<PAGE>
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934 (Amendment No. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement
[_] CONFIDENTIAL, FOR USE OF THE
COMMISSION ONLY (AS PERMITTED BY
RULE 14A-6(E)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to (S) 240.14a-11(c) or (S) 240.14a-12
ALPHARMA INC.
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(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which
the filing fee is calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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[_] Fee paid previously with preliminary materials.
[_] Check box if any part of the fee is offset as provided by Exchange
Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee
was paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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Notes:
Reg. (S) 240.14a-101.
SEC 1913 (3-99)
<PAGE>
[LOGO ALPHAMA INC.]
ALPHARMA INC.
One Executive Drive
Fort Lee, New Jersey 07024
-------------------------------------
Notice of Annual Meeting of Stockholders
To Be Held on May 25, 2000
-------------------------------------
To the Stockholders of ALPHARMA INC.:
NOTICE IS HEREBY GIVEN that the Annual Meeting of Stockholders of Alpharma
Inc., a Delaware corporation (the "Company"), will be held at The Regal U.N.
Plaza Hotel, One U.N. Plaza, New York, New York, on Thursday, May 25, 2000, at
9:00 a.m., local time, to consider and act upon the following matters:
1. The election of nine directors to the Company's Board of Directors, each
to hold office until the 2001 Annual Meeting of Stockholders and until
their successors shall be elected and shall qualify.
2. A proposal to amend the Company's 1997 Incentive Stock Option and
Appreciation Right Plan, as amended, to increase the number of shares
available for awards thereunder by 2 million shares.
3. Transaction of such other business as may properly come before the
meeting or any adjournments or postponements thereof.
The Board of Directors has fixed the close of business on March 27, 2000 as
the record date for determining the stockholders entitled to notice of and to
vote at the meeting or any adjournment thereof.
Your representation at this meeting is important. Whether or not you expect
to attend the Annual Meeting in person, please complete, date, sign and return
the enclosed proxy. An envelope is enclosed for your convenience which, if
mailed in the United States, requires no additional postage. If you attend the
Annual Meeting, you may then withdraw your proxy and vote in person.
A copy of the Company's Annual Report to stockholders for the year ended
December 31, 1999 and a Proxy Statement accompany this notice.
By order of the Board of Directors,
Robert F. Wrobel
Secretary
April 13, 2000
<PAGE>
[LOGO ALPHARMA INC.]
ALPHARMA INC.
One Executive Drive
Fort Lee, New Jersey 07024
MAILING DATE
April 13, 2000
---------------------------------------------
Proxy Statement for Annual Meeting of Stockholders
---------------------------------------------
To Be Held on May 25, 2000
This proxy statement (the "Proxy Statement") is furnished in connection with
the solicitation of proxies by the Board of Directors of Alpharma Inc., a
Delaware corporation (the "Company"), for use at the Annual Meeting of
Stockholders (the "Annual Meeting") to be held on Thursday, May 25, 2000 at
The Regal U.N. Plaza Hotel, One U.N. Plaza, New York, New York at 9:00 a.m.,
local time, and at any adjournment or postponement thereof. The cost of
solicitation of the Company's stockholders will be paid by the Company. Such
cost will include the reimbursement of banks, brokerage firms, nominees,
fiduciaries and other custodians for expenses of forwarding solicitation
materials to beneficial owners of shares. In addition to the solicitation of
proxies by use of mail, the directors, officers and employees of the Company
may solicit proxies personally or by telephone, telegraph or facsimile
transmission. Such directors, officers and employees will not be additionally
compensated for such solicitation but may be reimbursed for out-of-pocket
expenses incurred in connection therewith.
THE ANNUAL MEETING
Purpose of Meeting
At the Annual Meeting, the Company's stockholders will consider and act upon
the following matters:
1. The election of nine directors to the Company's Board of Directors,
each to hold office until the 2001 Annual Meeting of Stockholders and until
their successors shall be elected and shall qualify.
2. A proposal to amend the Company's 1997 Incentive Stock Option and
Appreciation Right Plan, as amended, (the "Stock Option Plan" or the
"Plan") to increase the number of shares available for awards thereunder by
2 million shares.
3. Transaction of such other business as may properly come before the
meeting or any adjournments or postponements thereof.
Record Date
The close of business on March 27, 2000 (the "Record Date") has been fixed
as the record date for determining holders of outstanding shares of the
Company's Class A Common Stock, par value $.20 per share
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<PAGE>
(the "Class A Stock"), and Class B Common Stock, par value $.20 per share (the
"Class B Stock"), entitled to notice of, and entitled to vote at, the Annual
Meeting. As of the Record Date, 20,174,633 shares of Class A Stock and
9,500,000 shares of Class B Stock were outstanding and entitled to vote.
Quorum
For each matter to be voted upon at the Annual Meeting, the presence in
person or by proxy, of holders of stock entitled to be voted with respect to
such matter representing a majority of the aggregate voting power of all
shares of stock entitled to be voted with respect to such matter is necessary
to constitute a quorum with respect to such matter and to transact business
with respect to such matter at the Annual Meeting. For purposes of determining
whether a quorum exists with respect to the election of directors, shares as
to which authority to vote in the election of directors has been withheld and
broker non-votes (where a broker submits a proxy but does not have authority
to vote a customer's shares on one or more matters) with respect thereto will
be considered present at the Annual Meeting. For the purpose of determining
whether a quorum exists with respect to amending the Stock Option Plan and any
other matter which may properly come before the Annual Meeting shares
abstaining on such matter and all broker non-votes with respect to such matter
will be considered present at the Annual Meeting.
Required Vote
Votes Entitled to be Cast by Each Class of Stock. Except for the election of
directors (described below) and certain matters that require a class vote, the
holders of the Class A Stock and the holders of the Class B Stock vote
together, with each share of Class A Stock entitling the holder thereof to one
vote and each share of Class B Stock entitling the holder thereof to four
votes.
Election of Directors. Nine directors will be elected at the Annual Meeting.
Under the Company's Certificate of Incorporation, the holders of the Class A
Stock are entitled, voting as a separate class, to elect at least 33 1/3% of
the Company's Board of Directors (rounded to the nearest whole number, but in
no event less than two members of the Company's Board of Directors), and the
holders of the Class B Stock are entitled, voting separately as a class, to
elect the remaining directors. Therefore, the holders of the Class A Stock
will elect three directors (directors to be elected by the holders of Class A
Stock being referred to as the "Class A Directors") and the holders of the
Class B Stock will elect six directors (directors elected by the holders of
Class B Stock being referred to as the "Class B Directors"). The affirmative
vote of a plurality of the votes cast at the Annual Meeting by the holders of
the Class A Stock, voting as a single class, is necessary to elect the three
Class A Directors, and the affirmative vote of a plurality of the votes cast
at the Annual Meeting by the holders of the Class B Stock, voting as a single
class, is necessary to elect the six Class B Directors. (A plurality of the
votes cast means the greatest number of votes cast for a director.)
Amendment of 1997 Incentive Stock Option and Appreciation Right
Plan. Approval of the proposal to amend the Stock Option Plan requires the
affirmative vote of a majority of the votes cast by the holders of the Class A
Stock and Class B Stock, voting together, present and entitled to vote at the
meeting.
Proxies
The enclosed proxy provides space for holders of Class A Stock to vote for,
or withhold authority to vote for, all or any one of the Company's three
nominees for Class A Directors
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<PAGE>
Shares of Class A Stock represented by properly executed proxies received at
or prior to the Annual Meeting and which have not been revoked will be voted
in accordance with the instructions indicated therein. If no instructions are
indicated, such proxies will be voted FOR (i) the election as directors of the
three nominees for Class A Directors nominated by the Company's Board of
Directors (see "Election of Directors; Nominees for Directors; Nominees for
Class A Directors" below), (ii) the proposal to amend the Stock Option Plan
and (iii) in the discretion of the proxy holder, as to any other matter which
may properly come before the Annual Meeting. With respect to the election of
directors, neither shares as to which authority to vote has been withheld (to
the extent withheld)nor broker non-votes will be considered affirmative votes.
With respect to any other matter which may properly come before the meeting,
abstentions, and broken non-votes will be considered present and entitled to
vote but will not have been cast and therefore will not be counted in
determining whether any matter received the requisite votes. With respect to
amendment of Stock Option Plan, (i) abstentions, pursuant to Delaware law,
will be considered present and entitled to vote but will not have been cast
and therefore will not be counted in determining whether such proposal
received the requisite votes and (ii) broker non-votes will be considered not
entitled to vote on such proposal and thus will not be counted in determining
whether such proposal has received the requisite votes.
YOUR VOTE IS IMPORTANT. WHETHER OR NOT YOU PLAN TO ATTEND THE ANNUAL
MEETING, PLEASE COMPLETE, DATE AND SIGN YOUR PROXY IN ORDER TO ENSURE THAT
YOUR SHARES WILL BE REPRESENTED AT THE ANNUAL MEETING. THE GIVING OF SUCH
PROXY DOES NOT AFFECT YOUR RIGHT TO VOTE IN PERSON IN THE EVENT YOU ATTEND THE
ANNUAL MEETING.
A holder of Class A Stock who has given a proxy may revoke such proxy at any
time prior to its exercise at the Annual Meeting by (i) giving written notice
of revocation to the Secretary of the Company, (ii) properly submitting to the
Company a duly executed proxy bearing a later date or (iii) attending the
Annual Meeting and voting in person. Attendance at the Annual Meeting will not
in and of itself revoke a proxy. All written notices of revocation and other
communications with respect to revocation of proxies should be sent to the
attention of the Secretary of the Company at the Company's United States
executive offices, located at One Executive Drive, Fort Lee, New Jersey 07024.
If a quorum is not obtained, the Annual Meeting may be adjourned for the
purpose of obtaining additional proxies or for any other purpose, and, at any
subsequent reconvening of the Annual Meeting, all proxies will be voted in the
same manner as such proxies would have been voted at the original convening of
the meeting(except for any proxies which have therefore effectively been
revoked or withdrawn), notwithstanding that they may have been effectively
voted on the same or any other matter at a previous meeting.
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<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Ownership of Common Stock
The following table sets forth as of March 7, 2000 (unless otherwise noted)
certain information regarding the beneficial ownership of the Class A Stock
and the Class B Stock by (a) each person who is known to the Company to be the
beneficial owner of more than 5% of the outstanding shares of either of such
classes, (b) each director and each nominee for director of the Company and
the five named executive officers (as defined below) and (c) all directors and
executive officers of the Company as a group. Unless otherwise indicated, each
beneficial owner possesses sole voting and dispositive power with respect to
the shares listed in this table.
<TABLE>
<CAPTION>
Percent of
Amount and Common
Nature of Percent of Stock (both
Title of Class Beneficial Class Classes)
Of Stock Name of Beneficial Owner Ownership Outstanding Outstanding
-------------------- ------------------------ ---------- ----------- -----------
<C> <S> <C> <C> <C>
A.L. Industrier AS
Class B Common Stock (1)(2)(3) 9,500,000 100.00% 32.1%
A.L. Industrier AS
Class A Common Stock (1)(2)(3) 0 * *
Putnam Investments, Inc.
Class A Common Stock (4) 1,403,199 6.88 4.63
Class A Common Stock Amvescap PLC (5) 1,529,849 7.50 5.05
Morgan Stanley Dean
Class A Common Stock Witter & Co. (6) 1,093,792 5.36 3.61
Class A Common Stock Einar W. Sissener (7)(8) 328,667 1.63 1.11
Class A Common Stock I. Roy Cohen (9) 19,044 * *
Class A Common Stock Thomas G. Gibian (9) 8,509 * *
Class A Common Stock Glen E. Hess (9) 10,842 * *
Class A Common Stock Erik G. Tandberg (8)(9) 6,234 * *
Class A Common Stock Peter G. Tombros (9) 6,818 * *
Class A Common Stock Erik Hornnaess (9) 7,667 * *
Class A Common Stock nyvin A. Broymer (9) 7,000 * *
Class A Common Stock Ingrid Wiik (9)(10) 47,833 * *
Class A Common Stock Jeffrey E. Smith (9)(11) 109,857 * *
Class A Common Stock Thomas Anderson (9) 38,181 * *
Class A Common Stock Bruce I. Andrews (9) 45,765 * *
Class A Common Stock Gert W. Munthe (12) 66,977 * *
Class A Common Stock All directors and 913,554 4.48 3.01
executive officers as a
group (20 persons) (8)
</TABLE>
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*Indicates ownership of less than one %.
(1) The address of A.L. Industrier AS (formerly known as Apothekernes
Laboratorium A.S), a corporation organized and existing under the laws of
the Kingdom of Norway ("A.L. Industrier"), is Harbitzalleen 3, 0275 Oslo,
Norway.
(2) The source of this information is Amendment No. 4 to the Schedule 13D,
dated December 8, 1998, filed with the Securities and Exchange Commission
(the "Commission") by A.L. Industrier A.S. ("A.L. Industrier"). The
shares reflected in the table are held of record by A/S Wangs Fabrik, a
wholly owned subsidiary of A.L. Industrier, although A.L. Industrier
retains full beneficial ownership of these shares. A.L. Industrier has
pledged approximately 50% of such shares and 50% of the Industrier Note
(as defined under "Certain Relationships and Certain Transactions") to a
Norwegian bank as collateral borrowings made in connection with the
purchase of certain Class B Stock in June of 1997 and to provide funds in
connection with the Industrier Note (see "Certain Relationships and
Related Transactions").
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<PAGE>
(3) Shares of Class B Stock are convertible into an equal number of shares of
Class A Stock. If all shares of Class B Stock beneficially owned by A.L.
Industrier were converted as of March 8, 2000, A.L. Industrier would own
approximately 32.1% of the then outstanding shares of Class A Stock.
(4) The source of this information is the Schedule 13G dated February 7, 2000
filed with the Commission by Putnam Investments Inc. ("PII"). Such
Schedule 13G reported that investment advisors and subsidiaries of PII
have shared voting power and shared disposition power with respect to
19,101 shares and 1,403,199 shares, respectively, and do not have sole
voting power or sole disposition power with respect to any shares. PII
declares that its filing of Schedule 13G shall not be an admission of
beneficial ownership by PII. The address of PII is One Post Office
Square, Boston, MA 02109.
(5) The source of this information is Amendment No. 7 to Schedule 13G dated
February 3, 2000 filed with the Commission by Amvescap PLC ("Amvescap").
Such Schedule 13G reports that subsidiaries of Amvescap hold shared
voting and disposition power with respect to all shares. Amvescap
declares that its filing of Schedule 13G shall not be an admission of
beneficial ownership by Amvescap or its subsidiaries. The address of
Amvescap is 11 Devonshire Square, London EC2M 4YR England.
(6) The source of this information is the Schedule 13G dated February 25,
2000 filed with the Commission by Morgan Stanley Dean Witter & Co.
("Morgan Stanley"). Such Schedule 13G reported that Morgan Stanley holds
shared voting power as to 1,058,192 shares, and shared dispositive power
as to 1,093,792 shares, and does not have sole voting or dispositive
power as to any shares. Morgan Stanley declared in its filing that the
shares as held in various accounts managed by Morgan Stanley and that no
account holds more than 5% of the Company's Class A Common Stock. The
address of Morgan Stanley is 1585 Broadway, New York, NY 10036.
(7) Beneficial ownership of the Company shares by A. L. Industrier's not
included. Mr. Sissener is Chairman of the Board of A.L. Industrier and
together with A/S Swekk (Mr. Sissener's family-controlled private holding
company) ("Swekk") and certain of his relatives beneficially owns 52.2%
of A.L. Industrier's outstanding ordinary shares entitled to vote and,
accordingly, may be deemed a controlling person of A.L. Industrier.
(8) Includes shares held by, Mr. Sissener, the estate of his wife, Swekk, and
EWS Stiftelse, a trust established for the benefit of members of the
family of Mr. Sissener.
(9) The shares reflected in the table include shares that the executive
officer or director has the right to acquire upon the exercise of stock
options granted under the Company's 1997 Incentive Stock Option Plan (the
"Stock Option Plan") or the Non-Employee Director Stock Option Plan which
are exercisable as of March 8, 2000 or within 60 days thereafter as
follows: Ms. Wiik--45,002 shares, Mr. Smith--89,000 shares, Mr.
Anderson--35,625 shares, Mr. Andrews--44,225 shares, Mr. Munthe--25,000
shares, each of Messrs. Cohen, Gibian, Hess, Tandberg and Tombros--6,000
shares, each of Mssrs. Broymer and Hornnaess--2,000 shares. All named
executive officers and directors as a group--272,852 shares.
(10) Mr. Tandberg and Ms. Wiik also own 49, and 565 shares, respectively, of
A.L. Industrier.
(11) The Company has been advised by Mr. Smith that his wife or children own
5,350 of Mr. Smith's shares of Class A Stock but that he has voting power
over such shares.
(12) Includes 40,492 shares of Class A Stock held by Mr. Munthe's wife. Mr.
Munthe is a director of A.L. Industrier. The Company has been advised by
Mr. Munthe that the members of his immediate family own 20,500 A.L.
Industrier Shares which are included in the number of A.L. Industrier
Shares beneficially owned by Mr. Sissener (See footnote (7) above) and
that Mr. Munthe does not have any voting or dispositive power over such
shares. In addition, Mr. Munthe owns 100 shares of A.L. Industrier.
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<PAGE>
ELECTION OF DIRECTORS
Election of Directors
The Company's Board of Directors intends to cause the nomination of the
nominees listed below under "Nominees for Directors; Nominees for Class A
Directors" and all proxies received from holders of the Class A Stock will be
voted FOR the election of such nominees as Class A Directors, except to the
extent that persons giving such proxies withhold authority to vote for such
nominees.
Each director is to be elected to hold office until the next Annual Meeting
of Stockholders and until his successor is chosen and qualified.
A.L. Industrier, which beneficially owns 100% of the shares of Class B
Stock, has advised the Company that it intends to vote its shares in favor of
the nominees listed below under "Nominees for Directors; Nominees for Class B
Directors," which would assure their election as Class B Directors.
Nominees for Directors
The Company believes that each of the nominees for director will be able to
serve. If any of the nominees would be unable to serve, the enclosed proxy
confers authority to vote in favor of such other person or persons as the
Company's Board of Directors at the time recommends to serve in place of the
person or persons unable to serve.
Nominees for Class A Directors. The name, age, principal business experience
during the last five years, and certain other information regarding each of
the persons proposed to be nominated for election as a Class A Director are
listed below.
<TABLE>
<CAPTION>
Name Age Principal Business Experience
---- --- -----------------------------
<C> <C> <S>
Thomas G. Gibian.. 77 Director of the Company since 1993. President and Chief
ExecutiveOfficer of Henkel Corporation, a specialty
chemicals manufacturer andUnited States Subsidiary of
Henkel KGaA, 1980 to 1986.
Peter G. Tombros.. 57 Director of the Company since 1994. Director, President
and Chief Executive Officer of Enzon, Inc., a developer
and marketer of pharmaceutical products, since April,
1994. A Vice President of Pfizer, Inc. from 1986 to
1994 with Responsibility for corporate strategic
planning 1990 to 1994;Executive Vice President of
Pfizer Pharmaceuticals Division, 1986 to 1990 and
served as Senior Vice President and General Manager of
Roerig Division of Pfizer and various other positions
with Pfizer Inc. 1968 to 1986. Also a director of NPS
Pharmaceuticals, Inc.
Erik Hornnaess.... 63 Director of the Company since 1998. Area Vice President
(Europe, Middle East and Africa) of Abbott Laboratories
Diagnostic Division from 1982 to 1997. Director of
Qiagen, The Netherlands.
</TABLE>
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<PAGE>
Nominees for Class B Directors. The name, age, principal business experience
during the last five years, and certain other information regarding each of
the persons proposed to be nominated for election as a Class B Director are
listed below.
<TABLE>
<CAPTION>
Name Age Principal Business Experience
---- --- -----------------------------
<C> <C> <S>
Einar W. Sissener.. 71 Chairman of the Company since 1975. Chief Executive
Officer from June 1994 to June 1999. Member of the
Office of the Chief Executive of the Company July 1991
to June 1994. Chairman of the Office of the Chief
Executive June 1999 to December 1999. President,
Alpharma AS since October 1994. President,
Apothekernes AS (now AL Industrier AS) 1972 to 1994.
Chairman of A.L. Industrier AS since November 1994.
I. Roy Cohen....... 77 Director of the Company since 1975. Consultant to the
Company since January 1991; Chairman of the Executive
Committee of the Company since June 1987; Chairman of
the Office of the Chief Executive of the Company July
1991 to June 1994; Vice Chairman of the Board of
Directors of the Company January 1991 to December 31,
1992; President and Chief Executive Officer of the
Company 1976 to January 1991.
Erik G. Tandberg... 70 Director of the Company since 1994. Partner in
Corporate Development International, a consulting
partnership specializing in international searches for
Companies, since 1986. President of Arco Chemical
Europe Inc., a chemical Company, 1982 to 1986.
Glen E. Hess....... 58 Director of the Company since 1983. Partner in the law
firm of Kirkland & Ellis since 1973.
Ingrid Wiik........ 55 President and Chief Executive Officer since January,
2000. President of Alpharma's International
Pharmaceuticals Division 1994 to January 2000;
President, Pharmaceutical Division of Apothekernes
Laboratorium A.S. 1986 to 1994.
Oyvin A. Broymer... 51 Director of the Company since 1998. Executive Vice
President, Leif Hoegh Co., ASA, a commercial shipping
firm, 1996 to present; Executive Vice President,
Hafslund Nycomed, 1982-1996.
//
</TABLE>
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<PAGE>
BOARD OF DIRECTORS AND COMMITTEES
Board Meetings and Attendance of Directors
The Company's Board of Directors held seven (7) meetings in 1999. Each
person who served as a director in 1998 attended at least 75% of the aggregate
of (i) the total number of meetings of the Company's Board of Directors held
while such person was a member and (ii) the total number of meetings held by
all committees of the Company's Board of Directors on which such person served
while such person was a member of such committee, except Mr. Munthe who
attended 43% of such meetings.
Committees of the Board
Pursuant to its bylaws, the Company has established standing Audit,
Executive, Finance and Compensation Committees.
The Audit Committee reviews and makes recommendations to the Company's Board
of Directors regarding internal accounting and financial controls and
accounting principles, auditing practices, the engagement of independent
public accountants and the scope of the audit to be undertaken by such
accountants. In addition, the Company's Board of Directors has adopted a
resolution requiring the Audit Committee to review transactions between the
Company and A.L. Industrier (the beneficial owner of all the outstanding Class
B Stock) (or their respective subsidiaries) involving more than $50,000 and to
report to the Company's Board of Directors regarding whether such transactions
are fair to the Company. Such resolution also requires prior approval of the
Audit Committee for any transaction with A.L. Industrier which involves
$500,000 or more, except that prior approval of the Audit Committee is
required for any sale or transfer of assets other than inventory sold or
transferred in the ordinary course of business. The Audit Committee also
monitors the Company's Business Conduct Guidelines. The bylaws of the Company
require that a majority of the members of the Audit Committee not be employees
of the Company or A.L. Industrier or otherwise have a material relationship
with either of them. The current members of the Audit Committee are Messrs.
Thomas G. Gibian (Chairman), Erik G. Tandberg, Peter G. Tombros and 0yvin A.
Broymer. The Audit Committee held 3 meetings in 1999.
The Executive Committee is generally empowered, to the fullest extent
permitted by Delaware law, to exercise all power and authority vested in the
Company's Board of Directors. By resolution, the Company's Board of Directors
has specifically authorized and requested the Executive Committee to act on
behalf of the Board in emergency situations where the full Board is unable to
meet, to discuss and consult with the Chief Executive Officer of the Company
as requested by such officer and to act with respect to such matters as the
Board may from time to time designate. The current members of the Executive
Committee are Messrs. I. Roy Cohen (Chairman), Erik Hornnaess and Einar W.
Sissener. The Executive Committee held 6 meetings in 1999 and also
communicated informally throughout the year.
The Finance Committee reviews and has the authority to make a recommendation
to the Board of Directors with respect to plans and arrangements relating to
the raising of funds required in the operation of the Company. The current
members of the Finance Committee are I. Roy Cohen, Chairman, Einar W. Sissener
and Glen E. Hess. The Finance Committee held 12 meetings in 1999.
The Compensation Committee has the authority of the Company's Board of
Directors with respect to the compensation, benefit and employment policies
and arrangements for executive officers and other highly paid personnel of the
Company, except the Chief Executive Officer as to whom the Committee makes
compensation recommendations to the Company's Board of Directors. The
Committee also has authority with respect to the
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<PAGE>
compensation and benefit plans generally applicable to the Company's
employees, and two members of the committee (Messrs. Tombros and Gibian) serve
as the committee administering the 1997 Stock Option and Appreciation Right
Plan, as amended, with authority to grant options to eligible employees of the
Company and its subsidiaries. The Compensation Committee held 19 meetings in
1999.
Compensation Committee Interlocks and Insider Participation
The members of the Compensation Committee are Messrs. Peter G. Tombros
(Chairman), I. Roy Cohen, Thomas G. Gibian, Glen E. Hess and Einar W.
Sissener. Mr. Cohen is a former executive officer of the Company, having
served as President and Chief Executive Officer from 1976 to January, 1991 and
as a member of the Office of the Chief Executive from July, 1991 through June
1994. He currently serves as a consultant to the Company and as Chairman of
the Finance and Executive Committees. (See "Certain Relationships and Related
Transactions" for a description of Mr. Cohen's consulting agreement). Mr.
Sissener currently serves as Chairman of the Board of the Company and, in
recent years has been the Company's Chief Executive Officer (see "Nominee for
Class B Directors" and "Compensation Committee Report on Executive
Compensation" for further information). Mr. Hess' professional corporation is
a partner of Kirkland & Ellis, a law firm which since 1978 has performed and
continues to perform significant legal services for the Company.
Directors' Compensation
During 1999, each director (except Messrs. Sissener and Munthe) received
directors' fees of $22,500 and (except Messrs. Sissener and Munthe) a grant of
an option to 4,000 shares of Class A Stock pursuant to the Director Stock
Option Plan. In addition, each director (other than Messrs. Sissener and
Munthe) received $1,200 for each Board meeting attended in person, $600 for
each Committee meeting attended in person and one-half of the applicable fee
for each meeting attended by telephone (with certain exceptions). The Chairman
of each of the Audit, Executive, Finance and Compensation Committees received
an additional $7,500. The same compensation arrangements will continue in
2000.
PROPOSAL TO AMEND THE STOCK OPTION PLAN
General
The Stock Option Plan of the Company originally was adopted by the Company's
Board of Directors on September 26, 1983 and approved by the Company's
stockholders on January 25, 1984. The Plan has been amended in various
respects, with certain amendments having been approved by stockholders. As of
March 15, 2000, the Plan provided that no more than 4.5 million shares were
available for grant under the Plan of which 1,453,418 have been issued in
excercise of option since 1983. At March 15, 2000 a total of 2,728,360 shares
were reserved for issuance pursuant to outstanding options under the Plan and
318,972 shares were available for the issuance of future options to be granted
under the Plan. On March 15, 2000, the Company's Board of Directors approved
an amendment of the Plan to increase the maximum number of shares available
for grant under the plan to 6.5 million shares. At the Annual Meeting a
resolution will be submitted seeking approval of the stockholders for this
amendment.
The purpose of the Plan is to enhance the Company's ability to attract,
retain and provide incentive to present and future executive, managerial,
marketing, technical and other key employees of the Company and its
subsidiaries by affording such employees an opportunity to acquire or increase
their proprietary interest in the Company through acquisition of shares of its
Class A Stock or Units based on the value of the Class A Stock.
- 9 -
<PAGE>
The Company's Board of Directors believes that the Plan has been successful to
date in accomplishing its purpose, and that the Proposal will further this
purpose. See "Report of the Compensation Committee." Information regarding
options granted during the last fiscal year to each named executive officer is
set forth below under "Information Regarding Executive Compensation--Summary
Compensation Table" and "Grants of Option."
The numbers of shares underlying options granted during 1999 to all current
executive officers as a group and all employees (including executive officers)
as a group were 269,000 shares and 694,500 shares respectively. The Plan does
not permit options to be granted to directors who are not employees although
such directors may receive options under the Non-Employee Director Option
Plan. See "Board of Directors and Committee--Directors Compensation."
As of March 15, 2000 approximately 197 people held options under the Plan.
The grant of options or units under the Plan is determined by the Stock Option
Committee and thus future grants to any individual under the Plan cannot be
determined. Options were granted in January and February of 2000 under the
Plan to 163 key personnel, including all of the named executive officers
except for the Mssrs. Munthe and Sissener. As a result, no new options are
currently proposed to be issued under the Plan to any specific individuals in
2000.
Approval of the proposal to amend the Plan requires that a majority of the
votes cast by the holders of shares of the Class A Stock and Class B Stock,
voting together, present and entitled to vote at the meeting be votes for
approval. A.L. Industrier has advised the company that it intends to vote its
shares in favor of the proposal, which will assure its approval. The material
features of the Plan, as amended (including the amendment being proposed), are
described below.
The Board of Directors recommends that the stockholders vote for the
proposal.
Summary Description of the Company's 1997 Incentive Stock Option and
Appreciation Right Plan
Attached as an appendix to this Proxy Statement is a copy of the 1997
Incentive Stock Option and Appreciation Right Plan (hereinafter referred to as
the "Plan") and the following summary description is qualified in its entirety
by reference to such appendix.
General. The Plan provides for the issuance by a Committee of the Company's
Board of Directors appointed for such purpose (the "Committee") of options to
acquire a maximum of 6.5 million shares of the Company's Class A Stock and
stock appreciation units which entitle the grantee to receive a payment equal
to the difference between (i) the base value and (ii) the fair market value of
a share of Class A Stock on the maturity date (as defined in the Plan) of the
unit. The Plan is administered by a committee of the Company's Board of
Directors appointed for such purpose (the "Committee"). The individuals who
are eligible to participate in the Plan are such executive, managerial,
marketing, technical and other key employees of the Company and its
subsidiaries as the Options Committee determines from time to time. In the
discretion of the Committee, options granted under the Plan may be either
"incentive stock options" as such term is defined in Section 422 of the United
States Internal Revenue Code of 1986, as amended ("Incentive Stock Options"),
or options which do not meet such definition. The number of shares which may
be subject to options granted or on which units may be issued under the Plan
shall be determined by the Committee in its discretion and shall be subject to
adjustment for any stock splits, recapitalization or other changes in the
Company's capital structure. Options or units for more than 100,000 shares
(subject to adjustment for any stock splits, recapitalization and other
changes in the Company's capital structure) may not be granted to any
participant in any taxable year.
- 10 -
<PAGE>
Options. At the time the option is granted, the Committee specifies the
price at which shares may be purchased pursuant to any option, and such price
may not be less than the fair market value of the shares on the date that the
option is granted. The exercise price may be paid in cash or by delivery of
shares of Class A Stock previously owned by the optionee having a fair market
value equal to the exercise price of the options being exercised. The
Committee also determines the term of each option, which in no event may
exceed ten years (in the case of an Incentive Stock Option) or ten years and
one month (in the case of any other option) from the date of grant. If for any
reason the full number of shares covered by any option are not issued before
the option expires or terminates, shares not issued under such option are
again available for the grant of options under the Plan.
Each option may be exercised fro time to time during its term, in part or in
whole, subject to such vesting requirements and any other limitations that the
Committee, in its discretion, may specify at the time of grant. Unless the
Committee otherwise determines at the time of grant, options become
exercisable (or vest) at the rate of 25% per year that the employee holds such
options so that options do not become fully exercisable until four years from
the date of grant. Subject to certain limitations, the Committee may, in its
discretion: (i) accelerate the time at which any outstanding option or part
thereof shall become exercisable and (ii) extend the time during which any
outstanding option may be exercised, provided that no option may be exercised
more than ten years (in the case of an Incentive Stock Option) or ten years
and one month (in the case of any other option) after the date of grant.
Stock Appreciation Units. Under the Plan the Committee is given discretion
to grant units having such maturity date as the Committee may specify
(including units which are "exercisable" by the grantee through his or her
selection of the maturity date). The number of units granted and the terms and
conditions of all units shall be determined by the Committee. The base value
of a unit shall not be less than the fair market value of a share of Class A
Stock on the date of grant and no unit shall have a maturity date later than
ten years and one month after the date of grant. Unless the Committee shall
otherwise determine, each unit shall have a base value equal to the fair
market value of the Class A Stock on the date of grant, shall have a maturity
date which is the fifth anniversary of the date of grant and shall provide
that the grantee is not entitled to payment unless such employee has remained
an employee of the Company from the date of grant to the maturity date (except
in the event of death or retirement).
Transferability of Options. Options and units are not transferable otherwise
than by will or the law of descent and distribution, except to such
transferees and on such terms as the committee may approve.
Termination of Employment or Death of Optionee. Except as expressly provided
in the Plan, options terminate of the earlier of: (i) the date of expiration
thereof, (ii) immediately upon termination of the employment relationship
between the Company and the optionee for cause, or (iii) 30 days (or up to two
years if the Committee so provides) after termination of the employment
relationship between the Company and the optionee without cause for any reason
other than death, retirement in good standing or disability.
If an optionee dies while in the employ of the Company and before the date
of expiration of an option, such option terminates on the earlier of such date
of expiration or two years following the date of such death. After the death
of an optionee, his or her executors or administrators have the right, at any
time prior to the termination of such option, to exercise such option to the
extent that such option was vested immediately prior to his or her death.
If the optionee is retired in good standing from the employment of the
Company for reason of age or disability before the date of expiration of an
option, such option terminates on the earlier of such date of such
- 11 -
<PAGE>
expiration or a date from 90 days to two years (as the Committee determines)
after the date of such retirement. In the event of such retirement the
optionee has the right prior to the termination of such option to exercise the
option to the extent to which he or she was entitled to exercise such option
immediately prior to such retirement.
Tax Consequences. The following discussion is intended only as a brief
summary of the United States Federal income tax consequences of the grant and
exercise of options and units. The discussion addresses only the United States
Federal income tax consequences to employees who are citizens or residents of
the United States and who perform services within the United States. Some
employees who are employees of the Company's foreign subsidiaries may be
subject to tax under the law of the country where they are citizens or
residents, which may differ significantly from the United States income tax
law. The laws governing the tax aspects of stock options and stock
appreciation rights are highly technical, and such laws are subject to change
at any time, which could be retroactive in nature.
The Committee has the discretion to grant either (i) Incentive Stock Options
with the meaning of Section 422 of the Internal Revenue Code of 1986, as
amended, or (ii) options which do not qualify as Incentive Stock Options and
which shall be referred to herein as "nonstatutory options." The United States
income tax consequences will vary depending on which type of option is
granted.
Tax Consequences of Incentive Stock Options to United States Citizens or
Residents. An optionee generally will not recognize taxable income or loss on
the grant or exercise of an Incentive Stock Option, but he may incur
alternative minimum tax liability on exercise of the Incentive Stock Option.
Neither the Company nor any subsidiary will be entitled to any deduction on
the grant or exercise of an Incentive Stock Option.
An optionee's tax consequences from the sale or other disposition of shares
acquired on the exercise of an Incentive Stock Option will depend on when such
sale or disposition occurs. If the optionee holds the option shares for more
than two years after the Incentive Stock Option was granted and for more than
one year after the Incentive Stock Option was exercised (the "Required Holding
Periods"), he will recognize long-term capital gain or loss when he sells or
disposes of his shares equal to the difference between the proceeds he
receives and his tax basis in the option shares (generally the exercise price
paid for the shares, except as otherwise discussed below). In such case,
neither the Company nor any subsidiary will be entitled to a deduction on the
optionee's sale or disposition of his shares.
If an optionee sells the shares acquired upon exercise of an option without
satisfying the Required Holding Periods (a "Disqualifying Disposition"), he
generally will recognize ordinary taxable income, and the Company, or a United
States subsidiary, if the subsidiary is the optionee's employer, will be
entitled to a deduction for the amount of ordinary income taxed to the
optionee. The amount of ordinary income taxable to the optionee (and the
corresponding deduction) is calculated by deducting the option price from the
lesser of (i) the fair market value of the shares on the exercise date and
(ii) the price at which the optionee sells or otherwise disposes the shares
(unless such sale or disposition is to a related party, in which case the fair
market value must be used even if the sales price is lower). If the price at
which the optionee sells the shares exceeds the shares' fair market value on
the exercise date, the excess will be taxed as capital gain. This capital gain
will be either long or short-term depending on whether the optionee held the
shares for more than one year. Neither the Company nor any subsidiary will be
entitled to a deduction for the capital gain.
If an optionee delivers previously-acquired Class A Stock (other than stock
acquired upon exercise of an Incentive Stock Option and not held for the
Required Holding Periods) in payment of all or part of the option
- 12 -
<PAGE>
price of an Incentive Stock Option, the optionee generally will not be
required to recognize as taxable income or loss any appreciation or
depreciation in the value of the previously-acquired stock after its
acquisition date. The optionee's tax basis in, and holding period (for capital
gain, but not Disqualifying Disposition, purposes) for, the previously-
acquired stock surrendered carries over to an equal number of the option
shares received on a share-for-share basis. Shares received in excess of the
number of shares surrendered have a tax basis equal to the amount paid (if
any) in excess of the previously-acquired shares used to pay the exercise
price, and the holding period of those excess shares will begin on the date of
exercise. Proposed regulations provide that where an Incentive Stock Option is
exercised using previously-acquired stock, a later Disqualifying Disposition
of the shares received will be deemed to have been a disposition of the shares
having the lowest basis first.
If an optionee pays the exercise price of an Incentive Stock Option in whole
or in part with Class A Stock that was previously acquired upon the exercise
of an Incentive Stock Option and that has not been held for the Required
Holding Periods, the optionee will recognize ordinary taxable income with
respect to the shares surrendered under the rules applicable to Disqualifying
Dispositions. The Company will be entitled to a corresponding deduction. The
optionee's basis in the shares received in exchange for the shares surrendered
will be increased by the amount of ordinary income recognized by the optionee.
Tax Consequences of Nonstatutory Options and Stock Appreciation Units to
United States Citizens or Residents. In general, upon the grant of a
nonstatutory option or unit, the grantee will not recognize taxable income or
loss, and neither the Company nor any subsidiary will be entitled to a
deduction.
Upon the exercise of a nonstatutory option, the amount by which the fair
market value of the shares at the time of exercise exceeds the option price
will constitute ordinary taxable income to the optionee. Payment of amounts
due to an employee pursuant to a stock appreciation unit will constitute
ordinary taxable income to the employee at the time of payment. The Company,
or if the optionee is employed by a subsidiary of the Company, the subsidiary,
will be entitled to a corresponding deduction. In the event the Company makes
payment pursuant to a unit in the form of shares of Class A Stock, the
employee's basis in such stock will equal the fair market value thereof on the
date of payment.
If an optionee delivers previously-acquired Class A Stock, however acquired,
in payment of all or part of the option exercise price of a nonstatutory
option, the optionee generally will not, as a result of such delivery, be
required to recognize as taxable income or loss any appreciation or
depreciation in the value of the previously-acquired stock after its
acquisition date. The optionee's tax basis in and, the holding period for, the
previously-acquired stock surrendered carries over to an equal number of the
option shares received on a share-for-share basis. The excess of the fair
market value of the shares received over the option exercise price constitutes
compensation taxable to the optionee as ordinary income. Such fair market
value is determined on the date of exercise. Shares received in excess of the
number of shares surrendered have a tax basis equal to their fair market value
on the exercise date, and their holding period begins on the exercise date.
The Company generally is entitled to a tax deduction equal to the compensation
income recognized by the optionee.
- 13 -
<PAGE>
EXECUTIVE COMPENSATION
Summary of Executive Compensation
The following table (the "Summary Compensation Table") sets forth the annual
and long-term compensation paid, or accrued for, the executive officers and
former executive officer named below (the "named executive officers") by the
Company or its subsidiaries during 1999, 1998 and 1997:
Summary Compensation Table
<TABLE>
<CAPTION>
Long Term
Compensation
Annual Compensation Awards
-------------------- ------------
Other Annual All Other
Name and Principal Salary Bonus Compensation Option/SARS Compensation
Position during 1999 Year ($) ($) ($) (#) (1) ($)
- ------------------------ ---- ------- ------- ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Einar W. Sissener....... 1999 462,555 500,000 * 0 0
(Chairman, Director and
until June 1998 600,000 325,000 * 0 0
1999, Chief Executive
Officer) 1997 450,000 125,000 * 0 0
Thomas Anderson (3)..... 1999 404,270 202,000 * 22,500 24,174(2)
(Vice President and
President 1998 404,712 195,000 * 25,000 16,479(2)
Of U.S. Pharmaceuticals 1997 353,365 110,000 * 70,000 8,085(2)
Division)
Bruce I. Andrews (4).... 1999 394,761 197,500 * 22,500 32,712(2)
(Vice President and
President, 1998 379,643 189,822 * 55,000 20,186(2)
Animal Health Division) 1997 193,460 60,000 * 35,000 5,538(2)
Jeffrey E. Smith........ 1999 364,834 173,500 * 20,000 32,066(2)
(Vice President--
Finance 1998 355,004 163,300 * 40,000 30,461(2)
and Chief Financial
Officer) 1997 355,004 60,000 * 24,000 24,999(2)
Gert W. Munthe (5)...... 1999 509,223 200,000 * 100,000 704,255(2)(6)
(President and Director 1998 263,068 170,000 * 100,000 69,177(2)(7)
until
December 31, 1999 and 1997 0 0 * 0
Chief Executive Officer
from June through
December 31, 1999)
</TABLE>
- ---------------------
* The Company provides automobile allowances to its executive officers and an
apartment (in lieu of hotel accommodations) to Mr. Sissener while he is in
the United States. The incremental cost of such perquisites in each of
1999, 1998, and 1997 was not in excess of the lesser of (a) $50,000 and (b)
10% of the amounts reported as Salary and Bonus for such year in the
Summary Compensation Table.
(1) Reflects options granted under the Stock Option Plan. The Company has not
granted any stock appreciation rights ("SARs") to any of the named
executive officers in 1997, 1998 or 1999.
(2) Includes contributions by the Company to various employee profit-sharing
and saving plans and, as to Mr. Munthe, $50,000 for additional U.S.
living expenses.
(3) Mr. Anderson initially became an employee of the Company on January 1,
1997. He was an executive officer of FoxMeyer Corporation until February
of 1996; approximately six months prior to FoxMeyer's filing for
protection under Chapter 11 of the Bankruptcy Act.
- 14 -
<PAGE>
(4) Mr. Andrews initially became an employee of the Company on May 1, 1997.
(5) Mr. Munthe became an employee of the Company on May 1, 1998 and resigned
as President, Chief Executive Officer and a Director on December 31,
1999. The Company has made a loan to Mr. Munthe in the amount of $271,090
at an interest rate of 6.125%, with respect to the purchase of his
primary residence. Said loan remains outstanding and is repayable no
later than concurrent with the sale of said residence. In addition, in
November of 1998, the Company loaned Mr. Munthe $116,700 at an interest
rate of 4.5% which has been fully repaid.
(6) Includes certain payments made in connection with Mr. Munthe's
resignation as President, Chief Executive Officer and Director (See
"Employment Agreements").
(7) Includes $17,190 for certain relocation expenses.
Employment Agreements
Mr. Smith is a party to an employment arrangement with the Company dated
July 30, 1991 which provides that, if his employment is terminated by the
Company for any reason other than for cause, he is entitled to receive base
salary and certain benefits for one year. Mr. Smith participates in all of the
employee benefits available to executives of the Company. Upon retirement, the
Company will pay to Mr. Smith supplemental retirement benefits equal to the
amount, if any, by which the pension due under the Company's Non-Contributory
Retirement Plan without any limitation imposed by the Internal Revenue Service
exceeds any ceiling imposed by the Internal Revenue Service.
Mr. Anderson is a party to an employment arrangement with the Company which
provides that in the event he is terminated for any reason other than cause or
the disposition of the Company's U.S. Pharmaceutical Division he will receive
salary and certain other benefits for up to 18 months. If Mr. Anderson's
employment is terminated in connection with a sale of said Division he will
receive salary and certain fringe benefits for up to 24 months. He
participates in all of the employee benefits available to executives of the
Company.
Mr. Andrews is a party to an employment arrangement with the Company which
provides that in the event he is terminated for any reason other than cause or
the disposition of the Company's Animal Health Division he will receive salary
and certain other benefits for up to 18 months. If Mr. Andrew's employment is
terminated in connection with a sale of said Division he will receive salary
and certain fringe benefits for up to 24 months. He participates in all of the
employee benefits available to executives of the Company.
See "Compensation Committee Report on Executive Compensation" for a
description of certain employment arrangements with Mssrs. Sissener and
Munthe.
Annual Performance Incentive Plan
The Company has approved a Bonus Plan for the 2000 fiscal year which
provides that all executive officers performing services for one of the
Company's operating divisions will be entitled to receive a cash bonus within
a target range if the appropriate operating group achieves certain operating
income levels relative to budget and the Company meets a Company wide earnings
threshold. The bonus for Mr. Smith and other executives having solely
corporate wide authority is based upon the overall performance of the Company
both in terms of operating income and earnings per share relative to budget.
In addition all bonuses take into consideration certain individual performance
factors. Higher bonuses than the target level may be paid if specified income
levels are exceeded but no bonuses will be paid if applicable income
thresholds are not met. Messrs. Smith, Anderson and Andrews have target
bonuses of 50% of base salary. The Company reserves the right to alter the
terms and
- 15 -
<PAGE>
conditions of the Plan during 1999 for unanticipated events and other
equitable factors. Mr. Sissener is not covered by this bonus plan. See
"Compensation Committee Report on Executive Compensation".
Grants of Options
The following table discloses, for the named executive officers certain
information with respect to options granted during 1999. All grants are
options under the Company's Stock Option Plan.
<TABLE>
<CAPTION>
Number of
Shares of Class Potential Realizable Value
A Common Stock at Assumed Annual Rates of
Underlying Exercise Expiration Stock Price Appreciation
Option Price Date(1) for Option Term
--------------- -------- --------------- ---------------------------
Name 5% 10%
- ---- -- ---
<S> <C> <C> <C> <C> <C>
Einar Sissener.......... 0 -- -- -- --
Jeffrey E. Smith........ 20,000 $39.6875 March 18, 2006 $ 323,135.96 $ 753,044.20
Thomas L. Anderson...... 22,500 $39.6875 March 18, 2006 $ 363,527.96 $ 847,174.72
Bruce I. Andrews........ 22,500 $39.6875 March 18, 2006 $ 363,527.96 $ 847,174.72
Gert W. Munthe (2)...... 50,000 $34.6250 January 4, 2009 $1,088.773.82 $2,759,166.63
50,000 $29.5625 June 10, 2009 $ 929,584.87 $2,355,750.57
</TABLE>
- ---------------------
(1) Options vest at the rate of 25% on each of the first four anniversaries
of the date of grant.
(2) Options expired as of December 31, 1999 as a result of Mr. Munthe's
resignation. See "Compensation Committee Report on Executive Compensation."
Option Exercises and Values
The following table discloses, for the named executive officers, (a) the
number of shares acquired upon exercise of options or with respect to which
such options were exercised and the aggregate dollar value realized upon such
exercise and (b) the number and value of unexercised options, in each case as
of December 31, 1999.
1999 Aggregated Option Exercises and Year-end Values
<TABLE>
<CAPTION>
Number of Number of Shares Value of Unexercised
Shares Underlying Unexercised In-the-Money
Acquired Options at 12/31/99 Options at 12/31/99(1)
on Value ------------------------- -------------------------------
Name Exercise Realized Exercisable Unexercisable Exercisable(2) Unexercisable(2)
- ---- --------- -------- ----------- ------------- -------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Einar W. Sissener....... 0 0 0 0 0 0
Jeffrey E. Smith........ 0 0 86,000 62,000 1,136,813 461,250
Thomas L. Anderson...... 0 0 25,000 68,750 373,594 632,344
Bruce I. Andrews........ 8,900 216,938 24,850 63,750 297,581 355,781
Gert W. Munthe.......... 0 0 25,000 25,000 228,125 228,125(3)
</TABLE>
- ---------------------
(1) All grants are options under the Company's Stock Option Plan.
(2) Value is based on the closing price of a share of Class A Common Stock on
December 31, 1999 ($30.75) minus the exercise price.
(3) Does not include the options which expired on December 31, 1999.
- 16 -
<PAGE>
Section 16(a) Beneficial Ownership Reporting Compliance
Reports to the Securities and Exchange Commission with respect to the sale
of 5,000 shares of Class A Common Stock by Mr. Cohen in January and February,
1999 were filed late and Mr. Hornnaess inadvertently omitted a report with
respect to the 1999 purchase of 3,000 shares of Class A Common Stock.
Retirement Plans
Messrs. Jeffrey E. Smith, Thomas L. Anderson and Bruce I. Andrews are
participants in the Alpharma Inc. Pension Plan (a qualified defined benefit
plan) (the "Pension Plan"). Mr. Sissener does not participate in the Pension
Plan and Mr. Munthe will not be entitled to any vested benefits under the
Pension Plan. Under the Pension Plan, both salaried and hourly employees are
eligible for benefits. Participants are entitled to receive their specified
annual benefit, in the form of a life annuity or, at the election of
participants, its actuarial equivalent in certain other forms, commencing
within one month of their 65th birthday. The specified annual benefit is equal
to (x) the sum of (i) 0.8% of the participant's highest five-year Final
Average Compensation (as defined below) up to "covered compensation" (($31,128
for 1999) plus (ii) 1.45% of the participant's highest five-year Final Average
Compensation in excess of "covered compensation", multiplied by (y) the number
of years of benefit service (up to a maximum of 30 years)). The Pension Plan
also provides for an early retirement benefit which is equal to the specified
annual benefit described above, reduced actuarially for each year by which the
early retirement date precedes the normal retirement date.
The following table sets forth the approximate annual retirement benefit
under the Pension Plan based on years of service and Final Average
Compensation.
Pension Plan Table
<TABLE>
<CAPTION>
Years of Service
-----------------------------------------------------------------
Remuneration (1) 15 20 25 30(2)
---------------- -------- -------- -------- --------
<S> <C> <C> <C> <C>
$125,000 $ 23,964 $ 31,952 $ 39,940 $ 47,928
$150,000 29,402 39,202 49,003 58,803
$175,000 34,839 46,452 58,065 69,678
$200,000 40,277 53,702 67,128 80,553
$225,000 45,714 60,952 76,190 91,428
$250,000 51,152 68,202 85,253 102,303
$275,000 56,589 75,452 94,315 113,178
$300,000 62,027 82,702 103,378 124,053
$325,000 67,464 89,952 112,440 134,928
$350,000 72,902 97,202 121,503 145,803
$375,000 78,339 104,452 130,565 156,678
$400,000 83,777 111,702 139,628 167,553
$425,000 89,214 118,952 148,690 178,428
$450,000 94,652 126,202 157,753 189,303
$475,000 100,089 133,452 166,815 200,178
$500,000 105,527 140,702 175,878 211,053
</TABLE>
- ---------------------
(1) Final average compensation. Current Federal pension law limits average
annual compensation considered for benefit purposes to $160,000 for 1998
and 1999.
(2) The Plan provides that there is a maximum of 30 years of service for
computation of benefits.
- 17 -
<PAGE>
For purposes of the Pension Plan, an employee's "Final Average Compensation"
generally is his regular cash salary (excluding bonuses) for the five
consecutive years of service in which his compensation was highest during the
ten years of service immediately preceding his retirement. In 1999, the
respective amounts of the compensation of Messrs. Smith, Anderson and Andrews
would have been $356,970, $387,449 and $322,621, respectively, under the
Pension Plan if there were no limitations under Federal pension law. However,
due to the Federal pension law, the respective amounts of compensation of
Messrs. Munthe, Smith, Anderson and Andrews under the Pension Plan in 1999
were limited to $160,000. Mr. Smith, however, is entitled to supplemental
retirement benefits from the Company equal to the amount, if any, by which the
pension due under the Pension Plan without any limitation imposed by the
Internal Revenue Service exceeds any ceiling imposed by the Internal Revenue
Service (the "Supplemental Benefit") and Messrs. Andrews and Anderson are
entitled to receive a Supplemental Benefit based upon a maximum base
compensation of $235,840 per annum. The years of service credited under the
Pension Plan as of December 31, 1999 to such officers were as follows:
Mr. Smith 15 years, Mr. Anderson 3 years and Mr. Andrews 3 years.
Under the Pension Plan, in the event of the termination of employment prior
to retirement, part of the employee's benefit may be forfeited. A retirement
benefit, payable in the form of a life annuity following the employee's 55th
birthday, is equal to an accrued percentage of the normal retirement benefit,
actuarially reduced to reflect commencement of payments prior to the normal
retirement date. As to employees hired on or after January 1, 1989, pension
benefits under the Pension Plan vest after five years of employment with the
Company. Pension benefits under the Pension Plan of employees hired prior to
January 1, 1989 are currently 100% vested.
Mr. Einar W. Sissener is presently receiving payments from the pension plan
of Alpharma Oslo, the Company's Norwegian subsidiary (a defined benefit plan)
(the "Oslo Pension Plan"). Under the Oslo Pension Plan, both salaried and
hourly employees are eligible for benefits. The retirement age under the Oslo
Pension Plan is 67 years of age. A participant's specified annual benefit
under the Oslo Pension Plan is equal to (x) the difference between (i) 60% of
such participant's Final Compensation, (base cash salary in the last year of
service), and (ii) the social security benefit (214,480 Norwegian Kroner
("NOK") or approximately $27,482 for 1999) multiplied by (y) a fraction, the
numerator of which is the number of years of service (up to a maximum of 30
years) and the denominator of which is 30. Under the Oslo Pension Plan, Mr.
Sissener is presently receiving a lifetime benefit of 900,000 NOK or
approximately $9,610 per month.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Company's Board of Directors is
responsible for reviewing the performance of the Chief Executive Officer
("CEO") and recommending to the Board the amount of compensation and other
benefits payable to the CEO, reviewing and approving the compensation and
benefits of other executive officers and highly paid personnel, reviewing the
general compensation and employment benefit policies for management personnel,
reviewing management development and succession matters and approving any
material new benefit plan or amendment to an existing material benefit plan.
During 1999, two members of the Compensation Committee (Messrs. Gibian and
Tombros) also served as the committee established under the Company's Stock
Option Plan with authority to fix the terms of, and grant options under, such
plan. The Compensation Committee is comprised of non-employee directors.
In general, the Compensation Committee strives to meet the following
objectives in making compensation decisions and recommendations for executive
officers and other key personnel: (1) provide overall compensation that is
competitive in its ability to attract and retain highly qualified personnel;
(2) relate compensation to the degree to which the Company (and/or specific
business unit for which an executive is responsible) attains its annual
earnings or other performance targets; (3) reward excellent individual
performance, with special
- 18 -
<PAGE>
consideration for specific projects completed or adverse conditions overcome;
and (4) provide incentive to contribute to the long-term growth of the
Company's businesses and stockholder value. The Committee considers the
deductibility of compensation which it approves or recommends under Section
162 of the Internal Revenue code of 1986, as amended, and consults with tax
advisors as necessary to avoid or minimize any non-deductible compensation.
As reflected in the Summary Compensation Table, there are three principal
components of senior executive compensation: salaries, bonuses and long-term
stock-based incentives. Salaries are determined annually, primarily on the
basis of industry standards ar applied to each executive's background,
experience and overall performance with the Company. In March, 1999, the
Committee approved an annual performance incentive or bonus plan for 1999
which provided that the Company's executive officers (other than the CEO) and
other highly paid personnel could receive cash bonuses within the target
ranges based upon Company-wide and divisional operating income targets set
forth in the plan. Under the plan bonuses were payable to executive and other
key employees based upon levels by which operating income of the applicable
operating unit exceeded the levels set forth in the plan but only if the
Company-wide income threshold was met. For 1999 the Company-wide income
threshold was met and four of five divisions met or exceeded the threshold.
Consequently, bonuses at the high end of the target range were approved for
the vice presidents and other key divisional employees of four of the
Company's five divisions. Bonuses at approximately 95% of target were approved
for officers and key employees having solely Company-wide responsibility. The
bonus for the CEO is not covered by the plan but is provided for in the
applicable employment agreement.
During 1999, Mr. Einar W. Sissener served as Chairman and CEO until June 8
when Mr. Gert W. Munthe was elected President and CEO. Mr. Munthe's
resignation as CEO was announced in September and he resigned as CEO effective
December 31. During his tenure as CEO Mr. Munthe reported to the Office of the
Chief Executive which consisted of Mr. Munthe and Mr. Sissener, who served as
chairman of the office. Mr. Sissener received a salary during the part of 1999
he served as CEO of $300,000. Beginning July 1 Mr. Sissener ceased to be an
employee of the Company and began receiving amounts payable under a
compensation agreement approved by the Committee in May, 1999. Under the
agreement Mr. Sissener is entitled to receive an annual fee as Chairman and
director of $150,000 and $12,000 per month for ten years in consideration of
certain consulting obligations. In addition he is entitled to receive his
normal Norwegian retirement benefits plus such amount as brings the total to
approximately $105,000 per year (at current exchange rates). The Committee
approved a bonus for Mr. Sissener of $500,000 with respect to 1999. In
determining the bonus the Committee considered the following: Mr. Sissener's
services as CEO for first half of the year and as chairman of the Office of
the Chief Executive for the second half of the year; the overall performance
of the Company and his contributions to that performance; and the relatively
low compensation he received since July 1, 1999 and the absence of stock
options granted to him in 1999 or prior years.
Until his resignation Mr. Munthe received the compensation provided in his
employment agreement dated March 13, 1998 which was approved by the Committee.
Accordingly, he received an option to purchase 50,000 shares of Class A common
stock on January 1, 1999 and upon his election as CEO in June his annual
salary was increased from $450,000 to $600,000. To provide increased
incentive, the Committee in June granted Mr. Munthe an option to acquire an
additional 50,000 shares. In connection with Mr. Munthe's resignation the
Committee approved an addendum to his employment agreement. The Committee
considered the length of time Mr. Munthe had served the Company, the
disruption caused by relocating his family from Norway, the potential benefit
of his future non-competition and consulting arrangements and his rights under
his employment agreement. This addendum generally provided that Mr. Munthe
would continue to serve as CEO until December 31 and receive a payment of
$200,000 for his 1999 bonus. The agreement further provided that he would not
- 19 -
<PAGE>
compete with the Company prior to June 30, 2001 and would be available for
limited consulting for 24 months, that 150,000 of his 200,000 options were
canceled and that he would receive $50,000 per month (with certain rights to a
discounted lump sum payment) from January 2000 through January 2001 and
$10,000 per month from July 2001 through December 2001, as well as certain
employee benefits during such period.
In early 1999 the Committee reviewed the use of options and proposed grants
under the Stock Option Plan for the purpose of enhancing the mutuality of
interests of key employees and stockholders in share value appreciation. The
Committee recognized the increased importance of stock options as a
compensation vehicle in recent years. As a result of its review, in March,
1999, the committee under the stock option plan, upon the recommendation of
the Compensation Committee, granted 165 personnel options to purchase 649,500
Class A Shares. In January and February, 2000, the Committee again reviewed
proposed option grants and as a result the stock option committee, upon
recommendation from the Committee, approved grants of options to purchase
727,550 Class A shares to approximately 163 individuals. The standard terms of
the options granted in 1999 and 2000 provide an exercise price equal to the
market price on the date of grant, vesting in equal installments over four
years and a seven year term. Due to the current Norwegian tax laws the options
granted to Norwegians varied from the standard terms.
Following Mr. Munthe's resignation the Committee (with Mr Sissener not
participating) became actively involved in the determination of his successor
as CEO and interviewed a management consulting firm engaged to evaluate
certain officers of the Company. Based on the consultant's report and other
factors the Committee determined not to seek an executive from outside the
Company but instead interviewed several current officers of the Company with
respect to becoming CEO. After such interviews the Committee reported its
recommendation to the Board and on January 10, 2000, the Board elected Ms.
Ingrid Wiik, Vice President of the International Pharmaceuticals Division, as
President and CEO. The Committee proposed an employment agreement with Ms.
Wiik which provides for her relocation to the New York metropolitan area, a
base salary of $650,000 per year, a bonus of up to 75% of her base salary and
a special bonus grant (made in January, 2000) of options to purchase 50,000
shares of Class A stock with standard terms under the Stock Option Plan.
Although Ms. Wiik's current compensation reflects the agreement approved by
the Compensation Committee, the agreement has not been executed because of
ongoing analysis regarding certain tax and pension issues.
By the Compensation Committee:
I. Roy Cohen
Thomas G. Gibian
Glen E. Hess
Einar W. Sissener
Peter G. Tombros (Chairman)
- 20 -
<PAGE>
Performance Graph
The following graph compares the Company's cumulative total stockholder
return during the last five years with the composite of the Media General
Financial Services Index for Drug Manufacturers--Other, Drug-Generic and Drug
Delivery Industry Groups (which indexes include 154 corporations that describe
themselves as drug manufacturers and are publicly traded) and The New York
Stock Exchange Index. The graph assumes $100 invested on December 31, 1994 in
the Company's Class A Stock and $100 invested at that time in each of the
selected indices. The comparison assumes that all dividends are reinvested.
Alpharma Inc.
5-year Cumulative Returns
versus Peer Group and NYSE Index
[LINE GRAPH]
<TABLE>
<CAPTION>
Fiscal year Ending
-----------------------------------------------------------------------------
December 31, December 31, December 31, December 31, December 31, December 31,
1994 1995 1996 1997 1998 1999
Company, Index, Market ------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Alpharma Inc............ 100.00 129.85 73.40 110.40 180.72 158.17
Media General Index..... 100.00 145.60 152.14 182.11 206.45 248.72
NYSE Market Index....... 100.00 129.66 156.20 205.49 244.52 267.75
</TABLE>
- 21 -
<PAGE>
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
A.L. Industrier and the Company's subsidiary Alpharma AS ("Alpharma Oslo")
are parties to a lease (the "Skoyen Lease") pursuant to which A.L. Industrier
leases to Alpharma Oslo the land and facility in Oslo, Norway where Alpharma
Oslo's principal administrative offices and fermentation plant for its bulk
antibiotics and animal health businesses are located. The Skoyen Lease has a
term ending in 2014, which term is renewable, at the option of Alpharma Oslo,
for four additional consecutive five year terms. Basic rent during the initial
term is $1.00 per year and, during any renewal term thereafter, basic rent
will be the then prevailing fair rental value of the premises. In addition to
basic rent, Alpharma Oslo pays documented expenses of ownership and operation
of such facility, such as taxes and maintenance expense. Alpharma Oslo has the
right to terminate the Skoyen Lease at any time during its term upon twelve
months written notice to A.L. Industrier.
Alpharma Oslo is a party to an administrative services agreement (the
"Administrative Services Agreement") with A.L. Industrier, pursuant to which
Alpharma Oslo provides certain administrative services to A.L. Industrier.
Such services are provided on a full cost basis, except that A.L. Industrier
paid Alphama Oslo a minimum fee for services rendered during calendar year
1999 equal to NOK 3,000,000 (or $385,000). The Administrative Services
Agreement expired in January 1997 and has been automatically extended for
successive one-year terms. Such one-year extensions will continue unless the
agreement is terminated by either of the parties thereto, upon six months'
notice.
During 1999, the Company through Alpharma Oslo and its subsidiaries sold
$2,306,000 of products, primarily multivitamins and adhesive products, to a
subsidiary of A.L. Industrier for distribution of these products to retail
food stores. In addition, during 1999 Alpharma Oslo purchased $30,000 of
product from a subsidiary of A.L. Industrier.
At December 31, 1999 A.L. Industrier held a convertible subordinated note
issued by the Company (the "Industrier Note") in the principal amount of
$67,850,000, which was issued by the Company concurrently with $125,000,000 of
Convertible Subordinated Notes sold to unaffiliated third parties (the
"Notes"). The Industrier Note has substantially the same terms (including
interest rate, conversion price and maturity date) as, and will rank pari
passu with, the Notes, except that the Industrier Note is convertible into
Class B Common Stock instead of Class A Common Stock. Subject to certain
adjustments the Industrier Note is convertible into 2,372,896 shares Class B
Common Stock. The Industrier Note, so long as it is held by Industrier or any
other affiliate of the Company, is not convertible at the holder's discretion
but instead will automatically be converted into Class B Common Stock on or
after April 6, 2001, if at least 75% of the Notes are converted into Class A
Common Stock by the holders thereof. The Industrier Note is exchangeable, in
whole or in part, into Notes at any time after October 31, 1999, solely for
the purpose of enabling the holder to sell the Notes received in such exchange
to an unaffiliated transferee. The Company paid A.L. Industrier $3,901,000 in
interest in 1999 on the Note.
All transactions with A.L. Industrier are subject to review by, and in
certain circumstances prior approval of, the Audit Committee. See "Board of
Directors and Committees--Committees of the Board" above.
Certain Other Transactions and Relationships
Mr. I. Roy Cohen, who as of January 15, 1991 retired as President and Chief
Executive Officer, has a contract to act as a special consultant to the
Company for a ten-year period following such retirement (the "Consultant
Term"). During the Consultant Term, the Company is required to pay him a
minimum annual consideration of $148,296 (for 1999) which may be increased to
reflect services rendered in excess of 40 days during the year, inflation and
other factors, and to provide him with an automobile allowance and certain
other
- 22 -
<PAGE>
employee benefits. The amount earned under such contract for excess days over
40 with respect to 1999 was $205,800. The contract provides, in the event of
Mr. Cohen's disability, death or termination during the Consultant Term, for
continued payments to Mr. Cohen (or his wife or children in the case of his
death) of the remaining amounts he would otherwise be entitled to receive.
Mr. Glen E. Hess' professional corporation is a partner of Kirkland & Ellis,
a law firm which since 1978 has performed and continues to perform significant
legal services for the Company.
Mr. Gert W. Munthe, a director, President and Chief Executive Officer of the
company until his December 31, 1999 resignation, is a director of A.L.
Industrier and the son-in-law of Mr. Sissener.
INDEPENDENT AUDITORS
PricewaterhouseCoopers L.L.P. has been selected to serve as the Company's
independent certified public accountants for the fiscal year ending December
31, 2000. A representative of that firm will be present at the Annual Meeting
with the opportunity to make a statement if he desires to do so and to respond
to questions of stockholders. The appointment of the auditors has been
approved by the Company's Board of Directors based upon the recommendation of
the Audit Committee.
STOCKHOLDERS' PROPOSALS FOR THE 2000 ANNUAL MEETING
In order to be considered for inclusion in the proxy statement for the 2001
Annual Meeting of Stockholders, stockholder proposals must be submitted to the
Company on or before December 20, 2000.
OTHER BUSINESS
As of the date hereof, the foregoing is the only business which management
intends to present, or is aware that others will present, at the Annual
Meeting. If any other proper business should be presented at the Annual
Meeting, the proxies will be voted in respect thereof in accordance with the
discretion and judgment of the person or persons voting the proxies.
By order of the Board of Directors
Robert F. Wrobel
Secretary
ALPHARMA INC.
YOUR VOTE IS IMPORTANT
PLEASE PROMPTLY COMPLETE AND SIGN THE ENCLOSED
FORM OF PROXY AND RETURN IT IN THE ENCLOSED ENVELOPE
- 23 -
<PAGE>
Appendix
ALPHARMA INC.
1997 Incentive Stock Option and Appreciation Right Plan
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
1. Purpose of the Plan ............................................... A-1
2. Administration .................................................... A-1
3. Shares Relating to Options and Units............................... A-1
4. Authority to Grant Options and Units............................... A-1
Limitation on Value of Shares Covered by Incentive Stock Options
5. granted to any Employee............................................ A-2
6. Eligibility........................................................ A-2
7. Option Price and Base Value........................................ A-2
8. Terms of Options; Vesting ......................................... A-2
9. Terms and Conditions of Units; Vesting............................. A-3
10. Exercisability of Options and Exercisable Units.................... A-4
10A. Procedure for Exercise of Options.................................. A-4
10B. Withholding Tax Requirements on Exercise of Options................ A-4
10C. Option Exercise with Previously Acquired Stock..................... A-5
11. Transferability of Benefits........................................ A-5
12. Termination of Employment or Death Options......................... A-5
13. Requirements Imposed by Law........................................ A-6
14. No Rights as Stockholder........................................... A-6
15. No Employment Obligation........................................... A-6
16. Changes in the Firm's Capital Structure............................ A-7
17. Amendment or Termination of Plan................................... A-7
18. Written Agreement.................................................. A-8
19. Director and Stockholder Approval; Duration of Plan................ A-8
</TABLE>
<PAGE>
ALPHARMA INC.
1997 INCENTIVE STOCK OPTION AND APPRECIATION RIGHT PLAN
1. Purpose of the Plan.
This 1997 Incentive Stock Option and Appreciation Right Plan (the "Plan") of
Alpharma Inc. (the "Company") is designed to provide incentive to present and
future executive, managerial, marketing, technical and other key employees of
the Company and of its subsidiaries (hereinafter referred to as "Employees")
by affording such Employees an opportunity to acquire or increase their
proprietary interest in the Company through the acquisition of shares of its
Class A Common Stock, with $.20 par value (hereinafter referred to as the
"Common Stock") or benefits based on the value of such shares. By encouraging
stock ownership by, or providing benefits based on the value of the Company's
shares to, such Employees, the Company seeks to attract and retain in its and
its subsidiaries' employ persons of exceptional competence and seeks to
furnish and added incentive for them to increase their efforts on behalf of
the Company.
2. Administration.
This Plan shall be administered by a committee of the Board of Directors of
the Company consisting of two or more directors (the "Committee") appointed
for such purpose. All questions of interpretation and application of this
Plan, of any options ("Options") or stock appreciation units ("Units") granted
hereunder (collectively referred to as "Benefits"), of any related agreements
and instruments, and of the value of shares of Common Stock subject to
Benefits shall be subject to the good faith determination of the Committee
which shall be final and binding. If for any reason a Committee shall not have
been appointed, all authority and duties of the Committee under this Plan
shall be vested in and exercised by the Board of Directors of the Company.
3. Shares Relating to Options and Units.
The stock subject to the Options and other provisions of this Plan and which
is the basis for the Units shall be shares of Common Stock. The total amount
of the Common Stock with respect to which Benefits may be granted shall not
exceed in the aggregate 6,500,000/1/ shares; provided, however, that the type
and aggregate number of shares which may be subject to Benefits granted
hereunder shall be subject to adjustment in accordance with the provisions of
section 16 hereof, and further provided that if Incentive Stock Options (as
hereinafter defined) are granted, the aggregate fair market value (determined
as of the time the option is granted) of the Common Stock with respect to
which Options are exercisable for the first time by any single employee during
any calendar year shall not exceed $100,000. Shares deliverable on exercise of
any Option or as payment pursuant to any Unit may be treasury shares or
authorized but unissued shares.
If for any reason the full number of shares covered by any Option are not
issued before the Option expires or terminates, shares not issued under such
Option shall again be available for the grant of Benefits under this Plan. If
any Units cease to be outstanding before the maturity date thereof because the
grantee has ceased to be an Employee or for any other reason, the number of
shares as to which such unmatured Units relate shall again be available for
the grant of Benefits under this Plan.
4. Authority to Grant Options and Units.
The Committee may grant Options and Units from time to time to such eligible
Employees as it shall determine; provided, however, that no Options or Units
may be granted to any person who is a member of the
- --------
/1/ As restated in March of 2000
A-1
<PAGE>
Committee at the time of such grant. Subject only to any applicable
limitations set forth in this Plan, the number of shares of Common Stock which
may be purchased pursuant to any Option or as to which any Units are based
shall be as determined by the Committee, but in no event may the number of
Options and Units granted to any person under the Plan exceed 100,000 in any
annual taxable period.
In the discretion of the Committee, Options granted under this Plan may be
"incentive stock options" as such term is defined in Section 422A of the
Internal Revenue Code of 1986 ("Incentive Stock Options"), or Options which do
not meet such definition. The option agreement with respect to any Option
intended to qualify as an Incentive Stock Option shall so identify such
Option.
The Committee may grant Options and Units to the same Employee and, without
limiting the Committee's authority to set conditions for any Benefits, may
condition the maturity of the Units upon exercise of the Options or vice
versa.
5. Limitation on Value of Shares Covered by Incentive Stock Options granted to
any Employee.
The aggregate fair market value (determined as of the time the Option is
granted) of the Common Stock with respect to which any employee may be granted
Incentive Stock Options under this Plan and any other plans of the Company or
any parent or subsidiary of the Company shall not exceed the amount permitted
by Section 422A of the Internal Revenue Code of 1986.
6. Eligibility.
The individuals who shall be eligible to receive Benefits under the Plan
shall be such Employees from the class of executive, managerial, marketing,
technical and other key employees as the Committee shall determine from time
to time.
7. Option Price and Base Value.
The price at which shares may be purchased pursuant to any Option and the
base value with respect to any Unit shall be specified by the Committee at the
time the Benefit is granted, and shall be equal to or greater than the fair
market value, as determined by the Options Committee, of the shares of Common
Stock on the date the Benefit is granted.
For all purposes of this Plan the fair market value of the Common Stock
shall be the closing price on the principal exchange on which the Common Stock
is traded on the day such value is measured (or most recent trading day), or
if no such price is available, the value shall be determined in such manner as
the Committee shall determine to be appropriate; provided that for purposes of
determining the fair market value of the common stock on the maturity date of
an exercisable Unit (as defined below), the Committee may provide that the
fair market value of the common stock shall be the average of the closing
prices on such principal exchange for the ten trading days prior to the
maturity date.
8. Terms of Options; Vesting.
The Committee shall determine the term of each Option and any vesting or
other conditions to the exercise of any Options, provided that in no event
shall the term of an Option exceed ten years and one month from the date of
grant. Unless the Committee shall otherwise determine at the time of grant,
Options shall vest at the rate of 25% per year that the Employee holds such
Option so that Options shall not become fully exercisable until
A-2
<PAGE>
four years from the date of grant. Accordingly, unless the Committee shall
otherwise determine at the time of grant, Options cannot be exercised until
one year after the Option has been granted and then 25% of the Option
Shares may be purchased during the second year, an additional 25% during the
third year, an additional 25% during the fourth year, and the final 25% after
four years. Subject to the limitations contained in paragraph 12 hereof, the
Committee may, in its discretion: (a) accelerate the time at which any
outstanding Option or part thereof shall become exercisable, (b) extend the
time during which any outstanding Option may be exercised (provided that no
Option may be exercised more than ten years and one month after the date of
grant) and (c) waive, in whole or in part, any condition to exercisability of
an Option. There shall be deemed to be part of the conditions and terms of
every Option granted hereunder as an Incentive Stock Option each condition,
term, limitation or restriction which is required under Section 422A of the
Internal Revenue Code and the applicable regulations for such Option to
qualify as an Incentive Stock Option.
9. Terms and Conditions of Units; Vesting.
Each Unit shall entitle the Employee to whom such Unit is granted to receive
a payment equal to any positive difference between (i) the fair market value
of one share of Common Stock on the maturity date of the Unit and (ii) the
base value of the Unit. The Committee may grant Units from time to time to
Employees and at the time of grant shall determine: (i) the maturity date
(which may be a specific date or a date based on an occurrence, such as
operating results of the Company or a division thereof, or an indeterminate
date to be specified by the grantee upon "exercise" of the Unit); provided the
maturity shall in no event be later than two years following termination of
Employee's employment relationship; (ii) the base value of each Unit granted;
(iii) any vesting or other conditions to maturity of the Units and the
Employee's right to payment; (iv) any events which may accelerate or defer
maturity of the Units; and (v) any other terms relating to such Units. In no
event shall the maturity date of a Unit be earlier than six months after the
date of grant or be (or be deferred to) later than ten years and one month
after the date of grant. A Unit as to which the grantee may select the
maturity date shall be referred to in this Plan as an "Exercisable Unit".
Unless the Committee shall otherwise determine, each Unit shall have a base
price equal to the fair market value of the Common Stock on the date of grant,
shall have a maturity date which is the fifth anniversary of the date of grant
and shall not entitle the grantee to any payment unless such Employee shall
remain an Employee of the Company from the date of grant to the maturity date
(except that in the event the Employee dies or retires in accordance with
established Company rules as a result of disability or age before the maturity
date, the maturity date of such Units shall be accelerated to the date such
Employee ceases to be an Employee due to death or retirement). In no event
shall a maturity date or any Unit be accelerated in the event that the
employment relationship of any Employee is terminated for cause prior to the
maturity date of such Unit.
Payments with respect to Units shall be made to the persons entitled thereto
in cash or, if the Committee so determines, shares of Common Stock having a
fair market value on the maturity date equal to the amount of payment to which
the recipient is entitled, or any combination of cash or such shares. Unless
deferred as hereafter provided, such payment shall be made by the Company
within ninety days after the maturity date.
An account shall be established for each Employee to whom Units are granted
in which shall be recorded the number of Units granted to such Employee, the
base price and maturity date of such Units and other appropriate data. If the
Committee so determines, an Employee who becomes entitled to receive a payment
with respect to any Units may have the right to defer such payment under such
deferred payment arrangement as the Company (or the subsidiary employing such
Employee) may from time to time provide. It shall be a condition of payment by
the Company with respect to any Unit that the person entitled to receive such
payment shall make appropriate payment or other arrangement acceptable to the
Company with respect to any withholding or similar
A-3
<PAGE>
tax requirement, and the Company may withhold any amount so required from any
payment it makes with respect to any Units.
10. Exercisability of Options and Exercisable Units.
Each Option and Exercisable Units may be exercised, so long as it has vested
and is valid and outstanding, from time to time, in part or in whole, subject
to any limitations with respect to the number of shares for which the Option
or Unit may be exercised at a particular time and to such other conditions as
the Committee in its discretion, may specify.
Each Exercisable Unit may be exercised by written notice to the Company,
(attention Treasurer) setting forth the maturity date of such Unit which in no
event shall be a date earlier than the day following the date on which each
such notice is received by the Company.
10A. Procedure for Exercise of Options.
Options shall be exercised by the delivery of written notice to the Company
(Attention: Treasurer) setting forth the number of shares with respect to
which the Option is to be exercised and the address to which the certificates
for such shares are to be mailed, together with (i) cash (including checks,
bank drafts or postal or express money orders payable to the order of the
Company) or (ii), unless prohibited by the Committee in accordance with
section 10C, shares of Common Stock previously acquired with an aggregate fair
market value equal to the option price of such shares. As promptly as
practicable after receipt of such written notification and payment and subject
to section 10B hereof, the Company shall deliver to the optionee certificates
for the number of shares with respect to which such Option has been so
exercised, issued in the optionee's name; provided that such delivery shall be
deemed effected for all purposes when such certificates shall have been
deposited in the United States mail, addressed to the optionee, at the address
specified pursuant to this paragraph. For all purposes, an optionee shall be
deemed to have exercised an Option and to have purchased and become the holder
of the Option Shares as of the date the Company receives written notification
of exercise and payment as provided herein.
10B. Withholding Tax Requirements on Exercise of Options.
It shall be a condition of exercise of any Option (including any Options
which has been transferred as permitted by section 11 of the Plan) that the
person exercising the Option make appropriate payment or other provision
acceptable to the Company with respect to any withholding tax requirement
arising from such exercise. The amount of withholding tax required, if any,
with respect to any Option exercise (the "Withholding Amount") shall be
determined by the Treasurer or other appropriate officer of the Company, and
each Employee shall furnish such information and make such representations as
such officer requires to make such determination with respect to all Options
granted to such Employee. If the Company determines that withholding tax is
required with respect to any Option exercise, the Company shall notify the
Employee of the Withholding Amount, and the Employee shall pay to the Company,
by check or other means acceptable to the Company, an amount not less than the
Withholding Amount. In lieu of making such payment, the Employee may elect to
pay the Withholding Amount by either (i) delivering to the Company a number of
shares of Common Stock having an aggregate fair market value as of the
"measurement date" (as hereinafter defined) not less than the Withholding
Amount of (ii) directing the Company to withhold (and not to deliver or issue
to such Employee) a number of shares of Common Stock otherwise issuable upon
the Option exercise having an aggregate fair market value as of the
measurement date not less than the Withholding Amount. If the Company
approves, an Employee may elect pursuant to the prior sentence to deliver or
direct the withholding of shares of Common Stock having an
A-4
<PAGE>
aggregate value in excess of the minimum Withholding Amount but not in excess
of the Employee's applicable highest marginal combined federal income tax
rate, as estimated in good faith by the Employee. Any fractional share
interest resulting from the delivery or withholding of shares of Common Stock
to meet withholding tax requirements shall be settled in cash. All amounts
paid to or withheld by the Company and the value of all shares of Common Stock
delivered to or withheld by the Company pursuant to this section 10B shall be
deposited in accordance with applicable law by the Company as withholding tax
for the Employee's account. If the Treasurer or other appropriate officer of
the Company determines that no withholding tax is required with respect to the
exercise of any Option (because such Option is an Incentive Stock Option or
otherwise), but subsequently it is determined that the exercise resulted in
taxable income as to which withholding is required (as a result of a
disposition of shares or otherwise), the Employee shall promptly, upon being
notified of the withholding requirement, pay to the Company by means
acceptable to the Company the amount required to be withheld; and at its
election the Company may condition any transfer of shares issued upon exercise
of an Incentive Stock Option upon receipt of such payment. The term
"measurement date" as used in this section IOB shall mean the date on which
any taxable income resulting from the exercise of an Option is determined
under applicable federal income tax provisions.
10C. Option Exercise with Previously Acquired Stock.
Unless the Committee, in its discretion, shall by rule applicable to all or
any specified class of Options prohibit the use of shares of Common Stock to
pay the option price, any Employee may pay the option price for the shares
being acquired upon the exercise of an Option to be paid, in full or in part,
by the delivery to the Company of a number of shares of Common Stock having an
aggregate fair market value as of the "exercise measurement date" (as
hereinafter defined) equal to the exercise price for the shares being
acquired. The term "exercise measurement date" as used in this section 10C
shall mean the date on which the Option is exercised in accordance with
section 10.
11. Transferability of Benefits.
Benefits shall not be transferable other than by will or by the laws of
descent and distribution, or in the case of Benefits which are not Incentive
Stock Options upon such terms and conditions and to such transferee as the
Option Committee may approve (through a rule applicable to all or specific
classes of Employees, pursuant to provisions of an option agreement approved
by the Committee, or upon request in individual cases).
12. Termination of Employment or Death Options.
Except as expressly provided herein, Options shall terminate on the earlier
of:
a. the date of expiration of the term thereof, specified pursuant to
section 8 of this Plan,
b. immediately upon termination of the employment relationship between the
Company and the optionee for cause, or
c. thirty (30) days or, if the written option agreement (as specified
pursuant to section 18 hereof) specifically provides or the Committee
specifically approves, for a longer period not to exceed two years after
termination of the employment relationship between the Company and the
optionee without cause, other than death or retirement in good standing
from the employ of the Company for reasons of age or disability under
then established rules of the Company or the subsidiary employing the
optionee.
The Committee shall determine in its sole discretion whether authorized
leave of absence, or absence on military or government service shall
constitute termination of the employment's relationship.
A-5
<PAGE>
In the event of the death of the holder of an Option while the employ of the
Company and before the date of expiration of such Option, such Option shall
terminate on the earlier of such date of expiration or two years following the
date of such death of the optionee and subject to any condition relating to
such Option, his or her executors, administrators, or any person or persons to
whom his or her Option may be transferred by will or by the laws of descent
and distribution or as permitted by section 11 of the Plan, shall have the
right, at any time to such termination to exercise such portions of such
Option which shall have been vested immediately prior to his or her death. If
before the date of expiration of an Option, the optionee shall be retired in
good standing from the employ of the Company for reasons of age or disability
under the then established rules of the Company, such Option shall terminate
on the earlier of such date of expiration of 90 days after the date of such
retirement unless the written option agreement specifically provides for a
longer period not to exceed two years after the date of such retirement. In
the event of such retirement, the optionee or a transferee permitted by
section 11 of the Plan shall have the right prior to the termination of such
Option and subject to any condition relating to such Option, to exercise such
portion of such Option which shall have been vested immediately prior to the
date of retirement.
For all purposes of this Plan, an employment relationship between the
Company and any holder of any Benefit shall be deemed to exist during any
period in which such holder is employed by the Company or by any subsidiary of
the Company.
13. Requirement Imposed by Law.
No Employee who is subject to Section 16(b) of the Securities and Exchange
Act of 1934 shall sell any shares of Common Stock acquired on exercise of an
Option or transfer any Option for consideration until the lapse of at least
six months from the date of grant of such Option.
The Company shall not be required to sell or issue any shares under any
Option or make any payment with respect to a Unit if the issuance of such
shares or making of such payments shall constitute a violation by the optionee
or holder of Units or by the Company of any provisions of any law or
regulation of any governmental authority. Any determination in this connection
by the Committee shall be final, binding and conclusive.
The Company shall not be required to issue any shares upon exercise of any
Option or payment with respect to any Unit unless the Company has received the
optionee's or holder's representation or other evidence satisfactory to it to
the effect that such optionee or holder of such Unit will not transfer such
Shares in any manner which wold constitute a violation of any securities or
other law, or which would not be in compliance with such other conditions as
the Committee may deem appropriate.
14. No Rights as Stockholder.
No holder of any Benefit under this Plan shall have rights as stockholder
with respect to shares covered relating to such holder's Benefit (except upon
exercise of an Option); and, except as otherwise provided in section 16
hereof, no adjustment for dividends, or otherwise, shall be made if the record
date therefor is prior to the date of exercise of such Option or maturity of a
Unit.
15. No Employment Obligation.
The granting of any Benefit shall not impose upon the Company any obligation
to employ or continue to employ any holder of a Benefit under the Plan, and
the right of the Company to terminate the employment of
A-6
<PAGE>
any officer or other employee shall not be diminished or affected by reason of
the fact that a Benefit has been granted to him or her.
16. Changes in the Firm's Capital Structure.
The existence of outstanding Benefits hereunder shall not affect in any way
the right or power of the Company or its stockholders to make or authorize any
or all adjustments, recapitalization, reorganizations, or other changes in the
Company's capital structure or its business, or any merger or consolidation of
the Company, or any issue of bonds, debentures or preferred or prior
preference stock senior to or otherwise affecting the Common Stock or the
rights thereof, or the dissolution or liquidation of the Company, or any sale
or transfer of all or any part of its assets or business, or any other
corporate act or proceeding, whether of a similar character or otherwise.
If the Company shall effect a subdivision or consolidation of shares or
other capital readjustment, or pay a dividend in shares of its Class A or
Class B Common Stock, then (a) the number, type, and per share price of shares
of stock subject to outstanding Options hereunder or on which a Unit is based
shall be appropriately adjusted in such a manner as to entitle the holder of
such Benefit to receive upon exercise of his Option or maturity of his Unit,
for the same aggregate consideration (in the case of Options), the same total
number and type of shares (in the case of Options) or the same value (in the
case of Units) as he would have received as a result of the event requiring
the adjustment had be exercise his Option or the Unit had matured in full
immediately prior to such event' provided, however, that, if any such
adjustment would result in the right to purchase a fractional share under an
Option, the number of shares subject to the Option will be decreased to the
next lower whole number, and (b) the number and type of shares with respect to
which Benefits may be granted under the Plan shall be adjusted by substituting
for the total number of shares of Common Stock then reserved that number and
type of shares of stock that would have been received by the owner of an equal
number of outstanding shares of Common Stock as the result of the event
requiring the adjustment.
If the Company shall be a party to any merger or consolidation or effect any
recapitalization which causes a change in the Common Stock which does not
effect an adjustment under the prior paragraph, the Committee, in its
discretion, may, if it considers it to be appropriate to carry out the intent
and purpose of the Plan, make such adjustments in the nature, amount of price
of securities subject to the Benefits as it considers appropriate, and such
adjustments shall be binding and conclusive on all holders of Benefits.
Except as expressly provided herein, the issuance by the Company of shares
of stock of any class, or securities convertible into shares of stock of any
class, for cash or property, or for labor or services either upon direct sale,
or upon the exercise of rights or warrants to subscribe therefor, or upon
conversion of other securities, shall not affect, and no adjustment by reason
thereof shall be made with respect to, the number or price of shares of Common
Stock then covered by or relating to outstanding Benefits.
17. Amendment or Termination of Plan.
The Board of the Directors of the company may modify, revise or terminate
this Plan at any time and from time to time, except that the aggregate number
of shares as to which Benefits may be granted under to this Plan, the maximum
number of Benefits which may be granted to any Employee in a particular fiscal
year, the minimum option price specified in paragraph 7 of this Plan and the
minimum base value for Units specified in Section 9 shall not, other than by
operation of paragraph 16 hereof, be adjusted without the consent of the
holders of Class A and Class B Common Stock having a majority of the voting
power. Any amendment of this Plan shall
A-7
<PAGE>
apply to all Benefits outstanding at the time of such amendment (i) unless
otherwise specified in the amendment or (ii) to the extent such amendment is
materially adverse to the outstanding Benefits.
18. Written Agreement
Each Benefit granted hereunder shall be embodies in a written agreement or
other document which shall be subject to the terms and conditions prescribed
above and shall be signed by the Employee holding the Benefit and by the
President or a Vice-President of the Company for and in the name and on behalf
of the Company. Such an option agreement or other document shall contain such
other provisions as the Committee in its discretion shall deem advisable.
19. Director and Stockholder Approval" Duration of Plan.
This Plan has been duly adopted by the Board of Directors originally on
September 26, 1983 and approved by the Stockholders of the Company on January
25, 1984, and restated by the Board on March 21, 1997. Options may not be
granted under this Plan after September, 2003. This Plan shall terminate (a)
when the total amount of Common Stock with respect to which Benefits may be
granted shall have been issued upon the exercise of Options, or (b) by action
of the Board of Directors pursuant to paragraph 17 hereof, whichever shall
first occur.
A-8
<PAGE>
3480-PS-00
<PAGE>
[LOGO OF ALPHARMA]
Dear Shareholder:
April 13, 2000
You are cordially invited to attend the Annual Meeting of Shareholders to be
held at 9:00 a.m. on Thursday, May 25, 2000 at The Regal U.N. Plaza Hotel, One
U.N. Plaza, New York, New York. Detailed information is contained in the
accompanying Notice of Annual Meeting and Proxy Statement.
Regardless of whether you plan to attend the meeting, it is important that your
shares be voted. Accordingly, we ask that you sign and return your proxy as soon
as possible in the envelope provided. If you do plan to attend the meeting,
please mark the appropriate box on the proxy.
Best regards,
/s/ Robert F. Wrobel
Robert F. Wrobel
Secretary
[X] Please mark
votes as in
this example.
1. ELECTION OF CLASS A DIRECTORS
Nominees: (01) Thomas G. Glbian, (02) Peter G. Tombros,
(03) Eric Hornnaess
FOR [ ] [ ] WITHHELD
ALL FROM ALL
NOMINEES NOMINEES
[ ]________________________________________
Form all nominees except as noted above
2. Approval of the amendment to the FOR AGAINST ABSTAIN
Company's 1997 Incentive Stock [ ] [ ] [ ]
Option and Appreciation Right Plan
described in the accompanying Proxy
Statement.
3. As such persons in their direction upon such
maters as may come before the meeting.
MARK HERE IF YOU PLAN TO ATTEND THE MEETING [ ]
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
Please mark, sign and mail this proxy promptly in the
enclosed envelope, which requires no postage if
mailed in the United States.
NOTE: The signature should correspond exactly with the name
of the stockholder as it appears hereon. Where stock is
registered in Joint Tenancy, all tenants should sign.
Persons signing as Executors, Administrators. Trustees,
etc. should so indicate.
Signature: _______________________ Date:________________________________
Signature: _______________________ Date:________________________________
<PAGE>
[LOGO OF ALHARMA]
PROXY
ALPHARMA INC.
One Executive Drive, Fort Lee, New Jersey 07024
Proxy for Annual Meeting of Stockholders on May 25, 2000
Jeffrey E. Smith, Vice President and Chief Financial Officer and Robert
F. Wrobel, Vice President, Chief Legal Officer and Secretary, or either one of
them, with full power of substitution, are hereby authorized to vote the shares
of Class A Common Stock of Alpharma Inc. (the "Company"), which the undersigned
is entitled to vote at the 2000 Annual Meeting of Stockholders to be held at
The Regal U.N. Plaza Hotel, One U.N. Plaza, New York, New York on Thursday, May
25, 2000 at 9:00 a.m., local time, and at all adjournments thereof, as follows
on the reverse side.
The Board of Directors recommends that the Stockholders vote FOR (i) the
nominees set forth in item 1 and (ii) items 2 and 3. Shares represented by this
proxy when properly executed will be voted in the manner directed by the
undersigned stockholder and in the discretion of the proxy holders as to any
other matter that may properly come before the Annual Meeting of Stockholders
or, if no direction is indicated, will be voted FOR (i) the nominees set forth
in item 1 and (ii) items 2 and 3, and in the discretion of the proxy holders as
to any other matter that may properly come before the Annual Meeting of
Stockholders.
[SEE REVERSE SIDE] CONTINUED AND TO BE SIGNED ON REVERSE SIDE [SEE REVERSE SIDE]
