3:
Exhibit 10.2
Mr. Ronald Warner
Dear Ron:
Alpharma, Inc. (the "Company") recognizes you as a valuable
member of the team charged with responsibility for managing the
Branded Business (which consists of the Branded Pharmaceuticals
business segment reported by Alpharma Inc. ("Alpharma") under the
Securities Act of 1934, hereafter called "Branded Pharmaceuticals
Business"). As you know, Alpharma anticipates significant changes
in the Company as a result of the impending sale of the Generics
business to Actavis. In order to incentivize you to remain with the
Company, and to protect you in the event your employment is
terminated the Company is providing you with the retention and
severance benefits set forth in this letter agreement (this
"Agreement").
This Agreement will remain in effect until the third anniversary
of the date hereof, and thereafter will remain in effect for a
series of one-year periods unless either party shall give to the
other written notice of expiration of this Agreement at least one
year in advance of a subsequent renewal date. In any event this
Agreement, if it has not expired when a "Qualifying Transaction,"
as defined below, occurs, shall remain in effect for two years
after a Qualifying Transaction.
Retention Benefits
Retention Payment .
The Company hereby grants you a series of "Retention Payments",
payable in the following amounts and on the following dates:
1/3 of your Base Salary (as defined below) and target annual bonus
opportunity as of the date of this Agreement (your "Annual
Compensation"), payable on June 30, 2006
1/3 of your Annual Compensation on December 29, 2006
1/3 of your Annual Compensation on June 29, 2007;
provided that you are an active employee of the Company on the
applicable payment date.
However, all unpaid amounts under this paragraph will be
accelerated and paid within ten (10) business days upon the first
to occur of (x) your termination of employment as a result of
death or termination by the Company for other than Cause (as
defined below) or due to a disability that would qualify you for
coverage under the applicable long-term disability plan that covers
employees of the Company ("Disability"), (y) six months after
a sale or other transfer of all or substantially all of the assets
and business of Branded Pharmaceuticals Business (a "Sale of
Branded Pharmaceuticals Business") that occurs while you are an
active employee of the Company or (z) a "Change in Control" of
Alpharma under Alpharma's Change in Control Plan that occurs while
you are an active employee of the Company. "Base Salary" shall mean
your base salary at the applicable time (which shall include your
executive allowance as indicated on the Company's payroll
records).
Performance Units .
In the event of the sale or other transfer of all or
substantially all of the assets and business of Global Generics to
any person, entity or group unaffiliated with Alpharma on or before
March 31, 2006 in a transaction that does not result in a "Change
in Control" of Alpharma under Alpharma's Change in Control Plan (a
"Sale of Global Generics"), the Performance Units that you have
previously been granted under Alpharma's 2003 Omnibus Incentive
Compensation Plan will be treated as follows: each Performance Unit
will be converted into the right to receive cash incentive payments
from the Company if you are an active employee of the Company on
both (x) the date of the Sale of Global Generics and
(y) the scheduled vesting date for such cash incentive
payments, as described below.
Payment of this cash incentive payment will be made at the
"target" level of $100.00 per Unit, but will be pro-rated based on
the number of days you were employed by Alpharma and its affiliates
prior to the applicable vesting date, but during the "Performance
Period" applicable to such Unit compared to the total number of
days in the Performance Period. The vesting date will be the first
to occur of (w) your employment being terminated as a result
of death or Disability or by the Company for other than Cause,
(x) a Sale of Branded Pharmaceuticals Business while you are
an active employee of the Company, (y) the end of the applicable
Performance Period, provided you are then an active employee of the
Company or (z) a "Change in Control" of Alpharma under
Alpharma's Change in Control Plan while you are an active employee
of the Company; provided that only a pro rata share of the full
value of the Performance Units will be payable based on the number
of days that have elapsed during the applicable Performance Periods
as of the vesting date. Payment of the cash incentive payment shall
occur ten (10) business days after the vesting date.
Additional Benefits Upon a Sale of Branded Pharmaceuticals
Business or Change in Control
If either (x) a Sale of Branded Pharmaceuticals Business or
(y) a "Change in Control" of Alpharma under Alpharma's Change
in Control Plan occurs while both you are an active employee of the
Company and the Company is a subsidiary of Alpharma (a "Qualifying
Transaction"), you will be entitled to the benefits described below
in lieu of the benefits set forth in Alpharma's Severance or Change
in Control Plans or any employment letter or agreement, or any
other plan or arrangement, in existence prior to the date of this
Agreement.
Treatment of Cash Bonuses and Equity Awards .
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Annual Bonus .
If a Qualifying Transaction occurs
while you are an active employee of the Company, your annual cash
bonus for the calendar year of such Qualifying Transaction will be
treated as follows:
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if the Qualifying Transaction is either (x) a Sale of Branded
Pharmaceuticals Business that occurs on or prior to June 30 of any
calendar year or (y) a "Change in Control" of Alpharma under
Alpharma's Change in Control Plan, the Company will pay you a
pro-rata bonus based on your target annual bonus opportunity, as in
existence immediately prior to the Qualifying Transaction, under
the Executive Bonus Plan based on the portion of such calendar year
that occurred prior to the Qualifying Transaction, payable ten (10)
business days after the applicable Qualifying Transaction; or
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if the Qualifying Transaction is a Sale of Branded Pharmaceuticals
Business that occurs after June 30 of any calendar year, the
Company will pay you a pro-rata bonus for that year based on actual
performance in accordance with the terms of the Executive Bonus
Plan based on the portion of such calendar year that occurred prior
to the Qualifying Transaction, payable between January 1 and
March 15 of the following calendar year.
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Equity Awards .
In addition, if a Qualifying Transaction occurs while you are an
active employee of the Company, then any Stock Options, Restricted
Stock or Restricted Stock Units of Alpharma issued to you prior to
the date of such Qualifying Transaction under either the 1997
Incentive Stock Option and Appreciation Rights Plan or the 2003
Omnibus Incentive Compensation Plan (or any successor plans) shall
immediately vest (but otherwise be governed by the terms of such
applicable grant document and Incentive Plan); provided that, if
such Qualifying Transaction is a "Change in Control" of Alpharma
under Alpharma's Change in Control Plan, then any such vesting with
respect to Restricted Stock or Restricted Stock Units shall instead
occur upon the earliest of (i) the vesting date set forth in the
applicable grant document, (ii) the termination of your employment
with the Company or the entity that acquires the Company (the
"Acquiring Company") prior to the second anniversary of the
Qualifying Transaction either by your employer without Cause or by
you pursuant to a Constructive Termination of employment, as
further described below, and (iii) the purchase or other
acquisition by the Acquiring Company of all or substantially all of
the issued and outstanding Class A and Class B common
stock of Alpharma. Notwithstanding the foregoing, no delivery with
respect to Restricted Stock Units shall occur until the first day
on which such delivery can occur without your incurring tax under
Section 409A of the Internal Revenue Code of 1986, as amended (the
"Code").
Special Severance Arrangement .
Should a Qualifying Transaction occur while you are an active
employee of the Company and your employment with the Company or the
Acquiring Company be terminated on or after the Qualifying
Transaction, but on or prior to the second anniversary of the
Qualifying Transaction (either by your employer without Cause or
pursuant to a Constructive Termination of employment, as further
described below), you shall receive from the Company the severance
benefits and payments set forth in Appendix A of this
Agreement.
For purposes of this Agreement, a Constructive Termination means
your voluntary termination following (i) any reduction in your Base
Salary or in your target annual bonus opportunity, as in existence
immediately prior to the Qualifying Transaction, (ii) your
relocation to a base office or site that is more than 50 miles from
the location of your present base office or site, (iii) any
material reduction in your health, welfare and pension benefits in
the aggregate or (iv) the assignment of duties substantially
inconsistent with, or a substantial diminution of, the duties,
responsibilities or status of your position with the Company
immediately prior to the Qualifying Transaction; provided that, if
you are eligible to voluntarily terminate employment pursuant to a
Constructive Termination of employment within the first six months
after the date of the Qualifying Transaction, the Company or the
Acquiring Company may request that you continue as a full time
employee to assist with transition and other activities reasonably
appropriate to your position, your background and history with the
Company with no reduction in Base Salary, target annual bonus
opportunity or benefits, and no relocation, as described above in
the definition of "Constructive Termination" until six months after
the Qualifying Transaction and any benefits and payments required
under this paragraph (and, in the case of a Qualifying Transaction
that is a Sale of Branded Pharmaceuticals Business, any unpaid
Retention Payments) shall be payable only upon your completion of
such service, or your death or termination due to Disability. In
any of the foregoing events, in order to qualify as a Constructive
Termination of employment, you must have provided written notice to
your employer of the circumstances that entitle you to terminate
due to a Constructive Termination, and the employer must be
afforded 30 days in which to cure such circumstances before you can
resign due to a Constructive Termination.
For purposes of this Agreement, a termination for "Cause" shall
mean your termination by the Company or the Acquiring Company due
to (a) conviction of a felony, or (b) substantial and willful
neglect of job duties or willful misconduct, in either case having
a material and demonstrable effect on the Company or the Acquiring
Company.
Gross-Up .
You will be entitled to, and subject to, the "gross-up"
provisions set forth in Appendix B of this Agreement.
Non-Competition and Non-Solicitation Obligations .
The payments and benefits provided for hereunder are conditional
on your agreement not to engage in competition with, or to solicit
employees of, the Company and its affiliates, as further provided
in Appendix B of this Agreement.
No Mitigation .
Unless expressly provided in this Agreement, the Company agrees
that any income or other employment benefits received by you from
any and all sources other than the Company, the Acquiring Company
and their respective affiliates for any reason whatsoever shall in
no way reduce or otherwise affect the Company's obligations to make
payments and afford benefits under this Agreement.
Miscellaneous .
This Agreement shall be governed by and construed in accordance
with the laws of the State of New Jersey (regardless of the laws
that might otherwise govern under applicable New Jersey principles
of conflicts of law).
Except as specifically set forth in this Agreement, no other
benefits shall be provided to you upon or after the occurrence of a
Qualifying Transaction, including benefits set forth in Alpharma's
Severance or Change in Control Plans or any employment letter or
agreement, or other plan or arrangement, in existence prior to the
date of this Agreement, and no amounts payable
