November 9, 2007

Mr. Carl-Aake Carlsson

Batstojordet 93

N-1363 Hovik, Norway

Dear Carl-Aake:

Alpharma AS (the "Company") recognizes you as a valuable member of the team charged with responsibility for completing the sale of all or substantially all of the Active Pharmaceutical Ingredient Business (which consists of the Active Pharmaceutical Ingredient business segment reported by Alpharma Inc. ("Alpharma") under the Securities Act of 1934, and hereafter called the "API Business "). 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 December 12, 2008; provided that, if a Qualifying Transaction (as defined below) occurs prior to such date, it shall remain in effect for two years after such Qualifying Transaction.

Retention Award 

Without regard to the occurrence of a Qualifying Transaction (as defined below), on the 15th day of the month following the full execution this letter agreement, you will receive a long-term incentive award in the form of Restricted Stock under the Company's 2003 Omnibus Incentive Compensation Plan (the "Omnibus Plan") consisting of 10,000 shares of the Alpharma's Class A Common Stock. As you may know, restricted stock is stock that Alpharma holds for you, pending the satisfaction of the restrictions set forth in the Restricted Stock Award Agreement,. At the time that the restrictions set forth in the award agreement lapse, the shares of stock will be "released" to you. You may retain, sell or otherwise dispose of the shares of stock subject to restrictions on the sale of the stock that are imposed by law and Alpharma's normal stock sale "black-out" provisions applicable generally to senior executives. You will be responsible for any taxes or sales costs associated with this award or the sale of the related Alpharma stock. 

The Restricted Stock Award Agreement will include a provision providing for 100% vesting of such restricted stock on the third anniversary date of the Grant Date (as defined therein) provided that you are an active employee of the Company on such date. The Award Agreement will also include certain other provisions under which vesting could occur earlier in the event of a Qualifying Transaction. You will have no right to the Restricted Stock unless and until it vests in the manner set forth in the Restricted Stock Award Agreement. All terms of this award are subject to the terms of the Restricted Stock Award Agreement which shall prevail should there be any inconsistencies between this Agreement and the Award Agreement.

Additional Benefits Upon a Qualifying Transaction

If prior to December 12, 2008, either a (x) a Sale of the API Business (as defined below) 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 companies constituting the API Business are direct or indirect subsidiaries of Alpharma (each a "Qualifying Transaction"), you will be entitled to the benefits described below. The benefits provided herein will be in lieu of the benefits set forth in Alpharma's Severance or Change in Control Plans or any employment letter or agreement, including the letter agreement dated December 12, 2005 between the Company and you (the "2005 Letter"), or any other plan or arrangement in existence prior to the date of this Agreement.

Transaction Bonus.

In recognition of your past and expected efforts in this regard, and in recognition of the fact that a Sale of the API Business could materially change the nature of your continuing responsibilities with the Company, the Company is granting you a Transaction Bonus (as defined below) provided that both of the following conditions are satisfied:

1.The consummation on or before December 12, 2008 of the sale or other transfer of all or substantially all of the assets and business of the API Business to any person, entity or group unaffiliated with Alpharma in a transaction that does not result in a "Change in Control" of Alpharma Inc. under the Alpharma Change in Control Plan (a "Sale of the API Business"). For avoidance of doubt, any transaction which results in a "Change in Control" of Alpharma shall not entitle you to a Transaction Bonus but the Sale of the API Business does not, by itself, constitute a "Change in Control" of Alpharma under the Alpharma Change in Control Plan, and 

2. You continue to be an employee of the Company or the entity that acquires the Company or the API Business (the "Acquiring Company") until the first to occur of (a) six months after the date of the Sale of the API Business, or (b) the date after the Sale of the API Business upon which (i) the Company or the Acquiring Company terminates your employment for any reason other than "Cause," or (ii) you terminate your employment due to a "Constructive Termination," as further described in this letter and you accept such termination without making any claim for damages, payments or entitlements ("Damages") not provided in this letter (including any Damages under Norwegian law) and provide the Company with an executed release of any right to receive such Damages in form and substance which the Company's Norwegian counsel advises is sufficient to release the Company from any obligation to pay Damages. For the purposes of this letter, 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 or (c) termination for any other reason justifiable under Norwegian law.

The Transaction Bonus ("Transaction Bonus") shall be equal to an amount as provided on Appendix A hereto.

Any Transaction Bonus due hereunder shall be payable in cash within ten (10) business days after the satisfaction of the employment criteria set forth in (2) above. 

Treatment of Annual Bonuses and Equity Awards.

A.	Annual Bonus.

If a Qualifying Transaction occurs while you are an active employee of the Company and prior to December 12, 2008, your annual cash bonus for the calendar year of such Qualifying Transaction will be treated as follows:

		(1)	if the Qualifying Transaction is either (x) a Sale of the API 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, which occurs at anytime during the calendar year, 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

		(2)	if the Qualifying Transaction is a Sale of the API 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 under the criteria established 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.

B.	Equity Awards.

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, or (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.**
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 is 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 B of this Agreement.

For purposes of this Agreement, a Constructive Termination means your voluntary termination following (i) any material 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 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.
**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 C 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.

You confirm that you have previously received copies of all Plans, employment letters and other agreements referred to in this Letter Agreement.

This Agreement shall be governed by and construed in accordance with the laws Norway.

 

 

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 pursuant to this Agreement shall be taken into account for purposes of any benefit plan maintained by the Company or any affiliate of the Company. Notwithstanding anything to the contrary, to the extent that the Company or an Acquiring Company makes a payment or payments to you under Norwegian or other applicable law as a result of a Qualifying Transaction or any termination of employment within two years after a Qualifying Transaction, the amount of such payment shall reduce, by an equal amount, (i) first, any payments due to you under the Special Severance Arrangement set forth above and; (ii) if said payments made under applicable law exceed the amount of the Special Severance Arrangement, then, payments due under the Transaction Bonus. 

Upon execution of this Agreement, the 2005 Letter, shall automatically terminate and be of no further force and effect without regard to the occurrence or a Qualifying Transaction.

Payments to you by the Company and its affiliates shall be subject to all applicable legal requirements with respect to withholding of taxes and you shall be responsible for all applicable Norwegian taxes which, under applicable laws and regulations, are payable by you or otherwise your responsibility.

This Agreement shall be binding upon, and inure to the benefit of, the parties hereto, any successors to or assigns of the Company and your heirs and the personal representatives of your estate. If the Company or the Acquiring Company consolidates with or merges into or sells all or substantially all of its assets to, another corporation, partnership or other entity or person, the Company (or the Acquiring Company, as the case may be) shall require such corporation, partnership or other entity or person to assume this Agreement, and upon such assumption, the successor corporation, partnership or other entity or person shall become obligated to perform all of the terms and conditions set forth herein.

This Agreement may not be modified, amended or waived in any manner except by an instrument in writing signed by the parties hereto. The waiver by either party of compliance with any provision in this Agreement by the other party shall not operate or be construed to operate as a waiver of any provision of this Agreement, or any subsequent breach by such party of any provision of this Agreement.

This Agreement is not an offer or promise of continuing employment by the Company. In addition, the Company shall have no responsibility or liability for your employment by an Acquiring Company other than with respect to payments due pursuant to the terms of this Agreement.

We ask that you acknowledge that, by countersigning this Agreement, you are agreeing to maintain a strict level of confidence regarding all information disclosed, developed or learned by you in the performance of your duties with the Company, including any facts, circumstances or discussions that could lead to a Qualifying Transaction ("Confidential Information"). By countersigning this Agreement, you agree that, unless you first secure the written consent of the Chief Executive Officer of Alpharma, you shall not disclose or use at any time, either during or after employment by the Company, any Confidential Information except to the extent that you are required to disclose or use such Confidential Information by law or in the performance of your assigned duties for the Company. This obligation is in addition to the confidentiality agreement that you have previously executed as an employee of the Company, the general obligation of confidentiality existing under the law and the Non-Competition and Non-Solicitation obligations included herewith as Appendix C.

Notwithstanding anything in this Agreement to the contrary, any payments hereunder that (i) are subject to United States Income Tax and (ii) would be subject to the additional income or excise tax imposed (x) by Section 409A of the United States Internal Revenue Code of 1986, as amended (the "Code"), shall be deferred until the earliest date that such payments may be made without the imposition of such tax, and any payments that would have been made to you but for this sentence shall be accumulated (without interest) and paid to you on such date or (y) by Section 4999 of the Code, shall be subject to the "Gross Up" provisions as set forth in Attachment B of this Letter Agreement.

We believe that the Retention Award, Transaction Bonus and other potential payments and benefits set forth above clearly reflect your value to this organization and provide you with enhanced financial benefits in connection with the potential Qualifying Transaction.

Please indicate your acknowledgement of this Agreement, and our acceptance of its terms, by countersigning this Agreement where indicated below and returning one copy to the Company.

Sincerely,

 

ALPHARMA AS

 

 

By:
/s/ Frode Johansen
/s/ Arnt-Tore Valsvik
/s/ Mikkel Lyager-Olsen 
Frode Johansen
Arnt-Tore Valsvik
Mikkel Lyager-Olsen 
Chairman
Director
Director
 

 
**I acknowledge and agree to the terms and conditions of this Agreement, and I intend to be legally bound hereby**
 

 

/s/ Carl-Aake Carlsson
Dated: November 12, 2007
Signature 
 
** 

Appendix A

Transaction Bonus

Upon the Sale of the API Business in which the Acquiring Company pays to the Company an amount equal to the Consideration (as defined below) listed on the chart below, subject to you satisfying the conditions for receipt of a Transaction Bonus as set forth in the attached letter

agreement, the Company shall pay you a lump-sum equal to the Transaction Bonus listed below. For purposes of calculating the Transaction Bonus, all Consideration values shall be rounded to the nearest ($USM). For avoidance of doubt, in the event Consideration values are equal to or in excess of $US 400M, the Transaction Bonus will be capped at $US 1,040,000. 

	
**Consideration**********