SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
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[ ] Preliminary Proxy Statement
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(as permitted by Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Section 240.14a-12
ALPHARMA INC.
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(Name of Registrant as Specified In Its Charter)
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[ALPHARMA LOGO]
ALPHARMA INC.
ONE EXECUTIVE DRIVE
FORT LEE, NEW JERSEY 07024
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NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 2003
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To the Stockholders of ALPHARMA INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Alpharma
Inc., a Delaware corporation (the "Company"), will be held at The Regency Hotel,
540 Park Avenue, New York, New York, on Monday, May 19, 2003, at 9:00 a.m.,
local time, to consider and act upon the following matters:
1. The election of nine directors to the Company's Board of Directors, each
to hold office until the 2004 Annual Meeting of Stockholders and until
their successors shall be elected and shall qualify.
2. Approval of an amendment to Article Fourth of the Company's Amended and
Restated Certificate of Incorporation, increasing the number of shares
of Class A Common Stock that the Company has authority to issue from
65,000,000 to 75,000,000.
3. A proposal to adopt the 2003 Omnibus Incentive Compensation Plan.
4. Ratifying the appointment of PricewaterhouseCoopers LLP as the Company's
independent accountants.
5. Transaction of such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 26, 2003 as
the record date for determining the Stockholders entitled to notice of and to
vote at the meeting or any adjournment thereof.
YOUR REPRESENTATION AT THIS MEETING IS IMPORTANT. Whether or not you
expect to attend the Annual Meeting in person, please complete, date, sign and
return the enclosed proxy. An envelope is enclosed for your convenience which,
if mailed in the United States, requires no additional postage. If you attend
the Annual Meeting, you may then withdraw your proxy and vote in person.
A copy of the Company's Annual Report to Stockholders for the year ended
December 31, 2002 and a Proxy Statement accompany this notice.
By order of the Board of Directors,
Robert F. Wrobel
Secretary
April 14, 2003
[ALPHARMA LOGO]
ALPHARMA INC.
ONE EXECUTIVE DRIVE
FORT LEE, NEW JERSEY 07024
MAILING DATE
APRIL 14, 2003
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PROXY STATEMENT FOR ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD ON MAY 19, 2003
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This proxy statement (the "Proxy Statement") is furnished in connection
with the solicitation of proxies by the Board of Directors of Alpharma Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Monday, May 19, 2003 at The
Regency Hotel, 540 Park Avenue, New York, New York at 9:00 a.m., local time, and
at any adjournment or postponement thereof. The cost of solicitation of the
Company's stockholders (the "Stockholders") will be paid by the Company. Such
cost will include the reimbursement of banks, brokerage firms, nominees,
fiduciaries and other custodians for expenses of forwarding solicitation
materials to beneficial owners of shares. In addition to the solicitation of
proxies by use of mail, the directors, officers and employees of the Company may
solicit proxies personally or by telephone, telegraph or facsimile transmission.
Such directors, officers and employees will not be additionally compensated for
such solicitation but may be reimbursed for out-of-pocket expenses incurred in
connection therewith.
It is anticipated that this Proxy Statement and form of proxy will first be
sent to the Company's Stockholders on or about April 14, 2003.
THE ANNUAL MEETING
PURPOSE OF MEETING
At the Annual Meeting, the Company's Stockholders will consider and act
upon the following matters:
1. The election of nine directors to the Company's Board of Directors,
each to hold office until the 2004 Annual Meeting of Stockholders and until
their successors shall be elected and shall qualify.
2. A proposal to amend Article Fourth of the Company's Amended and
Restated Certificate of Incorporation to increase the number of shares of
authorized Class A Common Stock.
3. A proposal to adopt the 2003 Omnibus Incentive Compensation Plan
(the "Incentive Compensation Plan").
4. Ratifying the appointment of PricewaterhouseCoopers LLP as the
Company's independent accountants.
5. Transaction of such other business as may properly come before the
meeting or any adjournments or postponements thereof.
RECORD DATE
The close of business on March 26, 2003 (the "Record Date") has been fixed
as the record date for determining holders of outstanding shares of the
Company's Class A Common Stock, par value $.20 per share (the "Class A Stock"),
and Class B Common Stock, par value $.20 per share (the "Class B Stock"),
entitled to notice of, and to vote at, the Annual Meeting. As of the Record
Date, 39,490,702.850 shares of Class A Stock and 11,872,897 shares of Class B
Stock were outstanding and entitled to vote.
QUORUM
For each matter to be voted upon at the Annual Meeting, the presence in
person or by proxy, of holders of stock entitled to be voted with respect to
such matter, representing a majority of the aggregate voting power of all shares
of stock entitled to be voted with respect to such matter, is necessary to
constitute a quorum with respect to such matter and to transact business with
respect to such matter at the Annual Meeting. For purposes of determining
whether a quorum exists with respect to the election of directors, shares as to
which authority to vote in the election of directors has been withheld and
broker non-votes (where a broker submits a proxy but does not have authority to
vote a customer's shares on one or more matters) with respect thereto will be
considered present at the Annual Meeting. For the purpose of determining whether
a quorum exists with respect to amending the Company's Amended and Restated
Certificate of Incorporation, approving the Incentive Compensation Plan,
ratifying the appointment of the Company's independent accountants and any other
matter which may properly come before the Annual Meeting, shares abstaining on
such matter and all broker non-votes with respect to such matter will be
considered present at the Annual Meeting.
REQUIRED VOTE
Votes Entitled to be Cast by Each Class of Stock. Except for the election
of directors (described below) and certain matters that require a class vote,
the holders of the Class A Stock and the holders of the Class B Stock vote
together, with each share of Class A Stock entitling the holder thereof to one
vote and each share of Class B Stock entitling the holder thereof to four votes.
Election of Directors. Nine directors will be elected at the Annual
Meeting. As permitted under the Company's by-laws, as amended, the number of
directors was increased from ten to twelve pursuant to the action of the Board
of Directors taken on February 21, 2003, and the number of directors is to be
decreased to nine as of the date of the Annual Meeting pursuant to the action of
the Company's Board of Directors taken on March 13, 2003. Under the Company's
Certificate of Incorporation, as amended, the holders of the Class A Stock are
entitled, voting as a separate class, to elect at least 33 1/3% of the Company's
Board of Directors (rounded to the nearest whole number, but in no event less
than two members of the Company's Board of Directors), and the holders of the
Class B Stock are entitled, voting separately as a class, to elect the remaining
directors. Therefore, the holders of the Class A Stock will elect three
directors (directors to be elected by the holders of Class A Stock being
referred to as the "Class A Directors") and the holders of the Class B Stock
will elect six directors (directors elected by the holders of Class B Stock
being referred to as the "Class B Directors"). The affirmative vote of a
plurality of the votes cast at the Annual Meeting by the holders of the Class A
Stock, voting as a single class, is necessary to elect the three Class A
Directors, and the affirmative vote of a plurality of the votes cast at the
Annual Meeting by the holders of the Class B Stock, voting as a single class, is
necessary to elect the six Class B Directors. (A plurality of the votes cast
means the greatest number of votes cast for a director.)
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Amendment of the Company's Amended and Restated Certificate of
Incorporation. Approval of the proposal to amend the Company's Amended and
Restated Certificate of Incorporation requires the affirmative vote of a
majority of the votes represented by all outstanding shares of Class A Stock and
Class B Stock voting together.
Adopting the Incentive Compensation Plan and Ratifying the Appointment of
the Independent Accountants. Approval of the proposal to adopt the Incentive
Compensation Plan and the proposal to ratify the appointment of the Company's
independent accountants requires the affirmative vote of a majority of the votes
cast by the holders of the Class A Stock and Class B Stock, voting together,
present and entitled to vote at the meeting.
PROXIES
The enclosed proxy provides space for holders of Class A Stock to vote for,
or withhold authority to vote for, all or any one of the Company's three
nominees for Class A Directors and to vote for, against, or abstain from voting
on all other proposals set forth in this Proxy Statement.
Shares of Class A Stock represented by properly executed proxies received
at or prior to the Annual Meeting and which have not been revoked will be voted
in accordance with the instructions indicated therein. If no instructions are
indicated, such proxies will be voted FOR (i) the election as directors of the
three nominees for Class A Directors nominated by the Company's Board of
Directors (see "Election of Directors; Nominees for Directors; Nominees for
Class A Directors" below), (ii) the proposal to amend Article Fourth of the
Company's Amended and Restated Certificate of Incorporation, (iii) the proposal
to adopt the Incentive Compensation Plan, (iv) the proposal to ratify the
appointment of the Company's independent accountants and (v) in the discretion
of the proxy holder, as to any other matter which may properly come before the
Annual Meeting. With respect to the election of directors, neither shares as to
which authority to vote has been withheld (to the extent withheld) nor broker
non-votes will be considered affirmative votes. With respect to any other matter
which may properly come before the meeting, abstentions and broker non-votes
will be considered present and entitled to vote but will not have been cast and
therefore will not be counted in determining whether any matter received the
requisite votes. With respect to the amendment of the Company's Amended and
Restated Certificate of Incorporation, the adoption of the Incentive
Compensation Plan and the ratification of the appointment of the Company's
independent accountants, (a) abstentions, pursuant to Delaware law, will be
considered present and entitled to vote but will not have been cast and
therefore will not be counted in determining whether such proposal received the
requisite votes and (b) broker non-votes will be considered not entitled to vote
on such proposal and thus will not be counted in determining whether such
proposal has received the requisite votes.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE COMPLETE, DATE AND SIGN YOUR PROXY IN ORDER TO ENSURE THAT YOUR
SHARES WILL BE REPRESENTED AT THE ANNUAL MEETING. THE GIVING OF SUCH PROXY DOES
NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT YOU ATTEND THE ANNUAL
MEETING.
A holder of Class A Stock who has given a proxy may revoke such proxy at
any time prior to its exercise at the Annual Meeting by (i) giving written
notice of revocation to the Secretary of the Company, (ii) properly submitting
to the Company a duly executed proxy bearing a later date or (iii) attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not
in and of itself revoke a proxy. All written notices of revocation and other
communications with respect to revocation of proxies should
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be sent to the attention of the Secretary of the Company at the Company's United
States executive offices, located at One Executive Drive, Fort Lee, New Jersey
07024.
If a quorum is not obtained, the Annual Meeting may be adjourned for the
purpose of obtaining additional proxies or for any other purpose, and, at any
subsequent reconvening of the Annual Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the meeting (except for any proxies which have been effectively revoked or
withdrawn), notwithstanding that they may have been effectively voted on the
same or any other matter at a previous meeting.
ELECTRONIC AND TELEPHONIC VOTING
You may vote your proxies by touch-tone telephone from the U.S., using the
toll-free telephone number on the proxy card, or via the Internet using the
procedures and instructions described on the proxy card. Stockholders who own
their common stock through a broker, also known as "street name" holders, may
vote by telephone or via the Internet if their bank or broker makes those
methods available, in which case the bank or broker will enclose instructions
with the Proxy Statement. The telephone and Internet voting procedures,
including the use of control numbers found on the proxy card, are designed to
authenticate Stockholder identities, to allow Stockholders to vote their shares
of common stock and to confirm that their instructions have been properly
recorded. Stockholders voting via the Internet should understand that there may
be costs associated with electronic access, such as usage charges from Internet
access providers and telephone companies, which must be paid by the Stockholder.
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
OWNERSHIP OF COMMON STOCK
The following table sets forth, as of February 19, 2003 (unless otherwise
noted), certain information regarding the beneficial ownership of the Class A
Stock and the Class B Stock of (a) each person who is known to the Company to be
the beneficial owner of more than 5% of the outstanding shares of either of such
classes, (b) each director and each nominee for director of the Company, (c) the
Chief Executive Officer and the four other most highly compensated executive
officers, (d) one former executive officer who would have been included in the
list of the four most highly compensated executive officers if not for the fact
that he was not an executive officer at the end of the fiscal year ended
December 31, 2002 and (e) all directors and executive officers of the Company as
a group. Unless otherwise indicated, each beneficial owner possesses sole voting
and dispositive power with respect to the shares listed for such beneficial
owner in this table.
AMOUNT AND PERCENT OF
NATURE OF PERCENT OF COMMON STOCK
BENEFICIAL CLASS (BOTH CLASSES)
TITLE OF CLASS OF STOCK NAME OF BENEFICIAL OWNER OWNERSHIP OUTSTANDING OUTSTANDING
----------------------- ------------------------ ---------- ----------- --------------
Class B Common Stock A.L. Industrier AS(1)(2)(3) 11,872,897 100.00% 23.12%
Class A Common Stock A.L. Industrier AS(1)(2)(3) 0 -- --
Class A Common Stock Pioneer Global Asset Management,
S.p.A.(4) 3,241,566 8.21 6.31
Class A Common Stock Putnam, LLC. d/b/a Putnam
Investments(5) 2,703,582 6.85 5.26
Class A Common Stock FMR Corp.(6) 2,269,310 5.75 4.42
Class A Common Stock Einar W. Sissener(7)(8)(9) 383,667 * *
Class A Common Stock Jeffrey E. Smith(7)(10) 186,465 * *
Class A Common Stock Ingrid Wiik(7)(11) 160,471 * *
Class A Common Stock Robert F. Wrobel(7) 76,968 * *
Class A Common Stock Michael J. Nestor(7) 26,917 * *
Class A Common Stock Carol A. Wrenn(7) 25,216 * *
Class A Common Stock Glen E. Hess(7)(12) 24,842 * *
Class A Common Stock Erik Hornnaess(7) 21,677 * *
Class A Common Stock Oyvin A. Broymer(7) 21,000 * *
Class A Common Stock Peter G. Tombros(7) 20,818 * *
Class A Common Stock Erik G. Tandberg(7)(11) 20,234 * *
Class A Common Stock I. Roy Cohen(7) 20,000 * *
Class A Common Stock Matthew T. Farrell 11,400 * *
Class A Common Stock William I. Jacobs 1,000 * *
Class A Common Stock Jill Kanin-Lovers -- -- --
Class A Common Stock Einar Kloster -- -- --
Class A Common Stock Robert Thong -- -- --
Class A Common Stock Farah M. Walters -- -- --
Class A Common Stock All directors and executive officers
as a group (16 persons)(7) 930,421 2.36 1.81
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* Indicates ownership of less than 1%.
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(1) The address of A.L. Industrier AS (formerly known as Apothekernes
Laboratorium AS), a corporation organized and existing under the laws of
the Kingdom of Norway ("A.L. Industrier"), is Harbitzalleen 3, 0275 Oslo,
Norway.
(2) The source of this information is Amendment No. 10 to Schedule 13D, dated
October 29, 2002, filed with the Securities and Exchange Commission (the
"Commission") by A.L. Industrier. The shares reflected in the table are
held of record by A/S Wangs Fabrik ("Wangs") and A.L. Chemy A.S. ("AL
Chemy"), wholly owned subsidiaries of A.L. Industrier, although A.L.
Industrier retains full beneficial ownership of these shares. Pursuant to a
Loan Agreement, dated October 29, 2002, by and between AL Chemy, Den norske
Bank ASA and Gjensidige Nor Sparebank ASA (collectively, the "Banks"), and
a Guarantee in favor of the Banks provided by A.L. Industrier, dated
October 29, 2002, the Banks have a security interest in all of A.L.
Industrier's shares in AL Chemy and Wangs Fabrik. Therefore, in certain
cases, upon the occurrence of an event of default under the Loan Agreement,
the Banks could become the beneficial owner of the Class B Stock
beneficially owned by A.L. Industrier.
(3) Shares of Class B Stock are convertible into an equal number of shares of
Class A Stock. If all shares of Class B Stock beneficially owned by A.L.
Industrier were converted as of February 19, 2003, A.L. Industrier would
own approximately 23.12% of the then outstanding shares of Class A Stock.
(4) The source of this information is Amendment No. 1 to Schedule 13G dated
February 12, 2003, filed with the Commission by Pioneer Global Asset
Management S.p.A. ("Pioneer"). The address of Pioneer is Galleria S. Carlo
6, 20122 Milano, Italy.
(5) The source of this information is Schedule 13G dated February 18, 2003,
filed with the Commission by Putnam, LLC d/b/a Putnam Investments
("Putnam"). Such Schedule 13G reports that Putnam, a wholly-owned
subsidiary of Marsh & McLennan Companies, Inc., wholly owns two registered
investment advisers: Putnam Investment Management, LLC., which is the
investment adviser to the Putnam family of mutual funds, and The Putnam
Advisory Company, LLC., which is the investment adviser to Putnam's
institutional clients. Both subsidiaries have dispository power over the
shares as investment managers, but each of the mutual funds' trustees has
voting power over the shares held by each fund, and The Putnam Advisory
Company, LLC. has shared voting power over the shares held by the
institutional clients. Putnam holds shared voting power as to 755,220
shares and shared dispositive power as to all shares. Putnam Investment
Management, LLC. holds shared dispositive power as to 986,700 shares, and
The Putnam Advisory Company, LLC. holds shared voting power as to 755,220
shares and shared dispositive power as to 1,716,882 shares. Marsh &
McLennan Companies, Inc. holds no voting or dispositive power as to the
shares. The address of Putnam is One Post Office Square, Boston,
Massachusetts, 02109.
(6) The source of this information is Amendment No. 5 to Schedule 13G dated
February 13, 2003, filed with the Commission by FMR Corp. ("FMR"). Such
Schedule 13G reports that FMR holds sole voting power as to 228 shares and
sole dispositive power as to all shares. FMR declared in its filing that
various persons have the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the shares.
The Schedule 13G reports that no one person's interest in the shares is
more than 5% of the total outstanding shares of Class A Stock. The address
of FMR is 82 Devonshire Street, Boston, Massachusetts 02109.
(7) The shares reflected in the table include shares that the executive
officer, former executive officer or director has the right to acquire upon
the exercise of stock options granted under the 1997 Incentive
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Stock Option and Appreciation Right Plan or the Non-Employee Director Option
Plan which are exercisable as of February 19, 2003 or within 60 days thereafter
as follows: Mr. Smith -- 153,167 shares, Ms. Wiik -- 135,500 shares, Mr.
Wrobel -- 74,417 shares, Mr. Nestor -- 25,000 shares, Ms. Wrenn -- 23,334
shares, each of Messrs. Cohen, Hess, Tandberg, and Tombros -- 20,000
shares, each of Messrs. Broymer and Hornnaess -- 16,000 shares, and Mr.
Sissener -- 10,000 shares. All executive officers and directors as a
group -- 492,168 shares.
(8) Beneficial ownership of the Company shares by A. L. Industrier is not
included. Mr. Sissener is Chairman of the Board of A.L. Industrier and
together with A/S Swekk (Mr. Sissener's family-controlled private holding
company) ("Swekk") and certain of his relatives, beneficially owns
approximately 51% of A.L. Industrier's outstanding ordinary shares entitled
to vote and, accordingly, may be deemed a controlling person of A.L.
Industrier.
(9) Includes 129,861 shares held by Mr. Sissener, 22,847 shares held by the
estate of Mr. Sissener's wife, 186,689 shares held by Swekk, and 34,270
shares held by EWS Stiftelse, a trust established for the benefit of
members of the family of Mr. Sissener.
(10) The Company has been advised by Mr. Smith that his children own 4,350 of
the shares of Class A Stock listed for Mr. Smith but that he has voting
power over such shares.
(11) Ms. Wiik and Mr. Tandberg also own 580 and 39 shares, respectively, of A.L.
Industrier.
(12) Includes 3,750 shares held by a private foundation of which Mr. Hess is
President; however he has no economic interest in the shares.
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ELECTION OF DIRECTORS
ELECTION OF DIRECTORS
In February of 2003, the Company's Board of Directors passed a resolution
which increased the number of Class A Directors to four and the number of Class
B Directors to eight. Concurrently with this increase in the number of Board
members, the Class A Directors passed a resolution appointing Ms. Farah M.
Walters as a Class A Director, effective February 21, 2003, and the Class B
Directors passed a resolution appointing Ms. Jill Kanin-Lovers and Mr. Robert
Thong as Class B Directors, effective February 21, 2003. In March of 2003, the
Company's Board of Directors passed a resolution which will decrease the number
of Class A Directors to three and decrease the number of Class B Directors to
six effective as of the date of the Annual Meeting. The current term of all of
the Company's directors expires at the Annual Meeting. Mr. Erik Hornnaess, a
Class A Director, Mr. Oyvin Broymer, a Class B Director, Mr. I. Roy Cohen, a
Class B Director, and Mr. Erik G. Tandberg, a Class B Director, have informed
the Board of Directors that they will not stand for re-election at the Annual
Meeting, as they each intend to retire from the Company's Board of Directors at
the end of their terms.
The Company's Board of Directors intends to cause the nomination of the
nominees listed below under "Nominees for Directors; Nominees for Class A
Directors" and all proxies received from holders of the Class A Stock will be
voted FOR the election of such nominees as Class A Directors, except to the
extent that persons giving such proxies withhold authority to vote for such
nominees.
Each director is to be elected to hold office until the next Annual Meeting
of Stockholders and until his or her successor is chosen and qualified.
A.L. Industrier, which beneficially owns 100% of the outstanding shares of
Class B Stock, has advised the Company that it intends to vote its shares in
favor of the nominees listed below under "Nominees for Directors; Nominees for
Class B Directors," which would assure their election as Class B Directors.
NOMINEES FOR DIRECTORS
The Company believes that each of the nominees for director will be able to
serve. If any of the nominees for Class A Directors would be unable to serve,
the enclosed proxy confers authority to vote in favor of such other person or
persons as the Company's Class A Directors at the time recommends to serve in
place of the person or persons unable to serve. Similarly, if any of the
nominees for Class B Directors would be unable to serve, the proxy provided to
Class B Stockholders confers authority to vote in favor of such other person or
persons as the Company's Class B Directors at the time recommends to serve in
place of the person or persons unable to serve.
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Nominees for Class A Directors. The name, age, principal business
experience during the last five years, and certain other information regarding
each of the persons proposed to be nominated for election as a Class A Director
are listed below.
NAME AGE PRINCIPAL BUSINESS EXPERIENCE
---- --- -----------------------------
William I. Jacobs.............. 61 Director of the Company since 2002. Former Managing
Director and Chief Financial Officer of NewPower Holding, a
retail energy company which filed a bankruptcy petition in
June 2002 and is currently liquidating, from 2000 to 2002.
Senior Executive Vice President of MasterCard
International, the credit card company, from 1995 to 2000.
Director of Investment Technology Group, an electronic
trading resources company, Global Payments, a payment
processing services company, Exide Technologies, a battery
manufacturer, and NewPower Holding. Chairman of the
Company's Audit Committee and Member of the Company's
Compensation and Stock Option Committees.
Peter G. Tombros............... 60 Director of the Company since 1994. Chief Executive Officer
of VivoQuest, a private biopharmaceutical company, since
2001. Former Director, President and Chief Executive
Officer of Enzon, Inc., a developer and marketer of
bio-pharmaceutical products, from April 1994 to June 2001.
Served in a variety of senior management positions at
Pfizer, Inc., the pharmaceutical company, for 25 years,
including Vice President of Marketing, Senior Vice
President and General Manager of the Roerig Pharmaceuticals
Division, Executive Vice President of Pfizer
Pharmaceuticals Division, Director, Pfizer Pharmaceuticals
Division, Vice President-Corporate Strategic Planning, and
Vice President-Corporate Officer of Pfizer, Inc. Director
of NPS Pharmaceuticals, Inc., a biotechnology company, and
Cambrex, a supplier of human health and bioscience products
to the life sciences industry. Chairman of the Company's
Compensation and Stock Option Committees and Member of the
Company's Audit Committee.
Farah M. Walters............... 58 Director of the Company since February 2003. President and
Chief Executive Officer of University Hospitals Health
System, Inc. and University Hospitals of Cleveland from
1992 to 2002. Served as Executive Director, Senior
Executive Vice President and Member of three person "Office
of the President" of University Hospitals Health System,
Inc. and University Hospitals of Cleveland from 1986 to
2002. Director of LTV Corporation, a manufacturer of
engineered metal building systems and processing services
which filed a bankruptcy petition in 2000, Kerr-McGee
Corporation, an oil and gas exploration and production and
chemical company, and PolyOne Corporation, a specialty
plastics and chemical company. Member of the Company's
Audit Committee.
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Nominees for Class B Directors. The name, age, principal business
experience during the last five years, and certain other information regarding
each of the persons proposed to be nominated for election as a Class B Director
are listed below. Mr. Kloster is not presently a director of the Company.
NAME AGE PRINCIPAL BUSINESS EXPERIENCE
---- --- -----------------------------
Glen E. Hess................... 61 Director of the Company since 1983. Partner in the law firm
of Kirkland & Ellis since 1973. Member of the Company's
Executive and Finance Committee.
Jill Kanin-Lovers.............. 51 Director of the Company since February 2003. Since 1998,
Senior Vice President, Human Resources of Avon Products,
Inc., the cosmetics and gifts company, and member of Avon
Products, Inc.'s Chairman's Council, Avon's internal
executive committee, and a member of the Board of Directors
for the Avon Foundation. Vice-President, Human Resources,
Global Operations from 1997 to 1998 and Vice President,
Human Resources, U.S. from 1995 to 1997 at IBM Corp., the
computer company. Senior Vice President, Worldwide
Compensation and Benefits at American Express, the credit
card company, from 1991 to 1995. From 1974 to 1991, held a
series of senior positions, including managing the Seattle
office and serving as the functional head for all global
consulting and support activities, for the total
compensation practice of Towers Perrin, a global management
consulting firm. Member of the Company's Compensation
Committee.
Einar Kloster.................. 65 Nominee for Director. Former Chairman and CEO and member of
the Group Management Committee of Philips Lighting Holding
and Royal Philips Electronics, from June 1990 to June 1994;
former President and CEO of North American Philips Corp.,
USA, from January 1989 to June 1990.
Einar W. Sissener.............. 74 Chairman of the Board since 1975. Consultant to the Company
since July 1999. Chief Executive Officer of the Company
from June 1994 to June 1999. Member of the Office of the
Chief Executive of the Company from July 1991 to June 1994.
Chairman of the Office of the Chief Executive from June
1999 to December 1999. President, Alpharma AS, from October
1994 to March 2000. President, Apothekernes AS (now A.L.
Industrier AS), from 1972 to 1994. Chairman of A.L.
Industrier AS since November 1994. Member of the Company's
Executive and Finance Committee.
10
NAME AGE PRINCIPAL BUSINESS EXPERIENCE
---- --- -----------------------------
Robert Thong................... 42 Director of the Company since February 2003. Co-Founder,
Director and Officer of NovaSecta, a management advisory
and executive coaching group, since 2002. Since 1999,
Managing Director of Phizz Rx, a provider of executive
advice and consulting to the life sciences, medical
technology and fine chemicals sectors in the U.K. and the
U.S. From 1997 to 1999, Vice President of Renaissance
Worldwide Strategy Limited and its subsidiary COBA
Consulting Limited and leader of the European Biosciences
Consulting Team. From 1990 to 1997, Vice President of
Gemini Consulting and Cap Gemini Group, providers of
information technology consulting services. Member of the
Company's Executive and Finance Committee.
Ingrid Wiik.................... 58 President, Chief Executive Officer and Director of the
Company since January 2000. President of Alpharma's
International Pharmaceuticals Division from 1994 to January
2000. President, Pharmaceutical Division of Apothekernes
Laboratorium A.S. from 1986 to 1994.
11
BOARD OF DIRECTORS AND COMMITTEES
BOARD MEETINGS AND ATTENDANCE OF DIRECTORS
The Company's Board of Directors held 7 meetings in 2002. Each person who
served as a director in 2002 attended at least 75% of the aggregate of (i) the
total number of meetings of the Company's Board of Directors held while such
person was a member and (ii) the total number of meetings held by all committees
of the Company's Board of Directors on which such person served while such
person was a member of such committee.
COMMITTEES OF THE BOARD
Pursuant to its by-laws, as amended, the Company has established standing
Audit, Executive and Finance and Compensation Committees.
The Audit Committee reviews and makes recommendations to the Company's
Board of Directors regarding internal accounting and financial controls and
accounting principles, auditing practices, the engagement of independent public
accountants and the scope of the audit to be undertaken by such accountants. In
addition, the Company's Board of Directors has adopted a resolution requiring
the Audit Committee to review transactions between the Company and A.L.
Industrier (the beneficial owner of all the outstanding Class B Stock) (or their
respective subsidiaries) involving more than $50,000 and to report to the
Company's Board of Directors regarding whether such transactions are fair to the
Company. Such resolution also requires prior approval of the Audit Committee for
any transaction with A.L. Industrier which involves $500,000 or more, and prior
approval of the Audit Committee is required for any sale or transfer of assets
other than inventory sold or transferred in the ordinary course of business. The
Audit Committee also monitors the Company's Business Conduct Guidelines. The
by-laws of the Company currently require that a majority of the members of the
Audit Committee not be employees of the Company or A.L. Industrier or otherwise
have a material relationship with either of them. The Board of Directors has
taken action to establish a corporate governance function within the Audit
Committee and has directed that action be taken at the May meeting of the Board
of Directors to formalize such function, after which time the Audit Committee
intends to revise its charter to reflect such function. The current members of
the Audit Committee are Messrs. William I. Jacobs (Chairman) and Peter G.
Tombros and Ms. Farah M. Walters. The Audit Committee held 15 meetings in 2002.
The Executive and Finance Committee is generally empowered, to the fullest
extent permitted by Delaware law, to exercise all power and authority vested in
the Company's Board of Directors. By resolution, the Company's Board of
Directors has specifically authorized and requested the Executive and Finance
Committee to act on behalf of the Board in emergency situations when the full
Board is unable to meet, to discuss and consult with the Chief Executive Officer
of the Company as requested by such officer and to act with respect to such
matters as the Board may from time to time designate. Additionally, the
Executive and Finance Committee reviews and has the authority to make
recommendations to the Board of Directors with respect to raising funds required
in the operation of the Company. The current members of the Executive and
Finance Committee are Messrs. I. Roy Cohen (Chairman), Einar W. Sissener, Glen
E. Hess, and Robert Thong. In 2002, the Executive and Finance Committee held 18
meetings and also communicated informally.
The Compensation Committee has the authority of the Company's Board of
Directors with respect to the compensation, benefit and employment policies and
arrangements for executive officers and other highly paid personnel of the
Company. The Committee also has authority with respect to the compensation and
benefit plans generally applicable to the Company's employees, and two members
of the committee (Messrs. Peter B.
12
Tombros and William I. Jacobs) serve as the committee administering the 1997
Stock Option and Appreciation Right Plan, as amended, with authority to grant
options to eligible employees of the Company and its subsidiaries. The
Compensation Committee held 16 meetings in 2002.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
The current members of the Compensation Committee are Messrs. Peter G.
Tombros (Chairman) and William I. Jacobs and Ms. Jill Kanin-Lovers. During
fiscal year 2002, Messrs. I. Roy Cohen, Einar W. Sissener, Glen E. Hess and
Thomas G. Gibian (a former director of the Company until May 2002) served on the
Compensation Committee with Mr. Tombros. Mr. Cohen is a former executive officer
of the Company, having served as President and Chief Executive Officer from 1976
to January 1991 and as a member of the Office of the Chief Executive from July
1991 through June 1994. He currently serves as Chairman of the Executive and
Finance Committee. Mr. Sissener currently serves as Chairman of the Board of the
Company and as a consultant to the Company and, from June 1994 to June 1999, was
the Company's Chief Executive Officer. (See "Nominee for Class B Directors" and
"Certain Relationships and Related Transactions" for further information). Mr.
Hess' professional corporation is a partner of Kirkland & Ellis, a law firm
which, since 1978, has performed and continues to perform significant legal
services for the Company. (See "Certain Relationships and Related
Transactions".)
DIRECTORS' COMPENSATION
Pursuant to an agreement between the Company and Mr. Sissener, in 2002 Mr.
Sissener received $150,000 for serving as Chairman of the Company's Board of
Directors (and as a director of certain of the Company's subsidiaries). Pursuant
to an agreement between the Company and Mr. Cohen, Mr. Cohen will receive an
honorarium in the amount of $12,500 per year for up to five years following his
retirement from the Company's Board of Directors in May 2003. (See "Certain
Relationships and Related Transactions" for a description of Mr. Sissener's and
Mr. Cohen's agreements). In September 2002, in recognition of his years of
service to the Company as President and Chief Executive Officer and as a
director since 1975, the Company agreed to reimburse Mr. Cohen for certain
travel expenses in an amount of up to $25,000. During 2002, each director
(except Mr. Sissener and Ms. Wiik) received directors' fees of $22,500 and each
director received a grant of an option to acquire 7,500 shares of Class A Stock
pursuant to the Non-Employee Director Option Plan. In addition, each director
(other than Mr. Sissener and Ms. Wiik) received $1,200 for each Board meeting
attended in person, $600 for each Committee meeting attended in person and
one-half of the applicable fee for each meeting attended by telephone (with
certain exceptions). The Chairman of each of the Audit, Executive and Finance
and Compensation Committees received an additional payment of $7,500. No action
has been taken to change these compensation arrangements for 2003.
PROPOSAL TO AMEND THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF
INCORPORATION
The Amended and Restated Certificate of Incorporation of the Company
presently provides that the Company is authorized to issue 80,500,000 shares
divided into three classes, namely: 500,000 shares of Preferred Stock of the par
value of $1.00 per share ("Preferred Stock"); 65,000,000 shares of Class A
Common Stock of the par value of $.20 per share ("Class A Stock"); and
15,000,000 shares of Class B Common Stock of the par value of $.20 per share
("Class B Stock", and with Class A Stock, the "Common Stock"). The Board of
Directors proposes that the Stockholders approve an amendment of the Amended and
Restated Certificate of Incorporation of the Company to provide for an increase
in the total number of shares
13
that the Company is authorized to issue to 90,500,000. The number of authorized
shares of Preferred Stock and Class B Stock would remain the same, but the
number of authorized shares of Class A Stock would be increased to 75,000,000
shares.
The Board of Directors has not authorized or approved any transactions
which would require the issuance of additional shares of the Company's Common
Stock. The Board of Directors believes that it is desirable to have additional
authorized shares of Class A Stock available for issuance without further action
by the Stockholders (unless such action is required by applicable law or the
rules of any stock exchange on which the Company's securities may be listed)
including, in addition to possible ongoing financing requirements, possible
additional future stock dividends or splits, acquisitions or other general
corporate purposes. The additional shares of Class A Stock for which
authorization is sought would be part of the existing Class A Stock and, if and
when issued, would have the same respective rights and privileges as the shares
of Class A Stock presently outstanding. The holders of Common Stock are not
entitled to preemptive rights. The proposed amendment will not affect the
authorized shares of Preferred Stock or Class B Stock or alter the rights of the
Common Stock.
The holders of the Class A Stock and Class B Stock will vote together as a
single class on the proposed amendment to the Company's Amended and Restated
Certificate of Incorporation. A.L. Industrier has advised the Company that it
intends to vote in favor of the amendment, which would assure the affirmative
vote of the holders of a majority of the voting power as a single class and
would assure approval of the increase in the number of authorized shares of
Class A Stock.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
AMENDMENT OF THE COMPANY'S AMENDED AND RESTATED CERTIFICATE OF INCORPORATION.
PROPOSAL TO ADOPT THE INCENTIVE COMPENSATION PLAN
GENERAL
ADOPTION OF THE ALPHARMA INC. 2003 OMNIBUS INCENTIVE COMPENSATION PLAN
In March 2003, the Company's Board of Directors adopted the Alpharma Inc.
2003 Omnibus Incentive Compensation Plan (the "Incentive Compensation Plan") and
is recommending that the Stockholders approve the Incentive Compensation Plan at
the Annual Meeting. The use of stock options and other stock awards among
pharmaceutical companies is widely prevalent. The Incentive Compensation Plan is
intended to maintain the flexibility that the Company needs to keep pace with
its competitors and effectively recruit, motivate, and retain the caliber of
employees essential for achievement of the Company's success.
The Incentive Compensation Plan will permit stock option grants, stock
appreciation rights grants ("SARs"), annual incentive awards, stock grants,
restricted stock grants, restricted stock unit grants, performance stock grants,
performance unit grants, and cash awards. Stockholder approval of the Incentive
Compensation Plan will permit the performance-based awards discussed below to
qualify for deductibility under Section 162(m) of the Internal Revenue Code, as
amended (the "Code").
Those eligible for Awards under the Incentive Compensation Plan are
referred to as "Participants." Participants include all employees of the Company
and its subsidiaries and all non-employee directors of the Company.
14
As of December 31, 2002, approximately 1,770,000 shares were available for
new grants under the Company's existing stock incentive plans (the Alpharma Inc.
1997 Stock Option and Appreciation Right Plan and the Alpharma Inc. Non-Employee
Director Option Plan) and there were approximately 4,220,000 shares subject to
outstanding grants under these and predecessor plans. It is the intention of the
Company's Board of Directors that, upon adoption of this Incentive Compensation
Plan, no additional options will be granted under these existing plans and all
shares reserved under these existing plans will be returned to the Company's
supply of authorized but unissued shares, not reserved for any purpose, although
outstanding options granted pursuant to such plans will remain outstanding.
Stock options and SARs granted under the Omnibus Plan may not be subject to
certain limitations present in the Company's two existing plans.
Approval of the proposal to adopt the Incentive Compensation Plan requires
that a majority of the votes cast by the holders of shares of the Class A Stock
and Class B Stock, voting together, present and entitled to vote at the meeting,
be votes for approval. A.L. Industrier has advised the Company that it intends
to vote its shares in favor of the proposal, which will assure its approval. The
material features of the Incentive Compensation Plan are described below.
SUMMARY DESCRIPTION OF THE COMPANY'S 2003 OMNIBUS INCENTIVE COMPENSATION PLAN
Attached as an appendix to this Proxy Statement is a copy of the 2003
Omnibus Incentive Compensation Plan (hereinafter referred to as the "Plan") and
the following summary description of the Plan (including the proposed
amendments) is qualified in its entirety by reference to such appendix.
Capitalized terms used in this Summary, but not defined herein, shall have the
meanings set forth in the Plan.
SHARES AVAILABLE FOR ISSUANCE
The aggregate number of shares of Common Stock that may be issued under the
Plan will not exceed 4,750,000 (subject to the adjustment provisions discussed
below). The number of shares that may be issued under the Plan for Awards other
than stock options or SARs (both with a grant price equal to at least fair
market value) will not exceed a total of 2,000,000 shares (subject to the
adjustment provisions discussed below).
ADMINISTRATION AND ELIGIBILITY
The Plan will be administered by a Committee of the Board (the "Committee")
consisting of two or more directors, each of whom will qualify as a
"non-employee director" within the meaning set forth in Rule 16b-3 promulgated
under the Securities Exchange Act of 1934, as amended (the "Exchange Act"). The
Committee will approve the aggregate Awards and the individual Awards for the
most senior elected officers and non-employee directors. The Committee may
delegate the administration of the Plan in accordance with the terms of the
Plan.
No Participant may receive in any Plan Year: (i) stock options relating to
more than 500,000 shares; (ii) restricted stock or restricted stock units
relating to more than 300,000 shares; (iii) SARs relating to more than 500,000
shares; or (iv) performance shares relating to more than 300,000 shares (all of
these limits subject to the adjustment provisions discussed below). The maximum
amount that may be earned under Performance Unit awards by any Participant who
is a covered employee within the meaning of Section 162(m) of the Code ("Covered
Employee") in any calendar year may not exceed the value of 300,000 shares.
15
AWARDS
Stock Options
Grants of Options
The Committee is authorized to grant stock options to Participants
("Optionees"), which may be either incentive stock options ("ISOs") or
nonqualified stock options ("NQSO"). ISOs and NQSOs are collectively referred to
as "Stock Options." The exercise price of any Stock Option must be equal to or
greater than the fair market value of the shares on the date of the grant (other
than NQSOs granted to Directors, which must be at fair market value); provided,
however, that NQSOs granted outside the United States may be granted with an
exercise price less than the fair market value of the shares on the date of the
grant if necessary to utilize a locally available tax advantage. The term of a
Stock Option cannot exceed 10 years. ISOs may not be granted more than 10 years
after the date that the Plan was adopted by the Company's stockholders.
The Plan sets forth a mechanism whereby the Directors shall receive,
subject to the discretion of the Board of Directors, NQSOs to purchase up to
10,000 shares immediately following each annual meeting of stockholders of the
Company. Such NQSOs shall have exercise prices set at the fair market value of
the shares on the date of the grant and shall be generally exerciseable for a
period which ends upon the later of ten years after the date of grant or five
years after an individual has ceased to be a Director.
For purposes of the Plan, fair market value shall be determined in such
manner as the Committee may deem equitable, or as required by applicable law or
regulation.
Exercisability and Termination
At the time of grant, the Committee in its sole discretion will determine
when Options are exercisable and when they expire, except with respect to NQSQs
granted to Directors, which are subject to specific exerciseability and
termination provisions contained in the Plan.
Payment of Option Price
Payment for shares purchased upon exercise of a Stock Option must be made
in full at the time of purchase. Payment may be made in cash, by the transfer to
the Company of shares owned by the Participant for at least six months (valued
at fair market value on the date of transfer), or in such other manner as may be
authorized by the Committee.
SARs
The Committee has the authority to grant SARs to Participants and to
determine the number of shares subject to each SAR, the term of the SAR, the
time or times at which the SAR may be exercised, and all other terms and
conditions of the SAR. A SAR is a right, denominated in shares, to receive, upon
exercise of the right, in whole or in part, without payment to the Company, an
amount, payable in shares, in cash or a combination thereof, that is equal to:
(i) the difference between the fair market value of Common Stock on the date of
exercise of the right over the SAR Grant Price of the right, multiplied by (ii)
the number of shares for which the right is exercised.
Restricted Stock and Restricted Stock Units
Restricted Stock consists of shares which are transferred or sold by the
Company to a Participant, but are subject to substantial risk of forfeiture and
to restrictions on their sale or other transfer by the Participant.
16
Restricted Stock Units are the right to receive shares at a future date in
accordance with the terms of such grant upon the attainment of certain
conditions specified by the Committee. The Committee determines the eligible
Participants to whom, and the time or times at which, grants of Restricted Stock
or Restricted Stock Units will be made, the number of shares or units to be
granted, the price to be paid, if any, the time or times within which the shares
covered by such grants will be subject to forfeiture, the time or times at which
the restrictions will terminate, and all other terms and conditions of the
grants. Restrictions or conditions could include, but are not limited to, the
attainment of performance goals (as described below), continuous service with
the Company, the passage of time or other restrictions or conditions.
Performance Stock
A Participant who is granted Performance Stock has the right to receive
shares or cash or a combination of shares and cash equal to the fair market
value of such shares at a future date in accordance with the terms of such grant
and upon the attainment of performance goals specified by the Committee.
The award of Performance Stock to a Participant will not create any rights
in such Participant as a stockholder of the Company until the issuance of Common
Stock with respect to an award.
Performance Units
A Participant who is granted Performance Units has the right to receive a
payment in cash upon the attainment of performance goals. The Committee may
substitute actual shares of Common Stock for the cash payment otherwise required
to be made pursuant to a Performance Unit award.
Stock Awards
The Committee may award shares of Common Stock to Participants without
payment therefor, as additional compensation for service to the Company or a
subsidiary. Stock awards may be subject to other terms and conditions, which may
vary from time to time and among Participants, as the Committee determines to be
appropriate.
Cash Awards
A cash award consists of a monetary payment made by the Company to a
Participant as additional compensation for his or her services to the Company or
a subsidiary. A cash award may be made in tandem with another Award or may be
made independently of any other Award. Cash awards may be subject to other terms
and conditions, which may vary from time to time and among Participants, as the
Committee determines to be appropriate.
Performance Measures
Awards of Restricted Stock, Restricted Stock Units, Performance Stock,
Performance Units and other incentives under the Plan may be made subject to the
attainment of performance measures relating to one or more of the following
business criteria within the meaning of Section 162(m) of the Code: net sales
growth; net income (before or after taxes); net operating profit; return
measures (including, but not limited to, return on assets, capital, equity, or
sales); cash flow; earnings before or after taxes, interest, depreciation,
and/or amortization; gross or operating margins; productivity ratios; share
price (including, but not limited to, growth measures and total stockholder
return); expense targets; margins; operating efficiency; customer satisfaction;
economic value added; employee satisfaction metrics; human resources metrics;
and working capital targets (collectively referred to as "Performance
Measures").
17
Any Performance Measure may be used to measure the performance of the
Company as a whole or any business unit of the Company, and any Performance
Measure may be adjusted to include or exclude special items.
Annual Incentive Awards
The Committee has the authority to grant Annual Incentive Awards to
designated executive officers of the Company or any subsidiary. Annual Incentive
Awards, in the event awarded, will be paid out of an incentive pool equal to 10%
of the Company's net income for each calendar year. The Committee will allocate
an incentive pool percentage to each designated Participant for each calendar
year. In no event may the incentive pool percentage for any one Participant
exceed 30% of the total pool. For purposes of the Plan, "net income" will mean
the consolidated net income of the Company, computed in accordance with
generally accepted accounting principles. The Participant's incentive award then
will be determined by the Committee based on the Participant's allocated portion
of the incentive pool subject to adjustment in the sole discretion of the
Committee. In no event may the portion of the incentive pool allocated to a
Participant who is a Covered Employee be increased in any way, including as a
result of the reduction of any other Participant's allocated portion.
AMENDMENT OF THE PLAN
The Board of Directors of the Company or the Committee has the right and
power to amend the Plan; provided, however, that neither the Board of Directors
nor the Committee may amend the Plan in a manner which would impair or adversely
affect the rights of the holder of an Award without the holder's consent. If the
Code or any other applicable statute, rule or regulation, including, but not
limited to, those of any securities exchange, requires stockholder approval with
respect to the Plan or any type of amendment thereto, then to the extent so
required, stockholder approval will be obtained.
TERMINATION OF THE PLAN
The Board of Directors of the Company may terminate the Plan at any time.
Termination will not in any manner impair or adversely affect any Award
outstanding at the time of termination.
COMMITTEE'S RIGHT TO MODIFY AWARDS
Any Award granted may be converted, modified, forfeited, or canceled, in
whole or in part, by the Committee if and to the extent permitted in the Plan,
or applicable agreement entered into in connection with an Award grant or with
the consent of the Participant to whom such Award was granted. The Committee may
grant Awards on terms and conditions different than those specified in the Plan
to comply with the laws and regulations of any foreign jurisdiction, or to make
the Awards more effective under such laws and regulations.
Neither the Board nor the Committee, without the prior approval of the
Company's stockholders, may cancel any outstanding Stock Option for the purpose
of reissuing the option to the Participant at a lower exercise price, or reduce
the option price of an outstanding option.
CHANGE IN CONTROL
The effect, if any, on Awards upon a Change in Control shall be set forth
in the Company's Change in Control Plan as in effect from time to time or
pursuant to specific action by the Board of Directors.
18
ADJUSTMENTS
If there is any change in the Common Stock by reason of any stock split,
stock dividend, spin-off, split-up, spin-out, recapitalization, merger,
consolidation, reorganization, combination, or exchange of shares, the total
number of shares available for Awards, the maximum number of shares which may be
subject to an award in any calendar year and the number of shares subject to
outstanding Awards, and the price of each of the foregoing, as applicable, will
be equitably adjusted by the Committee in its discretion.
Subject to any Change in Control provisions set forth in Award Agreements
or elsewhere, and without affecting the number of shares reserved or available
hereunder, either the Board or the Committee may authorize the issuance or
assumption of Awards in connection with any merger, consolidation, acquisition
of property or stock, or reorganization upon such terms and conditions as it
deems appropriate.
Reusage
If a Stock Option granted under the Plan expires or is terminated,
surrendered or canceled without having been fully exercised or if Restricted
Stock, Restricted Stock Units, Performance Shares or SARs granted under the Plan
are forfeited or terminated without the issuance of all of the shares subject
thereto, the shares covered by such Awards will again be available for use under
the Plan. Shares covered by an Award granted under the Plan would not be counted
as used unless and until they are actually issued and delivered to a
Participant. Shares withheld to pay withholding taxes in connection with the
exercise or payment of an Award will not be counted as used. Shares covered by
an Award granted under the Plan that is settled in cash will not be counted as
used.
FEDERAL INCOME TAX CONSEQUENCES
The Company has been advised by counsel that the federal income tax
consequences as they relate to Awards are as follows:
ISOs
An Optionee does not generally recognize taxable income upon the grant or
upon the exercise of an ISO. Upon the sale of ISO shares, the Optionee
recognizes income in an amount equal to the difference, if any, between the
exercise price of the ISO shares and the fair market value of those shares on
the date of sale. The income is taxed at long-term capital gains rates if the
Optionee has not disposed of the stock within two years after the date of the
grant of the ISO and has held the shares for at least one year after the date of
exercise and the Company is not entitled to a federal income tax deduction. The
holding period requirements are waived when an Optionee dies.
The exercise of an ISO may in some cases trigger liability for the
alternative minimum tax.
If an Optionee sells ISO shares before having held them for at least one
year after the date of exercise and two years after the date of grant, the
Optionee recognizes ordinary income to the extent of the lesser of: (i) the gain
realized upon the sale; or (ii) the difference between the exercise price and
the fair market value of the shares on the date of exercise. Any additional gain
is treated as long-term or short-term capital gain depending upon how long the
Optionee has held the ISO shares prior to disposition. In the year of
disposition, the Company receives a federal income tax deduction in an amount
equal to the ordinary income which the Optionee recognizes as a result of the
disposition.
19
NQSOs
An Optionee does not recognize taxable income upon the grant of an NQSO.
Upon the exercise of such a Stock Option, the Optionee recognizes ordinary
income to the extent the fair market value of the shares received upon exercise
of the NQSO on the date of exercise exceeds the exercise price. The Company
receives an income tax deduction in an amount equal to the ordinary income that
the Optionee recognizes upon the exercise of the Stock Option.
Restricted Stock
A Participant who receives an award of Restricted Stock does not generally
recognize taxable income at the time of the award. Instead, the Participant
recognizes ordinary income in the first taxable year in which his or her
interest in the shares becomes either: (i) freely transferable, or (ii) no
longer subject to substantial risk of forfeiture. The amount of taxable income
is equal to the fair market value of the shares less the cash, if any, paid for
the shares.
A Participant may elect to recognize income at the time he or she receives
Restricted Stock in an amount equal to the fair market value of the Restricted
Stock (less any cash paid for the shares but irrespective of any risk of
forfeiture) on the date of the award.
The Company receives a compensation expense deduction in an amount equal to
the ordinary income recognized by the Participant in the taxable year in which
restrictions lapse (or in the taxable year of the award if, at that time, the
Participant had filed a timely election to accelerate recognition of income).
Other Awards
In the case of an exercise of a SAR or an award of Restricted Stock Units,
Performance Stock, Performance Units, or Common Stock or cash, the Participant
will generally recognize ordinary income in an amount equal to any cash received
and the fair market value of any shares received on the date of payment or
delivery. In that taxable year, the Company will receive a federal income tax
deduction in an amount equal to the ordinary income which the Participant has
recognized.
MILLION DOLLAR DEDUCTION LIMIT
The Company may not deduct compensation of more than $1,000,000 that is
paid to an individual who, on the last day of the taxable year, is either the
Company's chief executive officer or is among one of the four other most
highly-compensated officers for that taxable year. The limitation on deductions
does not apply to certain types of compensation, including qualified
performance-based compensation. The Company believes that Awards in the form of
Stock Options, Performance Stock, Performance Units, SARs, performance-based
Restricted Stock and Restricted Stock Units and cash payments under Annual
Incentive Awards constitute qualified performance-based compensation and, as
such, will be exempt from the $1,000,000 limitation on deductible compensation.
If the Incentive Compensation Plan is approved by the Stockholders, the Company
will take steps to minimize any nondeductible compensation under Section 162(m)
of the Code. Such steps may include amending the Company's current Executive
Bonus Plan.
MISCELLANEOUS
A new benefits table is not provided because no grants have been made under
the Plan and all Awards are discretionary. On December 31, 2002, the closing
price of the Class A Common Stock was $11.91.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR ADOPTION
OF THE INCENTIVE COMPENSATION PLAN.
20
EQUITY COMPENSATION PLANS
The following table summarizes information, as of December 31, 2002,
relating to equity compensation plans of the Company pursuant to which grants of
options, restricted stock units or other rights to acquire shares may be granted
from time to time.
EQUITY COMPENSATION PLAN INFORMATION
NUMBER OF
NUMBER OF SECURITIES REMAINING
SECURITIES TO BE AVAILABLE FOR FUTURE
ISSUED UPON WEIGHTED-AVERAGE ISSUANCE UNDER
EXERCISE OF EXERCISE PRICE OF EQUITY COMPENSATION
OUTSTANDING OUTSTANDING PLANS (EXCLUDING
OPTIONS, WARRANTS OPTIONS, WARRANTS SECURITIES REFLECTED
PLAN CATEGORY AND RIGHTS (A) AND RIGHTS IN COLUMN (A))
------------- ----------------- ----------------- ---------------------
Equity compensation plans approved by security
holders(1).................................. 4,220,335 $20.565 1,768,423
Equity compensation plans not approved by
security holders............................ None None None
Total.................................... 4,220,335 $20.565 1,768,423
---------------
(1) The number of shares included in the table represent shares from the
following equity compensation plans which have been approved by the
Company's Stockholders: (i) Alpharma Inc. 1997 Stock Option and Appreciation
Right Plan, and (ii) Alpharma Inc. Non-Employee Director Option Plan. The
table does not include shares to be issued under the Company's Employee
Stock Purchase Plan (the "ESP Plan") which was approved by the Company's
Stockholders in 1991. The ESP Plan was not included because there are no
limitations on the number of shares that may be purchased under the ESP
Plan. The ESP Plan entitles employees to contribute a portion of his/her
basic pay into the ESP Plan for the purchase of shares of the Company's
Class A Stock. The Company contributes to the ESP Plan an amount equal to
50% of each participating employee's contributions.
21
PROPOSAL TO RATIFY APPOINTMENT OF
PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S ACCOUNTANTS
The Audit Committee of the Board of Directors and the full Board of
Directors has approved PricewaterhouseCoopers LLP as the Company's independent
accountants to audit its consolidated financial statements for the 2003 fiscal
year. During the 2002 fiscal year, PricewaterhouseCoopers LLP served as the
Company's independent accountants and also provided certain tax consulting and
other accounting services. The Company is not required to seek Stockholder
approval for the appointment of its independent accountants, however, the Board
of Directors believes it to be sound corporate practice to seek such approval.
If the appointment is not ratified, the Audit Committee will investigate the
reasons for Stockholder rejection and the Board of Directors will re-consider
the appointment.
The following table sets forth the aggregate fees billed or expected to be
billed by PricewaterhouseCoopers LLP for audit services rendered in connection
with the financial statements and reports for fiscal year 2002 and for other
services rendered during fiscal year 2002 on behalf of the Company and its
subsidiaries, as well as all "out-of-pocket" costs incurred in connection with
these services, which have been or will be billed to the Company:
Audit Fees.................................................. $1,592,000
Financial Information Systems Design and Implementation
Fees...................................................... $ --
All Other Fees(a)........................................... $ 591,000
--------------------
(a) All Other Fees includes fees for professional services rendered for all
services other than those covered under "Audit Fees" for fiscal year
2002. These other services include (i) $138,000 of services rendered in
connection with employee benefit plan audits, review of SEC filings,
and other accounting matters and (ii) $453,000 of U.S. and
international tax planning and assistance.
A representative of PricewaterhouseCoopers LLP will be present at the
Annual Meeting to respond to any questions. He or she will be given the
opportunity to make a statement if he or she desires to do so.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR THE
RATIFICATION OF THE APPOINTMENT OF PRICEWATERHOUSECOOPERS LLP AS THE COMPANY'S
INDEPENDENT ACCOUNTANTS.
22
EXECUTIVE COMPENSATION
SUMMARY OF EXECUTIVE COMPENSATION
The following table (the "Summary Compensation Table") sets forth annual
and long-term compensation paid to, or accrued for, the executive officers named
below (the "named executive officers") by the Company or its subsidiaries during
2002, 2001 and 2000:
SUMMARY COMPENSATION TABLE
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
------------------------ OTHER ANNUAL ------------ ALL OTHER
SALARY BONUS COMPENSATION OPTION/SARS COMPENSATION
NAME AND PRINCIPAL POSITION DURING 2002(1) YEAR ($) ($) ($) (#)(2) ($)(3)
------------------------------------------ ---- ------- ------- ------------ ------------ ------------
Ingrid Wiik............................ 2002 705,000 290,000 * 100,000 37,915
President and Chief 2001 690,000 -- * 40,000 36,522
Executive Officer 2000 659,247 400,000 * 85,000 19,762
Michael J. Nestor...................... 2002 450,000 80,000 * 65,000 9,401
Executive Vice President and 2001 106,875 467,862 * 20,000 14,314
President, U.S. Human 2000 -- -- -- -- --
Pharmaceuticals
Robert F. Wrobel....................... 2002 407,310 90,000 * 67,334 22,472
Executive Vice President, 2001 400,000 -- * 20,000 23,403
Chief Legal Officer and Secretary 2000 350,011 155,400 * 25,000 28,676
Matthew T. Farrell..................... 2002 305,888 175,000 * 100,000 12,136
Executive Vice President, 2001 -- -- -- -- --
and Chief Financial Officer 2000 -- -- -- -- --
Carol A. Wrenn......................... 2002 325,000 80,000 * 69,668 7,960
Executive Vice President and 2001 26,239 65,000 * 30,000 --
President, Animal Health Division 2000 -- -- -- -- --
Jeffrey E. Smith....................... 2002 475,000 -- * 29,167 1,232,037
Former Executive Vice President, 2001 425,000 -- * 20,000 37,319
Finance and Chief Financial Officer 2000 400,009 162,800 * 25,000 35,164
---------------
(1) Includes those persons who in fiscal year 2002 were the Chief Executive
Officer or one of the four most highly compensated officers as measured by
salary and bonus. Also includes one former executive officer, Mr. Smith, who
would have been one of the four most highly compensated executive officers
if not for the fact that he was not an executive officer at the end of the
fiscal year ended December 31, 2002. Mr. Farrell joined the Company on April
22, 2002 replacing Mr. Smith as Executive Vice President and Chief Financial
Officer. Mr. Smith resigned as an officer of the Company as of April 24,
2002 and continued as an employee of the Company through December 31, 2002.
Ms. Wrenn joined the Company on November 26, 2001 as President, Animal
Health Division. A modest amount of Ms. Wiik's compensation is nondeductible
compensation under Section 162(m) of the Internal Revenue Code, as amended.
(2) Reflects options granted under the 1997 Incentive Stock Option and Stock
Appreciation Right Plan. The Company has not granted any stock appreciation
rights ("SARs") to any of the named executive officers in 2000, 2001 or
2002.
23
(3) Includes contributions by the Company to various employee profit-sharing,
stock purchase and savings plans. The amounts shown for 2002 include (a)
matching contributions under the Employee Stock Purchase Plan (Ms. Wiik
$13,759, Mr. Nestor $3,375, Mr. Wrobel $6,608, Mr. Farrell $5,535, Ms. Wrenn
$3,250, and Mr. Smith $9,500); (b) contributions to the savings plan (Ms.
Wiik $16,674, Mr. Nestor $5,023, Mr. Wrobel $9,775, Mr. Farrell $4,298, Ms.
Wrenn $3,600, and Mr. Smith $28,500); (c) taxable life insurance premiums
(Ms. Wiik $7,482, Mr. Nestor $1,003, Mr. Wrobel $6,098, Mr. Farrell $2,300,
Ms. Wrenn $1,100, and Mr. Smith $7,095); and (d) payments related to Mr.
Smith's separation agreement, dated May 31, 2002, in the amount of
$1,186,942 to be paid through December 31, 2004.
* The incremental cost of the perquisites for each named executive in each of
2002, 2001, and 2000 was not in excess of the lesser of (a) $50,000 or (b)
10% of the amounts reported as Salary and Bonus for such year in the Summary
Compensation Table. The Company provides automobile allowance, car insurance
reimbursement and financial planning reimbursement for its named executive
officers.
EMPLOYMENT AGREEMENTS
Ms. Wiik is a party to an employment agreement with the Company dated
October 26, 2000. This agreement provides that the Company shall provide Ms.
Wiik with, or reimburse her for, the use of an automobile in the United States
and in Norway, plus reimbursement for garaging, insurance and auto maintenance.
Ms. Wiik participates in all of the employee benefits available to executives of
the Company (including life insurance, disability insurance, health and medical
insurance, 401(k) Savings Plan, Employee Stock Purchase Plan, paid vacation and
tax and financial services planning) except the Company's Pension Plan (defined
below). Upon retirement, Ms. Wiik is entitled to receive a defined retirement
benefit that is primarily based on a percentage of her base salary for twelve
months prior to her retirement. (See "Retirement Plans" for further
information.)
Mr. Nestor is a party to an employment agreement with the Company dated
September 17, 2001, which is supplemented by an employment agreement dated
February 26, 2003. Mr. Nestor received a hiring bonus of $366,800 upon joining
the Company in 2001, and he is entitled to receive an equal bonus amount to be
paid on his second anniversary with the Company. Mr. Nestor participates in all
of the employee benefits available to executives of the Company, including the
Severance Plan and Change in Control Plan. (See below.)
Mr. Farrell is a party to an employment agreement with the Company dated
April 12, 2002, which provided him, upon joining the Company, with 100,000
options under the Company's 1997 Incentive Stock Option and Stock Appreciation
Right Plan and a minimum bonus guarantee of $150,000 for the 2002 performance
year. The agreement also specifies that Mr. Farrell will be provided with the
option to purchase 20,000 shares of Class A Common Stock, in addition to his
normal annual stock option grants, under the Company's 1997 Incentive Stock
Option and Stock Appreciation Right Plan, making him eligible to receive up to
50,000 stock options in 2003 and 2004. Mr. Farrell participates in all of the
employee benefits available to executives of the Company, including the
Severance Plan and Change in Control Plan. (See below.)
Mr. Smith is a party to a separation agreement with the Company dated May
31, 2002. This agreement provides for Mr. Smith's resignation as an officer of
the Company effective as of April 24, 2002, and that he continue as an employee
of the Company through December 31, 2002. Mr. Smith's salary was adjusted under
the agreement to $475,000 for the 2002 calendar year. In addition, the Company
agreed to pay Mr. Smith an amount equal to $475,000 per year during his
severance period commencing on January 1, 2003 and ending on December 31, 2004.
During his severance period, Mr. Smith will continue to participate in health
and life
24
insurance benefits as well as receive executive automobile and financial
planning allowances. The agreement also provides Mr. Smith with a one-time
payment of $125,000 (less withholdings) in lieu of participation in certain
benefit plans during 2003 and 2004, and a pension benefit of $125,000 per annum
beginning on Mr. Smith's sixty-fifth birthday (although Mr. Smith may elect a
reduced payment for early retirement, joint survivor benefits or a partial lump
sum payment). All of Mr. Smith's outstanding stock options became exercisable as
of the date of this separation agreement and will remain exercisable through the
earlier of the stated expiration date for each option grant or December 31,
2004.
SEVERANCE AND CHANGE IN CONTROL PLANS
Ms. Wiik, Messrs. Nestor, Wrobel, and Farrell and Ms. Wrenn receive
additional benefits pursuant to the Company's Severance Plan and Change in
Control Plan, both adopted by the Board of Directors in 2002 (the "Severance
Plan" and "Change In Control Plan", respectively).
Pursuant to the terms of the Severance Plan and the Change in Control Plan,
in the event Ms. Wiik is terminated for any reason other than for cause, she is
entitled to receive her base salary, bonus and certain benefits for twenty-four
months and if she is terminated as a result of a change in control of the
Company, she is entitled to receive her salary and certain benefits for
thirty-six months, subject to certain tax limitations.
Additionally, the Severance Plan and the Change in Control Plan provide
that in the event that an Executive Officer, including Messrs. Nestor, Wrobel,
and Farrell and Ms. Wrenn, (i) is terminated for any reason other than for
cause, such Executive Officer is entitled to receive his or her base salary,
bonus and certain benefits for eighteen months and (ii) is terminated as a
result of a change in control of the Company, such executive officer is entitled
to receive his or her base salary and certain benefits for thirty months,
subject to certain tax limitations.
The Severance Plan and the Change in Control Plan also provide for payments
to be made to certain other key employees of the Company in the event of
termination for any reason other than for cause or as a result of a change in
control of the Company.
PERFORMANCE CASH BONUS INCENTIVE PLANS
The Company has approved the goals underlying both the Company's Executive
Bonus Plan applicable to employees at the "Vice President" level and above, and
the Company's Performance Incentive Plan applicable to employees below the "Vice
President" level, which shall apply to the 2003 fiscal year, and which provide
that all executive officers and key employees performing services for the
Company will be entitled to receive a cash bonus within a target range. Payment
of a bonus is dependent on achieving certain operating division or Company
financial levels relative to respective budgets. In addition, all bonuses take
into consideration certain individual performance factors. Higher cash bonuses
than the target level may be paid if budgeted financial levels are exceeded, but
no cash bonuses will be paid if minimum financial levels are not met. Ms. Wiik
has a target bonus for 2003 of 100% of base salary. Messrs. Wrobel and Farrell
and Ms. Wrenn have target bonuses for 2003 of 50% of base salary. Mr. Nestor has
a target bonus of 50% of base salary for the first six months of 2003, and he
shall have a target bonus of 75% of base salary effective July 1, 2003 for the
remaining six months of 2003. Mr. Nestor's award for 2003 will be pro-rated to
reflect his mid-year change in incentive target level. (See "Compensation
Committee Report on Executive Compensation".)
25
GRANTS OF OPTIONS
The following table discloses, for the named executive officers, certain
information with respect to options granted during 2002. All grants are options
under the Company's 1997 Incentive Stock Option and Stock Appreciation Right
Plan.
NUMBER OF
SHARES OF % OF TOTAL POTENTIAL REALIZABLE VALUE
CLASS A SHARES AT ASSUMED ANNUAL RATES OF
STOCK GRANTED TO STOCK APPRECIATION FOR
UNDERLYING EMPLOYEES OPTION TERM
OPTIONS IN FISCAL EXERCISE ---------------------------
NAME GRANTED YEAR PRICE EXPIRATION DATE(2) 5% 10%
---- ---------- ---------- -------- ------------------ ------------ ------------
Ingrid Wiik(1).......... 35,500 1.38% $25.41 January 29, 2006(3) $ 194,367 $ 418,577
64,500 2.51% $14.44 April 2, 2012 $ 585,618 $1,484,071
Michael J. Nestor....... 15,000 0.58% $25.41 January 29, 2006(3) $ 82,127 $ 176,863
20,000 0.78% $14.44 April 2, 2012 $ 181,587 $ 460,177
15,000 0.58% $ 9.48 January 29, 2006(4) $ 24,406 $ 51,568
15,000 0.58% $ 9.48 October 31, 2012 $ 89,428 $ 226,630
Robert F. Wrobel........ 13,667 0.53% $25.41 January 29, 2006(3) $ 74,828 $ 161,146
20,000 0.78% $14.44 April 2, 2012 $ 181,587 $ 460,177
13,667 0.53% $ 9.48 January 29, 2006(4) $ 22,237 $ 46,986
20,000 0.78% $ 9.48 October 31, 2012 $ 119,238 $ 302,173
Matthew T. Farrell...... 100,000 3.89% $16.05 April 22, 2012 $1,009,375 $2,557,956
Carol A. Wrenn.......... 10,834 0.42% $25.41 January 29, 2006(3) $ 59,137 $ 127,742
20,000 0.78% $14.44 April 2, 2012 $ 181,587 $ 460,177
10,834 0.42% $ 9.48 January 29, 2006(4) $ 17,628 $ 37,246
28,000 1.09% $ 9.48 October 31, 2012 $ 166,933 $ 423,043
Jeffrey E. Smith(5)..... 14,167 0.55% $25.41 December 31, 2004 $ 55,176 $ 115,645
15,000 0.58% $14.44 December 31, 2004 $ 31,070 $ 64,837
---------------
(1) Ms. Wiik was originally awarded 35,500 stock options on January 29, 2002 and
65,000 stock options on April 2, 2002. However, due to a 100,000 annual
share limitation in the Company's 1997 Incentive Stock Option and Stock
Appreciation Right Plan, 500 options from the April 2, 2002 grant date were
extinguished on May 1, 2002.
(2) Options vest at the rate of 25% on each of the first four anniversaries of
the date of grant, except as otherwise noted.
(3) Options became 100% vested on January 29, 2003.
(4) Options will become 100% vested on April 30, 2003.
(5) Pursuant to the terms of Mr. Smith's separation agreement, all outstanding
options became exercisable as of May 31, 2002 and will remain exercisable
through the earlier of the stated expiration date of such options or
December 31, 2004.
26
OPTION EXERCISES AND VALUES
The following table discloses, for the named executive officers, (a) the
number of shares acquired upon the exercise of options or with respect to which
such options were exercised and the aggregate dollar value realized upon such
exercise and (b) the number and value of unexercised options, in each case as of
December 31, 2002.
NUMBER OF SHARES VALUE OF UNEXERCISED
NUMBER OF UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT 12/31/02 OPTIONS AT 12/31/02(1)
ACQUIRED ON --------------------------- ---------------------------------
NAME EXERCISE VALUE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE(2) UNEXERCISABLE(2)
---- ----------- -------------- ----------- ------------- -------------- ----------------
Ingrid Wiik........... 0 $ 0 52,500 172,500 $0 $ 0
Michael J. Nestor..... 0 $ 0 5,000 80,000 $0 $72,900
Robert F. Wrobel...... 0 $ 0 39,500 99,834 $0 $81,810
Matthew T. Farrell.... 0 $ 0 0 100,000 $0 $ 0
Carol A. Wrenn........ 0 $ 0 7,500 92,168 $0 $94,366
Jeffrey E. Smith(3)... 24,000 $77,256 153,167 0 $0 $ 0
---------------
(1) All grants are options under the Company's 1997 Incentive Stock Option and
Stock Appreciation Right Plan.
(2) Value is based on the closing price of a share of Class A Stock on December
31, 2002 ($11.91) minus the exercise price.
(3) Pursuant to the terms of Mr. Smith's separation agreement, all outstanding
options became exercisable as of May 31, 2002 and will remain exercisable
through the earlier of the stated expiration date of such options or
December 31, 2004.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the Company's officers and directors, and persons who own more than 10% of a
registered class of the Company's equity securities, to file reports of
ownership and changes in ownership of the Company's stock on Forms 3, 4 and 5
with the Securities and Exchange Commission (the "Commission") and the New York
Stock Exchange. Officers, directors and greater than 10% beneficial stockholders
are required by Commission regulation to furnish the Company with copies of all
Forms 3, 4 and 5 that they file. Based upon such forms, the Company believes
that during the 2002 fiscal year, its officers, directors and greater than 10%
beneficial stockholders complied with all Section 16(a) filing requirements,
with the exception of Messrs. Jacobs and Tore Tonne, a former director of the
Company, who each inadvertently filed an initial statement of beneficial
ownership on Form 3 eight days late.
RETIREMENT PLANS
Ms. Wiik is not a participant in the Company's Pension Plan (as defined
below) pursuant to the terms of her employment agreement. (See "Employment
Agreements".) If Ms. Wiik retires after age 60 (or before age 60 in limited
circumstances), she is entitled to receive from the Company an annual retirement
benefit for each calendar year following retirement equal to (i) 30% of her Base
Compensation (defined below) plus (ii) inflationary adjustments (which shall be
the same as the adjustment for inflation provided in the retirement plan for
Alpharma AS for Norwegian employees) minus (iii) "Other Retirement Benefits"
27
(defined below). "Base Compensation" means annual base salary during the twelve
month period ending on the last day of the month preceding retirement or
disability (provided that if base salary shall have changed during such twelve
month period, Base Compensation shall mean the average annual base salary
weighted to reflect the number of days during which each varying base salary was
in effect). "Other Retirement Benefits" means amounts Ms. Wiik is entitled to
receive as retirement benefits under Norwegian pension plans, but does not
include (i) payments received under the 401(k) savings plan or the deferred
compensation plan maintained by the Company, or (ii) retirement benefits
received under any governmental program or under any insurance program funded by
the Company or any of its subsidiaries or their predecessors.
Messrs. Nestor, Wrobel, and Farrell, Ms. Wrenn and Mr. Smith are
participants in the Alpharma Inc. Pension Plan (a qualified defined benefit
plan) (the "Pension Plan"). Under the Pension Plan, both salaried and hourly
employees are eligible for benefits. Participants are entitled to receive their
specified annual benefit, in the form of a life annuity or, at the election of
participants, its actuarial equivalent in certain other forms, commencing within
one month of their 65th birthday. The specified annual benefit is equal to (x)
the sum of (i) 0.8% of the participant's highest five-year Final Average
Compensation (as defined below) up to "covered compensation" ($39,444 for 2002)
plus (ii) 1.45% of the participant's highest five-year Final Average
Compensation in excess of "covered compensation", multiplied by (y) the number
of years of benefit service (up to a maximum of 30 years). The Pension Plan also
provides for an early retirement benefit which is equal to the specified annual
benefit described above, reduced actuarially for each year by which the early
retirement date precedes the normal retirement date.
28
The following table sets forth the approximate annual retirement benefit
under the Pension Plan based on years of service and Final Average Compensation.
PENSION PLAN TABLE
YEARS OF SERVICE
-----------------------------------------
REMUNERATION(1) 15 20 25 30(2)
--------------- -------- -------- -------- --------
$250,000 50,529 67,372 84,215 101,058
$275,000 55,967 74,622 93,278 111,933
$300,000 61,404 81,872 102,340 122,808
$325,000 66,842 89,122 111,403 133,683
$350,000 72,279 96,372 120,465 144,558
$375,000 77,717 103,622 129,528 155,433
$400,000 83,154 110,872 138,590 166,308
$425,000 88,592 118,122 147,653 177,183
$450,000 94,029 125,372 156,715 188,058
$475,000 99,467 132,622 165,778 198,933
$500,000 104,904 139,872 174,840 209,808
$525,000 110,342 147,122 183,903 220,683
$550,000 115,779 154,372 192,965 231,558
$575,000 121,217 161,622 202,028 242,433
$600,000 126,654 168,872 211,090 253,308
$625,000 132,092 176,122 220,153 264,183
$650,000 137,529 183,372 229,215 275,058
$675,000 142,967 190,622 238,278 285,933
$700,000 148,404 197,872 247,340 296,808
---------------
(1) Final average compensation. Current Federal pension law limits average
annual compensation considered for benefit purposes to $200,000 for 2002 and
$170,000 for 2001.
(2) The Plan provides that there is a maximum of 30 years of service for
computation of benefits.
For purposes of the Pension Plan, an employee's "Final Average
Compensation" generally is his or her regular cash salary (excluding bonuses)
for the five consecutive years of service in which his or her compensation was
highest during the ten years of service immediately preceding his or her
retirement. In 2002, the amounts of the compensation of Messrs. Nestor, Wrobel
and Farrell, Ms. Wrenn and Mr. Smith would have been $450,000, $323,859,
$305,888, $325,000 and $428,873, respectively, under the Pension Plan if there
were no limitations under Federal pension law. However, due to the Federal
pension law, the respective amounts of compensation of Messrs. Nestor, Wrobel
and Farrell, Ms. Wrenn and Mr. Smith under the Pension Plan in 2002 were limited
to $200,000. Mr. Smith, however, pursuant to his separation agreement dated May
31, 2002, is entitled to retirement benefits from the Company through the
Pension Plan and a supplement benefit, equal to, in the aggregate, $125,000 per
year beginning on his sixty-fifth birthday (although he may elect a reduced
payment for early retirement, joint survivor benefits or a partial lump sum
payment). The years of service credited under the Pension Plan as of December
31, 2002 to such officers were as follows: Mr. Nestor 1 year, Mr. Wrobel 5
years, Mr. Farrell 1 year, Ms. Wrenn 1 year and Mr. Smith 18 years.
29
Under the Pension Plan, in the event of the termination of employment prior
to retirement, part of the employee's benefit may be forfeited. A retirement
benefit, payable in the form of a life annuity following the employee's 55th
birthday, is equal to an accrued percentage of the normal retirement benefit,
actuarially reduced to reflect commencement of payments prior to the normal
retirement date. As to employees hired on or after January 1, 1989, pension
benefits under the Pension Plan vest after five years of employment with the
Company. Pension benefits under the Pension Plan of employees hired prior to
January 1, 1989 are currently 100% vested.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Company's Board of Directors consisted
during 2002 of Mr. Tombros, as Chairman, and Messrs. Cohen, Hess, Sissener and,
until the 2002 Annual Meeting of the Company's stockholders, Mr. Gibian. In
January, 2003, Mr. Jacobs was elected a member of the Committee. In March 2003,
Ms. Kanin-Lovers was elected a member of the Committee and Messrs. Cohen, Hess
and Sissener resigned. Until the 2002 Annual Meeting of Stockholders, Mr.
Tombros and Mr. Gibian served as the Stock Option Committee that is established
under the Company's 1997 Incentive Stock Option and Stock Appreciation Right
Plan with authority to grant options and fix the terms thereof under this plan.
After such meeting, Mr. Jacobs replaced Mr. Gibian on the Stock Option
Committee.
Pursuant to its charter, the Compensation Committee is responsible for
reviewing the performance and total compensation of the Company's Chief
Executive Officer (the "CEO"), reviewing and approving the compensation and
benefits of other executive officers and highly paid personnel, reviewing the
general compensation and employment benefit policies for management personnel,
reviewing management development and succession matters and approving any
material new benefit plan or material amendment to such plan.
In general, the Compensation Committee has sought to meet the following
objectives by making compensation decisions and recommendations for executive
officers and other key personnel in a manner which: (1) provides overall
compensation that is competitive in its ability to attract and retain highly
qualified personnel; (2) relates compensation to the degree to which the Company
(and/or the specific business unit in which an executive has responsibility)
attains its annual financial performance targets; (3) rewards excellent
individual performance and teamwork, with special consideration for specific
projects completed or adverse conditions overcome; and (4) provides incentive to
contribute to the long-term growth of the Company's businesses and stockholder
value. In making compensation recommendations, the Committee is mindful of
Section 162(m) of the Internal Revenue Code of 1986, as amended, and consults
with tax advisors as necessary to minimize any nondeductible compensation under
Section 162(m).
During 2002, the Compensation Committee (i) approved compensation policies
which standardized targets for incentive compensation and stock options for
broad classes of key executives; (ii) approved various amendments to the
Company's Pension and Savings Plans; (iii) approved a Severance Plan, a Change
in Control Plan, amendments to the Employee Stock Purchase Plan and goals
underlying the Executive Bonus Plan (applicable to employees at the "Vice
President" level and above) and the Performance Incentive Plan (applicable to
employees below the "Vice President" level); (iv) approved compensation
arrangements for various new executive officers, including the Chief Financial
Officer; and (v) considered reports on the implications of the Sarbanes-Oxley
legislation, the proposed NYSE rules and proposals to expense stock options for
accounting purposes. At several meetings, the Committee also considered the
Company's long-
30
term incentive policies and the adoption and implementation of the Alpharma Inc.
2003 Omnibus Incentive Compensation Plan, a broader long-term incentive plan
which would permit the Committee to approve grants of restricted stock,
performance units and other long-term compensation intended to tie more directly
executive compensation to the Company's performance. The new Incentive
Compensation Plan is intended to replace both the Company's 1997 Incentive Stock
Option and Appreciation Right Plan and the Company's Non-Employee Director
Option Plan (although outstanding options granted pursuant to such plans will
remain outstanding) and is being submitted for stockholder approval at the
Annual Meeting.
In January 2002, the Compensation Committee recommended (and the Stock
Option Committee approved and granted) special stock options ("special options")
to senior executives and managers in lieu of participation in the Company's
Executive Bonus Plan during the first six months of 2002. The grant of special
options was intended to approximate in value 50% of the individual's target
bonus under the Plan. A grant was also made to the CEO who received special
options for 35,500 shares. A total of 288,690 special options were granted to 53
persons. All such special options have an exercise price equal to the market
price of the shares on the date of grant, became fully vested (without regard to
any Company performance criteria) on the first anniversary of the date of grant
and (as approved by the Committee in March 2002) have a four year term.
In March 2002, the Compensation Committee set various company-wide and
divisional financial targets for 2002 under the Company's Executive Bonus Plan
and Performance Incentive Plan. The cash bonus target for 2002 was reduced by
50% for recipients of the special options and the financial criteria approved by
the Committee were generally designed to enhance performance for the second half
of 2002. These criteria included total revenues, operating income, net income
and cash flow.
In April 2002, the Compensation Committee followed its policy of annually
granting stock options to key employees and recommended (and the Stock Option
Committee approved and granted) options to 223 key employees (including all
executive officers) to purchase 857,800 shares. Each option provided for an
exercise price equal to the market price on the date of grant, vesting in equal
installments over four years and a ten-year term.
In May 2002, the Compensation Committee approved reductions in certain
financial targets under the Company's Executive Bonus Plan and Performance
Incentive Plan for the US Human Pharmaceutical business segment and for the
Company as a whole to reflect the impact of two drug recalls which were not
anticipated at the time the Company's 2002 budget was approved. In September
2002, the Company approved additional modifications in the financial targets for
its US Human Pharmaceuticals and Animal Health business segments and for the
Company as a whole. These modifications increased cash flow targets for all
participants but lowered income related targets for some participants. The
Committee acted on the basis that no bonuses had been paid in 2001 and that the
incentive intent of the plans would be lost for some participants whose segments
had suffered from unanticipated business developments and who were unlikely to
receive any cash bonus under the plans unless modifications to the applicable
targets were made.
In September 2002, the Compensation Committee recommended that the Company
accelerate and issue to the Company's employees the 2003 annual grant of stock
options and the Stock Option Committee approved such grants. As a result,
options for 849,600 shares were issued to 233 employees in September 2002. At
the time of these grants, all options outstanding had an exercise price which
was greater than the market price for the Company's common stock - in some cases
by more than 100%. Consequently, the accelerated issuance of the 2003 annual
grant reflected the concern that the outstanding stock options would have little
incentive effect on the holders.
In October 2002, the Compensation Committee also recommended that
additional stock options (so called "tandem options") be awarded on a
one-for-one basis to each of the key personnel who in March 2002
31
had been awarded stock options intended to approximate the value of 50% of their
target bonuses for 2002. The tandem options were awarded because the market
value of the Company's common stock had declined significantly since the time of
grant of the special options. As a result, the Committee was concerned that the
special options would provide little incentive for holders to help the Company
attain its goals. The tandem options were intended to compensate for this loss
of value and provide its recipients with appropriate incentives. The Stock
Option Committee approved the grant of these special options.
None of the accelerated 2003 options or the October tandem options were
granted to the CEO or the Chief Financial Officer (the "CFO") because each such
officer had already received, in 2002, the maximum amount of 100,000 options
permitted by the plan in any single year. Consequently, the Committee resolved
to review granting additional options or other forms of compensation to the CEO
and CFO in 2003.
In February 2003, the Compensation Committee reviewed the CEO's performance
during 2002 and recommended several compensation matters with respect to Ms.
Wiik. The committee's review of Ms. Wiik's performance in 2002 focused on
Company financial and operating performance, strategic planning, internal and
external leadership, management succession, and relationship with the Board of
Directors. The Committee discussed the significant developments affecting the
Company, the strategic value of restructuring the Company, the benefits of the
F.H. Faulding acquisition, increased cash flow and debt repayment under the
deleveraging initiative, the results of the International Pharmaceutical and API
divisions and the CEO's energy and work habits. In recommending compensation for
the CEO, the Committee was guided by her employment contract and the performance
matters discussed by the Committee. For 2003, the Committee determined not to
increase Ms. Wiik's salary, but to pay her a bonus of $290,000 for 2002 and to
increase her target bonus for 2003 to 100% of her salary. Ms. Wiik's bonus for
2002 was roughly 50% of her target for 2002, reflects the Committee's assessment
of overall achievement of the Company's and the CEO's objectives, and is
consistent with bonuses received by the CEO's executive team. The CEO received
options to purchase 100,000 shares in 2002 (35,000 of which were additional
options granted in lieu of 50% of her target cash bonus). To compensate for the
prohibition on issuing more options to Ms. Wiik in 2002, the Committee approved
a grant to Ms. Wiik in March 2003 of 100,000 options. These options have an
exercise price equal to the market price of the Company's common stock on the
date of grant, vest over four years and have a term of ten years.
Pursuant to the terms of the Stock Option and Appreciation Right Plan, the
Compensation Committee has been limited in the amount of options it has been
permitted to distribute to certain executive members of the Company's
management. If the Incentive Compensation Plan is approved by the Stockholders,
the Compensation Committee may consider making distributions to certain
executive members following such approval in amounts greater than that which is
currently permitted under the Stock Option and Appreciation Right Plan.
By the Compensation Committee:
Peter G. Tombros (Chairman)
Jill Kanin-Lovers
William I. Jacobs
32
AUDIT COMMITTEE REPORT
The Audit Committee reviews and makes recommendations to the Board of
Directors regarding internal accounting and financial controls and accounting
principles, auditing practices, the engagement of independent public
accountants, the scope of the audit to be undertaken by such accountants, all
transactions with the Company's affiliates and the internal process for
monitoring compliance with the Company's Business Conduct Guidelines. Each of
the Audit Committee members satisfies the definition of an independent director
as established in the current New York Stock Exchange Listing Standards. The
Board adopted a written charter for the Audit Committee on May 25, 2000. The
Company operates with a January 1 to December 31 fiscal year. The Audit
Committee met fifteen times during the 2002 fiscal year.
The Audit Committee has reviewed the Company's audited consolidated
financial statements and discussed such statements with management. The Audit
Committee has discussed with PricewaterhouseCoopers LLP, the Company's
independent accountants, during the 2002 fiscal year, the matters required to be
discussed by Statement of Auditing Standards No. 61 (Codification of Statements
on Auditing Standards AU 380), as amended.
PricewaterhouseCoopers LLP also provided the Audit Committee with the
written disclosures and a letter required by Independence Standards Board
Standard No. 1 (Independence Standards Board Standard No. 1, Independence
Discussions with Audit Committees), and the Audit Committee discussed with the
independent accountants that firm's independence. The Committee considered
various non-audit services provided by the independent accountants and the fees
and costs billed and expected to be billed by the independent accountants for
those services (as shown on page 22 of this Proxy Statement). The Committee has
fully considered whether those services provided by the independent accountants
are compatible with maintaining auditor independence.
Based upon the review and discussions noted above, the Audit Committee
recommended to the Board of Directors that the Company's audited consolidated
financial statements be included in the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 2002, and be filed with the U.S. Securities
and Exchange Commission.
This report of the Audit Committee shall not be deemed incorporated by
reference into any filing under the Securities Act of 1933, as amended, or the
Securities Exchange Act of 1934, as amended, except to the extent that the
Company specifically incorporates this information by reference.
By the Audit Committee:
William I. Jacobs (Chairman)
Peter G. Tombros
Farah M. Walters
33
PERFORMANCE GRAPH
The following graph compares the Company's cumulative total Stockholder
return during the last five calendar years with the composite of the Media
General Financial Services Index for Drug Manufacturers -- Other, Drug-Generic
and Drug Delivery Industry Groups (which indexes include 148 corporations that
describe themselves as drug manufacturers and are publicly traded) and The New
York Stock Exchange Index. The graph assumes $100 invested on January 1, 1998 in
the Company's Class A Stock and $100 invested at that time in each of the
selected indices. The comparison assumes that all dividends are reinvested.
ALPHARMA INC.
5-YEAR CUMULATIVE RETURNS
VERSUS PEER GROUP AND NYSE INDEX
[ALPHARMA'S CUMULATIVE RETURN LINE GRAPH]
FISCAL YEAR ENDED
---------------------------------------------------------------------------------------
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
COMPANY, INDEX, MARKET 1997 1998 1999 2000 2001 2002
---------------------- ------------ ------------ ------------ ------------ ------------ ------------
Alpharma Inc. .......... 100.00 163.69 143.27 205.26 124.52 56.82
Peer Group Index........ 100.00 119.94 146.76 240.62 224.35 150.84
NYSE Market Index....... 100.00 118.99 130.3 133.4 121.52 99.27
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Mr. Sissener is Chairman of the Board of A.L. Industrier AS, commonly known
as A.L. Industrier. Together with certain family-controlled private holding
companies and certain of his relatives, Mr. Sissener beneficially owns
approximately 51% of A.L. Industrier's outstanding ordinary shares entitled to
vote and, accordingly, may be deemed a controlling person of A.L. Industrier.
In January 2003, pursuant to a sale agreement, the Company divested its
vitamin business to Nopal AS, a subsidiary of A.L. Industrier ("Nopal"), for a
purchase price of NOK 23.0 million, or approximately
34
$3.3 million. The Company also sold its inventory of finished, packaged vitamin
products and bulk tablets to Nopal. In connection with this sale, the Company
entered into two distribution agreements with Nopal pursuant to which Nopal will
continue to sell the Company's medical plaster and tape products to the grocery
sector and the Company will sell Nopal's acquired vitamin products to the
pharmacy and health care sectors as well as a supply agreement pursuant to which
the Company will manufacture one, and package substantially all, of Nopal's
vitamin products.
A.L. Industrier and Alpharma AS, one of the Company's Norwegian
subsidiaries, are parties to two leases pursuant to which A.L. Industrier leases
to Alpharma AS the land and facility in Oslo, Norway where Alpharma AS'
principal administrative offices and fermentation plant for its bulk antibiotics
are located, and adjoining land for a parking facility for employees. Both
leases have terms ending in 2014. The terms are renewable, at the option of
Alpharma AS, for up to four additional consecutive five year terms. Basic rent
during the initial terms are $1.00 per year under the office lease and NOK
2,400,000, approximately $305,000, per year under the parking facility lease
and, during any renewal term thereafter, basic rent under the office lease will
be the then prevailing fair rental value of the premises and basic rent for the
parking facility will remain at NOK 2,400,000. In addition to basic rent,
Alpharma AS pays documented expenses of ownership and operation of such
facilities, such as taxes and maintenance expenses. Alpharma AS has the right to
terminate the office lease at any time during its term upon twelve months'
written notice to A.L. Industrier and the parking lease at any time during its
term upon twenty-four months' written notice to A.L. Industrier.
Alpharma AS is a party to an administrative services agreement with A.L.
Industrier, pursuant to which Alpharma AS provides certain administrative
services to A.L. Industrier. Such services are provided on a full cost basis,
except that A.L. Industrier paid Alpharma AS a minimum fee for services rendered
during calendar year 2002 equal to NOK 3,000,000, or approximately $381,000.
This agreement expired in January 1997 and has been automatically extended for
successive one year terms. Such one year extensions will continue unless the
agreement is terminated by either of the parties, upon six months' notice.
During 2002, through Alpharma AS and other subsidiaries, the Company sold
$1,925,000 of products (primarily multivitamins and adhesive products), at then
prevailing market rates to a subsidiary of A.L. Industrier for distribution of
these products to retail food stores. In addition, during 2002, Alpharma AS
purchased $8,000 of products from a subsidiary of A.L. Industrier. These
transactions were made on an arm's length basis.
All transactions with A.L. Industrier are subject to review by, and in some
circumstances prior approval of, the Company's Audit Committee. (See "Board of
Directors and Committees -- Committees of the Board" above.)
CERTAIN OTHER TRANSACTIONS AND RELATIONSHIPS
Mr. Einar W. Sissener, who as of June 30, 1999, ceased acting as President
and Chief Executive Officer of the Company, is party to an agreement with the
Company, effective July 1, 1999, pursuant to which Mr. Sissener receives an
annual fee of $150,000 for serving as Chairman of the Board of Directors of the
Company (and director of certain of the Company's subsidiaries). Mr. Sissener is
reimbursed for expenses while in the New York metropolitan area and receives
other fringe benefits substantially equal to those received by executive
officers of the Company. In addition, Mr. Sissener has agreed to provide
consulting services to the Company's management for a ten year term for $12,000
per month plus payment of reasonable expenses incurred in connection with
performance of such consulting services. The consulting fee is adjusted annually
for inflation. In addition to the amounts described above, Mr. Sissener is
entitled to all benefits
35
available under applicable plans and policies in Norway arising from retirement
from employment by Alpharma AS and is entitled to receive from Alpharma AS an
amount which, when added to amounts he is entitled to receive under Norwegian
Social Security, Alpharma AS's pension plan and his individual retirement
benefits, equals 900,000 NOK (approximately $114,000). Such latter amount is
estimated at 344,000 NOK (approximately $44,000).
Mr. I. Roy Cohen, who as of January 15, 1991 retired as President and Chief
Executive Officer of the Company and who served as a Director of the Company
since 1975, shall receive from the Company an honorarium in the amount of
$12,500 per year for up to five years. This honorarium was approved by the
Company's Compensation Committee in March 2003, and shall be paid to Mr. Cohen
on December 1(st) of each year following Mr. Cohen's retirement from the Board
of Directors in May 2003.
Mr. Glen E. Hess' professional corporation is a partner of Kirkland &
Ellis, a law firm that, since 1978, has performed and continues to perform
significant legal services for the Company. In addition, Mr. Hess received, in
2002, a distribution from the Company's Amended and Restated Deferred
Compensation Plan, dated October 14, 1994, in an amount of approximately
$189,000. This distribution represented previous years' payments of directors'
cash compensation to Mr. Hess that he had deferred pursuant to the plan. Mr.
Hess shall receive additional distributions from the plan in similar amounts in
2003, 2004 and 2005.
STOCKHOLDERS' PROPOSALS FOR THE 2004 ANNUAL MEETING
In order to be considered for inclusion in the proxy statement for the 2004
Annual Meeting of Stockholders, Stockholder proposals must be submitted to the
Company on or before December 5, 2003. Such proposals will need to comply with
Securities and Exchange regulations regarding the inclusion of Stockholder
proposals in Company-sponsored proxy materials. Similarly, in order for a
Stockholder proposal to be raised from the floor during next year's annual
meeting, written notice must be received by the Company no later than December
5, 2003.
36
OTHER BUSINESS
As of the date hereof, the foregoing is the only business which management
intends to present, or is aware that others will present, at the Annual Meeting.
If any other proper business should be presented at the Annual Meeting, the
proxies will be voted in respect thereof in accordance with the discretion and
judgment of the person or persons voting the proxies.
By order of the Board of Directors,
ROBERT F. WROBEL
Secretary
ALPHARMA INC.
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY COMPLETE AND SIGN THE ENCLOSED
FORM OF PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
37
APPENDIX A
2003 OMNIBUS INCENTIVE
COMPENSATION PLAN
ALPHARMA INC.
EFFECTIVE , 2003
CONTENTS
Article 1. Establishment, Purpose, and Duration........................ 1
Article 2. Definitions................................................. 1
Article 3. Administration.............................................. 4
Article 4. Shares Subject to the Plan and Maximum Awards............... 5
Article 5. Eligibility and Participation............................... 6
Article 6. Stock Options............................................... 6
Article 7. Stock Appreciation Rights................................... 9
Article 8. Restricted Stock and Restricted Stock Units................. 10
Article 9. Performance Shares and Performance Units.................... 12
Article 10. Cash-Based Awards and Stock-Based Awards.................... 13
Article 11. Performance Measures........................................ 14
Article 12. Annual Incentive Awards..................................... 15
Article 13. Beneficiary Designation..................................... 16
Article 14. Deferrals and Share Settlements............................. 16
Article 15. Rights of Employees and Directors........................... 16
Article 16. Change in Control........................................... 17
Article 17. Amendment, Modification, Suspension, and Termination........ 17
Article 18. Withholding................................................. 17
Article 19. Successors.................................................. 18
Article 20. Legal Construction.......................................... 18
Article 21. General Provisions.......................................... 18
ALPHARMA INC.
2003 OMNIBUS INCENTIVE COMPENSATION PLAN
ARTICLE 1. ESTABLISHMENT, PURPOSE, AND DURATION
1.1 ESTABLISHMENT OF THE PLAN. Alpharma Inc., a Delaware corporation
(hereinafter referred to as the "Company"), establishes an incentive
compensation plan to be known as the Alpharma Inc. 2003 Omnibus Incentive
Compensation Plan (hereinafter referred to as the "Plan"), as set forth in this
document.
The Plan permits the grant of Annual Incentive Awards, Nonqualified Stock
Options, Incentive Stock Options, Stock Appreciation Rights ("SARs"), Restricted
Stock, Restricted Stock Units, Performance Shares, Performance Units, Cash-Based
Awards, and Stock-Based Awards.
The Plan shall become effective upon stockholder approval of the Plan (the
"Effective Date") and shall remain in effect as provided in Section 1.3 hereof.
1.2 PURPOSE OF THE PLAN. The purpose of the Plan is to promote the success
and enhance the value of the Company by linking the personal interests of the
Participants to those of the Company's stockholders, and by providing
Participants with an incentive for outstanding performance.
The Plan is further intended to provide flexibility to the Company in its
ability to motivate, attract, and retain the services of Participants upon whose
judgment, interest, and special effort the successful conduct of its operation
largely is dependent.
1.3 DURATION OF THE PLAN. The Plan shall commence as of the Effective
Date, as described in Section 1.1 herein, and shall remain in effect, subject to
the right of the Committee or the Board of Directors to amend or terminate the
Plan at any time pursuant to Article 17 herein, until all Shares subject to the
Plan have been purchased or acquired according to the Plan's provisions.
ARTICLE 2. DEFINITIONS
Whenever used in the Plan, the following terms shall have the meaning set
forth below, and when the meaning is intended, the initial letter of the word
shall be capitalized.
2.1 "AFFILIATE" shall have the meaning ascribed to such term in Rule 12b-2
of the General Rules and Regulations of the Exchange Act.
2.2 "ANNUAL INCENTIVE AWARD" means an Award granted to a Participant as
described in Article 12 herein.
2.3 "AWARD" means, individually or collectively, a grant under this Plan of
Annual Incentive Awards, Nonqualified Stock Options, Incentive Stock Options,
SARs, Restricted Stock, Restricted Stock Units, Performance Shares, Performance
Units, Cash-Based Awards, or Stock-Based Awards.
2.4 "AWARD AGREEMENT" means either (i) an agreement entered into by the
Company and each Participant setting forth the terms and provisions applicable
to Awards granted under this Plan; or (ii) a statement issued by the Company to
a Participant describing the terms and provisions of such Award.
2.5 "BENEFICIAL OWNER OR BENEFICIAL OWNERSHIP" shall have the meaning
ascribed to such term in Rule 13d-3 of the General Rules and Regulations under
the Exchange Act.
2.6 "BOARD" or "BOARD OF DIRECTORS" means the Board of Directors of the
Company.
1
2.7 "CASH-BASED AWARD" means an Award granted to a Participant as described
in Article 10 herein.
2.8 "CAUSE" means a conviction of, or a plea of no contest to, a felony,
habitual excessive use of drugs or alcohol, unsatisfactory attendance,
substantial and willful neglect of job duties, failure or inability to
adequately perform job duties (for a reason other than a disability that is
protected under state or federal law), disclosure of confidential information
regarding the Company or its operations, or the aiding or assisting of any
person or entity which is competitive with the Company or its successors.
The determination of whether an Employee is terminated for Cause or not for
Cause (as it relates to eligibility to receive benefits under the Plan) shall be
made by the Committee in its sole discretion and shall be final and conclusive.
2.9 "CHANGE IN CONTROL" shall have the meaning set forth in the Company's
Change in Control Plan, as amended and in effect from time to time, or any
successor thereto.
2.10 "CODE" means the U.S. Internal Revenue Code of 1986, as amended from
time to time, or any successor thereto.
2.11 "COMMITTEE" means the compensation committee of the Board of
Directors. The members of the Committee shall be appointed from time to time by
and shall serve in the manner provided in the constituent documents of the
Company.
2.12 "COMPANY" means Alpharma Inc., a Delaware corporation, and any
successor thereto as provided in Article 19 herein.
2.13 "COVERED EMPLOYEE" means a Participant who is a "covered employee," as
defined in Section 162(m) of the Code and the regulations promulgated under
Section 162(m) of the Code.
2.14 "DIRECTOR" means any individual who is a member of the Board of
Directors of the Company.
2.15 "EMPLOYEE" means a full-time permanent salaried or hourly employee of
the Company, as determined by the Committee. An Employee shall not include any
individual classified by the Company as a temporary employee, a leased employee,
or a Director (regardless of whether such individual is classified or
retroactively reclassified as an employee of the Company by any person, entity
or agency).
2.16 "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended
from time to time, or any successor act thereto.
2.17 "FAIR MARKET VALUE" or "FMV" means a price that is based on the
opening, closing, actual, high, low, or average selling prices of a Share on the
New York Stock Exchange ("NYSE") or other established stock exchange (or
exchanges) on the applicable date, the preceding trading day, the next
succeeding trading day, or an average of trading days, as determined by the
Committee in its discretion.
FMV shall be specified in the Award Agreement and may differ depending on
whether FMV is in reference to the grant, exercise, vesting, or settlement or
payout of an Award. If, however, the accounting standards used to account for
equity awards granted to Participants are substantially modified subsequent to
the Effective Date of the Plan, the Committee shall have the ability to
determine an Award's FMV based on the relevant facts and circumstances. If
Shares are not traded on an established stock exchange, FMV shall be determined
by the Committee based on objective criteria.
2
2.18 "FISCAL YEAR" means the fiscal year of the Company; provided that if
the Company changes the period for its fiscal year, the prior fiscal year period
shall continue to apply for purposes of the Award Limits specified in Section
4.1, unless stockholder approval is obtained for the new fiscal year period
under Section 4.1.
2.19 "FREESTANDING SAR" means an SAR that is granted independently of any
Options, as described in Article 7 herein.
2.20 "GRANT PRICE" means the price at which a SAR may be exercised by a
Participant, as determined by the Committee and set forth in Section 7.1 herein.
2.21 "INCENTIVE STOCK OPTION" or "ISO" means an Option to purchase Shares
granted under Article 6 herein and that is designated as an Incentive Stock
Option and is intended to meet the requirements of Section 422 of the Code, or
any successor provision.
2.22 "INSIDER" shall mean an individual who is, on the relevant date, an
officer, Director, or more than ten percent (10%) Beneficial Owner of any class
of the Company's equity securities that is registered pursuant to Section 12 of
the Exchange Act, as determined by the Board in accordance with Section 16 of
the Exchange Act.
2.23 "NONQUALIFIED STOCK OPTION" or "NQSO" means an Option to purchase
Shares, granted under Article 6 herein, which is not intended to be an Incentive
Stock Option or that otherwise does not meet such requirements.
2.24 "OPTION" means an Incentive Stock Option or a Nonqualified Stock
Option, as described in Article 6 herein.
2.25 "OPTION PRICE" means the price at which a Share may be purchased by a
Participant pursuant to an Option, as determined by the Committee.
2.26 "PARTICIPANT" means an Employee or Director who has been selected to
receive an Award or who has an outstanding Award granted under the Plan.
2.27 "PERFORMANCE-BASED COMPENSATION" means compensation under an Award
that is granted in order to provide remuneration solely on account of the
attainment of one or more preestablished, objective performance goals under
circumstances that satisfy the requirements of Section 162(m) of the Code.
2.28 "PERFORMANCE MEASURES" means measures as described in Article 11, the
attainment of which may determine the degree of payout and/or vesting with
respect to Awards to Covered Employees that are designated to qualify as
Performance-Based Compensation.
2.29 "PERFORMANCE PERIOD" means the period of time during which the
performance goals must be met in order to determine the degree of payout and/or
vesting with respect to an Award.
2.30 "PERFORMANCE SHARE" means an Award granted to a Participant, as
described in Article 9 herein.
2.31 "PERFORMANCE UNIT" means an Award granted to a Participant, as
described in Article 9 herein.
2.32 "PERIOD OF RESTRICTION" means the period when Awards are subject to
forfeiture based on the passage of time, the achievement of performance goals,
or upon the occurrence of other events as determined by the Committee, at its
discretion.
3
2.33 "PERSON" shall have the meaning ascribed to such term in Section
3(a)(9) of the Exchange Act and used in Sections 13(d) and 14(d) thereof,
including a "group" as defined in Section 13(d) thereof.
2.34 "RESTRICTED STOCK" means an Award of Shares granted to a Participant
pursuant to Article 8 herein.
2.35 "RESTRICTED STOCK UNIT" means an Award granted to a Participant
pursuant to Article 8 herein.
2.36 "SHARES" means the shares of Class A Common Stock of the Company.
2.37 "STOCK APPRECIATION RIGHT" or "SAR" means an Award, designated as an
SAR, pursuant to the terms of Article 7 herein.
2.38 "STOCK-BASED AWARD" means an Award granted pursuant to the terms of
Section 10.7 herein.
2.39 "SUBSIDIARY" means any corporation, partnership, joint venture,
limited liability company, or other entity (other than the Company) in an
unbroken chain of entities beginning with the Company if each of the entities
other than the last entity in the unbroken chain owns more than fifty percent
(50%) of the total combined voting power in one of the other entities in such
chain.
2.40 "TANDEM SAR" means an SAR that is granted in connection with a related
Option pursuant to Article 7 herein, the exercise of which shall require
forfeiture of the right to purchase a Share under the related Option (and when a
Share is purchased under the Option, the Tandem SAR shall similarly be
cancelled) or an SAR that is granted in tandem with an Option but the exercise
of such Option does not cancel the SAR, but rather results in the exercise of
the related SAR.
ARTICLE 3. ADMINISTRATION
3.1 GENERAL. The Committee shall be responsible for administering the
Plan. The Committee may employ attorneys, consultants, accountants, and other
persons, and the Committee, the Company, and its officers and Directors shall be
entitled to rely upon the advice, opinions, or valuations of any such persons.
All actions taken and all interpretations and determinations made by the
Committee shall be final, conclusive, and binding upon the Participants, the
Company, and all other interested parties.
3.2 AUTHORITY OF THE COMMITTEE. The Committee shall have full and
exclusive discretionary power to interpret the terms and the intent of the Plan
and to determine eligibility for Awards and to adopt such rules, regulations,
and guidelines for administering the Plan as the Committee may deem necessary or
proper. Such authority shall include, but not be limited to, selecting Award
recipients, establishing all Award terms and conditions and, subject to Article
17, adopting modifications and amendments, or subplans to the Plan or any Award
Agreement, including without limitation, any that are necessary to comply with
the laws of the countries in which the Company, its Affiliates, and/or its
Subsidiaries operate.
3.3 DELEGATION. The Committee may delegate to one or more of its members
or to one or more agents or advisors such administrative duties as it may deem
advisable, and the Committee or any person to whom it has delegated duties as
aforesaid may employ one or more persons to render advice with respect to any
responsibility the Committee or such person may have under the Plan. Except with
respect to Awards to Insiders, the Committee may, by resolution, authorize one
or more officers of the Company to do one or both of the following: (a)
designate officers, Employees, or Directors of the Company, its Affiliates,
and/or its Subsidiaries to be recipients of Awards; and (b) determine the size
of the Award; provided, however, that the resolution providing such
authorization sets forth the total number of Awards such officer or officers may
grant.
4
ARTICLE 4. SHARES SUBJECT TO THE PLAN AND MAXIMUM AWARDS
4.1 NUMBER OF SHARES AVAILABLE FOR AWARDS. Subject to adjustment as
provided in Section 4.2 herein, the number of Shares hereby reserved for
issuance to Participants under the Plan shall be four million seven hundred and
fifty thousand (4,750,000). The number of Shares that may be issued under the
Plan for Awards other than Options granted with an Option Price equal to at
least FMV on the date of grant or Stock Appreciation Rights with a Grant Price
equal to at least FMV on the date of grant shall not exceed two million
(2,000,000) Shares. All of the reserved Shares may be used as ISOs.
Any Shares related to Awards which terminate by expiration, forfeiture,
cancellation, or otherwise without the issuance of such Shares, are settled in
cash in lieu of Shares, or are exchanged with the Committee's permission for
Awards not involving Shares, shall be available again for grant under the Plan.
Moreover, if the Option Price of any Option granted under the Plan or the tax
withholding requirements with respect to any Award granted under the Plan are
satisfied by tendering Shares to the Company (by either actual delivery or by
attestation), or if an SAR is exercised, only the number of Shares issued, net
of the Shares tendered, if any, will be deemed delivered for purposes of
determining the maximum number of Shares available for delivery under the Plan.
The maximum number of Shares available for issuance under the Plan shall not be
reduced to reflect any dividends or dividend equivalents that are reinvested
into additional Shares or credited as additional Restricted Stock, Restricted
Stock Units, Performance Shares, or Stock-Based Awards. In addition, the
Committee, in its discretion, may establish any other appropriate methodology
for calculating the number of Shares issued pursuant to the Plan.
The Shares available for issuance under the Plan may be authorized and
unissued Shares or treasury Shares.
Unless and until the Committee determines that an Award to a Covered
Employee shall not be designed to qualify as Performance-Based Compensation, the
following limits ("Award Limits") shall apply to grants of such Awards under the
Plan:
(a) OPTIONS. The maximum aggregate number of Shares that may be
granted in the form of Options, pursuant to any Award granted in any one
Fiscal Year to any one Participant shall be five hundred thousand
(500,000).
(b) SARS. The maximum number of Shares that may be granted in the
form of Stock Appreciation Rights, pursuant to any Award granted in any one
Fiscal Year to any one Participant shall be five hundred thousand
(500,000).
(c) RESTRICTED STOCK/RESTRICTED STOCK UNITS. The maximum aggregate
grant with respect to Awards of Restricted Stock/Restricted Stock Units
granted in any one Fiscal Year to any one Participant shall be three
hundred thousand (300,000).
(d) PERFORMANCE SHARES/PERFORMANCE UNITS. The maximum aggregate Award
of Performance Shares or Performance Units that a Participant may receive
in any one Fiscal Year shall be three hundred thousand (300,000) Shares, or
equal to the value of three hundred thousand (300,000) Shares determined as
of the date of vesting or payout, as applicable.
(e) CASH-BASED AWARDS. The maximum aggregate amount awarded or
credited with respect to Cash-Based Awards to any one Participant in any
one Fiscal Year may not exceed one million dollars ($1,000,000) determined
as of the date of vesting or payout, as applicable.
5
(f) STOCK AWARDS. The maximum aggregate grant with respect to Awards
of Stock-Based Awards in any one Fiscal Year to any one Participant shall
be one hundred thousand (100,000) Shares.
(g) ANNUAL INCENTIVE AWARD. The maximum aggregate amount awarded or
credited in any one Fiscal Year with respect to an Annual Incentive Award
to a Participant who is a Covered Employee shall be determined in
accordance with Article 12.
4.2 ADJUSTMENTS IN AUTHORIZED SHARES. In the event of any corporate event
or transaction (including, but not limited to, a change in the Shares of the
Company or the capitalization of the Company) such as a merger, consolidation,
reorganization, recapitalization, separation, stock dividend, stock split,
reverse stock split, split up, spin-off, or other distribution of stock or
property of the Company, combination of securities, exchange of securities,
dividend in kind, or other like change in capital structure or distribution
(other than normal cash dividends) to stockholders of the Company, or any
similar corporate event or transaction, the Committee, in its sole discretion,
in order to prevent dilution or enlargement of Participants' rights under the
Plan, shall substitute or adjust, in an equitable manner, as applicable, the
number and kind of Shares that may be issued under the Plan, the number and kind
of Shares subject to outstanding Awards, the Option Price or Grant Price
applicable to outstanding Awards, the Award Limits, the limit on issuing Awards
other than Options granted with an Option Price equal to at least FMV on the
date of grant or Stock Appreciation Rights with a Grant Price equal to at least
FMV on the date of grant, and other value determinations applicable to
outstanding Awards.
Appropriate adjustments may also be made by the Committee in the terms of
any Awards under the Plan to reflect such changes or distributions and to modify
any other terms of outstanding Awards on an equitable basis, including
modifications of performance goals and changes in the length of Performance
Periods. The determination of the Committee as to the foregoing adjustments, if
any, shall be conclusive and binding on Participants under the Plan.
Subject to the provisions of Article 16 and any applicable law or
regulatory requirement, without affecting the number of Shares reserved or
available hereunder, the Committee may authorize the issuance, assumption,
substitution, or conversion of benefits under this Plan in connection with any
merger, consolidation, acquisition of property or stock, or reorganization, upon
such terms and conditions as it may deem appropriate. Additionally, the
Committee may amend the Plan, or adopt supplements to the Plan, in such manner
as it deems appropriate to provide for such issuance, assumption, substitution,
or conversion, all without further action by the Company's stockholders.
ARTICLE 5. ELIGIBILITY AND PARTICIPATION
5.1 ELIGIBILITY. Individuals eligible to participate in the Plan include
all Employees and Directors.
5.2 ACTUAL PARTICIPATION. Subject to the provisions of the Plan, the
Committee may from time to time, select from all eligible Employees and
Directors, those to whom Awards shall be granted and shall determine the nature
and amount of each Award.
ARTICLE 6. STOCK OPTIONS
6.1 GRANT OF OPTIONS. Subject to the terms and provisions of the Plan,
Options may be granted to Participants in such number, and upon such terms, and
at any time and from time to time as shall be determined by the Committee,
provided that ISOs shall not be granted to Directors. In addition, ISOs may not
be granted following the ten (10) year anniversary of the Effective Date.
6
6.2 AWARD AGREEMENT. Each Option grant shall be evidenced by an Award
Agreement that shall specify the Option Price, the duration of the Option, the
number of Shares to which the Option pertains, the conditions upon which an
Option shall become vested and exercisable, and such other provisions as the
Committee shall determine which are not inconsistent with the terms of the Plan.
The Award Agreement also shall specify whether the Option is intended to be an
ISO or a NQSO.
6.3 OPTION PRICE. Subject to the following sentence, the Option Price for
each grant of an Option under this Plan shall be as determined by the Committee;
provided, however, that the Option Price shall not be less than one hundred
percent (100%) of the FMV of a Share on the date the Option is granted, and all
NQSOs granted to Directors pursuant to Section 6.5(a) below shall be equal to
such FMV. For options granted to non-Director Participants outside of the United
States, the Committee, in order to utilize a locally available tax advantage,
shall have the authority to grant Options at a price that is less than the FMV
of a Share on the date of grant.
6.4 DURATION OF OPTIONS. Each Option granted to a Participant shall expire
at such time as the Committee shall determine at the time of grant; provided,
however, that no Option shall be exercisable later than the tenth (10th)
anniversary of the date of its grant. Notwithstanding the foregoing, (a) for
Options granted to Participants outside the United States, the Committee has the
authority to grant Options that have a term greater than ten (10) years, and (b)
NQSOs granted to Directors may be exercisable as provided in Section 6.5(b)
below.
6.5 DIRECTOR'S OPTIONS.
(a) Subject to the discretion and approval of the Board of Directors,
each Director shall receive an NQSO to purchase up to 10,000 Shares
immediately following each annual meeting of stockholders of the Company at
which such Director is elected to serve on the Board of Directors of the
Company. If a Director is elected or appointed to the Board of Directors
other than at the annual meeting of stockholders, such Director shall
receive as of the date of such election or appointment an NQSO to purchase
a number of Shares equal to (i) the amount of the then most recent grant
multiplied by (ii) a fraction, the numerator of which is the number of days
remaining from the date of such election or appointment until the
anniversary of the preceding annual meeting of the stockholders and the
denominator of which is 365. The price at which Shares may be purchased
pursuant to any Director NQSO shall be the FMV of the Shares on the date
that the Director NQSO is granted.
(b) Each Director NQSO shall have a term of ten years from the date of
grant or such lesser term as is approved by the Board of Directors (the
"Option Term"); provided that if a Director ceases to be a Director for any
reason, all Director NQSOs held by such Director shall terminate on the
fifth anniversary of the date on which such individual ceases to be a
Director, if such Director has served for five years or more, or otherwise
on the first anniversary of the date on which such individual ceases to
serve as a Director (the "Early Termination Date"). Each Director NQSO
which has become vested (as described below) may be exercised from time to
time until the earlier of (i) the end of the Option Term or (ii) the Early
Termination Date, in part or in whole. Each Director NQSO granted pursuant
to Section 6.5(a) above shall vest in full on the date of the first annual
meeting of stockholders following the date of grant of such NQSO; provided
that if a person ceases to be a Director for reason of disability or death
prior to such vesting date, a portion of any unvested Director NQSOs held
by such Director shall vest as of the day preceding the date such person
ceases to be a Director for such reason, which portion shall be equal to
(i) the number of unvested Director NQSOs held by such Director multiplied
by (ii) a fraction, the numerator of which is the number of days such
Director has held such unvested option and
7
the denominator of which is 365. If a Director is removed from the Board or
resigns other than for reasons of disability or death, the unvested
Director NQSOs held by such Director shall not vest following such removal
or resignation.
6.6 EXERCISE OF OPTIONS. Options granted under this Article 6 shall be
exercisable at such times and be subject to such restrictions and conditions as
the Committee shall in each instance approve, which need not be the same for
each grant or for each Participant.
6.7 PAYMENT. Options granted under this Article 6 shall be exercised by
the delivery of a written notice of exercise to the Company, setting forth the
number of Shares with respect to which the Option is to be exercised,
accompanied by full payment for the Shares.
The Option Price upon exercise of any Option shall be payable to the
Company in full either: (a) in cash or its equivalent; (b) by tendering (either
by actual delivery or attestation) previously acquired Shares having an
aggregate FMV at the time of exercise equal to the total Option Price (provided,
however, if the Company is accounting for the Options using APB Opinion 25, the
Shares that are tendered must have been held by the Participant for at least six
(6) months prior to their tender to satisfy the Option Price or have been
purchased on the open market); (c) by a combination of (a) and (b); or (d) any
other method approved by the Committee in its sole discretion at the time of
grant and as set forth in the Award Agreement.
The Committee also may allow cashless exercise as permitted under the
Federal Reserve Board's Regulation T, subject to applicable securities law
restrictions, or by any other means which the Committee determines to be
consistent with the Plan's purpose and applicable law.
Subject to Section 6.8 and any governing rules or regulations, as soon as
practicable after receipt of a written notification of exercise and full
payment, the Company shall deliver to the Participant, Share certificates or
evidence of book entry Shares, in an appropriate amount based upon the number of
Shares purchased under the Option(s).
Unless otherwise determined by the Committee, all payments under all of the
methods indicated above shall be paid in United States dollars.
6.8 RESTRICTIONS ON SHARE TRANSFERABILITY. The Committee may impose such
restrictions on any Shares acquired pursuant to the exercise of an Option
granted under this Article 6 as it may deem advisable, including, without
limitation, requiring the Participant to hold the Shares acquired pursuant to
exercise for a specified period of time, restrictions under applicable federal
securities laws, under the requirements of any stock exchange or market upon
which such Shares are then listed and/or traded, and under any blue sky or state
securities laws applicable to such Shares.
6.9 TERMINATION OF EMPLOYMENT. Each non-Director Participant's Award
Agreement shall set forth the extent to which the Participant shall have the
right to exercise the Option following termination of the Participant's
employment with the Company, its Affiliates, and/or its Subsidiaries. Except for
Awards made to Directors, such provisions shall be determined in the sole
discretion of the Committee, shall be included in the Award Agreement entered
into with each Participant, need not be uniform among all Options issued
pursuant to this Article 6, and may reflect distinctions based on the reasons
for termination.
6.10 TRANSFERABILITY OF OPTIONS.
(a) INCENTIVE STOCK OPTIONS. No ISO granted under the Plan may be
sold, transferred, pledged, assigned, or otherwise alienated or
hypothecated, other than by will or by the laws of descent and
distribution. Further, all ISOs granted to a Participant under this Article
6 shall be exercisable during his or her lifetime only by such Participant.
8
(b) NONQUALIFIED STOCK OPTIONS. Except as otherwise provided in a
Participant's Award Agreement, and except for NQSOs granted to the
Company's Directors, no NQSO granted under this Article 6 may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated,
other than by will or by the laws of descent and distribution. Further,
except as otherwise provided in a Participant's Award Agreement and except
for NQSOs granted to the Company's Directors, all NQSOs granted to a
Participant under this Article 6 shall be exercisable during his or her
lifetime only by such Participant.
6.11 NOTIFICATION OF DISQUALIFYING DISPOSITION. The Participant will
notify the Company upon the disposition of Shares issued pursuant to the
exercise of an Incentive Stock Option. The Company will use such information to
determine whether a disqualifying disposition as described in Section 421(b) of
the Code has occurred.
6.12 ANNUAL LIMIT ON INCENTIVE STOCK OPTIONS. To the extent that the
aggregate FMV (determined as of the date the ISO is granted) of the Shares with
respect to which ISOs granted to a participant under this Plan and all other
option plans of the Company and any subsidiary become exercisable for the first
time by the Participant during any calendar year exceeds the limit with respect
to ISOs as set forth in the Code, such ISOs shall be treated as NQSOs.
ARTICLE 7. STOCK APPRECIATION RIGHTS
7.1 GRANT OF SARS. Subject to the terms and conditions of the Plan, SARs
may be granted to Participants at any time and from time to time as shall be
determined by the Committee. The Committee may grant Freestanding SARs, Tandem
SARs, or any combination of these forms of SARs.
Subject to the terms and conditions of the Plan, the Committee shall have
complete discretion in determining the number of SARs granted to each
Participant and, consistent with the provisions of the Plan, in determining the
terms and conditions pertaining to such SARs.
The SAR Grant Price for each grant of a Freestanding SAR shall be
determined by the Committee and shall be specified in the Award Agreement.
Subject to the limitation set forth in Section 4.1 herein, the SAR Grant Price
may include (but not be limited to) a Grant Price based on one hundred percent
(100%) of the FMV of the Shares on the date of grant, a Grant Price that is
either set at a discount or premium to the FMV of the Shares on the date of
grant, or is indexed to the FMV of the Shares on the date of grant, with the
index determined by the Committee, in its discretion. The Grant Price of Tandem
SARs shall be equal to the Option Price of the related Option.
7.2 SAR AGREEMENT. Each SAR Award shall be evidenced by an Award Agreement
that shall specify the Grant Price, the term of the SAR, and such other
provisions as the Committee shall determine.
7.3 TERM OF SAR. The term of an SAR granted under the Plan shall be
determined by the Committee, in its sole discretion, and except as determined
otherwise by the Committee and specified in the SAR Award Agreement, no SAR
shall be exercisable later than the tenth (10th) anniversary date of its grant.
Notwithstanding the foregoing, for SARs granted to Participants outside the
United States, the Committee has the authority to grant SARs that have a term
greater than ten (10) years.
7.4 EXERCISE OF FREESTANDING SARS. Freestanding SARs may be exercised upon
whatever terms and conditions the Committee, in its sole discretion, imposes
upon them.
7.5 EXERCISE OF TANDEM SARS. Tandem SARs may be exercised for all or part
of the Shares subject to the related Option upon the surrender of the right to
exercise the equivalent portion of the related Option. A Tandem SAR may be
exercised only with respect to the Shares for which its related Option is then
exercisable.
9
Notwithstanding any other provision of this Plan to the contrary, with
respect to a Tandem SAR granted in connection with an ISO: (a) the Tandem SAR
will expire no later than the expiration of the underlying ISO; (b) the value of
the payout with respect to the Tandem SAR may be for no more than one hundred
percent (100%) of the difference between the Option Price of the underlying ISO
and the FMV of the Shares subject to the underlying ISO at the time the Tandem
SAR is exercised; and (c) the Tandem SAR may be exercised only when the FMV of
the Shares subject to the ISO exceeds the Option Price of the ISO.
7.6 PAYMENT OF SAR AMOUNT. Upon the exercise of an SAR, a Participant
shall be entitled to receive payment from the Company in an amount determined by
multiplying:
(a) The difference between the FMV of a Share on the date of exercise
over the Grant Price; by
(b) The number of Shares with respect to which the SAR is exercised.
At the discretion of the Committee, the payment upon SAR exercise may be in
cash, in Shares of equivalent value, in some combination thereof, or in any
other manner approved by the Committee at its sole discretion. The Committee's
determination regarding the form of SAR payout shall be set forth in the Award
Agreement pertaining to the grant of the SAR.
7.7 TERMINATION OF EMPLOYMENT OR DIRECTORSHIP. Each Award Agreement shall
set forth the extent to which the Participant shall have the right to exercise
the SAR following termination of the Participant's employment or directorship
with the Company, its Affiliates, and/or its Subsidiaries. Such provisions shall
be determined in the sole discretion of the Committee, shall be included in the
Award Agreement entered into with Participants, need not be uniform among all
SARs issued pursuant to the Plan, and may reflect distinctions based on the
reasons for termination.
7.8 NONTRANSFERABILITY OF SARS. Except as otherwise provided in a
Participant's Award Agreement, no SAR granted under the Plan may be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, all SARs granted to a
Participant under the Plan shall be exercisable during his or her lifetime only
by such Participant.
7.9 OTHER RESTRICTIONS. The Committee shall impose such other conditions
and/or restrictions on any Shares received upon exercise of a SAR granted
pursuant to the Plan as it may deem advisable. This includes, but is not limited
to, requiring the Participant to hold the Shares received upon exercise of an
SAR for a specified period of time.
7.10 SUBSTITUTING SARS. The Committee shall have the ability to
unilaterally substitute SARs for outstanding Options granted to a Participant;
provided, the terms of the substituted SARs and economic benefit of such
substituted SARs are equivalent.
ARTICLE 8. RESTRICTED STOCK AND RESTRICTED STOCK UNITS
8.1 GRANT OF RESTRICTED STOCK OR RESTRICTED STOCK UNITS. Subject to the
terms and provisions of the Plan, the Committee, at any time and from time to
time, may grant Shares of Restricted Stock and/or Restricted Stock Units to
Participants in such amounts, as the Committee shall determine. Restricted Stock
Units shall be similar to Restricted Stock except that no Shares are actually
awarded to the Participant on the date of grant.
8.2 RESTRICTED STOCK OR RESTRICTED STOCK UNIT AGREEMENT. Each Restricted
Stock and/or Restricted Stock Unit grant shall be evidenced by an Award
Agreement that shall specify the Period(s) of Restriction, the number of Shares
of Restricted Stock or the number of Restricted Stock Units granted, and such
other provisions as the Committee shall determine.
10
8.3 TRANSFERABILITY. Except as provided in this Article 8, the Shares of
Restricted Stock and/or Restricted Stock Units granted herein may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated until the
end of the applicable Period of Restriction established by the Committee and
specified in the Award Agreement (and in the case of Restricted Stock Units
until the date of delivery or other payment), or upon earlier satisfaction of
any other conditions, as specified by the Committee, in its sole discretion, and
set forth in the Award Agreement. All rights with respect to the Restricted
Stock and/or Restricted Stock Units granted to a Participant under the Plan
shall be available during his or her lifetime only to such Participant.
8.4 OTHER RESTRICTIONS. The Committee shall impose such other conditions
and/or restrictions on any Shares of Restricted Stock or Restricted Stock Units
granted pursuant to the Plan as it may deem advisable including, without
limitation, a requirement that Participants pay a stipulated purchase price for
each Share of Restricted Stock or each Restricted Stock Unit, restrictions based
upon the achievement of specific performance goals, time-based restrictions on
vesting following the attainment of the performance goals, time-based
restrictions, restrictions under applicable federal or state securities laws, or
any holding requirements or sale restrictions placed on the Shares by the
Company upon vesting of such Restricted Stock or Restricted Stock Units.
To the extent deemed appropriate by the Committee, the Company may retain
the certificates representing Shares of Restricted Stock in the Company's
possession until such time as all conditions and/or restrictions applicable to
such Shares have been satisfied or lapse.
Except as otherwise provided in this Article 8, Shares of Restricted Stock
covered by each Restricted Stock Award shall become freely transferable by the
Participant after all conditions and restrictions applicable to such Shares have
been satisfied or lapse, and Restricted Stock Units shall be paid in cash,
Shares, or a combination of cash and Shares as the Committee, in its sole
discretion shall determine.
8.5 CERTIFICATE LEGEND. In addition to any legends placed on certificates
pursuant to Section 8.4 herein, each certificate representing Shares of
Restricted Stock granted pursuant to the Plan may bear a legend such as the
following:
The sale or other transfer of the Shares of stock represented by this
certificate, whether voluntary, involuntary, or by operation of law, is
subject to certain restrictions on transfer as set forth in the Alpharma
Inc. 2003 Omnibus Incentive Compensation Plan, and in the associated
Restricted Stock Award Agreement. A copy of the Plan and such Restricted
Stock Award Agreement may be obtained from Alpharma Inc.
8.6 VOTING RIGHTS. To the extent permitted or required by law, as
determined by the Committee, Participants holding Shares of Restricted Stock
granted hereunder may be granted the right to exercise full voting rights with
respect to those Shares during the Period of Restriction. A Participant shall
have no voting rights with respect to any Restricted Stock Units granted
hereunder.
8.7 DIVIDENDS AND OTHER DISTRIBUTIONS. During the Period of Restriction,
Participants holding Shares of Restricted Stock or Restricted Stock Units
granted hereunder may, if the Committee so determines, be credited with
dividends paid with respect to the underlying Shares or dividend equivalents
while they are so held in a manner determined by the Committee in its sole
discretion. The Committee may apply any restrictions to the dividends or
dividend equivalents that the Committee deems appropriate. The Committee, in its
sole discretion, may determine the form of payment of dividends or dividend
equivalents, including cash, Shares, Restricted Stock, or Restricted Stock
Units.
8.8 TERMINATION OF EMPLOYMENT OR DIRECTORSHIP. Each Award Agreement shall
set forth the extent to which the Participant shall have the right to retain
Restricted Stock and/or Restricted Stock Units following
11
termination of the Participant's employment or directorship with the Company,
its Affiliates, and/or its Subsidiaries. Such provisions shall be determined in
the sole discretion of the Committee, shall be included in the Award Agreement
entered into with each Participant, need not be uniform among all Shares of
Restricted Stock or Restricted Stock Units issued pursuant to the Plan, and may
reflect distinctions based on the reasons for termination.
8.9 SECTION 83(b) ELECTION. The Committee may provide in an Award
Agreement that the Award is conditioned upon the Participant making or
refraining from making an election with respect to the Award under Section 83(b)
of the Code. If a Participant makes an election pursuant to Section 83(b) of the
Code concerning an Award, the Participant shall be required to file promptly a
copy of such election with the Company.
ARTICLE 9. PERFORMANCE SHARES AND PERFORMANCE UNITS
9.1 GRANT OF PERFORMANCE SHARES AND PERFORMANCE UNITS. Subject to the
terms of the Plan, Performance Shares and/or Performance Units may be granted to
Participants in such amounts and upon such terms, and at any time and from time
to time, as shall be determined by the Committee.
9.2 VALUE OF PERFORMANCE SHARES AND PERFORMANCE UNITS. Each Performance
Share shall have an initial value equal to the FMV of a Share on the date of
grant. Each Performance Unit shall have an initial value that is established by
the Committee at the time of grant. The Committee shall set performance goals in
its discretion which, depending on the extent to which they are met, will
determine the value and/or number of Performance Shares/Performance Units that
will be paid out to the Participant.
9.3 EARNING OF PERFORMANCE SHARES AND PERFORMANCE UNITS. Subject to the
terms of this Plan, after the applicable Performance Period has ended, the
holder of Performance Shares/Performance Units shall be entitled to receive
payout on the value and number of Performance Shares/Performance Units earned by
the Participant over the Performance Period, to be determined as a function of
the extent to which the corresponding performance goals have been achieved.
Notwithstanding the foregoing, the Company has the ability to require the
Participant to hold the Shares received pursuant to such Award for a specified
period of time.
9.4 FORM AND TIMING OF PAYMENT OF PERFORMANCE SHARES AND PERFORMANCE
UNITS. Payment of earned Performance Shares/Performance Units shall be as
determined by the Committee and as evidenced in the Award Agreement. Subject to
the terms of the Plan, the Committee, in its sole discretion, may pay earned
Performance Shares/Performance Units in the form of cash or in Shares (or in a
combination thereof) equal to the value of the earned Performance
Shares/Performance Units at the close of the applicable Performance Period. Any
Shares may be granted subject to any restrictions deemed appropriate by the
Committee. The determination of the Committee with respect to the form of payout
of such Awards shall be set forth in the Award Agreement pertaining to the grant
of the Award.
9.5 DIVIDENDS AND OTHER DISTRIBUTIONS. At the discretion of the Committee,
Participants holding Performance Shares may be entitled to receive dividend
equivalents with respect to dividends declared with respect to the Shares. Such
dividends may be subject to the accrual, forfeiture, or payout restrictions as
determined by the Committee in its sole discretion.
9.6 TERMINATION OF EMPLOYMENT OR DIRECTORSHIP. Each Award Agreement shall
set forth the extent to which the Participant shall have the right to retain
Performance Shares and/or Performance Units following termination of the
Participant's employment or directorship with the Company, its Affiliates,
and/or its
12
Subsidiaries. Such provisions shall be determined in the sole discretion of the
Committee, shall be included in the Award Agreement entered into with each
Participant, need not be uniform among all Awards of Performance Shares or
Performance Units issued pursuant to the Plan, and may reflect distinctions
based on the reasons for termination.
9.7 NONTRANSFERABILITY. Except as otherwise provided in a Participant's
Award Agreement, Performance Shares/Performance Units may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, a Participant's rights
under the Plan shall be exercisable during his or her lifetime only by such
Participant.
ARTICLE 10. CASH-BASED AWARDS AND STOCK-BASED AWARDS
10.1 GRANT OF CASH-BASED AWARDS. Subject to the terms of the Plan,
Cash-Based Awards may be granted to Participants in such amounts and upon such
terms, and at any time and from time to time, as shall be determined by the
Committee.
10.2 VALUE OF CASH-BASED AWARDS. Each Cash-Based Award shall have a value
as may be determined by the Committee. The Committee may establish performance
goals in its discretion. If the Committee exercises its discretion to establish
performance goals, the number and/or value of Cash-Based Awards that will be
paid out to the Participant will depend on the extent to which the performance
goals are met.
10.3 EARNING OF CASH-BASED AWARDS. Subject to the terms of this Plan, the
holder of Cash-Based Awards shall be entitled to receive payout on the number
and value of Cash-Based Awards earned by the Participant, to be determined as a
function of the extent to which applicable performance goals, if any, have been
achieved.
10.4 FORM AND TIMING OF PAYMENT OF CASH-BASED AWARDS. Payment of earned
Cash-Based Awards shall be as determined by the Committee and as evidenced in
the Award Agreement. Subject to the terms of the Plan, the Committee, in its
sole discretion, may pay earned Cash-Based Awards in the form of cash or in
Shares (or in a combination thereof) that have an aggregate FMV at the time
payment was earned under the Cash-Based Award equal to the value of the earned
Cash-Based Awards. Such Shares may be granted subject to any restrictions deemed
appropriate by the Committee. The determination of the Committee with respect to
the form of payout of such Awards shall be set forth in the Award Agreement
pertaining to the grant of the Award.
10.5 TERMINATION OF EMPLOYMENT. Each Award Agreement shall set forth the
extent to which the Participant shall have the right to receive Cash-Based
Awards and Stock-Based Awards following termination of the Participant's
employment with the Company, its Affiliates, and/or its Subsidiaries. Such
provisions shall be determined in the sole discretion of the Committee, shall be
included in the Award Agreement entered into with each Participant, need not be
uniform among all Awards of Cash-Based Awards and Stock-Based Awards issued
pursuant to the Plan, and may reflect distinctions based on the reasons for
termination.
10.6 NONTRANSFERABILITY. Except as otherwise provided in a Participant's
Award Agreement, Cash-Based Awards and Stock-Based Awards may not be sold,
transferred, pledged, assigned, or otherwise alienated or hypothecated, other
than by will or by the laws of descent and distribution. Further, except as
otherwise provided in a Participant's Award Agreement, a Participant's rights
under the Plan shall be exercisable during the Participant's lifetime only by
the Participant.
13
10.7 STOCK-BASED AWARDS. The Committee may grant other types of
equity-based or equity-related Awards (including the grant or offer for sale of
unrestricted Shares) in such amounts and subject to such terms and conditions,
as the Committee shall determine. Such Awards may entail the transfer of actual
Shares to Participants, or payment in cash or otherwise of amounts based on the
value of Shares and may include, without limitation, Awards designed to comply
with or take advantage of the applicable local laws of jurisdictions other than
the United States.
ARTICLE 11. PERFORMANCE MEASURES
Unless and until the Committee proposes for stockholder vote and the
stockholders approve a change in the general Performance Measures set forth in
this Article 11, the performance goals upon which the payment or vesting of an
Award to a Covered Employee that is intended to qualify as Performance-Based
Compensation shall be limited to the following Performance Measures:
(a) Net earnings;
(b) Earnings per share;
(c) Net sales growth;
(d) Net income (before or after taxes);
(e) Net operating profit;
(f) Return measures (including, but not limited to, return on assets,
capital, equity, or sales);
(g) Cash flow (including, but not limited to, operating cash flow and
free cash flow);
(h) Cash flow return on capital;
(i) Earnings before or after taxes, interest, depreciation, and/or
amortization;
(j) Gross or operating margins;
(k) Productivity ratios;
(l) Revenue growth;
(m) Share price (including, but not limited to, growth measures and
total stockholder return);
(n) Expense targets;
(o) Margins;
(p) Operating efficiency;
(q) Customer satisfaction;
(r) EVA(R);
(s) Employee satisfaction metrics;
(t) Human resources metrics; and
(u) Working capital targets.
14
Any Performance Measure(s) may be used to measure the performance of the
Company as a whole or any business unit of the Company or any combination
thereof, as the Committee may deem appropriate, or any of the above Performance
Measures as compared to the performance of a group of comparator companies, or
published or special index that the Committee, in its sole discretion, deems
appropriate, or the Company may select Performance Measure (m) above as compared
to various stock market indices. The Committee also has the authority to provide
for accelerated vesting of any Award based on the achievement of performance
goals pursuant to the Performance Measures specified in this Article 11.
The Committee may provide in any such Award that any evaluation of
performance may include or exclude any of the following events that occurs
during a Performance Period: (a) asset write-downs; (b) litigation or claim
judgments or settlements; (c) the effect of changes in tax laws, accounting
principles, or other laws or provisions affecting reported results; (d) any
reorganization and restructuring programs; (e) extraordinary nonrecurring items
as described in Accounting Principles Board Opinion No. 30 and/or in
management's discussion and analysis of financial condition and results of
operations appearing in the Company's annual report to stockholders for the
applicable year; (f) acquisitions or divestitures; and (g) foreign exchange
gains and losses. To the extent such inclusions or exclusions affect Awards to
Covered Employees, they shall be prescribed in a form that meets the
requirements of Code Section 162(m) for deductibility.
Awards that are designed to qualify as Performance-Based Compensation, and
that are held by Covered Employees, may not be adjusted upward. The Committee
shall retain the discretion to adjust such Awards downward.
In the event that applicable tax and/or securities laws change to permit
Committee discretion to alter the governing Performance Measures without
obtaining stockholder approval of such changes, the Committee shall have sole
discretion to make such changes without obtaining stockholder approval. In
addition, in the event that the Committee determines that it is advisable to
grant Awards that shall not qualify as Performance-Based Compensation, the
Committee may make such grants without satisfying the requirements of Code
Section 162(m).
ARTICLE 12. ANNUAL INCENTIVE AWARDS
The Committee may designate Company executive officers who are eligible to
receive a monetary payment in any Fiscal Year based on a percentage of an
incentive pool equal to ten percent (10%) of the Company's net income for the
Fiscal Year. The Committee shall allocate an incentive pool percentage to each
designated Participant for each Fiscal Year. In no event may the incentive pool
percentage for any one Participant exceed thirty percent (30%) of the total
pool. In addition, all Annual Incentive Awards are subject to an overriding
limitation. The maximum aggregate payout of an Annual Incentive Award for any
one Fiscal Year to any one Participant may not exceed two million five hundred
thousand dollars ($2,500,000).
Net income shall mean the consolidated net income for the Fiscal Year, as
reported in the annual report to stockholders or as otherwise reported to
stockholders, and as computed in accordance with generally accepted accounting
principles.
As soon as possible after the determination of the incentive pool for a
Fiscal Year, the Board shall calculate the Participant's allocated portion of
the incentive pool based upon the percentage established at the beginning of the
Fiscal Year. The Participant's Annual Incentive Award then shall be determined
by the Board based on the Participant's allocated portion of the incentive pool
subject to adjustment in the sole
15
discretion of the Board. In no event may the portion of the incentive pool
allocated to a Participant who is a Covered Employee be increased in any way,
including as a result of the reduction of any other Participant's allocated
portion.
ARTICLE 13. BENEFICIARY DESIGNATION
A Participant's "beneficiary" is the person or persons entitled to receive
payments or other benefits or exercise rights that are available under the Plan
in the event of the Participant's death. A Participant may designate a
beneficiary or change a previous beneficiary designation at any time by using
forms and following procedures approved by the Committee for that purpose. If no
beneficiary designated by the Participant is eligible to receive payments or
other benefits or exercise rights that are available under the Plan at the
Participant's death, the beneficiary shall be the Participant's estate.
If a Participant designates his or her spouse as a beneficiary and
subsequently becomes legally divorced from such spouse, such spouse shall cease
to be a beneficiary unless the Participant re-affirms, in writing to the Company
following the effective date of the divorce, his or her designation of such
spouse (the then ex-spouse) as a beneficiary. In the event that the Participant
fails to re-affirm such ex-spouse as a beneficiary and fails to designate a new
beneficiary following a divorce, the beneficiary upon such Participant's death
shall be the Participant's estate.
Notwithstanding the provisions above, the Committee may, in its discretion
and after notifying the affected Participants, modify the foregoing
requirements, institute additional requirements for beneficiary designations, or
suspend the existing beneficiary designations of living Participants or the
process of determining beneficiaries under this Article 13, or both. If the
Committee suspends the process of designating beneficiaries on forms and in
accordance with procedures it has approved pursuant to this Article 13, the
determination of who is a Participant's beneficiary shall be made under the
Participant's will and applicable state law.
ARTICLE 14. DEFERRALS AND SHARE SETTLEMENTS
The Committee may permit or require a Participant to defer such
Participant's receipt of the payment of cash or the delivery of Shares that
would otherwise be due to such Participant by virtue of the exercise of an
Option or SAR, or with respect to the lapse or waiver of restrictions with
respect to Restricted Stock or Restricted Stock Units or the satisfaction of any
requirements or performance goals with respect to Annual Incentive Awards,
Performance Shares, Performance Units, Cash-Based Awards, or Stock-Based Awards.
If any such deferral election is required or permitted, the Committee shall, in
its sole discretion, establish rules and procedures for such payment deferrals
and such payments shall be made through a separate, company-sponsored
non-qualified plan.
ARTICLE 15. RIGHTS OF EMPLOYEES AND DIRECTORS
15.1 RELATIONSHIP. Nothing in the Plan or an Award Agreement shall
interfere with or limit in any way the right of the Company, its Affiliates,
and/or its Subsidiaries to terminate any Participant's employment or other
relationship at any time, nor confer upon any Participant any right to continue
in the capacity in which he or she is employed or otherwise serves the Company,
its Affiliates, and/or its Subsidiaries.
Neither an Award nor any benefits arising under this Plan shall constitute
part of an employment contract with the Company, its Affiliates, and/or its
Subsidiaries and, accordingly, subject to Articles 3 and 17, this Plan and the
benefits hereunder may be terminated at any time in the sole and exclusive
discretion of the Committee without giving rise to liability on the part of the
Company, its Affiliates, and/or its Subsidiaries for severance payments.
16
For purposes of the Plan, transfer of employment of a Participant between
the Company, its Affiliates, and/or its Subsidiaries shall not be deemed a
termination of employment. Additionally, the Committee shall have the ability to
stipulate in a Participant's Award Agreement that a transfer to a company that
is spun-off from the Company shall not be deemed a termination of employment
with the Company for purposes of the Plan until the Participant's employment is
terminated with the spun-off company.
15.2 PARTICIPATION. No Employee or Director shall have the right to be
selected to receive an Award under this Plan, or, having been so selected, to be
selected to receive a future Award.
15.3 RIGHTS AS A STOCKHOLDER. A Participant shall have none of the rights
of a stockholder with respect to Shares covered by any Award until the
Participant becomes the record holder of such Shares.
ARTICLE 16. CHANGE IN CONTROL
A Change in Control shall have no effect upon Awards except as provided in
the Company's Change in Control Plan, as in effect from time to time, or as
specified by the Board.
ARTICLE 17. AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION
17.1 AMENDMENT, MODIFICATION, SUSPENSION, AND TERMINATION. The Committee
or Board may, at any time and from time to time, alter, amend, modify, suspend,
or terminate the Plan in whole or in part. Notwithstanding anything herein to
the contrary, without the prior approval of the Company's stockholders, Options
issued under the Plan will not be repriced, replaced, or regranted through
cancellation, or by lowering the exercise price of a previously granted Option.
No amendment of the Plan shall be made without stockholder approval if
stockholder approval is required by law, regulation, or stock exchange rule.
17.2 ADJUSTMENT OF AWARDS UPON THE OCCURRENCE OF CERTAIN UNUSUAL OR
NONRECURRING EVENTS. The Committee may make adjustments in the terms and
conditions of, and the criteria included in, Awards in recognition of unusual or
nonrecurring events (including, without limitation, the events described in
Section 4.2 hereof) affecting the Company or the financial statements of the
Company or of changes in applicable laws, regulations, or accounting principles,
whenever the Committee determines that such adjustments are appropriate in order
to prevent unintended dilution or enlargement of the benefits or potential
benefits intended to be made available under the Plan. The determination of the
Committee as to the foregoing adjustments, if any, shall be conclusive and
binding on Participants under the Plan.
17.3 AWARDS PREVIOUSLY GRANTED. Notwithstanding any other provision of the
Plan to the contrary, no termination, amendment, suspension, or modification of
the Plan shall adversely affect in any material way any Award previously granted
under the Plan, without the written consent of the Participant holding such
Award.
ARTICLE 18. WITHHOLDING
18.1 TAX WITHHOLDING. The Company shall have the power and the right to
deduct or withhold, or require a Participant to remit to the Company, an amount
sufficient to satisfy federal, state, and local taxes, domestic or foreign
(including the Participant's FICA obligation), required by law or regulation to
be withheld with respect to any taxable event arising or as a result of this
Plan.
18.2 SHARE WITHHOLDING. With respect to withholding required upon the
exercise of Options or SARs, upon the lapse of restrictions on Restricted Stock
or Restricted Stock Units, or upon the achievement of performance goals related
to Performance Shares, or any other taxable event arising as a result of Awards
granted hereunder, Participants may elect, subject to the approval of the
Committee, to satisfy the withholding requirement, in whole or in part, by
having the Company withhold Shares having a FMV on the date the tax is
17
to be determined equal to the tax that could be imposed on the transaction,
except that if the Company is using APB Opinion 25 to account for equity awards
in its financial statements, the amount of tax shall not exceed the minimum
statutory total tax that could be imposed on the transaction. All elections
shall be irrevocable, made in writing, and signed by the Participant, and shall
be subject to any restrictions or limitations that the Committee, in its sole
discretion, deems appropriate.
ARTICLE 19. SUCCESSORS
All obligations of the Company under the Plan with respect to Awards
granted hereunder, shall be binding on any successor to the Company, whether the
existence of such successor is the result of a direct or indirect purchase,
merger, consolidation, or otherwise, of all or substantially all of the business
and/or assets of the Company.
ARTICLE 20. LEGAL CONSTRUCTION
20.1 GENDER AND NUMBER. Except where otherwise indicated by the context,
any masculine term used herein also shall include the feminine, the plural shall
include the singular, and the singular shall include the plural.
20.2 SEVERABILITY. In the event any provision of the Plan shall be held
illegal or invalid for any reason, the illegality or invalidity shall not affect
the remaining parts of the Plan, and the Plan shall be construed and enforced as
if the illegal or invalid provision had not been included.
20.3 REQUIREMENTS OF LAW. The granting of Awards and the issuance of
Shares under the Plan shall be subject to all applicable laws, rules, and
regulations, and to such approvals by any governmental agencies or national
securities exchanges as may be required. The Company shall receive the
consideration required by law for the issuance of Awards under the Plan.
20.4 SECURITIES LAW COMPLIANCE. With respect to Insiders, transactions
under this Plan are intended to comply with all applicable conditions of Rule
16b-3 or its successors under the Exchange Act. To the extent any provision of
the Plan or action by the Committee fails to so comply, it shall be deemed null
and void, to the extent permitted by law and deemed advisable by the Committee.
20.5 GOVERNING LAW. The Plan and each Award Agreement shall be governed by
the laws of the State of New Jersey, excluding any conflicts or choice of law
rule or principle that might otherwise refer construction or interpretation of
the Plan to the substantive law of another jurisdiction. Unless otherwise
provided in the Award Agreement, recipients of an Award under the Plan are
deemed to submit to the exclusive jurisdiction and venue of the federal or state
courts of New Jersey, to resolve any and all issues that may arise out of or
relate to the Plan or any related Award Agreement.
ARTICLE 21. GENERAL PROVISIONS
21.1 FORFEITURE EVENTS. The Committee may specify in an Award Agreement
that the Participant's rights, payments, and benefits with respect to an Award
shall be subject to reduction, cancellation, forfeiture, or recoupment upon the
occurrence of certain specified events, in addition to any otherwise applicable
vesting or performance conditions of an Award. Such events shall include, but
shall not be limited to, termination of employment for Cause, violation of
material Company, Affiliate, and/or Subsidiary policies, breach of
noncompetition, confidentiality, or other restrictive covenants that may apply
to the Participant, or other
18
conduct by the Participant that is detrimental to the business or reputation of
the Company, its Affiliates, and/or its Subsidiaries.
21.2 LEGEND. The certificates for Shares may include any legend which the
Committee deems appropriate to reflect any restrictions on transfer of such
Shares.
21.3 LISTING. The Company may use reasonable endeavors to register Shares
allotted pursuant to the exercise of an Award with the United States Securities
and Exchange Commission or to effect compliance with the registration,
qualification, and listing requirements of any national or foreign securities
laws, stock exchange, or automated quotation system.
21.4 DELIVERY OF TITLE. The Company shall have no obligation to issue or
deliver evidence of title for Shares issued under the Plan prior to:
(a) Obtaining any approvals from governmental agencies that the
Company determines are necessary or advisable; and
(b) Completion of any registration or other qualification of the
Shares under any applicable national or foreign law or ruling of any
governmental body that the Company determines to be necessary or advisable.
21.5 INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
deemed by the Company's counsel to be necessary to the lawful issuance and sale
of any Shares hereunder, shall relieve the Company of any liability in respect
of the failure to issue or sell such Shares as to which such requisite authority
shall not have been obtained.
21.6 INVESTMENT REPRESENTATIONS. The Committee may require each
Participant receiving Shares pursuant to an Award under this Plan to represent
and warrant in writing that the Participant is acquiring the Shares for
investment and without any present intention to sell or distribute such Shares.
21.7 EMPLOYEES BASED OUTSIDE OF THE UNITED STATES. Notwithstanding any
provision of the Plan to the contrary, in order to comply with the laws in other
countries in which the Company, its Affiliates, and/or its Subsidiaries operate
or have Employees or Directors, the Committee, in its sole discretion, shall
have the power and authority to:
(a) Determine which Affiliates and Subsidiaries shall be covered by
the Plan;
(b) Determine which Employees and Directors outside the United States
are eligible to participate in the Plan;
(c) Modify the terms and conditions of any Award granted to Employees
or Directors outside the United States to comply with applicable foreign
laws;
(d) Establish subplans and modify exercise procedures and other terms
and procedures, to the extent such actions may be necessary or advisable.
Any subplans and modifications to Plan terms and procedures established
under this Section 21.7 by the Committee shall be attached to this Plan
document as appendices; and
(e) Take any action, before or after an Award is made that it deems
advisable to obtain approval or comply with any necessary local government
regulatory exemptions or approvals.
Notwithstanding the above, the Committee may not take any actions
hereunder, and no Awards shall be granted, that would violate the Exchange Act,
the Code, any securities law, or governing statute or any other applicable law.
19
21.8 UNCERTIFICATED SHARES. To the extent that the Plan provides for
issuance of certificates to reflect the transfer of Shares, the transfer of such
Shares may be effected on a noncertificated basis, to the extent not prohibited
by applicable law or the rules of any stock exchange.
21.9 UNFUNDED PLAN. Participants shall have no right, title, or interest
whatsoever in or to any investments that the Company, its Affiliates, and/or its
Subsidiaries may make to aid it in meeting its obligations under the Plan.
Nothing contained in the Plan, and no action taken pursuant to its provisions,
shall create or be construed to create a trust of any kind, or a fiduciary
relationship between the Company, its Affiliates, and/or its Subsidiaries and
any Participant, beneficiary, legal representative, or any other person. To the
extent that any person acquires a right to receive payments from the Company,
its Affiliates, and/or its Subsidiaries under the Plan, such right shall be no
greater than the right of an unsecured general creditor of the Company. All
payments to be made hereunder shall be paid from the general funds of the
Company and no special or separate fund shall be established and no segregation
of assets shall be made to assure payment of such amounts except as expressly
set forth in the Plan. The Plan is not intended to be subject to ERISA.
21.10 NO FRACTIONAL SHARES. No fractional Shares shall be issued or
delivered pursuant to the Plan or any Award. The Committee shall determine
whether cash, Awards, or other property shall be issued or paid in lieu of
fractional Shares or whether such fractional Shares or any rights thereto shall
be forfeited or otherwise eliminated.
20
3480-PS-03
[ALPHARMA LOGO]
Dear Stockholder: April 14, 2003
You are cordially invited to attend the Annual Meeting of Stockholders to be
held at 9:00 a.m. on Monday, May 19, 2003 at The Regency Hotel, 540 Park Avenue,
New York, New York. Detailed information is contained in the accompanying Notice
of Annual Meeting and Proxy Statement.
Regardless of whether you plan to attend the meeting, it is important that your
shares be voted. Accordingly, we ask that you sign and return your proxy as
soon as possible in the envelope provided. If you do plan to attend the
meeting, please mark the appropriate box on the proxy.
Best regards,
/s/ Robert F. Wrobel
Robert F. Wrobel
Secretary
DETACH HERE
[ALPHARMA LOGO]
PROXY
ALPHARMA INC.
ONE EXECUTIVE DRIVE, FORT LEE, NEW JERSEY 07024
PROXY FOR ANNUAL MEETING OF STOCKHOLDERS ON MAY 19, 2003
Matthew T. Farrell, Executive Vice President and Chief Financial Officer
and Robert F. Wrobel, Executive Vice President, Chief Legal Officer and
Secretary, or either one of them, with full power of substitution, are hereby
authorized to vote the shares of Class A Common Stock of Alpharma Inc. (the
"Company"), which the undersigned is entitled to vote at the 2003 Annual
Meeting of Stockholders to be held at The Regency Hotel, 540 Park Avenue, New
York, New York on Monday, May 19, 2003 at 9:00 a.m., local time, and at all
adjournments thereof, as follows on the reverse side.
THE BOARD OF DIRECTORS RECOMMENDS THAT THE STOCKHOLDERS VOTE FOR (I) THE
NOMINEES SET FORTH IN ITEM 1 AND (II) ITEMS 2, 3, AND 4. SHARES REPRESENTED BY
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED BY THE
UNDERSIGNED STOCKHOLDER AND IN THE DISCRETION OF THE PROXY HOLDERS AS TO ANY
OTHER MATTER THAT MA PROPERLY COME BEFORE THE ANNUAL MEETING OF STOCKHOLDERS
OR, IF NO DIRECTION IS INDICATED, WILL BE VOTED FOR (I) THE NOMINEES SET FORTH
IN ITEM 1 AND (II) ITEMS 2, 3, AND 4, AND IN THE DISCRETION OF THE PROXY
HOLDERS AS TO ANY OTHER MATTER THAT MAY PROPERLY COME BEFORE THE ANNUAL MEETING
OF STOCKHOLDERS.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
ALPHARMA INC.
C/O EQUISERVE TRUST COMPANY, N.A.
P.O. BOX 8694
EDISON, NJ 08818-8694
VOTER CONTROL NUMBER
----------------------------
----------------------------
Your vote is important. Please vote immediately.
Vote-by-Internet [COMPUTER] Vote-by-Telephone [TELEPHONE]
1. Log on to the Internet and go to 1. Call toll-free
http://www.eproxyvote.com/alo 1-877-PRX-VOTE (1-877-779-8683)
OR Outside U.S. and Canada call
2. Enter your Voter Control Number 1-201-536-8073 by midnight
listed above and follow the easy (Eastern time) on May 18, 2003
steps outlined on the secured
website. 2. Enter your Voter Control Number
listed above and follow the easy
recorded instructions.
If you vote over the Internet or by telephone, please do not mail your card.
DETACH HERE IF YOU ARE RETURNING YOUR PROXY CARD BY MAIL
[X] Please mark |
votes as in |
this example. |_____
1. ELECTION OF CLASS A DIRECTORS
Nominees: (01) William I. Jacobs, (02) Peter G. Tombros
and (03) Farah M. Walters
FOR WITHHELD
ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ]
------------------------------------------
For all nominee(s) except as written above
FOR AGAINST ABSTAIN
2. Proposal to amend Article Fourth of the Company's [ ] [ ] [ ]
Amended and Restated Certificate of Incorporation to
increase the number of shares of Class A Common
Stock that the Company has authority to issue from
65,000,000 to 75,000,000.
FOR AGAINST ABSTAIN
3. Proposal to adopt the 2003 Omnibus Incentive [ ] [ ] [ ]
Compensation Plan.
4. Proposal to ratify appointment of PricewaterhouseCoopers [ ] [ ] [ ]
LLP as the Company's independent accountants.
5. As such persons may, in their discretion, determine upon
such matters as may come before the meeting.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
PLEASE MARK, SIGN AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE,
WHICH REQUIRES NO POSTAGE IF MAILED IN THE UNITED STATES.
NOTE: The signature should correspond exactly with the name of the stockholder
as it appears hereon. Where stock is registered in Joint Tenancy, all tenants
should sign. Persons signing as Executors, Administrations, Trustees, etc.
should so indicate.
Signature:__________________ Date:_______ Signature:_______________ Date:______