COLLATERAL AGREEMENT
This Collateral Agreement (the "Agreement") is hereby entered into by and
between Xxxxx Xxxxx ("Panic") and ICN Pharmaceuticals, Inc. ("ICN") this 14th
day of August, 1996.
(a) WHEREAS, Panic is the Chairman of the Board, Chief Executive Officer
and President of ICN;
(b) WHEREAS, ICN and Panic were co-defendants in a civil action ("the
Suit") in which the plaintiff sought substantial sums of money as damages. The
Suit was extensively litigated, and a decision had to be made as to whether to
settle the case or carry on with the Suit. ICN preferred to settle it in order
to avoid the risks of a trial and additional costs. Panic contended that the
plaintiff s claim was baseless and that the Suit should be defended, but he
deferred to ICN's decision as to whether, and on what terms, to settle. A
settlement was negotiated and concluded. However, Panic, at ICN's request, did
not participate in the settlement negotiations;
(c) WHEREAS, at all times during the pendency of the Suit, Panic.was a
defendant in a separate civil suit with the same plaintiff as referred to in
Recital (b). This separate suit contained issues which, if decided favorably to
Panic, could have materially and favorably affected the outcome of the Suit in
which the settlement was reached because of the doctrines of res judicata and
collateral estoppel;
(d) WHERAS, there is a dispute between ICN and Panic concerning
responsibility for the above-referenced settlement and the Parties have reached
an agreement as to how the costs of the settlement should be allocated between
them;
(e) WHEREAS, ICN has determined that it is in the best interests of ICN
that it guarantee a loan granted to Panic by Sanwa Bank in the amount of
$3,600,000 so as to facilitate the agreement between Panic and ICN as to the
allocation of the costs of the settlement ("the Guarantee");
(f) WHEREAS. Panic has agreed to provide certain collateral to ICN in
exchange for the guarantee of said loan;
NOW THEREFORE, IT IS RESOLVED, that for good and valuable consideration as
described herein, the Parties agree as follows:
1. ICN shall execute all of the necessary documents to effect the Guarantee
referred to in Recital (e).
2. Panic shall pledge and assign to ICN as collateral for the Guarantee the
following assets which shall serve as the only recourse for the Guarantee:
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(a) Panic's right to purchase 100,000 shares of ICN common
stock at $22.75 per share as granted by the Compensation Committee of
the Board on July 24, 1996.
(b) Any and all rights which Panic or his estate might
otherwise have to the proceeds of a "keyman" life insurance policy on
Panic's life which shall be purchased by ICN.
(c) Panic shall have the right to substitute collateral for
the assets listed in subparagraphs (a) and (b) above, at his option,
provided that the value of the substitute collateral shall be equal to
the value of the asset or assets which such substitute collateral is
replacing.
Should Panic default on the loan to Sanwa Bank and ICN be required to
fulfill the obligations of the Guarantee, Paiiic's obligation to compensate or
repay ICN shall be without recourse except to the extent of the assets
specifically identified in subparagraphs (a) and (b) above (or the assets
substituted therefor in accordance with subparagraph [c] above) and ICN's right
to recover from Panic shall be limited to the rights to foreclose upon the
collateral described in subparagraphs (a) and (b) above (or the assets
substituted therefor in accordance with subparagraph (c) above). ICN shall have
no rights to seek any deficiency if foreclosure on the assets specified in
subparagraphs (a) and (b) above (or the assets substituted therefor in
accordance with subparagraph (c) above) should fail to yield enough money to
satisfy the obligation that Panic might otherwise have to ICN as a result of
ICN's fulfillment of its obligations under the Guarantee.
3. Should Panic fail to make any interest payments on his obligations to
Sanwa Bank, ICN may tender such payment and charge the payment to Panic as an
advance of the compensation to which Panic might otherwise be entitled as an
office or director of ICN.
4. ICN shall use all reasonable efforts to assert insurance claims against
its insurance carriers for recovery of any and all amounts paid bv ICN to defend
or settle the Suit, which efforts shall include the obligation to file suit
against any insurance carrier that refuses to reimburse ICN or any officer,
director or employee of it, for bad faith, breach of contract, indemnification
or recovery of defense costs that may be reasonably due under such insurance
policies.
5. Should any dispute arise between the parties regarding any of the terms
of this Agreement, the parties agree to submit the dispute to binding
arbitration. In the event of said dispute, within thirty (30) days the parties
shall determine the procedure for arbitration. Should the parties be unable to
reach an agreement on the procedure for arbitration, the parties shall submit
the dispute to the American Arbitration Association to be administered pursuant
to its ordinary commercial procedures and rules.
6. This Agreement shall be governed by the laws of the State of California.
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7. This Agreement represents the entire agreement of the parties with
respect to its subject matter, and any amendments or modifications hereto must
be in writing and executed by both parties.
8. The parties acknowledge and agree that the law firm of Xxxxx & Klar has
in the past represented, is now representing, and may in the future represent
both ICN and Panic, separately and together, with respect to a variety of
matters including the Suit and the related litigation referred to in the
Recitals. The parties further acknowledge and agree that they have each
specifically authorized Xxxxx & Xxxx to represent Panic with respect to this
Agreement and that ICN has been separately represented by its in-house counsel
with respect to this Agreement. The parties hereby consent to such
representation by Xxxxx & XXxx and ICN's in-house counsel in connection with
this Agreement and waive any right in which they might otherwise have to object
to such representation based upon any actual or claimed conflict of interest or
any other theory. The parties further specifically agree that Xxxxx & Klar may
continue to represent their respective interests in connection with any future
proceedings which are part of or ancillary to the Suit or the related litigation
referred to in the Recitals.
ICN PHARMACEUTICALS, INC. XXXXX XXXXX
By: /S/ XXXX X. XXXXXXXX By: /S/ XXXXX XXXXX
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[Legal Stamp]
Attachment Sep 11, 1996 to Collateral Agreement
My signature on this document is to be effective only if ICN does not itself
assume the $3.6 million obligation to Sanwa (because ICN rather than I should
have incurred the loss in the sum of $3.6 million). If ICN assumes that
obligation, I an to have no further liability for the note or any loan agreement
or other document related thereto.
/s/ Xxxxx Xxxxx
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