ICN Pharmaceuticals, Inc.
Long-Term Incentive Plan
TABLE OF CONTENTS
I. PURPOSE
II. DEFINITIONS
III. OPERATION OF THE PLAN
III. 1 General Plan Description
III. 2 Eligibility
III. 3 Performance Periods and Partial Performance Periods
III. 4 Calculation of Excess Market Value
III. 5 Determination of Restricted Stock Awards
III. 6 Vesting of Restricted Stock Awards
III. 7 Dividends on Restricted Stock Awards
IV. OTHER PLAN PROVISIONS
IV.1 Change in Position
IV.2 Termination of Employment
IV.3 Effect of Change in Control
IV.4 Employee Rights
IV.5 Transfer of Award
IV.6 Plan Administration
IV.7 Plan Duration and Modification
IV.8 Adjustments
IV.9 Effect of Certain Transactions
IV.10 Withholding Tax
IV.11 Validity
IV.12 Applicable Law
Exhibit 1: Allocation of Restricted Stock Awards
Exhibit 2: Graphical Example of Performance Periods
Exhibit 3: ICN Total Shareholder Return Example Calculation
Exhibit 4: Restricted Stock Award Example Calculation
ICN PHARMACEUTICALS, INC.
LONG-TERM INCENTIVE PLAN
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I. PURPOSE
The purpose of the ICN Pharmaceuticals, Inc. Long-Term Incentive Plan is to:
Focus Participants on creating sustained superior total
shareholder return relative to other pharmaceutical companies,
Encourage stock ownership among the top executive group,
Encourage team orientation among the top executive group, and
Offer the top executive group a competitive long-term incentive
opportunity, commensurate with performance.
II. DEFINITIONS
"Award" refers to any incentive amount earned under the Plan.
"Board of Directors" refers to the Board of Directors of ICN Pharmaceuticals,
Inc.
"Cause" means the commission of an act of fraud or intentional misrepresentation
or an act of embezzlement, misappropriation or conversion of assets of the
Company, Parent or any Subsidiary.
"Change in Capitalization" means any increase or reduction in the number of
Shares, or any change (including, but not limited to, a change in value) in the
Shares, or exchange of Shares for a different number or kind of shares or other
securities of the Company, by reason of a reclassification, recapitalization,
merger, consolidation, reorganization, spin-of, split-up, issuance of warrants
or rights of debentures, stock dividend, stock split or reverse stock split,
cash dividend, property dividend, combination or exchange of shares, repurchase
of shares, change in corporate structure or otherwise.
"Change in Control" shall mean the occurrence during the term of the Plan of:
(i) The "acquisition" by any "Person" (as the term person is used for
purposes of Section 13(d) or 14(d) of the Securities Exchange Act
of 1934, as amended (the "Exchange Act")) of "Beneficial
Ownership" (within the meaning of Rule 13d-3 promulgated under
the Exchange Act) of any securities of the Company which
generally entitles the holder thereof the vote for the election
of directors of the Company (the "Voting Securities") which, when
added to the Voting Securities then "Beneficially Owned" by such
person, would result in such Person "Beneficially Owning" forty
percent (40%) or more of the combined voting power of the
Company's then outstanding Voting Securities; provided, however,
that for purposes of this paragraph (i), a Person shall not be
deemed to have made an acquisition of Voting Securities if such
Person: (a) acquires Voting Securities as a result of a stock
split, stock dividend or other corporate restructuring in which
all stockholders of the class of such Voting Securities are
treated on a pro rata basis; (b) acquires the Voting Securities
directly from the Company; (c) becomes the Beneficial Owner of
more than the permitted percentage of Voting Securities solely as
a result of the acquisition of Voting Securities by the Company
which, by reducing the number of Voting Securities outstanding,
increases the proportional number of shares Beneficially Owned by
such Person; (d) is the Company or any corporation or other
Person of which a majority of its voting power or its equity
securities or equity interest is owned directly or indirectly by
the Company (a "Controlled Entity") or (e) acquires Voting
Securities in connection with a "Non-Control Transaction" (as
defined in paragraph (iii) below); or
(ii) The individuals who, as of November 10, 1994, are members of the
Board of Directors of the Company (the "Incumbent Board"), cease
for any reason to constitute at least two-thirds of the Board of
Directors of the Company; provided, however, that if either the
election of any new director or the nomination for election of
any new director by the Company's stockholders was approved by a
vote of a least two-thirds of the Incumbent Board, such new
director shall be considered as a member of the Incumbent Board;
provided further, however, that no individual shall be considered
a member of the Incumbent Board if such individual initially
assumed office as a result of either an actual or threatened
"Election Contest" (as described in Rule 14a-11 promulgated under
the Exchange Act) or other actual or threatened solicitation of
proxies or consents by or on behalf of a Person other than the
Board of Directors (a "Proxy Contest") including by reason of any
agreement intended to avoid or settle any Election Contest or
Proxy Contest; or
(iii)Shareholder approval of : (a) A merger, consolidation or
reorganization involving the Company (a "Business Combination"),
unless
(1) the stockholders of the Company, immediately before the
Business Combination, own, directly or indirectly
immediately following the Business Combination, at least
fifty-one percent (51%) of the combined voting power of the
outstanding voting securities of the corporation resulting
from the Business Combination (the" Surviving Corporation")
in substantially the same proportion as their ownership of
the Voting Securities immediately before the Business
Combination, and
(2) the individuals who were members of the Incumbent Board
immediately prior to the execution of the agreement
providing for the Business Combination constitute at least a
majority of the members of the Board of Directors of the
Surviving Corporation, and
(3) no Person (other than the Company or any Controlled Entity,
a trustee or other fiduciary holding securities under one or
more employee benefit plans or arrangements (or any trust
forming a part thereof) maintained by the Company, the
Surviving Corporation or any Controlled Entity, or any
Person who, immediately prior to the Business Combination,
had Beneficial Ownership of forty percent (40%) or more of
the then outstanding Voting Securities) has Beneficial
Ownership of forty percent (40%) or more of the combined
voting power of the Surviving Corporation's then outstanding
voting securities (a transaction described in this
subparagraph (a) shall be referred to as a "Non-Control
Transaction");
(b) A complete liquidation or dissolution of the Company;
or
(c) The sale or other disposition of all or substantially
all of the assets of the Company to any Person (other
than a transfer to a Controlled Entity).
Notwithstanding the foregoing, (x) a Change in Control shall not be deemed to
occur solely because forty percent (40%) or more of the then outstanding Voting
Securities is Beneficially Owned by (A) a trustee or other fiduciary holding
securities under one or more employee benefit plans or arrangements (or any
trust forming a part thereof) maintained by the Company or any Controlled Entity
or (B) any corporation which, immediately prior to its acquisition of such
interest, is owned directly or indirectly by the stockholders of the Company in
the same proportion as their ownership of stock in the Company immediately prior
to such acquisition; and (y) if a Participant's employment is terminated and the
Participant reasonably demonstrates that such termination (A) was at the request
of a third party who has indicated an intention or taken steps reasonably
calculated to effect a Change in Control and who effectuates a Change in Control
or (B) otherwise occurred in connection with, or in anticipation of, a Change in
Control which actually occurs, then for all purposes hereof, the date of a
Change in Control with respect to the Participant shall mean the date
immediately prior to the date of such termination of employment.
"Company" refers to ICN Pharmaceuticals, Inc.
"Company's Total Shareholder Return" refers to the compounded annual growth rate
of the Company's stock price over the given Performance Period (or Partial
Performance Period) assuming that all dividends paid during such Performance
Period (or Partial Performance Period) were reinvested in the Company's stock.
Ratable adjustments will be made to reflect any stock splits or stock dividends.
A detailed description of how to calculate the Company's Total Shareholder
Return is contained in Exhibit 1 herewith.
"Compensation Committee" refers to the Compensation Committee of the Board of
Directors of ICN Pharmaceuticals, Inc.
"Disability" means a physical or mental infirmity which impairs the
Participant's ability to perform substantially his or her duties for a period of
one hundred eighty (180) days during any three hundred sixty (360) day period.
"Excess Market Value" refers to an increase in ICN Market Capitalization as
defined in Section III.4 herein.
"Market Capitalization" refers to the common shares outstanding of the Company's
stock on the start date of each Performance Period (or Partial Performance
Period) multiplied by the closing price of the stock on the New York Stock
Exchange per share on the start date of each Performance Period (or Partial
Performance Period).
"Parent" means any corporation which is a parent corporation (within the meaning
of Section 424(e) of the Code) with respect to the Company.
"Participant" refers to those employees of the Company eligible to participate
in the Plan subject to Section III.2 herein.
"Plan" refers to the ICN Pharmaceuticals, Inc. Long-Term Incentive Plan, as
described herein.
"Pro Rata Award" refers to the percentage of days in the final year of the
Performance Period (or Partial Performance Period) during which the Participant
was employed by the Company multiplied by the Award that the Participant would
have received had the Participant been employed through such Performance Period
(or Partial Performance Period).
"Pro Rata Award Percentage" refers to the time-weighted average of all Award
Percentages for each eligible position held by the Participant during any Plan
year.
"Restricted Stock Agreement" means the written agreement by which an Award of
restricted stock is evidenced.
"S&P 500's Total Shareholder Return" refers to the compounded annual growth rate
of the Standard and Poor's 500 Composite Index's stock price over the given
Performance Period (or Partial Performance Period) assuming that all dividends
paid during such Performance Period (or Partial Performance Period) were
reinvested in the stock.
"Shares" means the common stock, par value $.01 per share, of the Company.
"Subsidiary" means any corporation which is a subsidiary corporation (within the
meaning of Section 424(g) of the Code) with respect to the Company.
"Vest" refers to the time when ownership of the restricted stock awarded
pursuant to the Plan becomes non-forfeitable by the Participant.
III. OPERATION OF THE PLAN
III.1 General Plan Description
The Plan was adopted by the Board of Directors on April 25, 1996 and was
approved by the Company's shareholders on May 29, 1996. The Plan provides the
opportunity to earn restricted stock Awards based on the Company's Excess Market
Value.
III.2 Eligibility
Senior executives of the Company holding the positions of Chief Executive
Officer, Executive Vice President, Senior Vice President, and Regional Manager
are eligible to participate in the Plan. At the beginning of each Performance
Period, Participants will be assigned a percentage of Excess Market Value
("Award Percentage") as contained in Exhibit 2 herewith.
III.3 Performance Periods and Partial Performance Periods
Awards are determined based on the Company's performance over the previous three
years (the "Performance Period"). Each Performance Period will begin on January
28 and will end on January 27, three years later.
Notwithstanding the above, Awards earned for the periods beginning on January
28, 1996 and ending on January 27, 1997 and January 27, 1998 (the "Partial
Performance Periods") will be based on the Excess Market Value calculated for
such periods. A diagram outlining the Performance Periods (and Partial
Performance Periods) is shown in Exhibit 2.
III.4 Calculation of Excess Market Value
Excess Market Value for each Performance Period (or Partial Performance Period)
is defined as the Company's Market Capitalization multiplied by the Company's
Total Shareholder Return in excess of the S&P 500's Total Shareholder Return.
The Excess Market Value, expressed as a formula, is:
- --------------------------------------------------------------------------------
Company's| |Company's | |Company's | | S&P 500's |
Excess | (=) |Market | (X) |Total Shareholder| (-) | Total Shareholder|
Value | |Capitalization| |Return | | Return |
- --------------------------------------------------------------------------------
In the event that the S&P 500's Total Shareholder Return is greater than the
Company's Total Shareholder Return for any Performance Period (or Partial
Performance Period), no Excess Market Value is created and therefore no Award is
earned for such period.
III.5 Determination of Restricted Stock Awards
At the beginning of each Performance Period (or Partial Performance Period),
Participants will be assigned an Award Percentage. The sum of all Award
Percentages for each Performance Period (or Partial Performance Period) will not
be greater than 6% of Excess Market Value. Each Participant's Award value will
equal his Award Percentage multiplied by the Company's Excess Market Value.
The total number of shares of restricted stock awarded to the Participant will
equal the Award value divided by the closing Company stock price on the New York
Stock Exchange on the end date of the Performance Period (or Partial Performance
Period). An example of the calculation of a Participant's restricted stock Award
is illustrated in Exhibit 4. Upon determination of the total number of shares of
restricted stock to be awarded to the Participant, the terms of the restricted
stock Award shall be set forth in a Restricted Stock Agreement.
III.6 Vesting of Restricted Stock Awards
Restricted stock awarded pursuant to the Plan will Vest 25% per year starting
one year from date of grant.
III.7 Dividends on Restricted Stock Awards
Any dividends paid on unvested restricted stock Awards will be held in escrow
until such Awards Vest.
IV. OTHER PLAN PROVISIONS
IV.1 Change in Position
In the event of a hire or promotion to an eligible position, the Participant
will be assigned an Award Percentage and will receive a Pro Rata Award for any
Performance Period (or Partial Performance Period) which is in its final year as
of the date of such hire or promotion. For all other Performance Periods (or
Partial Performance Periods), the Participant will receive an Award equal to his
full Award Percentage multiplied by the Excess Market Value for such Performance
Periods (or Partial Performance Periods).
In the event of a promotion/demotion within eligible positions, the Participant
will receive an Award for any Performance Period (or Partial Performance Period)
which is in its final year as of the date of a promotion/demotion within
eligible positions equal to the Pro Rata Award Percentage multiplied by the
Excess Market Value for such Performance Period (or Partial Performance Period).
For all other Performance Periods (or Partial Performance Periods), the
Participant will receive an Award equal to the full Award Percentage
commensurate with the new position multiplied by the Excess Market Value for
such Performance Periods (or Partial Performance Periods).
In the event of a demotion to an ineligible position, the Participant will
receive a Pro Rata Award for any Performance Period (or Partial Performance
Period) which is in its final year as of the date of such demotion. The
Participant will not receive any Award for any other Performance Period (or
Partial Performance Period).
IV.2 Termination of Employment
If employment of the Participant in the Plan is terminated as a result of death,
Disability, normal retirement or the Participant is terminated by the Company
without Cause, (i) the unvested portion of any restricted stock awarded to the
Participant under the Plan will Vest immediately, and (ii) the Participant will
be entitled to a Pro Rata Award for any Performance Period (or Partial
Performance Period) which is in its final year as of the Participant's
termination date. Such Award will be paid and will fully Vest within two (2)
months of the final day of the Performance Period (January 27). The Participant
forfeits the opportunity to earn any Awards for any other Performance Period (or
Partial Performance Period).
If the Participant's employment with the Company is terminated prior to the end
of any unfinished Performance Periods (or Partial Performance Period) for any
reason other than death, Disability, normal retirement or termination of the
Participant by the Company without Cause, the Participant will forfeit the
opportunity to earn an Award under the Plan for such periods and will forfeit
the unvested portion of any previous restricted stock Awards granted pursuant to
the Plan.
IV.3 Effect of Change in Control
In the event of a Change in Control, all Performance Periods (or Partial
Performance Periods), will be deemed to be fulfilled as of the Change in Control
date. The restricted stock Awards will be based on the Excess Market Value for
such Performance Period (or Partial Performance Period) and, subject to Section
IV.9, granted to Participants. All restricted stock Awards issued pursuant to
the Plan shall become fully vested as of the Change in Control date, including
those granted in connection with a Change in Control.
In the event that any Award made to Participants will subject Participants to
the Excise Tax imposed by Section 4999 of the Internal Revenue Code of 1986, as
amended, the Participant will be entitled to receive an additional payment (a
"Gross Up Payment"). The Gross Up Payment is an amount such that after payment
by the Participant of all taxes (including the Excise Tax) imposed on the Gross
Up Payment, the Participant retains an amount of the Gross Up Payment equal to
the Excise Tax imposed on the Award.
IV.4 Employee Rights
No employee has a claim or right to be a Participant in the Plan, to continue as
a Participant, or to be granted an Award under the Plan. Participation in the
Plan does not give the Participant the right to be retained in the employment of
the Company, nor does it imply or confer any other employment rights.
Nothing contained in the Plan will be construed to create a contract of
employment with any Participant. The Company reserves the right to elect any
person to its offices and to remove employees in any manner and upon any basis
permitted by law.
IV.5 Transfer of Award
Unvested restricted stock issued pursuant to the Plan is non-assignable and
non-transferable other than by will or by the laws of descent and distribution
or pursuant to a qualified domestic relations order.
IV.6 Plan Administration
The Plan is administered by the Compensation Committee of the Board of
Directors. Subject to the provisions of the Plan, the Compensation Committee has
full authority to implement and carry out the Plan, including but not limited to
the following: to construe and interpret the Plan and to make all other
determinations necessary or advisable for the administration of the Plan. The
Compensation Committee must also approve that the performance criteria have been
met before any restricted stock Award is paid out.
IV.7 Plan Duration and Modification
The Plan shall remain in effect until all restricted stock granted pursuant to
the Plan has fully Vested. The Compensation Committee may, five years from the
approval of the Plan, amend, alter, suspend or discontinue the Plan as it may
deem proper, except that no such action shall impair the rights of any grantee
under the Plan without the consent of the grantee.
No restricted stock Awards will be granted under the Plan after ten years from
the approval of the Plan. Restricted stock Awards granted pursuant to the Plan
will continue to Vest based on continued employment.
IV.8 Adjustments
In the event of a Change in Capitalization, the Compensation Committee shall, in
its sole discretion, make equitable adjustment of the number and class of common
shares of the Company's stock or other stock or securities covered by a
Restricted Stock Agreement.
IV.9 Effect of Certain Transactions
With respect to any restricted stock Award, in the event of (i) the liquidation
or dissolution of the Company, (ii) a merger or consolidation of the Company or
(iii) a Change in Control (a "Transaction"), the Plan and the restricted stock
Awards issued hereunder shall continue in effect in accordance with their
respective terms, and each Participant shall be entitled to receive in respect
of each common share of the Company's stock subject to any outstanding
restricted stock Awards, upon vesting, the same number and kind of stock,
securities, cash, property, or other consideration that each holder of a common
share of the Company's stock was entitled to receive in the Transaction in
respect of a common share of the Company's stock.
IV.10 Withholding Tax
The Participant will pay to the Company a cash amount equal to any tax
withholding obligation of the Company arising by reason of: (1) the Award of the
restricted shares; or (2) the Vesting of the restricted shares.
IV.11 Validity
In the event any provision of the Plan is held invalid, void, or unenforceable,
the same shall not affect, in any respect whatsoever, the validity of any other
provision of the Plan.
IV.12 Applicable Law
The Plan will be governed by and construed in accordance with the laws of the
State of California.