Page 5 of 12
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant To Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For quarter ended Commission file number 1-8593
March 31, 1997
ALPHARMA INC.
(Exact name of registrant as specified in its charter)
Delaware 22-2095212
(State of Incorporation) (I.R.S. Employer Identification
No.)
One Executive Drive, Fort Lee, New Jersey 07024
(Address of principal executive offices) zip code
(201) 947-7774
(Registrant's Telephone Number Including Area Code)
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15 (d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such requirements
for the past 90 days.
YES X NO
Indicate the number of shares outstanding of each of the
Registrant's classes of common stock as of May 1, 1997:
Class A Common Stock, $.20 par value -- 13,554,624 shares;
Class B Common Stock, $.20 par value -- 8,226,562 shares.
ALPHARMA INC.
INDEX
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Condensed Balance Sheet as of
March 31, 1997 and December 31, 1996 3
Consolidated Statement of Income for the
Three Months Ended March 31, 1997 and 1996 4
Consolidated Condensed Statement of Cash
Flows for the Three Months Ended March 31,
1997 and 1996 5
Notes to Consolidated Condensed Financial
Statements 6-7
Item 2. Management's Discussion and Analysis
of Financial Condition and Results of
Operations 8-10
PART II. OTHER INFORMATION
Item 6. Exhibits and reports on Form 8-K
Signatures 11
Exhibit 11 - Computation of Earnings
per Common Share 12
ALPHARMA INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEET
(In thousands of dollars)
(Unaudited)
March 31, December 31,
1997 1996
ASSETS
Current assets:
Cash and cash equivalents $ 10,877 $ 15,944
Accounts receivable, net 110,956 120,551
Inventories 120,579 123,585
Other 14,189 14,779
Total current assets 256,601 274,859
Property, plant and equipment, net 203,220 209,803
Intangible assets 116,758 119,918
Other assets and deferred charges 8,816 8,827
Total assets $585,395 $613,407
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 6,241 $ 4,966
Short-term debt 50,785 60,952
Accounts payable and accrued liabilities 76,117 88,288
Accrued and deferred income taxes 2,474 1,445
Total current liabilities 135,617 155,651
Long-term debt 231,838 233,781
Deferred income taxes 29,272 29,882
Other non-current liabilities 7,064 8,051
Stockholders' equity:
Class A Common Stock 2,765 2,762
Class B Common Stock 1,646 1,646
Additional paid-in-capital 122,450 122,252
Foreign currency translation
adjustment 4,572 10,491
Retained earnings 56,276 54,996
Treasury stock, at cost (6,105) (6,105)
Total stockholders' equity 181,604 186,042
Total liabilities and
stockholders' equity $585,395 $613,407
The accompanying notes are an integral part
of the consolidated condensed financial statements.
ALPHARMA INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME
(In thousands, except per share data)
(Unaudited)
Three Months Ended
March 31,
1997 1996
Total revenue $121,424 $127,810
Cost of sales 73,302 73,291
Gross profit 48,122 54,519
Selling, general and
administrative expenses 39,248 41,944
Operating income 8,874 12,575
Interest expense (4,842) (5,046)
Other, net (297) 176
Income before provision for income taxes 3,735 7,705
Provision for income taxes 1,475 2,928
Net income $ 2,260 $ 4,777
Average common shares outstanding:
Primary 21,781 22,405
Fully diluted 21,783 22,405
Earnings per common share:
Primary $ .10 $ .21
Fully Diluted $ .10 $ .21
Dividend per common share $ .045 $ .045
The accompanying notes are an integral part
of the consolidated condensed financial statements.
ALPHARMA INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENT OF CASH FLOWS
(In thousands of dollars)
(Unaudited)
Three Months Ended
March 31,
1997 1996
Operating Activities:
Net income $ 2,260 $ 4,777
Adjustments to reconcile net
income to net cash provided
by operating activities, principally
depreciation and amortization 7,744 7,937
Changes in assets and liabilities,
net of effects from business
acquisition:
Decrease in accounts receivable 6,795 15,179
(Increase) in inventory (131) (3,516)
(Decrease) in accounts payable
and accrued expenses (9,945) (13,835)
Other 1,345 (233)
Net cash provided by
operating activities 8,068 10,309
Investing Activities:
Capital expenditures (4,606) (6,643)
Net cash used in investing
activities (4,606) (6,643)
Financing Activities:
Dividends paid (980) (979)
Net repayments under lines of credit (8,663) (13,021)
Proceeds from long-term debt 1,506
Reduction of long-term debt (396) (350)
Other, net 201 (246)
Net cash used in
financing activities (8,332) (14,596)
Exchange Rate Changes:
Effect of exchange rate changes
on cash (734) (287)
Income tax effect of exchange rate
changes on intercompany advances 537 185
Net cash flows from exchange
rate changes (197) (102)
Increase (Decrease) in Cash (5,067) (11,032)
Cash and cash equivalents at
beginning of year 15,944 18,351
Cash and cash equivalents at
end of period $10,877 $ 7,319
The accompanying notes are an integral part
of the consolidated condensed financial statements.
1. General
The accompanying consolidated condensed financial statements
include all adjustments (consisting only of normal recurring
accruals) which are, in the opinion of management, considered
necessary for a fair presentation of the results for the periods
presented. These financial statements should be read in
conjunction with the consolidated financial statements of
Alpharma Inc. and Subsidiaries included in the Company's 1996
Annual Report on Form 10-K. The reported results for the three
month period ended March 31, 1997 are not necessarily indicative
of the results to be expected for the full year.
2. Inventories
Inventories consist of the following:
March 31, December 31,
1997 1996
Finished product $ 67,655 $ 69,629
Work-in-process 19,110 17,126
Raw materials 33,814 36,830
$120,579 $123,585
3. Supplemental Cash Flow Information:
March 31, March 31,
1997 1996
Cash paid for interest $5,095 $5,415
Cash paid for taxes $214 $3,870
4. Management Actions
In 1996, the International Pharmaceuticals Division ("IPD")
implemented actions to strengthen the competitive nature of the
division by lowering costs. In the first quarter of 1996, the IPD
severed approximately 30 sales, marketing and other personnel
based primarily in the Nordic countries and incurred termination
related costs of approximately $1,900. The termination costs are
included in operating expenses.
5. Class B Common Stock Subscription and Planned Class A Rights
Offering
On February 10, 1997, the Company announced the signing of a
stock subscription and purchase agreement with A.L. Industrier AS
("A.L. Industrier") whereby A.L. Industrier irrevocably
subscribed to purchase 1,273,438 shares of Class B Commons Stock
for $16.34 per share (total proceeds $20,808). Concurrently the
Company announced that Class A shareholders would be issued
special rights to purchase one share of Class A Common Stock for
$16.34 per share for every six shares of Class A Common currently
held. (Potential proceeds of approximately $34,000.) If the Class
A rights are exercised the current ownership proportion between
the Class A and B shareholders would be maintained. The
distribution of the rights will be made with a prospectus. The
final details, terms and conditions of the rights have not been
finalized, however they are expected to be transferable and have
a term expiring no later than November 30, 1997. A.L.
Industrier's purchase of Class B Common Stock will occur upon
termination of the Class A rights, but is not conditioned on the
exercise of any of the Class A rights.
Upon issuance of the Class A rights, the exercise price of
the 3,600,000 warrants outstanding ($21.945 per share) will be
adjusted pursuant to the warrant agreement.
6. Long-term Debt
On April 10, 1997, the existing credit facility was amended
to increase the available credit from $170,000 to $180,000. At
March 31, 1997, the Company had $163,150 outstanding under the
facility.
7. Recent Accounting Pronouncements
In February 1997, Statement of Financial Accounting
Standards ("SFAS") No. 128, "Earnings per Share", was issued
which established standards for computing and presenting earnings
per share. SFAS No. 128 is effective for financial statements
issued for periods ending after December 15, 1997, including
interim periods. The Company is currently evaluating the effect
of this standard on earnings per share.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Results of Operations - Three Months Ended March 31, 1997
Total revenue decreased $6.4 million (5.0%) in the three
months ended March 31, 1997 compared to 1996. Operating income in
1997 was $8.9 million, a decrease of $3.7 million, compared to
1996. Net income was $2.3 million ($.10 per share fully diluted)
compared to $4.8 million ($.21 per share fully diluted) in 1996.
Net income in 1996 is reduced by approximately $1.2 million ($.05
per share) for severance for approximately 30 people incurred in
the 1st quarter related to the reorganization of the
International Pharmaceutical Division ("IPD") sales and marketing
function in the Nordic countries.
Revenues decreased in both the business segments in which
the company operates, Human Pharmaceuticals and Animal Health.
Revenues in the Human Pharmaceutical Segment ("HPS") were
lower than 1996 and accounted for the major portion of the
consolidated revenue decline. Revenues declined in the U.S.
Pharmaceutical Division ("USPD") as a result of continued
reductions in net prices due to a fundamental shift in generic
pharmaceutical industry distribution, purchasing and stocking
patterns entirely offsetting increased volume primarily to
wholesalers. (See "U.S. Generic Pharmaceutical Industry".) In the
IPD revenues were lower as a result of selected volume declines
and the effect of translation of sales in Scandinavian currencies
into the U.S. dollar. Sales of Fine Chemicals increased due
principally higher volume.
Within the Animal Health Segment, Animal Health division
revenues decreased primarily due to price erosion within the
poultry market. BMDr volume was marginally higher with increased
volume to swine and international markets offsetting declines in
the poultry market. Aquatic Animal Health division revenues were
approximately the same as 1996 due to increased sales in the
Norwegian fish vaccine market offset by declines in other
products.
On a consolidated basis, gross profit decreased $6.4 million
and the gross margin percent decreased to 39.6 % in 1997 compared
to 42.7% in 1996.
The decrease resulted from lower net sales prices in the
USPD which directly lowered margins offset only partially by
increased volume. IPD experienced lower gross profits and margins
due to lower volume and some translation effects. Animal Health
had lower gross profits and margins due to lower prices and lower
volume of certain products other than BMD.
Operating expenses on a consolidated basis decreased $2.7
million. Included in operating expenses in 1996 are charges for
severance of $1.9 million relating to the reorganization of the
sales and marketing function for IPD in the Nordic countries.
Without the charges for severance, expenses were approximately
$.8 million lower than the prior year. The reduction reflects an
emphasis on cost control, a reduction of expenses resulting from
prior year management actions which reduced payroll and generally
flat selling and marketing expenses certain of which vary
directly with sales.
Operating income as reported declined $3.7 million as a
result of decreased gross profit in dollars and percent being
only partially offset by lower operating expenses.
Interest expense decreased $.2 million due to generally
lower interest rates in 1997.
Other, net in 1997 was a $.3 million loss compared to $.2
million income in 1996. Foreign exchange transaction losses in
1997 and 1996 were approximately $.4 million and $.1 million,
respectively. The loss in 1997 was primarily the result of the
strengthening of the U.S. dollar in the first quarter of 1997.
U.S. Generic Pharmaceutical Industry
The U.S. Generic Pharmaceutical industry has historically
been characterized by intense competition which is evidenced by
eroding prices for products as additional market participants
receive approvals for these products. Growth has historically
occurred through new product approvals and subsequent sales
exceeding declines in the base product line due to price
reductions and/or volume decreases. Generic pharmaceutical market
conditions were further exacerbated in the second half of 1996 by
a rapidly emerging fundamental shift in industry distribution,
purchasing and stocking patterns. The shift resulted in a
substantial drop in the USPD's 1996 volume and in particular to
generic drug distributors who represent an important but
declining part of the Company's base business. Programs initiated
by major wholesalers accelerated the changes and forced prices to
decline. Wholesaler programs generally require lower prices on
products sold, lower inventory levels kept at the wholesaler and
fewer manufacturers selected to provide products to the
wholesalers. The USPD was affected by lower sales as distributors
reduced business and as wholesalers reduced inventories and
prices. The Company has made agreements with major wholesalers to
provide product but cannot predict the effect on future volume
and prices. USPD has been and will continue to be affected by the
competitive and changing nature of this industry. Accordingly,
because of competition, the significance of relatively few major
customers (i.e. large wholesalers, distributors and chain
stores), a rapidly changing market and uncertainty of timing of
new product approvals, USPD sales volume and prices are subject
to unforeseen fluctuation. The generic industry in general is
subject to similar fluctuations.
In the first quarter of 1997 the USPD's volume increased
relative to 1996 with increases in wholesaler volume being only
partially offset by declines in volume to distributors and other
accounts overall. Prices declined substantially relative to the
first quarter of 1996 but appear to have declined marginally
relative to the second half of 1996. As a result of the effects
of lower pricing the USPD had an operating loss in the first
quarter of 1997.
European Operations
The fluctuations of European currencies have and will
continue to impact the Company's European operations which
comprise approximately 45% of total revenues. In addition, many
European governments have enacted or are in the process of
enacting mechanisms aimed at lowering the cost of
pharmaceuticals. Currency fluctuations and governmental actions
to reduce or not allow increases of prices have affected revenue.
The Company cannot predict future currency fluctuations or future
governmental pricing actions or their impact on the Company's
results.
Financial Condition
Working capital at March 31, 1997 was $121.0 million
compared to $119.2 million at December 31, 1996. The current
ratio was 1.89 to 1 at March 31, 1997 compared to 1.77 to 1 at
year end. Long-term debt to stockholders' equity was 1.28:1 at
March 31, 1997 compared to 1.26:1 at December 31, 1996.
All balance sheet captions decreased as of March 31, 1997
compared to December 1996 in U.S. Dollars as the functional
currencies of the Company's principal foreign subsidiaries, the
Norwegian Krone and Danish Krone, depreciated versus the U.S.
Dollar in the three months of 1997 by approximately 3% and 8%,
respectively. The decreases do impact to some degree the above
mentioned ratios. The approximate decrease due to currency
translation of selected captions was: accounts receivable $2.8
million, inventories $3.1 million, accounts payable and accrued
expenses $2.2 million, and total stockholders' equity $5.9
million.
___________
Statements made in this Form 10Q, are forward-looking statements
made pursuant to the safe harbor provisions of the Securities
Litigation Reform Act of 1995. Such statements involve certain
risks and uncertainties that could cause actual results to differ
materially from those in the forward looking statements.
Information on other significant potential risks and
uncertainties not discussed herein may be found in the Company's
filings with the Securities and Exchange Commission including its
Form 10K for the year ended December 31, 1996.
PART II. OTHER INFORMATION
Item 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
10a. Amendment to the Credit Agreement dated April 10,
1997 between the Company and Union Bank of Norway.
10b. Employment agreement dated April 7, 1997 between the
Company and Bruce I. Andrews.
11. Computation of Earnings per Common Share for the three
months ended March 31, 1997 and 1996.
(b) Reports on Form 8-K
On February 19, 1997, the Company filed a report on Form 8-K
dated February 10, 1997 reporting Item 5. "Other events" and Item
9. "Sales of Equity Securities pursuant to Regulation S".
The event reported was the Stock Subscription Agreement
signed with A.L. Industrier and the intention to issue rights to
the Class A Common stockholders.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
ALPHARMA INC.
(Registrant)
Date: May 12, 1997 /s/ Jeffrey E. Smith
Jeffrey E. Smith
Vice President, Finance and
Chief Financial Officer
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<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 10,877
<SECURITIES> 0
<RECEIVABLES> 110,956
<ALLOWANCES> 0
<INVENTORY> 120,579
<CURRENT-ASSETS> 256,601
<PP&E> 344,266
<DEPRECIATION> 141,046
<TOTAL-ASSETS> 585,395
<CURRENT-LIABILITIES> 135,617
<BONDS> 231,838
0
0
<COMMON> 4,411
<OTHER-SE> 177,193
<TOTAL-LIABILITY-AND-EQUITY> 585,395
<SALES> 121,424
<TOTAL-REVENUES> 121,424
<CGS> 73,302
<TOTAL-COSTS> 73,302
<OTHER-EXPENSES> 39,248
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 4,842
<INCOME-PRETAX> 3,735
<INCOME-TAX> 1,475
<INCOME-CONTINUING> 2,260
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 2,260
<EPS-PRIMARY> .10
<EPS-DILUTED> .10
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Page 1 of 12
Exhibit 11
ALPHARMA INC.
Computation of Earnings per Common Share
Primary and Fully Diluted
(Dollars in thousands, except for per share data)
Three Months Ended
March 31,
1997 1996
Computation for Statement of Income
Primary earnings per share:
Net income $ 2,260 $ 4,777
Average common shares outstanding 21,766,000 21,686,000
Additions:
Dilutive effect of outstanding
warrants determined by treasury
stock method 532,000
Dilutive effect of outstanding
options determined by treasury
stock method 15,000 187,248
21,781,000 22,405,248
Earnings per common share - Primary $0.10 $0.21
Fully diluted earnings per share:
Net income $ 2,260 $ 4,777
Average common shares outstanding 21,766,000 21,686,000
Additions:
Dilutive effect of outstanding
warrants determined by treasury
stock method 532,000
Dilutive effect of outstanding
options determined by treasury
stock method 17,000 187,248
21,783,000 22,405,248
Earnings per common share - Fully diluted $0.10 $0.21
AMENDMENT NO. 4
TO
CREDIT AGREEMENT
Dated as of April 10, 1997
AMENDMENT NO. 4 dated as of April 10, 1997 among ALPHARMA
U.S. INC., a Delaware corporation (together with its successors
and assigns, the "Borrower"), the BANKS AND FINANCIAL
INSTITUTIONS (the "Banks") party from time to time to the Credit
Agreement (as defined below) and UNION BANK OF NORWAY, as agent
(the "Agent").
W I T N E S S E T H:
WHEREAS, the Borrower, the Banks, the Agent, Union Bank of
Norway, as arranger, and Den norske Bank AS, as co-arranger, are
parties to that certain Credit Agreement dated as of September
28, 1994, as amended by (i) a Consent and Agreement dated as of
December 19, 1994, (ii) an Amendment No. 2 to Credit Agreement
dated as of December 1, 1995 and (iii) an Amendment No. 3 dated
as of February 26, 1997 (as so amended, the "Credit Agreement"),
pursuant to which the Banks made available to the Borrower loan
facilities in the aggregate original principal amount of
$185,000,000;
WHEREAS, pursuant to the aforementioned Amendment No. 3, the
total commitment of the Banks under the Credit Agreement was
reduced from $185,000,000 to $170,000,000;
WHEREAS, the Borrower and the Banks have agreed to amend the
Credit Agreement on the terms and conditions set forth herein in
order to increase the commitment of Summit Bank by $10,000,000
and thereby increase the aggregate amount of the Banks'
commitments under the Credit Agreement from $170,000,000 to
$180,000,000.
NOW, THEREFORE, in consideration of the premises and the
covenants and agreements contained herein, the parties hereto
agree as follows (with terms used herein and not otherwise
defined having the meaning ascribed thereto in the Credit
Agreement):
ARTICLE I
AMENDMENTS TO CREDIT AGREEMENT
Section 1.1. Amendment of Commitments. (a) Effective on
and as of the dates provided in Table A below, the aggregate of
the Banks' Tranche A Term Commitments, Tranche B Term Commitments
and Revolving Loan Commitments shall be as set forth in the Table
A below and (b) the Ratable Portion of each Bank's individual
Commitments in respect thereof on and as of each such date shall
be as set forth in Tables B-1, B-2 and B-3 below (and on and as
of each such date, all references in the Credit Agreement to
Schedule II shall be deemed to be references to Tables B-1, B-2
and B-3 below, respectively):
TABLE A
Tranche A Term Tranche B Term Revolving Loan
Effective Date Commitments Commitments Commitments
April 10, 1997 $58,500,000 $56,700,000 $64,800,000
June 2, 1997 $0 $56,700,000 $123,300,000
September 3, $0 $0 $180,000,000
1997
TABLE B-1
as of April 10, 1997
Tranche A Tranche B Revolving Total
Name of Bank Term Term Loan Commitment
Commitment Commitment Commitment
Union Bank $29,250,000 $36,450,000 $34,300,000 $100,000,000
of Norway
Den norske $15,750,000 $12,150,000 $12,100,000 $40,000,000
Bank ASA
Summit Bank $13,500,000 $0 $11,500,000 $25,000,000
CoreStates $0 $8,100,000 $ 6,900,000 $15,000,000
Bank, N.A.
TOTAL $58,500,000 $56,700,000 $64,800,000 $180,000,000
TABLE B-2
as of June 2, 1997
Tranche A Tranche B Revolving Total
Name of Bank Term Term Loan Commitment
Commitment Commitment Commitment
Union Bank $0 $36,450,000 $63,550,000 $100,000,000
of Norway
Den norske $0 $12,150,000 $27,850,000 $40,000,000
Bank ASA
Summit Bank $0 $0 $25,000,000 $25,000,000
CoreStates $0 $8,100,000 $ 6,900,000 $15,000,000
Bank, N.A.
TOTAL $0 $56,700,000 $123,300,000 $180,000,000
TABLE B-3
as of September 3, 1997
Tranche A Tranche B Revolving Total
Name of Bank Term Term Loan Commitment
Commitment Commitment Commitment
Union Bank $0 $0 $100,000,000 $100,000,000
of Norway
Den norske $0 $0 $40,000,000 $40,000,000
Bank ASA
Summit Bank $0 $0 $25,000,000 $25,000,000
CoreStates $0 $0 $15,000,000 $15,000,000
Bank, N.A.
TOTAL $0 $0 $180,000,000 $180,000,000
Section 1.7. Agreement Acknowledged and Confirmed. Except
as expressly amended hereby, the Credit Agreement and the other
Loan Documents are hereby ratified and confirmed.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
Section 2.1. Representations and Warranties. The Borrower
represents and warrants as follows:
(a) Due Authorization. The Borrower has the power,
and has taken all necessary action to authorize it, to execute
and deliver this Amendment and to perform this Amendment and the
Credit Agreement as amended by this Amendment in accordance with
their respective terms . This Amendment has been duly executed
and delivered by all necessary action of the Borrower and this
Amendment and the Credit Agreement as amended by this Amendment
are the legal, valid and binding obligations of the Borrower
enforceable in accordance with their respective terms under all
Applicable Law, subject, as to enforcement of remedies, to any
applicable bankruptcy, insolvency or other laws affecting the
enforcement of creditors' rights generally.
(b) Compliance with Law, etc. The execution and
delivery of this Amendment and the performance of this Amendment
and the Credit Agreement as amended by this Amendment in
accordance with their respective terms do not and will not (i)
violate any provision of any applicable laws, orders, rules or
regulations presently in effect or (ii) conflict with, result in
a breach of or constitute a default under the organizational
documents of the Borrower, or any indenture, agreement or
instrument to which the Borrower is a party or by which it or its
properties may be bound.
(c) Governmental Regulation. The Borrower is not
required to obtain any governmental authorizations, consents,
orders or approvals in connection with the execution and delivery
of this Amendment or the performance of the transactions
contemplated by each of this Amendment and the Credit Agreement
as amended by this Amendment.
(d) Validity. There are no proceedings or
investigations pending or, to the best knowledge of the Borrower,
threatened against the Borrower before any court, regulatory
body, administrative agency or other tribunal or governmental
instrumentality (i) asserting the invalidity of the Credit
Agreement as amended by this Amendment, (ii) seeking to prevent
the consummation of any of the transactions contemplated by the
Credit Agreement as amended by this Amendment, (iii) seeking any
determination or ruling that, in the reasonable judgment of the
Borrower, would materially and adversely affect the performance
by the Borrower of its obligations under this Amendment and the
Credit Agreement as amended by this Amendment and (iv) seeking
any determination or ruling that would materially and adversely
affect the validity or enforceability of the Credit Agreement as
so amended.
(e) Representations; No Defaults. The representations
and warranties contained in Article VII of the Credit Agreement
are true and correct, and no Default or Event of Default has
occurred and is continuing.
ARTICLE III
MISCELLANEOUS
Section 3.1. Governing Law. This Amendment shall be
governed by, and construed in accordance with, the laws of the
State of New York.
Section 3.2. Counterparts. This Amendment may be executed
in any number of counterparts, all of which taken together shall
constitute one and the same instrument.
Section 3.3. Severability. Any provision of this Amendment
that is prohibited or unenforceable in any jurisdiction shall, as
to such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating or affecting
the validity or enforceability of such provision in any other
jurisdiction.
Section 3.4. Loan Document. The parties hereto acknowledge
that this Amendment shall be a "Loan Document" as such term is
defined in the Credit Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this
Amendment to be executed by their duly authorized officers all as
of the date and year first above written.
ALPHARMA U.S. INC.
By: __________________________
Name: Jeffrey E. Smith
Title: Vice President and Chief
Financial Officer
UNION BANK OF NORWAY, as Agent
By: ___________________________
Name:
Title:
UNION BANK OF NORWAY, as Bank
By: ____________________________
Name:
Title:
CORESTATES BANK, N.A.
By: _________________________
Name:
Title:
DEN NORSKE BANK ASA
By: __________________________
Name:
Title:
SUMMIT BANK
By: ________________________
Name:
Title:
CONSENT OF GUARANTORS
Each of the undersigned acknowledges the foregoing Amendment and
agrees that its obligations under each Loan Document to which it
is a party shall remain unimpaired and in full force and effect.
ALPHARMA INC.
By _______________________
Name: Jeffrey E. Smith
Title: Vice President and Chief Financial Officer
ALPHARMA USPD INC.
By _______________________
Name: Albert N. Marchio, II
Title: Treasurer
PARMED PHARMACEUTICALS, INC.
By _______________________
Name: Albert N. Marchio, II
Title: Treasurer
NMC LABORATORIES, INC.
By _______________________
Name: Albert N. Marchio, II
Title: Treasurer
WADE JONES COMPANY, INC.
By _______________________
Name: Albert N. Marchio, II
Title: Assistant Treasurer
BARRE PARENT CORPORATION
By _______________________
Name: Albert N. Marchio, II
Title: Treasurer
MIKJAN CORPORATION
By _______________________
Name: Albert N. Marchio, II
Title: Assistant Treasurer
Execution Copy
4
c:\mydocs\corp\empl\ander1.doc
Employment Agreement
THIS EMPLOYMENT AGREEMENT (the "Agreement") is made and
entered into effective this 7th day of April 1997 by and
between ALPHARMA US INC., a Delaware corporation (the
"Company"), and Bruce I. Andrews (the "Executive").
NOW THEREFORE, in consideration of the mutual covenants
contained herein and other good and valuable consideration,
the receipt and sufficiency of which are hereby
acknowledged, the parties agree as follows:
1. Employment.
(a) The Company hereby agrees to employ Executive, and
Executive accepts such employment with the Company,
upon the terms and conditions set forth in this
Agreement effective May 1st, 1997. Executive shall
serve as the "President, Animal Health Division" and
shall report directly to the Chief Executive Officer
("CEO") of Alpharma Inc. ("Alpharma"). Executive shall
also be appointed a member of the Alpharma Operating
Committee. Executive shall have such responsibilities,
duties and authority as directed by the CEO.
(b) The Executive shall be an employee at will. During
Executive's employment with the Company, Executive
shall devote his best efforts and his full business
time and attention to the business and affairs of
Alpharma's Animal Health Division.
2. Place of Performance. In connection with the
Executive's employment by the Company, the Executive
shall be based at the Company's Fort Lee, New Jersey
offices.
3. Compensation and Benefits.
(a) Executive' salary shall be $275,000 per annum for
calendar year 1997 which salary shall be payable in
regular installments in accordance with the Company's
general payroll practices. Such salary shall be
reviewed annually and changes made shall be effective
each January 1 beginning in 1998.
(b) In addition to the salary set forth above,
Executive shall be eligible to be considered for a cash
bonus for each full calendar year Executive is employed
by the Company. For 1997 the amount payable will be pro-
rated to reflect actual service for the year. The
amount of the bonus shall be targeted at 30% of
Executive's base salary and with an opportunity to earn
45% of base salary. The criteria for determining the
amount of the bonus, if any, shall be established by
agreed upon financial and management objectives as set
forth in writing and delivered to Executive at the
beginning of each calendar year; provided that for the
1997 calendar year such criteria shall be established,
set forth in a writing and delivered to the Executive
within 60 days following the full execution of this
Agreement.
(c) Executive shall also be entitled to participate in
the benefit programs for which employees of the Company
are generally eligible, including medical, dental,
prescription, life insurance, disability, 401k and
stock option and stock purchase plans, in accordance
with the terms and rules of such plans. Executive
shall also be entitled to participate in the Alpharma
Non-Contributory Retirement Income Plan for Salaried
Employees as well as the Alpharma Supplemental Pension
Plan.
(d) Executive shall receive a taxable cash automobile
allowance per Company policy, (which is currently
$15,500p.a.). In addition, the Company shall reimburse
Executive for auto insurance and up to $2000 in
maintenance costs per year.
(e) Executive shall receive a taxable annual $3000
allowance for tax and/or financial planning and tax return
preparation.
(f) Executive shall be entitled to four weeks vacation.
4. Termination.
(a) Executive acknowledges and agrees that his
employment is at will. If Executive's services are
terminated because of a change in top management, or
for any other reason other than (i) as set forth in
subsection (b) of this Section 4, or (ii) cause,
provided Executive signs the Company's standard
release, he will be paid twelve month's base salary
with fringe benefits in a manner best suited for the
Company. In the event Executive does not have another
position after the twelve month period immediately
following the date of termination, the Company will
pay Executive's base salary with fringe benefits until
he takes another position for up to an additional six
months thereafter.
(b) If Executive's employment is terminated because of
the Company or Alpharma's Animal Health Division
being acquired, provided Executive signs the Company's
standard release, he will be paid eighteen months base
salary with fringe benefits in a manner best suited for
the Company. In the event Executive does not have
another position after the eighteen month period
immediately following the date of termination, the
Company will pay Executive's base salary with fringe
benefits until he takes another position for up to an
additional six months thereafter.
(c) If Executive's employment is terminated by the
Company for cause, as a result of Executive's
resignation or as a result of Executive's death or
permanent disability, Executive shall be entitled to
receive only his salary and benefits through the
termination date.
5. Compliance with Company Policy and Nondisclosure.
The Executive agrees that during the period of his
employment hereunder he will comply with Alpharma and
Company policies, including without limitation, the
Alpharma Business Conduct Guidelines, and shall
execute, before his first day of employment, the
Company's standard non-disclosure and assignment of
invention agreement.
6. Miscellaneous. No provisions of this Agreement may
be modified, waived or discharged unless such waiver,
modification or discharge is agreed to in writing
signed by the Executive and such officer of the Company
as may be specifically designated by the Board. No
waiver by either party hereto at any time of any breach
by the other party hereto of, or compliance with, any
condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver
of similar or dissimilar provisions or conditions at
the same or at any prior or subsequent time. The
validity, interpretation, construction and performance
of this Agreement shall be governed by the laws of the
State of Delaware without regard to its conflicts of
law principles.
7. Validity. The invalidity or unenforceability of
any provision of this Agreement shall not affect the
validity or enforceability of any other provision of
this Agreement, which shall remain in full force and
effect.
8. Counterparts. This Agreement may be executed in
one or more counterparts, each of which shall be deemed
to be an original but all of which together will
constitute one and the same instrument.
* * * * * * * * * * * * * * *
IN WITNESS WHEREOF, the parties have executed this
Agreement on the date and year first above written.
ALPHARMA U.S INC.
By:_________________________
Name:
Title:
BRUCE I. ANDREWS
____________________________
