[Letterhead of SSP-SPECIAL SITUATIONS PARTNERS INC.]
October 19, 2000
ICN Pharmaceuticals, Inc.
3300 Hyland Avenue
Costa Mesa, California 92626
Dear Sirs:
The purpose of this letter is to set forth the following agreements
and understandings between ICN Pharmaceuticals, Inc. (the "Company") and
SSP-Special Situations Partners Inc. ("SSP").
Section 1. Press Release. Concurrent with the execution of this
Letter Agreement, the Company has issued a press release in the form attached
hereto as Annex A (the "Press Release"). The Company shall not (and shall cause
its officers, directors, agents and advisors not to) make any public statement
in connection with this Letter Agreement or the matters addressed in the Press
Release that is inconsistent with the Press Release.
Section 2. Annual Meetings of Shareholders. As a means for SSP and
the stockholders of the Company to enforce the commitments of the Company set
forth in the Press Release, the Company agrees that:
(i) The board of directors of the Company (the "Board") and the
Company shall take all steps necessary or desirable to hold the 2001 annual
meeting of stockholders of the Company by not later than May 30, 2001 (the "2001
Meeting") and the 2002 annual meeting of stockholders of the Company not later
than May 29, 2002 (the "2002 Meeting"), and shall not seek to postpone or
adjourn, or permit the postponement or adjournment, of either the 2001 Meeting
or the 2002 Meeting.
(ii) The Board and the Company shall by not later than the 2002
Meeting, in accordance with applicable law, cause the size of the Board to be
reduced to, and fixed at nine directors, divided into three classes of three
directors. Such reduction shall be accomplished by reducing to three the number
of directors to be elected at each annual meeting of stockholders of the Company
(together with a concomitant reduction in the size of the entire Board)
beginning, seriatim, with the 2000 annual meeting of stockholders of the Company
(the "2000 Meeting").
(iii) The Board and the Company shall take all steps necessary or
desirable to procure that at each of the 2000 Meeting, the 2001 Meeting and the
2002 Meeting, the stockholders are entitled to elect exactly three directors and
that the number of directors to be elected at the 2002 Meeting, when taken
together with the number of directors elected at the
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2001 Meeting, shall in no event constitute less than two-thirds of the entire
Board at the date of the 2002 Meeting.
(iv) The Company shall not (and shall cause its officers, directors,
agents and advisors not to) take any action (including increasing the size of
the Board or proposing any amendment to its Restated Certificate of
Incorporation or By-laws) that would impede or prevent (A) the Company from
complying fully with the terms of this Letter Agreement or (B) any person who
has complied with the Company's Restated Certificate of Incorporation and any
other applicable law from making any shareholder proposals or nominations at, or
from soliciting proxies in respect of, the 2001 Meeting or the 2002 Meeting.
(v) The Board shall, as soon as possible but by not later than
October 24, 2000, duly adopt, in accordance with the charter documents of the
Company and in accordance with the Delaware General Corporation Law, an
amendment to the Company's By-laws in the form attached hereto as Annex B.
Section 3. SSP Covenant. SSP hereby covenants and agrees that it
will not, and will cause each of its affiliates not to, nominate or propose to
nominate any person for election at, or bring or propose to bring any matter
before, the 2000 annual meeting of stockholders of the Company.
Section 4. Representations and Warranties. (a) The Company
represents and warrants to SSP that (i) its execution, delivery and performance
of this Letter Agreement has been approved by the Board and does not violate its
Restated Certificate of Incorporation or By-laws or any agreement to which it is
a party, and (ii) this Letter Agreement constitutes a valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms.
(b) SSP represents and warrants to the Company that (i) its
execution, delivery and performance of this Letter Agreement has been approved
by all necessary corporate approvals and does not violate its constituent
documents or any agreement to which it is a party, and (ii) this Letter
Agreement constitutes a valid and binding obligation of SSP, enforceable against
SSP in accordance with its terms.
Section 5. Miscellaneous. This Letter Agreement represents the
entire understanding of the parties hereto with reference to the subject matter
hereof and supersedes any and all other oral or written agreements and
understandings among the parties heretofore made. This Letter Agreement shall be
governed by, and construed in accordance with, the laws of the State of
Delaware. Each of the parties hereto shall use such party's best efforts to take
such actions as may be necessary or reasonably requested by the other party
hereto to carry out and consummate the transactions contemplated by this Letter
Agreement. No party to this Letter Agreement directly or indirectly, shall, or
shall permit anyone acting on its behalf to challenge the validity or
enforceability of any provision of this Letter Agreement or the matters
contemplated hereby. The parties hereto agree that irreparable damage may occur
in the event that any provision of this Letter Agreement is not performed in
accordance with the terms hereof and that the non-breaching party will be
entitled (in addition to any other remedy at law or equity) to an injunction or
injunctions to prevent breaches of the provisions of this Letter
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Agreement and to enforce the terms and provisions of this Letter Agreement by a
decree of specific performance in any action instituted in any court of the
United States or any state thereof having jurisdiction without the necessity of
proving the inadequacy of a remedy of money damages. If any term or other
provision of this Letter Agreement is invalid, illegal or incapable of being
enforced by any rule of law or public policy, all other conditions and
provisions of this Letter Agreement shall nevertheless remain in full force and
effect.
If the terms of this Letter Agreement are in accordance with your
understandings and agreements with us, please sign and return the enclosed
duplicate of this letter, whereupon this Letter Agreement shall constitute a
binding agreement between us.
Very truly yours,
SSP-SPECIAL SITUATIONS PARTNERS INC.
By: /s/ Eric Knight
-------------------------------------
Accepted and agreed to as of
the date first above written:
ICN PHARMACEUTICALS, INC.
By: /s/ David C. Watt
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Annex A
Form of Press Release
ICN DISCLOSES REVISED RESTRUCTURING PLAN
IN AGREEMENT WITH SSP
HIGHLIGHTS
- 100% of ICN's remaining interest in Ribapharm and ICN International
to be distributed on a tax free basis to ICN shareholders (following
initial public offerings of the two companies) as soon as possible.
- ICN Board to consider other strategic transactions, including a sale
of part or all of the Company, prior to consummating the
restructuring.
- Mr. Milan Panic's future role will be Chairman and CEO of ICN
International and non-executive Chairman of ICN Americas. The Board
will immediately institute an internal and external search for a CEO
for ICN Americas.
- SSP will not seek to nominate any directors for election at ICN's
2000 Annual Meeting on December 18, 2000. Annual Meetings will be
held no later than the last Wednesday in May 2001 and 2002.
Enquiries:
ICN Pharmaceuticals, Inc
[name]
[telephone number]
<PAGE>
October 20, 2000. Costa Mesa, California. ICN Pharmaceuticals, Inc. (ICN:
NYSE) disclosed today a revised restructuring plan in agreement with SSP by
breaking-up ICN into its three constituent businesses.
The ICN Board of Directors remains committed to effect its previously
announced plan to divide ICN into three separate publicly-traded companies -
Ribapharm, ICN International and ICN Americas - and is now also committed to
ensuring that each of these three companies be completely separated from the
others as soon as possible, with separate managements and truly independent
boards. This will be achieved by means of a tax free distribution of ICN's
entire remaining interests in Ribapharm and ICN International (following initial
public offerings of the stock of these two subsidiaries) to the ICN
shareholders.
As part of ICN's strategic restructuring plan, ICN's public senior debt
will be repaid or refinanced.
The strategic restructuring plan is designed to enhance stockholder value.
Prior to consummation of the restructuring, in the exercise of its fiduciary
duties to stockholders, the Board of Directors of ICN is committed to consider
other strategic transactions, including a sale of all or part of the Company,
that would provide alternative means to increase stockholder value.
The spin-offs
As previously announced, ICN has filed a registration statement with the
Securities and Exchange Commission to sell a minority interest in Ribapharm in
an underwritten public offering. ICN also intends to make an offering of a
minority interest in ICN International as soon as market circumstances permit
and documentation is well advanced. ICN intends to apply for listing of the
shares of ICN International on the Budapest Stock Exchange and secondarily on
the London Stock Exchange.
After each of these offerings is completed, the Board of Directors has
decided to distribute the remaining interests in Ribapharm and ICN International
to the ICN stockholders on a tax free basis as soon as possible. Each
distribution will be subject to: obtaining a ruling from the Internal Revenue
Service that the legal requirements under the U.S. tax laws for a tax-free
spin-off are satisfied; compliance with all other applicable laws, including the
regulations of the SEC and Delaware General Corporation Law provisions regarding
the payment of dividends; and, to the extent required, approval by the holders
of ICN's outstanding debt. ICN intends to file a ruling request with the
Internal Revenue Service as soon as possible and in any case within 60 days of
completion of each offering. Neither distribution will be dependent on the other
distribution being effected.
The Board of Directors believes that each of the ICN International and
Ribapharm distributions should qualify as a tax free spin-off; although there
can be no assurance that a favorable ruling from the Internal Revenue Service
will be obtained. The Company has been
<PAGE>
advised that it typically takes three to six months from the time of submission
for the Internal Revenue Service to make a determination. Should the requisite
tax ruling(s) and other regulatory approvals not be obtained within a reasonable
period of time, the Board of Directors will promptly use its best efforts to
achieve as close as possible an outcome that is equivalent to the break-up plan
by other means. Should the break-up plan not be fully implemented, the Company
will consider other strategic transactions, including a sale of all or part of
the Company, that would provide alternative means to increase stockholder value.
Management and Boards
Ribapharm, ICN International and ICN Americas will each have separate management
and independent boards of directors. Mr. Milan Panic, presently Chairman of the
Board and Chief Executive Officer of ICN, will be the Chairman of the Board and
Chief Executive Officer of ICN International. He will also be the non-executive
Chairman of the Board of ICN Americas. The Board will immediately initiate an
internal and external search for a CEO for ICN Americas. Mr. Panic will have no
management or board position with Ribapharm.
Agreement with SSP
ICN has been advised by SSP-Special Situations Partners Inc. that, in view
of ICN's commitment to separate ICN into three independent companies and to spin
off the entirety of ICN's remaining interests in two of the three units, SSP
will not seek to nominate any directors for election at ICN's 2000 Annual
Meeting to be held on December 18, 2000.
ICN's Board of Directors has committed to SSP to reduce the size of the
Board to nine (three classes of three) by the 2002 Annual Meeting. The Company
has agreed to hold its 2001 and 2002 stockholder meetings not later than the
last Wednesday in May 2001 and 2002, and that at each meeting no more than three
directors would stand for election.
* * *
On October 17, 2000, the closing price of the ICN common stock on the New
York Stock Exchange was $37 5/16. The cumulative return on our common stock
based upon the closing price on October 6, 2000 (excluding dividend
reinvestment) was 35% year-to-date, 101% of the last year, 142% of the last five
years, and 914% of the last ten years.
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<PAGE>
When available, copies of the preliminary prospectus relating to the
offering of shares of Class A Common Stock of Ribapharm Inc. may be obtained
from the offices of UBS Warburg LLC, 229 Park Avenue, New York, New York 10171
tel (212) 821-4011.
A registration statement relating to the shares of Class A common stock of
Ribapharm has been filed with the U.S. Securities and Exchange Commission but
has not yet become effective. These securities may not be sold nor may offers to
buy be accepted prior to the time that the registration statement becomes
effective. This press release shall not constitute an offer or the solicitation
of an offer to buy, nor shall there be any sale of these securities in any state
in which such offer, solicitation or sale would be unlawful prior to
registration or qualification under the securities laws of any such state.
The shares of common stock of ICN International have not been registered
under the U.S. Securities Act of 1933, as amended, and may not be offered or
sold in the U.S. absent registration or an applicable exemption from the
registration requirements of that act.
THE `SAFE HARBOR' STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM
ACT OF 1995. This press release contains forward-looking statements that involve
risks and uncertainties detailed from time to time in ICN's Securities and
Exchange Commission filings.
Notes to Editors
ICN is a research-based global pharmaceutical company that manufactures,
markets and distributes a broad range of prescription and non-prescription
pharmaceuticals under the ICN brand name. ICN has operations in North and Latin
America, Western, Central and Eastern Europe, and the Pacific Rim countries.
Ribapharm Inc. will comprise the following:
- ICN's royalty stream from ribavirin: an ICN-discovered drug that is
licensed to Schering-Plough for sales in combination with Schering's
Interferon A as REBETRON in the U.S. and REBETOL
(ribavirin/Virazole(R)) in Europe for the treatment of Hepatitis C
- ICN's R&D operations, including:
ICN's library of at least 3,500 nucleoside analog compounds
(chemically modified components of DNA) Laboratories and
equipment
Patents
R&D personnel
Facilities in California
<PAGE>
ICN International will comprise the following:
ICN's operations in Russia, where ICN is the largest pharmaceutical
producer, marketer and distributor; in Poland; Hungary; the Czech
Republic; Montenegro; Macedonia and other countries in southeastern Europe
as well as ICN's operations in Western Europe and the Pacific Basin.
- ICN International will be headquartered in Moscow and will have
approximately 12,600 employees and 13 manufacturing sites.
ICN Americas will comprise the following:
- ICN's operations in the U.S., Canada, Mexico, Puerto Rico and Latin
America, including Brazil and Argentina.
- ICN Americas will continue to trade on the New York Stock Exchange and
will have approximately 1,700 employees and eight manufacturing sites.
<PAGE>
Annex B
Form of By-law Amendment
RESOLVED, that the By-laws of the Company be, and they hereby are, amended
to add a new Section 17 to Article III of the By-laws reading as follows:
"SECTION 17. The 2001 and 2002 Annual Meeting. The 2001 annual
meeting of stockholders shall be held not later than May 30, 2001, and the
2002 annual meeting of stockholders shall be held not later than May 29,
2002. At each of the 2000 annual meeting of stockholders, the 2001 annual
meeting of stockholders and the 2002 annual meeting of stockholders, the
stockholders shall be entitled to elect three directors; provided, the
number of directors to be elected at the 2002 annual meeting of
stockholders when taken together with the number of directors elected at
the 2001 annual meeting of stockholders shall in no event constitute less
than two-thirds of the entire Board of Directors at the date of the 2002
annual meeting of stockholders. Notwithstanding Article VIII of these
By-laws, this Section of the By-laws may be amended or repealed, or a new
By-law adopted that is inconsistent with this By-law, only (a) by the
affirmative vote of the holders of not less than 75% of the voting power
of all securities of the Corporation entitled to vote generally in the
election of directors or (b) by the affirmative vote of the entire Board
of Directors at a regular or special meeting thereof."
