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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 30, 1999
REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER THE SECURITIES ACT OF 1933
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ALPHARMA INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 22-2095212
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
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ONE EXECUTIVE DRIVE
FORT LEE, NEW JERSEY 07024
TELEPHONE: (201) 947-7774
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF REGISTRANT'S PRINCIPAL OFFICES)
ROBERT F. WROBEL
VICE PRESIDENT AND CHIEF LEGAL OFFICER
ALPHARMA INC.
ONE EXECUTIVE DRIVE
FORT LEE, NEW JERSEY 07024
TELEPHONE: (201) 947-7774
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER,
INCLUDING AREA CODE, OF AGENT FOR SERVICE)
COPY TO:
GLEN E. HESS, P.C.
KIRKLAND & ELLIS
CITICORP CENTER
153 EAST 53RD STREET
NEW YORK, NEW YORK 10022
(212) 446-4800
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
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If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box: [ ]
If any of the securities being registered on this form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, check the following box: [ ]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following box
and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box: [ ]
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CALCULATION OF REGISTRATION FEE
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TITLE OF EACH CLASS OF PROPOSED MAXIMUM AMOUNT OF
SECURITIES TO BE REGISTERED AGGREGATE OFFERING PRICE(1) REGISTRATION FEE
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3% Convertible Senior Subordinated Notes due 2006........... $170,000,000 $47,260
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Class A Common Stock, par value $.20 per share.............. (2) (2)
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(1) Estimated solely for the purposes of determining the registration fee
pursuant to Rule 457(c) under the Securities Act of 1933, as amended.
(2) Such indeterminate number of shares of Common Stock as shall be issuable
upon the conversion of the Convertible Notes being registered hereunder. No
separate consideration will be received by the Company upon conversion of
the Convertible Notes and, accordingly, no additional registration fee is
payable pursuant to Rule 457(i) under the Securities Act.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT THAT SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(a) OF
THE SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(a),
MAY DETERMINE.
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SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED AUGUST 30, 1999
Prospectus
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$160,119,000
[ALPHARMA LOGO]
3% CONVERTIBLE SENIOR SUBORDINATED NOTES DUE 2006
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BACKGROUND
- - On June 2, 1999 we issued $170,000,000 worth of notes that are convertible
into shares of our Class A common stock.
THIS PROSPECTUS
- - Under the prospectus, the noteholders listed on pages 32 through 35 may offer
to sell all or a portion of their notes, totaling up to $160,119,000 worth of
notes and up to 4,986,573 shares of our Class A common stock into which those
notes are convertible.
CONVERSION
- - The Notes are convertible into 31.1429 shares of our Class A common stock, par
value $.20 per share, per $1,000 of initial principal amount of Notes, subject
to adjustment in certain circumstances. This rate results in an initial
conversion price of $32.11 per share, or a 25% premium to the closing price of
$25.6875 of our Class A common stock on the New York Stock Exchange on May 27,
1999. The number of shares into which a Note is convertible will not be
adjusted for the accretion of principal or for accrued interest.
INTEREST
- - We will pay cash interest of 3% per annum on the Notes on June 1 and December
1 of each year, commencing December 1, 1999, calculated based on the initial
principal amount of the Notes.
MATURITY AND YIELD
- - The Notes will mature on June 1, 2006 at a price of 134.104% of the initial
principal amount. The payment of the principal amount of the Notes at
maturity, together with cash interest paid over the term of the Notes, will
yield an investor who holds a Note from the initial issuance date until
maturity 6 7/8% per annum, calculated on a semi-annual basis.
RANKING
- - The Notes are subordinated to all of our existing and future senior
indebtedness and structurally subordinated to all of our subsidiaries'
obligations, including trade payables. As of June 30, 1999, we had
approximately $415 million of consolidated indebtedness and other obligations
effectively ranking senior to the Notes.
- - The Notes rank senior to our convertible subordinated notes due 2005, of which
$192.8 million were outstanding as of June 30, 1999.
CHANGE IN CONTROL
- - If we experience a change in control, we must offer to repurchase the Notes at
the prices described herein, together with accrued and unpaid cash interest,
if any, to the date of repurchase.
REDEMPTION
- - After June 16, 2002, we may at our option redeem the Notes at the redemption
prices described herein, together with accrued and unpaid cash interest, if
any, to the date of redemption.
- - The Notes are not entitled to any mandatory redemption or sinking fund.
LISTING AND TRADING
- - The Class A common stock is listed on the New York Stock Exchange under the
symbol "ALO."
- - The Notes are eligible for trading in the PORTAL Market of the National
Association of Securities Dealers, Inc.
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SEE "RISK FACTORS" BEGINNING ON PAGE 2 FOR A DISCUSSION OF CERTAIN FACTORS THAT
YOU SHOULD CONSIDER BEFORE INVESTING IN THE NOTES.
The information in this preliminary prospectus is not complete and may be
changed. We may not sell these securities until the registration statement
covering them has been declared effective by the SEC. This preliminary
prospectus is not an offer to sell these securities and are we not soliciting
offers to buy these securities in any state where the offer or sale is not
permitted.
PRICE: 100% OF THE INITIAL PRINCIPAL AMOUNT PLUS ACCRUED AND UNPAID CASH
INTEREST
The date of this prospectus is , 1999.
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TABLE OF CONTENTS
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PAGE
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Forward-looking Statements...... i
Where You Can Find More
Information................... i
Incorporation by Reference...... i
Our Company..................... 1
Risk Factors.................... 2
Use of Proceeds................. 8
Ratio of Earnings to Fixed
Charges....................... 8
Capitalization.................. 9
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PAGE
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Description of Notes............ 10
Description of Capital Stock.... 21
Certain United States Federal
Income Tax Consequences....... 22
Selling Securityholders......... 32
Plan of Distribution............ 37
Legal Matters................... 38
Experts......................... 38
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<PAGE> 4
FORWARD-LOOKING STATEMENTS
This prospectus contains "forward-looking statements," or statements that
are based on current expectations, estimates, and projections rather than
historical facts. We offer these forward-looking statements in reliance on the
safe harbor provisions of the Private Securities Litigation Reform Act of 1995.
Forward-looking statements may prove, in hindsight, to have been inaccurate
because of risks and uncertainties that are difficult to predict. Many of the
risks and uncertainties that we face are included under the captions "Risk
Factors."
We are not obligated to publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
In light of these risks, uncertainties and assumptions, the forward-looking
events discussed in this prospectus might not occur.
WHERE YOU CAN FIND MORE INFORMATION
We file annual, quarterly and current reports, proxy statements and other
information with the Securities and Exchange Commission. You may read and copy
these reports, statements and other information at the SEC's public reference
rooms at:
- Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549;
- Seven World Trade Center, 13th Floor, New York, New York 10048; and
- Citicorp Center, 500 West Madison Street, Suite 1400, Chicago, Illinois
60661.
Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference rooms. You can also request copies of these
documents, for a copying fee, by writing to the SEC.
Our SEC filings can also be reviewed by accessing the SEC's Internet site
at http://www.sec.gov, which contains reports, proxy and information statements
and other information.
In addition, our class A common stock is traded on the New York Stock
Exchange and reports, proxy and information statements and other information
about us can also be inspected at our offices at One Executive Drive, Fort Lee,
New Jersey 07024.
INCORPORATION BY REFERENCE
We have filed the following documents with the Securities and Exchange
Commission. These documents are incorporated herein by reference as of their
respective dates of filing and shall be deemed to be a part of this prospectus:
1. Our Annual Report on Form 10-K for the year ended December 31, 1998.
2. Our Quarterly Reports on Form 10-Q for the quarters ended March 31, 1999
and June 30, 1999 and Form 10Q/A for the quarter ended June 30, 1999.
3. Our Current Reports on Form 8-K dated February 23, 1999, June 17, 1999
and July 2, 1999.
All documents and reports which we file pursuant to Section 13(a), 13(c),
14 or 15(d) of the Securities Exchange Act of 1934 after the date of this
prospectus are also incorporated by reference in this prospectus and will be
deemed a part of this prospectus from the date of filing of the document or
report.
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Statements contained in documents incorporated or deemed to be incorporated
by reference after the date of this prospectus will modify statements in any
other subsequently filed documents to the extent the new information differs
from the old information. Any statements modified or superseded will no longer
constitute a part of this prospectus in their original form.
We will provide you without charge, upon request, with a copy of any or all
of the documents referred to above which have been or may be incorporated in the
prospectus by reference, other than exhibits to such documents unless the
exhibits themselves are specifically incorporated by reference. Requests for
such copies should be directed to Alpharma Inc., One Executive Drive, Fort Lee,
New Jersey 07024, Attention: Investor Relations Department (telephone number:
(201) 947-7774).
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OUR COMPANY
We are a multinational pharmaceutical company that develops, manufactures
and markets specialty human pharmaceutical and animal health products. We
manufacture and market approximately 620 pharmaceutical products for human use
and 40 animal health products. We conduct our business in more than 60 countries
and have approximately 3,200 employees at 40 sites in 22 countries. For the year
ended December 31, 1998, we generated revenue of over $600 million and operating
income of $65 million.
Our human pharmaceutical business is the largest manufacturer and marketer
of generic liquid and topical pharmaceuticals in the U.S. In addition, we have
leading and expanding positions internationally, especially in Europe, where we
have leading positions in branded generic in the Nordic countries and a
substantial generic pharmaceutical market presence in the UK, Netherlands,
Germany and France, through recent acquisitions. Further, through our fine
chemicals division, we are the world's leading producer of bacitracin,
bacitracin zinc and polymixin, which are important pharmaceutical grade
antibiotics. Our human pharmaceutical business generated approximately $420
million of revenue, or approximately 70% of or total revenues, for the year
ended December 31, 1998. On June 18, 1999 we acquired Isis Pharma and Isis
Puren, the German generic businesses of Schwarz Pharma AG. The acquisition
consisted of sales personnel, product registrations, patents and trademarks.
Isis had 1998 revenues in Germany of approximately $75 million and has about 200
employees, of which 140 are in the sales force. Schwarz Pharma has agreed to
continue to supply some of the more substantial Isis products for a period of
four years and all remaining products for one year. Approximately 80% of Isis'
sales consist of cardiovascular products. The most important product of Isis is
the cardiovascular drug Pentalong(TM).
Our animal health business is a leading provider of animal feed additives
for the poultry and swine industries, as well as vaccines for the aquaculture
industry. We are the market leader in the manufacture and sale of
bacitracin-based feed additives sold under the trade names BMD(R) and Albac. In
addition, we believe that we have a significant market share with several other
of our feed additives, including those sold under our Deccox and 3-Nitro(R)
brands. In aquatic animal health, we believe we are a leader in the development,
manufacture and marketing of vaccines for use in immunizing farmed fish against
disease. Our animal health business generated approximately $185 million of
revenue, or approximately 30% of our total revenues, for the year ended December
31, 1998.
We were originally organized as A.L. Laboratories, Inc., a wholly owned
subsidiary of Apotheketnes Laboratorium A.S., a Norwegian healthcare company,
the predecessor company to A.L. Industrier AS. In 1994, we acquired the
complementary human pharmaceutical and animal health business of our parent
company and subsequently changed our name to Alpharma Inc. to operate worldwide
as one corporate entity.
Our principal executive offices are located at One Executive Drive, Fort
Lee, New Jersey 07024.
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RISK FACTORS
You should carefully consider the following risks as well as other
information contained in this prospectus before deciding to invest in the notes.
OUR SUBSTANTIAL INDEBTEDNESS COULD LIMIT OUR ABILITY TO OBTAIN ADDITIONAL
FINANCING, LIMIT OUR OPERATING FLEXIBILITY AND MAKE US MORE VULNERABLE TO
ECONOMIC DOWNTURNS.
As of June 30, 1999, we had total outstanding long-term indebtedness of
approximately $600 million, or approximately 69% of our total capitalization. In
addition, we had $93 million of availability under our revolving credit facility
and short-term European line, subject to the satisfaction of the financial tests
and maintenance of the financial ratios we describe in this document and our
other public filings. These tests and covenants include an interest coverage
ratio, total debt to EBITDA and equity to asset ratio. This level of
indebtedness could:
- limit our ability to obtain additional financing
- limit our operating flexibility as a result of covenants contained in our
credit facility
- make us more vulnerable to economic downturns and
- limit our ability to pursue other business opportunities.
Also, we are vulnerable to fluctuations in interest rates since
approximately $294 million of our debt at June 30, 1999 was at variable interest
rates. We believe that we are more leveraged than many of our competitors.
Our acquisition of the Isis Group resulted in an equity to total asset
ratio under our revolving credit facility of 24.5% as of June 30, 1999. A ratio
of below 25% requires an increase in the interest rate margin under our
revolving credit facility of .75%. We are required to increase the equity to
total asset ratio under our revolving credit facility to at least 25% by
December 18, 1999. A failure to meet this minimum ratio by December 18, 1999
would constitute an event of default under our revolving credit facility and
would have a material adverse effect on us.
POTENTIAL ACQUISITIONS MAY REDUCE OUR EARNINGS, BE DIFFICULT TO INTEGRATE INTO
OUR COMPANY AND REQUIRE ADDITIONAL FINANCING.
We search for and evaluate acquisitions which will provide new product and
market opportunities, leverage existing assets and add critical mass.
Acquisitions commonly involve risks and may have a material effect on our
results of operations. Any acquisitions we make may fail to accomplish our
strategic objectives, may not be successfully integrated with our operations and
may not perform as expected. In addition, based on current acquisition prices in
the pharmaceutical industry, acquisitions could initially be dilutive to our
earnings and add significant intangible assets and related goodwill amortization
charges. Our acquisition strategy will require additional debt or equity
financing, resulting in additional leverage and dilution of ownership,
respectively. We may not be able to finance acquisitions on terms satisfactory
to us.
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WE ARE SUBJECT TO GOVERNMENT REGULATIONS THAT INCREASE OUR COSTS AND COULD
PREVENT US FROM MARKETING OR SELLING SOME OF OUR PRODUCTS IN CERTAIN COUNTRIES.
The research, development, manufacturing and marketing of our products are
subject to extensive government regulation. Government regulation includes
inspection of and controls over testing, manufacturing, safety, efficacy,
labeling, record keeping, sale and distribution of pharmaceutical products. The
U.S. and other governments regularly review manufacturing operations.
Noncompliance with applicable requirements can result in fines, recall or
seizure of products, suspension of production and debarment of individuals or
our company from obtaining new drug approvals. Government regulation
substantially increases the cost of manufacturing, developing and selling our
products.
We have filed applications to market our products with the United States
Food and Drug Administration and other regulatory agencies both in the U.S. and
internationally. The timing of receipt of approvals of these applications can
significantly affect future revenues and income. This is particularly
significant with respect to human pharmaceuticals at the end of third parties'
patent protection. There can be no assurance that we will obtain new product
approvals in a timely manner, if ever. Failure to obtain approvals, or to obtain
them when expected, could have a material adverse effect on our business. We
also have affiliations, license agreements and other arrangements with
companies, such as Ascent Pediatrics, Inc., which arrangements depend on
regulatory approvals sought by such companies.
The European Union and five non-EU countries have banned the use of
bacitracin zinc, a feed antibiotic growth promoter, in livestock feeds effective
July 1, 1999. Our initial effort to reverse this action by means of a court
injunction from the Court of First Instance of the European Court was denied. We
are making further attempts to reverse or limit this action, with particular
emphasis on political means. Although we may not succeed, we believe that strong
scientific evidence exists to refute the EU position. In addition, other
countries are considering a similar ban. If the loss of bacitracin zinc sales is
limited to the European Union and those countries that have already taken
similar action, we do not anticipate a material adverse effect. If either (a)
other countries more important to our sales of bacitracin-based products ban
these products or (b) the European Union (or countries or customers within the
EU) acts to prevent the importation of meat products from countries that allow
the use of bacitracin-based products, we could be materially affected. We cannot
predict whether the present bacitracin zinc ban will be expanded.
OUR FOREIGN OPERATIONS ARE SUBJECT TO ADDITIONAL ECONOMIC AND POLITICAL RISKS.
Our foreign operations are subject to currency exchange fluctuations and
restrictions, political instability in some countries, and uncertainty as to the
enforceability of, and government control over, commercial rights.
Some of our foreign operations, particularly in Indonesia where we have a
manufacturing facility and Brazil where we have recently added significant
sales, are being affected by the wide currency fluctuations and decreased
economic activity in these regions and, in the case of Indonesia, by social and
political unrest. While our present exposure to economic factors in these
regions is not material, they are important areas for anticipated future growth.
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We sell products in many countries that are recognized to be susceptible to
significant foreign currency risk. These products are generally sold for U.S.
dollars, which eliminates the direct currency risk but increases credit risk if
the local currency devalues significantly and it becomes more difficult for
customers to purchase U.S. dollars required to pay us. Recent acquisition in
Europe may increase the foreign currency risk.
OUR OPERATING RESULTS HAVE VARIED IN THE PAST AND MAY CONTINUE TO DO SO.
Our businesses and may experience variations in revenues and net income as
a result of many factors, including acquisitions, delays in the introduction of
new products, success or failures of strategic alliances and joint ventures,
management actions and the general conditions of the pharmaceutical and animal
health industries.
MANY OF OUR COMPETITORS HAVE MORE RESOURCES THAN WE HAVE.
All of our businesses operate in highly competitive markets and many of our
competitors are substantially larger and have greater financial, technical and
marketing resources. As a result, we may be at a disadvantage in our ability to
develop and market new products to meet competitive demands.
WE HAVE BEEN AND WILL CONTINUE TO BE AFFECTED BY THE COMPETITIVE AND CHANGING
NATURE OF THE PHARMACEUTICAL INDUSTRY.
Our U.S. generic pharmaceutical business has historically been subject to
intense competition. As patents and other bases for market exclusivity expire,
prices typically decline as generic competitors enter the marketplace. Normally,
there is a further unit price decline as the number of generic competitors
increases. The timing of these price decreases is unpredictable and can result
in a significantly curtailed period of profitability for a generic product. In
addition, brand-name manufacturers frequently take actions to prevent or
discourage the use of generic equivalents through marketing and regulatory
activities and litigation.
Generic pharmaceutical market conditions in the U.S. were further
exacerbated in the second half of 1996 by a fundamental shift in industry
distribution, purchasing and stocking patterns resulting from increased
importance of sales to major wholesalers and a concurrent reduction in sales to
private label generic distributors. We believe that this trend continues to
date. 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 wholesaler's own marketing programs.
The factors which have adversely affected the U.S. generic pharmaceutical
industry may also affect some or all of the markets in which the international
pharmaceutical division operates. In addition, in Europe we are encountering
price pressure from parallel imports of identical products from lower priced
markets under EU laws of free movement of goods. Parallel imports could lead to
lower volume growth. In addition, in Europe we are encountering price pressure
from imports of identical products from lower priced markets under EU laws of
free movement of goods. Both parallel imports and governmental cost containment
could create downward pressure on prices in certain product and geographical
market areas including the Nordic countries where we have significant sales.
It is difficult for us to respond to competitive challenges because of the
significance of relatively few major customers, such as large wholesalers and
chain stores, a rapidly changing market and uncertainty of timing of new product
approvals.
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FUTURE INABILITY TO OBTAIN RAW MATERIALS OR PRODUCTS FROM CONTRACT MANUFACTURERS
COULD SERIOUSLY AFFECT OUR OPERATIONS.
We currently purchase many of our raw materials and other products are from
single domestic or foreign suppliers. Although we have not experienced
difficulty to date, we may experience supply interruptions in the future and may
have to obtain substitute materials or products. If we had to obtain substitute
materials or products, we would require additional regulatory approvals. Any
significant interruption of supply could have a material adverse effect on our
operations.
OUR BUSINESS IS AFFECTED BY THE POLICIES OF THIRD-PARTY PAYORS, SUCH AS INSURERS
AND MANAGED CARE ORGANIZATIONS.
Our commercial success with respect to generic products will depend, in
part, on the availability of adequate reimbursement from third-party health care
payors, such as government and private health insurers and managed care
organizations. Third-party payors are increasingly challenging the pricing of
medical products and services and their reimbursement practices may prevent us
from maintaining our present product price levels. In addition, the market for
our products may be limited by third-party payors who establish lists of
approved products and do not provide reimbursement for products not listed.
SOME OF OUR PRODUCTS MAY BE SUBJECT TO PRODUCT LIABILITY CLAIMS.
Continuing studies are being conducted by the industry, government agencies
and others. These studies increasingly employ sophisticated methods and
techniques and can call into question the utilization, safety and efficacy of
previously marketed products and have given rise to claims for damages from
previous users. Our business could be harmed by such actions.
THE NOTES ARE EFFECTIVELY SUBORDINATED TO OUR SENIOR INDEBTEDNESS AND ALL
LIABILITIES OF OUR SUBSIDIARIES.
The notes are subordinated in right of payment to all of our existing and
future senior indebtedness, and are structurally subordinated to all
liabilities, including trade payables of our subsidiaries. As of June 30, 1999,
we had approximately $415 million of consolidated indebtedness and other
obligations effectively ranking senior to the notes. The indenture governing the
notes does not restrict the incurrence of senior indebtedness or our other debt
or that of our subsidiaries. By reason of such subordination, in the event of
the insolvency, bankruptcy, liquidation, reorganization, dissolution or winding
up of our business, our assets will be available to pay the amounts due on the
notes only after all senior indebtedness has been paid in full, and, therefore,
there may not be sufficient assets remaining to pay amounts due on any or all of
the notes then outstanding. See "Description of Notes -- Subordination of
Notes."
Our ability to meet our cash obligations in the future will be dependent
upon the ability of our subsidiaries to make cash distributions to us. The
ability of our subsidiaries to make these distributions is and will continue to
be restricted by, among other limitations, applicable provisions of governing
law and contractual provisions. The indenture governing the notes does not limit
the ability of our subsidiaries to incur such restrictions in the future. Our
right to participate in the assets of any subsidiary (and thus the ability of
holders of the notes to benefit indirectly from such assets) is generally
subject to the prior claims of creditors, including trade creditors, of that
subsidiary except
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to the extent that we are recognized as a creditor of such subsidiary, in which
case our claim would still be subject to any security interest of other
creditors of such subsidiary. The notes, therefore, are structurally
subordinated to creditors, including trade creditors, of our subsidiaries with
respect to the assets of the subsidiaries against which such creditors have a
claim.
OUR RELATIONSHIP WITH OUR CONTROLLING STOCKHOLDER COULD LEAD TO CONFLICTS OF
INTEREST.
A.L. Industrier AS, or Industrier, is the beneficial owner of 100% of the
outstanding shares of the Class B common stock. Industrier also owns $67.8
million of our 5 3/4% convertible subordinated notes due 2005 which are
convertible into Class B common stock. As a result of its ownership, Industrier
controls Alpharma and is presently entitled to elect two-thirds of the members
of our board of directors. Einar Sissener, Chairman of the Board and Chairman of
the Office of the Chief Executive of Alpharma, controls a majority of
Industrier's outstanding shares and is Chairman of Industrier. In addition, Mr.
Sissener beneficially owns 338,668 shares of Class A common stock. Gert Munthe,
President and Chief Executive Officer of Alpharma, is the son-in-law of Mr.
Sissener and a director of Industrier.
Alpharma and Industrier engage in various transactions from time to time,
and conflicts of interest are present with respect to the terms of such
transactions. All contractual arrangements between Alpharma and Industrier are
subject to review by, or ratification of, a committee of our board of directors
consisting of one or more directors who are unaffiliated with Industrier, as to
the fairness of the terms and conditions of such arrangements to Alpharma.
THE MARKET PRICE OF OUR COMMON STOCK MAY BE HIGHLY VOLATILE BECAUSE OF INTERNAL
AND EXTERNAL FACTORS.
The stock market has from time to time experienced significant price and
volume fluctuations that may be unrelated to the operating performance of
particular companies. In addition, the market price of our Class A common stock,
like the stock prices of many publicly traded pharmaceutical companies, has been
and may continue to be highly volatile. The sale by our major shareholders or
members of our management of shares of common stock, management actions,
announcements of technological innovations or new commercial products by us or
our competitors, publicity regarding actual or potential medical results
relating to marketed products, regulatory developments in either the United
States or foreign countries, public concern as to the safety of pharmaceutical
and animal health products, factors present in foreign operations, the loss of
suppliers or contract manufacturers, third-party reimbursement pressures,
potential liability for current products and economic and other external
factors, as well as period-to-period fluctuations in financial results, among
other factors, may have a significant impact on the market price of the Class A
common stock.
WE MAY NOT HAVE THE ABILITY TO RAISE THE FUNDS NECESSARY TO FINANCE THE CHANGE
IN CONTROL OFFER REQUIRED BY THE INDENTURE.
If we undergo a change in control (as defined), each holder of the notes
and each holder of the 2005 Notes may require us to repurchase all or a portion
of the holder's notes. We cannot assure you that there will be sufficient funds
available for any required repurchases of these securities if a change in
control occurs. In addition, the terms of any agreements related to borrowing
which we may enter from time to time may prohibit or
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limit or make our repurchase of notes an event of default under those
agreements. If we fail to repurchase the notes in that circumstance, we will be
in default under the indentures governing the notes and the 2005 Notes. See
"Description of Notes -- Repurchase at Option of Holders Upon Change in
Control."
WE CANNOT ASSURE YOU THAT AN ACTIVE TRADING MARKET WILL DEVELOP FOR THE NOTES.
The notes constitute a new issue of securities for which there is no
established trading market. We have been informed by the initial purchasers that
they intend to make a market in the notes after the offering is completed. The
initial purchasers may cease their market-making at any time without notice.
Although we have designated the notes for trading through the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market, we cannot
assure you that an active trading market for the notes will develop or, if such
market develops, how liquid it will be.
If a trading market does not develop or is not maintained, holders of the
notes may experience difficulty in reselling, or an inability to sell, the
notes. If a market for the notes develops, any such market may be discontinued
at any time. If a public trading market develops for the notes, future trading
prices of the notes will depend on many factors, including, among other things,
prevailing interest rates, our operating results and the market for similar
securities. Depending on prevailing interest rates, the market for similar
securities and other factors, including our financial condition, the notes may
trade at a discount from their principal amount.
7
<PAGE> 13
USE OF PROCEEDS
We will not receive any of the proceeds from the sale of the securities by
the selling securityholders.
RATIO OF EARNINGS TO FIXED CHARGES
The following table sets forth the ratio of earnings to fixed charges for
our company and our subsidiaries for each of the periods indicated. We
calculated the ratio of earnings to fixed charges by dividing earnings by total
fixed charges. Earnings consist of pretax income plus fixed charges and
amortization of capitalized interest less capitalized interest. Fixed charges
consist of interest expense on all indebtedness (including amortization of
deferred debt issuance costs) and a portion of rent expense (33%) we estimated
to be the interest component of those rentals.
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
- -------------------------------- SIX MONTHS ENDED
1994 1995 1996 1997 1998 JUNE 30, 1999
- ---- ---- ---- ---- ---- ----------------
<S> <C> <C> <C> <C> <C>
1.07x 2.24x (1) 2.31x 2.29x 2.31x
</TABLE>
- ---------------
(1) Earnings in 1996 were not sufficient to cover fixed charges. The deficiency
of earnings was $16.4 million.
8
<PAGE> 14
CAPITALIZATION
The following table presents as of June 30, 1999 the consolidated
capitalization of Alpharma. You should read this table in conjunction with our
consolidated financial statements and notes, which are included elsewhere in
this prospectus.
<TABLE>
<CAPTION>
JUNE 30, 1999
--------------
(IN THOUSANDS)
<S> <C>
Cash and cash equivalents................................... $ 22,516
========
Short-term debt, including current maturities of long-term
debt...................................................... $ 56,175
========
Long-term debt, excluding current maturities:
Credit Facility(1)........................................ $190,000
Notes offered hereby, including interest accretion........ 170,512
2005 Notes(2)............................................. 192,850
Other..................................................... 47,923
--------
Total long-term debt................................... 601,285
Stockholders' equity:
Preferred stock, par value $1.00 per share; no shares
issued................................................. --
Class A common stock, par value $0.20 per share;
18,313,685 shares issued(3)............................ 3,662
Class B common stock, par value $0.20 per share, 9,500,000
shares issued and outstanding(4)....................... 1,900
Additional paid-in capital................................ 233,626
Accumulated other comprehensive loss...................... (31,522)
Retained earnings......................................... 69,369
Treasury stock at cost (277,334 shares)................... (6,184)
--------
Total stockholders' equity............................. 270,851
--------
Total capitalization................................... 872,136
========
</TABLE>
- -------------------------
(1) In January 1999, we entered into a new $300.0 million unsecured credit
facility. The new credit facility provides for a $100.0 million six-year
term loan and a $200.0 million revolving credit facility which has an
initial five-year term and two possible one-year extensions. Principal
payments on the term loans amortize on a semi-annual basis, beginning
January 2000. The credit facility has several financial covenants, including
an interest coverage ratio, total debt to EBITDA ratio and equity to asset
ratio. Both the term loan and the revolving loan bear interest at the LIBOR
with a margin of between 0.875% and 1.6625% depending on the ratio of total
debt to EBITDA. The equity to asset covenant requires that we maintain a
ratio of equity to total assets of at least 0.25:1, which may be reduced to
0.20:1 for six months if we make a significant acquisition. At June 30, 1999
after acquisition of Isis the ratio was 24.5% and the interest rate margin
on the debt outstanding was increased effective August 19, 1999 by .75% to
2.25%.
(2) Includes $67.8 million of 2005 Notes held by Industrier and convertible into
Class B common stock.
(3) In addition to the shares issued, we have 3,348,299 shares of Class A common
stock reserved for issuance under our stock option plans, of which options
to purchase 2,215,295 shares were outstanding as of June 30, 1999, and
4,371,585 shares of Class A common stock reserved for issuance upon
conversion of the Class A 2005 Notes (as defined) and 5,294,301 shares of
Class A common stock reserved for issuance upon conversion of the 2006
Notes.
(4) In addition to the shares issued, we have 2,372,897 shares of Class B common
stock reserved for issuance upon conversion of the Class B 2005 Notes (as
defined). All of Class B common stock is held by Industrier, which has
pledged 2,000,000 of such shares to a Norwegian bank to secure debt
previously incurred to make investments in Alpharma. Industrier has agreed
not to sell any shares of Class B common stock or convert any Class B common
stock into Class A common stock until after October 31, 1999.
9
<PAGE> 15
DESCRIPTION OF NOTES
The notes were issued under an indenture entered into between Alpharma and
First Union National Bank, as trustee. The following statements are subject to
the detailed provisions of the indenture and are qualified in their entirety by
reference to the indenture. We will provide a copy of the indenture to
prospective investors upon request, and it is also available for inspection at
the office of the trustee. Wherever particular provisions of the indenture are
referred to, such provisions are incorporated by reference as a part of the
statements made, and the statements are qualified in their entirety by such
reference. For purposes of this summary, the terms "Alpharma," "we," "us," "our"
and "company" refer only to Alpharma Inc. and not to any of its subsidiaries.
GENERAL
The notes represent our unsecured general obligations, subordinate in right
of payment to certain of our other obligations as described under "Subordination
of Notes," and convertible into Class A common stock as described under
"Conversion." We will pay cash interest on the notes semiannually on June 1 and
December 1 of each year, with the first payment to be made on December 1, 1999,
at the rate of 3% per annum, calculated based upon the initial principal amount
of the notes (except defaulted interest), to the persons who are registered
holders of notes at the close of business on the preceding May 15 and November
15, respectively (subject to certain exceptions in the case of notes redeemed or
repurchased upon a change in control between a record date and the next
succeeding interest payment date). Unless previously redeemed or converted, the
notes will mature on June 1, 2006 and will be repaid in full at a price of
134.104% of the initial principal amount, plus any accrued and unpaid interest.
This amount, together with cash interest paid over the term of the notes, will
yield an investor who holds a note from the initial issuance date until maturity
6 7/8% per annum, calculated on a semi-annual basis. The notes are limited to
$170,000,000 aggregate initial principal amount. We may pay principal and
interest by check and may mail an interest check to a holder's registered
address. Holders must surrender notes to the paying agent to collect principal
payments.
The notes were issued without coupons in denominations of $1,000 of initial
principal amount and whole multiples of $1,000. A holder may transfer or
exchange notes in accordance with the indenture. No service charge will be made
for any registration of transfer, exchange or conversion of the notes, except
for any tax or other governmental charges that may be imposed in connection with
any transfers, registration of transfers or exchanges. The registrar for the
notes need not transfer or exchange any notes selected for redemption. Also, it
need not transfer or exchange any notes for a period of 15 days before selecting
notes to be redeemed. The registered holder of a note may be treated as its
owner for all purposes.
Initially, the trustee will act as registrar, paying agent and conversion
agent. We may appoint an additional, or change any, paying agent, registrar or
conversion agent without notice. We may act in any such capacity.
The indenture does not contain any restrictions on the payment of dividends
or on the repurchase of securities of Alpharma or any financial covenants, nor
does the indenture require us to maintain any sinking fund or other reserves for
repayment of the notes.
CONVERSION
The holders of the notes are entitled at any time after the original
issuance thereof and before the close of business on the date of maturity of the
notes, subject to prior
10
<PAGE> 16
redemption or repurchase, to convert the notes, or portions thereof (if the
portions are $1,000 or whole multiples thereof) into 31.1429 shares of Class A
common stock per $1,000 of initial principal amount of notes, subject to
adjustment in certain circumstances described in the next paragraph. The number
of shares into which a note is convertible will not be adjusted for the
accretion of principal or for accrued interest. In addition, except as described
below, the number of shares into which a note is convertible will not be
adjusted for dividends on any Class A common stock issued on conversion. If any
note is converted between a record date for the payment of interest and the next
succeeding interest payment date, unless such note has been called for
redemption on a redemption date between such dates, such note must be
accompanied by funds equal to the cash interest payable to the registered holder
on such interest payment date on the principal amount so converted. A note
converted on an interest payment date need not be accompanied by any payment,
and the interest on the principal amount of the note being converted will be
paid on such interest payment date to the registered holder of such note on the
immediately preceding record date. We will not issue fractional shares of class
A common stock upon conversion of notes and instead will deliver a check in lieu
of the fractional share based upon the market value of the Class A common stock
on the last trading day prior to the conversion date. In the case of notes
called for redemption, conversion rights will expire at the close of business on
the tenth calendar day preceding the redemption date, and in the event any
holder exercises its repurchase right (as defined below), such holder's
conversion right will terminate upon receipt of the written notice of exercise
of such repurchase right. See "-- Repurchase at Option of Holders Upon Change in
Control." In the case of notes called for redemption on a redemption date
between a record date and the opening of business on the next succeeding
interest payment date, no cash interest will be payable on any such notes
converted during such period.
The number of shares issuable on conversion is subject to adjustment as set
forth in the indenture in certain events, including:
(1) the payment of dividends or distributions on the common stock in shares
of capital stock;
(2) subdivisions or combinations of the common stock into a greater or
smaller number of shares;
(3) a reclassification of the common stock resulting in an issuance of any
shares of our capital stock;
(4) the distribution of rights or warrants to all holders of common stock
entitling them for a period of sixty days or less to purchase common
stock at less than the then current market price at that time; and
(5) the distribution to all holders of common stock of assets or debt
securities or any rights or warrants to purchase assets or debt
securities, which assets, debt securities, rights or warrants have an
aggregate fair market value on the date such distribution is declared
that exceeds the "permitted dividend amount." The "permitted dividend
amount" means:
(x) 10% of our market capitalization (the product of the current market
price of the Class A common stock and the number of shares of common
stock outstanding as of any particular date) minus
(y) the aggregate value of all dividends or distributions made to
holders of common stock within the 12 months preceding such
distribution (excluding any distributions or dividends referred to
in (1)-(4) above), provided that with respect to any distribution
not paid out of our retained earnings, the
11
<PAGE> 17
permitted dividend amount shall be zero, unless the dividend is paid
out of consolidated net income or in the form of common stock.
No adjustment will be required for rights to purchase common stock pursuant to
any plan of Alpharma for reinvestment of dividends or interest, or for a change
in the par value of the common stock. To the extent that notes become
convertible into cash, no adjustment will be required thereafter as to cash. No
adjustment in the number of shares issuable on conversion will be made unless
such adjustment would require a change of at least 1% in the conversion ratio;
however, any adjustment that would otherwise be required to be made shall be
carried forward and taken into account at the earlier of any subsequent
adjustment or three years after the occurrence of the event giving rise to the
adjustment. We reserve the right to make such increases in the conversion rate
in addition to those required in the foregoing provisions as we in our
discretion shall determine to be advisable in order that certain stock-related
distributions hereafter made by us to our stockholders shall not be taxable or
for any other appropriate reason. Except as stated above, the number of shares
issuable on conversion will not be adjusted for the issuance of common stock or
any securities convertible into or exchangeable for common stock, or carrying
the right to purchase any of the foregoing. See "Certain Federal Income Tax
Consequences -- Dividends on the Class A Common Stock."
If we reclassify the Class A common stock or merge into, or transfer or
lease substantially all of our assets to, another corporation, the holders of
the notes then outstanding will be entitled thereafter to convert such notes
into the kind and amount of shares of capital stock, other securities, cash or
other assets which they would have owned immediately after such event had such
notes been converted immediately before the effective date of the transaction.
Adjustments in the number of shares issuable upon conversion may in certain
circumstances result in constructive distributions that could be taxable as
dividends under the Internal Revenue Code of 1986, as amended, to holders of
notes or to holders of class A common stock issued upon conversion thereof. See
"Certain Federal Income Tax Consequences -- Dividends on the Class A Common
Stock."
REDEMPTION
Prior to June 16, 2002, the notes are not redeemable.
Redemption at Our Option. The notes will be redeemable at our option, in
whole or in part, at any time on or after June 16, 2002, at the redemption price
determined as described below to the date of redemption, together with accrued
and unpaid cash interest to such date.
The redemption price (whether payable by reason of a redemption by
Alpharma, a change in control, an event of default or at maturity) shall be
determined so that taking into account cash interest paid and accrued and unpaid
interest, the holder of a note from the initial issuance date will receive a
yield of 6 7/8% per annum (calculated on a semi-annual basis). The redemption
price will be calculated in accordance with the following formula, rounded (if
necessary) to three decimal places with 0.0005 being rounded upwards:
Redemption Price = (Previous Redemption Price X (1 + r/2)(d/p)) - AI
12
<PAGE> 18
For purposes of this formula:
Previous Redemption Price = the Redemption Price on the interest payment date
immediately preceding the date fixed for redemption
(or if the notes are to be redeemed or repurchased
prior to December 1, 1999, $1,000) as set out below:
<TABLE>
<CAPTION>
INTEREST PAYMENT DATE REDEMPTION PRICE
--------------------- ----------------
<S> <C>
December 1, 1999............................................ $1,019.38
June 1, 2000................................................ 1,039.42
December 1, 2000............................................ 1,060.15
June 1, 2001................................................ 1,081.59
December 1, 2001............................................ 1,103.77
June 1, 2002................................................ 1,126.71
December 1, 2002............................................ 1,150.44
June 1, 2003................................................ 1,174.99
December 1, 2003............................................ 1,200.38
June 1, 2004................................................ 1,226.64
December 1, 2004............................................ 1,253.81
June 1, 2005................................................ 1,281.91
December 1, 2005............................................ 1,310.97
June 1, 2006................................................ 1,341.04
</TABLE>
<TABLE>
<S> <C> <C>
r = 6 7/8% expressed as a fraction.
d = number of days (as described in the following sentence) from
and including the immediately preceding interest payment
date (or if the notes are to be redeemed or repurchased on
or before December 1, 1999 from and including June 2, 1999)
to but excluding the date fixed for redemption. The number
of days elapsed in any one-month period from date of
issuance or any interest payment date shall be deemed to be
30, and the number of days elapsed in any incomplete month
shall be deemed to be the number of actual days elapsed (not
to exceed 30).
p = 180.
AI = accrued interest from the interest payment date immediately
preceding the date fixed for redemption or the date of
issuance, as applicable.
</TABLE>
REPURCHASE AT OPTION OF HOLDERS UPON CHANGE IN CONTROL
Upon any change in control (as defined below) with respect to Alpharma,
each holder of the notes shall have the right, at the holder's option, to
require us to repurchase all of such holder's notes or a portion thereof which
is $1,000 or any integral multiple thereof, on the date that is 45 days after
the date of the company notice (as defined below) at a price equal to the
redemption price on the repurchase date, together with accrued and unpaid cash
interest to such date.
Within 30 days after the occurrence of a change in control, we are
obligated to mail to all holders of record of the notes a notice of the
occurrence of such change in control and the repurchase right arising as a
result thereof. We shall deliver a copy of the company notice to the trustee and
shall cause a copy of such notice to be published in The Financial Times and The
Wall Street Journal or another newspaper of national circulation. To exercise
the repurchase right, a holder of notes must deliver on or before the 30th day
after the date of the company notice irrevocable written notice to us (or an
agent designated by us for such purpose) and the trustee of the holder's
exercise of such right together with the notes with respect to which the right
is being exercised, duly endorsed for transfer.
13
<PAGE> 19
A "change in control" of Alpharma means:
(1) the acquisition by any person, entity or "group" within the meaning of
Section 13(d)(3) or 14(d)(2) of the Exchange Act of 1934, (excluding,
for this purpose, Alpharma or its subsidiaries, or any employee benefit
plan of Alpharma or its subsidiaries which acquires beneficial
ownership of voting securities of Alpharma) of beneficial ownership
(within the meaning of Rule 13d-3 promulgated under the Exchange Act of
1934) of shares of common stock sufficient to elect a majority of
directors;
(2) persons who, as of the date of the indenture, constitute the board of
directors (the "incumbent board") cease for any reason to constitute at
least a majority of the board of directors, provided that any person
becoming a director subsequent to the date hereof whose election, or
nomination for election by our stockholders, was approved by a vote of
at least a majority of the directors then comprising the incumbent
board shall be considered as though such person were a member of the
incumbent board;
(3) approval by our stockholders of a reorganization, merger or
consolidation, in each case, with respect to which persons who were our
stockholders immediately prior to such reorganization, merger or
consolidation do not, immediately thereafter, beneficially own shares
sufficient to elect a majority of directors of the reorganized, merged
or consolidated company's then outstanding voting securities; or
(4) our liquidation or dissolution (other than pursuant to the United
States Bankruptcy Code) or the conveyance, transfer or leasing of all
or substantially all of our assets to any person; provided, however,
that for the purpose of clauses (1) through (4) above, the terms
"person," "entity," and "group" shall not be deemed to include
(x) Industrier,
(y) the stockholders of Industrier in the case of a distribution of
shares of our capital stock beneficially owned by Industrier to the
shareholders of Industrier, unless a change in control of Industrier
has occurred or occurs concurrently with such a distribution, or in
a series of related transactions of which such distribution is a
part, (determined without regard to this clause (y) of this proviso)
or
(z) E.W. Sissener, any heir or descendant of Mr. Sissener or the estate
of Mr. Sissener (each, an "EWS Party"), or any trust or other
similar arrangement for the benefit of any EWS Party or any
corporation or other person or entity controlled by one or more EWS
Party, or any group of which any EWS Party is a member.
For purposes of the above sentence, a "liquidation" or "dissolution" shall not
be deemed to include any transfer of our property solely to any of the persons
described in clauses (x), (y) and (z) of the proviso in such sentence.
No quantitative or other established meaning has been given to the phrase
"all or substantially all" (which appears in the definition of change in
control) by courts which have interpreted this phrase in various contexts. In
interpreting this phrase, courts make a subjective determination as to the
portion of assets conveyed, considering such factors as
14
<PAGE> 20
the value of assets conveyed and the proportion of an entity's income derived
from the assets conveyed. To the extent the meaning of such phrase is uncertain,
uncertainty will exist as to whether or not a change in control may have
occurred (and, accordingly, whether or not the holders of notes will have the
right to require us to repurchase their notes).
The occurrence of a change in control would, in most cases, permit the
lenders to require prepayment of some or all amounts outstanding under our bank
lines of credit and other debt agreements. See "Capitalization." In the event of
a change in control, any repurchase of the notes could, absent payment in full
of any amounts outstanding under such credit facilities or waiver, be prevented
by the subordination provisions of the notes. See "-- Subordination of Notes."
Our failure to repurchase the notes when required will result in an event of
default with respect to the notes whether or not such repurchase is permitted by
the subordination provisions. The right to require us to repurchase the notes
could delay or deter our change in control, whether or not such change in
control were supported by our board of directors.
If a change in control occurs, we cannot assure you that we would have
sufficient funds or financing to repay any senior indebtedness then required to
be repaid or to repurchase any or all notes then required to be repurchased
under the indenture. If an offer is made to repurchase notes as a result of a
change in control, we intend to comply with all tender offer rules, including
but not limited to Section 13(e) and 14(e) under the Exchange Act of 1934 and
Rules 13e-1 and 14e-1 thereunder, to the extent applicable to such offer.
SUBORDINATION OF NOTES
Upon any distribution to our creditors in our liquidation or dissolution or
in a bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to us or our property, the payment of the principal of and premium, if
any, and interest on the notes will be subordinated, to the extent provided in
the indenture, in right of payment to the prior payment in full of all senior
indebtedness.
No payment of principal of or premium, if any, or interest may be made by
us, directly or indirectly, on the notes (including any repurchase pursuant to
the exercise of the repurchase right) or to acquire any of the notes at any time
if a default in payment of the principal of or premium, if any, or interest on
senior indebtedness exists, unless and until such default shall have been cured
or waived or shall have ceased to exist. During the continuance of any event of
default with respect to any senior indebtedness, as such event of default is
defined under any such senior indebtedness or in any agreement pursuant to which
any senior indebtedness has been issued (other than default in payment of the
principal of, or premium, if any, or interest on any senior indebtedness),
permitting the holders thereof to accelerate the maturity thereof, no payment
may be made by us, directly or indirectly, with respect to principal of or
premium, if any, or interest on the notes for 183 days following written notice
to us, from any holder or holders thereof or their representative or
representatives or the trustee or trustees under any indenture under which any
instrument evidencing any such senior indebtedness may have been issued, that
such an event of default has occurred and is continuing. However, if the
maturity of such senior indebtedness is accelerated, no payment may be made on
the notes until such senior indebtedness that has matured has been paid or such
acceleration has been cured or waived.
15
<PAGE> 21
Senior indebtedness is defined in the indenture as indebtedness (as defined
below) of Alpharma outstanding at any time except indebtedness that by its terms
is subordinate in right of payment to the notes or indebtedness that is not
otherwise senior in right of payment to the notes. Senior indebtedness does not
include indebtedness of Alpharma to any of Alpharma's subsidiaries. Indebtedness
is defined with respect to any person as the principal of, and premium, if any,
and interest on:
(a) all indebtedness of such person for borrowed money (including all
indebtedness evidenced by notes, bonds, debentures or other securities
sold by such person for money);
(b) all obligations incurred by such person in the acquisition (whether by
way of purchase, merger, consolidation or otherwise and whether by such
person or another person) of any business, real property or other
assets (except inventory and related items acquired in the ordinary
course of the conduct of the acquiror's usual business);
(c) guarantees by such person of indebtedness described in clause (a) or
(b) of another person;
(d) all renewals, extensions, refundings, deferrals, restructurings,
amendments and modifications of any such indebtedness, obligation or
guarantee;
(e) all reimbursement obligations of such person with respect to letters of
credit, bankers' acceptances or similar facilities issued for the
account of such person;
(f) all capital lease obligations of such person; and
(g) all net obligations of such person under interest rate swap or similar
agreements of such person. There are no restrictions in the indenture
upon the creation of additional senior indebtedness by Alpharma, or on
the creation of any indebtedness by Alpharma or any of its
subsidiaries. As of June 30, 1999, we had senior indebtedness
(excluding accrued interest) of approximately $247 million and
approximately $168 million of indebtedness and other obligations of
subsidiaries effectively ranking senior to the notes. The notes will be
senior to the outstanding 2005 Notes, of which $192.8 million of
principal is outstanding.
By reason of the subordination provisions described above, in the event of
insolvency, funds which would otherwise be payable to noteholders will be paid
to the holders of senior indebtedness to the extent necessary to pay senior
indebtedness in full. As a result of these payments, our general creditors may
recover less, ratably, than holders of senior indebtedness and such general
creditors may recover more, ratably, than holders of notes or our other
subordinated indebtedness.
MERGER OR CONSOLIDATION
The indenture does not permit us to consolidate with, or merge into, or
transfer or lease all or substantially all of its assets to, another person
unless such other person is a corporation organized under the laws of the United
States, any State thereof or the District of Columbia and such person assumes by
supplemental indenture all of our obligations under the notes and the indenture,
and immediately after giving effect to the transaction, no default shall exist.
16
<PAGE> 22
RULE 144A INFORMATION REQUIREMENT
We have agreed to furnish to the holders or beneficial holders of the notes
and prospective purchasers of the notes designated by the holders of the notes,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act of 1933 until such time as we register the
notes and the underlying Class A common stock for resale under the Securities
Act of 1933. In addition, we have agreed to furnish such information if at any
time while the notes or the Class A common stock issuable upon conversion of the
notes are restricted securities within the meaning of the Securities Act of 1933
or we are not subject to the informational requirements of the Exchange Act of
1934.
DEFAULTS AND REMEDIES
An event of default includes the occurrence of any of the following:
- default for 30 days in payment of interest;
- default in payment of principal (including accretion) at maturity, upon
redemption or exercise of a repurchase right or otherwise;
- default in payment on indebtedness at maturity, giving effect to
applicable grace periods, of at least $5,000,000 principal amount and
continuance of such default for 30 days after notice is given in
accordance with the indenture, or default on indebtedness and, as a
result, payment of at least $5,000,000 principal amount of indebtedness
is accelerated without such acceleration having been cured, waived,
rescinded, or annulled for 30 days;
- our failure for 60 days after notice to it to comply with any of its
other agreements in the indenture or the notes; and
- certain events of bankruptcy or insolvency.
If an event of default occurs and is continuing, the trustee or the holders
of at least 25% in principal amount of the notes may declare all the notes to be
due and payable immediately, except for defaults due to certain events of
bankruptcy or insolvency in which case if an event of default occurs and is
continuing, the redemption price on the date of notice of acceleration shall
automatically become immediately due and payable. The trustee may require
indemnity satisfactory to it before it enforces the Indenture or the notes.
Subject to certain limitations, holders of a majority in principal amount of the
notes may direct the trustee in its exercise of any trust power. The trustee may
withhold from noteholders notice of any default (except a default in payment of
principal or interest) if it determines that withholding notice is in their
interests. We are required to file with the trustee annually an officers'
statement as to the absence of defaults in fulfilling any of its obligations
under the indenture.
MODIFICATIONS OF THE INDENTURE
We and the trustee may amend the indenture without notice to any noteholder
but with the written consent of the holders of a majority in principal amount of
the outstanding notes. However, without the consent of each noteholder affected,
an amendment may not:
(1) reduce the amount of notes whose holders must consent to an amendment;
(2) reduce the rate or change the time for payment of interest on any note;
17
<PAGE> 23
(3) reduce the principal of or change the fixed maturity of any note
(including, without limitation, the optional redemption provisions or
the repurchase right);
(4) make any note payable in money other than that stated in the note;
(5) change the provisions of the indenture regarding the right of a
majority of the note holders to waive defaults under the indenture or
impair the right of any noteholder to institute suit for the
enforcement of any payment of principal and interest on the notes on
and after their respective due dates;
(6) make any change that adversely affects the rights to convert any note;
or
(7) make any change in the terms of the notes that adversely affects the
rights of any noteholder.
SATISFACTION AND DISCHARGE OF INDENTURE
The indenture will be discharged and canceled upon the satisfaction of
certain conditions, including the payment of all the notes or the deposit with
the trustee, within not more than six months prior to the maturity of the notes
or within one year of redemption of all of the notes, of funds sufficient for
such payment or redemption.
REPORTS TO HOLDERS OF NOTES
We will regularly furnish to each holder of notes copies of its annual
report to stockholders, containing audited financial statements, and any other
financial reports which we furnish to our stockholders.
TRUSTEE AND TRANSFER AGENT
The trustee and transfer agent for the notes is First Union National Bank.
LISTING
The notes are eligible for trading on the PORTAL Market. The Class A common
stock is listed on the NYSE under the symbol "ALO."
BOOK ENTRY
The notes were issued in the form of a global security issued in reliance
on Rule 144A, a global security issued in reliance on Regulation S and a global
security issued to "accredited investors," as defined in Section 501(a) under
the Securities Act of 1933. After the issuance of a global security, the
depository or its nominee credited the accounts of persons holding through it
with the respective principal amounts of the notes represented by such global
security. Such accounts were designated by the initial purchasers with respect
to notes placed by the initial purchasers for us. Ownership of beneficial
interests in a global security are limited to persons that have accounts with
the depository or persons that may hold interests through participants.
Ownership of beneficial interests by participants in a global security are shown
on, and the transfer of that ownership interest will be effected only through,
records maintained by the depository for such global security. Ownership of
beneficial interests in such global security by persons that hold through
participants are shown on, and the transfer of that ownership interest through
such participant will be effected only through, records maintained by such
participant. The foregoing may impair the ability to transfer beneficial
interests in a global security.
Payment of principal, premium, if any, and interest on notes represented by
any such global security will be made to the depository or its nominee, as the
case may be, as the sole holder of the notes represented thereby for all
purposes under the indenture. None of Alpharma, the trustee, any agent of
Alpharma or the trustee or the initial purchasers will
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<PAGE> 24
have any responsibility or liability for any aspect of the depository's records
relating to or payments made on account of beneficial ownership interests in
global security representing any notes or for maintaining, supervising or
reviewing any of the depository's records relating to such beneficial ownership
interests.
We have been advised by the depository that, upon receipt of any payment of
principal, premium, if any, or interest on any global security, the depository
will immediately credit, on its book-entry registration and transfer system, the
accounts of participants with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such global security
as shown on the records of the depository. Payments by participants to owners of
beneficial interests in a global security held through such participants will be
governed by standing instructions and customary practices as is now the case
with securities held for customer accounts registered in "street name," and will
be the sole responsibility of such participants.
A global security may not be transferred except as a whole by the
depository for such global security to a nominee of such depository or by a
nominee of such depository to such depository or another nominee of such
depository or by such depository or any such nominee to a successor of such
depository or a nominee of such successor. If the Depository is at any time
unwilling or unable to continue as depository and a successor depository is not
appointed by us or the depository within 90 days, we will issue notes in
definitive form in exchange for the global security. In either instance, an
owner of a beneficial interest in the global security will be entitled to have
notes equal in principal amount to such beneficial interest registered in its
name and will be entitled to physical delivery of such notes in definitive form.
Notes so issued in definitive form will be issued in denominations of $1,000 and
integral multiples thereof and will be issued in registered form only, without
coupons. Principal, premium, if any, and interest on the notes will be payable,
and the notes may be presented for registration of transfer or exchange, at the
offices of the trustee.
So long as the depository for a global security, or its nominee, is the
registered owner of such global security, such depository or such nominee, as
the case may be, will be considered the sole holder of the notes represented by
such Global Security for the purposes of receiving payment on the notes,
receiving notices and for all other purposes under the indenture and the notes.
Beneficial interests in notes will be evidenced only by, and transfers thereof
will be effected only through, records maintained by the depository and its
participants. Cede & Co. has been appointed as the nominee of the depository.
Except as provided above, owners of beneficial interests in a global security
will not be entitled to and will not be considered the holders thereof for any
purposes under the indenture. Accordingly any such person owning a beneficial
interest in such a global security must rely on the procedures of the
depository, and, if any such person is not a participant, on the procedures of
the participant through which such person owns its interest, to exercise any
rights of a holder under the indenture. The indenture provides that the
depository may grant proxies and otherwise authorize participants to give or to
take any request, demand, authorization, direction, notice, consent, waiver or
other action which a holder is entitled to give or take under the indenture. We
understand that under existing industry practices, in the event that we request
any action of holders or that an owner of a beneficial interest in such a global
security desires to give or take any action which a holder is entitled to give
or take under the indenture, the depository would authorize the participants
holding the relevant beneficial interest to give or take such action and such
participants would authorize beneficial owners owning through such participants
to give or take such action or would otherwise act upon the instructions of
beneficial owners owning through them.
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<PAGE> 25
The depository has advised us that the depository is a limited-purpose
trust company organized under the laws of the State of New York, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the New
York Uniform Commercial Code, and a "clearing agency" registered under the
Exchange Act of 1934. The depository was created to hold the securities of its
participants and to facilitate the clearance and settlement of securities
transactions among its participants in such securities through electronic
book-entry changes in accounts of the participants, thereby eliminating the need
for physical movement of securities certificates. The depository's participants
include securities brokers and dealers (including the initial purchasers),
banks, trust companies, clearing corporations and certain other organizations,
some of whom (and/or their representatives) own the depository. Access to the
depository's book-entry system is also available to others, such as banks,
brokers, dealers and trust companies, that clear through or maintain a custodial
relationship with a participant, either directly or indirectly.
Beneficial interests in any global security may be exchanged for beneficial
interests in any other global security only in connection with a transfer of
such interest. Such transfers are subject to compliance with customary
certification requirements which are set forth in the indenture.
Any beneficial interest in one of the global securities that is exchanged
for an interest in any other global security will cease to be an interest in
such global security and will become an interest in such other global security.
Accordingly, such interest will thereafter be subject to all transfer
restrictions and other procedures applicable to beneficial interests in such
other global security for as long as it remains such an interest. Any exchange
of a beneficial interest in one global security for a beneficial interest in any
other global security will be effected by the depository by means of an
instruction originated by the trustee through the depository's Deposit/Withdraw
at Custodian system. Accordingly, in connection with any such exchange,
appropriate adjustments will be made in the records of the registrar to reflect
a decrease in the principal amount of such global security and a corresponding
increase in the principal amount of such other global security.
PAYMENTS OF PRINCIPAL AND INTEREST
The indenture requires that payments in respect of the notes (including
principal, premium, if any, and interest) held of record by The Depositary Trust
Company (including notes evidenced by the global notes) be made in same day
funds. Payments in respect of the notes held of record by holders other than The
Depositary Trust Company may, at our option, be made by check and mailed to such
holders of record as shown on the register for the notes.
GOVERNING LAW
The indenture and, except as may otherwise be required by mandatory
provisions of law, notes are governed by and to be construed in accordance with
the laws of the State of New York, without giving effect to such state's
conflicts of laws principles.
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<PAGE> 26
DESCRIPTION OF CAPITAL STOCK
Our authorized capital stock currently consists of (i) 50,000,000 shares of
Class A common stock, of which 18,036,351 shares were outstanding as of June 30,
1999, (ii) 15,000,000 shares of Class B common stock, $.20 par value per share,
of which 9,500,000 shares were issued and outstanding as of June 30, 1999, and
(iii) 500,000 shares of preferred stock, par value $1.00 per share, of which
none were issued and outstanding as of June 30, 1999. The following description
of our capital stock is a summary of provisions of our amended and restated
certificate of incorporation and is qualified in its entirety by the provisions
of that document which has been filed with the SEC. As of June 30, 1999, the
Class A common stock was held of record by approximately 1,788 stockholders.
COMMON STOCK
The Class A common stock and the Class B common stock are identical in all
respects, including with respect to the right to receive dividends, except as
follows: (1) the holders of the Class A common stock are currently entitled as
class to elect 33 1/3% of the Board of Directors (rounded to the nearest whole
number, but not less than two members of the Board of Directors), and the
holders of the Class B common stock are entitled as a class to elect the
remaining directors; (2) on all other matters submitted to a vote of
stockholders, the holders of the Class A common stock are entitled to one vote
per share of Class A common stock held, and the holders of the Class B common
stock are entitled to four votes per share of Class B common stock held; (3) the
holders of the Class B common stock have the right at any time and from time to
time to convert each share of Class B common stock into one share of Class A
common stock; and (4) shares of Class A common stock may be declared and paid as
dividends on shares of both Class A common stock and Class B common stock;
shares of Class B common stock; may be declared and paid as dividends on shares
of both Class A common stock and Class B common stock shares of Class A common
stock may be declared and paid as dividends on shares of Class B common stock;
and in any such case the same number of shares must be declared and paid as
dividends on shares of Class A common stock and shares of Class B common stock
may be declared and paid as dividends on shares of Class B common stock; and in
any such case the same number of shares must be declared and paid as dividends
in respect of each outstanding share of Class A common stock and each
outstanding share of Class B common stock. The special voting rights of the
holders of the Class A common stock as reflected in clause (1) above terminate
if the number of outstanding shares of Class A common stock is less than 10% of
the aggregate number of issued and outstanding shares of Class A common stock
and Class B common stock, and the special voting rights of the holders of the
Class B common stock as reflected in clause (1) and (2) above terminate if the
number of issued and outstanding shares of Class B common stock is less than
12 1/2% of such aggregate number, in each case as determined on the record for
the stockholder vote.
We may not subdivide or combine either class of common stock without at the
same time combining or subdividing shares of the other class of common stock in
the same proportion. Upon liquidation of Alpharma, holders of the Class A common
stock and the Class B common stock are entitled to share ratably in any assets
available for distribution to stockholders after payment of all our obligations,
and payments due in respect of any other of our senior securities, including any
shares of preferred stock. Holders of common stock do not have cumulative voting
rights or preemptive, subscription or, except as set forth above with respect to
the Class B common stock, conversion rights.
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PREFERRED STOCK
We may issue the preferred stock in one or more series, with designations,
relative rights, powers, priorities, preferences and limitations thereof as the
Board of Directors, without any stockholder action, may determine, provided that
we may not limit the right of the holders of Class A common stock, voting as a
class, to elect no less than 25% of the board of directors by granting voting
rights to any series of preferred stock.
TRANSFER AGENT
BankBoston, N.A. is the transfer agent for the common stock.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of certain material United States federal income
and estate tax considerations relating to the purchase, ownership and
disposition of the notes and of common stock into which notes may be converted,
but does not purport to be a complete analysis of all the potential tax
considerations relating thereto. This summary is based on the provisions of the
Internal Revenue Code of 1986, as amended, the applicable Treasury Regulations
promulgated thereunder, judicial authority and current administrative rulings
and practice, all of which are subject to change, possibly on a retroactive
basis. This summary deals only with holders that will hold notes and common
stock into which notes may be converted as "capital assets" (within the meaning
of Section 1221 of the Internal Revenue Code). This summary does not purport to
deal with all aspects of United States federal income or estate taxation that
might be relevant to particular holders in light of their personal investment
circumstances or status, nor does it address tax considerations applicable to
investors that may be subject to special tax rules, such as certain financial
institutions, tax-exempt organizations, S Corporations, insurance companies,
broker-dealers, dealers or traders in securities or currencies, expatriates
subject to Internal Revenue Code Section 877 and taxpayers subject to the
alternative minimum tax, and also does not discuss notes held as part of a
hedge, straddle, "synthetic security" or other integrated investment composed of
a note and one or more other investments, or situations in which the functional
currency of the holder is not the United States dollar. Moreover, the effect of
any applicable state, local or foreign tax laws is not discussed. We have not
sought any ruling from the IRS with respect to the statements made and the
conclusions reached in the following summary, and there can be no assurance that
the IRS will agree with such statements and conclusions. THE FOLLOWING
DISCUSSION IS FOR GENERAL INFORMATION ONLY. INVESTORS CONSIDERING THE PURCHASE
OF NOTES SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE APPLICATION
OF THE UNITED STATES FEDERAL INCOME AND ESTATE TAX LAWS TO THEIR PARTICULAR
SITUATIONS AS WELL AS ANY TAX CONSEQUENCES ARISING UNDER THE LAWS OF ANY STATE,
LOCAL OR FOREIGN TAXING JURISDICTION OR UNDER ANY APPLICABLE TAX TREATY.
The term "United States holder" means a holder of a note that is, for
United States federal income tax purposes,
(A) a citizen or resident of the United States,
(B) a corporation created or organized under the laws of the United States
or of any political subdivision thereof,
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(C) an estate, the income of which is subject to United States federal
income taxation regardless of source, or
(D) a trust, if
(x) a court within the United States is able to exercise primary
jurisdiction over its administration and one or more United States
persons have the authority to control all of its substantial
decisions, or
(y) in the case of a trust that was treated as a domestic trust under
the law in effect before 1997, a valid election is in place under
applicable United States Treasury Regulations to treat such trust
as a domestic trust.
The term "non-United States holder" means a holder of a note that is neither a
United States holder nor a partnership for United States federal income tax
purposes.
A partnership for United States federal income tax purposes is not subject
to the income tax on income derived from holding the notes. A partner of the
partnership may be subject to tax on such income pursuant to rules similar to
the rules for United States holders or non-United States holders depending on
whether:
(1) the partnership is a United States or a non-United States partnership;
(2) the partner is a United States or a non-United States person; and
(3) the partnership is or is not engaged in a United States trade or
business to which income or gain from the notes is effectively
connected.
UNITED STATES HOLDERS
PAYMENT OF INTEREST -- ORIGINAL ISSUE DISCOUNT
The semiannual interest payments on the notes are qualified stated
interest. Consequently, a United States holder of a note generally is required
to include such interest in ordinary income when it is received or when it
accrues, depending upon such holder's method of accounting for United States
federal income tax purposes.
In addition, the notes were issued with original issue discount equal to
the difference between their issue price and their stated redemption price at
maturity. The "issue price" of the notes was $1,000. The "stated redemption
price at maturity" of the notes is $1,341.04. Regardless of their methods of
accounting, United States holders are required to include such original issue
discount in ordinary income before it is paid, under the rules described below.
A United States holder is required to include original issue discount in
income for federal income tax purposes as it accrues. Original issue discount
accrues daily in accordance with a constant yield method based on a compounding
of interest. Under this method, holders of the notes are required to include in
income increasingly greater amounts of original issue discount in successive
accrual periods. The original issue discount allocable to any accrual period
equals the product of the adjusted issue price of the notes as of the beginning
of such period and the notes' yield to maturity, less any qualified stated
interest allocable to that accrual period. The "adjusted issue price" of the
notes as of the beginning of any accrual period equals the issue price of the
notes increased by original issue discount previously includable in income and
decreased by any payments under the notes (other than qualified stated
interest). Because original issue discount accrues and is includable in income
at least annually and no payments other than qualified stated interest will be
made under the notes, the adjusted issue price of the notes will increase
throughout
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<PAGE> 29
their life. Original issue discount includable in income will therefore increase
during each accrual period.
If a United States holder purchases a note for more than its adjusted issue
price on the date of purchase, the original issue discount includible by the
purchasing holder will be reduced to take account of this acquisition premium.
If a United States holder purchases a note for more than the amount payable on
maturity, no original issue discount will be included in the purchasing holder's
income. See "-- Amortizable Bond Premium" below for rules allowing some bond
premium to be offset against payments of qualified stated interest.
We are required to furnish certain information to the Internal Revenue
Service, and will furnish to record holders of notes, information with respect
to interest and original issue discount accruing during the calendar year. The
original issue discount information will be based upon the adjusted issue price
of the debt instrument as if the holder were the original holder of the debt
instrument.
MARKET DISCOUNT
Investors acquiring notes pursuant to this prospectus should consider that
the resale of those notes may be negatively affected by the market discount
provisions of Sections 1276 through 1278 of the Internal Revenue Code. Except as
described below, gain recognized on the disposition of a note that has accrued
market discount will be treated as ordinary income, and not capital gain, to the
extent of the accrued market discount. "Market discount" is defined generally as
the excess, if any, of
<TABLE>
<S> <C> <C>
the revised issue price of the note, the tax basis of the note in the hands
which approximately equals its adjusted over of the United States holder
issue price immediately after acquisition
</TABLE>
Under a de minimis exception, there is no market discount if the excess of
the principal amount of the obligation over the United States holder's tax basis
in the obligation is less than 0.25% of the revised issue price multiplied by
the number of complete years after the acquisition date to the obligation's date
of maturity. Unless the United States holder elects to accrue market discount on
a constant yield basis, the accrued market discount generally is the amount
calculated as follows:
<TABLE>
<S> <C> <C>
the number of days the obligation has been
held by the United States holder
the total market discount x ---------------------------------------------------
the number of days after the United States
holder's acquisition of the obligation up to
and including its maturity date
</TABLE>
If a United States holder of a note acquired with market discount disposes
of such note in any transaction other than a sale, exchange or involuntary
conversion, such United States holder will be deemed to have realized an amount
equal to the fair market value of the note and will be required to recognize as
ordinary income any accrued market discount. See the discussion below under
"-- Sale, Exchange or Redemption of the Notes" for the tax consequences of a
sale or exchange. Any partial principal payment on a note will be includable as
ordinary income upon receipt to the extent of any accrued market
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<PAGE> 30
discount thereon. Although it is not free from doubt, any accrued market
discount not previously taken into income prior to a conversion of a note into
shares of Class A common stock should carry over to the Class A common stock
received on conversion and be treated as ordinary income upon a subsequent
disposition of the Class A common stock, to the extent of any gain recognized on
such disposition. Unless the election described below is in effect, a United
States holder of a note acquired at a market discount also may be required to
defer the deduction of all or a portion of the interest on any indebtedness
incurred or maintained to purchase or carry the note until the maturity of the
note or the earlier disposition of the note in a taxable transaction.
A United States holder of a note acquired at a market discount may elect to
include the market discount in income as it accrues, on either a straight-line
basis or a constant yield basis. This election would apply to all market
discount obligations acquired by the electing United States holder on or after
the first day of the first year to which the election applies. The election may
be revoked only with the consent of the IRS. If a United States holder of a note
elects to include market discount in income currently, the rules discussed above
regarding
(1) ordinary income recognition resulting from a sale and some other
disposition transactions and
(2) deferral of interest deductions
would not apply.
AMORTIZABLE BOND PREMIUM
If a United States holder of a note acquires the note at a cost that, after
being reduced by an amount equal to the value of the conversion option, is in
excess of the amount payable at maturity, the United States holder may elect to
amortize the excess cost on a constant-yield basis over the term of such note,
as an offset to payments of qualified stated interest. If the United States
holder makes an election to amortize bond premium, the tax basis of all such
United States holder's notes will be reduced by the allowable bond premium
amortization. The amortization election would apply to all indebtedness
instruments held or subsequently acquired by the electing purchaser and cannot
be revoked without permission from the IRS. On conversion of a note into shares
of Class A common stock, no additional amortization of any bond premium would be
allowed, and any remaining premium would be added to the United States holder's
basis in the Class A common stock received.
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Upon the sale, exchange or redemption of a note, a United States holder
generally recognizes capital gain or loss equal to the difference between
(1) the amount of cash proceeds and the fair market value of any property
received on the sale, exchange or redemption (except to the extent such
amount is attributable to accrued and unpaid interest, which is treated
as interest subject to the rules discussed above under "Payment of
Interest") and
(2) such holder's adjusted tax basis in the note. A United States holder's
adjusted tax basis in a note generally is equal to the holder's cost of
the note, increased by any original issue discount and any market
discount previously included in income by such holder, and reduced by
any bond premium previously amortized and any payments received by such
holder, other than payments of qualified stated
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<PAGE> 31
interest. Such capital gain or loss will be long-term capital gain or
loss if the United States holder's holding period in the note is more
than one year at the time of sale, exchange or redemption.
CONVERSION OF THE NOTES
A United States holder generally will not recognize any income, gain or
loss upon conversion of a note into Class A common stock, except with respect to
cash received in lieu of a fractional share of Class A common stock. Such
holder's tax basis in the Class A common stock received on conversion of a note
will be the same as such holder's adjusted tax basis in the note at the time of
conversion (reduced by any basis allocable to a fractional share interest), and
the holding period for the Class A common stock received on conversion will
generally include the holding period of the note converted.
Cash received in lieu of a fractional share of Class A common stock upon
conversion should be treated as a payment in exchange for the fractional share
of Class A common stock. Accordingly, the receipt of cash in lieu of a
fractional share of Class A common stock generally should result in capital gain
or loss (measured by the difference between the cash received for the fractional
share and the United States holder's adjusted tax basis in the fractional
share).
DIVIDENDS ON THE CLASS A COMMON STOCK
The amount of any distribution by us in respect of the Class A common stock
will be equal to the amount of cash and the fair market value, on the date of
distribution, of any property distributed. Generally, distributions will be
treated as a dividend, subject to a tax as ordinary income, to the extent of our
current or accumulated earnings and profits, then as a tax-free return of
capital to the extent of the holder's tax basis in the Class A common stock, and
thereafter as capital gain from the sale or exchange of such stock, long-term or
short-term depending on whether the holder's holding period exceeds one year.
In general, a dividend distribution to a corporate United States holder
will qualify for the 70% dividends received deduction if the holder owns less
than 20% of the voting power and value of our stock (other than any non-voting,
non-convertible, non-participating preferred stock). A corporate United States
holder that owns 20% or more of the voting power and value of our stock (other
than any non-voting, non-convertible, non-participating preferred stock)
generally will qualify for an 80% dividends received deduction. The dividends
received deduction is subject, however, to certain holding period, taxable
income and other limitations.
If at any time
(1) we make a distribution of cash or property to our stockholders or
purchase Class A common stock and such distribution or purchase would
be taxable to such stockholders as a dividend for United States federal
income tax purposes (e.g., distributions of evidences of our
indebtedness or assets, but generally not stock dividends or rights to
subscribe for Class A common stock) and, pursuant to the antidilution
provisions of the indenture, the conversion rate of the notes is
increased; or
(2) the conversion rate of the notes is increased at our discretion, such
increase in conversion rate may be deemed to be the payment of a
taxable dividend to United States holders of notes (pursuant to Section
305 of the Internal Revenue
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<PAGE> 32
Code of 1986) to the extent of our current or accumulated earnings and
profits. Such holders of notes could therefore have taxable income as a
result of an event pursuant to which they received no cash or property.
SALE OF CLASS A COMMON STOCK
Subject to the market discount rules discussed above under "-- Market
Discount," upon the sale or exchange of Class A common stock, a United States
holder generally will recognize capital gain or loss equal to the difference
between:
(1) the amount of cash and the fair market value of any property received
upon the sale or exchange; and
(2) such holder's adjusted tax basis in the Class A common stock.
Such capital gain or loss will be long-term if the United States holder's
holding period in the Class A common stock is more than one year at the time of
the sale or exchange. A United States holder's basis and holding period in Class
A common stock received upon conversion of a note are determined as discussed
above under "-- Conversion of the Notes."
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
In general, certain information is required to be reported by a payor to
the IRS with respect to payments of principal, premium, if any, and interest on
a note (including the payment of liquidated damages under the registration
rights agreement), payments of dividends on Class A common stock, payments of
the proceeds of the sale of a note and payments of the proceeds of the sale of
Class A common stock to certain noncorporate United States holders. The payor
will be required to withhold backup withholding tax at the rate of 31% if:
(a) the payee fails to furnish a taxpayer identification number to the
payor or establish an exemption from backup withholding;
(b) the IRS notifies the payor that the taxpayer identification number
furnished by the payee is incorrect;
(c) there has been a notified payee underreporting with respect to
interest, dividends or original issue discount described in Section
3406(c) of the Internal Revenue Code; or
(d) there has been a failure of the payee to certify under the penalty of
perjury that the payee is not subject to backup withholding under the
Internal Revenue Code.
Any amounts withheld under the backup withholding rules from a payment to a
United States holder will be allowed as a credit against such holder's United
States federal income tax liability and may entitle the holder to a refund,
provided that the required information is furnished to the IRS.
NON-UNITED STATES HOLDERS
PAYMENT OF INTEREST
Generally, interest income of a non-United States holder that is not
effectively connected with a United States trade or business is subject to a
withholding tax at a 30% rate (or, if applicable, a lower treaty rate). However,
interest paid on a note by us or any paying agent to a non-United States holder
qualifies for the "portfolio interest exemption"
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<PAGE> 33
(provided we are not a "USRPHC" as defined below under "-- FIRPTA Treatment of
Non-United States Holders") and, therefore, subject to the discussion of backup
withholding below, is not subject to United States federal income tax or
withholding tax, provided that such interest income is not effectively connected
with a United States trade or business of the non-United States holder and
provided that the non-United States holder:
(1) does not actually or constructively own (pursuant to the conversion
feature of the notes or otherwise) 10% or more of the combined voting
power of all classes of our stock entitled to vote;
(2) is not a controlled foreign corporation related to us actually or
constructively through stock ownership;
(3) is not a bank which acquired the notes in consideration for an
extension of credit made pursuant to a loan agreement entered into in
the ordinary course of business; and
(4) either
(a) provides a Form W-8 (or a suitable substitute form) signed under
penalties of perjury that includes its name and address and
certifies as to its non-United States status in compliance with
applicable law and regulations, or
(b) is a securities clearing organization, bank or other financial
institution that holds customers' securities (including the note) in
the ordinary course of its trade or business and provides a
statement to us or our agent under penalties of perjury in which it
certifies that such a Form W-8 (or a suitable substitute) has been
received by it from the non-United States holder or qualifying
intermediary and furnishes us or our agent with a copy thereof.
Treasury Regulations that become effective January 1, 2001 provide
alternative methods for satisfying the certification requirement described in
clause (4) above. These Treasury Regulations also will require, in the case of
notes held by a foreign partnership, that:
(1) the certification described in clause (4) above be provided by the
partners rather than by the foreign partnership (unless the foreign
partnership agrees to become a "withholding foreign partnership"); and
(2) the partnership provide certain information, including a United States
taxpayer identification number.
A look-through rule will apply in the case of tiered partnerships.
Except to the extent that an applicable treaty otherwise provides, a
non-United States holder generally is taxed in the same manner as a United
States holder with respect to interest if the interest income is effectively
connected with a United States trade or business of the non-United States
holder. Effectively connected interest received by a corporate non-United States
holder may also, under certain circumstances, be subject to an additional
"branch profits tax" at a 30% rate (or, if applicable, a lower treaty rate).
Even though such effectively connected interest is subject to income tax, and
may be subject to the branch profits tax, it is not subject to withholding tax
if the holder delivers a properly executed Internal Revenue Service Form 4224 to
the payor.
28
<PAGE> 34
SALE, EXCHANGE OR REDEMPTION OF THE NOTES
Subject to the discussion below under "FIRPTA Treatment of Non-United
States Holders," a non-United States holder of a note is generally not subject
to United States federal income tax or withholding tax on any gain realized on
the sale, exchange or redemption of the note (including the receipt of cash in
lieu of fractional shares upon conversion of a note into Class A common stock
but not including any amount representing interest or accrued market discount)
unless
(1) the gain is effectively connected with a United States trade or
business of the non-United States holder or
(2) in the case of a non-United States holder who is an individual, such
holder is present in the United States for a period or periods
aggregating 183 days or more during the taxable year of the disposition
and certain other requirements are met.
CONVERSION OF THE NOTES
In general, no United States federal income tax or withholding tax will be
imposed upon the conversion of a note into Class A common stock by a non-United
States holder except with respect to the receipt of cash in lieu of fractional
shares by non-United States holders upon conversion of a note where either of
the conditions described above under "Non-United States Holders -- Sale,
Exchange or Redemption of the Notes" is satisfied.
SALE OR EXCHANGE OF CLASS A COMMON STOCK
Subject to the discussion below under "FIRPTA Treatment of Non-United
States Holders," a non-United States holder generally will not be subject to
United States federal income tax or withholding tax on the sale or exchange of
Class A common stock unless either of the conditions described above under
"Non-United States Holders -- Sale, Exchange or Redemption of the Notes" is
satisfied.
FIRPTA TREATMENT OF NON-UNITED STATES HOLDERS
Under the Foreign Investment in Real Property Tax Act of 1980, as amended
("FIRPTA"), foreign persons generally are subject to United States federal
income tax on capital gain realized on the disposition of any interest (other
than solely as a creditor) in a corporation that is a United States real
property holding corporation (a "USRPHC"). For this purpose, a foreign person is
defined as any holder who is a foreign corporation (other than certain foreign
corporations that elect to be treated as domestic corporations), a non-resident
alien individual, a non-resident fiduciary of a foreign estate or trust, or a
foreign partnership. Under FIRPTA, a corporation is a USRPHC if the fair market
value of the United States real property interests held by the corporation is 50
percent or more of the aggregate fair market value of certain assets of the
corporation.
We do not currently believe that we are a USRPHC. If we are not a USRPHC, a
non-United States holder will not be subject to United States federal income tax
imposed by FIRPTA on a sale or other disposition of the notes or shares of Class
A common stock. If we are a USRPHC, a non-United States holder generally will
not be subject to FIRPTA withholding on proceeds from a sale or other
disposition of notes or Class A common stock by reason of our USRPHC status
unless the holder's interest in the notes or Class A common stock exceeds the
relevant threshold described below.
Assuming the Class A common stock is regularly traded, a non-United States
holder will not be subject to FIRPTA withholding on a sale or other disposition
of Class A common stock unless such holder owns, actually or constructively,
Class A common stock
29
<PAGE> 35
with a fair market value in excess of 5 percent of the fair market value of all
the Class A common stock outstanding at any time during the shorter of the
five-year period preceding such disposition or the holder's holding period. In
the case of a sale or other disposition of notes, the relevant ownership
threshold depends upon whether the notes are regularly traded. If the notes are
not regularly traded, a non-United States holder will be subject to FIRPTA
withholding only if on the date the holder acquired such notes they had a fair
market value greater than 5% of the aggregate value of the outstanding Class A
common stock. If the notes are publicly traded, a holder will be subject to
FIRPTA withholding only if such holder owned more than 5% of the total fair
market value of all the notes outstanding at any time during the shorter of the
five-year period preceding such disposition or the holder's holding period for
such notes.
We believe that the Class A common stock will be treated as regularly
traded.
DIVIDENDS
Distributions by us with respect to the Class A common stock that are
treated as dividends paid (or deemed paid), as described above under "United
States Holders -- Dividends on the Common Stock" to a non-United States holder
(excluding dividends that are effectively connected with the conduct of a trade
or business in the United States by such holder and are taxable as described
below) will be subject to United States federal withholding tax at a 30% rate
(or lower rate provided under any applicable income tax treaty). Except to the
extent that an applicable tax treaty otherwise provides, a non-United States
holder will be taxed in the same manner as a United States holder on dividends
paid (or deemed paid) that are effectively connected with the conduct of a trade
or business in the United States by the non-United States holder. If such
non-United States holder is a foreign corporation, it may also be subject to a
United States branch profits tax on such effectively connected income at a 30%
rate or such lower rate as may be specified by an applicable income tax treaty.
Even though such effectively connected dividends are subject to income tax, and
may be subject to the branch profits tax, they will not be subject to United
States withholding tax if the holder delivers a properly executed Internal
Revenue Service Form 4224 to the payor.
Under current United States Treasury regulations, dividends paid to an
address in a foreign country are presumed to be paid to a resident of that
country (unless the payor has knowledge to the contrary) for purposes of the
withholding discussed above and, under the current interpretation of the
Treasury Regulations, for purposes of determining the applicability of a tax
treaty rate. Under Treasury Regulations that become effective for distributions
after 2000, however, a non-United States holder of Class A common stock who
wishes to claim the benefit of an applicable treaty rate would be required to
satisfy applicable certification and other requirements. In addition, under
these Treasury Regulations, in the case of common stock held by a foreign
partnership, the certification requirement would generally be applied to the
partners of the partnership (unless the partnership agrees to become a
"withholding foreign partnership") and the partnership would be required to
provide certain information, including a United States taxpayer identification
number. These Treasury Regulations also provide look-through rules for tiered
partnerships.
DEATH OF A NON-UNITED STATES HOLDER
A note held by an individual who is a non-United States holder at the time
of his or her death will not be includable in the decedent's gross estate for
United States estate tax purposes, provided that such holder or beneficial owner
did not at the time of death
30
<PAGE> 36
directly or indirectly, actually or constructively, own 10% or more of the
combined voting power of all classes of our stock entitled to vote, and provided
that, at the time of death, payments with respect to such notes would not have
been effectively connected with the conduct by such non-United States holder of
a trade or business within the United States.
Class A common stock actually or beneficially held (other than through a
foreign corporation) by a non-United States holder at the time of his or her
death (or previously transferred subject to certain retained rights or powers)
will be subject to United States federal estate tax unless otherwise provided by
an applicable estate tax treaty.
INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
United States information reporting requirements and backup withholding tax
will not apply to payments on a note to a non-United States holder if the
statement described in "Non-United States Holders -- Payment of Interest" is
duly provided by such holder, provided that the payor does not have actual
knowledge that the holder is a United States person.
Information reporting requirements and backup withholding tax will not
apply to any payment of the proceeds of the sale of a note or any payment of the
proceeds of the sale of Class A common stock effected outside the United States
by a foreign office of a "broker" (as defined in applicable Treasury
Regulations), unless such broker is:
(1) a United States person;
(2) a foreign person that derives 50% of more of its gross income for
certain periods from activities that are effectively connected with the
conduct of a trade or business in the United States;
(3) a controlled foreign corporation for United States federal income tax
purposes; or
(4) (after December 31, 2000) a foreign partnership more than 50% of the
capital or profits of which is owned by one or more United States
persons or which engages in a United States trade or business.
Payment of the proceeds of any such sale effected outside the United States by a
foreign office of any broker that is described in (1), (2), (3) or (4) of the
preceding sentence will not be subject to backup withholding tax, but will be
subject to information reporting requirements unless such broker has documentary
evidence in its records that the beneficial owner is a non-United States holder
and certain other conditions are met, or the beneficial owner otherwise
establishes an exemption. Payment of the proceeds of any such sale to or through
the United States office of a broker is subject to information reporting and
backup withholding requirements, unless the beneficial owner of the note
provides the statement described in "Non-United States Holders -- Payment of
Interest" or otherwise establishes an exemption.
If paid to an address outside the United States, dividends on Class A
common stock held by a non-United States holder will generally not be subject to
the information reporting and backup withholding requirements described in this
section, provided that the payor does not have actual knowledge that the holder
is a United States person. However, under the Treasury Regulations effective
with respect to payments made after December 31, 2000, dividend payments will be
subject to information reporting and backup withholding unless applicable
certification requirements are satisfied. See the discussion above with respect
to rules applicable to foreign partnerships under the Treasury Regulations that
become effective on January 1, 2001.
31
<PAGE> 37
SELLING SECURITYHOLDERS
The table below shows the name of each selling securityholder and
- the amount of notes each selling securityholder owns as of August 30,
1999;
- the maximum amount of notes that each selling securityholder may offer
for his account under this prospectus;
- the amount of common stock owned by each selling securityholder as of
August 30, 1999; and
- the maximum amount of common stock that may be offered for the account of
each selling securityholder under this prospectus.
The respective selling securityholders have furnished all of the
information regarding beneficial ownership to us. Beneficial ownership of the
notes and common stock listed in the table has been determined in accordance
with the applicable rules and regulations promulgated under the Exchange Act of
1934.
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
PRINCIPLE AMOUNT OF NO. OF
AMOUNT % OF NOTES NO. OF SHARES OFFERED
NAME OF SELLING SECURITY HOLDER OF NOTES CLASS OFFERED HEREBY SHARES(1)(2) HEREBY(1)(2)
- ------------------------------- ------------ ----- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Aim Balanced Fund............... $ 6,000,000 3.53 $ 6,000,000 186,857 186,857
Aim V.I. Balanced Fund.......... 50,000 * 50,000 1,557 1,557
Bear Stearns & Co. Inc. ........ 8,000,000 4.71 8,000,000 249,143 249,143
White River Securities.......... 5,000,000 2.94 5,000,000 155,715 155,715
The Class IC Company, Ltd....... 600,000 * 600,000 18,686 18,686
Allstate Insurance Company...... 2,500,000 1.47 2,500,000 77,857 77,857
BBT Fund, L.P................... 6,500,000 3.82 6,500,000 202,429 202,429
BNP Arbitrage SNC............... 6,400,000 3.76 6,400,000 199,315 199,315
Boulder Capital Inc. ........... 1,250,000 * 1,250,000 38,929 38,929
Onex Industrial Partners
Limited....................... 650,000 * 650,000 20,243 20,243
Boulder II Limited.............. 4,100,000 2.41 4,100,000 127,686 127,686
Pebble Capital Inc. ............ 1,500,000 * 1,500,000 46,714 46,714
Calamos Market Neutral Fund --
Calamos Investment Trust...... 55,000 * 55,000 1,713 1,713
SPT............................. 300,000 * 300,000 9,343 9,343
Jackson County Employees'
Retirement System............. 110,000 * 110,000 3,426 3,426
Calamos Convertible Portfolio --
Calamos Advisors Trust........ 7,000 * 7,000 218 218
Consulting Group Capital Market
Funds......................... 100,000 * 100,000 3,114 3,114
Associated Electric & Gas
Insurance Services Limited.... 300,000 * 300,000 9,343 9,343
Boilermaker Blacksmith Pension
Trust......................... 935,000 * 935,000 29,119 29,119
</TABLE>
32
<PAGE> 38
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
PRINCIPLE AMOUNT OF NO. OF
AMOUNT % OF NOTES NO. OF SHARES OFFERED
NAME OF SELLING SECURITY HOLDER OF NOTES CLASS OFFERED HEREBY SHARES(1)(2) HEREBY(1)(2)
- ------------------------------- ------------ ----- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Calamos Convertible Fund --
Calamos Investment Trust...... 600,000 * 600,000 18,686 18,686
Calamos Growth and Income
Fund -- Calamos Investment
Trust......................... 100,000 * 100,000 3,114 3,114
California Public Employees
Retirement System............. 3,000,000 1.76 3,000,000 93,429 93,429
General Motors Welfare Benefit
Trust (L-T Veba).............. 1,000,000 * 1,000,000 31,143 31,143
Monumental Life Insurance
Company....................... 3,000,000 1.76 3,000,000 93,429 93,429
Conseco Direct Life -- Palladian
Managers...................... 400,000 * 400,000 12,457 12,457
Morgan Stanley Dean Witter
Convertible Securities
Trust......................... 2,500,000 1.47 2,500,000 77,857 77,857
Convexity Partners, L.P......... 1,100,000 * 1,100,000 34,257 34,257
Deutsche Bank Securities........ 6,000,000 3.53 6,000,000 186,857 186,857
Heritage Income Growth Trust.... 900,000 * 900,000 28,029 28,029
Jackson National Life/Eagle Core
Equity Series................. 100,000 * 100,000 3,114 3,114
Fidelity Financial Trust:
Fidelity Convertible
Securities Fund............ 3,400,000 2.00 3,400,000 105,886 105,886
Forest Global Convertible Fund
Series A5..................... 1,140,000 * 1,140,000 35,503 35,503
Sylvan IMA Ltd.................. 200,000 * 200,000 6,229 6,229
Forest Alternative Strategies
Fund II LP Series A5M......... 20,000 * 20,000 623 623
Forest Alternative Strategies
Fund II LP Series A5I......... 80,000 * 80,000 2,491 2,491
Forest Fulcrum Fund LP.......... 500,000 * 500,000 15,571 15,571
FIST Franklin Convertible
Securities Fund............... 3,000,000 1.76 3,000,000 93,429 93,429
Grace Brothers Ltd.............. 1,000,000 * 1,000,000 31,143 31,143
Highbridge Capital.............. 11,000,000 6.47 11,000,000 342,572 342,572
Arbitex Master Fund Limited..... 5,000,000 2.94 5,000,000 155,715 155,715
JMG Convertible Investments,
L.P. ......................... 1,000,000 * 1,000,000 31,143 31,143
Triton Capital Investments,
Ltd. ......................... 1,000,000 * 1,000,000 31,143 31,143
Lincoln National Convertible
Securities Fund............... 1,000,000 * 1,000,000 31,143 31,143
</TABLE>
33
<PAGE> 39
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
PRINCIPLE AMOUNT OF NO. OF
AMOUNT % OF NOTES NO. OF SHARES OFFERED
NAME OF SELLING SECURITY HOLDER OF NOTES CLASS OFFERED HEREBY SHARES(1)(2) HEREBY(1)(2)
- ------------------------------- ------------ ----- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
LLT Limited..................... 60,000 * 60,000 1,869 1,869
Merrill Lynch Convertible Fund,
Inc. ......................... 375,000 * 375,000 11,679 11,679
Merrill Lynch ECS Convertible
Securities Portfolio, Inc..... 125,000 * 125,000 3,893 3,893
Northwestern Mutual............. 8,000,000+ 4.71 8,000,000 249,143 249,143
OCM Convertible Trust........... 1,515,000 * 1,515,000 47,181 47,181
OCM Convertible Limited
Partnership................... 90,000 * 90,000 2,803 2,803
Delta Airlines Master Trust..... 1,110,000 * 1,110,000 34,569 34,569
State Employees' Retirement Fund
of the State of Delaware...... 960,000 * 960,000 29,897 29,897
State of Connecticut Combined
Investment Funds.............. 3,225,000 1.90 3,225,000 100,436 100,436
Partner Reinsurance Company
Ltd. ......................... 325,000 * 325,000 10,121 10,121
Chrysler Corporation Master
Retirement Trust.............. 2,775,000 1.63 2,775,000 86,422 86,422
Raytheon Company Master Pension
Trust......................... 1,435,000 * 1,435,000 44,690 44,690
Motion Picture Industry Health
Plan -- Active Member Fund.... 165,000 * 165,000 5,139 5,139
Vanguard Convertible Securities
Fund, Inc..................... 2,040,000 1.20 2,040,000 63,532 63,532
National Bank of Canada......... 700,000 * 700,000 21,800 21,800
Palladin Securities LLC......... 600,000 * 600,000 18,686 18,686
PGEP III LLC.................... 300,000 * 300,000 9,343 9,343
Conseco Direct Life............. 400,000 * 400,000 12,457 12,457
Quattro Offshore Fund Ltd. ..... 750,000 * 750,000 23,357 23,357
Sage Capital.................... 250,000 * 250,000 7,786 7,786
American Investors Life
Insurance Company, Inc. ...... 2,000,000 1.18 2,000,000 62,286 62,286
Amerus Life..................... 600,000 * 600,000 18,686 18,686
Financial Benefit............... 150,000 * 150,000 4,671 4,671
Brahma.......................... 200,000 * 200,000 6,229 6,229
Cap Arbitrage................... 2,250,000 1.32 2,250,000 70,072 70,072
Diversified Arbitrage........... 1,500,000 * 1,500,000 46,714 46,714
General Motors Arb.............. 2,250,000 1.32 2,250,000 70,071 70,071
General Motors Investment
Management Corp. ............. 7,000,000 4.12 7,000,000 218,000 218,000
JNL Balanced Fund............... 20,000 * 20,000 623 623
</TABLE>
34
<PAGE> 40
<TABLE>
<CAPTION>
AGGREGATE PRINCIPAL
PRINCIPLE AMOUNT OF NO. OF
AMOUNT % OF NOTES NO. OF SHARES OFFERED
NAME OF SELLING SECURITY HOLDER OF NOTES CLASS OFFERED HEREBY SHARES(1)(2) HEREBY(1)(2)
- ------------------------------- ------------ ----- -------------- ------------ --------------
<S> <C> <C> <C> <C> <C>
Motors Insurance Co. ........... 1,250,000 * 1,250,000 38,929 38,929
Regence Blue Cross/Blue Shield
of Oregon..................... 202,000 * 202,000 6,291 6,291
Regence Blue Cross/Blue Shield
of Utah....................... 62,000 * 62,000 1,931 1,931
Regence Blue Cross/Blue Shield
of Washington................. 336,000 * 336,000 10,464 10,464
NW Balanced Fund................ 175,000 * 175,000 5,450 5,450
Premium Total Return Fund....... 2,500,000 1.47 2,500,000 77,857 77,857
SB Total Return Fund............ 500,000 * 500,000 15,571 15,571
SB Variable Total Return Fund... 20,000 * 20,000 623 623
San Diego County Employees
Retirement Association........ 750,000 * 750,000 23,357 23,357
SoundShore Holdings Ltd. ....... 1,000,000 * 1,000,000 31,143 31,143
SoundShore Opportunity Holding
Fund Ltd...................... 500,000 * 500,000 15,571 15,571
The TCW Group, Inc. ............ 13,760,000 8.09 13,760,000 428,526 428,526
Warburg Dillon Read LLC......... 6,497,000 3.82 6,497,000 202,335 202,335
TOTAL................. $160,119,000 94.19 $160,119,000 4,986,573 4,986,573
</TABLE>
- ---------------
+ Includes $500,000 in principal amount held in The Northerwestern Mutual Life
Insurance Company Group Annuity Separate Account.
* Less than 1%
(1) All share amounts shown represent less than 1% of the outstanding Class A
common stock.
(2) Reflects the shares of common stock into which the notes held by such
selling securityholder are convertible at the initial conversion rate. The
conversion price and the number of shares of common stock issuable upon
conversion of the notes may be adjusted under certain circumstances. Assumes
conversion of the full amount of the notes held by the selling
securityholder at the initial conversion rate into Class A common stock and
the offering of all of these shares.
No estimate can be given as to the amount of the notes and common stock
that will be held by the selling securityholders at the end of sales of these
notes because the selling securityholders may offer all or portions of the notes
or shares of common stock acquired through conversion of these notes.
Additionally, the selling securityholders named above may have sold, transferred
or otherwise disposed of all or a portion of their notes and common stock since
the date on which they provided the information regarding their notes and common
stock in transactions exempt from the registration requirements of the
Securities Act of 1933. These sales would affect the data in the table above.
This prospectus only allows the selling securityholders named above who
beneficially own the notes and common stock next to each securityholder's name
on the effective date of the registration statement to sell those notes and
shares of common stock. We may from time to time include additional selling
securityholders in supplements to this prospectus.
35
<PAGE> 41
We have agreed to pay the cost of the registration of the securities and
the preparation of this prospectus and the registration statement under which it
is filed. The selling securityholders are responsible for any underwriting
discounts and commissions relating to the securities to be sold by them.
36
<PAGE> 42
PLAN OF DISTRIBUTION
The selling securityholders received the notes in connection with an
underwritten private placement. The selling securityholders may sell the notes
and underlying common stock from time to time. The selling securityholders may
sell all or a portion of the securities in one or more transactions:
(1) on the exchange on which the securities are traded, if any;
(2) in the over-the-counter market;
(3) in separately negotiated transactions; or
(4) in a combination of such transactions.
Each sale may be made at market prices prevailing at the time of the sale or at
negotiated prices. Some or all of the securities may be sold through brokers
acting on behalf of the selling securityholders or to dealers or underwriters
for resale by them. In connection with such sales such brokers, dealers and
underwriters may receive compensation in the form of discounts or commissions
from the selling securityholders and may receive commissions from the purchasers
of securities for whom they act as broker or agent (which discounts and
commissions are not anticipated to exceed those customary in the types of
transactions involved). Any broker or dealer participating in any such sale may
be deemed to be an "underwriter" within the meaning of the Securities Act of
1933 and will be required to deliver a copy of this prospectus to any person who
purchases any of the securities from or through such broker or dealer.
In connection with any sales through a broker, such broker may act as agent
for the selling securityholder or may purchase from the selling securityholder
all or a portion of such securities as principal. Securities sold by a broker
may be made in one or more of the following transactions:
(1) block transactions (which may involve crosses) in which a broker may
sell all or a portion of such shares as agent but may position and
resell all or a portion of the block as principal to facilitate the
transaction;
(2) purchases by any broker as principal and resale by such broker for its
own account;
(3) an exchange distribution or a secondary distribution in accordance with
applicable NYSE rules;
(4) ordinary brokerage transactions and transactions in which any broker
solicits purchasers;
(5) sales "at the market" to or through the market maker or into an
existing trading market, on an exchange or otherwise, for such
securities; and
(6) sales in other ways not involving market makers or established trading
markets, including direct sales to institutions or individual
purchasers.
We are permitted to suspend the use of this prospectus in connection with
the sales of notes and the underlying common stock by holders upon the happening
of certain events or if there exists any fact that makes any statement of
material fact made in this prospectus untrue or that requires the making of
additions to or changes in the prospectus in order to make the statements herein
not misleading until such time as we advise the selling securityholders that use
of the prospectus may be resumed. We have agreed to pay the cost of the
registration of the securities and the preparation of this prospectus and the
Registration Statement under which it is filed. The expenses so payable by us
are estimated to be approximately $125,000.
37
<PAGE> 43
In order to comply with the securities laws of certain states, if
applicable, the notes and the underlying common stock may be sold in such
jurisdictions only through registered or licensed brokers or dealers. In
addition, in certain states the notes and the underlying common stock may not be
sold unless it has been registered or qualified for sale or an exemption from
registration or qualification requirements is available and is complied with.
Any securities covered by this prospectus that qualify for sale pursuant to
Rule 144 or Rule 144A of the Securities Act of 1933 may be sold under Rule 144
or Rule 144A rather than pursuant to this prospectus. There can be no assurance
that any selling securityholder will sell any or all of the notes or the
underlying common stock described herein, and any selling securityholder may
transfer, devise or gift such securities by other means not described herein.
LEGAL MATTERS
Kirkland & Ellis, New York, New York (a partnership that includes
professional corporations) will pass upon legal matters regarding the issuance
of the securities and the validity of the common stock being issuable upon
conversion of the securities. Mr. Glen E. Hess has been a director of Alpharma
since 1983. Mr. Hess's professional corporation is a partner of Kirkland &
Ellis, a law firm which since 1978 has performed significant legal services for
Alpharma.
EXPERTS
The financial statements incorporated in this prospectus by reference to
the Annual Report on Form 10-K for the year ended December 31, 1998, have been
so incorporated in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of said firm as experts in
auditing and accounting.
38
<PAGE> 44
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
$170,000,000
LOGO
3% CONVERTIBLE SENIOR SUBORDINATED
NOTES DUE 2006
-------------------
PROSPECTUS
----------------
, 1999
UNTIL , 1999, ALL DEALERS THAT EFFECT TRANSACTIONS IN THESE
SECURITIES, WHETHER OR NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO
DELIVER A PROSPECTUS. THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER
A PROSPECTUS WHEN ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD
ALLOTMENTS OR SUBSCRIPTIONS.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE> 45
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
The following table sets forth the expenses of the Registrant in connection
with the registration of the securities being registered, other than
underwriting discounts and commissions. All such amounts are estimates, other
than the fees payable to the Commission.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee......... $ 47,260
Legal fees and expenses..................................... 40,000
Accounting fees and expenses................................ 10,000
Printing.................................................... 10,000
Trustee's Fees and Expenses................................. 8,500
Miscellaneous............................................... 9,240
--------
Total............................................. $125,000*
========
</TABLE>
- ---------------
* All expenses, except the Securities and Exchange Commission registration fee,
are estimated.
ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
permits a Delaware corporation to limit the personal liability of its directors
in accordance with the provisions set forth therein. The Restated Certificate of
Incorporation of the Registrant provides that the personal liability of its
directors shall be limited to the fullest extent permitted by applicable law.
Section 145 of the General Corporation Law of the State of Delaware
contains provisions permitting corporations organized thereunder to indemnify
directors, officers, employees or agents against expenses, judgments and fines
reasonably incurred and against certain other liabilities in connection with any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, by reason of the fact that such
person was or is a director, officer, employee or agent of the corporation. The
Restated Certificate of Incorporation of the Registrant provides for
indemnification of its directors and officers to the fullest extent permitted by
applicable law.
ITEM 16. EXHIBITS
The following exhibits are filed pursuant to Item 601 of Regulation S-K:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Sale and purchase agreement between Schwarz Pharma AG,
Alpharma GmbH & Co. KG and Alpharma Inc. dated June 18, 1999
was filed as Exhibit 2.1 of the Company's Form 8-K dated as
of July 2, 1999, and is incorporated by reference.
2.2 Agreement for the sale and purchase of the issued share
capital of Cox Investments Limited dated April 30, 1998
between Hoechst AG Alpharma (U.K.) Limited, and Alpharma
Inc. was filed as Exhibit 2.1 of the Company's Form 8-K,
dated as of May 7, 1998 and is incorporated by reference.
</TABLE>
II-1
<PAGE> 46
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
4.1 Reference is made to Article Fourth of the Amended and
Restated Certificate of Incorporation of the Company which
is filed as Exhibit 3.1 to the Company's 1998 Annual Report
on Form 10-K and incorporated by reference.
4.2 Indenture dated as of June 2, 1999, by and between the
Registrant and First Union National Bank, as trustee, with
respect to the 3% Convertible Senior Subordinated Notes due
2006, was filed as Exhibit 4.1 to the Company's Form 8-K
dated as of June 16, 1999 and is incorporated by reference.
4.3 Registration Rights Agreement dated as of June 2, 1999, by
and among the Registrant and the initial purchases named
therein, was filed as Exhibit 4.2 to the Company's Form 8-K
dated as of June 17, 1999 and is incorporated by reference.
5.1 Opinion of Kirkland & Ellis regarding legality of securities
being registered.
12.1 Statement re: computation of ratio of earnings to fixed
charges.
23.1 Consent of PricewaterhouseCoopers, LLP
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included signature pages of Registration
Statement).
</TABLE>
ITEM 17. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or
the most recent post-effective amendment thereof) which,
individually or in the aggregate, represent a fundamental
change in the information set forth in the registration
statement. Notwithstanding the foregoing, any increase or
decrease in volume of securities offered (if the total dollar
value of securities offered would not exceed that which was
registered) and any deviation from the low or high end of the
estimated maximum offering range may be reflected in the form
of prospectus filed with the Commission pursuant to Rule
424(b) if, in the aggregate, the changes in volume and price
represent no more than 20 percent change in the maximum
aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration
statement.
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration
statement or any material change to such information in the
registration statement;
provided, however, that paragraphs (1)(i) and (1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed with or furnished to the
Commission by the registrant pursuant to Section 13 or Section 15(d) of the
Securities Exchange Act of 1934 that are incorporated by reference in the
registration statement.
II-2
<PAGE> 47
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be
deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time
shall be the initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each
filing of the registrant's annual report pursuant to Section 13(a)
or 15(d) of the Securities Exchange Act of 1934 (and, where
applicable, each filing of an employee benefit plan's annual report
pursuant to Section 15(d) of the Securities Exchange Act of 1934)
that is incorporated by reference in the registration statement
shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at
that time shall be deemed to be the initial bona fide offering
thereof.
(c) Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the registrant pursuant to the foregoing
provisions, or otherwise, the registrant has been advised that in
the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Act and
is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the registrant of expenses incurred or paid by a director, officer
or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director,
officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its
counsel the matter has been settled by controlling precedent, submit
to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the
Act and will be governed by the final adjudication of such issue.
II-3
<PAGE> 48
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the
Registrant certifies that it has reasonable grounds to believe it meets all the
requirements for filing on Form S-3 and has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Fort Lee, New Jersey, as of August 30, 1999.
ALPHARMA INC.
By: /s/ ROBERT F. WROBEL
------------------------------------
Robert F. Wrobel
Vice President and
Chief Legal Officer
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Jeffrey E. Smith and Robert Wrobel and each of
them, as true and lawful attorneys-in-fact and agents with full power of
substitution and resubstitution for him and his name, place and stead, in any
and all capacities to sign any and all amendments (including pre-effective and
post-effective amendments) to this Registration Statement (and any registration
statement filed pursuant to Rule 462(b) under the Securities Act), and to file
the same with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission), granting unto said
attorneys-in-fact and agents, and each of them, full power and authority to do
and perform each and every act and thing requisite and necessary to be done in
and about the premises, as fully to all intents and purposes as he might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes may lawfully do or cause to be done by virtue hereof.
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES ACT OF 1933, AS AMENDED,
THIS REGISTRATION STATEMENT HAS BEEN SIGNED BY THE FOLLOWING PERSONS IN THE
CAPACITIES AND AS OF THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ EINAR W. SISSENER Chairman and Director August 30, 1999
- --------------------------------------------------- (Principal Executive
Einar W. Sissener Officer)
/s/ GERT W. MUNTHE President, Chief Executive August 30, 1999
- --------------------------------------------------- Officer and Director
Gert W. Munthe
/s/ JEFFREY E. SMITH Vice President, Finance and August 30, 1999
- --------------------------------------------------- Chief Financial Officer
Jeffrey E. Smith (Principal Financial Officer
and Principal Accounting
Officer)
Director , 1999
- ---------------------------------------------------
I. Roy Cohen
Director , 1999
- ---------------------------------------------------
Thomas Gibian
/s/ GLEN E. HESS Director August 30, 1999
- ---------------------------------------------------
Glen E. Hess
</TABLE>
II-4
<PAGE> 49
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ ERIK G. TANDBERG Director August 30, 1999
- ---------------------------------------------------
Erik G. Tandberg
Director , 1999
- ---------------------------------------------------
Peter G. Tombros
Director , 1999
- ---------------------------------------------------
Erik Hornnaess
/s/ OYVIN A. BROYMER Director August 30, 1999
- ---------------------------------------------------
Oyvin A. Broymer
</TABLE>
II-5
<PAGE> 50
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
<C> <S>
2.1 Sale and purchase agreement between Schwarz Pharma AG,
Alpharma GmbH & Co. KG and Alpharma Inc. dated June 18, 1999
was filed as Exhibit 2.1 of the Company's Form 8-K dated as
of July 2, 1999, and is incorporated by reference.
2.2 Agreement for the sale and purchase of the issued share
capital of Cox Investments Limited dated April 30, 1998
between Hoechst AG Alpharma (U.K.) Limited, and Alpharma
Inc. was filed as Exhibit 2.1 of the Company's Form 8-K,
dated as of May 7, 1998 and is incorporated by reference.
4.1 Reference is made to Article Fourth of the Amended and
Restated Certificate of Incorporation of the Company which
is filed as Exhibit 3.1 to the Company's 1998 Annual Report
on Form 10-K and incorporated by reference.
4.2 Indenture dated as of June 2, 1999, by and between the
Registrant and First Union National Bank, as trustee, with
respect to the 3% Convertible Senior Subordinated Notes due
2006, was filed as Exhibit 4.1 to the Company's Form 8-K
dated as of June 16, 1999 and is incorporated by reference.
4.3 Registration Rights Agreement dated as of June 2, 1999, by
and among the Registrant and the initial purchases named
therein, was filed as Exhibit 4.2 to the Company's Form 8-K
dated as of June 17, 1999 and is incorporated by reference.
5.1 Opinion of Kirkland & Ellis regarding legality of securities
being registered.
12.1 Statement re: computation of ratio of earnings to fixed
charges.
23.1 Consent of PricewaterhouseCoopers, LLP
23.2 Consent of Kirkland & Ellis (included in Exhibit 5.1).
24.1 Powers of Attorney (included signature pages of Registration
Statement).
</TABLE>
<PAGE> 1
EXHIBIT 5.1
August 30,1999
Alpharma Inc.
One Executive Drive
Fort Lee, New Jersey 07024
Re: Alpharma Inc.
Registration Statement on Form S-3
Ladies and Gentlemen:
We are acting as special counsel to Alpharma Inc., a Delaware corporation
(the "Company"), in connection with its registration statement on Form S-3 (the
"Registration Statement"), filed with the Securities and Exchange Commission
(the "Commission"), relating to resales of up to $160,119,000 aggregate
principal amount of the Company's 3% Convertible Senior Subordinated Notes due
2006 (the "Notes") and the 4,986,573 shares (as such number may be adjusted
between the Company and First Union National Bank, as trustee ("the Trustee"))
of Common Stock, par value $0.20 per share, of the Company (the "Common Stock")
issuable upon conversion of the Notes in accordance with the Indenture. This
opinion letter is furnished to you at your request to enable you to fulfill the
requirements of Item 601(b)(5) of Regulation S-K in connection with the
Registration Statement.
For purposes of this opinion letter, we have examined copies of the
following documents:
1. An executed copy of the Registration Statement.
2. An executed copy of the Indenture.
3. Executed copies of the Notes, each dated as of June 2, 1999.
4. The Amended and Restated Certificate of Incorporation of the Company,
as certified by the Secretary of the State of the State of Delaware on
May 26, 1999.
5. The Certificate of Amendment of the Company Filed with the Secretary
of the State of the State of Delaware on July 6, 1999.
6. The Amended and Restated Bylaws of the Company.
7. Resolutions of the Board of Directors of the Company adopted at a
meeting of the Board of Directors of the Company on April 27, 1999,
and resolutions adopted by the Pricing Committee of the Board of
Directors on May 27, 1999, relating to the offering of the Notes and
arrangements in connection therewith.
8. Copies of all certificates and other documents delivered at the
closing of the purchase and sale of the Notes.
For purposes of this opinion letter, we have assumed the authenticity of
all documents submitted to us as originals, the conformity to the originals
<PAGE> 2
of all documents submitted to us as copies and the authenticity of the
originals of all documents submitted to us as copies. We have also assumed the
legal capacity of all natural persons, the genuineness of the signatures of
persons signing all documents in connection with which this opinion is
rendered, the authority of such persons signing on behalf of the parties
thereto other than the Company and the due authorization, execution and
delivery of all documents by the parties thereto other than the Company. As to
any facts material to the opinions expressed herein, we have relied upon the
statements and representations of officers and other representations of the
Company and others.
Our advice on every legal issue addressed in this letter is based
exclusively on the internal laws of the State of New York, the General
Corporation Law of the State of Delaware and the federal law of the United
States of America, and represents our opinion as to how that issue would be
resolved were it to be considered by the highest court in the jurisdiction
which enacted such law. The manner in which any particular issue would be
treated in any actual court case would depend in part on facts and
circumstances particular to the case, and this opinion letter is not intended
to guarantee the outcome of any legal dispute which may arise in the future.
Based upon and subject to the foregoing qualifications, assumptions and
limitations and the further limitations set forth below, we hereby advise you
that in our opinion:
1. The Notes constitute valid and binding obligations of the Company,
enforceable against the Company in accordance with their terms.
2. The shares of Common Stock issuable upon conversion of the Notes,
when issued in accordance with the terms of the Notes, will be validly
issued, fully paid and non-assessable.
Our opinion in paragraph 1 of this opinion letter is subject to: (i) the
effect of bankruptcy, insolvency, fraudulent conveyance and other similar laws
and judicially developed doctrines in this area such as substantive
consolidation and equitable subordination; (ii) the effect of general principles
of equity; and (iii) other commonly recognized statutory and judicial
constraints on enforceability including statutes of limitations. "General
principles of equity" include but are not limited to: principles which limit the
availability of specific performance and injunctive relief; principles which
limit the availability of a remedy under certain circumstances where another
remedy has been elected; principles requiring reasonableness, good faith and
fair dealing in the performance and enforcement of an agreement by the party
seeking enforcement; principles which may permit a party to cure a material
failure to perform its obligations; and principles affording equitable defenses
such as waiver, laches and estoppel. It is possible that some of the terms of
the Notes and the Indenture may not prove enforceable against the Company for
reasons other than those listed in this opinion letter should an actual
enforcement action be brought, but (subject to all the exceptions,
qualifications, exclusions and other limitations in this letter) such
unenforceability would not, in our opinion prevent the holders of the Notes from
realizing the principal benefits purported to be provided by the Notes and the
Indenture.
We do not find it necessary for the purposes of this opinion, and
accordingly we do not purport to cover herein, the application of the
securities of "Blue Sky" laws of the various states to the Notes and the Common
Stock issuable upon conversion of the Notes.
This opinion letter is limited to the specific issues addressed herein,
and no opinion may be inferred or implied beyond that expressly stated herein.
We assume no obligation to revise or supplement this opinion should the present
laws of the State of New York, the General Corporation Law of the State of
Delaware or the federal law of the United States be changed by legislative
<PAGE> 3
action, judicial decision or otherwise.
We hereby consent to the filing of this opinion letter with the Commission
as Exhibit 5.1 to the Registration Statement. We also consent to the reference
to our firm under the heading "Legal Matters" in the Registration Statement. In
giving this consent, we do not thereby admit that we are in the category of
persons whose consent is required under Section 7 of the Securities Act of 1933
or the rules and regulations of the Commission.
Very truly yours,
/s/ Kirkland & Ellis
KIRKLAND & ELLIS
<PAGE> 1
ALPHARMA INC. AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In thousands, except for ratio data)
<TABLE>
<CAPTION>
Six months Six months
ended ended
June 30, June 30,
--------------------------------------------------------- ---------- ----------
1994 1995 1996 1997 1998 1998 1999
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
Income before provision
for income taxes $ 1,736 $ 30,228 $(16,226) $ 27,750 $ 38,983 $ 13,949 $ 23,987
Add:
Portion of rents representative of
the interest factor 1,838 1,858 2,193 1,942 2,222 1,056 1,104
Interest on indebtedness 15,355 21,993 19,976 18,581 25,613 10,979 16,323
Amortization of debt expense 246 302 302 309 1,313 339 657
Amortization of interest capitalized 313 386 397 380 408 204 230
-------- -------- -------- -------- -------- -------- --------
INCOME AS ADJUSTED $ 19,488 $ 54,767 $ 6,642 $ 48,962 $ 68,539 $ 26,527 $ 42,301
======== ======== ======== ======== ======== ======== ========
FIXED CHARGES
Interest on indebtedness (a) $ 15,355 $ 21,993 $ 19,976 $ 18,581 $ 25,613 $ 10,979 $ 16,323
Interest capitalized (b) 722 318 572 407 744 351 250
Amortization of debt expense (c ) 246 302 302 309 1,313 339 657
Rent expense 5,513 5,574 6,578 5,825 6,665 3,169 3,312
Portion of rents representative of
the interest factor (d) 1,838 1,858 2,193 1,942 2,222 1,056 1,104
-------- -------- -------- -------- -------- -------- --------
Fixed charges (a+b+c+d) $ 18,161 $ 24,471 $ 23,043 $ 21,239 $ 29,892 $ 12,725 $ 18,334
======== ======== ======== ======== ======== ======== ========
RATIO OF EARNINGS TO FIXED CHARGES 1.07 2.24 -- 2.31 2.29 2.08 2.31
======== ======== ======== ======== ======== ======== ========
</TABLE>
<PAGE> 1
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Registration
Statement on Form S-3 of our report dated February 24, 1999 relating to the
financial statements, which appears in Alpharma Inc.'s Annual Report on Form
10-K for the year ended December 31, 1998. We also consent to the reference to
us under the heading "Experts" in such Registration Statement.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Florham Park, New Jersey
August 30, 1999
