<PAGE>
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SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant /x/
Filed by a Party other than the Registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statement
/ / Confidential, for Use of the Commission Only (as permitted by
Rule 14a-6(e)(2))
/x/ Definitive Proxy Statement
/ / Definitive Additional Materials
/ / Soliciting Material Pursuant to Section 240.14a-11(c) or
Section 240.14a-12
ICN PHARMACEUTICALS, INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
/x/ No fee required.
/ / 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:
- --------------------------------------------------------------------------------
(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:
- --------------------------------------------------------------------------------
(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>
ICN PHARMACEUTICALS, INC.
August 27, 1999
To the Stockholders of ICN Pharmaceuticals, Inc.:
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
ICN Pharmaceuticals, Inc., which will be held on September 22, 1999, at
10:00 a.m. at The Waldorf-Astoria, 301 Park Avenue, New York, New York 10022.
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>
ICN PHARMACEUTICALS, INC.
3300 HYLAND AVENUE
COSTA MESA, CALIFORNIA 92626
------------------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 22, 1999
------------------------
To the Stockholders of
ICN Pharmaceuticals, Inc.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of ICN
Pharmaceuticals, Inc., a Delaware corporation (the "Company"), will be held at
The Waldorf-Astoria, 301 Park Avenue, New York, New York 10022, on
September 22, 1999, at 10:00 a.m., local time, for the purpose of considering
and acting upon the following:
1. The election of six directors, to hold office until the 2002 Annual
Meeting of Stockholders and thereafter until their successors are elected and
qualified.
2. To consider a stockholder proposal to provide for a mandatory retirement
policy for directors of the Company.
3. The transaction of such other business as may properly come before the
meeting or any adjournments thereof.
Only stockholders of record at the close of business on August 10, 1999
will be entitled to notice of and to vote at the meeting and any adjournments or
postponements 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: August 27, 1999
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.
<PAGE>
ICN PHARMACEUTICALS, INC.
3300 HYLAND AVENUE
COSTA MESA, CALIFORNIA 92626
------------------------
PROXY STATEMENT
------------------------
ANNUAL MEETING OF STOCKHOLDERS TO BE HELD ON
SEPTEMBER 22, 1999
This Proxy Statement is being mailed on or about August 27, 1999, 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 September 22, 1999, or adjournments or
postponements thereof, 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, 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 August 10, 1999, there were outstanding
78,235,052 shares of the Company's common stock, par value $.01 per share, (the
"Common Stock" or the "Shares") held of record by approximately 8,538
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 of Common Stock 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 is the acquiring
company and, as a result, the Company reports the historical financial data of
SPI in its financial results for periods prior to the Merger.
1
<PAGE>
ICN PROPOSAL
ELECTION OF DIRECTORS
The Certificate of Incorporation of the Company provides that the Board of
Directors be divided into three classes of directors. Six directors are to be
elected at the 1999 Annual Meeting, each to serve until the 2002 Annual Meeting
of Stockholders and until his successor is elected and qualified. The nominees
are Norman Barker, Jr., David H. Batchelder, Birch Bayh, Jr., 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 six 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 six nominees listed above. If any other matters are properly
presented at the Meeting for action, other than the election of directors, and a
stockholders proposal to amend the By-Laws 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 matters
since directors are elected by a plurality of the votes cast at the Annual
Meeting.
INFORMATION CONCERNING NOMINEES AND DIRECTORS
The current Board of Directors consists of sixteen members: Messrs. Barker,
Batchelder, Charles, Jerney and Moses and Sen. Bayh are standing for
re-election; Messrs. Guillemin, Kurz, Manatt, Panic and M. Smith are serving
until the 2000 Annual Meeting of Stockholders; and Messrs. Jolley, Lenagh, R.
Smith, Starr and Kozyrev will serve until the 2001 Annual Meeting of
Stockholders.
The Board has elected Mr. David H. Batchelder as a member of the Board of
Directors of the Company, as well as a nominee to be elected at the 1999 Annual
Meeting. Mr. Batchelder is a Principal and Managing Member of Relational
Investors, LLC ("RILLC") which currently owns 1,563,900 shares of the Company's
common stock. In connection with the nomination of Mr. Batchelder, the Company
has entered into a Standstill Agreement with RILLC whereby RILLC agrees not to
acquire in excess of 10% of the outstanding common stock of the Company,
directly or indirectly. In addition, should RILLC seek to nominate an additional
director prior to the 2000 Annual Meeting, the Company will propose three
independent candidates, one of whom will be selected by RILLC to be nominated to
stand for election at the Company's 2000 Annual Meeting.
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).
2
<PAGE>
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)(g) .................................. 77 1988 Bank Plus, Inc.; TCW
Mr. Barker is the retired Chairman of the Board of First Convertible Securities, Inc.
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.
DAVID H. BATCHELDER ........................................... 50 1999 Apria Healthcare Group, Inc.,
Mr. Batchelder is a Principal and Managing Member of Morrison Knudsen Corporation,
Relational Investors, LLC, of which he was a founder in 1996. Neuvo Energy Company
He has served as the Chairman and Chief Executive Officer of
Batchelder & Partners, Inc., a financial advisory and
investment-banking firm based in San Diego, California, since
1988.
BIRCH E. BAYH, JR., ESQ. (a)(g) ............................... 71 1992 Simon Property Group
Sen. Bayh is a senior partner in the Washington, D.C. law
firm of Oppenheimer, Wolff, Donnelly & Bayh, L.L.P. He
previously was head of the Washington office of Bayh,
Connaughton & Stewart, L.L.P. (1991-1997) and Rivkin, Radler,
Bayh, Hart & Kremer (1985-1991), and a partner in the
Indianapolis, Indiana and Washington, D.C. law firm of Bayh,
Tabbert & Capehart (1981-1985). Sen. Bayh served as a United
States Senator from the state of Indiana from 1963-1981.
ALAN F. CHARLES (a)(f) ........................................ 61 1986 Rand Institute of Civil
Mr. Charles was Vice Chancellor of University Relations at Justice
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 ................................................... 57 1992
Mr. Jerney is Chief Operating Officer and President 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 SPI. He became President of
the Company in 1997. Prior to joining ICN, he spent four
years with F. Hoffman-LaRoche & Company.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE THE COMPANY DIRECTORSHIPS
- --------------------------------------------------------------- --- ----------- -----------------------------
<S> <C> <C> <C>
STEPHEN D. MOSES (a)(b)(f) .................................... 64 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>
DIRECTORS WHOSE TERMS EXPIRE IN 2000
<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) .............................. 75 1989 Theratechnologies, Inc.;
Dr. Guillemin has been an Adjunct Professor of Medicine at CEREP S.A.
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) ..................................... 65 1989 Board of Banque Pasche
Mr. Kurz was a member of the Board of Directors and the S.A., Geneva
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.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE THE COMPANY DIRECTORSHIPS
- --------------------------------------------------------------- --- ----------- -----------------------------
<S> <C> <C> <C>
CHARLES T. MANATT (c)(g) ...................................... 63 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) ............................................... 69 1960
Mr. Panic, the founder of ICN, has been Chairman of the Board
and Chief Executive Officer of ICN since its inception in
1960 and served as President until 1997; 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) prior to the Merger, and
he may be deemed to be a "control person" of the Company.
MICHAEL SMITH, Ph.D. (d) ...................................... 67 1994 Pasteur-Merieux-
Dr. Smith is Director of the Biotechnology Laboratory, an Counaught, North America
interdisciplinary unit, at the University of British
Columbia. He is a 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>
DIRECTORS WHOSE TERMS EXPIRE IN 2001
<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE THE COMPANY DIRECTORSHIPS
- --------------------------------------------------------------- --- ----------- -----------------------------
<S> <C> <C> <C>
WELDON B. JOLLEY, Ph.D. (b)(d)(e) ............................. 72 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
physiologist at the Veterans Hospital in Loma Linda,
California.
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
YEAR
COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE THE COMPANY DIRECTORSHIPS
- --------------------------------------------------------------- --- ----------- -----------------------------
<S> <C> <C> <C>
THOMAS H. LENAGH (b)(c)(f) .................................... 80 1979 Adams Express, V-Band Corp.,
Mr. Lenagh is an independent financial advisor. He was ASD Group Fund, Clemente
Chairman of the Board of Greiner Engineering, Inc. from 1982 Global Fund Inrad Corp.
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.
ROBERTS A. SMITH, Ph.D. (a)(d)(e) ............................. 70 1960 PLC Medical Systems
Dr. Smith was President of Viratek and Vice 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 (c) .......................................... 78 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.
ANDREI KOZYREV, Ph.D.(f) ...................................... 48 1998
Prior to joining ICN, Dr. Kozyrev had served as a member of
the Russian Parliament and several other senior level posts
in Russia. Dr. Kozyrev earned his Ph.D. in History. He is
also an author, having published several works on the Russian
economy and international affairs.
</TABLE>
- ------------------
(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 Communications Committee
(g) 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.
6
<PAGE>
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 current 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 no meetings during the year ended
December 31, 1998.
The current members of the Audit Committee, which held ten meetings during
the year ended December 31, 1998 are Messrs. Lenagh, Jolley 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, Charles, Moses, and R. Smith and Sen. Bayh. This Committee held
seven meetings during the year ended December 31, 1998.
The Finance Committee oversees investment and commercial banking issues and
investment guidelines. The current members of this Committee are Messrs. Barker,
Kurz, Lenagh, Manatt and Starr. This Committee held three meetings during the
year ended December 31, 1998.
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, Jolley, M. Smith and R. Smith. This Committee held three
meetings during the year ended December 31, 1998.
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, Lenagh, Kozyrev and Moses. This Committee did not meet during
the year ended December 31, 1998.
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 and
Barker, and Sen. Bayh. This Committee did not meet during the year ended
December 31, 1998.
The Board of Directors met ten times during 1998 and all of the directors
attended at least 75% of the meetings, except for Dr. Guillemin, Dr. Kozyrev,
Mr. Kurz and Dr. M. Smith, who attended 70%, 40%, 40% and 40%, respectively.
STOCKHOLDER PROPOSAL
PROPOSAL TO AMEND THE COMPANY'S BY-LAWS TO PROVIDE FOR
A MANDATORY RETIREMENT POLICY FOR DIRECTORS OF THE COMPANY
The following proposal was submitted by Heartland Advisors, 790 North
Milwaukee St., Milwaukee, WI 53202.
Mandatory Retirement for Director Nominees at Age 70
RESOLVED, that the Bylaws of the Company be amended to provide for a
mandatory retirement policy for all members of the Board at age 70, and further
provided that if such policy is not adopted by the next regularly scheduled
annual meeting for stockholders, the Company shall adopt, commencing with
directors to be elected at the 2000 meeting, that the mandatory retirement age
for all nominees of the Board of Directors is set at age 70
7
<PAGE>
and no person shall be deemed qualified for nomination as a director whose term
of office as a director shall extend past his or her 70th birthday.
SUPPORTING STATEMENT
Certain members of the Company's Board of Directors may, if permitted,
remain entrenched in their director positions even though they may no longer be
capable of approaching their responsibilities with the vigor and flexible
outlook demanded of an effective Board member. In addition, the extended
entrenchment of Board members makes it more difficult to introduce new members,
with fresh ideas and innovations to the Board of Directors. The imposition of a
maximum age limit on nominees for election as Company directors will not only
reduce the possibility that a director's age will adversely affect his or her
ability to serve the Company, but will also facilitate periodic changes in the
composition of the Board that will help to bring new ideas and approaches to
bear on Company issues.
This proposal is designed to provide that vigorous, energetic and
innovative personnel can be brought into director positions and similar
proposals have been previously adopted by numerous public corporations.
Please vote "FOR" this proposal.
The Board of Directors' Recommendation and Comments on the Foregoing
Stockholder Proposal
We believe that it is not in the best interest of the stockholders to
prohibit qualified persons from serving as members of the Board of Directors
solely on the basis of age. As the United States and various state governments
have recognized in the passage of laws prohibiting age-related job
discrimination, there is no legitimate scientific or other basis for the
establishment of an arbitrary age for retirement. A policy mandating retirement
from the Board at the age of 70, without regard to the potential contributions
of the individual in question, could deprive the Corporation of the services of
extremely able and dedicated directors whose experiences and areas of expertise
contribute to the quality and diversity of the Board as a whole. We believe that
a Board Member's ability to serve the Corporation is determined by such
individual's unique qualifications, in the context of the overall composition of
the Board and the Corporation's management needs, and not by such individual's
age.
In 1993 the United States Equal Employment Opportunity Commission sued
Johnson & Higgins alleging that its mandatory retirement policy for directors
violated the Age Discrimination in Employment Act. Under settlement terms
recently reached, the Company was required to drop its mandatory retirement
policy and pay $28 million dollars in damages to affected directors.
The policy of the Board is to select nominees whom it believes to be best
qualified to oversee the management of the Corporation. A policy restricting the
discretion of the Board could have a negative impact on the quality and
diversity of the nominees eligible for election to the Board.
It should be noted that the portion of the foregoing stockholder proposal
pertaining to nominees is ambiguous as stated in that it does not specify by
what means the Corporation shall adopt the specified policy. Such portion may be
intended as a proposal to amend the By-Laws or, alternatively, as a precatory
recommendation that the Board adopt such policy.
Accordingly, the Board of Directors recommends a vote AGAINST the foregoing
stockholder proposal.
Pursuant to the provisions of the Corporation's By-Laws, approval of the
foregoing stockholder proposal, insofar as it constitutes a proposal to amend
the By-Laws, would require the affirmative vote of not less than seventy-five
percent of the voting power of all securities of the Corporation entitled to
vote generally in the election of Directors. Otherwise, it would require the
affirmative vote of a majority of the voting power of the securities of the
Corporation represented at the Meeting and entitled to vote generally in the
election of Directors. When a proxy in the form enclosed with the Proxy
Statement is returned properly executed, such proxy will be voted against such
stockholder proposal unless marked to the contrary. In the case of a By-Law
amendment, abstentions and broker non-votes will have the effect of votes
against such stockholder proposal. In the case of a precatory recommendation,
abstentions will have the effect of votes against such stockholder proposal and
broker non-votes will have no effect since they will not be considered for this
purpose as securities represented at the Meeting.
8
<PAGE>
EXECUTIVE OFFICERS
THE EXECUTIVE OFFICERS OF THE COMPANY ARE AS FOLLOWS:
<TABLE>
<CAPTION>
NAME AGE PRESENT POSITION WITH THE COMPANY
- ---- --- ---------------------------------
<S> <C> <C>
Milan Panic........................ 69 Chairman of the Board and Chief Executive Officer
Adam Jerney........................ 57 Director, President and Chief Operating Officer
John E. Giordani................... 57 Executive Vice President, Chief Financial Officer and Corporate
Controller
Bill A. MacDonald.................. 51 Executive Vice President, Strategic Planning
David C. Watt...................... 46 Executive Vice President, General Counsel and Corporate Secretary
Jack L. Sholl...................... 57 Senior Vice President, Corporate Human Resources
Richard A. Meier................... 40 Senior Vice President, Finance and Corporate Treasurer
</TABLE>
Milan Panic, the founder of ICN, has been Chairman of the Board and Chief
Executive Officer of the Company since its inception in 1960 and President until
1997, 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).
Adam Jerney has been President of the Company since January 1997 and has
served as a director of ICN since 1992, at the time of Milan Panic's leave of
absence. Prior to the Merger, he had served as an officer of ICN, Viratek and
Biomedicals since 1987, and as 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. Prior to
joining ICN, he spent four years with F. Hoffmann-LaRoche & Company.
John E. Giordani joined ICN Pharmaceuticals, Inc. in June of 1986 as Senior
Vice President and Chief Financial Officer. He has served as ICN's Executive
Vice President and Chief Financial Officer since 1992. Prior to joining ICN,
Mr. Giordani served as Vice President and Corporate Controller of Revlon, Inc.
in New York from 1982 through 1986 and Deputy and Assistant Corporate Controller
with Revlon from 1978 through 1982. He was with the public accounting firm of
Peat, Marwick, Mitchell & Co. (now known as "KPMG Peat Marwick LLP") from 1969
to 1978.
Bill A. MacDonald joined ICN in March 1982 as Director of Taxes. In 1983,
he became Vice President--Taxes and Corporate Development. In 1987,
Mr. MacDonald became Senior Vice President--Tax and Corporate Development, and
in 1992 was promoted to Executive Vice President--Strategic Planning. Prior to
the Merger in November 1994, he had been President of Biomedicals since March
18, 1993. 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.
David C. 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, General Counsel
and Corporate Secretary 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.
9
<PAGE>
Jack L. Sholl joined ICN in August 1987 as Vice President, Public
Relations. Prior to the Merger, he was promoted to Senior Vice President of SPI.
He was elected Senior Vice President-Corporate Human Resources in September
1994. 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 (1971-1973) and in editorial
positions with The Associated Press (1986-1971), the last as supervising
Business and Financial Editor in New York.
Richard A. Meier joined ICN in May 1998 as Senior Vice President--Finance
and Corporate Treasurer. Before joining ICN, Mr. Meier was a Senior Vice
President with the investment banking firm of Schroder & Co. Inc. in New York,
New York. From 1994 to 1996, he served as an Analyst at Salomon Smith Barney,
Inc. in New York, New York. From 1985 to 1993, Mr. Meier served in various
banking and private equity capacities at Manufacturers Hanover Trust
Corporation, Australian Capital Equity, Inc., and Windsor Hall Partners in New
York and Dallas, Texas.
OWNERSHIP OF THE COMPANY'S SECURITIES
PRINCIPAL STOCKHOLDERS
As of July 31, 1999, the following stockholders were known to management to
be beneficial owners of more than 5% of the outstanding shares of the Common
Stock:
<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) .................... 4,734,795 6.1%
Heartland Value Fund
790 North Milwaukee Street
Milwaukee, WI 53202
</TABLE>
- ------------------
(1) Total outstanding shares of Common Stock for purposes of this table include
78,233,892 shares outstanding on July 31, 1999.
(2) As reported on Form 13G filed with the Securities and Exchange Commission
(the "Commission"), 4,734,795 shares may be deemed beneficially owned by
Heartland Advisors within the meaning of Rule 13d-3 of the Securities Act of
1934. The interests of Heartland Group, Inc., a services investment company
for which Heartland Advisors serves as investment advisor, relates to more
than 5% of the class.
10
<PAGE>
OWNERSHIP BY MANAGEMENT
The following table sets forth, as of July 31, 1999, certain information
regarding the beneficial ownership of the Company's common stock and the percent
of shares owned beneficially by each director, nominee, and each Named Executive
Officer, and all directors, nominees, and executive officers of the Company 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............................................................... 103,694(3) (2)
David H. Batchelder............................................................. 1,563,900(4) 2.0%
Birch E. Bayh, Jr............................................................... 54,141(5) (2)
Alan F. Charles................................................................. 57,424(6) (2)
Roger Guillemin, M.D., Ph.D..................................................... 117,384(7) (2)
Adam Jerney..................................................................... 1,057,600(8) 1.3%
Weldon B. Jolley, Ph.D.......................................................... 98,198(9) (2)
Andrei Kozyrev.................................................................. 5,625(10) (2)
Jean-Francois Kurz.............................................................. 86,503(11) (2)
Thomas H. Lenagh................................................................ 92,992(12) (2)
Charles T. Manatt............................................................... 119,593(13) (2)
Stephen D. Moses................................................................ 46,918(14) (2)
Milan Panic..................................................................... 2,920,968(15) 3.6%
Michael Smith, Ph.D............................................................. 89,688(16) (2)
Roberts A. Smith, Ph.D.......................................................... 173,586(17) (2)
Richard W. Starr................................................................ 86,207(18) (2)
John E. Giordani................................................................ 81,863(19) (2)
Bill A. MacDonald............................................................... 23,095(20) (2)
David Watt...................................................................... 175,320(21) (2)
Directors, nominees, and executive officers of the Company as a group
(21 persons).................................................................. 7,059,649(22) 8.5%
</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 98,565 shares of ICN common stock which Mr. Barker has the right
to acquire within 60 days upon the exercise of stock options.
(4) All of the above shares are held by Relational Investors, LLC ("RILLC"),
separate accounts which it manages or by limited partnerships (Relational
Coast Partners, L.P., Relational Investors, L.P., Relational Fund Partners,
L.P., or Relational Partners, L.P.) of which RILLC is the sole general
partner. Mr. Batchelder is one of three managing members of RILLC and
shares voting and dispositive power as to the shares. For certain purposes,
Mr. Batchelder may be deemed to be the beneficial owner of shares held by
RILLC and its related managed accounts and limited partnerships.
(5) Includes 54,141 shares of ICN common stock which Sen. Bayh has the right to
acquire within 60 days upon the exercise of stock options.
(6) Includes 57,355 shares of ICN common stock which Mr. Charles has the right
to acquire within 60 days upon the exercise of stock options.
(Footnotes continued on next page)
11
<PAGE>
(Footnotes continued from previous page)
(7) Includes 116,556 shares of ICN common stock which Dr. Guillemin has the
right to acquire within 60 days upon the exercise of stock options.
(8) Includes 1,051,044 shares of ICN common stock which Mr. Jerney has the
right to acquire within 60 days upon the exercise of stock options.
(9) Includes 97,973 shares of ICN common stock which Dr. Jolley has the right
to acquire within 60 days upon the exercise of stock options.
(10) Includes 5,625 shares of ICN common stock which Dr. Kozyrev has the right
to acquire within 60 days upon the exercise of stock options.
(11) Includes 86,503 shares of ICN common stock which Mr. Kurz has the right to
acquire within 60 days upon the exercise of stock options.
(12) Includes 84,591 shares of ICN common stock which Mr. Lenagh has the right
to acquire within 60 days upon the exercise of stock options.
(13) Includes 116,556 shares of ICN common stock which Mr. Manatt has the right
to acquire within 60 days upon the exercise of stock options.
(14) Includes 46,615 shares of ICN common stock which Mr. Moses has the right to
acquire within 60 days upon the exercise of stock options.
(15) Includes 2,520,274 shares of ICN common stock which Mr. Panic has the right
to acquire within 60 days upon the exercise of stock options.
(16) Includes 89,688 shares of ICN common stock which Dr. Michael Smith has the
right to acquire within 60 days upon the exercise of stock options.
(17) Includes 165,608 shares of ICN common stock which Dr. Roberts A. Smith has
the right to acquire within 60 days upon the exercise of stock options.
(18) Includes 5,625 shares of ICN common stock which Mr. Starr has the right to
acquire within 60 days upon the exercise of stock options.
(19) Includes 78,795 shares of ICN common stock which Mr. Giordani has the right
to acquire within 60 days upon the exercise of stock options.
(20) Includes 20,061 shares of ICN common stock which Mr. MacDonald has the
right to acquire within 60 days upon the exercise of stock options.
(21) Includes 169,292 shares of ICN common stock which Mr. Watt has the right to
acquire within 60 days upon the exercise of stock options.
(22) Includes 4,959,600 shares of ICN common stock which directors and executive
officers have the right to acquire within 60 days upon the exercise of
stock options.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires ICN's executive 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 executive officers,
directors and stockholders 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 1998 all filing requirements
applicable to its executive officers, directors and ten percent beneficial
owners were timely satisfied with the exception of A. Jerney, an officer, who
filed one late report of a required Form 144 for the notice of proposed sale of
securities, and R. Meier, an officer, who filed one late report of a required
Form 3 for the initial statement of beneficial ownership of securities.
12
<PAGE>
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 the Company (the "Named Executive Officers"),
for services rendered to the Company in all capacities during the years ended
December 31, 1998, 1997 and 1996.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG TERM COMPENSATION
------------------------------------------- ----------------------------
OTHER ANNUAL RESTRICTED SECURITIES ALL OTHER
NAME AND COMPENSATION STOCK UNDERLYING COMPENSATION
PRINCIPAL POSITION YEAR SALARY($) BONUS($) ($)(1) AWARDS($)(2) OPTIONS(#)(3) ($)(4)
------------------ ---- --------- --------- ------------ ------------ ------------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Milan Panic....................... 1998 701,277 1,336,000 4,013,966 253,542 193,366(5)
Chairman and Chief 1997 644,680 1,787,000 -- 279,000 190,473
Executive Officer 1996 612,500 750,000 -- 150,000 73,893
Adam Jerney....................... 1998 422,940 235,773 1,204,183 50,000 40,144(6)
President and Chief 1997 402,800 669,200 -- 111,600 26,729
Operating Officer 1996 380,000 160,000 -- -- 22,400
John E. Giordani.................. 1998 312,375 423,900 802,800 45,000 14,490(7)
Executive Vice President, 1997 297,500 376,800 -- 69,750 15,499
Chief Financial Officer 1996 278,000 127,000 -- -- 16,300
and Corporate Controller
Bill A. MacDonald................. 1998 222,600 328,567 802,800 45,000 3,100(8)
Executive Vice President, 1997 212,000 444,324 -- 69,750 3,502
Strategic Planning 1996 200,000 141,000 -- -- 15,600
David Watt........................ 1998 224,700 354,449 802,800 45,000 2,256(9)
Executive Vice President, 1997 214,000 562,000 -- 69,750 4,657
General Counsel and 1996 200,000 269,000 -- -- 3,000
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 award of restricted stock under the Company's Long Term Incentive
Plan. The values of restricted stock awards presented in the table are based
upon the market value of the common stock as of the date awarded. The
restricted shares vest 25% per year, starting one year from the date of
grant. At December 31, 1998, the aggregate number of shares of restricted
stock and the value thereof were: Mr. Panic, 122,254 shares, $2,769,053;
Mr. Jerney, 36,676 shares, $830,711; Mr. Giordani, 24,451 shares, $553,815;
Mr. MacDonald, 24,451 shares, $553,815; Mr. Watt, 24,451 shares, $553,815.
Dividends are paid on the restricted shares to the same extent paid on the
Company's common stock, and are held in escrow until the related shares are
vested.
(3) Includes grants of options to purchase shares of the Company's common stock.
(4) Except where otherwise indicated, the amounts in this column represent
matching contributions to the Company's 401(K) plan, amounts accrued under
an executive deferral plan and medical benefits and medical and life
insurance premiums.
(5) In 1998, the $193,366 of "All Other Compensation" Mr. Panic received
consisted of the following: executive medical ($1,777), life insurance
($9,688), and interest paid pursuant to a collateral agreement ($181,901).
(6) In 1998, the $40,144 of "All Other Compensation" Mr. Jerney received
consisted of the following: accounting-tax ($26,895), executive medical
($8,337), tennis club ($420) and life insurance ($4,492).
(7) In 1998, the $14,490 of "All Other Compensation" Mr. Giordani received
consisted of the following: executive medical ($10,318) and life insurance
($4,172).
(8) In 1998, the $3,100 of "All Other Compensation" Mr. MacDonald received
consisted of the following: executive medical ($1,140) and life insurance
($1,960).
(9) In 1998, the $2,256 of "All Other Compensation" Mr. Watt received consisted
of life insurance.
13
<PAGE>
In April 1997, the Company made a short-term advance of $327,000 to
Mr. Panic which was repaid, with interest, in 1997.
In August 1996, the Company loaned Mr. Panic $428,000 in regards to tax
matters relating to the exercise of stock options. This loan, along with accrued
interest, was repaid in November 1996.
In June 1996, the Company made a short-term loan to Mr. Panic in the amount
of $3,500,000 for certain personal obligations. During August 1996, this amount
was repaid to the Company. In connection with this transaction, the Company
guaranteed $3,600,000 of debt of Mr. Panic with a third party bank. In addition
to the guarantee, the Company deposited $3,600,000 with this bank as collateral
to Mr. Panic's debt. This deposit is recorded as a long-term asset on the
balance sheet. Mr. Panic has provided collateral to the Company's guarantee in
the form of a right to the proceeds of the exercise of stock options in the
amount of 150,000 options with an exercise price of $15.17 and the rights to a
$4,000,000 life insurance policy provided by the Company. In the event of any
default on the debt to the bank, the Company has recourse that is limited to the
collateral described above. Both the transaction and the sufficiency of the
collateral for the guarantee were approved by the Board of Directors.
In February 1996, the Company loaned Mr. Jerney $389,000 for the exercise
of stock options. This amount was subsequently repaid with interest.
OPTION GRANT TABLE
The following table sets forth information with respect to options to
purchase shares of Common Stock granted to Named Executive Officers in 1998.
<TABLE>
<CAPTION>
PERCENT OF
NUMBER OF TOTAL OPTIONS GRANTED
SECURITIES UNDERLYING TO EMPLOYEES IN EXERCISE EXPIRATION GRANT DATE
NUMBER OPTIONS GRANTED(1) FISCAL YEAR(2) PRICE DATE PRESENT VALUE(3)
- ------------------------------ --------------------- --------------------- -------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
Milan Panic................... 150,000 6.0% $45.25 5/01/08 $3,119,325
Milan Panic................... 103,542(4) 4.0% $ 2.91 9/14/99 $1,285,909
Adam Jerney................... 50,000 2.0% $45.25 5/01/08 $1,039,775
John E. Giordani.............. 45,000 1.8% $45.25 5/01/08 $ 935,797
Bill A. MacDonald............. 45,000 1.8% $45.25 5/01/08 $ 935,797
David C. Watt................. 45,000 1.8% $45.25 5/01/08 $ 935,797
</TABLE>
- ------------------
(1) Unless otherwise noted, the options granted have ten year terms. The options
granted to the executive officers excluding Mr. Panic 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 grants received by Mr. Panic were vested as of the date of grant.
Except as otherwise noted, all options were granted with an exercise price
equal to the fair market value of the underlying shares on the date of
grant.
(2) Options to purchase a total of 2,515,000 shares were granted to employees,
including executive officers, during fiscal 1998, including 304,000 shares
resulting from the extension of the term of certain options held by four
officers, directors or employees of the Company.
(3) 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.
(4) In September 1998, the Compensation Committee of the Company's Board of
Directors extended, by one year, the term of options to purchase 103,542
shares of the Company's common stock held by Mr. Panic (which expired in
September 1998). The market price of the Company's common stock at the time
was $15.25 per share.
14
<PAGE>
OPTION EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth information regarding (i) stock option
exercises by the Named Executive Officers during 1998 and (ii) unexercised stock
options held by the Named Executive Officers at December 31, 1998:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
SHARES OPTIONS AT 12/31/98 AT 12/31/98(2)
ACQUIRED VALUE ---------------------------- ----------------------------
NAME ON EXERCISE REALIZED(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ------------------------------ ----------- ----------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Milan Panic................... -- $ -- 2,520,279 -- $18,431,449 $ --
Adam Jerney................... -- -- 1,010,652 133,700 13,308,805 749,810
John E. Giordani.............. -- -- 92,050 87,937 727,254 384,643
Bill A. MacDonald............. -- -- 53,552 87,937 559,607 384,643
David Watt.................... 25,000 855,795 162,546 87,937 1,754,368 384,643
</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, 1998 and the exercise price.
COMPENSATION OF DIRECTORS OF ICN
Members of the Board of Directors of ICN, other than employees, were 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 were reimbursed for their out-of-pocket expenses in
attending meetings. In addition, non-employee directors on each April 18th are
granted options to purchase 22,500 shares of the Company's common stock. During
1998, the Company extended by one year the term of options to purchase 103,495
shares of common stock which are held by Roberts Smith, Ph.D., a director of the
Company.
CERTAIN EMPLOYMENT AGREEMENTS
On March 18, 1993, the Board of Directors of ICN adopted Employment
Agreements ("Employment Agreements") which contained "Change in Control"
benefits for five current key senior executive officers of ICN. The executives
include Messrs. Jerney, Giordani, MacDonald and Watt, then officers of ICN, and
Mr. Sholl, then an officer of SPI. The Employment Agreements were assumed by ICN
in connection with the Merger. In addition, the Company entered into an
Employment Contract with Richard A. Meier, Senior Vice President- Finance and
Corporate Treasurer, on December 31, 1998, 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 with Messrs. Jerney, Giordani,
MacDonald, Watt and Sholl had an initial term which ended March 30, 1996 and has
been extended through March 30, 2000. The Agreement with Mr. Meier has an
initial term extending through December 31, 2000. The Employment Agreements
automatically extend 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 the Agreements). 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 following a Change in
Control of ICN (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.
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,
15
<PAGE>
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 approximate amounts (based upon present compensation): Adam Jerney
$3,276,420; John Giordani $2,208,825; Bill MacDonald $2,000,772; David Watt
$2,360,100; Jack Sholl $1,277,295; and Richard A. Meier $1,593,384. 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.
PANIC EMPLOYMENT AGREEMENT
ICN and Milan Panic entered into an Employment Agreement effective
October 1, 1988, which, as amended and extended, terminates on December 31, 2002
(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. Upon consummation of the merger, the Panic Employment Agreement was assumed
by ICN. The Panic Employment Agreement provides for an annual salary, currently
$701,277, 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 may, at his option, provide consulting services
to ICN for $120,000 per year for life, which amount is subject to annual
cost-of-living adjustments from the base year of 1967 until the date of
retirement. Mr. Panic will be entitled when serving as a consultant to
participate in the Company's medical and dental plans. Including such
cost-of-living adjustments, the annual cost of such consulting services is
currently estimated to be in excess of $584,000. 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
16
<PAGE>
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)
$3,506,385.
COMPENSATION REPORT
The Compensation and Benefits Committee ("Committee") is composed of
Messrs. Barker, Charles, R. Smith and Moses and Sen. Bayh, 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 their unit in relation to the plan. Specific goals and objectives for each
executive are reviewed by the executive and their supervisor. In reviewing the
annual performance which will determine the executive's compensation, the
supervisor assesses a performance grade based on the pre-set performance
objectives. This assessment is used to determine base salary for the following
fiscal year. 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 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 long-term stock incentive plans.
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
are granted at fair market value and vest over a ten year period. The amount of
options granted is tied to salary and performance and each grant is evaluated.
No grant to executives is automatic. In 1996, the stockholders approved a Long
Term Incentive Plan
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("LTIP") which provides for restricted stock awards to be granted to certain key
officers and employees of the Company. Eligibility for awards under the LTIP
requires that the Company's stock performance exceeds that of the Standard and
Poor's 500 Index.
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
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 $1,000,000 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
The Compensation Committee consists of Messrs. Barker, Charles, Moses, and
R. Smith and Sen. Bayh, each a non-employee director. Sen. Bayh (or the law firm
with which he is affiliated), and Messrs. Charles and Moses received $139,530,
$48,000, and $48,000 respectively, in 1998 from ICN for consulting services
rendered.
Compensation and Benefits Committee
Norman Barker, Jr.
Senator Birch Bayh
Alan F. Charles
Roberts A. Smith
Stephen D. Moses
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PERFORMANCE GRAPH
The following compares the cumulative total return on an investment in ICN
Common Stock with the cumulative total return on the Standard & Poor's 500 Stock
Index and the 5-Stock Custom Composite Index for the five years ended
December 31, 1998. The graph assumes the investment of $100 in ICN Common Stock
or in each index on December 31, 1993, 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,
1993 (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 upon an initial investment of $100 on December 31, 1993
with dividends reinvested
[GRAPH]
<TABLE>
<CAPTION>
MEASUREMENT PERIOD
(FISCAL YEAR ICN OLD CUSTOM COMPOSITE NEW CUSTOM COMPOSITE
COVERED) PHARMACEUTICALS INC. S&P 500 INDEX (5 STOCKS) INDEX (5 STOCKS)
-------------------- -------------------- ------- -------------------- --------------------
<S> <C> <C> <C> <C>
Dec-93 100 100 100 100
Dec-94 127 101 125 97
Dec-95 152 139 206 123
Dec-96 156 171 192 109
Dec-97 395 229 198 138
Dec-98 276 294 383 253
</TABLE>
The 5-Stock Old Custom Composite Index consists of Allergan Inc., Amgen
Inc., Carter Wallace Inc., Forest Laboratories--Class A, and Syntex Corp.
Performance for Syntex calculated through September 1994. after which the
company was acquired.
The 5-Stock New Custom Composite Index consists of Allergan Inc., Alza
Corp., Forrest Laboratories (Class A), Mylan Laboratories and Watson
Pharmaceuticals Inc.
The Company modified its composite index of peer companies to more
accurately reflect the Company's standing in the specialty pharmaceutical
industry. The Company deleted Amgen and Carter Wallace on the basis that these
businesses no longer were a meaningful comparison with the Company's business.
Syntex was deleted due to the fact that it was acquired in 1994.
CERTAIN TRANSACTIONS
In June 1996, the Company made a short-term loan to Mr. Panic in the amount
of $3,500,000 for certain personal obligations. During August 1996, this amount
was repaid to the Company. In connection with this transaction, the Company
guaranteed $3,600,000 of debt of Mr. Panic with a third party bank. In addition
to the
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guarantee, the Company deposited $3,600,000 with this bank as collateral to Mr.
Panic's debt. This deposit is recorded as a long-term asset on the balance
sheet. Mr. Panic has provided collateral to the Company's guarantee in the form
of a right to proceeds of the exercise of stock options in the amount of 150,000
options with an exercise price of $15.17 and the rights to a $4,000,000 life
insurance policy provided by the Company. In the event of any default on the
debt to the bank, the Company has recourse that is limited to the collateral
described above. Both the transaction and the sufficiency of the collateral for
the guarantee were approved by the Board of Directors.
During 1998, Sen. Bayh, or the law firm with which he is affiliated,
received legal or consulting fees from ICN in the amount of $139,530. In
addition, Drs. Guillemin and M. Smith and Messrs. Charles and Moses received
$75,000, $50,000, $48,000, and $48,000, respectively, in 1998 from ICN for
consulting services rendered.
INDEPENDENT PUBLIC ACCOUNTANTS
PricewaterhouseCoopers LLP was selected as the Company's independent public
accountants for fiscal 1998. A representative of PricewaterhouseCoopers LLP 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 to be presented to all
stockholders at the Company's 2000 Annual Meeting must submit his proposal to
the Company so that it is received by the Company at its principal executive
offices no later than January 30, 2000.
ANNUAL REPORT
The Annual Report to Stockholders for the year ended December 31, 1998
(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
August 27, 1999
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.
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ICN PHARMACEUTICALS, INC.
3300 HYLAND AVENUE,
COSTA MESA, CALIFORNIA 92626
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON SEPTEMBER 22, 1999
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
August 10, 1999 at the annual meeting of stockholders to be held at 10:00 a.m.
E.D.T. on September 22, 1999 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" the nominees to
the Board of Directors listed below, and AGAINST the adoption of the stockholder
proposal.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" PROPOSAL 1 AND "AGAINST" PROPOSAL
2.
- --------------------------------------------------------------------------------
(CONTINUED AND TO BE SIGNED ON THE REVERSE SIDE.)
<PAGE>
/x/ Please mark your vote as in this example.
1. Election of nominees listed below to the Board of Directors of the
Company. The Board of Directors of the Company recommends a vote "FOR"
Proposal 1.
<TABLE>
<S> <C> <C>
FOR all nominees listed below WITHHOLD AUTHORITY
(except as marked to the contrary below) / / to vote for all nominees listed below / /
</TABLE>
NOMINEES: Norman Barker, Jr., David H. Batchelder, Birch Bayh, Jr., Esq.,
Alan F. Charles, Adam Jerney, and Stephen Moses
(INSTRUCTION: To withhold authority to vote for any individual nominee(s), write
the name(s) of such nominee(s) in the following space)
2. Adoption of a stockholder proposal.
The Board of Directors recommends a vote "AGAINST" Proposal 2.
FOR / / AGAINST / / ABSTAIN / /
NOTE: Please date this Proxy and sign exactly as your name appears herein. When
there is more than one owner, all must sign, when signatory or attorney,
executor, administrator, trustee, guardian, corporate officer or partner,
sign full title as such. If a corporation, please sign in full corporate
name by duly authorized officer. If a partnership, please sign in
partnership name by a duly authorized person.
THE UNDERSIGNED ACKNOWLEDGES RECEIPT OF THE COPY OF THE NOTICE OF ANNUAL
MEETING AND PROXY STATEMENT (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.
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Signature(s) Date
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Signature(s) Date
