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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1 to
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1998. COMMISSION FILE NUMBER 1-11397
ICN PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 33-0628076
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3300 HYLAND AVENUE, COSTA MESA, CALIFORNIA 92626
(Address of principal executive offices) (Zip Code)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 545-0100
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- ------------------- ---------------
Common Stock, $.01 par value New York Stock Exchange
(Including associated preferred
stock purchase rights)
9-1/4% Senior Notes Due 2005 New York Stock Exchange
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
None
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months, and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the Registrant's voting stock held by
non-affiliates of the Registrant on March 23, 1999, was approximately
$1,752,699,000.
The number of outstanding shares of the Registrant's Common Stock as of
March 23, 1999 was 77,419,478.
DOCUMENTS INCORPORATED BY REFERENCE
None.
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<PAGE>
2
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The current Board of Directors consists of fifteen members: the terms of office
of Messrs. Barker, Bayh, Charles, Jerney and Moses continue until the 1999
Annual Meeting of Stockholders; 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.
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).
<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. 76 1988 Bank Plus, Inc.; TCW
Mr. Barker is the retired Chairman of the Board of First Convertible
Interstate Bank of California and Former Vice Chairman Securities, Inc.
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.
BIRCH E. BAYH, JR., ESQ. 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, D.C. 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). Mr. Bayh served as a United States
Senator from the state of Indiana from 1963-1981.
ALAN F. CHARLES 61 1986 Rand Institute of
Mr. Charles was Vice Chancellor of University Relations at Civil 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.
STEPHEN D. MOSES 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>
<PAGE>
3
<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. 75 1989 Theratechnologies,
Dr. Guillemin has been an Adjunct Professor of Medicine Inc.; CEREP S.A.
at the University of California College of Medicine
in San Diego since 1970. 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 64 1989 Board of Banque
Mr. Kurz was a member of the Board of Directors and the Pasche 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.
CHARLES T. MANATT 62 1992 Federal Express;
Mr. Manatt is a partner in the law firm of Manatt, Phelps, Comsat
Phillips, of which he was a founder in 1965. Mr. Manatt
served as Chairman of the Democratic Party.
MILAN PANIC 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. 66 1994 Pasteur-Merieux-
Dr. Smith is Director of the Biotechnology Laboratory, an Counaught, North
interdisciplinary unit, at the University of British Columbia. America
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>
<PAGE>
4
<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. 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.
THOMAS H. LENAGH 80 1979 Adams Express, V-Band
Mr. Lenagh is an independent financial advisor. He was Corp. ASD Group Fund;
Chairman of the Board of Greiner Engineering, Inc. Clemente Global Fund;
from 1982 to 1985. Mr. Lenagh served as Financial Vice Inrad Corp.
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. 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 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 year
of experience in commercial banking.
ANDREI KOZYREV, PH.D. 48 1998
Dr. Kozyrev was invited to join ICN's Board by Mr. Panic
in early 1998. Prior to that, he 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>
None of the directors are related by blood or marriage to one another or to an
executive officer of the Company.
<PAGE>
5
EXECUTIVE OFFICERS
The executive officers of the Company are as follows:
NAME AGE PRESENT POSITION WITH THE COMPANY
- ---- --- ---------------------------------
Milan Panic 69 Chairman of the Board and Chief Executive Officer
Adam Jerney 57 Director, President and Chief Operating Officer
John E. Giordani 56 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 39 Senior Vice President, Finance and Corporate
Treasurer
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.
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,
<PAGE>
6
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 (1968-1971), 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.
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.
<PAGE>
7
11. EXECUTIVE COMPENSATION
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>
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 1997 297,500 376,800 -- 69,750 15,499
President, Chief 1996 278,000 127,000 -- -- 16,300
Financial Officer and
Corporate Controller
Bill A. MacDonald 1998 222,600 328,567 802,800 45,000 3,100(8)
Executive Vice 1997 212,000 444,324 -- 69,750 3,502
President, Strategic 1996 200,000 141,000 -- -- 15,600
Planning
David Watt 1998 224,700 354,449 802,800 45,000 2,256(9)
Executive Vice 1997 214,000 562,000 -- 69,750 4,657
President, General 1996 200,000 269,000 -- -- 3,000
Counsel, and 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.
<PAGE>
8
(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.
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>
Number of Percent of
Securities Total Options
Underlying Granted to
Options Employees in Exercise Expiration Grant Date
Name 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.
<PAGE>
9
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
Shares Underlying Unexercised In-the-Money Options
Acquired Value Options at 12/31/98 at 12/31/98(2)
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
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. 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.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The Compensation Committee consists of Messrs. Barker, Bayh, Charles, Moses, and
R. Smith, 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.
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-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 was
extended through March 30, 1999. 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
<PAGE>
10
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, 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 $1,504,593; John Giordani $1,361,025; Bill MacDonald
$996,366; David Watt $1,028,549; Jack Sholl $820,549; and Richard A. Meier
$1,023,384. 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
<PAGE>
11
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)
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.
12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Principal Stockholders
As of February 28, 1999, the following stockholders were known to management to
be beneficial owners of more than 5% of the outstanding shares of the Common
Stock:
Name and Address Number of Shares Percent of Class
of Beneficial Owner Beneficially Owned Outstanding(1)
------------------- ------------------ --------------
Heartland Advisors, Inc.(2) 4,734,795 5.6%
Heartland Value Fund
790 North Milwaukee Street
Milwaukee, WI 53202
- --------------------------------------------------------------------------------
(1) Total outstanding shares of Common Stock for purposes of this table include
77,595,548 shares outstanding on February 28, 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.
<PAGE>
12
Ownership by Management
The following table sets forth, as of March 31, 1999, certain information
regarding the beneficial ownership of the Company's common stock and the percent
of shares owned beneficially by each Director and each Named Executive Officer
and all directors and executive officers of the Company as a group:
Number of Shares
and Nature of
Beneficial
Ownership
of ICN Percentage
Identity of Owner or Group Common Stock(1) of Class
---------------------------------- ------------------ ---------
Norman Barker, Jr................. 103,694(3) (2)
Birch E. Bayh, Jr................. 54,141(4) (2)
Alan F. Charles................... 57,424(5) (2)
Roger Guillemin, M.D., Ph.D....... 168,502(6) (2)
Adam Jerney....................... 1,051,052(7) 1.3%
Weldon B. Jolley, Ph.D............ 226,200(8) (2)
Andrei Kozyrev.................... 5,625(9) (2)
Jean-Francois Kurz................ 86,504(10) (2)
Thomas H. Lenagh.................. 92,992(11) (2)
Charles T. Manatt................. 119,594(12) (2)
Stephen D. Moses.................. 71,413(13) (2)
Milan Panic....................... 2,898,836(14) 3.6%
Michael Smith, Ph.D............... 89,689(15) (2)
Roberts A. Smith, Ph.D............ 277,083(16) (2)
Richard W. Starr.................. 114,709(17) (2)
John E. Giordani.................. 120,738(18) (2)
Bill A. MacDonald................. 95,810(19) (2)
David Watt........................ 194,227(20) (2)
Directors and executive officers of
the Company as a group (20 persons)... 5,923,707 (21) 7.2%
(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) 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.
(5) 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.
(6) Includes 167,674 shares of ICN common stock which Dr. Guillemin has the
right to acquire within 60 days upon the exercise of stock options.
(7) Includes 1,051,052 shares of ICN common stock which Mr. Jerney has the
right to acquire within 60 days upon the exercise of stock options.
(8) Includes 97,975 shares of ICN common stock which Dr. Jolley has the right
to acquire within 60 days upon the exercise of stock options.
(9) 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.
(10) Includes 86,504 shares of ICN common stock which Mr. Kurz has the right to
acquire within 60 days upon the exercise of stock options.
(11) Includes 86,504 shares of ICN common stock which Mr. Lenagh has the right
to acquire within 60 days upon the exercise of stock options.
(12) Includes 116,557 shares of ICN common stock which Mr. Manatt has the right
to acquire within 60 days upon the exercise of stock options.
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13
(13) Includes 71,110 shares of ICN common stock which Mr. Moses has the right to
acquire within 60 days upon the exercise of stock options.
(14) Includes 2,520,279 shares of ICN common stock which Mr. Panic has the right
to acquire within 60 days upon the exercise of stock options.
(15) Includes 89,689 shares of ICN common stock which Dr. Michael Smith has the
right to acquire within 60 days upon the exercise of stock options.
(16) Includes 269,105 shares of ICN common stock which Dr. Roberts A. Smith has
the right to acquire within 60 days upon the exercise of stock options.
(17) Includes 81,405 shares of ICN common stock which Mr. Starr has the right to
acquire within 60 days upon the exercise of stock options.
(18) Includes 120,738 shares of ICN common stock which Mr. Giordani has the
right to acquire within 60 days upon the exercise of stock options.
(19) Includes 82,240 shares of ICN common stock which Mr. MacDonald has the
right to acquire within 60 days upon the exercise of stock options.
(20) Includes 191,234 shares of ICN common stock which Mr. Watt has the right to
acquire within 60 days upon the exercise of stock options.
(21) Includes 5,336,038 shares of ICN common stock which directors and executive
officers have the right to acquire within 60 days upon the exercise of
stock options.
13. CERTAIN RELATIONSHIPS AND RELATED 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 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.
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.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
ICN PHARMACEUTICALS, INC.
Date: April 29, 1999
By /S/ DAVID C. WATT
-----------------------------------
David C. Watt
Executive Vice President, General Counsel
and Corporate Secretary
