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Collateral Agreement - ICN Pharmaceuticals Inc. and Milan Panic

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                              COLLATERAL AGREEMENT

     This Collateral  Agreement (the  "Agreement") is hereby entered into by and
between Milan Panic ("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

     (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:

                  (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

     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

     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.


     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 Segal & 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  Segal & Klar 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 Segal & KJar 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 Segal & 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.


By:  /S/ JOHN E. GIORDANI                       By:      /S/ MILAN PANIC
   ----------------------------                 ------------------------------

[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/ Milan Panic