<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant /X/
Filed by a Party other than the Registrant / /
Check the appropriate box:
<TABLE>
<S> <C>
/ / Preliminary Proxy Statement / / Confidential, for Use of the Commission Only
/X/ Definitive Proxy Statement (as permitted by Rule 14a-6(e)(2))
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to sec. 240.14a-11(c) or sec. 240.14a-12
</TABLE>
ICN PHARMACEUTICALS, INC.
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(Name of Registrant as Specified In Its Charter)
ICN PHARMACEUTICALS, INC.
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/X/ $125 per Exchange Act Rules 0-11(c)(1)(ii), or 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing fee is calculated and state how it was determined):
----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
----------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
/ / Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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<PAGE> 2
ICN PHARMACEUTICALS, INC.
May 1, 1996
To the Stockholders of
ICN Pharmaceuticals, Inc.:
Dear Stockholder:
You are cordially invited to attend the 1996 Annual Meeting of Stockholders
of ICN Pharmaceuticals, Inc., which will be held on May 29, 1996, at 10:00 a.m.
local time at the corporate headquarters of the Company, 3300 Hyland Avenue,
Costa Mesa, California. Official Notice of the Meeting, a Proxy Statement and a
form of proxy accompany this letter.
The Company's Annual Report to Stockholders, including audited financial
statements, accompanies this Proxy Statement.
Please mark, date, sign and return the proxy in the enclosed envelope so
that your shares may be represented. This will not prevent you from voting in
person should you so desire, but will help secure a quorum necessary for the
transaction of business.
By Order of the Board of Directors,
/s/ MILAN PANIC
----------------------------------
MILAN PANIC
Chairman of the Board
<PAGE> 3
ICN PHARMACEUTICALS, INC.
3300 HYLAND AVENUE
COSTA MESA, CALIFORNIA 92626
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
MAY 29, 1996
------------------------
To the Stockholders of
ICN Pharmaceuticals, Inc.:
NOTICE IS HEREBY GIVEN that the 1996 Annual Meeting of Stockholders of ICN
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), will be held at
the corporate headquarters of the Company, 3300 Hyland Avenue, Costa Mesa,
California, on May 29, 1996, at 10:00 a.m., local time, for the purpose of
considering and acting upon the following:
1. The election of five directors, to hold office until the 1999
Annual Meeting of Stockholders and thereafter until their successors are
elected and qualified.
2. Approval of the ICN Pharmaceuticals, Inc. 1994 Stock Option Plan.
3. Approval of the ICN Pharmaceuticals, Inc. Long Term Incentive Plan.
4. The transaction of such other business as may properly come before
the meeting or any postponements or adjournments thereof.
Only stockholders of record at the close of business on April 12, 1996,
will be entitled to notice of and to vote at the meeting and any postponements
or adjournments thereof.
By Order of the Board of Directors,
/s/ MILAN PANIC
----------------------------------
MILAN PANIC
Chairman of the Board
/s/ DAVID C. WATT
----------------------------------
DAVID C. WATT
Secretary
Dated: May 1, 1996
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PLEASE MARK, DATE, SIGN AND RETURN THE ENCLOSED PROXY IN THE ACCOMPANYING
ENVELOPE, WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING. NO POSTAGE IS
REQUIRED IF MAILED IN THE UNITED STATES.
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<PAGE> 4
ICN PHARMACEUTICALS, INC.
3300 HYLAND AVENUE
COSTA MESA, CALIFORNIA 92626
--------------------------
PROXY STATEMENT
--------------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
MAY 29, 1996
------------------------
This Proxy Statement is being mailed on or about May 1, 1996, to
stockholders of ICN Pharmaceuticals, Inc. (the "Company" or "ICN") in connection
with the solicitation of proxies by the Board of Directors for use at the Annual
Meeting of Stockholders to be held on May 29, 1996, or any postponements or
adjournments thereof (the "Annual Meeting"), for the purposes set forth in this
Proxy Statement and in the accompanying Notice of Annual Meeting of
Stockholders.
When a proxy in the form enclosed with this Proxy Statement is returned
properly executed, the shares represented thereby will be voted at the Annual
Meeting in accordance with the directions indicated thereon or, if no direction
is indicated, the shares will be voted in accordance with the recommendations of
the Board of Directors. A stockholder who executes and returns the enclosed
proxy may revoke it at any time prior to its exercise by giving written notice
of such revocation to the Chairman of the Board of the Company, at the address
of the Company, or by revoking it in person at the Annual Meeting. Attendance at
the Annual Meeting by a stockholder who has executed and returned the enclosed
proxy does not alone revoke the proxy.
The costs of preparing and mailing this Notice and Proxy Statement and the
enclosed form of proxy will be paid by the Company. In addition to soliciting
proxies by mail, officers and regular employees of the Company may, at the
Company's expense, solicit proxies in person and by telephone or telegraph. The
Company has retained Georgeson & Company Inc. to assist in the solicitation of
proxies. The Company will pay fees estimated at $14,000, plus reasonable
out-of-pocket expenses incurred by them. The Company will pay brokers, nominees,
fiduciaries and other custodians their reasonable fees and expenses for
forwarding solicitation material to principals and for obtaining their
instructions.
VOTING SECURITIES
As of the close of business on April 12, 1996, there were 32,342,419
outstanding shares of the Company's common stock, par value $.01 per share (the
"Shares"), held of record by approximately 4,219 stockholders, each of which
shares is entitled to one vote at the Annual Meeting. The Company has no other
class of voting securities outstanding.
MERGER
On November 1, 1994, the stockholders of ICN Pharmaceuticals, Inc. ("Old
ICN"), SPI Pharmaceuticals, Inc. ("SPI"), Viratek, Inc. ("Viratek"), and ICN
Biomedicals, Inc. ("Biomedicals") (collectively, the "Predecessor Companies")
approved a business combination involving the Predecessor Companies ("the
Merger"). On November 10, 1994, SPI, Old ICN and Viratek merged into ICN Merger
Corp. (then a wholly owned subsidiary of SPI), and Biomedicals merged into ICN
Subsidiary Corp., a wholly-owned subsidiary of ICN Merger Corp. In the Merger,
all of the stockholders of the Predecessor Companies (other than Old ICN)
received Shares in exchange for the shares of common stock of the predecessor
companies at specified exchange rates for each of the Predecessor Companies. In
conjunction with the Merger, ICN Merger Corp. was renamed ICN Pharmaceuticals,
Inc. For accounting purposes, SPI was the acquiring company and as a result, the
Company will report the historical financial data of SPI in its financial
results.
<PAGE> 5
PROPOSAL NO. 1
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides that the Board of
Directors be divided into three classes of directors. Five directors are to be
elected at the 1996 Annual Meeting, each to serve until the 1999 Annual Meeting
of Stockholders 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., Birch E. Bayh, Jr., Esq., Alan F.
Charles, Adam Jerney and Stephen D. Moses, all of whom currently serve as
directors of the Company. 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 Board of Directors
may designate. The 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 the Company recommends that the stockholders vote
FOR the election of the five nominees for director named in this Proxy
Statement.
When a proxy in the form enclosed with this Proxy Statement is returned
properly executed, unless marked to the contrary, such proxy will be voted in
favor of the five nominees listed above. If any other matters are properly
presented at the Meeting for action, which is not presently contemplated, the
proxy holder will vote the proxies (which confer discretionary authority upon
such holder to vote on such matters) in accordance with their best judgment.
The presence, in person or by proxy, of the holders of a majority of the
Shares entitled to vote at the Annual Meeting is necessary to constitute a
quorum for the transaction of business at the Annual Meeting. The affirmative
vote of a plurality of the votes cast by the holders of the Shares present, in
person or represented by proxy, at the Annual Meeting and entitled to vote their
Shares is required to elect directors. Abstentions and broker non-votes in
connection with the election of directors shall have no effect on such matter
since directors are elected by a plurality of the votes cast at the Annual
Meeting.
2
<PAGE> 6
INFORMATION CONCERNING NOMINEES AND DIRECTORS
The current Board of Directors consists of fifteen members: Messrs. Barker,
Bayh, Charles, Jerney and Moses are standing for re-election; Messrs. Guillemin,
Kurz, Manatt, Panic and Smith are serving until the 1997 Annual Meeting of
Stockholders; and Messrs. Hanson, Jolley, Lenagh, Smith and Starr are serving
until the 1998 Annual Meeting of Stockholders. Set forth below with respect to
each director is certain personal information, including the present principal
occupation and recent business experience, age, year commenced service as a
director of the Company (including service as a director of a Predecessor
Company) and other corporate directorships (reference to ICN below includes
service to Old ICN as applicable).
DIRECTORS NOMINATED FOR ELECTION
<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE THE COMPANY DIRECTORSHIPS
- ------------------------------------------------------- --- ------------ ----------------------------
<S> <C> <C> <C>
NORMAN BARKER, JR. (a)(c)(f)(h) 73 1988 American Health Properties,
Mr. Barker is the retired Chairman of the Board of Inc.; Fidelity Federal Bank,
First Interstate Bank of California and Former Vice Chairman; Pacific American
Chairman of the Board of First Interstate Bankcorp. Income Shares, Inc.,
Mr. Barker joined First Interstate Bank of California Chairman; TCW Convertible
in 1957 and was elected President and Director in Securities Fund, Inc.
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.
BIRCH E. BAYH, JR., ESQ. (a)(h) 68 1992 Acordia, Inc. and Simon
Mr. Bayh is the senior partner in the Washington, Property Group
D.C. law firm of Bayh, Connaughton & Malone, P.C.
(1991-present). He previously was head of the
Washington office of Rivkin, Radler, Bayh, Hart &
Kremer (1985-1991), and partner in the Indianapolis,
Indiana and Washington, D.C. law firm of Bayh,
Tabbert & Capehart (1981-1985). Mr. Bayh served as a
United States Senator from the state of Indiana from
1963-1981.
ALAN F. CHARLES (a)(f)(g) 58 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. He is now an independent consultant in higher
education management.
ADAM JERNEY 54 1992
Mr. Jerney is Chief Operating Officer of ICN. 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. 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 became
President and Chief Operating Officer of ICN. Prior
to joining ICN, he spent four years with F.
Hoffmann-LaRoche & Company.
STEPHEN D. MOSES (a)(b)(f)(g) 61 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
1970's, Mr. Moses was President of Flagg Communities,
Inc.
</TABLE>
3
<PAGE> 7
DIRECTORS WHOSE TERM EXPIRE 1997
<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE THE COMPANY DIRECTORSHIPS
- ------------------------------------------------------- --- ------------ ----------------------------
<S> <C> <C> <C>
ROGER GUILLEMIN, M.D., PH.D. (d) 72 1989 Prizm Pharmaceuticals, Inc.
Dr. Guillemin has been an Adjunct Professor of
Medicine at the University of California College of
Medicine in San Diego since 1970. Prior to this, he
was a distinguished Scientist at the Whittier
Institute in La Jolla, California from March 1989 to
1995 and was Resident Fellow and Chairman of the
Laboratories for Neuroendocrinology at the Salk
Institute in La Jolla, California. 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.
He has also served as President of the American
Endocrine Society.
JEAN-FRANCOIS KURZ (c)(e) 61 1989 Board of Banque Pasche S.A.,
Mr. Kurz was a member of the Board of Directors and Geneva
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 of Banque Pasche S.A., Geneva.
CHARLES T. MANATT (c)(h) 59 1992 Federal Express; Comsat
Mr. Manatt is a partner in the law firm of Manatt,
Phelps & Phillips, of which he was a founder in 1965.
Mr. Manatt served as Chairman of the Democratic
Party.
MILAN PANIC (e) 66 1960
Mr. Panic, 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 served as Chairman of the Board and Chief
Executive Officer of SPI, Viratek and Biomedicals
from their respective inceptions (except for such
leaves of absence), and he may be deemed to be a
"control person" of the Company.
MICHAEL SMITH, PH.D. (d) 63 1994
Dr. Smith is Director of the Biotechnology
Laboratory, an interdisciplinary unit, at the
University of British Columbia. He is Peter Wall
Distinguished Professor of Biotechnology and
University Professor at the University. He has been a
Career Investigator of the Medical Research Council
of Canada since 1966 and was awarded the Nobel Prize
in Chemistry in 1993 for the development of
site-directed mutagenesis.
</TABLE>
4
<PAGE> 8
DIRECTORS WHOSE TERM EXPIRE IN 1998
<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE THE COMPANY DIRECTORSHIPS
- ------------------------------------------------------- --- ------------ ----------------------------
<S> <C> <C> <C>
DALE M. HANSON (c)(g)(h) 53 1995
Mr. Hanson is the Chief Executive Officer of American
Partner's Capital Group, a provider of financial
services to institutional investors. From 1987 to
1994, Mr. Hanson was Chief Executive Officer of the
California Public Employees Retirement System (Cal
PERS). From 1981 to 1987, Mr. Hanson served as Chief
Operating Officer of the Wisconsin Retirement System.
WELDON B. JOLLEY, PH.D. (d)(e) 69 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 1991. 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 physiolo-
gist at the Veterans Hospital in Loma Linda,
California.
THOMAS H. LENAGH (b)(c)(g) 73 1979 Adams Express Company; U.S.
Mr. Lenagh is an independent financial advisor. He Life Corporation; SCI
was Chairman of the Board of Greiner Engineering, Systems, Inc.; Gintel Funds;
Inc. from 1982 to 1985. Mr. Lenagh served as Irvine Sensors, Inc.; CML,
Financial Vice President to the Aspen Institute from Inc.; Clemente Global Funds;
1978 to 1980, and since then as an independent Franklin Quest; V Band Corp.
financial consultant. From 1964 to 1978, he was
Treasurer of the Ford Foundation.
ROBERTS A. SMITH, PH.D. (d)(e) 67 1960 Nucleic Acid Research
Dr. Smith was President of Viratek and Vice Institute; PLC Systems
President -- Research and Development of SPI through
1992. For more than eleven years, Dr. Smith was
Professor of Chemistry and Biochemistry at the
University of California at Los Angeles.
RICHARD W. STARR (b)(c) 75 1983
Mr. Starr is the retired Executive Vice President and
Chief Credit Officer Worldwide of First Interstate
Bank of California. Mr. Starr spent 31 years with
First Interstate before retiring in 1983 and has over
44 years of experience in commercial banking.
</TABLE>
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(a) Member of the Compensation and Benefits Committee
(b) Member of the Audit Committee
(c) Member of the Finance Committee
(d) Member of the Science and Technology Committee
(e) Member of the Executive Committee
(f) Member of the Special Committee
(g) Member of the Communications Committee
(h) Member of the Corporate Governance Committee
None of the directors are related by blood or marriage to one another or to
an executive officer of the Company.
In May 1991, Old 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 Old ICN and its subsidiaries were targets,
generally related to compliance by Old 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, Old ICN entered into
a civil consent decree whereby it neither admitted nor denied any violations of
FDA statutes and regulations. In addition, Old 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
5
<PAGE> 9
costs. On October 7, 1991, Old ICN, Viratek, Milan Panic, as Chairman of the
Board, President and Chief Executive Officer of Old ICN and Dr. Weldon B.
Jolley, a director of Old ICN, entered into a settlement agreement in the form
of a Consent Decree with the SEC, ending the investigation of Old ICN and its
subsidiaries which began in 1987 and generally concerned Old 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, Old ICN, Viratek and the individuals agreed not to violate
securities laws in the future (which obligations were assumed by ICN in the
Merger.)
COMMITTEES AND MEETINGS OF THE BOARD OF DIRECTORS
The Board of Directors has a standing Executive Committee, Audit Committee,
Finance Committee, Science and Technology Committee, Compensation and Benefits
Committee, Communications Committee and Corporate Governance Committee, but does
not have a standing nominating committee.
The members of the Executive Committee are Messrs. Panic, Jolley, Kurz and
R. Smith. This 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 held one meeting during the year ended December 31, 1995.
The current members of the Audit Committee, which held eight meetings
during the year ended December 31, 1995, are Messrs. Starr, Lenagh and Moses.
Its functions include recommending to the Board of Directors the selection of
the Company's independent public accountants and reviewing with such accountants
the plan and results of their audit, the scope and results of the Company's
internal audit procedures and the adequacy of the Company'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 the Company by its independent public
accountants.
The Compensation and Benefits Committee 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 are
Messrs. Barker, Bayh, Charles and Moses. This Committee held six meetings during
the year ended December 31, 1995.
The Finance Committee oversees investment and commercial banking issues and
investment guidelines. The current members of this Committee are Messrs. Barker,
Hanson, Kurz, Lenagh, Manatt and Starr. This Committee met four times during the
year ended December 31, 1995.
The Science and Technology Committee formulates and oversees the scientific
and technology policy of the Company. The current members of this Committee are
Drs. Guillemin, M. Smith, R. Smith and Jolley. This Committee did not meet
during the year ended December 31, 1995.
The Communications Committee oversees the development of external
communications policy for the Company in both the public relations and investor
relations disciplines. The current members of the Communications Committee are
Messrs. Charles, Hanson, Lenagh and Moses. This Committee met eight times during
the year ended December 31, 1995.
The Corporate Governance Committee was formed in July of 1995 and oversees
the development of the Company's policies and procedures to insure the Company's
adherence to good corporate governance for the benefit of the stockholders of
the Company. The current members of this Committee are Messrs. Manatt, Barker,
Hanson and Bayh. This Committee met one time during the year ended December 31,
1995.
A Special Committee (the "Committee") was formed in February, 1995 to
review certain issues of concern to the stockholders, including the review of
trading by executives of the Company and issues surrounding the timely
disclosure of information received from the FDA regarding the Company's NDA for
the use of Virazole(R) in the treatment of chronic hepatitis C. The Committee
completed its investigation in April, 1995 and upon completion of its assignment
has been dissolved.
The Board of Directors met 13 times during 1995 and all of the directors
attended at least 15% of the meetings.
6
<PAGE> 10
Dr. Vernon Knight and Mr. James P. Miscall resigned from the Board of
Directors during 1995. Mr. Robert H. Finch died on October 10, 1995.
PROPOSAL NO. 2
APPROVAL OF THE ICN 1994 STOCK OPTION PLAN
EFFECT OF THE MERGER ON THE COMPANY'S STOCK OPTION PLANS
Prior to the Merger, each of the Predecessor companies had both Incentive
and Non-Qualified Stock Option Plans. Upon consummation of the Merger, ICN
assumed all options outstanding under the existing stock option plan. Subsequent
to the Merger, no additional shares have been issued and no additional shares
will be issued pursuant to these plans.
1994 STOCK OPTION PLAN
The 1994 Stock Option Plan was approved by the Board of Directors on
January 26, 1995. The 1994 Stock Option Plan provides for the granting of
options to key employees, officers, directors, consultants and scientific
advisors of ICN.
PURPOSE OF THE ICN 1994 STOCK OPTION PLAN
ICN believes that the 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 to acquire an increased
personal and proprietary interest in its continued success and progress. ICN
believes that the 1994 Stock Option 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 ICN 1994 Stock Option 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 ICN 1994 Stock Option
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.
GRANTS TO NONEMPLOYEE DIRECTORS
The ICN 1994 Stock Option 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
15,000 shares of ICN Common Stock are made at the close of business each April
18th. Options are granted at a price no less than one hundred percent of the
fair market value of the ICN Common Stock at the date of grant. Vesting shall be
consistent with the schedule for all other participants in the Plan.
DURATION AND MODIFICATIONS
The ICN 1994 Stock Option 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 ICN 1994 Stock
Option Plan provided that no stock options may be granted under the ICN 1994
Stock Option Plan ten years from the date the plan is approved by stockholders.
The Board of Directors and the ICN Compensation Committee may, at any earlier
times, amend, alter, suspend or discontinue the ICN 1994 Stock Option 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 ICN 1994 Stock Option 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.
7
<PAGE> 11
FEDERAL INCOME TAX CONSEQUENCES RELATING TO NON-QUALIFIED STOCK OPTIONS
A portion of the options granted under the ICN 1994 Stock Option 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 reporting requirements or the optionee includes such amounts in
income, 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 ICN 1994 Stock Option
Plan is not expected to have a material impact on the federal income tax
liability of ICN.
FEDERAL INCOME TAX CONSEQUENCES RELATING TO INCENTIVE STOCK OPTIONS
A portion of the options granted under the ICN 1994 Stock Option 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 of
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.
8
<PAGE> 12
SECURITIES SUBJECT TO THE ICN 1994 STOCK OPTION PLAN
The maximum number of shares of ICN Common Stock currently available for
issuance under the ICN 1994 Stock Option Plan is 3,000,000 shares, except as
described below under the caption "Adjustment of Shares and Price." The shares
of ICN Common Stock issued under the ICN 1994 Stock Option Plan may be either
authorized and unissued shares or share previously issued and reacquired by ICN.
During 1995 1,087,000 shares were granted to new hires, subject to stockholder
approval of the 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 ICN 1994 Stock Option Plan and the number and price per
share of stock which may be purchased under any outstanding options. In the
event of (i) the liquidation or dissolution of the Company or (ii) a merger or
consolidation of the Company (a "Transaction"), the Plan and the Options issued
hereunder shall continue in effect in accordance with their respective terms and
each Optionee shall be entitled to receive in respect of each Share subject to
any outstanding Options, upon exercise of such Options, the same number and kind
of stock, securities, cash, property, or other consideration that each holder of
a Share was entitled to receive in the Transaction in respect of a Share.
EFFECT OF CHANGE IN CONTROL
In the event of a "Change in Control" as defined in the Plan, all
outstanding options shall vest immediately and be fully exercisable.
ADMINISTRATION OF THE ICN 1994 STOCK OPTION PLAN
The ICN 1994 Stock Option 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. Barker, Moses, Charles and
Bayh.
No member of the Board of ICN receives additional compensation for his
services in administering the ICN 1994 Stock Option Plan except insofar as such
members receive $1,000 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 ICN 1994 Stock Option Plan, the ICN
Compensation Committee has full authority to implement and carry out the ICN
1994 Stock Option Plan, including, but not limited to, the following: to
construe and interpret the ICN 1994 Stock Option Plan and to make all other
determinations necessary or advisable for the administration of the ICN 1994
Stock Option Plan.
ELIGIBILITY AND EXTENT OF PARTICIPATION
Options may be granted and shares may be acquired pursuant to stock option
agreements under the ICN 1994 Stock Option 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 ICN 1994
Stock Option Plan." A grantee may be granted more than one option under the ICN
1994 Stock Option Plan. If the ICN 1994 Stock Option 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 1,000,000 shares. All
options are subject to the terms of option agreements executed by ICN and the
respective grantees. There are currently approximately 200 individuals eligible
to participate in the ICN 1994 Stock Option 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 the grant.
9
<PAGE> 13
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 surrender of previously
acquired shares of ICN Common stock or a combination, pursuant to the rules as
determined by the ICN Compensation Committee.
The times at which 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 ICN 1994 Stock
Option Plan, including restrictions on the transferability of such shares.
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 employee 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, 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 stock option under the ICN 1994 Stock Option 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
Approval of the ICN 1994 Stock Option Plan requires the favorable vote of
the holders of a majority of the shares of ICN Pharmaceuticals, Inc. Common
Stock represented at the 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.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
PROPOSAL NO. 3
APPROVAL OF THE ICN LONG TERM INCENTIVE PLAN
THE ICN LONG TERM INCENTIVE PLAN
The ICN Long Term Incentive Plan was adopted by the Board of Directors on
April 25, 1996. The Plan provides for the award of compensation in the form of
stock options and restricted stock to senior level executives.
PURPOSE OF THE ICN LONG TERM INCENTIVE PLAN
The purpose of the ICN Long Term Incentive Plan is to provide incentive
compensation which is based on the increase in "total shareholder return."
Awards are in the form of fair market value stock options and restricted stock
to provide for increased stock ownership by senior management and align
management with the interests of shareholders.
10
<PAGE> 14
AWARDS PURSUANT TO THE ICN LONG TERM INCENTIVE PLAN
Awards under the plan will be in the form of the annual grant of fair
market value stock options pursuant to the ICN 1994 Stock Option Plan and
restricted stock awarded upon conclusion of a three-year performance period.
AWARDS IN THE FORM OF RESTRICTED STOCK
Participants will be eligible for awards of restricted stock based on the
Company's "excess market value" which is defined as ICN's three year average
total shareholder return in excess of the Standard and Poor's 500 three year
average total shareholder return. Total shareholder return is defined as the
appreciation of the stock price assuming all dividends were reinvested in the
Company's stock. A pool will be created in the amount of six percent (6%) of the
"excess market value" which will be granted in the form of restricted stock at
the market value at the date of grant as follows:
<TABLE>
<CAPTION>
PARTICIPANTS % OF POOL
--------------------------------------------------------- ---------
<S> <C> <C>
Tier 1: Milan Panic.............................................. 2.0%
Tier 2: Adam Jerney.............................................. 0.4%
Executive Vice President
Chief Operating Officer
David C.Watt............................................. 0.4%
Executive Vice President
General Counsel & Secretary
John F. Giordani......................................... 0.4%
Executive Vice President
Chief Financial Officer
Bill A. MacDonald........................................ 0.4%
Executive Vice President
Strategic Planning
Jack Sholl............................................... 0.4%
Senior Vice President
Human Resources
John Julian.............................................. 0.4%
Senior Vice President
Worldwide Marketing
Group.................................................... 2.8%
Tier 3: Richard Dolighan......................................... 0.2%
Regional Manager -- North America
Kobi Sethna.............................................. 0.2%
Regional Manager -- Western Europe
Javier Rovalo............................................ 0.2%
Regional Manager -- Latin America
Lubicia Rakic............................................ 0.2%
Regional Manager -- Eastern Europe
Group.................................................... 0.8%
Reserve.................................................. 0.4%
Total................................................ 6%
===
</TABLE>
No award will be granted if ICN's three year average total shareholder
return does not exceed the three year average S&P 500 total shareholder return.
11
<PAGE> 15
VESTING OF RESTRICTED STOCK AWARDS
Restricted stock awarded pursuant to the ICN Long Term Incentive Plan will
vest 25% per year pursuant to the terms and conditions of a restricted stock
agreement executed with each participant and administered by the Compensation
Committee of the Board of Directors.
DURATION AND MODIFICATIONS
The ICN Long Term Incentive Plan shall remain in effect until all
restricted stock granted pursuant to the Plan has fully vested. Options granted
pursuant to the ICN 1994 Stock Option Plan are governed by the terms and
conditions of such plan. The Board of Directors and the ICN Compensation
Committee may, five years from the approval of the Plan, amend, alter, suspend
or discontinue the ICN Long Term Incentive Plan as it may deem proper, except
that no such action shall impair the rights of any grantee under the Plan
without the consent of the grantee. ICN may not, however, without further
approval by ICN shareholders, take any action for which shareholder approval is
required under Rule 16b-3 under the Exchange Act.
EFFECT OF CHANGE IN CONTROL
Notwithstanding anything contained in the Plan or an Agreement to the
contrary, in the event of a Change in Control, the three year performance period
will deem to be fulfilled and shall constitute the measurement period and (i)
all restricted stock issued pursuant to the Plan shall become fully vested and
(ii) restricted stock earned during the modified performance period shall be
awarded.
ADMINISTRATION OF THE ICN LONG TERM INCENTIVE PLAN
The ICN Long Term 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" within the meaning of Section
162(m) of the Code and the regulations promulgated thereunder. The present
members of the Committee are Messrs. Barker, Bayh, Charles and Moses.
No member of the Board of ICN receives additional compensation in
administering the ICN Long Term Incentive Plan except insofar as such members
receive $1,000 for each Compensation Committee meeting attended. The Board shall
from time to time appoint members of the Compensation Committee who are
disinterested persons and outside directors for such terms as the Board shall
determine, and members of the Compensation Committee may be removed by the Board
at any time, with or without cause.
Subject to the provisions of the ICN Long Term Incentive Plan the
Compensation Committee has full authority to implement and carry out the ICN
Long Term Incentive Plan, including but not limited to the following: to
construct and interpret the ICN Long Term Incentive Plan and to make all other
determinations necessary or advisable for the administration of the ICN Long
Term Incentive Plan.
ELIGIBILITY AND EXTENT OF PARTICIPATION
Restricted stock awards granted pursuant to the ICN Long Term Incentive
Plan may be granted to certain "senior" managers of ICN as the Compensation
Committee may from time to time determine. There are currently twelve (12)
individuals eligible to participate in the ICN Long Term Incentive Plan.
DEATH, TERMINATION OF EMPLOYMENT
Unvested restricted stock issued pursuant to the Plan is non-assignable and
non-transferrable 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).
If a Plan participant is terminated without cause, the unvested portion of
any restricted stock awarded pursuant to the Plan will become immediately
vested. If participant is terminated without cause during the three year
performance period participant will be entitled to a pro-rata award at the time
of termination. If a
12
<PAGE> 16
plan participant is terminated "for cause," participant shall only be entitled
to the vested portion of their respective restrictive stock award.
VOTE REQUIRED
Adoption of the ICN Long Term Incentive Plan requires the favorable vote of
the holders of a majority of the shares of ICN Common Stock represented at the
meeting. Proxies submitted by the Board of Directors of ICN shall be voted for
the proposal unless a vote against the proposal or abstention is specifically
indicated.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR THIS PROPOSAL.
OWNERSHIP OF THE COMPANY'S SECURITIES
PRINCIPAL STOCKHOLDER
As of February 28, 1996, the following stockholders were known to
management to be the beneficial owners of more than 5% of the outstanding
shares:
<TABLE>
<CAPTION>
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING(1)
------------------- ------------------ ----------------
<S> <C> <C>
Heartland Advisors, Inc.(2).................. 3,261,192 10.9%
Heartland Group, Inc.
790 North Milwaukee Street
Milwaukee, WI 53202
AIM Management Group(3)...................... 1,721,514 5.7%
11 Greenway Plaza, Suite 1919
Houston, Texas 77046
</TABLE>
- ---------------
(1) Total outstanding Shares for purposes of this table include 31,098,551
shares outstanding on March 13, 1996.
(2) As reported on Form 13G filed with the Securities and Exchange Commission
(the "Commission"), 3,261,192 Shares may be deemed beneficially owned within
the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act") by Heartland Advisors.
(3) As reported on Form 13G filed with the Securities and Exchange Commission
(the "Commission"), 1,721,514 Shares may be deemed beneficially owned within
the meaning of Rule 13d-3 of the Securities Exchange Act of 1934, as
amended, (the "Exchange Act") by Aim Management.
13
<PAGE> 17
OWNERSHIP BY MANAGEMENT
The following table sets forth, as of March 31, 1996, certain information
regarding the beneficial ownership of Shares, including the percent of shares
owned beneficially by each Executive Officer and all directors and executive
officers of ICN as a group:
<TABLE>
<CAPTION>
NUMBER OF SHARES
AND NATURE OF
BENEFICIAL
OWNERSHIP
OF ICN PERCENTAGE
IDENTITY OF OWNER OR GROUP COMMON STOCK(1) OF CLASS
--------------------------------------------- ------------------- ----------
<S> <C> <C>
Norman Barker, Jr............................ 49,211(3) (2)
Birch E. Bayh, Jr............................ 29,042(4) (2)
Alan F. Charles.............................. 22,846(5) (2)
Roger Guillemin, M.D., Ph.D.................. 61,629(6) (2)
Dale Hanson.................................. 0(7) (2)
Adam Jerney.................................. 615,864(8) 1.9%
Weldon B. Jolley, Ph.D....................... 131,813(9) (2)
Jean-Francois Kurz........................... 11,343(10) (2)
Thomas H. Lenagh............................. 15,730(11) (2)
Charles T. Manatt............................ 29,541(12) (2)
Stephen D. Moses............................. 28,719(13) (2)
Milan Panic.................................. 1,432,748(14) 4.4%
Michael Smith, Ph.D.......................... 10,704(15) (2)
Roberts A. Smith, Ph.D....................... 161,373(16) (2)
Richard W. Starr............................. 36,111(17) (2)
John E. Giordani............................. 94,842(18) (2)
Bill A. MacDonald............................ 137,042(19) (2)
David Watt................................... 118,326(20) (2)
Directors and executive officers of the
Company as a group (18 persons)............ 2,986,884(21) 8.9%
</TABLE>
- ---------------
(1) Except as indicated otherwise in the following notes, shares shown as
beneficially owned are those as to which the named persons possess sole
voting and investment power. However, under the laws of California and
certain other states, personal property owned by a married person may be
community property which either spouse may manage and control, and the
Company has no information as to whether any shares shown in this table are
subject to community property laws.
(2) Less than 1%.
(3) Includes 46,456 shares of ICN common stock which Mr. Barker has the right
to acquire upon the exercise of currently exercisable stock options.
(4) Includes 29,042 shares of ICN common stock which Mr. Bayh has the right to
acquire upon the exercise of currently exercisable stock options.
(5) Includes 22,800 shares of ICN common stock which Mr. Charles has the right
to acquire upon the exercise of currently exercisable stock options.
(6) Includes 61,077 shares of ICN common stock which Dr. Guillemin has the
right to acquire upon the exercise of currently exercisable stock options.
(7) Includes 0 shares of ICN common stock which Mr. Hanson has the right to
acquire upon the exercise of currently exercisable stock options.
(8) Includes 503,988 shares of ICN common stock which Mr. Jerney has the right
to acquire upon the exercise of currently exercisable stock options.
(9) Includes 77,961 shares of ICN common stock which Dr. Jolley has the right
to acquire upon the exercise of currently exercisable stock options.
14
<PAGE> 18
(10) Includes 11,343 shares of ICN common stock which Mr. Kurz has the right to
acquire upon the exercise of currently exercisable stock options.
(11) Includes 11,343 shares of ICN common stock which Mr. Lenagh has the right
to acquire upon the exercise of currently exercisable stock options.
(12) Includes 28,517 shares of ICN common stock which Mr. Manatt has the right
to acquire upon the exercise of currently exercisable stock options.
(13) Includes 28,517 shares of ICN common stock which Mr. Moses has the right to
acquire upon the exercise of currently exercisable stock options.
(14) Includes 1,176,800 shares of ICN common stock which Mr. Panic has the right
to acquire upon the exercise of currently exercisable stock options.
(15) Includes 10,704 shares of ICN common stock which Dr. Michael Smith has the
right to acquire upon the exercise of currently exercisable stock options.
(16) Includes 124,348 shares of ICN common stock which Dr. Roberts A. Smith has
the right to acquire upon the exercise of currently exercisable stock
options.
(17) Includes 17,609 shares of ICN common stock which Mr. Starr has the right to
acquire upon the exercise of currently exercisable stock options.
(18) Includes 94,842 shares of ICN common stock which Mr. Giordani has the right
to acquire upon the exercise of currently exercisable stock options.
(19) Includes 130,539 shares of ICN common stock which Mr. MacDonald has the
right to acquire upon the exercise of currently exercisable stock options.
(20) Includes 116,331 shares of ICN common stock which Mr. Watt has the right to
acquire upon the exercise of currently exercisable stock options.
(21) Includes 2,492,217 shares of ICN common stock which directors and certain
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 New York Stock Exchange. 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 1995 all filing requirements
applicable to its officers, directors and ten percent beneficial owners were
timely satisfied.
15
<PAGE> 19
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 of ICN (based upon salary and bonus earned during
1994), for services rendered to the Predecessor Companies and ICN in all
capacities during the twelve months ended December 31, 1995, 1994 and 1993.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
------------
OTHER AWARDS
ANNUAL COMPENSATION ANNUAL ------------ ALL OTHER
NAME AND --------------------------- COMPENSATION LONG TERM COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) OPTIONS(2) ($)(3)
- --------------------------------- ---- --------- -------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic...................... 1995 572,450 275,000 -- 92,482(5)
Chairman, President and 1994 535,000 195,626 702,600(4) 70,603(5)
Chief Executive Officer 1993 535,000 -- 60,000(4) 49,245(5)
Adam Jerney...................... 1995 380,000 200,000 -- 66,436(7)
Executive Vice President, 1994 380,000 146,719 212,415(6) 60,741(7)
Chief Operating Officer 1993 380,000 38,100 150,000(6) 18,730(7)
John E. Giordani................. 1995 238,707 100,000 -- 30,187
Executive Vice President, 1994 225,195 96,671 55,000(8) 32,045
Chief Financial Officer 1993 225,195 -- 65,000(8) 38,886
and Corporate Controller
Bill A. MacDonald................ 1995 200,000 100,000 -- 3,067
Executive Vice President, 1994 200,000 96,671 105,520(9) 16,860
Corporate Development 1993 200,000 -- 125,000(9) 13,496
David Watt....................... 1995 200,000 100,000 -- 2,607
Executive Vice President, 1994 180,000 96,671 51,190(10) 2,448
General Counsel, 1993 180,000 -- 55,000(10) 5,817
Corporate Secretary
</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 common stock of Old ICN
("Old ICN common stock"), common stock of SPI ("SPI common stock")(adjusted
for stock dividend after the grant date and prior to the Merger), common
stock of Viratek ("Viratek common stock") and common stock of Biomedicals
("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 an
executive deferral plan and medical benefits and medical and life insurance
premiums.
(4) Mr. Panic was granted options to purchase the following shares of Old ICN
common stock, SPI common stock, Viratek common stock and Biomedicals common
stock.
POST MERGER:
<TABLE>
<CAPTION>
ICN (NEW)
---------
<S> <C>
1995............................... --
</TABLE>
PRE-MERGER:
<TABLE>
<CAPTION>
ICN SPI VIRATEK BIOMEDICALS
--------- ------- ------- -----------
<S> <C> <C> <C> <C>
1994............................... 300,000 202,600 200,000 --
1993............................... -- -- -- 60,000
</TABLE>
16
<PAGE> 20
(5) In 1995, the $92,482 of "All Other Compensation" consists of the following:
legal $78,960, executive medical $5,330 and life insurance $8,192. In 1994,
the $70,603 consists of the following: legal $23,835, accounting $34,045,
executive medical $6,107 and life insurance $6,616. All other compensation
also includes $38,242 for miscellaneous fringe benefits in 1993. For the
two years ended December 31, 1994, Mr. Panic realized $7,498,500 and
$4,771,220 on the exercise of stock options for ICN, SPI, and Viratek,
respectively. These stock option gains are not reflected in the "All Other
Compensation" column.
(6) Mr. Jerney was granted options to purchase the following shares of ICN
common stock (Post Merger), ICN common stock (Pre-Merger), SPI common stock
(adjusted for stock dividend after the grant date and prior to the Merger),
Viratek common stock and Biomedicals common stock:
POST MERGER:
<TABLE>
<CAPTION>
ICN (NEW)
---------
<S> <C>
1995................................. --
</TABLE>
PRE-MERGER:
<TABLE>
<CAPTION>
ICN SPI VIRATEK BIOMEDICALS
--------- ------ ------- -----------
<S> <C> <C> <C> <C>
1994................................. 50,000 50,650 50,000 61,765
1993................................. 50,000 50,000 50,000 --
</TABLE>
(7) In 1995, the $66,436 of "All Other Compensation" consists of the following:
accounting-tax $41,925, legal expense $12,568, executive medical $7,572,
tennis club $420 and life insurance $3,951. In 1994, the $60,741 is broken
out as follows: accounting-tax $27,871, deferred compensation interest
$16,928, executive medical $8,523; 401K employee contribution $4,620,
tennis club $415, and life insurance $2,384. For the two years ended
December 31, 1994 and 1993, Mr. Jerney realized $372,795 and $894,569 on
the exercise of stock option for ICN and SPI common stock, respectively.
These stock option gains are not reflected in the "All Other Compensation"
column.
(8) Mr. Giordani was granted options to purchase the following shares of ICN
common stock (Post Merger), ICN common stock (Pre-Merger), SPI common stock
(adjusted for stock dividend after the grant date and prior to the Merger),
Viratek common stock and Biomedicals common stock:
POST MERGER:
<TABLE>
<CAPTION>
ICN (NEW)
---------
<S> <C>
1995............................... --
</TABLE>
PRE-MERGER:
<TABLE>
<CAPTION>
ICN SPI VIRATEK BIOMEDICALS
--------- ------- ------- -----------
<S> <C> <C> <C> <C>
1994............................... 25,000 20,000 10,000 20,000
1993............................... 25,000 20,000 10,000 30,000
</TABLE>
(9) Mr. MacDonald was granted options to purchase the following shares of ICN
common stock (Post Merger), ICN common stock (Pre-Merger), SPI common stock
(adjusted for stock dividend after the grant date and prior to the Merger),
Viratek common stock and Biomedicals common stock:
POST MERGER:
<TABLE>
<CAPTION>
ICN (NEW)
---------
<S> <C>
1995................................. --
</TABLE>
PRE-MERGER:
<TABLE>
<CAPTION>
ICN SPI VIRATEK BIOMEDICALS
--------- ------ ------- -----------
<S> <C> <C> <C> <C>
1994................................. 25,000 40,520 10,000 30,000
1993................................. 25,000 40,000 10,000 50,000
</TABLE>
17
<PAGE> 21
(10) Mr. Watt was granted options to purchase the following shares of ICN common
stock (Post Merger), ICN common stock (Pre-Merger), SPI common stock
(adjusted for stock dividend after the grant date and prior to the Merger),
Viratek common stock and Biomedicals common stock:
POST MERGER:
<TABLE>
<CAPTION>
ICN (NEW)
---------
<S> <C>
1995................................. --
</TABLE>
PRE-MERGER:
<TABLE>
<CAPTION>
ICN SPI VIRATEK BIOMEDICALS
--------- ------ ------- -----------
<S> <C> <C> <C> <C>
1995................................. 0
1994................................. 25,000 49,900 10,500 --
1993................................. 25,000 20,400 10,000 --
</TABLE>
- ---------------
Dr. Johannesson resigned from the Company effective December 31, 1995.
In January 1995, the Company advanced Milan Panic $1,406,682, in regards to
tax matters relating to the exercise of stock options. The advance, plus accrued
interest at Bank of America's Reference Rate thereon, was fully paid by March,
1995 with cash of $1,271,013 and Shares having a market value at the time of
$135,669.
In July 1992, Milan Panic, then Chairman of the Board, President and Chief
Executive Officer of Old ICN and also occupying similar positions with SPI,
Viratek and Biomedicals, with the approval of Old ICN's Board of Directors,
became Prime Minister of Yugoslavia and was granted a paid leave of absence from
all duties to Old ICN while retaining his title as Chairman of the Board. Mr.
Panic and Old ICN entered into a Leave of Absence and Reemployment Agreement
which contained mutual obligations, requiring, among other things, that Old ICN
reemploy Mr. Panic and that Mr. Panic return to his previous positions with Old
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 Old
ICN.
In addition to the salaries of Mr. Panic and certain Old ICN employees
assisting him during his leave of absence, Old ICN and Mr. Panic incurred
certain other expenses in connection with Mr. Panic's transition to and return
from his leave of absence. Old ICN retained a then recently retired member of
the California Superior Court to review all such expenses to determine whether
such expenses represented a valid expense of the Company. The Judge prepared a
report for the Audit Committees of Old ICN and SPI that indicated that these
costs represented costs of Old ICN and SPI. Such report was reviewed and
approved by these Audit Committees.
Mr. Panic reimbursed Old ICN certain withholding taxes due as of December
31, 1992, previously advanced by Old 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.
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 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 Old ICN common stock and SPI common stock,
respectively.
18
<PAGE> 22
OPTION GRANT INFORMATION
The following table sets forth information with respect to options to
purchase shares of new ICN common stock granted to Executive Officers, adjusted
for stock dividends occurring after grant for 1995 and through March 31, 1996:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
SECURITIES TOTAL OPTIONS
UNDERLYING GRANTED TO
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
NAME COMPANY GRANTED FISCAL YEAR PRICE DATE PRESENT VALUE
- --------------------------------- ------- --------- ------------- -------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic...................... ICN 0 0% $.00 0/00/00 $000.
Adam Jerney...................... ICN 0 0% $.00 0/00/00 $000.
John E. Giordani................. ICN 0 0% $.00 0/00/00 $000.
Bill A. MacDonald................ ICN 0 0% $.00 0/00/00 $000.
Jack Sholl....................... ICN 0 0% $.00 0/00/00 $000.
David C. Watt.................... ICN 0 0% $.00 0/00/00 $000.
</TABLE>
AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information regarding (i) stock option
exercises by the Named Executive Officers during 1995 and through March 31,
1996, and (ii) unexercised stock options held by the Named Executive Officers at
March 31, 1996:
AGGREGATED OPTION EXERCISES
IN 1995 AND MARCH 31, 1996 OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SECURITIES UNDERLYING IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 03/31/96 AT 03/31/96(2)
ACQUIRED VALUE --------------------------- ---------------------------
NAME COMPANY EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ------- --------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Milan Panic.......... ICN 21,555 $ 245,298 1,176,800 245,979 $ 5,230,276 $ 1,529,259
Adam Jerney.......... ICN 66,362 764,128 503,988 151,179 4,087,584 1,316,867
John E. Giordani..... ICN 23,530 306,357 94,842 40,037 353,387 284,551
Bill A. MacDonald.... ICN 23,995 292,490 130,539 54,161 789,163 453,679
David Watt........... ICN 8,585 160,428 116,331 42,318 892,193 346,427
</TABLE>
- ---------------
(1) Difference between the fair market value of the shares of common stock of
the Company at the date of exercise and the exercise price.
(2) Difference between the fair market value of the shares of common stock of
the Company on December 31, 1995 and the exercise price.
19
<PAGE> 23
COMPENSATION OF DIRECTORS OF ICN
Members of the Board of Directors of ICN, other than employees, are paid an
annual fee of $30,000, payable quarterly, plus a fee of $1,000 for every Board
meeting attended and an additional fee of $1,000 for every committee meeting
attended, and are reimbursed for their out-of-pocket expenses in attending
meetings. During 1995, Mr. Bayh, or the firm with which he is affiliated,
received legal or consulting fees from ICN in the amount of $43,092, Dr.
Guillemin received $75,000 from ICN for consulting services rendered. Dr. M.
Smith received $50,000 in 1995 from ICN for consulting services rendered. Dr. R.
Smith received $97,800 in 1995 from ICN for consulting services rendered. Mr.
Alan Charles received $24,000 in 1995 from ICN for consulting services rendered.
Mr. Stephen Moses received $24,000 in 1995 from ICN for consulting services
rendered. In addition, non-employee directors on each April 18th are granted
options to purchase 15,000 Shares.
CERTAIN EMPLOYMENT AGREEMENTS
On March 18, 1993, the Board of Directors of Old ICN adopted Employment
Agreements ("Employment Agreements") which contained "Change in Control"
benefits for six then current key senior executive officers of Old ICN. The
executives include Messrs. Jerney, Giordani, MacDonald and Watt, then officers
of Old ICN, and Messrs. Phillips and Sholl, then officers of SPI. The Employment
Agreements were assumed by New ICN in connection with the Merger. Mr. Phillips
retired from the Company in May, 1995 and his contract terminated. In addition,
the Company entered into an Employment Contract in May, 1995 with John Julian,
Senior Vice President, containing identical provisions to the "Employment
Agreements."
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, if the executive terminates employment for certain enumerated reasons
(including a Change in Control of ICN 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.
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 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 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,
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; David Watt $935,955 and John Julian $900,000. 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.
20
<PAGE> 24
In connection with the Merger, each of the senior executives executed an
agreement waiving the effect under the Employment Agreements of any Change in
Control which may have been deemed to have arisen as a result of the Merger.
PANIC EMPLOYMENT AGREEMENT
Old ICN and Milan Panic entered into an Employment Agreement effective
October 1, 1988, which, as amended and extended, terminates on September 30,
1998 (the "Panic Employment Agreement"). The base amount of salary for Mr. Panic
was determined by the Compensation Committee of the Board of Directors of Old
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
Old ICN. Upon consummation of the Merger, the Panic Employment Agreement was
assumed by 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
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) the
Shares 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 executed an agreement waiving the
effect under the Panic Employment Agreement of any Change in Control which may
have been deemed to have arisen as a result of the Merger.
21
<PAGE> 25
COMPENSATION REPORT
The Compensation and Benefits Committee ("Committee") is composed of
Messrs. Barker, Bayh, Charles and Moses each of whom are an independent
non-employee director.
The following statement made by the members of the Committee shall not be
deemed incorporated by reference into any filing under the Securities Act of
1933 or under the Securities Exchange Act of 1934 and shall not otherwise be
deemed filed under such Acts.
Compensation Philosophy
The Board of Directors adopts an annual budget and financial plan which
incorporates the goals and objectives to be achieved by the Company and the
specific operating units. The goals focus on growth in operating income and
growth in earnings per share. Each executive is responsible for the performance
of 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 is 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 failure
to meet the objective standards are beyond the control of the Company and/or the
employee. Stock options are granted based on a program developed for the Company
by Towers Perrin, a compensation consulting company. Each individual's base
number of options is derived from a formula which ties to their base salary. The
Committee may then consider the achievement of individual as well as corporate
performance goals in determining the ultimate number of options granted.
The compensation of executives consists of salary, a bonus plan to reward
performance and a long-term incentive stock option program.
Base Salary
Salaries are paid within certain grades which are established by the Human
Resources Department reviewing data of other like companies in the same
industry. The Company reviewed salary surveys prepared by Towers Perrin. These
surveys did not state which companies participated in the surveys. The salary
levels were in the median of compensation for similar positions. Grades are
updated to reflect changes in the marketplace. The salaries of executives are
reviewed on an annual basis by supervisory managers and the Committee.
Bonus Plan
The Company has adopted an Incentive Bonus Plan which is based on target
goals of growth in both operating income and earnings per share. Individual
performance goals are compared against the target goals established.
Recommendations are made by individual supervisors and approved by the
Committee.
Long Term Stock Incentive Plans
Stock options are granted as long range incentives to executives. Options
vest over a ten year period. Options are granted at fair market value. The
amount of options granted is tied to salary and performance and each grant is
evaluated. No grant to executives is automatic.
The Board of Directors has adopted a new Long Term Incentive Plan which
will provide that incentive compensation for the Chief Executive Officer and
other key senior officers of the Company will be dependent upon the increase in
shareholder value in excess of the S&P 500 Index. This program is described
herein -- See Proposal No. 3.
Chief Executive Officer Compensation
The Committee determines the compensation of the Chief Executive Officer
based on a number of factors. The goal of the Committee is to grant compensation
consistent with compensation granted to other chief executive officers of
companies in the same industry. The Chief Executive Officer's compensation is
22
<PAGE> 26
based on an employment agreement with ICN (See "Executive Compensation")
comprised of a base salary and a bonus based on the Company's performance.
Special one-time bonuses will be paid, at the Committee's discretion, based on
special contributions made to the Company. Substantial bonuses are approved by
the Board of Directors.
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 the stockholders. The application of Section 162(m)
is not expected to have a material impact on the federal income tax liability of
ICN.
Compensation Committee Interlocks and Insider Participation
Bayh, Connaughton & Malone received legal fees in 1995 from ICN (including
the Predecessor Companies) for legal services in the amount of $43,092. Mr.
Birch E. Bayh, Jr. is a partner in the firm.
COMPENSATION AND BENEFITS COMMITTEE
Norman Barker, Jr.
Senator Birch Bayh
Alan F. Charles
Stephen D. Moses
23
<PAGE> 27
PERFORMANCE GRAPH
The following compares ICN'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, 1995. The
graph assumes that the value of the investment of Shares in each index as $100
at December 31, 1990 and that all dividends were reinvested. The cumulative
total return for the Company is based on an initial investment in SPI (the
predecessor for accounting purposes to the Company) on December 31, 1990 (and
taking into account the conversion of shares of SPI common stock into Shares in
the Merger on November 11, 1994 on a one for one basis).
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING DECEMBER 31, 1990
<TABLE>
<CAPTION>
CUSTOM
ICN COMPOSITE
MEASUREMENT PERIOD PHARMACEUTI- INDEX (5
(FISCAL YEAR COVERED) CALS, INC. STOCKS) S&P 500
<S> <C> <C> <C>
DEC-90 100 100 100
DEC-91 443 211 130
DEC-92 163 161 140
DEC-93 236 122 155
DEC-94 300 152 157
DEC-95 359 252 215
</TABLE>
The 5-Stock Custom Composite Index includes Allergan Inc., Carter Wallace
Inc., Amgen Inc., Forest Labs Inc. -- Class A, and Syntex Corp.
24
<PAGE> 28
CERTAIN TRANSACTIONS
Under an agreement entered into in 1982 between Old ICN and Baylor College
of Medicine ("Baylor"), the employer of Dr. Vernon Knight, a former director of
ICN, the Company is required to pay a 2% royalty to Baylor on all sales of
Virazole(R) in aerosolized form. Such royalties include $850,987 for 1995.
In July 1995 and February 1996 the Company loaned the Chief Operating
Officer of the Company $93,000 and $389,000 respectively for the exercise of
stock options. These amounts were subsequently repaid with interest.
Certain outside directors have provided legal and other consultation
services to ICN (including the Predecessor Companies), which amounted to
approximately $313,892 during 1995.
INDEPENDENT PUBLIC ACCOUNTANTS
Coopers & Lybrand was selected as the Company's independent public
accountants for fiscal 1996. A representative of Coopers & Lybrand will be
present at the Annual Meeting and such representative will have an opportunity
to make a statement if desired. Further, such representative will be available
to respond to appropriate stockholder questions directed to him or her.
STOCKHOLDER PROPOSALS
Any stockholder wishing to submit a proposal for inclusion in the proxy
statement for the Company's 1997 Annual Meeting must submit the proposal to the
Company so that it is received by the Company at its principal executive offices
no later than January 30, 1997.
ANNUAL REPORT
The Annual Report to Stockholders for the year ended December 31, 1995
(including audited financial statements) is being mailed to stockholders with
this Proxy Statement. The Annual Report does not form part of the material for
the solicitation of proxies.
MISCELLANEOUS
The Board of Directors knows of no other matters which are likely to come
before the Meeting. If any other matters, of which the Board is not now aware,
should properly come before the Annual meeting, 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.
By Order of the Board of Directors,
/s/ MILAN PANIC
----------------------------------
MILAN PANIC
Chairman of the Board
Costa Mesa, California
May 1, 1996
THE COMPANY WILL MAIL WITHOUT CHARGE UPON WRITTEN REQUEST A COPY OF ITS
MOST RECENT ANNUAL REPORT ON FORM 10-K, INCLUDING THE FINANCIAL STATEMENTS,
SCHEDULES AND A LIST OF EXHIBITS. REQUESTS SHOULD BE SENT TO: SECRETARY, ICN
PHARMACEUTICALS, INC., 3300 HYLAND AVENUE, COSTA MESA, CALIFORNIA 92626.
25
