1
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K/A
(AMENDMENT NUMBER 1 TO FORM 10-K FILED ON MARCH 31, 1994)
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE YEAR ENDED DECEMBER 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-9934
ICN PHARMACEUTICALS, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-2565381
(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, INCLUDING 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, $1.00 PAR VALUE NEW YORK STOCK EXCHANGE
PACIFIC STOCK EXCHANGE
12 7/8% SINKING FUND DEBENTURES NEW YORK STOCK EXCHANGE
DUE JULY 15, 1998
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
(TITLE OF CLASS)
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. X
THE AGGREGATE MARKET VALUE OF THE REGISTRANT'S VOTING STOCK HELD BY
NON-AFFILIATES ON MARCH 29, 1994 WAS APPROXIMATELY $178,581,000.
THE NUMBER OF OUTSTANDING SHARES OF COMMON STOCK AS OF MARCH 29, 1994 WAS
20,528,931.
PORTIONS OF THE REGISTRANT'S DEFINITIVE PROXY STATEMENT FOR ITS 1993 ANNUAL
MEETING OF STOCKHOLDERS ARE INCORPORATED INTO PART III OF THIS REPORT BY
REFERENCE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
2
PART III
ITEM 10. INFORMATION CONCERNING DIRECTORS
The current Board of Directors consists of ten members: Messrs. Barker,
Bayh, Finch, Guillemin, Jerney, Jolley, Panic, Smith, Smith and Starr, each of
whom is standing for re-election. Messrs. Finch, Jolley, Panic, Smith and Starr
were elected at the last Annual Meeting of Stockholders. On October 21, 1993 Dr.
Guillemin was elected to fill a new position which was created by an amendment
to the By-laws increasing the number of directors from eight to nine. On
February 1, 1994 Dr. Michael Smith was elected to fill a new position which was
created by an amendment to the By-laws increasing the number of directors from
nine to ten. The names of the ten nominees for election as directors are listed
below, together with certain personal information, including the present
principal occupation and recent business experience of each.
YEAR
COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE THE COMPANY DIRECTORSHIPS
- ----------------------------- --- ----------- ---------------
NORMAN BARKER, JR................................. 71 1992 Pacific American
Mr. Barker is the retired Chairman of the Board Income Shares, Inc.;
of First Interstate Bank of California and Southern California
Former Vice Chairman of the Board of First Edison Company;
Interstate Bancorp. Mr. Barker joined First TCW Convertible
Interstate Bank of California in 1957 and was Securities Fund, Inc.;
elected President and Director in 1968, Chief SPI Pharmaceuticals, Inc.
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........................... 65 1992
Mr. Bayh is a partner in the law firm of Bayh,
Connaughton, Fensterheim & Malone. He was a
partner in the Indianapolis Indiana and
Washington, D.C. law firm of Bayh, Tabbert &
Capehart from April 1981 through June 1985. From
1963 to 1981, Mr. Bayh served as United States
Senator from the State of Indiana.
ROBERT H. FINCH, ESQ. (a)(b)(c)................... 68 1976 Nationwide Health
Mr. Finch has been a partner in the Pasadena, Properties, Inc; Viratek,
California law firm of Fleming, Anderson, Inc.; Continental
McClung and Finch since 1976. Prior thereto he Graphics; North American
was Counsel to the President of the United Trust Co.
States from 1971 to 1972, Secretary of the
United States Department of Health, Education
and Welfare from 1969 to 1972, and Lieutenant
Governor of the State of California from 1967 to
1969.
2
3
YEAR
COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE THE COMPANY DIRECTORSHIPS
- ----------------------------- --- ----------- ---------------
ROGER GUILLEMIN, M.D., PH.D....................... 68 1993 SPI Pharmaceuticals, Inc.;
Dr. Guillemin is Distinguished Scientist at The Viratek, Inc.;
Whittier Institute in La Jolla, California since Erbamont N.V.
March 1989 and was Resident Fellow and Chairman
of the Laboratories for Neuroendocrinology at
The Salk Institute in La Jolla, California, and
Adjunct Professor of Medicine at the Medical
School of the University of California at San
Diego. He was awarded the Nobel Prize in
Medicine in 1977, and, in the same year, was
presented the National Medal of Science by the
President of the United States. He is a member
of the National Academy of Sciences, the
American Academy of Arts and Sciences, and a
Fellow of the American Association for the
Advancement of Science. He has also served as
President of the American Endocrine Society.
ADAM JERNEY (c)................................... 51 1992 SPI Pharmaceuticals, Inc.;
Mr. Jerney is President and Chief Operating ICN Biomedicals, Inc.;
Officer of SPI Pharmaceuticals, Inc. He served Viratek, Inc.
as Chairman of the Board and Chief Executive
Officer of the Company from July 14, 1992, to
March 4, 1993, during Mr. Panic's leave of
absence from the Company. Mr. Jerney is also a
director of SPI Pharmaceuticals, Inc., a
subsidiary of ICN, ICN Biomedicals, Inc., a
subsidiary of ICN and a director of Viratek,
Inc., a subsidiary of ICN. He joined ICN in 1973
as Director of Marketing Research in Europe, and
assumed the position of General Manager of ICN
Netherlands in 1975. In 1981, he was elected
Vice President-Operations and in 1987 he assumed
his current position.
WELDON B. JOLLEY, PH.D. (a)(b).................... 67 1961
Dr. Jolley is President of Golden Opportunities,
and was President of the Nucleic Acid Research
Institute, a former division of the Company,
from 1985 to 1989. Dr. Jolley was a Vice
President of the Company until 1990. Prior to
that, he was, for over eleven years, Professor
of Surgery at the Loma Linda University School
of Medicine in Loma Linda, California and a
physiologist at the Veterans Hospital in Loma
Linda, California.
3
4
YEAR
COMMENCED
SERVING AS
DIRECTOR OF OTHER CORPORATE
NAME AND PRINCIPAL OCCUPATION AGE THE COMPANY DIRECTORSHIPS
- ----------------------------- --- ----------- ---------------
MILAN PANIC (c)................................... 63 1960 Viratek, Inc.;
Mr. Panic, the founder of the Company, has been SPI Pharmaceuticals, Inc.;
Chairman of the Board, Chief Executive Officer ICN Biomedicals, Inc.;
and President of the Company since its ICN Galenika
inception; except, he did not serve as President
from October 1979 to June 1980, and from July
14, 1992 to March 4, 1993, he was on leave of
absence from the Company while serving as Prime
Minister of Yugoslavia. Mr. Panic also serves as
Chairman of the Board, Chief Executive Officer
and director of various subsidiaries of the
Company and may be deemed to be a "control
person" of the Company.
MICHAEL SMITH, PH.D............................... 62 1994
Dr. Smith is Director of the Biomedical Research
Center, a privately funded research institute at
the University of British Columbia. In 1993, Dr.
Smith received the Nobel Prize in Chemistry. He
has been a career investigator of the Medical
Research Council of Canada since 1979. He is a
member of the American Endocrine Society.
ROBERTS A. SMITH, PH.D. (c)....................... 64 1960 Viratek, Inc.,
Dr. Smith is President of Viratek, Inc. and is PLC Systems
also a Vice President R&D of SPI and was a
member of the Executive Committee of the Nucleic
Acid Research Institute. He was a director of
that institute from 1985 to 1989. For more than
eleven years, Dr. Smith was Professor of
Chemistry and Biochemistry at the University of
California, Los Angeles.
RICHARD W. STARR (a)(b)........................... 73 1983
Retired April 1, 1983 from First Interstate Bank
of California as Executive Vice President and
Chief Credit Officer Worldwide. He spent 31
years with First Interstate Bank and has spent
over 44 years in commercial banking.
- ---------------
(a) Member of the Compensation and Stock Option Committee.
(b) Member of the Audit Committee.
(c) Member of the Executive Committee.
None of the proposed nominees are related by blood or marriage to one
another or to an executive officer of the Company. In May 1991, ICN completed a
civil settlement with the U.S. Justice Department regarding a grand jury
investigation initiated in September 1988. The grand jury investigation, in
which ICN and its subsidiaries were targets, generally related to compliance by
ICN and its subsidiaries with applicable Food and Drug Administration ("FDA")
statutes and regulations concerning the marketing and sale of Virazole(R). In
settling the matter, ICN entered into a civil consent decree whereby it neither
admitted nor denied any violations of FDA statutes and regulations. In addition,
ICN agreed to abide by all FDA laws and regulations in the future and to pay
$400,000 and to reimburse the FDA $200,000 for administrative costs. On October
7, 1991 ICN, Viratek, Milan Panic, Chairman of the Board, President and Chief
Executive Officer of ICN and Dr. Weldon B. Jolley, a director of ICN, entered
into a settlement agreement in the form of a Consent Decree
4
5
with the SEC, ending the investigation of the Company and its subsidiaries which
began in 1987 and generally concerned Company disclosures in 1986 and 1987
relating to the safety and efficacy of Virazole(R) in treating certain
AIDS-related conditions. Without admitting or denying any violations of the
securities laws, ICN, Viratek and the individuals agreed not to violate
securities laws in the future.
COMPENSATION OF DIRECTORS
The directors, other than officers of the Company or its affiliates, are
paid an annual fee of $22,000, payable quartely, plus a fee of $500 for every
Board meeting attended and an additional fee of $500 for every committee meeting
attended. During 1993 Messrs. Bayh, Finch and Jolley, or firms with which they
are affiliated, received legal or consulting fees from the Company in the
amounts of $50,598, $20,958, $55,464 and respectively. Additionally, in 1993 Mr.
Bayh's law firm received legal fees of $50,598 from ICN. Dr. Guillemin received
$6,000 from Viratek for consulting services rendered. Dr. Smith received $21,000
in 1993 from Viratek for consulting services rendered.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Section 16(a) of the Exchange Act requires the Company's officers and
directors, and persons who own more than ten percent of a registered class of
the Company's equity securities, to file reports of ownership and changes in
ownership with the SEC and the New York Stock Exchange. Such officers, directors
and shareholders are required by SEC regulations to furnish the Company with
copies of all Section 16(a) forms they file.
Based on its review of the copies of such forms received by the Company, or
written representations from certain reporting persons that no Forms 5 were
required for those persons, the Company believes that during fiscal year 1993
all filing requirements applicable to its officers, directors and ten percent
beneficial owners were timely satisfied.
5
6
ITEM 11. EXECUTIVE COMPENSATION AND RELATED MATTERS
SUMMARY COMPENSATION
The following table sets forth the annual and long-term compensation
awarded to, earned by, or paid to the Chief Executive Officer and the other
executive officers of the Company by the Company and its subsidiaries for
services rendered in all capacities for 1993, 1992 and 1991.
SUMMARY COMPENSATION TABLE
LONG-TERM
COMPENSATION
--------------------
ANNUAL COMPENSATION AWARDS
-------------------------------------- ---------- PAYOUTS
OTHER STOCK -------
NAME AND PRINCIPAL ANNUAL OPTION LTTP ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION (1) GRANTS (2) PAYOUTS COMPENSATION (3)
- ---------------------- ----- -------- --------- ---------------- ---------- ------- ----------------
($) ($) ($) # ($) ($)
Milan Panic (4) 1993 535,000 -- -0- 39,262
Chief Executive 1992 535,000 5,625,000 900,000(1) 39,262(5)
Officer 1991 535,000 200,000 -0- 1,458
Adam Jerney (6) 1993 380,000 38,100 150,000 4,497
President 1992 321,821 150,000 4,364 450,000 4,364
1991 244,799 229,150 4,237 140,000 4,237
Bill A. MacDonald (7) 1993 200,000 -- 125,000 4,497
Executive Vice 1992 168,322 90,000 4,659 30,000 4,659
President 1991 157,310 190,000 4,237 25,000 4,237
John E. Giordani (8) 1993 225,195 -- 65,000 4,497
Executive Vice 1992 210,472 90,000 4,364 30,000 4,364
President 1991 196,693 130,000 3,676 25,000 3,676
David C. Watt (9) 1993 180,000 -- -- 55,000 4,497
Executive Vice 1992 134,825 79,200 -- 20,000 --
President 1991 128,404 90,000 -- 32,500 --
- ---------------
(1) Excludes certain personal benefits such as medical insurance and life
insurance which, after reasonable inquiry, the Company is unable to
determine specifically or with precision, but which do not, in any event,
exceed for any person $50,000 or 10% of the amount reported in the table for
such person unless so disclosed.
(2) Includes stock option grants for the Company and its subsidiaries.
(3) This consists solely of amounts which were paid as matching contributions to
ICN's 401(k) plan, unless otherwise indicated.
(4) Mr. Panic was granted options to purchase the following shares of common
stock of the Company and its subsidiaries;
ICN SPI BIOMEDICALS VIRATEK
------- ------- ----------- -------
1993................................ -0- -0- 60,000 -0-
1992................................ -0- 400,000 300,000 200,000
1991................................ -0- -0- -0- -0-
(5) All other compensation includes $38,242 for legal services and $1,020 for
medical premiums and miscellaneous fringe benefits.
6
7
(6) Mr. Jerney is also President of SPI and his salary is paid by SPI. Mr.
Jerney was granted options to purchase the following shares of common stock
of the Company and its subsidiaries:
ICN SPI BIOMEDICALS VIRATEK
------- ------- ----------- -------
1993................................ 50,000 50,000 -0- 50,000
1992................................ 100,000 150,000 100,000 100,000
1991................................ 40,000 100,000 -0- -0-
(7) Mr. MacDonald was granted options to purchase the following shares of common
stock of the Company and its subsidiaries:
ICN SPI BIOMEDICALS VIRATEK
------- ------- ----------- -------
1993................................ 25,000 40,000 50,000 10,000
1992................................ -0- 30,000 -0- -0-
1991................................ 10,000 10,000 -0- 5,000
(8) Mr. Giordani was granted options to purchase the following shares of common
stock of the Company and its subsidiaries:
ICN SPI BIOMEDICALS VIRATEK
------- ------- ----------- -------
1993................................ 25,000 -0- 30,000 10,000
1992................................ -0- 30,000 -0- -0-
1991................................ 10,000 10,000 -0- 5,000
(9) Mr. Watt is also Senior Vice President, General Counsel and Secretary of SPI
and his salary is paid by SPI. Mr. Watt was granted options to purchase the
following shares of common stock of the Company and its subsidiaries:
ICN SPI BIOMEDICALS VIRATEK
------- ------- ----------- -------
1993................................ 25,000 20,000 -0- 10,000
1992................................ -0- 20,000 -0- -0-
1991................................ 20,000 12,500 -0- -0-
In July 1992, Milan Panic, Chairman of the Board, President and Chief
Executive Officer of the Company, with the approval of the Company's Board of
Directors, became Prime Minister of Yugoslavia and was granted a paid leave of
absence from all duties to the Company while retaining his title as Chairman of
the Board. Mr. Panic and the Company entered into a Leave of Absence and
Reemployment Agreement which contained mutual obligations, requiring, among
other things, that the Company reemploy Mr. Panic and that Mr. Panic return to
his previous positions with the Company. Mr. Panic was succeeded as Prime
Minister on March 4, 1993, and pursuant to the Leave of Absence and Reemployment
Agreement, returned to his duties at the Company.
Mr. Panic has reimbursed certain withholding taxes due as of December 31,
1992, previously advanced by the Company, in connection with the exercise of
stock options, in the amount of $1,351,000. Mr. Panic paid these amounts, in
1993, in the form of cash in the amount of $678,000 and common stock of Viratek
in the amount of $776,000 valued at fair market value, subject to receipt of a
fairness opinion.
On April 1, 1992, the Board of Directors granted Mr. Panic a bonus of
200,000 shares of SPI common stock for his extraordinary efforts in completing
the ICN Galenika transaction. The value at the date of grant was $5,375,000. Mr.
Panic sold the shares during 1993 for a realized value of $4,005,223.
Additionally, in 1993, Mr. Panic realized $1,881,250 and $1,853,000 on other
sales of ICN and SPI common stock.
On December 20, 1990, with the approval of the Board of Directors of the
Company, Mr. Panic borrowed 200,000 shares of SPI common stock from the Company
(which shares had a market value as of that date of $1,935,000). Mr. Panic was
obligated to return these shares together with interest at the rate of two times
7
8
SPI's then current dividend rate. No restrictions were imposed on the use of
such shares and, therefore, the shares could have been used by Mr. Panic as
collateral for borrowing or could have been sold by him. All the shares have
been returned to the Company.
OPTION GRANTS
The following table sets forth information with respect to stock options to
purchase shares and common stock of SPI, Viratek and Biomedicals granted in 1993
to the named executive officers of the Company.
OPTION GRANTS IN LAST FISCAL YEAR
INDIVIDUAL GRANTS
---------------------------------------------------------------------------------
PERCENT OF
TOTAL OPTIONS/SARS
OPTIONS GRANTED EMPLOYEES EXERCISE EXPIRATION GRANT DATE PRESENT
NAME COMPANY GRANTED IN FISCAL YEAR PRICE DATE VALUE (1)(2)
- ------------------------- ----------- ------ ------------------ ------ ------- ------------------
Milan Panic.............. Biomedicals 60,000 12% $3.25 4/15/03 $ 60,600
Adam Jerney.............. ICN 50,000 26 6.375 1/13/03 245,500
SPI 50,000 6.6 12.25 1/12/03 325,731
Viratek 50,000 20 10.025 5/11/03 424,500
Bill MacDonald........... ICN 25,000 13 6.375 1/13/03 122,750
SPI 40,000 5 12.25 1/12/03 260,517
Viratek 10,000 4.1 10.025 5/11/03 84,900
Biomedicals 50,000 10 3.25 4/15/03 50,500
John E. Giordani......... ICN 25,000 13 6.375 1/12/03 122,750
Viratek 10,000 4.1 10.025 5/11/03 84,900
Biomedicals 30,000 6 3.25 4/15/03 30,300
David C. Watt............ ICN 25,000 13 6.375 1/13/03 122,750
SPI 20,000 2.6 12.25 1/12/03 130,289
Viratek 10,000 4.1 10.025 5/11/03 84,900
- ---------------
(1) The options granted have 10 year terms. The options vest on the following
schedule: 25% on the first anniversary date of the grant date and 25% on
each of the next succeeding three anniversary dates of the grant date. The
options were granted with an exercise price equal to the market value on
the date of grant.
(2) Based on the Black-Scholes option pricing model adapted for use in valuing
executive stock options. The actual value, if any, an executive may realize
will depend on the excess of the stock price over the exercise price on the
date the option is exercised, so that there is no assurance the value
realized by an executive will be at or near the value estimated by the
Black-Scholes model. The estimated values under that model are based on
arbitrary assumptions as to variables such as interest rates, stock price
volatility and future dividend yield.
8
9
OPTION EXERCISES AND FISCAL YEAR-END VALUES
The following table sets forth information with respect to (i) stock option
exercises by the named executive officers during 1993 and (ii) unexercised stock
options held by the named executive officers at December 31, 1993.
AGGREGATED OPTION EXERCISES
IN 1993 AND DECEMBER 31, 1993 OPTION VALUES
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
SHARES STOCK OPTIONS IN-THE-MONEY OPTIONS AT
ACQUIRED VALUE AT DECEMBER 31, 1993 DECEMBER 31, 1993 ($)(1)
ON REALIZED --------------------------- ---------------------------
NAME COMPANY EXERCISE ($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- -------------------- ----------- -------- -------- ----------- ------------- ----------- -------------
Mr. Panic........... ICN 832,000 5,436,000 0 0 0 0
SPI 284,054(2) 2,644,935 502,259 0 601,891 0
Viratek.... 141,091(3) 1,461,306 488,908 0 2,291,033 0
Biomedicals 0 0 400,000 260,000 0 75,000
-------- -------- ----------- ------------- ----------- -------------
Total...... 1,257,145 9,542,241 1,391,167 262,000 2,892,924 75,000
-------- -------- ----------- ------------- ----------- -------------
-------- -------- ----------- ------------- ----------- -------------
Adam Jerney......... ICN 50,519 372,795 37,500 132,500 93,750 343,750
SPI 80,420 894,569 132,194 233,158 187,920 677,128
Viratek 0 0 26,250 131,250 68,750 243,750
Biomedicals 0 0 25,000 75,000 181,950 56,250
-------- -------- ----------- ------------- ----------- -------------
Total...... 130,939 1,267,364 220,944 704,102 532,370 1,533,804
-------- -------- ----------- ------------- ----------- -------------
-------- -------- ----------- ------------- ----------- -------------
Bill A. MacDonald... ICN 6,608 39,114 6,250 23,750 15,625 62,500
SPI 0 0 28,659 62,475 91,969 156,532
Viratek 0 0 6,301 10,499 25,506 20,619
Biomedicals 0 0 9,900 52,500 0 62,500
-------- -------- ----------- ------------- ----------- -------------
Total...... 6,608 39,114 51,110 149,224 133,100 302,151
-------- -------- ----------- ------------- ----------- -------------
-------- -------- ----------- ------------- ----------- -------------
John E. Giordani.... ICN 8,571 54,818 6,250 23,750 15,625 62,500
SPI 6,126 67,550 29,020 28,898 67,325 66,167
Viratek 0 0 5,251 10,499 16,881 20,619
Biomedicals 0 0 15,000 35,000 0 37,500
-------- -------- ----------- ------------- ----------- -------------
Total...... 14,697 122,368 55,521 98,147 99,831 186,786
-------- -------- ----------- ------------- ----------- -------------
-------- -------- ----------- ------------- ----------- -------------
David C. Watt....... ICN 2,500 20,000 16,250 28,750 46,875 78,125
SPI 11,990 172,705 26,949 43,601 107,076 109,757
Viratek 7,350 68,000 2,625 7,875 1,875 5,625
Biomedicals 0 0 0 0 0 0
-------- -------- ----------- ------------- ----------- -------------
Total...... 21,840 260,705 45,824 80,226 155,826 193,507
-------- -------- ----------- ------------- ----------- -------------
-------- -------- ----------- ------------- ----------- -------------
- ---------------
(1) Difference between the fair market value of the shares of common stock on
December 31, 1993 and the exercise price.
(2) 227,191 of these shares were exercised and paid to the Company in repayment
of all expenses related to a loan to Mr. Panic authorized by the Board of
Directors.
(3) These shares were exercised in April of 1993 and transferred to ICN to
reimburse ICN for certain expenses previously paid by ICN on behalf of Mr.
Panic.
COMPENSATION PURSUANT TO PLANS
Stock Option Plans
At December 31, 1993, under the Company's 1981 Employee Incentive Stock
Option Plan (which terminated in 1991) options for 35,878 Shares were
outstanding and exercisable (at prices ranging from $3.00 to $9.250). There were
options for 30,256 shares exercised during 1993 at $3.00 per share. There were
options for 2,250 Shares exercised during 1992 at $4.655. There were options for
5,000 Shares exercised during 1991 at an average price of $6.375.
Pursuant to non-qualified stock option agreements with key employees and
officers of the Company, options for 215,863 Shares were outstanding (at prices
ranging from $3.00 to $5.75) of which options for 126,863 Shares were
exercisable at December 31,1993. There were options for 153,808 shares exercised
during
9
10
1993 at an average price of $4.736. There were options for 181,855 Shares
exercised during 1992 at an average price of $3.55. There were options for
348,007 Shares exercised during 1991 at an average price of $3.00.
During 1992, the stockholders of the Company approved the 1992
Non-Qualified Stock Option Plan ("1992 Option Plan") and the 1992 Employee
Incentive Stock Option Plan ("1992 Incentive Plan"), reserving 500,000 Shares
per plan of the Company's common stock for issuance to employees and directors
of the Company. The Company has granted options for Shares under both plans.
Options under both plans are exercisable over a period to be determined by the
Committee, which shall not exceed ten years from the date of grant and will
expire at the end of the option period.
At December 31, 1993, options for 85,000 Shares were outstanding under the
1992 Option Plan (at prices ranging from $6.375 to $22.875) of which 11,000 were
exercisable at December 31, 1993. Options for 255,000 Shares were outstanding
under the 1992 Incentive Plan (at prices ranging from $6.375 to $9.50) of which
26,250 Shares were exercisable at December 31, 1993. There were no options
exercised in either plan during 1993.
Mr. Panic exercised 832,000 shares at a price of $3.00 per share in 1993
under three individual grants of stock options approved by the shareholders in
1984, 1985 and 1989 respectively.
DEFERRED COMPENSATION PLAN
During 1985, the Company adopted a four year executive plan (the "Plan")
available to officers and certain key employees of the Company or any of its
subsidiaries with benefits commencing at death or, if the participant is at
least 55 years of age and has participated in the Plan for at least 10 years, on
retirement. The four year term of the Plan ended May 1, 1989. Participants in
the Plan had to be key employees earning $40,000 or more as a base salary who
elected to participate for either a two or four year period. Each participant in
the Plan was required to execute a salary deferral agreement, which provided
that the participant's compensation from the Company would be reduced by a
specified percentage, which amount would not be less than $2,000 per year nor
more than 50% of covered salary (including bonuses, if any). The Company
contributed an annual amount not greater than 5% of the participant's base
annual salary.
A retiring participant receives his account balance (his contributions plus
the Company's contributions) together with interest at an annual rate equal to
Moody's Bond Index Rate ("Moody's") plus 3% and may elect to delay receiving
payments. The payments are normally made in monthly installments unless the
balance at time of retirement is less than $25,000. The minimum number of such
installments a participant may elect is 180, the maximum 300. If a participant
dies prior to retirement, such participant's designated beneficiary receives the
greater of such participant's account balance, with interest at Moody's plus 3%,
or ten times the participant's contributions for the prior year, with interest
at Moody's plus 3%. The beneficiary may elect a lump sum payment or up to 180
monthly payments. If a participant becomes disabled prior to retirement, such
participant will receive an annual benefit equal to one and one-half times the
amount of such participant's annual deferral, and the Company will pay the
regular retirement benefit commencing at age 65. Finally, if a participant
terminates employment with the Company for any other reason, such participant
receives his contributions plus the vested portion of the Company's
contributions, with interest calculated based on years of participation. The
Company's contribution vests for this purpose based upon the participant's years
with the Company as follows: 40% vests after four years of employment, followed
by 10% additional vesting per year until 100% is vested after 10 years. The
interest is calculated as follows: one year in plan, no interest; two to four
years, Moody's; five to six years, Moody's plus 1%; seven to 10 years, Moody's
plus 2%; and after 10 years Moody's plus 3%. Payment of the amount due is made
as follows: if under $25,000 owed, a lump sum payment within 90 days; if
$25,000-$50,000, 120 monthly payments; if over $50,000, 180 monthly payments.
The present value of benefits expected to be paid is being accrued with
interest. In 1993, 1992 and 1991, $292,000, $309,000 and $453,000 was accrued
pursuant to the agreements for all participating employees as a group,
respectively. Of these numbers $25,890, $25,362 and $23,704 was accrued for
fiscal 1993, 1992 and 1991, respectively, for all current executive officers.
10
11
CHANGE IN CONTROL EMPLOYMENT AGREEMENTS
On March 18, 1993, the Board of Directors of ICN adopted Employment
Agreements ("Employment Agreements") which contain "change in control" benefits
for six current key senior executive officers of ICN and its subsidiaries. The
executives include Mr. Jerney, Mr. Giordani, Mr. MacDonald and Mr. Watt,
officers of the Company, Mr. John Phillips, Executive Vice President and Chief
Financial Officer, and Mr. Jack Sholl, Senior Vice President, Public Relations,
respectively, of SPI.
The Employment Agreements are intended to retain the services of these
executives and provide for continuity of management in the event of any actual
or threatened change in control. Each agreement has an initial term of three
years and is automatically extended for one year terms unless either the
employee or the Company elects not to extend it (provided that any notice by the
Company not to extend the agreement cannot cause the agreement to be terminated
prior to the expiration of the third anniversary of the date of any change in
control). These Employment Agreements provide that each executive shall receive
severance benefits equal to three times salary (and certain other benefits) if
following a change in control of the Company or a subsidiary, as the case may
be, the executive's employment is terminated without cause, the executive
terminates employment for certain enumerated reasons (including a significant
reduction in the executive's compensation, duties, title or reporting
responsibilities or a change in the executive's job location) or the executive
leaves the Company for any reason or without reason during a 60 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 the Company) by
any person, subject to certain exceptions, of beneficial ownership, directly or
indirectly, of 20% or more of the combined voting power of the Company'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 the Company'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 the Company of (a) a merger or
consolidation involving the Company if the stockholders of the Company,
immediately before such merger or consolidation, do not, as a result of such
merger or consolidation, own, directly or indirectly, more than eighty percent
of the combined voting power of the then outstanding voting securities of the
corporation resulting from such merger or consolidation in substantially the
same proportion as their ownership of the combined voting power of the voting
securities of the Company outstanding immediately before such merger or
consolidation, or (b) a complete liquidation or dissolution of the Company or an
agreement for the sale or other disposition of all or substantially all of the
assets of the Company. Removal of the Company's Board of Directors would
constitute a change in control under the Employment Agreements. If the
employment of such key senior executives is terminated under any of the
circumstances described above following a Change in Control, the executives
would be entitled to receive the following amounts (based upon present
compensation): Bill MacDonald $1,179,486; John Giordani $1,238,277; Adam Jerney
$2,092,623; John Phillips $1,180,251; Jack Sholl $737,076; and David Watt
$935,955. 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.
MR. PANIC'S EMPLOYMENT AGREEMENT
The Company and Mr. Panic entered into an Employment Agreement effective
October 1, 1988, which, as amended, terminates on November 30, 1994 (the "Panic
Employment Agreement"). The base amount of salary for Mr. Panic was determined
by the Compensation Committee of the Board of Directors of the Company in 1988.
In setting the base amount, the Compensation Committee took into consideration
Mr. Panic's then current base salary, 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 the Company.
The Panic Employment Agreement provides for an annual salary, currently $535,000
with an annual 7% increase under certain circumstances. The Panic Employment
Agreement provides that during the period of his employment, Mr. Panic will not
engage in businesses competitive with the Company without the approval of the
Board of Directors. Under the Panic Employment Agreement, Mr. Panic agreed to
waive and
11
12
eliminate retirement benefits contained in his prior employment contract with
the Company. In place thereof, Mr. Panic may, at his option, retire upon
termination of the Panic Employment Agreement. Upon retirement, Mr. Panic has
agreed to provide consulting services to the Company for $120,000 per year,
which amount is subject to annual cost-of-living adjustments from the base year
of 1967 until the date of retirement not to exceed his salary at the date of
retirement (currently estimated to be in excess of $535,000 per year, as
adjusted). Mr. Panic's agreement to provide consulting services to the Company
is a lifetime agreement. The consulting fee shall not at any time exceed the
highest annual compensation, as adjusted, paid to Mr. Panic during his
employment by the Company. 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 agreement in the event of a change
in control of the Company. The Panic Employment Agreement provides that if
within two years after a change in control of the Company, Mr. Panic's
employment with the Company is terminated, except as a result of death,
disability or illness, or if Mr. Panic leaves the employ of the Company within
such two-year period, then Mr. Panic will receive as severance compensation,
five times Mr. Panic's 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 the Company 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 the Company,
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 the Company representing 15% or more of the
combined voting power of the Company'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 the Company's Board of Directors; or
(iv) ICN's Shares cease to be registered under the Exchange Act. "Existing Board
of Directors" is defined in the Panic Employment Agreement as those persons
constituting the Board of Directors at the date of the Panic Employment
Agreement, together with each new director whose election or nomination for
election by the Company'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 of Control, in addition to the
consulting fee as described above, Mr. Panic would be entitled to receive (based
upon present compensation) $2,675,000.
COMPENSATION REPORT
The Compensation and Stock Option Committee (the "Committee") is composed
of three independent non-employee directors, Messrs. Finch, Jolley and Starr.
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 Exchange Act and shall not otherwise be deemed filed under such Acts.
Compensation Philosophy
The Board of Directors adopts an annual budget and financial plan which
incorporates the goals and objectives to be achieved by 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. The salaries and bonuses of Mr. Jerney, who was Chief Executive
Officer during Mr. Panic's leave of absence, and Mr. Watt were paid by SPI and
reviewed by the SPI Compensation Committee. The members of the SPI Compensation
Committee are different individuals than those on the Committee, although the
criteria used by them to determine compensation are the same. With respect to
ICN, eligibility for bonus awards for Mr. Giordani and Mr. MacDonald was based
on the pre-set performance guidelines and growth in operating income and
earnings per share. However, payment of
12
13
bonuses may be paid even when these objective standards are not met if specific
contributions by an employee merit a bonus or the reason for failure to meet the
objective standards are beyond the control of the Company and/or the employee.
Growth in operating income goals were met in 1993 despite very difficult
circumstances relating to the Company's subsidiary, SPI, operating in Yugoslavia
under U.N. imposed economic sanctions. Stock options are granted based on a
program developed for the Company by Towers Perrin, a compensation consulting
company. Each individual's base number of options is derived from a formula
which ties to their base salary. The Committee may then consider the achievement
of individual as well as corporate performance goals in determining the ultimate
number of options granted.
The compensation of executives consists of salary, a bonus plan to reward
performance and a long-term incentive stock option program.
Base Salary
Salaries are paid within certain grades which are established by the Human
Resources Department reviewing data of other like companies in the same
industry. The Company reviewed salary surveys prepared by Coopers & Lybrand and
Towers Perrin. These surveys did not state which companies participated in the
surveys. The salary levels were in the median range of compensation for similar
positions. Grades are updated to reflect changes in the marketplace. The
salaries of executives are reviewed on an annual basis by supervisory managers
and the Committee.
Bonus Plan
During 1988, the Company adopted an Incentive Bonus Plan which is based on
target goals of growth in both operating income and earnings per share.
Individual performance goals are compared against the target goals established.
Recommendations are made by individual supervisors and approved by the
Committee.
Long-Term Stock Incentive Plans
Stock options are granted as long range incentives to executives. Options
vest over a ten year period. Options are granted at fair market value. The
amount of options granted is tied to salary and performance and each grant is
evaluated. No grant to executives is automatic.
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
comprised of a base salary and a bonus based on the Company's performance and
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. With regard to Mr. Panic, his base compensation is set
pursuant to his employment agreement, which is described above. With respect to
Mr. Jerney, when he became Chief Executive Officer of the Company during Mr.
Panic's paid leave of absence, Mr. Jerney's compensation was increased based on
a salary survey conducted at the time by the Committee of other chief executive
officers' compensation.
Compensation and Stock Option Committee
Robert H. Finch
Weldon B. Jolley
Richard W. Starr
13
14
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total stock return on
the shares with the cumulative return on the Standard & Poor's 500 Stock Index
and the Standard & Poor's Health Care Diversified Index for the five years ended
December 31, 1992. The graph assumes that the value of the investment of the
Shares in each index was $100 at December 31, 1987 and that all dividends were
reinvested.
CUMULATIVE TOTAL RETURN
BASED ON REINVESTMENT OF $100 BEGINNING DECEMBER 31, 1988
S&P(R) Health
Measurement Period ICN Care Diversified
(Fiscal Year Covered) Pharmaceuticals Inc. S&P 500(R) Index
- --------------------- -------------------- ---------- -----
Dec-88 100 100 100
Dec-89 73 132 139
Dec-90 41 128 169
Dec-91 257 166 250
Dec-92 93 179 214
Dec-93 127 197 204
SOURCE: GEORGESON & COMPANY, INC.
14
15
ITEM 12. OWNERSHIP OF THE COMPANY'S SECURITIES
PRINCIPAL STOCKHOLDER
As of April 25, 1994, the following stockholder was known to management to
be the beneficial owner of more than 5% of the outstanding Shares:
NAME AND ADDRESS NUMBER OF SHARES PERCENT OF CLASS
OF BENEFICIAL OWNER BENEFICIALLY OWNED OUTSTANDING (1)
----------------------- ------------------ ----------------
Invesco MIM, PLC 1,325,000(2) 6.5%
11 Devonshire Square
London EC2M 7 YR
England
- ------------------
(1) Total outstanding Shares for purposes of this table include 20,528,931
shares outstanding on May 2, 1994.
(2) Information with respect to these Shares was reported on Schedule 13G filed
with the SEC on March 10, 1993, by Invesco MIM, PLC, on behalf of itself
and Invesco North American Holdings, Inc. and Invesco Funds Group, Inc.,
each a subsidiary of Invesco MIM, PLC. The entities have expressly declared
that the filing of the Schedule 13G was not an admission of beneficial
ownership of any of the securities covered therein.
OWNERSHIP OF SECURITIES OF ICN AND SUBSIDIARIES
BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth as of December 31, 1994 the number of Shares
of the Company and the common stock of the Company's subsidiaries and the
percent of Shares of the Company and common stock of the Company's subsidiaries
owned beneficially by each director of the Company, by the executive officers of
the Company and by all directors and executive officers of the Company as a
group.
NUMBER OF
NUMBER OF SHARES AND NUMBER OF NUMBER OF
SHARES AND NATURE OF SHARES AND SHARES AND
NATURE OF BENEFICIAL NATURE OF NATURE OF
BENEFICIAL OWNERSHIP BENEFICIAL BENEFICIAL
IDENTITY OF OWNERSHIP OF OF SPI'S OWNERSHIP OF OWNERSHIP OF
OWNER OR THE COMPANY'S PERCENTAGE COMMON PERCENTAGE BIOMEDICALS' PERCENTAGE VIRATEK'S PERCENTAGE
GROUP (1) COMMON STOCK OF CLASS STOCK OF CLASS COMMON STOCK OF CLASS COMMON STOCK OF CLASS
- ------------- ------------- ---------- ---------- ---------- ------------ ---------- ------------ ----------
Norman Barker,
Jr......... 1,000 (3) 17,388(3) (2) 0 0 0 0
Birch Bayh... 400 (3) 0 0 0 0 22,500(4) (2)
Robert H.
Finch...... 2,600(5) (3) 0 0 0 0 2,625(6) (2)
Roger Guillemin,
M.D., Ph.D. 1,000 (3) 23,700(7) (2) 0 0 0(8) 0
Adam Jerney.. 57,500(9) (3) 160,515(10) (2) 25,000(11) 0 26,250(12) 0
Weldon B. Jolley,
Ph.D....... 188,178(13) (3) 38,168(14) (2) 25,000(1 5) (2) 26,250(16) (2)
Milan Panic.. 533,008 2.60% 509,652(17) 2.44% 423,867(18) 4.49% 499,408(19) 2.68%
Roberts A.
Smith, Ph.D. 194,462(20) (3) 29,146(21) (2) 25,100(2 2) (2) 49,350(23) (2)
Richard Starr 25,000(24) (3) 4,146 (2) 0 0 0 0
John E.
Giordani... 14,821(25) (3) 29,020(26) (2) 15,000(27) (2) 5,251(28) (2)
Bill A.
MacDonald.. 12,858(29) (3) 28,659(30) (2) 16,400(31) (2) 6,301(32) (2)
David C. Watt 18,750(33) (3) 26,949(34) (2) 0 0 2,625(35) (0)
Directors and
officers as
a group (13
persons)... 1,047,077(36) 5.0% 867,343(37) 4.1% 530,367(38) 5.56% 611,685(39) 3.26%
15
16
- ---------------
(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 15,368 shares which Mr. Barker has the right to acquire upon the
exercise of currently exercisable stock options.
(4) Includes 22,500 shares which Mr. Bayh has the right to acquire upon the
exercise of currently exercisable stock options.
(5) Includes 2,500 shares Mr. Finch has the right to acquire upon the exercise
of currently exercisable stock options.
(6) Includes 2,625 shares which Mr. Finch has the right to acquire upon the
exercise of currently exercisable stock options.
(7) Includes 23,700 shares which Dr. Guillemin has the right to acquire upon
the exercise of currently exercisable stock options.
(8) Includes 0 shares which Dr. Guillemin has the right to acquire upon the
exercise of currently exercisable stock options.
(9) Includes 37,500 shares which Mr. Jerney has the right to acquire upon the
exercise of currently exercisable stock options.
(10) Includes 142,609 shares which Mr. Jerney has the right to acquire upon the
exercise of currently exercisable stock options.
(11) Includes 25,000 shares which Mr. Jerney has the right to acquire upon the
exercise of currently exercisable stock options.
(12) Includes 26,250 shares which Mr. Jerney has the right to acquire upon the
exercise of currently exercisable stock options.
(13) Includes 178,178 shares which Dr. Jolley has the right to acquire upon the
exercise of currently exercisable stock options.
(14) Includes 26,250 shares which Dr. Jolley has the right to acquire upon the
exercise of currently exercisable stock options.
(15) Includes 25,000 shares which Dr. Jolley has the right to acquire upon the
exercise of currently exercisable stock options.
(16) Includes 25,000 shares which Dr. Jolley has the right to acquire upon the
exercise of currently exercisable stock options.
(17) Includes 502,259 shares which Mr. Panic has the right to acquire upon the
exercise of currently exercisable stock options.
(18) Includes 400,000 shares which Mr. Panic has the right to acquire upon the
exercise of currently exercisable stock options.
(19) Includes 488,908 shares which Mr. Panic has the right to acquire upon the
exercise of currently exercisable stock options.
(20) Includes 86,052 shares which Dr. Smith has the right to acquire upon the
exercise of currently exercisable stock options.
(21) Includes 29,146 shares which Dr. Smith has the right to acquire upon the
exercise of currently exercisable stock options.
16
17
(22) Includes 25,000 shares which Dr. Smith has the right to acquire upon the
exercise of currently exercisable stock options.
(23) Includes 20,475 shares which Dr. Smith has the right to acquire upon the
exercise of currently exercisable stock options.
(24) Includes 22,500 shares which Mr. Starr has the right to acquire upon the
exercise of currently exercisable stock options.
(25) Includes 6,250 shares which Mr. Giordani has the right to acquire upon the
exercise of currently exercisable stock options.
(26) Includes 29,020 shares which Mr. Giordani has the right to acquire upon the
exercise of currently exercisable stock options.
(27) Includes 15,000 shares which Mr. Giordani has the right to acquire upon the
exercise of currently exercisable stock options.
(28) Includes 5,251 shares which Mr. Giordani has the right to acquire upon the
exercise of currently exercisable stock options.
(29) Includes 6,250 shares which Mr. MacDonald has the right to acquire upon the
exercise of currently exercisable stock options.
(30) Includes 28,659 shares which Mr. MacDonald has the right to acquire upon
the exercise of currently exercisable stock options.
(31) Includes 9,900 shares which Mr. MacDonald has the right to acquire upon the
exercise of currently exercisable stock options.
(32) Includes 6,307 shares which Mr. MacDonald has the right to acquire upon the
exercise of currently exercisable stock options.
(33) Includes 16,250 shares which Mr. Watt has the right to acquire upon the
exercise of currently exercisable stock options.
(34) Includes 29,438 shares which Mr. Watt has the right to acquire upon the
exercise of currently exercisable stock options.
(35) Includes 2,625 shares which Mr. Watt has the right to acquire upon the
exercise of currently exercisable stock options.
(36) Includes 355,480 shares which certain directors and officers have has the
right to acquire upon the exercise of currently exercisable stock options.
(37) Includes 683,840 shares which certain directors and officers have has the
right to acquire upon the exercise of currently exercisable stock options.
(38) Includes 499,900 shares which certain directors and officers have has the
right to acquire upon the exercise of currently exercisable stock options.
(39) Includes 599,935 shares which certain directors and officers have has the
right to acquire upon the exercise of currently exercisable stock options.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Fleming, Anderson, McClung and Finch received legal fees of $20,958 in 1993
from the Company for legal services rendered. Mr. Finch, former Chairman of
Viratek, is a partner of the firm. Dr. Jolley, who was a Vice President of the
Company until 1990 was paid $55,464 for consulting services rendered in 1993.
Mr. Birch E. Bayh, Jr. is a partner in the firm of Bayh, Connaughton,
Fensterheim & Malone which was paid $50,598 in legal fees in 1993. Dr. Roberts
Smith received $21,000 in 1993 from Viratek for consulting services rendered.
17
18
CERTAIN TRANSACTIONS
GENERAL
ICN controls Biomedicals and Viratek through stock ownership, voting
control and board representation and is affiliated with SPI. Certain officers of
ICN occupy similar positions with SPI, Biomedicals and Viratek. ICN, SPI,
Biomedicals and Viratek (collectively, the "Affiliated Corporations") have
engaged in, and will continue to engage in, certain transactions with each
other.
An Oversight Committee of the Boards of Directors of the Affiliated
Corporations reviews transactions between or among the Affiliated Corporations
to determine whether a conflict of interest exists among the Affiliated
Corporations with respect to a particular transaction and the manner in which
such conflict can be resolved. The Oversight Committee has advisory authority
only and makes recommendations to the Boards of Directors of each of the
Affiliated Corporations. The Oversight Committee consists of one non-management
director of each Affiliated Corporation and a non-voting chairman. The
significant related party transactions have been reviewed and recommended for
approval by the Oversight Committee, and approved by the respective Boards of
Directors. See "Information Concerning Directors -- Committees and Meetings of
the Board of Directors."
Effective December 1, 1990, SPI and Viratek entered into a new royalty
agreement. Under this agreement, SPI continued to act as Viratek's exclusive
distributor of ribavirin and paid Viratek a royalty of 20% on sales worldwide
for a term of 10 years with an option by either party to extend it for an
additional 10 years. Worldwide sales for ribavirin for 1993, 1992 and 1991 were
$29,515,000, $27,240,000 and $21,315,000, respectively, which generated
royalties to Viratek for 1993, 1992 and 1991 of $5,903,000, $5,448,000 and
$4,263,000, respectively.
Under an agreement between ICN and the employer of a director of Viratek,
SPI is required to pay a 2% royalty to the employer on all sales of Virazole(R)
in aerosolized form. Such royalties for 1993, 1992 and 1991 were $422,000,
$430,000 and $313,000, respectively.
Beginning December 1986, SPI began selling Brown Pharmaceuticals, Inc.
products under license from ICN. ICN charges SPI royalties at 8 1/2% of net
sales. During 1993, 1992 and 1991 SPI paid ICN $218,000, $65,000 and $93,000,
respectively, in royalties under this arrangement.
COST ALLOCATIONS
The Affiliated Corporations occupy ICN's facility in Costa Mesa,
California. In each of 1993, 1992 and 1991, ICN charged facility costs of
$279,000, $310,000 and $30,000 to SPI, Biomedicals and Viratek, respectively.
The costs of common services such as maintenance, purchasing and personnel are
paid by SPI and allocated to ICN, Biomedicals and Viratek based on services
utilized. The total of such costs were $2,584,000 in 1993, $2,556,000 in 1992
and $2,617,000 in 1991 of which $1,733,000, $1,679,000 and $1,568,000 were
allocated to ICN, Viratek and Biomedicals, respectively.
During 1991, Viratek began renting certain office equipment to ICN for use
at the Costa Mesa facility. Rent is being charged at the rate of $20,000 per
month through 1993. During 1993, 1992 and 1991 Viratek charged ICN $240,000,
$240,000 and $120,000, respectively. It is management's belief that the methods
used and amounts allocated for facility costs and common services are reasonable
based upon the usage by the respective companies.
INVESTMENT POLICY
ICN and its affiliates have a policy covering intercompany advances and
interest rates, and the types of investments (marketable equity securities,
high-yield bonds, etc.) to be made by ICN and its affiliates. As a result of
this policy, excess cash is transferred to ICN. The affiliates are credited with
interest income based on prime (6% at December 31, 1993) less 1/2% and are
charged interest at the prime rate plus 1/2% on the amounts invested or
advanced.
18
19
SPI had outstanding borrowings from ICN in the amount of $18,313,000 and
$30,433,000 as of December 31, 1993 and 1992. During 1993, 1992 and 1991, ICN
charged (credited) SPI interest of $800,000, $1,195,000 and ($2,486,000),
respectively. During 1993 and 1992, SPI reclassified its Biomedicals
intercompany receivable of $2,333,000 and $3,631,000 and its Viratek
intercompany payable of $5,228,000 and $6,332,000, respectively, to SPI's ICN
intercompany account resulting in a net increase in SPI's liability to ICN of
$2,895,000 and $2,701,000, respectively.
During 1993 and 1992, Viratek reclassified $272,000 and $536,000 of
intercompany payables to Biomedicals to ICN and reclassified $5,228,000 and
$6,332,000 of intercompany receivables from SPI to ICN, which resulted in a
receivable of $15,528,000 and $9,325,000 due from ICN at December 31, 1993 and
1992, respectively. Viratek earned interest income of $714,000, $239,000 and
$271,000 from ICN on the average balance outstanding during 1993, 1992 and 1991.
During the year ended December 31, 1993 and 1992, Biomedicals reclassified
its SPI intercompany payable of $2,333,000 and $3,631,000, and its Viratek
intercompany receivables of $272,000 and $536,000 to ICN, resulting in
intercompany payables of $5,932,000 and $8,414,000 to ICN as of December 31,
1993 and 1992, respectively. ICN charged (credited) $420,000, $314,000 and
($218,000) to Biomedicals for interest on the average balance outstanding during
1993, 1992 and 1991, respectively.
ICN charged (credited) $420,000, $314,000 and ($218,000) to Biomedicals for
interest on the average balance outstanding during 1993, 1992 and 1991,
respectively.
OTHER
On August 30, 1993, Biomedicals issued 300,000 shares of a new series "A"
of the Biomedical's non-convertible, non-voting, preferred stock valued pursuant
to a fairness opinion, at $30,000,000 to ICN. In exchange, ICN delivered
4,983,606 shares of the Company's common stock that ICN owned and exchanged
intercompany debt owed to ICN by the Company in the amount of $11,000,000.
In addition, on August 30, 1993, Biomedicals issued 390,000 shares of a new
series "B" of Biomedical's non-convertible, non-voting, preferred stock valued
pursuant to a fairness opinion, at $32,000,000 to ICN. In exchange, ICN
delivered to Biomedicals 8,384,843 shares of Biomedical's common stock that ICN
owned.
Certain outside directors have provided legal and other consultation
services to ICN, which amounted to $71,556, $811,000 and $58,000 during 1993,
1992 and 1991, respectively.
On December 31, 1992, Biomedicals exchanged, in a non-cash transaction,
$11,250,000 of debt owed to ICN in exchange for 3,214,286 shares of Biomedicals'
common stock issued to ICN at a price of $3.50 per share which represented the
closing market price of the stock at that date.
On April 1, 1992, Biomedicals transferred, in a non-cash transaction,
$13,072,000 of debt with First City Bank of Texas - Houston, N.A., to ICN
Biomedicals, in exchange, issued 2,412,449 shares of Biomedicals' common stock
at a price of $5.42 per share which represented the closing market price of the
stock at that date less a discount of 15%.
On March 31, 1992, Biomedicals transferred, in a non-cash transaction,
$2,711,000 of debt owed to Skopbank of Finland to ICN. Biomedicals, in exchange,
issued 500,334 shares of Biomedicals' common stock at a price of $5.42 per share
which represented the closing market price of Biomedicals' stock on that date
less a discount of 15%. ICN became primarily liable for the debt and Biomedicals
became guarantor.
On March 31, 1992 Biomedicals exchange, in a non-cash transaction,
$4,837,000 of debt owed to ICN for 892,703 shares of Biomedicals' common stock
issued to ICN at a price of $5.42 per share which represented the closing market
price of the stock at that date less a discount of 15%.
On December 31, 1991, Biomedicals issued, in a non-cash transaction,
3,363,298 shares of Biomedicals' common stock to ICN at a price of $6.25 which
represented the fair market value of Biomedicals' stock at that date in exchange
for debt owed ICN in the amount of $18,167,523.
19
20
On March 31, 1991, Biomedicals, pursuant to a fairness opinion, exchanged,
in a non-cash transaction, $3,833,000 of advances due to ICN into 538,000 shares
of Biomedicals' common stock, issued at a price of $7.125 which represented the
fair market value of Biomedicals' stock at that date less a discount of 22%.
On August 30, 1993, Biomedicals issued 300,000 shares of a new series "A"
of its non-convertible, non-voting preferred stock valued pursuant to a fairness
opinion, at $30,000,000 to the Company. In exchange, the Company delivered
4,983,606 shares of Biomedicals' common stock that ICN owned and exchanged
intercompany debt owed to ICN by Biomedicals in the amount of $11,000,000.
In addition, on August 30, 1993, Biomedicals issued 390,000 shares of a new
series "B" of its non-convertible, non-voting, preferred stock valued pursuant
to a fairness opinion, at $32,000,000 to the Company. In exchange, ICN delivered
to Biomedicals 8,384,843 shares of Biomedicals' common stock that ICN owned.
Effective May 1, 1991, Viratek and ICN transferred the rights to four
compounds, in various stages of development, to SPI for $1,350,000 and $250,000,
respectively, plus a royalty of 6.8% of future sales representing a non-cash
transaction. These amounts have been credited to additional capital. Future
royalties will be recognized as income when earned. During 1993 and 1992, there
have been no sales of product subject to this royalty. Viratek has reclassified
the intercompany receivable from SPI to a receivable due from ICN in the amount
of $1,350,000.
Effective January 1, 1992, Viratek and Biomedicals entered into an
agreement whereby Biomedicals agreed to transfer rights, title and interest in
certain of its research and development assets to Viratek. Biomedicals shall
retain a right of first refusal to the marketing and distribution rights for any
product developed from the transferred assets and pay a royalty to Viratek.
Future royalties will be recognized as income when earned. During 1992 there
have been no sales of product subject ot his royalty.
20
21
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.
Registrant
Date: April 27, 1994
By: /s/ MILAN PANIC
Milan Panic
Chairman of the Board, President and
Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
- ----------------------------------------------- ------------------------------ ---------------
/s/ MILAN PANIC Chairman of the Board, April 27, 1994
Milan Panic President and Chief
Executive Officer
/s/ JOHN E. GIORDANI Executive Vice President April 27, 1994
John E. Giordani Finance and Chief
Financial Officer
/s/ NORMAN BARKER, JR. Director April 27, 1994
Norman Barker, Jr.
/s/ ROBERT H. FINCH, ESQ. Director April 27, 1994
Robert H. Finch
/s/ ADAM JERNEY Director April 27, 1994
Adam Jerney
/s/ WELDON B. JOLLEY Director April 27, 1994
Weldon B. Jolley
/s/ ROBERTS A. SMITH Director April 27, 1994
Roberts A. Smith
/s/ RICHARD W. STARR Director April 27, 1994
Richard W. Starr
/s/ ROGER GUILLEMIN, M.D., Ph.D. Director April 27, 1994
Roger Guillemin, M.D., Ph.D.
/s/ MICHAEL SMITH Director April 27, 1994
Michael Smith
21