SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
-----------------------------------
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
-----------------------------------
Date of report: December 23, 2002
Date of earliest event reported: December 23, 2002
ICN PHARMACEUTICALS, INC.
(Exact Name of Registrant as Specified in Charter)
Delaware 1-11397 33-0628076
(State or Other (Commission File Number) (I.R.S. Employer
Jurisdiction of Identification Number)
Incorporation )
3300 Hyland Avenue
Costa Mesa, California 92626
(Address of Principal Executive Offices)
Registrant's telephone number, including area code: (714) 545-0100
ITEM 5. OTHER EVENTS.
On December 23, 2002, the registrant issued a press release with
respect to its action by written consent to remove all current directors of
Ribapharm Inc., a Delaware corporation ("Ribapharm"), other than Roberts A.
Smith, Ph.D., and to amend the bylaws (the "Bylaws") of Ribapharm to rescind
a new bylaw adopted by the board of directors of Ribapharm (the "Ribapharm
Board") purporting to require notice of any action by written consent of
stockholders to be made to Ribapharm at least 35 days prior to effectiveness
thereof. Such action shall be effective January 27, 2003, or such earlier
date as ordered by a court of competent jurisdiction, unless earlier
rescinded or amended by the registrant. The directors so removed include Kim
Campbell, Arnold H. Kroll, Johnson Y.N. Lau, M.D., Hans Thierstein and John
Vierling, and each other person (other than Roberts A. Smith) who is a
director (or may be appointed by the Ribapharm Board as a director on or
following December 23, 2002 until the effectiveness of such action).
The registrant, which holds approximately 120,100,000 shares of
Ribapharm common stock, representing approximately 80.07% of the outstanding
shares of common stock of Ribapharm, is effecting the removal and the
amendment of the Bylaws pursuant to Section 228 of the General Corporation
Law of the State of Delaware. Notice of the registrant's stockholder action
by written consent was provided to Ribapharm on December 23, 2002.
A copy of the press release announcing this information with an
attached letter from the registrant to the Ribapharm Board and the notice of
action by written consent are filed herewith and incorporated herein by
reference, as Exhibits 99.1 and 99.2, respectively.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
Exhibit No. Description
99.1 Press release issued December 23, 2002,
with a letter from ICN Pharmaceuticals to
the Board of Directors of Ribapharm Inc.,
dated December 23, 2002
99.2 Notice of Action by Written Consent, dated
December 23, 2002
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on behalf of
the undersigned hereunto duly authorized.
Dated: December 23, 2002
ICN PHARMACEUTICALS, INC.
By: /s/ Gregory Keever
----------------------------------
Name: Gregory Keever
Title: Executive Vice President, General
Counsel and Corporate Secretary
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
99.1 Press release issued December 23, 2002, with
a letter from ICN Pharmaceuticals to the
Board of Directors of Ribapharm Inc., dated
December 23, 2002
99.2 Notice of Action by Written Consent, dated
December 23, 2002
Exhibit 99.1
------------
Investor Contact:
Jeff Misakian
714-545-0100, ext. 3230
ICN PHARMACEUTICALS TAKES ACTION TO REMOVE
RIBAPHARM DIRECTORS
COSTA MESA, CA, December 23, 2002 - ICN Pharmaceuticals Inc. (NYSE:
ICN) announced today that it has taken shareholder action by written consent
as permitted by Delaware law to remove all but one member of the Board of
Directors of its 80-percent owned subsidiary, Ribapharm Inc. (NYSE: RNA).
The directors to be removed include Kim Campbell, Arnold H. Kroll, Johnson
Y.N. Lau, M.D., Hans Thierstein and John Vierling, M.D. Roberts A. Smith,
Ph.D. is not affected by this action, and is expected to remain a director of
Ribapharm.
ICN said recent actions by Ribapharm's management and its board have
resulted in a loss of confidence in the company's leadership by ICN's board.
ICN said it has taken the action to remove Ribapharm directors and it is also
pursuing equitable relief against the Ribapharm directors to ensure the
preservation of the Ribapharm assets.
Robert W. O'Leary, chairman and chief executive officer of ICN,
commented: "The steps we have taken today, unanimously approved by ICN's
Board of Directors, are absolutely essential to protect the interests of all
Ribapharm stockholders, including ICN."
The written consent was delivered to Ribapharm today, and will be
effective on January 27, 2003 or such earlier date as may be ordered by a
court of competent jurisdiction. The delay in the implementation of this
action is required by a bylaw provision enacted by the Ribapharm board on
December 13, 2002 that purports to require the delivery of written notice to
Ribapharm of an action to be taken by written shareholder consent at least 35
days prior to the proposed effective date of such action.
A letter from ICN to Ribapharm's board informing it of ICN's actions is
attached to this press release.
ICN is an innovative, research-based global pharmaceutical company that
manufactures, markets and distributes a broad range of prescription and
non-prescription pharmaceuticals under the ICN brand name. Its research and
new product development focuses on innovative treatments for dermatology and
infectious diseases.
Additional information is also available on the company's Web site at
http://www.icnpharm.com.
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, including but not limited to,
projections of future sales, operating income, returns on invested assets,
regulatory approval processes, success of the company's strategic
repositioning initiatives and the ability of management to execute them,
success of the company's ongoing inventory reduction program and other
cost-cutting measures, and other risks detailed from time to time in the
company's Securities and Exchange Commission filings.
- Letter to Ribapharm Board of Directors Attached -
###
ICN PHARMACEUTICALS, INC.
3300 Hyland Avenue
Costa Mesa, CA 92626
December 23, 2002
The Board of Directors
Ribapharm Inc.
3300 Hyland Avenue
Costa Mesa, CA 92626
Lady and Gentlemen:
As you are aware, ICN Pharmaceuticals, Inc. is the holder of
approximately 120,100,000 shares of common stock, par value $.01 per share,
of Ribapharm Inc., representing approximately 80.07% of the outstanding
shares of common stock of Ribapharm. This holding in Ribapharm is one of our
most significant assets. The ICN Board of Directors has asked me to write
this letter to you. Recent actions and inactions by you and Ribapharm's
management have caused us to lose confidence in the Ribapharm Board of
Directors and to worry that you or your management will take actions that
could harm Ribapharm and diminish its value. ICN believes that the Ribapharm
Board has failed to exercise appropriate oversight over management.
As a preliminary matter, let it be clear that our concern is with
Ribapharm's leadership, and is not a reflection on the talented and dedicated
scientific staff and other employees at Ribapharm. We have great respect for
the hard-working team of scientists and other employees, and their efforts on
behalf of Ribapharm.
ICN has been dismayed and concerned by recent events at
Ribapharm. We understand that in early December 2002, the Compensation
Committee of the Ribapharm Board granted significant cash bonuses and stock
option awards to senior Ribapharm management. The grant of bonuses and
options only seven months following Ribapharm's IPO and prior to finalization
of 2002 financial results appears unorthodox, and highly inappropriate. This
is particularly unwarranted at a time when under their employment agreements
with Ribapharm, Johnson Lau (Chairman and CEO), Thomas Stankovich (Senior
Vice President and CFO) and Roger Loomis (Senior Vice President and General
Counsel) are entitled to voluntarily terminate their employment (at any time
during the 60-day window period from December 11th to February 9th) and (a)
receive a cash severance payment equal to 300% of their base salary and
highest bonus paid during the three years ended prior to the year in which
they "walk away" (including the newly granted bonuses) and (b) obtain
accelerated vesting and extended term for all of their options, as well as
other benefits.
As to the bonuses paid and stock options granted in early
December, we question whether your management made the Ribapharm Board or the
Compensation Committee aware of the consequences of their actions. If they
did not, we believe that is irresponsible and intolerable conduct by them.
If they did, we believe it was irresponsible of the Ribapharm Board (or the
Compensation Committee) to go along with management's desire. Equally as
disturbing, your management and you appear to have attempted to hide these
actions from ICN and Ribapharm's other stockholders.
Late Friday afternoon, Ribapharm sent a letter to ICN containing
an underlying threat of breach of the existing Tax Sharing Agreement between
Ribapharm and ICN, if ICN does not declare its intention regarding completion
of a spin-off. Such a declaration is not required by the Tax Sharing
Agreement. In fact, the Affiliation and Distribution Agreement between ICN
and Ribapharm expressly contemplates that "ICN shall, in its sole and
absolute discretion, determine whether to proceed with the Distribution and
the timing of and conditions to the consummation of the Distribution." This
discretion as to whether to proceed with the spin-off of Ribapharm was
disclosed in Ribapharm's prospectus for its initial public offering, which
not only acknowledged that ICN is not required to complete the spin-off, but
also stated that any commitment of ICN to effect the spin-off "does not
constitute a binding legal obligation to do so." In light of the clear
possibility that a spin-off might not be completed in 2002, or indeed ever,
Ribapharm's formal request for "assurances" is unwarranted. As you are
aware, and as ICN has publicly disclosed, ICN is currently evaluating its
options with regard to Ribapharm, and at this time has not determined whether
or not to complete the spin-off. The implied threat of a breach by Ribapharm
of its obligations under this agreement is highly inappropriate.
Also on Friday afternoon, Ribapharm disclosed in a Form 8-K
filing with the Securities and Exchange Commission ("SEC") that the Ribapharm
Board had adopted a week earlier, but Ribapharm had not disclosed, a bylaw
purporting to impose delays on stockholder action by written consent.
Despite whatever protestations you may articulate, this action is an obvious
attempt to entrench the current Board and to delay and frustrate
shareholders. In this regard, Ribapharm breached a covenant in the
Affiliation and Distribution Agreement which explicitly requires Ribapharm to
deliver to ICN substantially final drafts of its SEC filings as soon as they
are prepared and final copies of such SEC filings no later than one business
day prior to the date of filing as well as a covenant that requires Ribapharm
to give ICN an opportunity to review and comment on any and all of its SEC
filings prior to the time they are filed with the SEC.
It is clear to us that Ribapharm's management is anxious to
entrench itself and consolidate its leverage over the Ribapharm Board. This
is evident from Dr. Lau's engineering his appointment as Chairman of the
Ribapharm Board as well as the compensation arrangements described above.
Particularly in the current environment of increased sensitivity to the need
for board oversight of management, we cannot understand how the Ribapharm
Board has allowed this to happen.
The foregoing and other events have made it clear to ICN that the
Ribapharm Board and senior management are no longer properly acting in the
best interests of shareholders. As the owner of over 80% of Ribapharm, ICN
has a significant stake in maintaining the value of Ribapharm for its
stockholders and in ensuring that the Board of Directors of Ribapharm is
accountable to all of its stockholders. ICN has lost all confidence in the
current Ribapharm Board of Directors and its willingness to exercise the
requisite oversight of management and stewardship of Ribapharm.
Accordingly, today ICN has acted by written consent pursuant to
Section 228 of the Delaware General Corporation Law to remove all directors
on the Ribapharm Board, other than Roberts A. Smith, Ph.D., and to amend
Ribapharm's bylaws by rescinding the new bylaw provision, effective as of
January 27, 2003 or such earlier date as may be ordered by a court of
competent jurisdiction.
We have commenced a lawsuit against the directors to be removed
in the Chancery Court of the State of Delaware. In connection with this
litigation, we are seeking a temporary restraining order to prevent Ribapharm
and its Board from taking actions outside the ordinary course of business
prior to the effectiveness of our action by written consent. We are also
asking the Court to shorten or eliminate the 35-day notice period, which is
wholly uncalled for under the circumstances.
The Ribapharm Board has shown its willingness to attempt to
entrench itself, make payments to management and take other questionable
actions without stockholder approval or even timely public disclosure. These
actions are improper and not supported by the holder of in excess of 80% of
your outstanding shares. We call on you to begin to exercise your fiduciary
duty to all stockholders, and, pending your removal, to take no actions
outside of the ordinary course of running Ribapharm's business operations.
We shall seek to hold each one of you personally liable for any harm that may
be caused by any further improper actions.
We also call on you to rescind the recently adopted bylaw that
purports to delay shareholder action by written consent.
Very truly yours,
ICN PHARMACEUTICALS, INC.
By: /s/ Robert W. O'Leary
--------------------------------
Robert W. O'Leary
Chairman and Chief Executive
Officer
cc: The Board of Directors of ICN Pharmaceuticals, Inc.
Exhibit 99.2
------------
ICN PHARMACEUTICALS, INC.
3300 Hyland Avenue
Costa Mesa, CA 92626
December 23, 2002
Ribapharm Inc.
3300 Hyland Avenue
Costa Mesa, CA 92626
Attention: Roger D. Loomis, Jr.
Senior Vice President, General Counsel and Secretary
Re: Notice of Stockholder Action by Written Consent
-----------------------------------------------
Dear Mr. Loomis:
ICN Pharmaceuticals, Inc. ("ICN") hereby provides notice pursuant
to new Section 8(C)(4) of the bylaws (the "Bylaws") of Ribapharm Inc., a
Delaware corporation ("Ribapharm"), purported to have been adopted by the
board of directors of Ribapharm on December 13, 2002 and announced in a Form
8-K filed with the Securities and Exchange Commission on December 20, 2002.
ICN's address is 3300 Hyland Avenue, Costa Mesa, California 92626. ICN is
the record and beneficial holder of approximately 120,100,000 shares of
common stock, par value, $.01 per share, of Ribapharm as of the date hereof.
ICN hereby notifies Ribapharm that it is taking stockholder
action by written consent, effective on January 27, 2003 or such earlier date
as may be ordered by a court of competent jurisdiction, to remove each
director on the Board of Directors of Ribapharm (the "Ribapharm Board"),
other than Roberts A. Smith, Ph.D., and to amend the Bylaws by rescinding new
Section 8(C)(4) of Article I of the Bylaws purported to have been adopted by
the Ribapharm Board on December 13, 2002. The directors to be so removed
upon effectiveness of the consent include Kim Campbell, Arnold H. Kroll,
Johnson Y.N. Lau, M.D., Hans Thierstein and John Vierling, and each other
person (other than Roberts A. Smith) who is a director (or may be appointed
by the Ribapharm Board as a director following the date hereof until the
effectiveness of the actions taken in the written consent). These actions
are being taken by written consent as a stockholder pursuant to Section 228
of the General Corporation Law of the State of Delaware (the "DGCL"); a copy
of the action is attached hereto as Annex A.
ICN is taking the action to remove directors because it has lost
confidence in the current Ribapharm Board and its willingness to exercise
requisite oversight of management and stewardship of Ribapharm. ICN is
taking the action to rescind the recently adopted bylaw provision in order to
permit action by written consent without notice. Attached hereto as Annex B
is a letter sent today to the Ribapharm Board regarding ICN's decision to
effect removal of the Ribapharm directors, other than Roberts A. Smith.
ICN hereby requests that the Secretary of Ribapharm deliver
prompt notice of the foregoing action to the stockholders of Ribapharm
pursuant to Section 228(e) of the DGCL.
ICN PHARMACEUTICALS, INC.
By: /s/ Gregory Keever
--------------------------------
Name: Gregory Keever
Title: Executive Vice President,
General Counsel and
Corporate Secretary
Annex A
-------
ACTION BY WRITTEN CONSENT
OF MAJORITY STOCKHOLDER OF
RIBAPHARM INC.
The undersigned, ICN Pharmaceuticals, Inc., a Delaware
corporation, being the record and beneficial holder of approximately
120,100,000 shares of the common stock, par value, $.01 per share (the
"Common Stock"), of Ribapharm Inc., a Delaware corporation (the
"Corporation") (such shares of Common Stock representing more than 80% of the
outstanding Common Stock of the Corporation), acting pursuant to Section 228
of the General Corporation Law of the State of Delaware (the "DGCL"), does
hereby adopt as of December 23, 2002 the following resolutions with the same
force and effect as if they were approved and adopted by a vote at a duly
convened meeting of the stockholders of the Corporation:
RESOLVED, that each director on the Corporation's board of
directors (the "Board") as of the date of effectiveness hereof,
other than Roberts A. Smith, Ph.D., is hereby removed as a
director of the Corporation, effective January 27, 2003 or such
earlier date as ordered by a court of competent jurisdiction; the
directors so removed include Kim Campbell, Arnold H. Kroll,
Johnson Y.N. Lau, M.D., Hans Thierstein, John Vierling, and each
other person not named herein (other than Roberts A. Smith) who
is a director (or may be appointed by the Board as a director on
or following the date hereof until the effectiveness hereof); and
FURTHER RESOLVED, that, in accordance with Section (a) of
Article V of the amended and restated certificate of
incorporation of the Corporation and Article VI of the amended
and restated bylaws of the Corporation (the "Bylaws"), the Bylaws
are hereby amended by rescinding, effective January 27, 2003 or
such earlier date as ordered by a court of competent
jurisdiction, new Section 8(C)(4) of Article I of the Bylaws
adopted by the Board on December 13, 2002.
The actions set forth herein taken by written consent executed as of December
23, 2002 shall be effective January 27, 2003 or such earlier date as ordered
by a court of competent jurisdiction, unless earlier rescinded or amended by
the undersigned stockholder.
IN WITNESS WHEREOF, this Action by Written Consent has
been executed by the undersigned stockholder of the Corporation as of the 23rd
day of December, 2002.
ICN PHARMACEUTICALS, INC.
By: /s/ Robert W. O'Leary
--------------------------------
Name: Robert W. O'Leary
Title:Chairman and Chief Executive
Officer
Annex B
-------
ICN PHARMACEUTICALS, INC.
3300 Hyland Avenue
Costa Mesa, CA 92626
December 23, 2002
The Board of Directors
Ribapharm Inc.
3300 Hyland Avenue
Costa Mesa, CA 92626
Lady and Gentlemen:
As you are aware, ICN Pharmaceuticals, Inc. is the holder of
approximately 120,100,000 shares of common stock, par value $.01 per share,
of Ribapharm Inc., representing approximately 80.07% of the outstanding
shares of common stock of Ribapharm. This holding in Ribapharm is one of our
most significant assets. The ICN Board of Directors has asked me to write
this letter to you. Recent actions and inactions by you and Ribapharm's
management have caused us to lose confidence in the Ribapharm Board of
Directors and to worry that you or your management will take actions that
could harm Ribapharm and diminish its value. ICN believes that the Ribapharm
Board has failed to exercise appropriate oversight over management.
As a preliminary matter, let it be clear that our concern is with
Ribapharm's leadership, and is not a reflection on the talented and dedicated
scientific staff and other employees at Ribapharm. We have great respect for
the hard-working team of scientists and other employees, and their efforts on
behalf of Ribapharm.
ICN has been dismayed and concerned by recent events at
Ribapharm. We understand that in early December 2002, the Compensation
Committee of the Ribapharm Board granted significant cash bonuses and stock
option awards to senior Ribapharm management. The grant of bonuses and
options only seven months following Ribapharm's IPO and prior to finalization
of 2002 financial results appears unorthodox, and highly inappropriate. This
is particularly unwarranted at a time when under their employment agreements
with Ribapharm, Johnson Lau (Chairman and CEO), Thomas Stankovich (Senior
Vice President and CFO) and Roger Loomis (Senior Vice President and General
Counsel) are entitled to voluntarily terminate their employment (at any time
during the 60-day window period from December 11th to February 9th) and (a)
receive a cash severance payment equal to 300% of their base salary and
highest bonus paid during the three years ended prior to the year in which
they "walk away" (including the newly granted bonuses) and (b) obtain
accelerated vesting and extended term for all of their options, as well as
other benefits.
As to the bonuses paid and stock options granted in early
December, we question whether your management made the Ribapharm Board or the
Compensation Committee aware of the consequences of their actions. If they
did not, we believe that is irresponsible and intolerable conduct by them.
If they did, we believe it was irresponsible of the Ribapharm Board (or the
Compensation Committee) to go along with management's desire. Equally as
disturbing, your management and you appear to have attempted to hide these
actions from ICN and Ribapharm's other stockholders.
Late Friday afternoon, Ribapharm sent a letter to ICN containing
an underlying threat of breach of the existing Tax Sharing Agreement between
Ribapharm and ICN, if ICN does not declare its intention regarding completion
of a spin-off. Such a declaration is not required by the Tax Sharing
Agreement. In fact, the Affiliation and Distribution Agreement between ICN
and Ribapharm expressly contemplates that "ICN shall, in its sole and
absolute discretion, determine whether to proceed with the Distribution and
the timing of and conditions to the consummation of the Distribution." This
discretion as to whether to proceed with the spin-off of Ribapharm was
disclosed in Ribapharm's prospectus for its initial public offering, which
not only acknowledged that ICN is not required to complete the spin-off, but
also stated that any commitment of ICN to effect the spin-off "does not
constitute a binding legal obligation to do so." In light of the clear
possibility that a spin-off might not be completed in 2002, or indeed ever,
Ribapharm's formal request for "assurances" is unwarranted. As you are
aware, and as ICN has publicly disclosed, ICN is currently evaluating its
options with regard to Ribapharm, and at this time has not determined whether
or not to complete the spin-off. The implied threat of a breach by Ribapharm
of its obligations under this agreement is highly inappropriate.
Also on Friday afternoon, Ribapharm disclosed in a Form 8-K
filing with the Securities and Exchange Commission ("SEC") that the Ribapharm
Board had adopted a week earlier, but Ribapharm had not disclosed, a bylaw
purporting to impose delays on stockholder action by written consent.
Despite whatever protestations you may articulate, this action is an obvious
attempt to entrench the current Board and to delay and frustrate
shareholders. In this regard, Ribapharm breached a covenant in the
Affiliation and Distribution Agreement which explicitly requires Ribapharm to
deliver to ICN substantially final drafts of its SEC filings as soon as they
are prepared and final copies of such SEC filings no later than one business
day prior to the date of filing as well as a covenant that requires Ribapharm
to give ICN an opportunity to review and comment on any and all of its SEC
filings prior to the time they are filed with the SEC.
It is clear to us that Ribapharm's management is anxious to
entrench itself and consolidate its leverage over the Ribapharm Board. This
is evident from Dr. Lau's engineering his appointment as Chairman of the
Ribapharm Board as well as the compensation arrangements described above.
Particularly in the current environment of increased sensitivity to the need
for board oversight of management, we cannot understand how the Ribapharm
Board has allowed this to happen.
The foregoing and other events have made it clear to ICN that the
Ribapharm Board and senior management are no longer properly acting in the
best interests of shareholders. As the owner of over 80% of Ribapharm, ICN
has a significant stake in maintaining the value of Ribapharm for its
stockholders and in ensuring that the Board of Directors of Ribapharm is
accountable to all of its stockholders. ICN has lost all confidence in the
current Ribapharm Board of Directors and its willingness to exercise the
requisite oversight of management and stewardship of Ribapharm.
Accordingly, today ICN has acted by written consent pursuant to
Section 228 of the Delaware General Corporation Law to remove all directors
on the Ribapharm Board, other than Roberts A. Smith, Ph.D., and to amend
Ribapharm's bylaws by rescinding the new bylaw provision, effective as of
January 27, 2003 or such earlier date as may be ordered by a court of
competent jurisdiction.
We have commenced a lawsuit against the directors to be removed
in the Chancery Court of the State of Delaware. In connection with this
litigation, we are seeking a temporary restraining order to prevent Ribapharm
and its Board from taking actions outside the ordinary course of business
prior to the effectiveness of our action by written consent. We are also
asking the Court to shorten or eliminate the 35-day notice period, which is
wholly uncalled for under the circumstances.
The Ribapharm Board has shown its willingness to attempt to
entrench itself, make payments to management and take other questionable
actions without stockholder approval or even timely public disclosure. These
actions are improper and not supported by the holder of in excess of 80% of
your outstanding shares. We call on you to begin to exercise your fiduciary
duty to all stockholders, and, pending your removal, to take no actions
outside of the ordinary course of running Ribapharm's business operations.
We shall seek to hold each one of you personally liable for any harm that may
be caused by any further improper actions.
We also call on you to rescind the recently adopted bylaw that
purports to delay shareholder action by written consent.
Very truly yours,
ICN PHARMACEUTICALS, INC.
By: /s/ Robert W. O'Leary
--------------------------------
Robert W. O'Leary
Chairman and Chief Executive
Officer
cc: The Board of Directors of ICN Pharmaceuticals, Inc.