if such
Right had been exercised immediately prior to such date and at a time when the
Preferred Stock transfer books of the Corporation were open, such holder would
have owned upon such exercise and been entitled to receive by virtue of such
dividend, subdivision, combination or reclassification; provided, however, that
in no event shall the consideration to be paid upon the exercise of one Right be
less than the aggregate par value of the shares of capital stock of the
Corporation issuable upon exercise of one Right. If an event occurs which would
require

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<PAGE> 12

an adjustment under both Section 11(a)(i) and Section 11(a)(ii), the adjustment
provided for in this Section 11(a)(i) shall be in addition to, and shall be made
prior to, any adjustment required pursuant to Section 11(a)(ii).

(ii) In the event any Person, alone or together with its Affiliates and
Associates, shall become an Acquiring Person, then proper provision shall be
made so that each holder of a Right (except as provided below and in Section
7(e) hereof) shall, for a period of 60 days after the later of the occurrence of
any such event or the effective date of an appropriate registration statement
under the Act pursuant to Section 9 hereof, have a right to receive, upon
exercise thereof at a price equal to the then current Purchase Price, in
accordance with the terms of this Agreement, such number of shares of Common
Stock (or, in the discretion of the Board of Directors, one one-hundredths of a
share of Preferred Stock) as shall equal the result obtained by (x) multiplying
the then current Purchase Price by the then number of one one-hundredths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
the first occurrence of a Section 11(a)(ii) Event and dividing that product by
(y) 50% of the then current per share market price of the Corporation's Common
Stock (determined pursuant to Section 11(d) hereof) on the date of such first
occurrence (such number of shares being referred to as the "Adjustment
Shares" ); provided, however, that if the transaction that would otherwise give
rise to the foregoing adjustment is also subject to the provisions of Section 13
hereof, then only the provisions of Section 13 hereof shall apply and no
adjustment shall be made pursuant to this Section 11(a)(ii);

(iii) In the event that there shall not be sufficient treasury shares or
authorized but unissued (and unreserved) shares of Common Stock to permit the
exercise in full of the Rights in accordance with the foregoing subparagraph
(ii) and the Rights become so exercisable (and the Board has determined to make
the Rights exercisable into fractions of a share of Preferred Stock),
notwithstanding any other provision of this Agreement, to the extent necessary
and permitted by applicable law, each Right shall thereafter represent the right
to receive, upon exercise thereof at the then current Purchase Price in
accordance with the terms of this Agreement, (x) a number of (or fractions of)
shares of Common Stock (up to the maximum number of shares of Common Stock which
may permissibly be issued) and (y) one one-hundredths of a share of Preferred
Stock or a number of, or fractions of other equity securities of the Corporation
(or, in the discretion of the Board of Directors, debt) which the Board of
Directors of the Corporation has determined to have the same aggregate current
market value (determined pursuant to Section 11(d)(i) and (ii) hereof, to the
extent applicable) as one share of Common Stock (such number of shares of, or
fractions of a share of, Preferred Stock, debt, or other equity securities or
debt of the Corporation being referred to as a "capital stock equivalent" ),
equal in the aggregate to the number of Adjustment Shares; provided, however, if
sufficient shares of Common Stock and/or capital stock equivalents are
unavailable, then the Corporation shall, to the extent permitted by applicable
law, take all such action as may be necessary to authorize additional shares of
Common Stock or capital stock equivalents for issuance upon exercise of the
Rights, including the calling of a meeting of stockholders; and provided,
further, that if the Corporation is unable to cause sufficient shares of Common
Stock and/or capital stock equivalents to be available for issuance upon
exercise in full of the Rights, then each Right shall thereafter represent the
right to receive the Adjusted Number of Shares upon exercise at the Adjusted
Purchase Price (as such terms are hereinafter defined). As used herein, the term
"Adjusted Number of Shares" shall mean that number of shares (or fractions of
shares) of Common Stock (and/or capital stock equivalents) equal to the product
of (x) the number of Adjustment Shares and (y) a fraction, the numerator of
which is the number of shares of Common Stock (and/or capital stock equivalents)
available for issuance upon exercise of the Rights and the denominator of which
is the aggregate number of Adjustment Shares otherwise issuable upon exercise in
full of all Rights (assuming there were a sufficient number of shares of Common
Stock available) (such fraction being referred to as the "Proration Factor" ).

The "Adjusted Purchase Price" shall mean the product of the Purchase Price
and the Proration Factor. The Board of Directors may, but shall not be required
to, establish procedures to allocate the right to receive shares of Common Stock
and capital stock equivalents upon exercise of the Rights among holders of
Rights.

(b) In case the Corporation shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of shares of
Preferred Stock entitling them (for a period expiring within 45 calendar days
after such record date) to subscribe for or purchase shares of Preferred Stock
(or shares

9
<PAGE> 13

having the same rights, privileges and preferences as the Preferred Stock
("preferred stock equivalents" )) or securities convertible into shares of
Preferred Stock or preferred stock equivalents at a price per share of Preferred
Stock or preferred stock equivalent (or having a conversion price per share, if
a security convertible into shares of Preferred Stock or preferred stock
equivalents) less than the then current per share market price of the Preferred
Stock (as determined pursuant to Section 11(d) hereof) on such record date, the
Purchase Price to be in effect after such record date shall be determined by
multiplying the Purchase Price in effect immediately prior to such record date
by a fraction, the numerator of which shall be the number of shares of Preferred
Stock outstanding on such record date plus the number of shares of Preferred
Stock which the aggregate offering price of the total number of shares of
Preferred Stock and/or preferred stock equivalents so to be offered (and/or the
aggregate initial conversion price of the convertible securities so to be
offered) would purchase at such current per share market price, and the
denominator of which shall be the number of shares of Preferred Stock
outstanding on such record date plus the number of additional shares of
Preferred Stock and/or preferred stock equivalents to be offered for
subscription or purchase (or into which the convertible securities so to be
offered are initially convertible); provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation issuable
upon exercise of one Right. In case such subscription price may be paid in a
consideration part or all of which shall be in a form other than cash, the value
of such consideration shall be determined in good faith by the Board of
Directors of the Corporation, whose determination shall be described in a
statement filed with the Rights Agent and shall be binding on the Rights Agent.
Shares of Preferred Stock owned by or held for the account of the Corporation
shall not be deemed outstanding for the purpose of any such computation. Such
adjustment shall be made successively whenever such a record date is fixed; and
in the event that such rights, options or warrants are not so issued, the
Purchase Price shall be adjusted to be the Purchase Price which would then be in
effect if such record date had not been fixed.

(c) In case the Corporation shall fix a record date for the making of a
distribution to all holders of shares of Preferred Stock (including any such
distribution made in connection with a consolidation or merger in which the
Corporation is the continuing or surviving corporation) of evidences of
indebtedness or assets (other than a regular quarterly cash dividend or a
dividend payable in shares of Preferred Stock) or subscription rights or
warrants (excluding those referred to in Section 11(b) hereof), the Purchase
Price to be in effect after such record date shall be determined by multiplying
the Purchase Price in effect immediately prior to such record date by a
fraction, the numerator of which shall be the then current per share market
price (as determined pursuant to Section 11(d) hereof) of the Preferred Stock on
such record date, less the fair market value (as determined in good faith by the
Board of Directors of the Corporation, whose determination shall be described in
a statement filed with the Rights Agent and shall be binding on the Rights
Agent) of the portion of the assets or evidences of indebtedness so to be
distributed or of such subscription rights or warrants applicable to one share
of Preferred Stock and the denominator of which shall be such current per share
market price of the Preferred Stock; provided, however, that in no event shall
the consideration to be paid upon the exercise of one Right be less than the
aggregate par value of the shares of capital stock of the Corporation to be
issued upon exercise of one Right. Such adjustments shall be made successively
whenever such a record date is fixed; and in the event that such distribution is
not so made, the Purchase Price shall again be adjusted to be the Purchase Price
which would then be in effect if such record date had not been fixed.

(d) (i) For the purpose of any computation hereunder, the "current per
share market price" of any security (a "Security" for the purpose of this
Section 11(d)(i)) on any date shall be deemed to be the average of the daily
closing prices per share of such Security for the thirty (30) consecutive
Trading Days (as such term is hereinafter defined) immediately prior to such
date; provided, however, that in the event that the current per share market
price of the Security is determined during a period following the announcement
by the issuer of such Security of (A) a dividend or distribution on such
Security payable in shares of such Security or securities convertible into such
shares or (B) any subdivision, combination or reclassification of such Security
and prior to the expiration of thirty (30) Trading Days after the ex-dividend
date for such dividend or distribution or the record date for such subdivision,
combination or reclassification, then, and in each such case, the current per
share market price shall be appropriately adjusted to reflect the current market
price per share equivalent of such Security. The closing price for each day
shall be the last sale price, regular

10
<PAGE> 14

way, or, in case no such sale takes place on such day, the average of the
closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Security
is not listed or admitted to trading on the New York Stock Exchange, as reported
in the principal consolidated transaction reporting system with respect to
securities listed on the principal national securities exchange on which the
Security is listed or admitted to trading or, if the Security is not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by the National Association of Securities
Dealers, Inc. Automated Quotations System ("NASDAQ" ) or such other system then
in use, or, if on any such date the Security is not quoted by any such
organization, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Security selected by the Board
of Directors of the Corporation. If on any such date no such market maker is
making a market in the Security, the fair value of the Security on such date as
determined in good faith by the Board of Directors of the Corporation shall be
used. The term "Trading Day" shall mean a day on which the principal national
securities exchange on which the Security is listed or admitted to trading is
open for the transaction of business or, if the Security is not listed or
admitted to trading on any national securities exchange, a Business Day.

(ii) For the purpose of any computation hereunder, the "current per share
market price" of the Preferred Stock shall be determined in accordance with the
method set forth in Section 11(d)(i). If the shares of Preferred Stock are not
publicly traded, the "current per share market price" of the Preferred Stock
shall be conclusively deemed to be the current per share market price of the
shares of Common Stock as determined pursuant to Section 11(d)(i) (appropriately
adjusted to reflect any stock split, stock dividend or similar transaction
occurring after the date hereof), multiplied by one hundred. If neither the
Common Stock nor the Preferred Stock is publicly held or so listed or traded,
"current per share market price" shall mean the fair value per share as
determined in good faith by the Board of Directors of the Corporation, whose
determination shall be described in a statement filed with the Rights Agent and
shall be binding on the Rights Agent.

(e) Anything herein to the contrary notwithstanding, no adjustment in the
Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least 1% in the Purchase Price; provided, however,
that any adjustments which by reason of this Section 11(e) are not required to
be made shall be carried forward and taken into account in any subsequent
adjustment. All calculations under this Section 11 shall be made to the nearest
cent or to the nearest one one-hundredth of a share of Preferred Stock or one
ten-thousandth of any other share or security, as the case may be.
Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment or
(ii) the Final Expiration Date.

(f) If as a result of an adjustment made pursuant to Section 11(a)(ii) or
Section 13(a) hereof, the holder of any Right thereafter exercised shall become
entitled to receive any shares of capital stock of the Corporation other than
Preferred Stock, thereafter the number of other shares so receivable upon
exercise of any Right shall be subject to adjustment from time to time in a
manner and on terms as nearly equivalent as practicable to the provisions with
respect to the Preferred Stock contained in Section 11(a) through (c),
inclusive, and the provisions of Sections 7, 9, 10, 13 and 14 with respect to
the Preferred Stock shall apply on like terms to any such other shares.

(g) All Rights originally issued by the Corporation subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-hundredths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.

(h) The Corporation may elect on or after the date of any adjustment of the
Purchase Price to adjust the number of Rights, in lieu of any adjustment in the
number of one one-hundredths of a share of Preferred Stock purchasable upon the
exercise of a Right. Each of the Rights outstanding after such adjustment of the
number of Rights shall be exercisable for the number of one one-hundredths of a
share of Preferred Stock for which a Right was exercisable immediately prior to
such adjustment. Each Right held of record prior to such

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<PAGE> 15

adjustment of the number of Rights shall become that number of Rights
(calculated to the nearest one ten-thousandth) obtained by dividing the Purchase
Price in effect immediately prior to adjustment of the Purchase Price by the
Purchase Price in effect immediately after adjustment of the Purchase Price. The
Corporation shall make a public announcement of its election to adjust the
number of Rights, indicating the record date for the adjustment, and, if known
at the time, the amount of the adjustment to be made. This record date may be
the date on which the Purchase Price is adjusted or any day thereafter, but, if
the Right Certificates have been issued, shall be at least ten (10) days later
than the date of the public announcement. If Right Certificates have been
issued, upon each adjustment of the number of Rights pursuant to this Section
11(h), the Corporation shall, as promptly as practicable, cause to be
distributed to holders of record of Right Certificates on such record date Right
Certificates evidencing, subject to Section 14 hereof, the additional Rights to
which such holders shall be entitled as a result of such adjustment, or, at the
option of the Corporation, shall cause to be distributed to such holders of
record in substitution and replacement for the Right Certificates held by such
holders prior to the date of adjustment, and upon surrender thereof, if required
by the Corporation, new Right Certificates evidencing all the Rights to which
such holders shall be entitled after such adjustment. Right Certificates so to
be distributed shall be issued, executed and countersigned in the manner
provided for herein and shall be registered in the names of the holders of
record of Right Certificates on the record date specified in the public
announcement.

(i) Irrespective of any adjustment or change in the Purchase Price or the
number of one one-hundredths of a share of Preferred Stock issuable upon the
exercise of the Rights, the Right Certificates theretofore and thereafter issued
may continue to express the Purchase Price and the number of one one-hundredths
of a share of Preferred Stock which were expressed in the initial Right
Certificates issued hereunder.

(j) Before taking any action that would cause an adjustment reducing the
Purchase Price below the then par value, if any, of the number of one
one-hundredths of a share of Preferred Stock, shares of Common Stock or other
securities issuable upon exercise of the Rights, the Corporation shall take any
corporate action which may, in the opinion of its counsel, be necessary in order
that the Corporation may validly and legally issue such number of fully paid and
non-assessable one one-hundredths of a share of Preferred Stock, shares of
Common Stock or other securities at such adjusted Purchase Price.

(k) In any case in which this Section 11 shall require that an adjustment
in the Purchase Price be made effective as of a record date for a specified
event, the Corporation may elect to defer until the occurrence of such event the
issuance to the holder of any Right exercised after such record date the shares
of Preferred Stock, Common Stock or other securities of the Corporation, if any,
issuable upon such exercise over and above the shares of Preferred Stock, Common
Stock or other securities of the Corporation, if any, issuable upon exercise on
the basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Corporation shall deliver to such holder a due bill or other
appropriate instrument evidencing such holder's right to receive such additional
shares upon the occurrence of the event requiring such adjustment.

(l) Anything in this Section 11 to the contrary notwithstanding, the
Corporation shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that it in its sole discretion shall determine to be advisable in
order that (i) any consolidation or subdivision of the Preferred Stock, (ii)
issuance wholly for cash of Preferred Stock at less than the current market
price, (iii) issuance wholly for cash of Preferred Stock or securities which by
their terms are convertible into or exchangeable for Preferred Stock, (iv) stock
dividend or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Corporation to holders of its Preferred Stock
shall not be taxable to such stockholders.

(m) The Corporation covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Corporation in a transaction which does not violate Section
11(n) hereof), (ii) merge with or into any other Person (other than a Subsidiary
of the Corporation in a transaction which does not violate Section 11(n) hereof)
or (iii) sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction, or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Corporation and
its Subsidiaries (taken as a whole) to any other Person or Persons (other than
the Corporation and/or any of its Subsidiaries in one or

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<PAGE> 16

more transactions each of which does not violate Section 11(n) hereof), if (x)
at the time of or immediately after such consolidation, merger, sale or transfer
there are any charter or by-law provisions or any rights, warrants or other
instruments or securities outstanding or agreements in effect or other actions
taken, which would materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights or (y) prior to, simultaneously with or
immediately after such consolidation, merger or sale, the stockholders of the
Person who constitutes, or would constitute, the "Principal Party" for purposes
of Section 13(a) hereof shall have received a distribution of Rights previously
owned by such Person or any of its Affiliates and Associates. The Corporation
shall not consummate any such consolidation, merger, sale or transfer unless
prior thereto the Corporation and such other Person shall have executed and
delivered to the Rights Agent a supplemental agreement evidencing compliance
with this Section 11(m).

(n) The Corporation covenants and agrees that, after the Distribution Date,
it will not, except as permitted by Section 23 or Section 26 hereof, take (or
permit any Subsidiary to take) any action the purpose of which is to, or if at
the time such action is taken it is reasonably foreseeable that the effect of
such action is to, materially diminish or otherwise eliminate the benefits
intended to be afforded by the Rights.

(o) The exercise of Rights under Section 11(a)(ii) shall only result in the
loss of rights under Section 11(a)(ii) to the extent so exercised and shall not
otherwise affect the rights represented by the Rights under this Agreement,
including the rights represented by Section 13.

Section 12. Certificate of Adjusted Purchase Price or Number of
Shares. Whenever an adjustment is made as provided in Sections 11 or 13 hereof,
the Corporation shall promptly (a) prepare a certificate setting forth such
adjustment, and a brief statement of the facts accounting for such adjustment,
(b) file with the Rights Agent and with each transfer agent for the Common Stock
and the Preferred Stock a copy of such certificate and (c) mail a brief summary
thereof to each holder of a Right Certificate in accordance with Section 25
hereof. The Rights Agent shall be fully protected in relying on any such
certificate and on any adjustment therein contained and shall not be deemed to
have knowledge of such adjustment unless and until it shall have received such
certificate.

Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power. (a) In the event that, on or following the Stock Acquisition Date,
directly or indirectly, (x) the Corporation shall consolidate with, or merge
with and into, any Person, (y) the Corporation shall consolidate with, or merge
with, any Person, and the Corporation shall be the continuing or surviving
corporation of such consolidation or merger (other than, in a case of any
transaction described in (x) or (y), a merger or consolidation which would
result in all of the securities generally entitled to vote in the election of
directors ("voting securities" ) of the Corporation outstanding immediately
prior thereto, continuing to represent (either by remaining outstanding or by
being converted into securities of the surviving entity) all of the voting
securities of the Corporation or such surviving entity outstanding immediately
after such merger or consolidation and the holders of such securities not having
changed as a result of such merger or consolidation) or (z) the Corporation
shall sell or otherwise transfer (or one or more of its Subsidiaries shall sell
or otherwise transfer), in one transaction or a series of related transactions,
assets or earning power aggregating more than 50% of the assets or earning power
of the Corporation and its Subsidiaries (taken as a whole) to any Person, then,
and in each such case (except as provided in Section 13(d) hereof), proper
provision shall be made so that (i) each holder of a Right, except as provided
in Section 7(e) hereof, shall thereafter have the right to receive, upon the
exercise thereof at a price equal to the then current Purchase Price, in
accordance with the terms of this Agreement and in lieu of shares of Preferred
Stock, such number of freely tradeable shares of Common Stock of the Principal
Party (as hereinafter defined), not subject to any liens, encumbrances, rights
of first refusal or other adverse claims, as shall equal the result obtained by
(A) multiplying the then current Purchase Price by the number of one
one-hundredths of a share of Preferred Stock for which a Right is then
exercisable (without taking into account any adjustment previously made pursuant
to Section 11(a)(ii)) and dividing that product by (B) 50% of the then current
per share market price of the Common Stock of such Principal Party (determined
pursuant to Section 11(d) hereof) on the date of consummation of such Section 13
Event; (ii) such Principal Party shall thereafter be liable for, and shall
assume, by virtue of such Section 13 Event, all the obligations and duties of
the Corporation pursuant to this Agreement; (iii) the term "Corporation" shall
thereafter be deemed to refer to such Principal Party, it being specifically
intended that the provisions of

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<PAGE> 17

Section 11 hereof shall apply only to such Principal Party following the first
occurrence of a Section 13 Event; and (iv) such Principal Party shall take such
steps (including, but not limited to, the reservation of a sufficient number of
shares of its Common Stock) in connection with the consummation of any such
transaction as may be necessary to assure that the provisions hereof shall
thereafter be applicable, as nearly as reasonably may be, in relation to the
shares of Common Stock thereafter deliverable upon the exercise of the Rights.

(b) "Principal Party" shall mean

(i) in the case of any transaction described in clause (x) or (y) of the
first sentence of Section 13(a), the Person that is the issuer of any securities
into which shares of Common Stock of the Corporation are converted in such
merger or consolidation, and if no securities are so issued, the Person that is
the other party to such merger or consolidation (including, if applicable, the
Corporation if it is the surviving corporation); and

(ii) in the case of any transaction described in clause (z) of the first
sentence of Section 13(a), the Person that is the party receiving the greatest
portion of the assets or earning power transferred pursuant to such transaction
or transactions; provided, however, that in any of the foregoing cases, (1) if
the shares of Common Stock of such Person are not at such time and have not been
continuously over the preceding twelve (12) month period registered under
Section 12 of the Exchange Act and such Person is a direct or indirect
Subsidiary of another Person the shares of Common Stock of which are and have
been so registered, "Principal Party" shall refer to such other Person; (2) in
case such Person is a Subsidiary, directly or indirectly, of more than one
Person, the shares of Common Stock of two or more of which are and have been so
registered, "Principal Party" shall refer to whichever of such Persons is the
issuer of the shares of Common Stock having the greatest aggregate market value;
and (3) in case such Person is owned, directly or indirectly, by a joint venture
formed by two or more Persons that are not owned, directly or indirectly, by the
same Person, the rules set forth in (1) and (2) above shall apply to each of the
chains of ownership having an interest in such joint venture as if such party
were a "Subsidiary" of both or all of such joint venturers and the Principal
Parties in each such chain shall bear the obligations set forth in this Section
13 in the same ratio as their direct or indirect interests in such Person bear
to the total of such interests.

(c) The Corporation shall not consummate any such consolidation, merger,
sale or transfer unless the Principal Party shall have a sufficient number of
shares of its authorized Common Stock which have not been issued or reserved for
issuance to permit the exercise in full of the Rights in accordance with this
Section 13 and unless prior thereto the Corporation and such Principal Party
shall have executed and delivered to the Rights Agent a supplemental agreement
providing for the terms set forth in paragraphs (a) and (b) of this Section 13
and further providing that, as soon as practicable after the date of any
consolidation, merger, sale or transfer mentioned in paragraph (a) of this
Section 13, the Principal Party at its own expense shall:

(i) prepare and file a registration statement under the Act with
respect to the Rights and the securities purchasable upon exercise of the
Rights on an appropriate form and use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after
such filing and (B) remain effective (with a prospectus at all times
meeting the requirements of the Act) until the Final Expiration Date;

(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under the blue sky laws
of such jurisdictions as may be necessary or appropriate; and

(iii) deliver to holders of the Rights historical financial statements
for the Principal Party which comply in all respects with the requirements
for registration on Form 10 under the Exchange Act.

The provisions of this Section 13 shall similarly apply to successive
mergers or consolidations or sales or other transfers. The rights under this
Section 13 shall be in addition to the rights to exercise Rights and adjustments
under Section 11(a)(ii) and shall survive any exercise thereof.

(d) Notwithstanding anything in this Agreement to the contrary, Section 13
shall not be applicable to a transaction described in subparagraphs (x) and (y)
of Section 13(a) if: (i) such transaction is consummated with a Person or
Persons who acquired shares of Common Stock pursuant to a Permitted Offer (or a
wholly

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<PAGE> 18

owned Subsidiary of any such Person or Persons); (ii) the price per share of
Common Stock offered in such transaction is not less than the price per share of
Common Stock paid to all holders of shares of Common Stock whose shares were
purchased pursuant to such Permitted Offer; and (iii) the form of consideration
offered in such transaction is the same as the form of consideration paid
pursuant to such Permitted Offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.

Section 14. Fractional Rights and Fractional Shares. (a) The Corporation
shall not be required to issue fractions of Rights or to distribute Right
Certificates which evidence fractional Rights. In lieu of such fractional
Rights, there shall be paid to the registered holders of the Right Certificates
with regard to which such fractional Rights would otherwise be issuable, an
amount in cash equal to the same fraction of the current market value of a whole
Right. For the purposes of this Section 14(a), the current market value of a
whole Right shall be the closing price of the Rights for the Trading Day
immediately prior to the date on which such fractional Rights would have been
otherwise issuable. The closing price for any day shall be the last sale price,
regular way, or, in case no such sale takes place on such day, the average of
the closing bid and asked prices, regular way, in either case as reported in the
principal consolidated transaction reporting system with respect to securities
listed or admitted to trading on the New York Stock Exchange or, if the Rights
are not listed or admitted to trading on the New York Stock Exchange, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
Rights are listed or admitted to trading or, if the Rights are not listed or
admitted to trading on any national securities exchange, the last quoted price
or, if not so quoted, the average of the high bid and low asked prices in the
over-the-counter market, as reported by NASDAQ or such other system then in use
or, if on any such date the Rights are not quoted by any such organization, the
average of the closing bid and asked prices as furnished by a professional
market maker making a market in the Rights selected by the Board of Directors of
the Corporation. If on any such date no such market maker is making a market in
the Rights, the fair value of the Rights on such date as determined in good
faith by the Board of Directors of the Corporation shall be used.

(b) The Corporation shall not be required to issue fractions of a share of
Preferred Stock (other than fractions which are one one-hundredth or integral
multiples of one one-hundredth of a share of Preferred Stock) upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Preferred Stock (other than fractions which are one one-hundredth or integral
multiples of one one-hundredth of a share of Preferred Stock). Fractions of a
share of Preferred Stock in integral multiples of one one-hundredth of a share
of Preferred Stock may, at the election of the Corporation, be evidenced by
depositary receipts, pursuant to an appropriate agreement between the
Corporation and a depositary selected by it; provided that such agreement shall
provide that the holders of such depositary receipts shall have the rights,
privileges and preferences to which they are entitled as beneficial owners of
the shares of Preferred Stock represented by such depositary receipts. In lieu
of fractional shares of Preferred Stock that are not one one-hundredth or
integral multiples of one one-hundredth of a share of Preferred Stock, the
Corporation shall pay to the registered holders of Right Certificates at the
time such Rights are exercised as herein provided an amount in cash equal to the
same fraction of the current market value of one share of Preferred Stock. For
the purposes of this Section 14(b), the current market value of a share of
Preferred Stock shall be the closing price of a share of Preferred Stock (as
determined pursuant to Section 11(d)(ii) hereof) for the Trading Day immediately
prior to the date of such exercise.

(c) Following the occurrence of one of the transactions or events specified
in Section 11 giving rise to the right to receive shares of Common Stock,
capital stock equivalents (other than Preferred Stock) or other securities upon
the exercise of a Right, the Corporation shall not be required to issue
fractions of shares or units of such Common Stock, capital stock equivalents or
other securities upon exercise of the Rights or to distribute certificates which
evidence fractions of such Common Stock, capital stock equivalents or other
securities. In lieu of fractional shares or units of such Common Stock, capital
stock equivalents or other securities, the Corporation may pay to the registered
holders of Right Certificates at the time such Rights are exercised as herein
provided an amount in cash equal to the same fraction of the current market
value of a share or unit of such Common Stock, capital stock equivalents or
other securities. For purposes of this

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<PAGE> 19

Section 14(c), the current market value shall be determined in the manner set
forth in Section 11(d) hereof for the Trading Day immediately prior to the date
of such exercise and, if such capital stock equivalent is not traded, each such
capital stock equivalent shall have the value of one one-hundredth of a share of
Preferred Stock.

(d) The holder of a Right by the acceptance of the Right expressly waives
his right to receive any fractional Right or any fractional share upon exercise
of a Right (except as provided above).

Section 15. Rights of Action. All rights of action in respect of this
Agreement, excepting the rights of action given to the Rights Agent under
Section 18 hereof, are vested in the respective registered holders of the Right
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Right Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Right Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Corporation to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Right Certificate in the manner provided
in such Right Certificate and in this Agreement. Without limiting the foregoing
or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and will be entitled to specific performance of
the obligations under, and injunctive relief against actual or threatened
violations of the obligations of any Person subject to, this Agreement.

Section 16. Agreement of Right Holders. Every holder of a Right, by
accepting the same, consents and agrees with the Corporation and the Rights
Agent and with every other holder of a Right that:

(a) prior to the Distribution Date, the Rights will be transferable only in
connection with the transfer of the Common Stock;

(b) after the Distribution Date, the Right Certificates are transferable
only on the registry books of the Rights Agent if surrendered at the principal
office or offices of the Rights Agent designated for such purpose, duly endorsed
or accompanied by a proper instrument of transfer and with the appropriate form
fully executed;

(c) subject to Section 6 and Section 7(f) hereof, the Corporation and the
Rights Agent may deem and treat the person in whose name the Right Certificate
(or, prior to the Distribution Date, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby
(notwithstanding any notations of ownership or writing on the Right Certificate
or the associated Common Stock certificate made by anyone other than the
Corporation or the Rights Agent) for all purposes whatsoever, and neither the
Corporation nor the Rights Agent, subject to the last sentence of Section 7(e)
hereof, shall be bound by any notice to the contrary; and

(d) notwithstanding anything in this Agreement to the contrary, neither the
Corporation nor the Rights Agent shall have any liability to any holder of a
Right or a beneficial interest in a Right or other Person as a result of its
inability to perform any of its obligations under this Agreement by reason of
any preliminary or permanent injunction or other order, decree or ruling issued
by a court of competent jurisdiction or by a governmental, regulatory or
administrative agency or commission, or any statute, rule, regulation or
executive order promulgated or enacted by any governmental authority,
prohibiting or otherwise restraining performance of such obligation; provided,
however, that the Corporation shall use its best efforts to have any such order,
decree or ruling lifted or otherwise overturned as soon as possible.

Section 17. Right Certificate Holder Not Deemed a Stockholder. No holder,
as such, of any Right Certificate shall be entitled to vote, receive dividends
or be deemed for any purpose the holder of the shares of Preferred Stock or any
other securities of the Corporation which may at any time be issuable on the
exercise of the Rights represented thereby, nor shall anything contained herein
or in any Right Certificate be construed to confer upon the holder of any Right
Certificate, as such, any of the rights of a stockholder of the Corporation or
any right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in Section 24 hereof), or to receive dividends
or other distributions

16
<PAGE> 20

or to exercise any preemptive or subscription rights, or otherwise, until the
Right or Rights evidenced by such Right Certificate shall have been exercised in
accordance with the provisions hereof.

Section 18. Concerning the Rights Agent. The Corporation agrees to pay to
the Rights Agent reasonable compensation for all services rendered by it
hereunder and, from time to time, on demand of the Rights Agent, its reasonable
expenses and counsel fees and other disbursements incurred in the administration
and execution of this Agreement and the exercise and performance of its duties
hereunder. The Corporation also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises. The indemnity provided
for herein shall survive the expiration of the Rights and the termination of
this Agreement.

The Rights Agent shall be protected and shall incur no liability for, or in
respect of, any action taken, suffered or omitted by it in connection with, its
administration of this Agreement in reliance upon any Right Certificate or
certificate for shares of Common Stock or for other securities of the
Corporation, instrument of assignment or transfer, power of attorney,
endorsement, affidavit, letter, notice, direction, consent, certificate,
statement or other paper or document believed by it to be genuine and to be
signed, executed and, where necessary, verified or acknowledged, by the proper
Person or Persons.

Section 19. Merger or Consolidation or Change of Name of Rights
Agent. Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the Rights Agent or any
successor Rights Agent shall be a party, or any corporation succeeding to the
stock transfer or all or substantially all of the corporate trust business of
the Rights Agent or any successor Rights Agent, shall be the successor to the
Rights Agent under this Agreement without the execution or filing of any paper
or any further act on the part of any of the parties hereto, provided that such
corporation would be eligible for appointment as a successor Rights Agent under
the provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Right
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Right Certificates so countersigned; and in case at that time any
of the Right Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Right Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Right Certificates shall have the full force provided in the Right
Certificates and in this Agreement.

In case at any time the name of the Rights Agent shall be changed and at
such time any of the Right Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Right Certificates so countersigned; and in case at that time any of
the Right Certificates shall not have been countersigned, the Rights Agent may
countersign such Right Certificates either in its prior name or in its changed
name; and in all such cases such Right Certificates shall have the full force
provided in the Right Certificates and in this Agreement.

Section 20. Duties of Rights Agent. The Rights Agent undertakes only
those duties and obligations imposed by this Agreement upon the following terms
and conditions, by all of which the Corporation and the holders of Right
Certificates, by their acceptance thereof, shall be bound:

(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Corporation), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.

(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of an Acquiring Person and the
determination of the current market price of any Security) be proved or
established by the Corporation prior to taking or suffering any action
hereunder, such fact or matter (unless other evidence in respect thereof be
herein specifically prescribed) may be deemed to be conclusively proved and
established by a certificate signed by any one of the Chairman of the Board, the
Chief Executive Officer, the President, any

17
<PAGE> 21

Vice President, the Treasurer or the Secretary of the Corporation and delivered
to the Rights Agent; and such certificate shall be full authorization to the
Rights Agent for any action taken or suffered in good faith by it under the
provisions of this Agreement in reliance upon such certificate.

(d) The Rights Agent shall not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the Right
Certificates (except its countersignature on such Right Certificates) or be
required to verify the same, but all such statements and recitals are and shall
be deemed to have been made by the Corporation only.

(e) The Rights Agent shall not be under any responsibility in respect of
the validity of this Agreement or the execution and delivery hereof (except the
due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Right Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Corporation of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 7(e) hereof) or any adjustment required
under the provisions of Section 11 or Section 13 hereof or responsible for the
manner, method or amount of any such adjustment or the ascertaining of the
existence of facts that would require any such adjustment (except with respect
to the exercise of Rights evidenced by Right Certificates after receipt of the
certificate described in Section 12 hereof); nor shall it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any shares of Preferred Stock or Common Stock to be issued
pursuant to this Agreement or any Right Certificate or as to whether any shares
of Preferred Stock or Common Stock will, when issued, be validly authorized and
issued, fully paid and non-assessable.

(f) The Corporation agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.

(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
one of the Chairman of the Board, the Chief Executive Officer, the President,
any Vice President, the Treasurer or the Secretary of the Corporation, and to
apply to such officers for advice or instructions in connection with its duties,
and shall not be liable for any action taken or suffered by it in good faith or
lack of action in accordance with instructions of any such officer or for any
delay in acting while waiting for those instructions. Any application by the
Rights Agent for written instructions from the Corporation may, at the option of
the Rights Agent, set forth in writing any action proposed to be taken or
omitted by the Rights Agent under this Agreement and the date on or after which
such action shall be taken or such omission shall be effective. The Rights Agent
shall not be liable for any action taken by, or omission of, the Rights Agent in
accordance with a proposal included in any such application on or after the date
specified in such application (which date shall not be less than five Business
Days after the date any officer of the Corporation actually receives such
application, unless any such officer shall have consented in writing to an
earlier date) unless, prior to taking any such action (or the effective date in
the case of an omission), the Rights Agent shall have received written
instructions in response to such application specifying the action to be taken
or omitted.

(h) The Rights Agent and any stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in any of the Rights or other securities
of the Corporation or become pecuniarily interested in any transaction in which
the Corporation may be interested, or contract with or lend money to the
Corporation or otherwise act as fully and freely as though it were not Rights
Agent under this Agreement. Nothing herein shall preclude the Rights Agent from
acting in any other capacity for the Corporation or for any other legal entity.

(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent shall not be

18
<PAGE> 22

answerable or accountable for any act, default, neglect or misconduct of any
such attorneys or agents or for any loss to the Corporation resulting from any
such act, default, neglect or misconduct, provided reasonable care was exercised
in the selection and continued employment thereof.

(j) No provision of this Agreement shall require the Rights Agent to expend
or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.

(k) If, with respect to any Rights Certificate surrendered to the Rights
Agent for exercise or transfer, the certificate attached to the form of
assignment or form of election to purchase, as the case may be, has not been
completed, the Rights Agent shall not take any further action with respect to
such requested exercise or transfer without first consulting with the
Corporation.

Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Corporation and to each
transfer agent of the Common Stock or Preferred Stock by registered or certified
mail, and to the holders of the Right Certificates by first-class mail. The
Corporation may remove the Rights Agent or any successor Rights Agent upon sixty
(60) days' notice in writing, mailed to the Rights Agent or successor Rights
Agent, as the case may be, and to each transfer agent of the Common Stock or
Preferred Stock by registered or certified mail, and to holders of the Right
Certificates by first-class mail. If the Rights Agent shall resign or be removed
or shall otherwise become incapable of acting, the Corporation shall appoint a
successor to the Rights Agent. If the Corporation shall fail to make such
appointment within a period of sixty (60) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of a
Right Certificate (who shall, with such notice, submit his Right Certificate for
inspection by the Corporation), then the registered holder of any Right
Certificate may apply to any court of competent jurisdiction for the appointment
of a new Rights Agent. Any successor Rights Agent, whether appointed by the
Corporation or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of any state of the United
States so long as such corporation is in good standing and is authorized under
such laws to exercise corporate trust or stock transfer powers and is subject to
supervision or examination by federal or state authority and has at the time of
its appointment as Rights Agent a combined capital and surplus of at least
$100,000,000. After appointment, the successor Rights Agent shall be vested with
the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment the Corporation shall file
notice thereof in writing with the predecessor Rights Agent and each transfer
agent of the Common Stock or Preferred Stock, and mail a notice thereof in
writing to the registered holders of the Right Certificates. Failure to give any
notice provided for in this Section 21, however, or any defect therein, shall
not affect the legality or validity of the resignation or removal of the Rights
Agent or the appointment of the successor Rights Agent, as the case may be.

Section 22. Issuance of New Right Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the
Corporation may, at its option, issue new Right Certificates evidencing Rights
in such form as may be approved by its Board of Directors to reflect any
adjustment or change in the Purchase Price and the number or kind or class of
shares or other securities or property purchasable under the Right Certificates
made in accordance with the provisions of this Agreement.

In addition, in connection with the issuance or sale of shares of Common
Stock following the Distribution Date and prior to the earlier of the Redemption
Date and the Final Expiration Date, the Corporation (a) shall with respect to
shares of Common Stock so issued or sold pursuant to the exercise of stock
options or under any employee plan or arrangement, or upon the exercise,
conversion or exchange of securities, notes or debentures issued by the
Corporation and (b) may, in any other case, if deemed necessary or appropriate
by the Board of Directors of the Corporation, issue Right Certificates
representing the appropriate number of Rights in connection with such issuance
or sale; provided, however, that (i) the Corporation shall not be

19
<PAGE> 23

obligated to issue any such Right Certificates if, and to the extent that, the
Corporation shall be advised by counsel that such issuance would create a
significant risk of material adverse tax consequences to the Corporation or the
Person to whom such Right Certificate would be issued and (ii) no Right
Certificate shall be issued if, and to the extent that, appropriate adjustment
shall otherwise have been made in lieu of the issuance thereof.

Section 23. Redemption and Termination.

(a) (i) The Board of Directors of the Corporation may, at its option,
redeem all but not less than all the then outstanding Rights at a redemption
price of $.01 per Right, as such amount may be appropriately adjusted to reflect
any stock split, stock dividend or similar transaction occurring after the date
hereof (such redemption price being hereinafter referred to as the "Redemption
Price"), at any time prior to the earlier of (x) the occurrence of a Section
11(a)(ii) Event or (y) the Final Expiration Date.

(ii) In addition, the Board of Directors of the Corporation may, at its
option, at any time following the occurrence of a Section 11(a)(ii) Event and
the expiration of any period during which the holder of Rights may exercise the
rights under Section 11(a)(ii) but prior to any Section 13 Event redeem all but
not less than all of the then outstanding Rights at the Redemption Price (x) in
connection with any merger, consolidation or sale or other transfer (in one
transaction or in a series of related transactions) of assets or earning power
aggregating 50% or more of the earning power of the Corporation and its
subsidiaries (taken as a whole) in which all holders of shares of Common Stock
are treated alike and not involving (other than as a holder of shares of Common
Stock being treated like all other such holders) an Interested Stockholder or
(y)(aa) if and for so long as the Acquiring Person is not thereafter the
Beneficial Owner of 15% of the shares of Common Stock and (bb) at the time of
redemption no other Persons are Acquiring Persons.

(b) In the case of a redemption permitted under Section 23(a)(i),
immediately upon the date for redemption set forth (or determined in the manner
specified in) in a resolution of the Board of Directors of the Corporation
ordering the redemption of the Rights, evidence of which shall have been filed
with the Rights Agent, and without any further action and without any notice,
the right to exercise the Rights shall terminate and the only right thereafter
of the holders of Rights shall be to receive the Redemption Price for each Right
so held. In the case of a redemption permitted only under Section 23(a)(ii),
evidence of which shall have been filed with the Rights Agent, the right to
exercise the Rights will terminate and represent only the right to receive the
Redemption Price upon the later of ten Business Days following the giving of
such notice or the expiration of any period during which the rights under
Section 11(a)(ii) may be exercised. The Corporation shall promptly give public
notice of any such redemption; provided, however, that the failure to give, or
any defect in, any such notice shall not affect the validity of such redemption.
Within ten (10) days after such date for redemption set forth in a resolution of
the Board of Directors ordering the redemption of the Rights, the Corporation
shall mail a notice of redemption to all the holders of the then outstanding
Rights at their last addresses as they appear upon the registry books of the
Rights Agent or, prior to the Distribution Date, on the registry books of the
transfer agent for the Common Stock. Any notice which is mailed in the manner
herein provided shall be deemed given, whether or not the holder receives the
notice. Each such notice of redemption will state the method by which the
payment of the Redemption Price will be made. Neither the Corporation nor any of
its Affiliates or Associates may redeem, acquire or purchase for value any
Rights at any time in any manner other than that specifically set forth in this
Section 23 and other than in connection with the purchase of shares of Common
Stock prior to the Distribution Date.

(c) The Corporation may, at its option, discharge all of its obligations
with respect to the Rights by (i) issuing a press release announcing the manner
of redemption of the Rights in accordance with this Agreement and (ii) mailing
payment of the Redemption Price to the registered holders of the Rights at their
last addresses as they appear on the registry books of the Rights Agent or,
prior to the Distribution Date, on the registry books of the Transfer Agent of
the Common Stock, and upon such action, all outstanding Rights and Right
Certificates shall be null and void without any further action by the
Corporation.

Section 24. Notice of Certain Events. (a) In case the Corporation shall
propose (i) to pay any dividend payable in stock of any class to the holders of
shares of its Preferred Stock or to make any other distribution to the holders
of shares of its Preferred Stock (other than a regularly quarterly cash
dividend),

20
<PAGE> 24

(ii) to offer to the holders of shares of its Preferred Stock rights or warrants
to subscribe for or to purchase any additional shares of Preferred Stock or
shares of stock of any class or any other securities, rights or options, (iii)
to effect any reclassification of its Preferred Stock (other than a
reclassification involving only the subdivision of outstanding shares of
Preferred Stock), (iv) to effect any consolidation or merger into or with any
other Person (other than a Subsidiary of the Corporation in a transaction which
does not violate Section 11(n) hereof) or to effect any sale or other transfer
(or to permit one or more of its Subsidiaries to effect any sale or other
transfer) in one or more transactions, of 50% or more of the assets or earning
power of the Corporation and its Subsidiaries (taken as a whole) to any other
Person or Persons (other than the Corporation and/or any of its Subsidiaries in
one or more transactions each of which does not violate Section 11(n) hereof) or
(v) to effect the liquidation, dissolution or winding up of the Corporation,
then, in each such case, the Corporation shall give to each holder of a Right
Certificate, in accordance with Section 25 hereof, a notice of such proposed
action to the extent feasible and file a certificate with the Rights Agent to
that effect, which shall specify the record date for the purposes of such stock
dividend, or distribution of rights or warrants, or the date on which such
reclassification, consolidation, merger, sale, transfer, liquidation,
dissolution, or winding up is to take place and the date of participation
therein by the holders of shares of Preferred Stock, if any such date is to be
fixed, and such notice shall be so given in the case of any action covered by
clause (i) or (ii) above at least twenty (20) days prior to the record date for
determining holders of the shares of Preferred Stock for purposes of such
action, and in the case of any such other action, at least twenty (20) days
prior to the date of the taking of such proposed action or the date of
participation therein by the holders of the shares of Preferred Stock, whichever
shall be the earlier.

(b) In case of a Section 11(a)(ii) Event, then (i) the Corporation shall as
soon as practicable thereafter give to each holder of a Right Certificate, in
accordance with Section 25 hereof, a notice of the occurrence of such event,
which notice shall describe such event and the consequences of such event to
holders of Rights under Section 11(a)(ii) hereof and (ii) all references in the
preceding paragraph (a) to shares of Preferred Stock shall be deemed thereafter
to refer also to Common Stock and/or, if appropriate, other securities of the
Corporation.

Section 25. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Right Certificate
to or on the Corporation shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Rights Agent) as follows:

ICN Merger Corp.
3300 Hyland Avenue
Costa Mesa, CA
Attention: Milan Panic

Subject to the provisions of Section 21 hereof, any notice or demand
authorized by this Agreement to be given or made by the Corporation or by the
holder of any Right Certificate to or on the Rights Agent shall be sufficiently
given or made if sent by first-class mail, postage prepaid, addressed (until
another address is filed in writing with the Corporation) as follows:

[Rights Agent]
[Address]
Attention:

Notices or demands authorized by this Agreement to be given or made by the
Corporation or the Rights Agent to the holder of any Right Certificate or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock shall be sufficiently given or made if sent by
first-class mail, postage prepaid, addressed to such holder at the address of
such holder as shown on the registry books of the Corporation.

Section 26. Supplements and Amendments. Prior to the Distribution Date,
the Corporation and the Rights Agent shall, if the Corporation so directs,
supplement or amend any provision of this Agreement without the approval of any
holders of certificates representing shares of Common Stock. From and after the

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<PAGE> 25

Distribution Date, the Corporation and the Rights Agent shall, if the
Corporation so directs, supplement or amend this Agreement without the approval
of any holders of Right Certificates in order (i) to cure any ambiguity, (ii) to
correct or supplement any provision contained herein which may be defective or
inconsistent with any other provisions herein, (iii) to shorten or lengthen any
time period hereunder or (iv) to change or supplement the provisions hereunder
in any manner which the Corporation may deem necessary or desirable and which
shall not adversely affect the interests of the holders of Right Certificates
(other than an Acquiring Person or an Affiliate or Associate of an Acquiring
Person); provided, however, that this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights. Upon the delivery of a certificate from an
appropriate officer of the Corporation which states that the proposed supplement
or amendment is in compliance with the terms of this Section 26, the Rights
Agent shall execute such supplement or amendment, provided that such supplement
or amendment does not adversely affect the rights or obligations of the Rights
Agent under Section 18 or Section 20 of this Agreement. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of shares of Common Stock.

Section 27. Determination and Actions by the Board of Directors, etc. The
Board of Directors of the Corporation shall have the exclusive power and
authority to administer this Agreement and to exercise all rights and powers
specifically granted to the Board or the Corporation, or as may be necessary or
advisable in the administration of this Agreement, including, without
limitation, the right and power to (i) interpret the provisions of this
Agreement and (ii) make all determinations deemed necessary or advisable for the
administration of this Agreement (including, without limitation, a determination
to redeem or not redeem the Rights or to amend the Agreement and whether any
proposed amendment adversely affects the interests of the holders of Right
Certificates). For all purposes of this Agreement, any calculation of the number
of shares of Common Stock or other securities outstanding at any particular
time, including for purposes of determining the particular percentage of such
outstanding shares of Common Stock or any other securities of which any Person
is the Beneficial Owner, shall be made in accordance with the last sentence of
Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the Exchange Act
as in effect on the date of this Agreement. All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Corporation,
the Rights Agent, the holders of the Right Certificates and all other parties
and (y) not subject the Board to any liability to the holders of the Right
Certificates.

Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Corporation or the Rights Agent shall
bind and inure to the benefit of their respective successors and assigns
hereunder.

Section 29. Benefits of this Agreement. Nothing in this Agreement shall
be construed to give to any person or corporation other than the Corporation,
the Rights Agent and the registered holders of the Right Certificates (and,
prior to the Distribution Date, the shares of Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Corporation, the Rights Agent and
the registered holders of the Right Certificates (and, prior to the Distribution
Date, the shares of Common Stock).

Section 30. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.

Section 31. Governing Law. This Agreement, each Right and each Right
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.

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<PAGE> 26

Section 32. Counterparts. This Agreement may be executed in counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.

Section 33. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.

IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and attested, all as of the date and year first above written.

ICN MERGER CORP.

Attest:

By By
------------------------------------------- ----------------------------------------
Name: Name:
Title: Title:

[Insert name of Rights Agent]
Attest:

By By
------------------------------------------- ----------------------------------------
Name: Name:
Title: Title:
</TABLE>

<PAGE> 1

EXHIBIT 5

September 28, 1994

SPI Pharmaceuticals, Inc.
3300 Hyland Avenue
Costa Mesa, California 92626

Re: Registration Statement on Form S-4, Registration No. 33-
Registering up to 30,000,000 Shares of Common Stock, par value
$.01 per share,
of ICN Merger Corp. (the "Registration Statement")

Ladies and Gentlemen:

I am General Counsel for SPI Pharmaceuticals, Inc., a Delaware corporation,
and have been involved with the registration in the Securities Act of 1933, as
amended (the "Act"), by ICN Merger Corp., a Delaware corporation (the
"Company"), of an aggregate of up to 30,000,000 shares of the common stock, par
value $.01 per share, of the Company (the "Common Stock") being offered to
stockholders of ICN Pharmaceuticals, Inc., a Delaware corporation, SPI
Pharmaceuticals, Inc., a Delaware corporation, Viratek, Inc., a Delaware
corporation, and ICN Biomedicals, Inc., a Delaware corporation (collectively,
the "Merging Companies").

In connection with the offering of the Common Stock, I have examined
originals or copies submitted to me that I have assumed are genuine, accurate,
and complete, of all such corporate records of the Company, agreements and other
instruments, certificates of public officials, officers, and representatives of
the Company, and other documents I have deemed necessary or appropriate to
require as the basis for the opinion hereinafter expressed.

Based and relying solely upon the foregoing, assuming all of the common
stock of the Merging Companies is validly issued, fully paid, and nonassessable,
it is my opinion that when the 30,000,000 shares of the Common Stock, or any
portion thereof, are issued as described in the Registration Statement, such
shares will be validly issued, fully paid, and nonassessable.

This opinion may be filed as an exhibit to the Registration Statement.
Consent is also given to the reference to me under the caption "Legal Matters"
in the Joint Proxy Statement and Prospectus included in the Registration
Statement as having passed upon the validity of the issuance of the Common
Stock. In giving this consent, I do not thereby admit that I come within the
category of persons whose consent is required under Section 7 of the Act or
rules and regulations of the Securities and Exchange Commission promulgated
thereunder.

Respectfully submitted,

By: /s/ M'LISS JONES KANE
------------------------------------
M'Liss Jones Kane

<PAGE> 1

EXHIBIT 8

September 27, 1994

(202) 639-7073

ICN Merger Corp.
3300 Hyland Avenue
Costa Mesa, California 92626

Re: Federal Income Tax Consequences of Merger of ICN
Pharmaceuticals, Inc.,
SPI Pharmaceuticals, Inc. and Viratek, Inc. into ICN
Merger Corp. and the
Merger of ICN Biomedicals, Inc. into ICN Subsidiary Corp.

Gentlemen:

You have requested our opinion as to certain federal income tax
consequences of the proposed mergers (the "Consolidation") of ICN
Pharmaceuticals, Inc. ("ICN"), SPI Pharmaceuticals, Inc. ("SPI") and Viratek,
Inc. ("Viratek") with and into ICN Merger Corp. ("New ICN"), with New ICN
surviving each such merger and of the proposed merger (the "Subsidiary Merger")
of ICN Biomedicals, Inc. ("Biomedicals") with and into ICN Subsidiary Corp., a
wholly-owned subsidiary of New ICN ("Newco"), with Newco surviving the
Subsidiary Merger.

The opinions expressed herein are as of the date hereof and are based on
the Internal Revenue Code of 1986, as amended, the U.S. Treasury regulations
promulgated thereunder, rulings of the Internal Revenue Service and court
decisions, all as in effect on the date of this opinion. These authorities may
be repealed, revoked, reversed or modified prior to the date on which the
Consolidation and the Subsidiary Merger are expected to occur. In that event,
the federal income tax consequences of the Consolidation and the Subsidiary
Merger could be different from those expressed in the opinions set forth below.

In reaching the opinions expressed below, we have reviewed and relied on
(i) the Agreement and Plan of Merger among SPI, ICN, Viratek, Biomedicals and
New ICN, dated as of August 1, 1994 (the "Merger Agreement"), (ii) the draft
Joint Proxy Statement/Prospectus, dated September 12, 1994 of ICN, SPI, Viratek
and Biomedicals (the "Proxy"); and (iii) certain representations made by New
ICN, Newco, ICN, SPI, Viratek and Biomedicals in the certificates attached
hereto. Capitalized terms used herein and not otherwise defined shall have the
meanings given to them in the Merger Agreement.

Based upon and subject to the foregoing, and assuming that (i) the
Consolidation, the Subsidiary Merger and related transactions will take place as
described in the Merger Agreement (including, without limitation, Section 5.15
thereof) and in the Proxy (including, without limitation, the section captioned
"THE MERGER AGREEMENT -- Alternative Structure"), and (ii) that with respect to
each of ICN, SPI, Viratek and Biomedicals, each of the fair market value and the
aggregate adjusted tax basis of the assets transferred in the Consolidation or
the Subsidiary Merger will equal or exceed the sum of the liabilities assumed by
New ICN (in the case of ICN, SPI and Viratek in the Consolidation) or by Newco
(in the case of Biomedicals in the Subsidiary Merger), plus the amount of
liabilities, if any, to which such transferred assets are subject, it is our
opinion for federal income tax purposes:

(a) The Consolidation will be treated as a reorganization within the
meaning of Section 368(a) of the Code.

(b) The Subsidiary Merger will be treated as a reorganization within
the meaning of Section 368(a) of the Code.
<PAGE> 2

(c) Each of ICN, SPI, Viratek, New ICN, Biomedicals and Newco will be
a party to a reorganization within the meaning of Section 368(b) of the
Code.

(d) No gain or loss will be recognized by holders of ICN Common Stock,
SPI Common Stock, Viratek Common Stock or Biomedicals Common Stock as a
result of the exchange of such shares solely for New ICN Common Stock
pursuant to the Consolidation or the Subsidiary Merger, as the case may be,
except that gain or loss will be recognized on the receipt of cash, if any,
received in lieu of fractional shares of New ICN Common Stock.

(e) The aggregate tax basis of the New ICN Common Stock received by
each ICN, SPI, Viratek and Biomedicals stockholder will equal the aggregate
tax basis of such stockholder's shares of ICN Common Stock, SPI Common
Stock, Viratek Common Stock or Biomedicals Common Stock, respectively,
(reduced by any amount allocable to fractional share interests for which
cash is received) exchanged in the Consolidation or the Subsidiary Merger,
as the case may be.

(f) The holding period for the New ICN Common Stock received by an
ICN, SPI, Viratek and Biomedicals stockholder will include the holding
period for the shares of ICN Common Stock, SPI Common Stock, Viratek Common
Stock or Biomedicals Common Stock, respectively, of such stockholder
exchanged in the Consolidation or the Subsidiary Merger, as the case may
be, provided that the ICN Common Stock, SPI Common Stock, Viratek Common
Stock or Biomedicals Common Stock is held as a capital asset as of the
Effective Time.

(g) Neither New ICN, ICN, SPI, Viratek, Biomedicals nor Newco will
recognize gain or loss as a result of the Consolidation of the Subsidiary
Merger.

We hereby consent to the filing of this opinion as an exhibit to the Proxy
and to the reference to this firm under the caption "THE MERGER
AGREEMENT -- Certain Federal Income Tax Consequences" in the Proxy. In giving
such consent, we do not thereby admit that we are in the category of such
persons whose consent is required under Section 7 of the Securities Act of 1933,
as amended.

The opinions expressed herein are solely for your benefit and the benefit
of holders of outstanding ICN Common Stock, SPI Common Stock, Viratek Common
Stock and Biomedicals Common Stock and may not be relied upon in any manner or
for any purpose except as specifically provided for herein.

Very truly yours,

FRIED, FRANK, HARRIS, SHRIVER & JACOBSON

By: ALAN S. KADEN
Alan S. Kaden

<PAGE> 1

EXHIBIT 10.3

EMPLOYMENT AGREEMENT

THIS AGREEMENT entered into as of the 18th day of March, 1993, by and
between ICN Pharmaceuticals, Inc., (the "Company"), Viratek, Inc., a subsidiary
of the Company (the "Subsidiary") and John Giordani, an individual (the
"Executive") (hereinafter collectively referred to as "the parties").

WHEREAS, the Executive has heretofore been employed by the Company as its
Executive Vice President and Chief Financial Officer as Vice
President -- Finance of Viratek, Inc. and is experienced in all phases of the
business of the Company and the Subsidiary and the Company and the Subsidiary
desires to retain the services of the Executives on the terms set forth herein;

WHEREAS, the Board of Directors of the Company (the "Board") recognizes
that the threat of an unsolicited takeover of the Company or the Subsidiary may
occur which can result in significant distractions of its management personnel
because of the uncertainties inherent in such a situation;

WHEREAS, the Boards of the Company and the Subsidiary has determined that
it is essential and in the best interest of the Company, the Subsidiary and its
stockholders to retain the services of its key management personnel in the event
of a threat of a change in control of the Company and the Subsidiary and to
ensure their continued dedication and efforts in such event without undue
concern for their personal financial and employment security; and

WHEREAS, in order to induce the Executive to remain in the employ of the
Company and the Subsidiary, particularly in the event of a threat of a change in
control of the Company or the Subsidiary, the Company and the Subsidiary desires
by this writing to set forth the continued employment relationship of the
Executive with the Company and the Subsidiary.

NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:

1. TERM. The initial term of employment under this Agreement shall be for
the period commencing on the date hereof, and ending March 30, 1996; provided,
however, that the term of this Agreement shall be automatically extended for one
(1) year on March 30, 1996, and on each March 30th thereafter unless either the
Company or the Subsidiary or the Executive shall have given written notice to
the other at least ninety (90) days prior thereto that the term of this
Agreement shall not be so extended; and provided, further, that notwithstanding
any such notice by the Company not to extend, the term of this Agreement shall
not expire prior to the expiration of the third anniversary of a Change in
Control (as hereinafter defined). Notwithstanding the foregoing, in no event
shall the term of this Agreement extend beyond the first day of the month
following the month in which the Executive attains age 65.

2. EMPLOYMENT. (a) The Executive shall be employed as the Executive Vice
President and Chief Financial Officer of the Company and as Vice President --
Finance of the Subsidiary or such other senior executive capacity as may be
mutually agreed to in writing by the parties. The Executive shall perform the
duties, undertake the responsibilities and exercise the authority customarily
performed, undertaken and exercised by persons situated in a similar executive
capacity. He shall also promote, by entertainment or otherwise, the business of
the Company and the Subsidiary.

(b) Excluding periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote reasonable attention
and time during usual business hours to the business and affairs of the
Company to the extent necessary to discharge the responsibilities assigned
to the Executive hereunder. The Executive may (i) serve on corporate, civil
or charitable boards and committees, (ii) manage personal investments and
(iii) deliver lectures and teach at educational institutions, so long as
such activities do not significantly interfere with the performance of the
Executive's responsibilities hereunder.
<PAGE> 2

3. BASE SALARY. The Company or the Subsidiary agrees to pay or cause to
be paid to the Executive during the term of this Agreement a base salary at the
rate of $210,000 per annum or such larger amount as the Board may from time to
time determine (hereinafter referred to as the "Base Salary"). Such Base Salary
shall be payable in accordance with the Company's or the Subsidiary's customary
practices applicable to its executives. Such rate of salary, or increased rate
of salary, if any, as the case may be, shall be reviewed at least annually by
the respective Board and may be further increased (but not decreased) in such
amounts as the respective Board in its discretion may decide.

4. EMPLOYEE BENEFITS. The Executive shall be entitled to participate in
all employee benefit plans, practices and programs maintained by the Company or
the Subsidiary and made available to employees generally including, without
limitation, all pension, retirement, profit sharing, savings, medical,
hospitalization, disability, dental, life or travel accident insurance benefit
plans. The Executive's participation in such plans, practices and programs shall
be on the same basis and terms as are applicable to employees of the Company and
the Subsidiary generally.

5. EXECUTIVE BENEFITS. The Executive shall be entitled to participate in
all executive benefit or incentive compensation plans now maintained or
hereafter established by the Company or the Subsidiary for the purpose of
providing compensation and/or benefits to executives of the Company or the
Subsidiary including, but not limited to, the Company's 401(k) and Deferred
Compensation Plans and any supplemental retirement, salary continuation, stock
option, deferred compensation, supplemental medical or life insurance or other
bonus or incentive compensation plans. Unless otherwise provided herein, the
Executive's participation in such plans shall be on the same basis and terms as
other similarly situated executives of the Company or the Subsidiary, but in no
event on a basis less favorable in terms of benefit levels or reward
opportunities applicable to the Executive as in effect on the date hereof. No
additional compensation provided under any of such plans shall be deemed to
modify or otherwise affect the terms of this Agreement or any of the Executive's
entitlement hereunder.

6. OTHER BENEFITS. (a) Fringe Benefits and Perquisites. The Executive
shall be entitled to all fringe benefits and perquisites (e.g. Company cars,
club dues, physical examinations, financial planning and tax preparation
services) generally made available by the Company or the Subsidiary to its
executives.

(b) Expenses. The Executive shall be entitled to receive prompt
reimbursement of all expenses reasonably incurred by him in connection with
the performance of his duties hereunder or for promoting, pursuing or
otherwise furthering the business or interests of the Company or the
Subsidiary.

(c) Office and Facilities. The Executive shall be provided with an
appropriate office in Costa Mesa, California, or such other place as may be
mutually agreed and with such secretarial and other support facilities as
are commensurate with the Executive's status with the Company or the
Subsidiary and adequate for the performance of his duties hereunder.

7. VACATION AND SICK LEAVE. At such reasonable times as the Board shall
in its discretion permit, the Executive shall be entitled, without loss of pay,
to absent himself voluntarily from the performance of his employment under this
Agreement, provided that:

(a) The Executive shall be entitled to annual vacation in accordance
with the policies as periodically established by the Board for similarly
situated executives of the Company or the Subsidiary, which shall in no
event be less than four weeks per year.

(b) In addition to the aforesaid paid vacations, the Executive shall
be entitled, without loss of pay, to absent himself voluntarily from the
performance of his employment for such additional periods of time and for
such valid and legitimate reasons as the Board in its discretion may
determine. Further, the Board shall be entitled to grant to the Executive a
leave or leaves of absence with or without pay at such time or times and
upon such terms and conditions as the Board in its discretion may
determine.

(c) The Executive shall be entitled to sick leave (without loss of
pay) in accordance with the Company's or the Subsidiary's policies as in
effect from time to time.

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<PAGE> 3

8. TERMINATION. The Executive's employment hereunder may be terminated
under the following circumstances:

(a) Disability. The Company or the Subsidiary may terminate the
Executive's employment after having established the Executive's Disability.
For purposes of this Agreement, "Disability" means a physical or mental
infirmity which impairs the Executive's ability to substantially perform
his duties under this Agreement which continues for a period of at least
one hundred eighty (180) consecutive days. The Executive shall be entitled
to the compensation and benefits provided for under this Agreement for any
period during the term of this Agreement for any period during the term of
this Agreement and prior to the establishment of the Executive's Disability
during which the Executive is unable to work due to a physical or mental
infirmity. Notwithstanding anything contained in this Agreement to the
contrary, until the Termination Date specified in a Notice of Termination
(as each term is hereinafter defined) relating to the Executive's
Disability, the Executive shall be entitled to return to his position with
the Company or the Subsidiary as set forth in this Agreement in which event
no Disability of the Executive will be deemed to have occurred.

(b) Cause. The Company or the Subsidiary may terminate the
Executive's employment for "Cause". A termination for Cause is a
termination evidenced by a resolution adopted in good faith by two-thirds
(2/3) of the Board that the Executive (i) willfully and continually failed
to substantially perform his duties with the Company (other than a failure
resulting from the Executive's incapacity due to physical or mental
illness) which failure continued for a period of at least thirty (30) days
after a written notice of demand for substantial performance has been
delivered to the executive specifying the manner in which the Executive has
failed to substantially perform, or (ii) willfully engaged in conduct which
is demonstrably and materially injurious to the Company, monetarily or
otherwise; provided, however that no termination of the Executive's
employment shall be for Cause as set forth in clause (ii) above until (x)
there shall have been delivered to the Executive a copy of a written notice
setting forth that the Executive was guilty of the conduct set forth in
clause (ii) and specifying the particulars thereof in detail, and (y) the
Executive shall have been provided an opportunity to be heard by the Board
(with the assistance of the Executive's counsel if the Executive so
desires). No act, nor failure to act, on the Executive's part, shall be
considered "willful" unless he has acted or failed to act, with an absence
of good faith and without a reasonable belief that his action or failure to
act was in the best interest of the Company and the Subsidiary.
Notwithstanding anything contained in this Agreement to the contrary, no
failure to perform by the Executive after Notice of Termination is given by
the Executive shall constitute Cause for purposes of this Agreement.

(c) (1) Good Reason. The Executive may terminate his employment for
"Good Reason." For purposes of this Agreement, Good Reason shall mean the
occurrence after a Change in Control (as hereinafter defined in this
Section 8(e)) of any of the events or conditions described in Subsections
(i) through (viii) hereof;

(i) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, does not represent a promotion from
his status, title, position or responsibilities as in effect
immediately prior thereto; the assignment to the Executive of any
duties or responsibilities which, in the Executive's reasonable
judgment, are inconsistent with such status, title, position or
responsibilities; or any removal of the Executive from or failure to
reappoint or reelect him to any of such positions, except in
connection with the termination of his employment for Disability,
Cause, as a result of his death or by the Executive other than for
Good Reason;

(ii) a reduction in the Executive's Base Salary or a failure by
the Company or the Subsidiary to increase the Executive's Base Salary
within any twelve (12) month period by the average percentage
increase during such period of the base salaries of, similarly
situated executives;

(iii) the Company's or the Subsidiary's requiring the Executive
to be based at any place outside a 30-mile radius from Costa Mesa,
California, except for reasonably required travel on

3
<PAGE> 4

the Company's or Subsidiary's business which is not materially
greater than such travel requirements prior to the Change in Control;

(iv) the failure by the Company or the Subsidiary to (A)
continue in effect any material compensation or benefit plan in which
the Executive was participating at the time of the Change in Control,
including, but not limited to, the Company's or Subsidiary's Deferred
Compensation Plan, 401 (K) Plan, or (B) provide the Executive with
compensation and benefits at least equal (in terms of benefit levels
and/or reward opportunities) to those provided for under each
employee benefit plan, program and practice as in effect immediately
prior to the Change in Control (or as in effect following the Change
in Control, if greater).

(v) the insolvency or the filing (by any party, including the
Company or the Subsidiary) of a petition for bankruptcy, of the
Company or the Subsidiary;

(vi) any material breach by the Company or the Subsidiary of any
provision of this Agreement;

(vii) any purported termination of the Executive's employment
for Cause by the Company or the Subsidiary which does not comply with
the terms of Section 8 of this Agreement; and

(viii) the failure of the Company or the Subsidiary to obtain an
agreement, satisfactory to the Executive, from any successor or
assign of the Company or the Subsidiary to assume and agree to
perform this Agreement, as contemplated in Section 11 hereof.

(2) Any event or condition described in this Section 8(c)(i)
through (viii) which occurs prior to a Change in Control but which (i)
was at the request of a third party who has taken steps reasonably
calculated to effect a Change in Control, or (ii) otherwise arose in
connection with a Change in Control, shall constitute Good Reason for
purposes of this Agreement notwithstanding that it occurred prior to a
Change in Control.

(3) The Executive's right to terminate his employment pursuant to
this Section 8(c) shall not be affected by his incapacity due to
physical or mental illness.

(d) Voluntary Termination. The Executive may voluntarily terminate
his employment hereunder at any time. If the Executive voluntarily
terminates his employment for any reason or without reason during the
60-day period which commences on the date which is six (6) months following
the date of a Change in Control, it shall be referred to as a "Limited
Period Termination."

(e) For purposes of this Agreement, a "Change in Control" shall mean
any of the following events:

(1) The acquisition (other than from the Company or the Subsidiary)
by any person (as such term is defined in Sections 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) of
beneficial ownership (within the meaning of Rule 13d-3 promulgated under
the 1934 Act) of twenty percent (20%) or more of the combined voting
power of the Company's or the Subsidiary's then outstanding voting
securities; or

(2) The individuals who, as of the date hereof, are members of the
Board of the Company or the Subsidiary (the "Incumbent Board"), cease
for any reason to constitute at least two-thirds ( 2/3) of the Board,
unless the election, or nomination for election by the Company's or the
Subsidiary's stockholders, of any new director was approved by a vote of
at least two-thirds ( 2/3) of the Incumbent Board, and such new director
shall, for purposes of this Agreement, be considered as a member of the
Incumbent Board; or

(3) Approval by stockholders of the Company or the Subsidiary of
(i) a merger or consolidation involving the Company or the Subsidiary if
the stockholders of 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 (80%) of the combined
voting power of the then outstanding voting securities of the
corporation resulting from such merger or consolidation in substantially
the same proportion as their ownership of the combined voting power of
the voting

4
<PAGE> 5

securities of the Company or the Subsidiary outstanding immediately
before such merger or consolidation or (ii) a complete liquidation or
dissolution of the Company or the Subsidiary or an agreement for the
sale or other disposition of all or substantially all of the assets of
the Company or the Subsidiary.

Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur pursuant to Section 8(e)(1), solely because twenty percent (20%) or more
of the combined voting power of the Company's or the Subsidiary's then
outstanding securities is acquired by (i) a trustee or other fiduciary holding
securities under one or more employee benefit plans maintained by the Company or
the Subsidiary or any of its subsidiaries or (ii) any corporation which,
immediately prior to such acquisition, is owned directly or indirectly by the
stockholders of the Company or the Subsidiary in the same proportion as their
ownership of stock in the Company or the Subsidiary immediately prior to such
acquisition.

(f) Notice of Termination. Any purported termination by the
Company or the Subsidiary or by the Executive shall be communicated by
written Notice of Termination to the other. For purposes of this
Agreement, a "Notice of Termination" shall mean a notice which indicates
the specific termination provision in this Agreement relied upon and
shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under
the provision so indicated. For purposes of this Agreement, no such
purported termination of employment shall be effective without such
Notice of Termination.

(g) Termination Date, Etc. "Termination Date" shall mean in the
case of the Executive's death, his date of death, or in all other cases,
the date specified in the Notice of Termination subject to the
following;

(1) If the Executive's employment is terminated by the Company or
the Subsidiary for Cause or due to Disability, the date specified in the
Notice of Termination shall be at least thirty (30) days from the date
the Notice of Termination is given to the Executive, provided that in
the case of Disability the Executive shall not have returned to the
full-time performance of his duties during such period of at least
thirty (30) days; and

(2) If the Executive's employment is terminated for Good Reason or
is a Limited Period Termination, the date specified in the Notice of
Termination shall not be more than sixty (60) days from the date the
Notice of Termination is given to the Company or the Subsidiary.

9. COMPENSATION UPON TERMINATION. Upon termination of the Executive's
employment during the term of this Agreement (including any extensions thereof),
the Executive shall be entitled to the following benefits:

(a) If the Executive's employment is terminated by the Company or
the Subsidiary for Cause or Disability or by the Executive (other than
for Good Reason or a Limited Period Termination), or by reason of the
Executive's death, the Company or the Subsidiary shall pay the Executive
all amounts earned or accrued hereunder through the Termination Date but
not paid as of the Termination Date, including (i) Base Salary, (ii)
reimbursement for any and all monies advanced or expenses incurred in
connection with the Executive's employment for reasonable and necessary
expenses incurred by the Executive on behalf of the Company or the
Subsidiary for the period ending on the Termination Date, (iii) vacation
pay, (iv) any bonuses or incentive compensation and (v) any previous
compensation which the Executive has previously deferred (including any
interest earned or credited thereon) (collectively, "Accrued
Compensation"). In addition to the foregoing, if the Executive's
employment is terminated by the Company or the Subsidiary for Disability
or by reason of the Executive's death, the Company shall pay to the
Executive or his beneficiaries an amount equal to the bonus or incentive
award that the Executive would have been entitled to receive in respect
of the fiscal year in which the Executive's Termination Date occurs had
he continued in employment until the end of such fiscal year, calculated
as if all performance targets and goals (if applicable) had been fully
met by the Company or the Subsidiary and by the Executive, as
applicable, for such year, multiplied by a fraction the numerator of
which is the number of days in

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<PAGE> 6

such fiscal year through the Termination Date and the denominator of
which is 365 (a "Pro Rata Bonus"). Executive's entitlement to any other
compensation or benefits shall be determined in accordance with the
Company's or the Subsidiary's employee benefit plans and other
applicable programs and practices then in effect.

(b) If the Executive's employment by the Company or the Subsidiary
shall be terminated (1) by the Company other than for Cause, death or
Disability, (2) by the Executive for Good Reason, or (3) by the Executive
as a Limited Period Termination, then the Executive shall be entitled to
the benefits provided below:

(i) the Company or the Subsidiary shall pay the Executive all
Accrued Compensation and a Pro Rata Bonus;

(ii) the Company or the Subsidiary shall pay the Executive as
severance pay and in lieu of any further salary for periods subsequent
to the Termination Date, in a single payment an amount in cash equal to
three (3) times the sum of (A) the Executive's Base Salary at the
highest rate in effect at any time within the ninety (90) day period
ending on the date the Notice of Termination is given (or if the
Executive's employment is terminated after a Change in Control, the
Executive's Base Salary immediately prior to the Change in Control, if
greater) and (B) the "Bonus Amount" (as defined below). Notwithstanding
the foregoing, the amount to be paid under this Subsection (ii) shall be
multiplied by a fraction (which in no event shall be greater than one
(1)) the denominator of which shall be the number of months (for this
purpose any partial month shall be considered as a whole month)
remaining until the Executive's 65th birthday and the denominator of
which shall be thirty-six (36). The term "Bonus Amount" shall mean (x)
the greatest amount of any cash bonus or incentive compensation received
by the Executive during the three fiscal years immediately preceding the
Termination Date or (y) if no such bonus was received by the Executive
during any of such three years, then an amount equal to the Executive's
maximum bonus which could be awarded for the fiscal year in which the
Termination Date occurs had he continued in employment until the end of
such fiscal year, assuming all performance targets and goals (if
applicable) had been fully met by the Company or the Subsidiary and by
the Executive, as applicable, for such year;

(iii) for a number of months equal to the lesser of (A) thirty-six
(36) or (b) the number of months remaining until the Executive's 65th
birthday, the Company or the Subsidiary shall at its expense continue on
behalf of the Executive and his dependents and beneficiaries the life
insurance, disability, medical, dental and hospitalization benefits
which were being provided to the Executive at the time Notice of
Termination is given (or, if the Executive is terminated following a
Change in Control, the benefits provided to the executive at the time of
the Change in Control, if greater). The benefits provided in this
Section 9(b)(iii) shall be no less favorable to the Executive, in terms
of amounts and deductibles and costs to him, than the coverage provided
the Executive under the plans providing such benefits at the time Notice
of Termination is given (or, if the Executive is terminated following a
Change in Control, at the time of the Change in Control if more
favorable to the Executive). The Company's obligation hereunder with
respect to the foregoing benefits shall be limited to the extent that
the Executive obtains any such benefits pursuant to a subsequent
employer's benefit plans, in which case the Company or the Subsidiary
may reduce the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverage of the combined
benefit plans is no less favorable to the Executive, in terms of amounts
and deductibles and costs to him, than the coverage required to be
provided hereunder. This Subsection (iii) shall not be interpreted so as
to limit any benefits to which the Executive or his dependents may be
entitled under any of the Company's or Subsidiary's employee benefit
plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life
insurance benefits;

(iv) the Company or the Subsidiary shall pay in a single payment an
amount in cash equal to the excess of (A) the actuarial equivalent of
the aggregate retirement benefit the Executive would have been entitled
to receive under the Company's or the Subsidiary's supplemental and
excess

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<PAGE> 7

retirement plans had (x) the Executive remained employed by the Company
for an additional three (3) complete years of credited service (or until
his 65th birthday, (if earlier)), (y) his annual compensation during
such period been equal to his Base Salary (at the rate used for purposes
of Section 9(b)(ii)) and the Bonus Amount, and (z) he been fully (100%)
vested in his benefit under each such retirement plan, over (B) the
actuarial equivalent of the aggregate retirement benefit the Executive
is actually entitled to receive under such retirement plans. For
purposes of this Subsection (iv), "actuarial equivalent" shall be
determined in accordance with the actuarial assumptions used for the
calculation of benefits under any Retirement Plan as applied prior to
the Termination Date in accordance with such plan's past practices (but
shall in any event take into account; the value of any subsidized early
retirement benefit); and

(v) all restrictions on any outstanding awards granted by the
Company or the Subsidiary or any other subsidiaries of the Company or
the subsidiary (including restricted stock awards) granted to the
Executive shall lapse and such awards shall become fully (100%) vested
immediately, and all stock options and stock appreciation rights granted
to the Executive shall become fully (100%) vested and shall become
immediately exercisable.

(c) The amounts provided for in Sections 9(a) and 9(b)(i), (ii) and
(iv) shall be paid with five (5) days after the Executive's Termination
Date.

(d) The Executive shall not be required to mitigate the amount of any
payment provided for in this Agreement by seeking other employment or
otherwise and no such payment shall be offset or reduced by the amount of
any compensation or benefits provided to the Executive in any subsequent
employment.

10. UNAUTHORIZED DISCLOSURE. The Executive shall not make any
Unauthorized Disclosure. For purposes of this Agreement, "Unauthorized
Disclosure" shall mean disclosure by the Executive without the consent of the
Board to any person, other than an employee of the Company or a person to whom
disclosure is reasonably necessary or appropriate in connection with the
performance by the Executive of his duties as an executive of the Company or as
may be legally required, of any confidential information obtained by the
Executive while in the employ of the Company (including, but not limited to, any
confidential information with respect to any of the Company's customers or
methods of distribution) the disclosure of which he knows or has reason to
believe will be materially injurious to the Company; provided, however, that
such term shall not include the use or disclosure by the Executive, without
consent, of any information known generally to the public (other than as a
result of disclosure by him in violation of this Section 10) or any information
not otherwise considered confidential by a reasonable person engaged in the same
business as that conducted by the Company.

11. SUCCESSORS AND ASSIGNS. (a) This Agreement shall be binding upon and
shall inure to the benefit of the Company or the Subsidiary, its successors and
assigns and the Company or the Subsidiary shall require any successor or assign
to expressly assume and agree to perform this Agreement in the same manner and
to the same extent that the Company would be required to perform it if no such
succession or assignment had taken place. The term "the Company" or the
"Subsidiary" as used herein shall include such successors and assigns. The term
"successors and assigns" as used herein shall mean a corporation or other entity
acquiring all or substantially all the assets and business of the Company or the
Subsidiary (including this Agreement) whether by operation of law or otherwise.

(b) Neither this Agreement nor any right or interest hereunder shall
be assignable or transferable by the Executive, his beneficiaries or legal
representatives, except by will or by the laws of descent and distribution.
This Agreement shall inure to the benefit of and be enforceable by the
Executive's legal personal representative.

12. FEES AND EXPENSES. The Company shall pay all legal fees and related
expenses (including the costs of experts, evidence and counsel) incurred by the
Executive as they become due as a result of (i) the Executive's termination of
employment (including all such fees and expenses, if any, incurred in contesting
or disputing any such termination of employment), (ii) the Executive's hearing
before the Board as contemplated in Section 8(b) of this Agreement, or (iii) the
Executive's seeking to obtain or enforce any right or

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<PAGE> 8

benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company or the Subsidiary under which the Executive is or may
be entitled to receive benefits.

13. NOTICE. For the purposes of this Agreement, notices and all other
communications provided for in the Agreement (including the Notice of
Termination) shall be in writing and shall be deemed to have been duly given
when personally delivered or sent by certified mail, return receipt requested,
postage prepaid, addressed to the respective addresses last given by each party
to the other, provided that all notices to the Company or the Subsidiary shall
be directed to the attention of the Board with a copy to the Secretary of the
Company. All notices and communications shall be deemed to have been received on
the date of delivery thereof or on the third business day after the mailing
thereof, except that notice of change of address shall be effective only upon
receipt.

14. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Agreement shall prevent or
limit the Executive's continuing or future participation in any benefit, bonus,
incentive or other plan or program provided by the Company or the Subsidiary or
any of its subsidiaries and for which the Executive may qualify, nor shall
anything herein limit or reduce such rights as the Executive may have under any
other agreements with the Company or the Subsidiary or any of its subsidiaries.
Amounts which are vested benefits or which the Executive is otherwise entitled
to receive under any plan or program of the Company or any of its subsidiaries
shall be payable in accordance with such plan or program, except as explicitly
modified by this Agreement.

15. SETTLEMENT OF CLAIMS. The Company's or the Subsidiary's obligation to
make the payments provided for in this Agreement and otherwise to perform its
obligations hereunder shall not be affected by any circumstances, including,
without limitation, any set-off, counterclaim, recoupment, defense or other
right which the Company or the Subsidiary may have against the Executive or
others.

16. MISCELLANEOUS. No provision of this Agreement may be modified, waived
or discharged unless such waiver, modification or discharge is agreed to in
writing and signed by the Executive and the Company or the Subsidiary. No waiver
by either party hereto at any time of any breach by the other party hereto of,
or compliance with, any condition or provision of this Agreement to be performed
by such other party shall be deemed a waiver of similar or dissimilar provisions
or conditions at the same or at any prior or subsequent time. No agreement or
representations, oral or otherwise, express or implied, with respect to the
subject matter hereof have been made by either party which are not expressly set
forth in this Agreement.

17. GOVERNING LAW. This Agreement shall be governed by and construed and
enforced in accordance with the laws of the State of California without giving
effect to the conflict of law principles thereof.

18. SEVERABILITY. The provisions of this Agreement shall be deemed
severable and the invalidity or unenforceability of any provision shall not
affect the validity or enforceability of the other provisions hereof.

19. ENTIRE AGREEMENT. This Agreement constitutes the entire agreement
between the parties hereto and supersedes all prior agreements, if any,
understandings and arrangements, oral or written, between the parties hereto
with respect to the subject matter hereof.

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<PAGE> 9

IN WITNESS WHEREOF, the Company and the Subsidiary has caused this
Agreement to be executed by its duly authorized officer and the Executive has
executed this Agreement as of the day and year first above written.

ATTEST: ICN PHARMACEUTICALS, INC.

/s/ DAVID C. WATT By: /s/ MILAN PANIC
- -------------------------------------- ------------------------------
Secretary Title: President and Chief
Executive Officer

SPI PHARMACEUTICALS, INC.

By: /s/ ADAM JERNEY
------------------------------
Adam Jerney

VIRATEK, INC.

By: /s/ DAVID C. WATT
------------------------------
David C. Watt

ICN BIOMEDICALS, INC.

By: /s/ RICHARD M. FALLIS
-------------------------------
Richard M. Fallis

THE "EXECUTIVE"

By: /s/ JOHN E. GIORDANI
-------------------------------
John E. Giordani

<PAGE> 1

EXHIBIT 10.4

EMPLOYMENT AGREEMENT

THIS AGREEMENT entered into as of the 18th day of March, 1993, by and
between ICN Pharmaceuticals, Inc., (the "Company"), ICN Biomedicals, Inc., a
subsidiary of the Company (the "Subsidiary"), SPI Pharmaceuticals, Inc. (the
"Subsidiary"), and Bill MacDonald, an individual (the "Executive") (hereinafter
collectively referred to as "the parties").

WHEREAS, the Executive has heretofore been employed by the Company as its
Executive Vice President of Corporate Development and Taxes, and President and
Senior Vice President of Corporate Development of the Subsidiary and is
experienced in all phases of the business of the Company and the Subsidiary and
the Company and the Subsidiary desires to retain the services of the Executives
on the terms set forth herein;

WHEREAS, The Boards of the Company and the Subsidiary has determined that
it is essential and in the best interest of the Company, the Subsidiary and its
stockholders to retain the services of its key management personnel in the event
of a threat of a change in control of the Company and the Subsidiary and to
ensure their continued dedication and efforts in such event without undue
concern for their personal financial and employment security; and

NOW, THEREFORE, in consideration of the respective agreements of the
parties contained herein, it is agreed as follows:

2. EMPLOYMENT. (a) The Executive shall be employed as the Executive Vice
President -- Corporate Development and President of the Subsidiary or such other
senior executive capacity as may be mutually agreed to in writing by the
parties. The Executive shall perform the duties, undertake the responsibilities
and exercise the authority customarily performed, undertaken and exercised by
persons situated in a similar executive capacity. He shall also promote, by
entertainment or otherwise, the business of the Company and the Subsidiary.

(b) Excluding periods of vacation and sick leave to which the
Executive is entitled, the Executive agrees to devote reasonable attention
and time during usual business hours to the business and affairs of the
Company to the extent necessary to discharge the responsibilities assigned
to the Executive hereunder. The Executive may (i) serve on corporate, civil
or charitable boards or committees, (ii) manage personal investments and
(iii) deliver lectures and teach at educational institutions, so long as
such activities do not significantly interfere with the performance of the
Executive's responsibilities hereunder.

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<PAGE> 2

3. BASE SALARY. The Company or the Subsidiary agrees to pay or cause to
be paid to the Executive during the term of this Agreement a base salary at the
rate of $200,000 per annum or such larger amount as the Board may from time to
time determine (hereinafter referred to as the "Base Salary"). Such Base Salary
shall be payable in accordance with the Company's or the Subsidiary's customary
practices applicable to its executives. Such rate of salary, or increased rate
of salary, if any, as the case may be, shall be reviewed at least annually by
the respective Board and may be further increased (but not decreased) in such
amounts as the respective Board in its discretion may decide.

4. EMPLOYEE BENEFITS. The Executive shall be entitled to participate in
all employee benefit plans, practices and programs maintained by the Company or
the Subsidiary and made available to employees generally including, without
limitation all pension, retirement, profit sharing, savings, medical,
hospitalization, disability, dental, life or travel accident insurance benefit
plans. The Executive's participation in such plans, practices and programs shall
be on the same basis and terms as are applicable to employees of the Company and
the Subsidiary generally.

6. OTHER BENEFITS. (a) FRINGE BENEFITS AND PERQUISITES. The Executive
shall be entitled to all fringe benefits and perquisites (e.g. Company cars,
club dues, physical examinations, financial planning and tax preparation
services) generally made available by the Company or the Subsidiary to its
executives.

(b) EXPENSES. The Executives shall be entitled to receive prompt
reimbursement of all expenses reasonably incurred by him in connection with
the performance of his duties hereunder or for promoting, pursuing or
otherwise furthering the business or interests of the Company or the
Subsidiary.

(c) OFFICE AND FACILITIES. The Executive shall be provided with an
appropriate office in Costa Mesa, California, or such other place as may be
mutually agreed and with such secretarial and other support facilities as
are commensurate with the Executive's status with the Company or the
Subsidiary and adequate for the performance of his duties hereunder.

(c) The Executive shall be entitled to sick leave (without loss of
pay) in accordance with the Company's or the Subsidiary's policies as in
effect from time to time.

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<PAGE> 3

8. TERMINATION. The Executive's employment hereunder may be terminated
under the following circumstances:

(a) DISABILITY. The Company or the Subsidiary may terminate the
Executive's employment after having established the Executive's Disability.
For purposes of this Agreement, "Disability" means a physical or mental
infirmity which impairs the Executive's ability to substantially perform
his duties under this Agreement which continues for a period of at least
one hundred eighty (180) consecutive days. The Executive shall be entitled
to the compensation and benefits provided for under this Agreement for any
period during the term of this Agreement and prior to the establishment of
the Executive's Disability during which the Executive is unable to work due
to a physical or mental infirmity. Notwithstanding anything contained in
this Agreement to the contrary, until the Termination Date specified in a
Notice of Termination (as each term is hereinafter defined) relating to the
Executive's Disability, the Executive shall be entitled to return to his
position with the Company or the Subsidiary as set forth in this Agreement
in which event no Disability of the Executive will be deemed to have
occurred.

(b) CAUSE. The Company or the Subsidiary may terminate the
Executive's employment for "Cause". A termination for Cause is a
termination evidenced by a resolution adopted in good faith by two-thirds
( 2/3) of the Board that the Executive (i) willfully and continually failed
to substantially perform his duties with the Company (other than a failure
resulting from the Executive's incapacity due to physical or mental
illness) which failure continued for a period of at least thirty (30) days
after a written notice of demand for substantial performance has been
delivered to the Executive specifying the manner in which the Executive has
failed to substantially perform, or (ii) willfully engaged in conduct which
is demonstrably and materially injurious to the Company, monetarily or
otherwise; provided, however that no termination of the Executive's
employment shall be for Cause as set forth in clause (ii) above until (x)
there shall have been delivered to the Executive a copy of a written notice
setting forth that the Executive was guilty of the conduct set forth in
clause (ii) and specifying the particulars thereof in detail, and (y) the
Executive shall have been provided an opportunity to be heard by the Board
(with the assistance of the Executive's counsel if the Executive so
desires). No act, nor failure to act, on the Executive's part, shall be
considered "willful" unless he has acted or failed to act, with an absence
of good faith and without a reasonable belief that his action or failure to
act was in the best interest of the Company and the Subsidiary.
Notwithstanding anything contained in this Agreement to the contrary, no
failure to perform by the Executive after Notice of Termination is given by
the Executive shall constitute Cause for purposes of this Agreement.

(c) GOOD REASON. The executive may terminate his employment for "Good
Reason." For purposes of this Agreement, Good Reason shall mean the
occurrence after a Change in Control (as hereinafter defined in this
Section 8(e)) of any of the events or conditions described in Subsections
(i) through (viii) hereof:

(i) a change in the Executive's status, title, position or
responsibilities (including reporting responsibilities) which, in the
Executive's reasonable judgment, does not represent a promotion from his
status, title, position or responsibilities as in effect immediately
prior thereto; the assignment to the Executive of any duties or
responsibilities which, in the Executive's reasonable judgment, are
inconsistent with such status, title, position or responsibilities; or
any removal of the Executive from or failure to reappoint or reelect him
to any of such positions, except in connection with the termination of
his employment for Disability, Cause, as a result of his death or by the
Executive other than for Good Reason;

(ii) a reduction in the Executive's Base Salary or a failure by the
Company or the Subsidiary to increase the Executive's Base Salary within
any twelve (12) month period by the average percentage increase during
such period of the base salaries of, similarly situated executives;

(iii) the Company's or the Subsidiary requiring the Executive to be
based at any place outside a 30-mile radius from Costa Mesa, California,
except for reasonably required travel on the Company's or Subsidiary's
business which is not materially greater than such travel requirements
prior to the Change in Control;

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<PAGE> 4

(iv) the failure by the Company or the Subsidiary to (A) continue
in effect any material compensation or benefit plan in which the
Executive was participating at the time of the Change in Control,
including, but not limited to, the Company's or Subsidiary's Deferred
Compensation Plan, 401(k) Plan, or (B) provide the Executive with
compensation and benefits at least equal (in terms of benefit levels
and/or reward opportunities) to those provided for under each employee
benefit plan, program and practice as in effect immediately prior to the
Change in Control (or as in effect following the Change in Control, if
greater).

(v) the insolvency or the filing (by any party, including the
Company or the Subsidiary) of a petition for bankruptcy, of the Company
or the Subsidiary;

(vi) any material breach by the Company or the Subsidiary of any
provision of this Agreement;

(vii) any purported termination of the Executive's employment for
Cause by the Company or the Subsidiary which does not comply with the
terms of Section 8 of this Agreement; and

(viii) the failure of the Company or the Subsidiary to obtain an
agreement, satisfactory to the Executive, from any successor or assign
of the Company or the Subsidiary to assume and agree to perform this
Agreement, as contemplated in Section 11 hereof.

(2) Any event or condition described in this Section 8(c)(i) through
(viii) which occurs prior to a Change in Control but which (i) was at the
request of a third party who has taken steps reasonably calculated to
effect a Change in Control, or (ii) otherwise arose in connection with a
Change in Control, shall constitute Good Reason for purposes of this
Agreement notwithstanding that it occurred prior to a Change in Control.

(3) The Executive's right to terminate his employment pursuant to this
Section 8(c) shall not be affected by his incapacity due to physical or
mental illness.

(d) VOLUNTARY TERMINATION. The Executive may voluntarily terminate
his employment hereunder at any time. If the Executive voluntarily
terminates his employment for any reason or without reason during the
60-day period which commences on the date which is six (6) months following
the date of a Change in Control, it shall be referred to as a "Limited
Period Termination."

(e) For purposes of this Agreement, a "Change in Control" shall mean
any of the following events:

(1) The acquisition (other than from the Company or the Subsidiary) by
any person (as such term is defined in Sections 13(d) or 14(d) of the
Securities Exchange Act of 1934, as amended (the "1934 Act")) of beneficial
ownership (within the meaning of Rule 13d-3 promulgated under the 1934 Act)
of twenty percent (20%) or more of the combined voting power of the
Company's or the Subsidiary's then outstanding voting securities; or

(2) The individuals who, as of the date hereof, are members of the
Board of the Company or the Subsidiary (the "Incumbent Board"), cease for
any reason to constitute at least two-thirds ( 2/3) of the Board, unless
the election, or nomination for election by the Company's or the
Subsidiary's stockholders, of any new director was approved by a vote of at
least two-thirds ( 2/3) of the Incumbent Board, and such new director
shall, for purposes of this Agreement, be considered as a member of the
Incumbent Board; or

(3) Approval by stockholders of the Company or the Subsidiary of (i) a
merger or consolidation involving the Company or the Subsidiary if the
stockholders of 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 (80%) of the combined
voting power of the then outstanding voting securities of the corporation
resulting from such merger or consolidation in substantially the same
proportion as their ownership of the combined voting power of the voting
securities of the Company or the Subsidiary outstanding immediately before
such merger or consolidation or (ii) a complete liquidation or dissolution

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<PAGE> 5

of the Company or the Subsidiary or an agreement for the sale or other
disposition of all or substantially all of the assets of the Company or the
Subsidiary.

Notwithstanding the foregoing, a Change in Control shall not be deemed to
occur pursuant to Section 8(a)(1), solely because twenty percent (20%) or
more of the combined voting power of the Company's or the Subsidiary's then
outstanding securities is acquired by (i) a trustee or other fiduciary
holding securities under one or more employee benefit plans maintained by
the Company or the Subsidiary or any of its subsidiaries or (ii) any
corporation which, immediately prior to such acquisition, is owned directly
or indirectly by the stockholders of the Company or the Subsidiary in the
same proportion as their ownership of stock in the Company or the
Subsidiary immediately prior to such acquisition.

(f) NOTICE OF TERMINATION. Any purported termination by the Company
or the Subsidiary or by the executive shall be communicated by written
Notice of Termination to the other. For purposes of this Agreement, a
"Notice of Termination" shall mean a notice which indicates the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis
for termination of the Executive's employment under the provision so
indicated. For purposes of this Agreement, no such purported termination of
employment shall be effective without such Notice of Termination.

(g) TERMINATION DATA, ETC. "Termination Date" shall mean in the case
of the Executive's death, his date of death, or in all other cases, the
date specified in the Notice of Termination subject to the following:

(1) If the Executive's employment is terminated by the Company or the
Subsidiary for Cause or due to Disability, the date specified in the Notice
of Termination shall be at least thirty (30) days from the date the Notice
of Termination is given to the Executive, provided that in the case of
Disability the Executive shall not have returned to the full-time
performance of his duties during such period of at least thirty (30) days;
and

(2) If the Executive's employment is terminated for Good Reason or is
a Limited Period Termination, the date specified in the Notice of
Termination shall not be more than sixty (60) days from the date the Notice
of Termination is given to the Company or the Subsidiary.

9. COMPENSATION UPON TERMINATION. Upon Termination of the Executive's
employment during the term of this Agreement (including any extensions thereof),
the Executive shall be entitled to the following benefits:

(a) If the Executive's employment is terminated by the Company or the
Subsidiary for Cause or Disability or by the Executive (other than for Good
Reason or a Limited Period Termination), or by reason of the Executive's
death, the Company or the Subsidiary shall pay the Executive all amounts
earned or accrued hereunder through the Termination Date but not paid as of
the Termination Date, including (i) Base Salary, (ii) reimbursement for any
and all monies advanced or expenses incurred in connection with the
Executive's employment for reasonable and necessary expenses incurred by
the Executive on behalf of the Company or the Subsidiary for the period
ending on the Termination Date, (iii) vacation pay, (iv) any bonuses or
incentive compensation and (v) any previous compensation which the
Executive has previously deferred (including any interest earned or
credited thereon) (collectively, "Accrued Compensation"). In addition to
the foregoing, if the Executive's employment is terminated by the Company
or the Subsidiary for Disability or by reason of the Executive's death, the
Company shall pay to the Executive or his beneficiaries an amount equal to
the bonus or incentive award that the Executive would have been entitled to
receive in respect of the fiscal year in which the Executive's Termination
Date occurs had he continued in employment until the end of such fiscal
year, calculated as if all performance targets and goals (if applicable)
had been fully met by the Company or the Subsidiary and by the Executive,
as applicable, for such year, multiplied by a fraction the numerator of
which is the number of days in such fiscal year through the Termination
Date and the denominator of which is 365 (a "Pro Rata Bonus"). Executive's
entitlement to any other compensation or benefits shall be determined in

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<PAGE> 6

accordance with the Company's or the Subsidiary's employee benefit plans
and other applicable programs and practices then in effect.

(i) the Company or the Subsidiary shall pay the Executive all
Accrued Compensation and a Pro Rata Bonus;

(ii) the Company or the Subsidiary shall pay the Executive as
severance pay and in lieu of any further salary for periods subsequent
to the Termination Date, in a single payment an amount in cash equal to
three (3) times the sum of (A) the Executive's Base Salary at the
highest rate in effect at any time within the ninety (90) day period
ending on the date the Notice of Termination is given (or if the
Executive's employment is terminated after a Change in Control, the
Executive's Base Salary immediately prior to the Change in Control, if
greater) and (B) the "Bonus Amount" (as defined below). Notwithstanding
the foregoing, the amount to be paid under this Subsection (ii) shall be
multiplied by a fraction (which in no event shall be greater than
one(1)) the denominator of which shall be the number of months (for this
purpose any partial month shall be considered as a whole month)
remaining until the Executive's 65th birthday and the denominator of
which shall be thirty-six (36). The term "Bonus Amount" shall mean (x)
the greatest amount of any cash bonus or incentive compensation received
by the Executive during the three fiscal years immediately preceding the
Termination Date or (y) if no such bonus was received by the Executive
during any of such three years, then an amount equal to the Executive's
maximum bonus which could be awarded for the fiscal year in which the
Termination Date occurs had he continued in employment until the end of
such fiscal year, assuming all performance targets and goals (if
applicable) had been fully met by the Company or the Subsidiary and by
the Executive, as applicable, for such year;

(iii) for a number of months equal to the lesser of (A) thirty-six
(36) or (B) the number of months remaining until the Executive's 65th
birthday, the Company or the Subsidiary shall at its expense continue on
behalf of the Executive and his dependents and beneficiaries the life
insurance, disability, medical, dental and hospitalization benefits
which were being provided to the Executive at the time Notice of
Termination is given (or, if the Executive is terminated following a
Change in Control, the benefits provided to the Executive at the time of
the Change in Control, if greater). The benefits provided in this
Section 9(b) (iii) shall be no less favorable to the Executive, in terms
of amounts and deductibles and costs to him, than the coverage provided
the Executive under the plans providing such benefits at the time Notice
of Termination is given (or, if the Executive is terminated following a
Change in Control, at the time of the Change in Control if more
favorable to the Executive). The Company's obligation hereunder with
respect to the foregoing benefits shall be limited to the extent that
the Executive obtains any such benefits pursuant to a subsequent
employer's benefit plans, in which case the Company or the Subsidiary
may reduce the coverage of any benefits it is required to provide the
Executive hereunder as long as the aggregate coverage of the combined
benefit plans is no less favorable to the Executive, in terms of amounts
and deductibles and costs to him, than the coverage required to be
provided hereunder. This Subsection (iii) shall not be interpreted so as
to limit any benefits to which the Executive or his dependents may be
entitled under any of the Company's or Subsidiary's employee benefit
plans, programs or practices following the Executive's termination of
employment, including without limitation, retiree medical and life
insurance benefits;

(iv) The Company or the Subsidiary shall pay in a single payment an
amount in cash equal to the excess of (A) the actuarial equivalent of
the aggregate retirement benefit the Executive would have been entitled
to receive under the Company's or the Subsidiary's supplemental and
excess retirement plans had (x) the Executive remained employed by the
Company for an additional three (3) complete years of credited service
(or until his 65th birthday, (if earlier)), (y) his annual

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<PAGE> 7

compensation during such period been equal to his Base Salary (at the
rate used for purposes of Section 9(b)(ii)) and the Bonus Amount, and
(z) he has been fully (100%) vested in his benefit under each such
retirement plan, over (B) the actuarial equivalent of the aggregate
retirement benefit the Executive is actually entitled to receive under
such retirement plans. For purposes of this Subsection (iv), "actuarial
equivalent" shall be determined in accordance with the actuarial
assumptions used for the calculation of benefits under any Retirement
Plan as applied prior to the Termination Date in accordance with such
plan's past practices (but shall in any event take into account; the
value of any subsidized early retirement benefit); and

(c) The amounts provided for in Sections 9(a) and 9(b)(i), (ii) and
(iv) shall be paid within five (5) days after the Executive' s Termination
Date.

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<TABLE>
<S> <C>
ICN Pharmaceuticals, Inc.

ATTEST: By: /s/
MILAN PANIC
/s/ -----------------------------------------
DAVID C. WATT Milan Panic
- ------------------------------------------- Title: President and Chief
Secretary Executive Officer
SPI Pharmaceuticals, Inc.
By: /s/
ADAM JERNEY
-----------------------------------------
Adam Jerney
VIRATEK, INC.
By: /s/
DAVID C. WATT
-----------------------------------------
ICN BIOMEDICALS, INC.
By: /s/
RICHARD M. FALLIS
-----------------------------------------
Richard M. Fallis
The "Executive"
By: /s/
BILL A. MACDONALD
-----------------------------------------
Bill A. MacDonald
</TABLE>

<PAGE> 1

EXHIBIT 11.1

STATEMENT RE COMPUTATION OF PRO FORMA PER SHARE EARNINGS
ICN MERGER CORP.
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The computation of pro forma net income per share for the year ended
December 31, 1993 and for the six months ended June 30, 1994 is as follows:

SIX
MONTHS
ENDED
DECEMBER 31, JUNE 30,
1993 1994
------------- -------
<S> <C> <C>
PRIMARY
Net income......................................... $ 3,545 $ 3,415
======= =======
Average common shares outstanding.................. 26,234 26,971
Dilutive common equivalent shares issuable upon the
exercise of options currently outstanding to
purchase common shares of ICN Merger Corp........ 413 506
------- -------
26,647 27,477
======= =======
Net income per share............................... $ 0.13 $ 0.12
======= =======
FULLY DILUTED
Net income......................................... $ 3,545 $ 3,415
Conversion of debentures........................... 13,798 6,873
------- -------
$17,343 $10,288
======= =======
Average common shares outstanding.................. 26,234 26,971
Dilutive common equivalent shares issuable upon the
exercise of options currently outstanding to
purchase common shares of ICN Merger Corp........ 619 808
Conversion of debentures........................... 8,752 8,752
------- -------
35,605 36,531
======= =======
Net income per share............................... $ 0.49 $ 0.28
======= =======
</TABLE>

<PAGE> 1

EXHIBIT 11.2

STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
SPI PHARMACEUTICALS, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)

Computations of net income per share for the years ended December 31, 1991,
1992, and 1993 and for the first six months of 1993 and 1994 follow:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-----------------
1991(1) 1992(1) 1993(1) 1993(1) 1994
------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C>
PRIMARY
Net income....................................... $30,126 $34,503 $21,510 $ 6,827 $13,609
======= ======= ======= ======= =======
Average common shares outstanding................ 18,616 19,194 19,752 19,563 20,327
Dilutive common equivalent shares issuable upon
the exercise of options currently outstanding
to purchase common shares...................... 764 654 405 435 488
------- ------- ------- ------- -------
19,380 19,848 20,157 19,998 20,815
======= ======= ======= ======= =======
Net income per share............................. $ 1.55 $ 1.74 $ 1.07 $ .34 $ .65
======= ======= ======= ======= =======
FULLY DILUTED
Net income....................................... $30,126 $34,503 $21,510 $ 6,827 $13,609
======= ======= ======= ======= =======
Average common shares outstanding................ 18,616 19,194 19,752 19,563 20,327
Dilutive common equivalent shares issuable upon
the exercise of options currently outstanding
to purchase common shares...................... 764 654 405 435 488
------- ------- ------- ------- -------
19,380 19,848 20,157 19,998 20,815
======= ======= ======= ======= =======
Net income per share............................. $ 1.55 $ 1.74 $ 1.07 $ .34 $ .65
======= ======= ======= ======= =======
</TABLE>

- ---------------

(1) In March and July 1991, SPI issued 10% and 15% stock distributions,
respectively, which resulted in a 26% stock split. In January 1993, SPI
issued a fourth quarter 1992 stock dividend of 2%. During 1993, SPI issued
additional stock dividends which totaled 6%. In January and May 1994, SPI
declared a first and second quarter 1994 stock dividend of 1.4% and 1.3%,
respectively. All per share amounts have been restated to reflect these
stock splits and dividends.

<PAGE> 1

EXHIBIT 11.3

STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
ICN PHARMACEUTICALS, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The computation of net income (loss) per share for the years ended December
31, 1991, 1992 and 1993 and for the first six months of 1993 and 1994 as
follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1991 1992 1993 1993 1994
------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PRIMARY
Net income (loss)............................ $ 5,855 $(64,802) $(11,270) $ (1,903) $(11,377)
Dilution in earnings which would result upon
the exercise of options and warrants
currently outstanding to purchase common
shares of subsidiaries..................... (745) (603) -- (4) (11)
------- -------- -------- -------- --------
$ 5,110 $(65,405) $(11,270) $ (1,907) $(11,388)
======= ======== ======== ======== ========
Average common shares outstanding............ 11,776 14,010 19,813 19,135 20,526
Dilutive common equivalent shares issuable
upon the exercise of options and warrants
currently outstanding to purchase common
shares of ICN Pharmaceuticals, Inc......... 1,053 -- -- -- --
------- -------- -------- -------- --------
12,829 14,010 19,813 19,135 20,526
------- -------- -------- -------- --------
Net income (loss) per share.................. $ .40 $ (4.67) $ (.57) $ (.10) $ (.55)
======= ======== ======== ======== ========
FULLY DILUTED
Net income................................... 5,855 (64,802) (11,270) (1,903) (11,377)
Dilution in earnings which would result upon
the exercise of options and warrants
currently outstanding to purchase common
shares..................................... (745) (603) -- (4) (11)
Conversion of debentures..................... 4,835 3,950 3,233 1,625 1,099
------- -------- -------- -------- --------
9,945 (61,455) (8,037) (282) (10,289)
------- -------- -------- -------- --------
Average common shares outstanding............ 11,776 14,010 19,813 19,135 20,526
Dilutive common equivalent shares issuable
upon the exercise of options and warrants
currently outstanding to purchase common
shares of ICN Pharmaceuticals, Inc......... 1,539 1,188 594 754 314
Conversion of debentures..................... 3,671 3,441 2,863 3,441 2,827
------- -------- -------- -------- --------
16,986 18,639 23,270 23,330 23,667
------- -------- -------- -------- --------
Net income (loss) per share.................. $ .58 $ (3.30) $ (.35) $ (.01) $ (.43)
======= ======== ======== ======== ========
</TABLE>

<PAGE> 1

EXHIBIT 11.4

STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
VIRATEK, INC.
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The computation of net income per share for the years ended December 31,
1991, 1992 and 1993 and for the first six months of 1993 and 1994 is as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1991(1) 1992(1) 1993(1) 1993(1) 1994
-------- ------- ------- -------- --------
<S> <C> <C> <C> <C> <C>
PRIMARY
Net income (loss)............................. $ 3,587 $ 1,817 $ (822) $ (822) $ (1,331)
-------- ------- ------- -------- --------
Average common shares outstanding............. 14,747 14,838 16,937 16,228 18,113
Dilutive common equivalent shares issuable
upon the exercise of options and warrants
currently outstanding to purchase common
shares...................................... 355 411 -- -- --
-------- ------- ------- -------- --------
15,102 15,249 16,937 16,228 18,113
-------- ------- ------- -------- --------
Net income (loss) per share................... $ .24 $ .12 $ (.05) $ (.05) $ (.07)
======== ======= ======= ======== ========
FULLY DILUTED
Net income (loss)............................. $ 3,587 $ 1,817 $ (822) $ (822) $ (1,331)
-------- ------- ------- -------- --------
Average common shares outstanding............. 14,747 14,838 16,937 16,228 18,113
Dilutive common equivalent shares issuable
upon the exercise of options and warrants
currently outstanding to purchase common
shares...................................... 457 400 407 786 281
-------- ------- ------- -------- --------
15,204 15,238 17,344 17,014 18,394
======== ======= ======= ======== ========
Net income (loss) per share................... $ .24 $ .12 $ (.05) $ (.05) $ (.07)
======== ======= ======= ======== ========
</TABLE>

- ---------------

(1) In December 1993, Viratek declared a fourth quarter 1993 stock dividend of
5%. All share and per share amounts have been restated to reflect this stock
dividend.

<PAGE> 1

EXHIBIT 11.5

STATEMENT RE COMPUTATION OF PER SHARE EARNINGS
ICN BIOMEDICALS, INC.

(IN THOUSANDS, EXCEPT PER SHARE DATA)

The computations of net income (loss) per share for the years ended
December 31, 1991, 1992, and 1993 and for the first six months of 1993 and 1994
are as follows:

<TABLE>
<CAPTION>
SIX MONTHS ENDED
JUNE 30,
-------------------
1991 1992 1993 1993 1994
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
PRIMARY
Net income (loss)........................... $(12,892) $(87,420) $ 1,762 $ 4,400 $ 1,050
======== ======== ======== ======== ========
Average common shares outstanding........... 11,790 18,224 17,895 22,399 9,034
Dilutive common equivalent shares issuable
upon the exercise of options and warrants
currently outstanding to purchase common
shares.................................... -- -- 69 41 94
-------- -------- -------- -------- --------
11,790 18,224 17,964 22,440 9,128
======== ======== ======== ======== ========
Net income (loss) per share................. $ (1.09) $ (4.80) $ .10 $ .20 $ .12
======== ======== ======== ======== ========
Fully diluted:
Net income (loss)........................... $(12,892) $(87,420) $ 1,762 $ 4,400 $ 1,050
Add back: Interest expense, net of tax,
applicable to convertible debt............ 831 778 668 324 327
Accretion, net of tax, on Danish bonds
acquired if debt converted................ 1,667 662 552 261 279
-------- -------- -------- -------- --------
$(10,394) $(85,980) $ 2,982 $ 4,985 $ 1,656
======== ======== ======== ======== ========
Average common shares outstanding........... 11,790 18,224 17,895 22,399 9,034
Dilutive common equivalent shares issuable
upon the exercise of options and warrants
currently outstanding to purchase common
shares.................................... 118 55 82 41 94
Shares issuable upon conversion of debt..... 3,003 2,778 2,608 2,608 2,608
-------- -------- -------- -------- --------
14,911 21,057 20,585 25,048 11,736
======== ======== ======== ======== ========
Net income (loss) per share................. $ (.70) $ (4.08) $ .14 $ .20 $ .14
======== ======== ======== ======== ========
</TABLE>

<PAGE> 1

EXHIBIT 15

LETTER OF AWARENESS

September 28, 1994

Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549

Re: ICN Merger Corp.
Registration Statement
on Form S-4

We are aware that our report dated August 4, 1994 and May 11, 1994 on our
reviews of interim financial information of ICN Pharmaceuticals, Inc. as of June
30, 1994 and for the three and six month periods ended June 30, 1994 and 1993
and as of March 31, 1994 and for the three month period ended March 31, 1994,
are included and incorporated by reference, respectively, in this Registration
Statement on Form S-4 (File No. 33- ). Pursuant to Rule 436(c) under the
Securities Act of 1933, these reports should not be considered a part of the
registration statement prepared or certified by us within the meaning of
Sections 7 and 11 of that Act.

Very truly yours,

COOPERS & LYBRAND L.L.P.

<PAGE> 1

EXHIBIT 21

<TABLE>
<CAPTION>
PERCENTAGE OF
VOTING
SECURITIES OWNED
JURISDICTION OF BY COMPANY OR
NAME INCORPORATION SUBSIDIARY
- ---------------------------------------------------------- ---------------- -------------------
<S> <C> <C>
Viratek, Inc. ............................................ Delaware 63
SPI Pharmaceuticals, Inc. ................................ Delaware 39
ICN Canada Holding, Limited............................... Canada 100
ICN Canada, Limited....................................... Canada 100
Laboratorios Panol, S.A. de C.V. ......................... Mexico 100
ICN Farmaceutica, S.A. ................................... Mexico 100
Laboratorios Grossman, S.A. .............................. Mexico 100
ICN Pharmaceuticals Holland, B.V. ........................ Netherlands 100
Laboratorios Hubber, S.A. ................................ Spain 100
COVOCO Holdings, B.V. .................................... Netherlands 100
ICN Galenika.............................................. Yugoslavia 75
Oculenti, B.V. ........................................... Netherlands 100
Faraday Urban Renewal Corporation......................... New Jersey 100
ICN Biomedicals, Inc. .................................... Delaware 69
ICN Biomedicals GmbH-Eschwege............................. Germany 100
ICN Biomedicals Canada, Ltd............................... Canada 100
ICN Biomedicals, Ltd...................................... Scotland 100
Flow Laboratories, Inc. .................................. Maryland 100
ICN Biomedicals Australasia Pty Ltd....................... New South Wales 100
ICN Biomedicals Japan Co. Ltd............................. Japan 100
Amstelstad A.G. .......................................... Switzerland 100
ICN Biomedicals B.V. ..................................... Netherlands 100
Labsystems Benelux B.V. .................................. Netherlands 100
Labsystems Benelux N.V. .................................. Belgium 100
ICN Biomedicals, GmbH..................................... Germany 100
Labsystems GmbH........................................... Germany 100
Flow Laboratories B.V. ................................... Netherlands 100
Flow Trading A.G. ........................................ Switzerland 100
ICN Biomedicals N.V./S.A. ................................ Belgium 100
ICN Biomedicals California, Inc. ......................... California 100
ICN France SARL........................................... France 100
ICN Biomedicals S.R.L. ................................... Italy 100
Alpha Pharmaceuticals Inc. ............................... Panama 100
</TABLE>

In accordance with the instructions of Item 601 of Regulation S-K, certain
subsidiaries are omitted from the foregoing table.

<PAGE> 1

EXHIBIT 23.1

INDEPENDENT AUDITOR'S CONSENT

We consent to the inclusion in this Registration Statement on Form S-4
(File No. 33- ) of our report dated March 30, 1994, on our audits of the
consolidated financial statements of ICN Pharmaceuticals, Inc. as of December
31, 1993 and 1992, and for each of the three years in the period ended December
31, 1993. The report referred to above include an emphasis of a matter paragraph
related to certain transactions between affiliates and an explanatory paragraph
referring to the change to the equity method of accounting for a previously
consolidated subsidiary.

We consent to the inclusion in this Registration Statement on Form S-4
(File No. 33- ) of our report dated February 24, 1994, except for Note 15 to
which the date is March 24, 1994, on our audits of the consolidated financial
statements of SPI Pharmaceuticals, Inc. as of December 31, 1993 and 1992, and
for each of the three years in the period ended December 31, 1993. The report
referred to above include an emphasis of a matter paragraph related to certain
transactions between affiliates.

We consent to the inclusion in this Registration Statement on Form S-4
(File No. 33- ) of our report dated March 4, 1994, on our audit of the
consolidated financial statements of Viratek, Inc. as of December 31, 1993 and
1992, and for each of the three years in the period ended December 31, 1993. The
report referred to above includes an emphasis of a matter paragraph related to
certain transactions between affiliates.

We consent to the inclusion in this Registration Statement on Form S-4
(File No. 33- ) of our report dated March 30, 1994, on our audits of the
consolidated financial statements of ICN Biomedicals, Inc. as of December 31,
1993 and 1992, and for each of the three years in the period ended December 31,
1993. The report referred to above include an emphasis of a matter paragraph
related to certain transactions between affiliates.

We also consent to the reference to us under the heading "Experts"
appearing in this Registration Statement.

COOPERS & LYBRAND L.L.P.

September 28, 1994
Los Angeles, California

<PAGE> 1

EXHIBIT 23.3

[PRUDENTIAL SECURITIES LETTERHEAD]

September 28, 1994

ICN Merger Corp.
3300 Hyland Avenue
Costa Mesa, California 92626

Dear Sirs:

We hereby consent to the inclusion in the Registration Statement on Form
S-4, relating to the proposed merger of ICN Pharmaceuticals, Inc., SPI
Pharmaceuticals, Inc., Viratek, Inc., ICN Biomedicals, Inc. and ICN Merger
Corp., of our opinion letter appearing as Appendix B in the Joint Proxy
Statement/Prospectus, which is a part of the Registration Statement, and the
references thereto which appear under the captions "SUMMARY -- Opinions of
Financial Advisers -- ICN," "THE MERGER -- Background of the Merger," "THE
MERGER -- Reasons for the Merger; Recommendations of the Special Committees and
the Boards of Directors -- ICN;" and "THE MERGER -- Opinions of Financial
Advisors -- ICN." In giving such consent, we do not thereby admit that we come
within the category of persons whose consent is required under Section 7 of the
Securities Act of 1933 or the rules and regulations adopted by the Securities
and Exchange Commission thereunder.

Very truly yours,

PRUDENTIAL SECURITIES INCORPORATED
------------------------------------
Prudential Securities Incorporated

<PAGE> 1

EXHIBIT 23.4

(Letterhead)

September 27, 1994

The Board of Directors of:
SPI Pharmaceuticals, Inc.
3300 Hyland Avenue
Costa Mesa, CA 92626

Gentlemen:

Wertheim Schroder & Co. Incorporated hereby consents to the filing of our
fairness opinion dated September 27, 1994 as an exhibit to the Registration
Statement on Form S-4 of ICN Merger Corp. (The "Company") and the inclusion of
such opinion in the proxy materials related to the proposed merger transaction.
We also consent to the reference to this firm under the captions
"Summary -- Opinions of Financial Advisors" and "The Merger -- Opinions of
Financial Advisors" in the Registration Statement and elsewhere in the
Registration Statement. Under the proposed merger, SPI Pharmaceuticals, Inc.
would be combined with the Company, ICN Pharmaceuticals, Inc. ("ICN"), Viratek,
Inc. ("Viratek") and ICN Biomedicals, Inc. ("Biomedicals"). This letter does not
imply permission to use the fairness opinion for any other purpose, except as
stipulated in the opinion letter itself, and is not to be construed as an
admission that we are a person whose consent is required to be filed with the
Registration Statement on Form S-4 under the provisions of the Securities Act of
1933.

Very truly yours,

WERTHEIM SCHRODER & CO.
Incorporated

<PAGE> 1

EXHIBIT 23.5

[KEMPER SECURITIES LETTERHEAD]

September 27, 1994

ICN Merger Corp.
3300 Hyland Avenue
Costa Mesa, California 92626

Dear Sirs:

We hereby consent to the inclusion in the Registration Statement on Form
S-4, relating to the proposed merger of ICN Pharmaceuticals, Inc., SPI
Pharmaceuticals, Inc., Viratek, Inc., ICN Biomedicals, Inc. and ICN Merger
Corp., of our opinion letter appearing as Appendix D in the Joint Proxy
Statement/Prospectus, which is a part of the Registration Statement, and the
references thereto which appear under the Captions "SUMMARY -- Opinions of
Financial Advisers -- Viratek," "THE MERGER -- Background of the Merger," "THE
MERGER -- Reasons for the Merger; Recommendatrions of the Special Committees and
the Boards of Directors -- Viratek;" and "THE MERGER -- Opinions of Financial
Advisors -- Viratek." In giving such consent, we do not thereby admit that we
come within the category of persons whose consent is required under Section 7 of
the Securities Act of 1933 or the rules and regulations adopted by the
Securities and Exchange Commission thereunder.

Very truly yours,

KEMPER SECURITIES, INC.
-------------------------------------
Kemper Securities, Inc.

<PAGE> 1

EXHIBIT 23.6

(Jefferies & Company Letterhead)

September 27, 1994

ICN MERGER CORP.
3300 Hyland Avenue
Costa Mesa, CA 92626

Dear Sirs:

Very truly yours,

JEFFERIES & COMPANY
--------------------------------------
Jefferies & Company, Inc.

<PAGE> 1

EXHIBIT 23.7

[LETTERHEAD]

September 27, 1994

ICN Merger Corp.
3300 Hyland Avenue
Costa Mesa, CA 92626

Dear Sirs:

We hereby consent to the inclusion in the Registration Statement on Form S-4,
relating to the proposed merger of ICN Pharmaceuticals, Inc., SPI
Pharmaceuticals, Inc., Viratek, Inc. ("Viratek"), ICN Biomedicals, Inc.
("Biomedicals") and ICN Merger Corp., of the references to our appraisal of
certain of the assets of Viratek and Biomedicals in the Joint Proxy
Statement/Prospectus which is a part of the Registration Statement. In giving
such consent, we do not thereby admit that we come within the category of
persons whose consent is required under Section 7 of the Securities Action of
1933 or the rules and regulations adopted by the Securities and Exchange
Commission thereunder.

Very truly yours,

HOULIHAN, LOKEY, HOWARD & ZUKINK, INC.

<PAGE> 1

EXHIBIT 23.8.1

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

The undersigned hereby consents to the inclusion of his name in this
Registration Statement on Form S-4 (File No. 33- ) as a person to
become a director of ICN Merger Corp. upon the consummation of the merger
involving ICN Merger Corp., ICN Pharmaceuticals, Inc., SPI Pharmaceuticals,
Inc., Viratek, Inc. and ICN Biomedicals, Inc.

September 23, 1994 /s/ MICHAEL SMITH
---------------------------------
Michael Smith

<PAGE> 1

EXHIBIT 23.8.2

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 19, 1994 /s/ STEPHEN MOSES
---------------------------------
Stephen Moses

<PAGE> 1

EXHIBIT 23.8.3

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 16, 1994 /s/ NORMAN BARKER
--------------------------------
Norman Barker

<PAGE> 1

EXHIBIT 23.8.4

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 15, 1994 /s/ ROGER GUILLEMIN
---------------------------------
Roger Guillemin

<PAGE> 1

EXHIBIT 23.8.5

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 15, 1994 /s/ BIRCH BAYH
---------------------------------
Birch Bayh

<PAGE> 1

EXHIBIT 23.8.6

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 15, 1994 /s/ VERNON KNIGHT
----------------------------------
Vernon Knight

<PAGE> 1

EXHIBIT 23.8.7

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 16, 1994 /s/ WELDON JOLLEY
--------------------------------
Weldon Jolley

<PAGE> 1

EXHIBIT 23.8.8

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 14, 1994 /s/ JEAN-FRANCOIS KURZ
-----------------------------------
Jean-Francois Kurz

<PAGE> 1

EXHIBIT 23.8.9

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 17, 1994 /s/ THOMAS LENAGH
----------------------------------
Thomas Lenagh

<PAGE> 1

EXHIBIT 23.8.10

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 17, 1994 /s/ CHARLES MANATT
---------------------------------
Charles Manatt

<PAGE> 1

EXHIBIT 23.8.11

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 18, 1994 /s/ MILAN PANIC
---------------------------------
Milan Panic

<PAGE> 1

EXHIBIT 23.8.12

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 19, 1994 /s/ ROBERTS A. SMITH
-----------------------------
Roberts A. Smith

<PAGE> 1

EXHIBIT 23.8.13

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 15, 1994 /s/ ROBERT FINCH
---------------------------------
Robert Finch

<PAGE> 1

EXHIBIT 23.8.14

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 16, 1994 /s/ ADAM JERNEY
-------------------------------
Adam Jerney

<PAGE> 1

EXHIBIT 23.8.15

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 17, 1994 /s/ JAMES MISCOLL
--------------------------------
James Miscoll

<PAGE> 1

EXHIBIT 23.8.16

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 18, 1994 /s/ ALAN CHARLES
-------------------------------
Alan Charles

<PAGE> 1

EXHIBIT 23.8.17

CONSENT OF PERSONS ABOUT TO BECOME DIRECTORS

September 20, 1994 /s/ RICHARD STARR
----------------------------------
Richard Starr
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 5
<CIK> 0000049601
<NAME> ICN PHARMACEUTICALS INC.
<MULTIPLIER> 1000

<S> <C> <C>
<PERIOD-TYPE> QTR-2 YEAR
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1993
<PERIOD-START> JAN-01-1994 JAN-01-1993
<PERIOD-END> JUN-30-1994 DEC-31-1993
<CASH> 14,526 24,170
<SECURITIES> 0 0
<RECEIVABLES> 14,134 12,122
<ALLOWANCES> 0 2,400
<INVENTORY> 15,473 15,601
<CURRENT-ASSETS> 53,204 74,685
<PP&E> 0 59,963
<DEPRECIATION> 0 23,720
<TOTAL-ASSETS> 188,640 207,856
<CURRENT-LIABILITIES> 45,078 45,058
<BONDS> 132,000 139,047
<COMMON> 20,529 20,519
0 0
0 0
<OTHER-SE> (28,554) (16,499)
<TOTAL-LIABILITY-AND-EQUITY> 188,640 207,856
<SALES> 32,843 62,556
<TOTAL-REVENUES> 32,843 62,556
<CGS> 13,500 27,631
<TOTAL-COSTS> 21,181 27,151
<OTHER-EXPENSES> 1,010 1,079
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 8,734 19,589
<INCOME-PRETAX> (11,582) (12,894)
<INCOME-TAX> (32) (474)
<INCOME-CONTINUING> 0 (11,897)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 627
<CHANGES> 0 0
<NET-INCOME> (11,377) (11,270)
<EPS-PRIMARY> (.55) (.57)
<EPS-DILUTED> 0 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 5
<CIK> 0000723046
<NAME> SPI PHARMACEUTICALS
<MULTIPLIER> 1000

<S> <C> <C>
<PERIOD-TYPE> QTR-2 YEAR
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1993
<PERIOD-START> JAN-01-1994 JAN-01-1993
<PERIOD-END> JUN-30-1994 DEC-31-1993
<CASH> 19,238 14,777
<SECURITIES> 0 32,587
<RECEIVABLES> 50,279 43,277
<ALLOWANCES> 0 7,633
<INVENTORY> 91,883 107,196
<CURRENT-ASSETS> 178,865 208,762
<PP&E> 0 108,915
<DEPRECIATION> 0 30,197
<TOTAL-ASSETS> 305,131 302,017
<CURRENT-LIABILITIES> 74,714 81,503
<BONDS> 16,154 16,980
<COMMON> 204 202
0 0
0 0
<OTHER-SE> 165,196 155,677
<TOTAL-LIABILITY-AND-EQUITY> 305,131 302,017
<SALES> 151,094 403,957
<TOTAL-REVENUES> 151,094 403,957
<CGS> 77,783 211,923
<TOTAL-COSTS> 50,270 137,391
<OTHER-EXPENSES> 1,099 3,826
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 3,046 23,750
<INCOME-PRETAX> 18,896 27,067
<INCOME-TAX> 4,854 5,368
<INCOME-CONTINUING> 0 21,510
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> 13,609 21,510
<EPS-PRIMARY> .65 1.08
<EPS-DILUTED> 0 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 5
<CIK> 0000351237
<NAME> VIRATEK INC.
<MULTIPLIER> 1000

<S> <C> <C>
<PERIOD-TYPE> QTR-2 YEAR
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1993
<PERIOD-START> JAN-01-1994 JAN-01-1993
<PERIOD-END> JUN-30-1994 DEC-31-1993
<CASH> 11,564 17,698
<SECURITIES> 0 0
<RECEIVABLES> 0 0
<ALLOWANCES> 0 0
<INVENTORY> 0 0
<CURRENT-ASSETS> 11,590 17,718
<PP&E> 0 1,562
<DEPRECIATION> 0 1,358
<TOTAL-ASSETS> 34,165 35,248
<CURRENT-LIABILITIES> 1,175 913
<BONDS> 0 0
<COMMON> 1,811 1,811
0 0
0 0
<OTHER-SE> 30,924 32,264
<TOTAL-LIABILITY-AND-EQUITY> 34,165 35,248
<SALES> 3,570 5,903
<TOTAL-REVENUES> 3,570 5,903
<CGS> 0 0
<TOTAL-COSTS> 4,896 6,971
<OTHER-EXPENSES> 0 (132)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 0 0
<INCOME-PRETAX> (1,326) (836)
<INCOME-TAX> 5 (14)
<INCOME-CONTINUING> (1,331) (822)
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 0
<CHANGES> 0 0
<NET-INCOME> (1,331) (822)
<EPS-PRIMARY> (.05) (.05)
<EPS-DILUTED> 0 0

</TABLE>
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.

<ARTICLE> 5
<CIK> 0000798166
<NAME> ICN BIOMEDICALS
<MULTIPLIER> 1000

<S> <C> <C>
<PERIOD-TYPE> QTR-2 YEAR
<FISCAL-YEAR-END> DEC-31-1993 DEC-31-1993
<PERIOD-START> JAN-01-1994 JAN-01-1993
<PERIOD-END> JUN-30-1994 DEC-31-1993
<CASH> 850 765
<SECURITIES> 0 0
<RECEIVABLES> 13,173 11,574
<ALLOWANCES> 0 2,400
<INVENTORY> 15,473 15,601
<CURRENT-ASSETS> 32,098 31,181
<PP&E> 0 32,928
<DEPRECIATION> 0 17,200
<TOTAL-ASSETS> 52,195 51,831
<CURRENT-LIABILITIES> 18,439 20,425
<BONDS> 10,768 10,567
<COMMON> 90 90
0 0
7 7
<OTHER-SE> 12,814 12,544
<TOTAL-LIABILITY-AND-EQUITY> 52,195 51,831
<SALES> 30,658 59,076
<TOTAL-REVENUES> 30,658 59,076
<CGS> 13,500 27,631
<TOTAL-COSTS> 14,552 30,765
<OTHER-EXPENSES> 592 (2,399)
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 1,066 2,256
<INCOME-PRETAX> 948 823
<INCOME-TAX> (102) (312)
<INCOME-CONTINUING> 1,050 1,135
<DISCONTINUED> 0 0
<EXTRAORDINARY> 0 (827)
<CHANGES> 0 0
<NET-INCOME> 1,050 1,762
<EPS-PRIMARY> .12 .10
<EPS-DILUTED> 0 0

</TABLE>

<PAGE> 1

EXHIBIT 99.1

PRELIMINARY COPIES -- CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY

ICN PHARMACEUTICALS, INC.
3300 HYLAND AVENUE, COSTA MESA, CALIFORNIA 92626
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON NOVEMBER 1, 1994

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ICN
PHARMACEUTICALS, INC.

The undersigned hereby appoints Milan Panic and David C. Watt as Proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all the shares of common stock of
ICN Pharmaceuticals, Inc. (the "Company") held of record by the undersigned on
October 3, 1994 at the annual meeting of stockholders to be held at 9:00 a.m.
local time on November 1, 1994 or any adjournments or postponements thereof.

THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED IN THE MANNER DIRECTED HEREIN
BY THE UNDERSIGNED STOCKHOLDER. IF NO INSTRUCTIONS ARE INDICATED HEREIN, THIS
PROXY WILL BE TREATED AS A GRANT OF AUTHORITY TO VOTE "FOR" PROPOSALS 1, 3 AND 4
AND "FOR" THE NOMINEES TO THE BOARD OF DIRECTORS LISTED ON THE REVERSE SIDE OF
THIS PROXY CARD.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSALS 1, 3 AND
4 AND FOR THE NOMINEES TO THE BOARD OF DIRECTORS LISTED BELOW.

(Continued and to be signed on other side)

1. PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER, DATED AS
OF AUGUST 1, 1994, AS AMENDED, BY AND AMONG THE COMPANY, SPI
PHARMACEUTICALS, INC., VIRATEK, INC., ICN BIOMEDICALS, INC. AND ICN
MERGER CORP. AND THE TRANSACTIONS CONTEMPLATED THEREBY.

/ / FOR / / AGAINST / / ABSTAIN

2. ELECTION OF THE NOMINEES LISTED BELOW TO THE BOARD OF DIRECTORS OF THE
COMPANY.

/ / FOR ALL NOMINEES LISTED BELOW / / WITHHOLD AUTHORITY
(except as marked to the contrary to vote for nominees
below) listed below

(Instruction: To withhold authority to vote for any individual nominee(s), write
the name(s) of such nominee(s) in the following space)

- --------------------------------------------------------------------------------

<TABLE>
<S> <C> <C> <C> <C>
Norman Barker, Jr. Robert H. Finch Adam Jerney Milan Panic Roberts A. Smith
Birch E. Bayh Roger Guillemin Weldon B. Jolley Michael Smith Richard W. Starr

</TABLE>

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR" THE
NOMINEES OF THE BOARD
3. PROPOSAL TO APPROVE THE AMENDED AND RESTATED 1992 ICN PHARMACEUTICALS,
INC. NON-QUALIFIED STOCK OPTION PLAN, WHICH AMENDMENT AND RESTATEMENT
INCREASED THE NUMBER OF SHARES AVAILABLE FOR GRANT THEREUNDER FROM 500,000
TO 1,250,000 SHARES OF ICN COMMON STOCK AND PROVIDED THAT THE MAXIMUM
NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO ANY
INDIVIDUAL DURING THE TERM OF THE PLAN MAY NOT EXCEED 400,000 SHARES.

/ / FOR / / AGAINST / / ABSTAIN

4. PROPOSAL TO APPROVE THE AMENDED AND RESTATED 1992 ICN PHARMACEUTICALS,
INC. INCENTIVE STOCK OPTION PLAN, WHICH AMENDMENT AND RESTATEMENT
INCREASED THE NUMBER OF SHARES AVAILABLE FOR GRANT THEREUNDER FROM 500,000
TO 750,000 SHARES OF ICN COMMON STOCK AND PROVIDED THAT THE MAXIMUM NUMBER
OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO ANY INDIVIDUAL
DURING THE TERM OF THE PLAN MAY NOT EXCEED 200,000 SHARES.

/ / FOR / / AGAINST / / ABSTAIN

5. IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

Print and sign your name below exactly as it appears hereon. When Shares are
registered in the name of more than one person, the proxy card must be signed by
all named holders. When signing as attorney, executor, administrator, trustee or
guardian, please give full title, as such. If a corporation, please sign as full
corporate name by president or authorized officer. If a partnership, please sign
in partnership name by authorized person.
The undersigned acknowledges
receipt of the copy of the
Notice of Annual Meeting and
Proxy Statement/Prospectus (with
all enclosures and attachments)
relating to the meeting. THE
BOARD OF DIRECTORS OF THE
COMPANY RECOMMENDS THAT YOU
SIGN, DATE AND MAIL THE PROXY
CARD TODAY.

Dated: ___________________, 1994

--------------------------------
Signature (Title, if any)

--------------------------------
Signature, if held jointly

--------------------------------
Print name of Shareholder as it
appears hereon

<PAGE> 1

EXHIBIT 99.2

PRELIMINARY COPIES -- CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY

SPI PHARMACEUTICALS, INC.
3300 HYLAND AVENUE, COSTA MESA, CALIFORNIA 92626
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON NOVEMBER 1, 1994

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF SPI
PHARMACEUTICALS, INC.

The undersigned hereby appoints Milan Panic and M'Liss Jones Kane as Proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all the shares of common stock of
SPI Pharmaceuticals, Inc. (the "Company") held of record by the undersigned on
October 3, 1994 at the annual meeting of stockholders to be held at 10:00 a.m.
local time on November 1, 1994 or any adjournments or postponements thereof.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSALS 1, 3 AND
4 AND FOR THE NOMINEES TO THE BOARD OF DIRECTORS LISTED BELOW.

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR" THE
NOMINEES OF THE BOARD

(Continued and to be signed on other side)

1. PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER, DATED AS
OF AUGUST 1, 1994, AS AMENDED, BY AND AMONG THE COMPANY, ICN
PHARMACEUTICALS, INC., VIRATEK, INC., ICN BIOMEDICALS, INC. AND ICN
MERGER CORP. AND THE TRANSACTIONS CONTEMPLATED THEREBY.

/ / FOR / / AGAINST / / ABSTAIN

2. ELECTION OF THE NOMINEES LISTED BELOW TO THE BOARD OF DIRECTORS OF THE
COMPANY.

/ / FOR ALL NOMINEES LISTED BELOW / / WITHHOLD AUTHORITY
(except as marked to the contrary to vote for nominees
below) listed below

(Instruction: To withhold authority to vote for any individual nominee(s), write
the name(s) of such nominee(s) in the following space)

- --------------------------------------------------------------------------------
Norman Barker, Jr. Roger Guillemin Charles T. Manatt Stephen D. Moses
Alan F. Charles Adam Jerney James P. Miscoll Milan Panic

3. PROPOSAL TO APPROVE THE AMENDED AND RESTATED 1992 SPI PHARMACEUTICALS,
INC. NON-QUALIFIED STOCK OPTION PLAN, WHICH AMENDMENT AND RESTATEMENT
INCREASED THE NUMBER OF SHARES AVAILABLE FOR GRANT THEREUNDER FROM
1,000,000 TO 3,000,000 SHARES OF SPI COMMON STOCK AND PROVIDED THAT THE
MAXIMUM NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO
ANY INDIVIDUAL DURING THE TERM OF THE PLAN MAY NOT EXCEED 500,000 SHARES.

/ / FOR / / AGAINST / / ABSTAIN

4. PROPOSAL TO APPROVE THE AMENDED AND RESTATED 1992 SPI PHARMACEUTICALS,
INC. INCENTIVE STOCK OPTION PLAN, WHICH AMENDMENT AND RESTATEMENT
INCREASED THE NUMBER OF SHARES AVAILABLE FOR GRANT THEREUNDER FROM 500,000
TO 1,000,000 SHARES OF SPI COMMON STOCK AND PROVIDED THAT THE MAXIMUM
NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO ANY
INDIVIDUAL DURING THE TERM OF THE PLAN MAY NOT EXCEED 500,000 SHARES.

/ / FOR / / AGAINST / / ABSTAIN

5. IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

The undersigned acknowledges
receipt of the copy of the
Notice of Annual Meeting and
Proxy Statement/Prospectus (with
all enclosures and attachments)
relating to the meeting. THE
BOARD OF DIRECTORS OF THE
COMPANY RECOMMENDS THAT YOU
SIGN, DATE AND MAIL THE PROXY
CARD TODAY.

Dated: ___________________, 1994

--------------------------------
Signature (Title, if any)

--------------------------------
Signature, if held jointly

--------------------------------
Print name of Shareholder as it
appears hereon

<PAGE> 1

EXHIBIT 99.3

PRELIMINARY COPIES -- CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY

VIRATEK, INC.
3300 HYLAND AVENUE, COSTA MESA, CALIFORNIA 92626
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON NOVEMBER 1, 1994

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF VIRATEK, INC.
The undersigned hereby appoints Milan Panic and Thomas Seoh as Proxies, each
with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all the shares of common stock of
Viratek, Inc. (the "Company") held of record by the undersigned on October 3,
1994 at the annual meeting of stockholders to be held at 11:00 p.m. local time
on November 1, 1994 or any adjournments or postponements thereof.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSALS 1, 3 AND
4 AND FOR THE NOMINEES TO THE BOARD OF DIRECTORS LISTED BELOW.
(Continued and to be signed on other side)

1. PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER, DATED AS
OF AUGUST 1, 1994, AS AMENDED, BY AND AMONG THE COMPANY, ICN
PHARMACEUTICALS, INC., SPI PHARMACEUTICALS, INC., ICN BIOMEDICALS, INC.
AND ICN MERGER CORP. AND THE TRANSACTIONS CONTEMPLATED THEREBY.

/ / FOR / / AGAINST / / ABSTAIN

2. ELECTION OF THE NOMINEES LISTED BELOW TO THE BOARD OF DIRECTORS OF THE
COMPANY.

/ / FOR ALL NOMINEES LISTED BELOW / / WITHHOLD AUTHORITY
(except as marked to the contrary to vote for nominees
below) listed below

(Instruction: To withhold authority to vote for any individual nominee(s), write
the name(s) of such nominee(s) in the following space)

- --------------------------------------------------------------------------------
Robert H. Finch Adam Jerney Milan Panic
Roger Guillemin Vernon Knight, M.D. Roberts A. Smith

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR" THE
NOMINEES OF THE BOARD

3. PROPOSAL TO APPROVE THE AMENDED AND RESTATED 1992 VIRATEK NON-QUALIFIED
STOCK OPTION PLAN, WHICH AMENDMENT AND RESTATEMENT INCREASED THE NUMBER OF
SHARES AVAILABLE FOR GRANT THEREUNDER FROM 500,000 TO 1,000,000 SHARES OF
VIRATEK COMMON STOCK AND PROVIDED THAT THE MAXIMUM NUMBER OF SHARES WITH
RESPECT WHICH OPTIONS MAY BE GRANTED TO ANY INDIVIDUAL DURING THE TERM OF
THE PLAN MAY NOT EXCEED 400,000 SHARES.

/ / FOR / / AGAINST / / ABSTAIN
4. PROPOSAL TO APPROVE THE AMENDED AND RESTATED 1992 VIRATEK INCENTIVE STOCK
OPTION PLAN, WHICH AMENDMENT AND RESTATEMENT INCREASED THE NUMBER OF
SHARES AVAILABLE FOR GRANT THEREUNDER FROM 500,000 TO 1,000,000 SHARES OF
VIRATEK COMMON STOCK AND PROVIDED THAT THE MAXIMUM NUMBER OF SHARES WITH
RESPECT TO WHICH OPTIONS MAY BE GRANTED TO ANY INDIVIDUAL DURING THE TERM
OF THE PLAN MAY NOT EXCEED 400,000 SHARES.
/ / FOR / / AGAINST / / ABSTAIN

5. IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

The undersigned acknowledges
receipt of the copy of the
Notice of Annual Meeting and
Proxy Statement/ Prospectus
(with all enclosures and
attachments) relating to the
meeting. THE BOARD OF DIRECTORS
OF THE COMPANY RECOMMENDS THAT
YOU SIGN, DATE AND MAIL THE
PROXY CARD TODAY.

Dated: ___________________, 1994

--------------------------------
Signature (Title, if any)

--------------------------------
Signature, if held jointly

--------------------------------
Print name of Shareholder as it
appears hereon

<PAGE> 1

EXHIBIT 99.4

PRELIMINARY COPIES -- CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY

ICN BIOMEDICALS, INC.
3300 HYLAND AVENUE, COSTA MESA, CALIFORNIA 92626
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON NOVEMBER 1, 1994

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ICN
BIOMEDICALS, INC.

The undersigned hereby appoints Milan Panic and M'Liss Jones Kane as Proxies,
each with the power to appoint his substitute, and hereby authorizes them to
represent and to vote, as designated below, all the shares of common stock of
ICN Biomedicals, Inc. (the "Company") held of record by the undersigned on
October 3, 1994 at the annual meeting of stockholders to be held at 11:30 p.m.
local time on November 1, 1994 or any adjournments or postponements thereof.

THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THE APPROVAL OF PROPOSALS 1, 3 AND
4 AND FOR THE NOMINEES TO THE BOARD OF DIRECTORS LISTED BELOW.

(Continued and to be signed on other side)

1. PROPOSAL TO APPROVE AND ADOPT THE AGREEMENT AND PLAN OF MERGER, DATED AS
OF AUGUST 1, 1994, AS AMENDED, BY AND AMONG THE COMPANY, ICN
PHARMACEUTICALS, INC., SPI PHARMACEUTICALS, INC., VIRATEK, INC. AND ICN
MERGER CORP. AND THE TRANSACTIONS CONTEMPLATED THEREBY.

/ / FOR / / AGAINST / / ABSTAIN

2. ELECTION OF THE NOMINEES LISTED BELOW TO THE BOARD OF DIRECTORS OF THE
COMPANY

/ / FOR ALL NOMINEES LISTED BELOW / / WITHHOLD AUTHORITY
(except as marked to the contrary to vote for nominees
below) listed below

(Instruction: To withhold authority to vote for any individual nominee(s), write
the name(s) of such nominee(s) in the following space)

- --------------------------------------------------------------------------------
Adam Jerney Jean-Francois Kurz Thomas H. Lenagh Milan Panic

THE BOARD OF DIRECTORS OF THE COMPANY RECOMMENDS THAT YOU VOTE "FOR" THE
NOMINEES OF THE BOARD

3. PROPOSAL TO APPROVE THE AMENDED AND RESTATED 1992 ICN BIOMEDICALS, INC.
NON-QUALIFIED STOCK OPTION PLAN, WHICH AMENDMENT AND RESTATEMENT
INCREASED THE NUMBER OF SHARES AVAILABLE FOR GRANT THEREUNDER FROM
500,000 TO 1,000,000 SHARES OF BIOMEDICALS COMMON STOCK AND PROVIDED THAT
THE MAXIMUM NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED
TO ANY INDIVIDUAL DURING THE TERM OF THE PLAN MAY NOT EXCEED 500,000
SHARES.

/ / FOR / / AGAINST / / ABSTAIN

4. PROPOSAL TO APPROVE THE AMENDED AND RESTATED 1992 ICN BIOMEDICALS, INC.
INCENTIVE STOCK OPTION PLAN, WHICH AMENDMENT AND RESTATEMENT INCREASED
THE NUMBER OF SHARES AVAILABLE FOR GRANT THEREUNDER FROM 500,000 TO
1,000,000 SHARES OF BIOMEDICALS COMMON STOCK AND PROVIDED THAT THE
MAXIMUM NUMBER OF SHARES WITH RESPECT TO WHICH OPTIONS MAY BE GRANTED TO
ANY INDIVIDUAL DURING THE TERM OF THE PLAN MAY NOT EXCEED 500,000 SHARES.

/ / FOR / / AGAINST / / ABSTAIN

5. IN THEIR DISCRETION THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING.

The undersigned acknowledges
receipt of the copy of the
Notice of Annual Meeting and
Proxy Statement/ Prospectus
(with all enclosures and
attachments) relating to the
meeting. THE BOARD OF DIRECTORS
OF THE COMPANY RECOMMENDS THAT
YOU SIGN, DATE AND MAIL THE
PROXY CARD TODAY.

Dated: ___________________, 1994

--------------------------------
Signature (Title, if any)

--------------------------------
Signature, if held jointly

--------------------------------
Print name of Shareholder as it
appears hereon