<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 19, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
WARNER-LAMBERT COMPANY
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 2834 22-1598912
(State or Other Jurisdiction (Primary Standard (I.R.S. Employer Identification
of Incorporation or Organization) Industrial Classification Code Number)
Number)
</TABLE>
------------------------
WARNER-LAMBERT COMPANY
201 TABOR ROAD
MORRIS PLAINS, NEW JERSEY 07950-2693
(973) 540-2000
(Address, Including Zip Code, and Telephone Number, Including Area Code, of
Registrant's Principal Executive Offices)
GREGORY L. JOHNSON, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
WARNER-LAMBERT COMPANY
201 TABOR ROAD
MORRIS PLAINS, NEW JERSEY 07950-2693
(973) 540-2895
(Name, Address, Including Zip Code, and Telephone Number, Including Area Code,
of Agent For Service)
COPIES TO:
<TABLE>
<S> <C> <C>
JAMES M. COTTER, ESQ. GARY E. FRIEDMAN, ESQ. MARK KESSEL, ESQ.
GARY I. HOROWITZ, ESQ. AGOURON PHARMACEUTICALS, SHEARMAN & STERLING
SIMPSON THACHER & BARTLETT INC. 599 LEXINGTON AVENUE
425 LEXINGTON AVENUE 10350 NORTH TORREY PINES NEW YORK, NEW YORK 10022
NEW YORK, NEW YORK 10017 ROAD
SAN DIEGO, CALIFORNIA 92037
</TABLE>
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC:
As soon as possible after this Registration Statement is declared effective.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act of 1933, check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act of 1933, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
AMOUNT MAXIMUM PROPOSED MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE PER AGGREGATE OFFERING REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT PRICE FEE(2)
<S> <C> <C> <C> <C>
Common Stock, $1.00 par value 29,874,346 shares N/A $2,103,340,673 $130,559.92
</TABLE>
(1) This Registration Statement relates to Common Stock, par value $1.00 per
share ("Warner-Lambert Common Stock"), of Warner-Lambert Company
("Warner-Lambert") issuable to holders of Common Stock, no par value
("Agouron Common Stock"), of Agouron Pharmaceuticals, Inc. ("Agouron") in
the proposed merger (the "Merger") of a wholly owned subsidiary of
Warner-Lambert with and into Agouron. The amount of Warner-Lambert Common
Stock to be registered has been determined by multiplying the maximum
exchange ratio (0.9300 shares of Warner-Lambert Common Stock for each share
of Agouron Common Stock held prior to the Merger) by 32,122,953, the maximum
aggregate number of shares of Agouron Common Stock convertible in the
Merger.
(2) The registration fee was calculated pursuant to Rule 457(f) as 0.000278 of
$70.40625 (the average of the high and low prices of Warner-Lambert Common
Stock on the New York Stock Exchange Composite Transaction Tape on April 14,
1999), multiplied by 29,874,346 shares. This fee of $584,728.71 is offset as
provided by Exchange Act Rule 0-11(a)(2) in the amount of $454,168.79 for
the same transaction as filed on Schedule 14A by Agouron dated February 10,
1999. Therefore, the amount of Registration Fee is $130,559.92.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
AGOURON PHARMACEUTICALS, INC.
10350 NORTH TORREY PINES ROAD
LA JOLLA, CA 92037-1020
MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
TO THE SHAREHOLDERS OF AGOURON:
The Board of Directors of Agouron Pharmaceuticals, Inc. has unanimously
agreed on a merger in which Warner-Lambert Company will acquire Agouron. We
believe the merger will allow Agouron to continue to develop its innovative
therapies for the treatment of cancer, viral diseases and diseases of the eye
while giving Agouron greater access to the financial and technical resources of
Warner-Lambert.
Upon completion of the merger, each share of your Agouron stock will be
converted into the right to receive a fraction of a share of Warner-Lambert
stock equal to an exchange ratio. The exchange ratio is calculated by dividing
$60.00 by the average closing price of Warner-Lambert stock during the ten-day
trading period ending two trading days before the special meeting. In no event
will you receive less than 0.8108 nor more than 0.9300 of a share of
Warner-Lambert stock for each share of Agouron stock.
The following table sets forth examples of the number of shares of
Warner-Lambert stock each share of Agouron stock would be entitled to receive if
the average closing price during the ten-day trading period is $60.00, $64.52,
$69.00, $74.00 and $79.00:
<TABLE>
<CAPTION>
AVERAGE NO. OF SHARES OF
CLOSING PRICE WARNER-LAMBERT STOCK
- ------------- -----------------------
<S> <C>
$ 60.00 .9300
$ 64.52 .9300
$ 69.00 .8696
$ 74.00 .8108
$ 79.00 .8108
</TABLE>
The Warner-Lambert common stock is principally traded on the New York Stock
Exchange under the symbol "WLA" and is also traded on the Chicago, Pacific,
London and Zurich stock exchanges. Warner-Lambert expects to issue between
29,494,302 and 33,830,416 shares of its stock to Agouron shareholders in the
merger.
The merger will be tax-free to you for federal income tax purposes except
for taxes due on cash, if any, that you receive for fractional shares.
The merger requires the approval of a majority of Agouron shareholders, and
we have scheduled a special meeting of the Agouron shareholders on Monday, May
17, 1999 to vote on the merger.
Regardless of the number of shares you own or whether you plan to attend the
meeting, it is important that your shares be represented and voted. Voting
instructions are inside.
This document provides you with detailed information about the proposed
merger. We encourage you to read this entire document carefully.
/s/ Peter Johnson
- ------------------------
Peter Johnson
President and Chief Executive Officer
Agouron Pharmaceuticals, Inc.
FOR A DISCUSSION OF CERTAIN RISK FACTORS WHICH YOU SHOULD CONSIDER IN
EVALUATING THE MERGER, SEE "RISK FACTORS" BEGINNING ON PAGE 12.
Neither the Securities and Exchange Commission nor any state securities
regulator has approved the Warner-Lambert stock to be issued in the merger or
determined whether this Proxy Statement/ Prospectus is truthful or complete. Any
representation to the contrary is a criminal offense.
The accompanying Proxy Statement/Prospectus is dated April 19, 1999, and is
first being mailed to shareholders on or about April 19, 1999.
<PAGE>
AGOURON PHARMACEUTICALS, INC.
10350 NORTH TORREY PINES ROAD
LA JOLLA, CALIFORNIA 92037-1020
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD MAY 17, 1999
To the Shareholders of
Agouron Pharmaceuticals, Inc.:
NOTICE IS HEREBY GIVEN that a special meeting of shareholders of Agouron
Pharmaceuticals, Inc. will be held on Monday, May 17, 1999, at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York, commencing at
9:00 a.m., local time, for the following purposes:
1. To consider and vote upon a proposal to approve and adopt the merger
agreement, dated as of January 26, 1999, among Warner-Lambert Company, a
Delaware corporation, WLC Acquisition Corporation, a California
corporation and a wholly owned subsidiary of Warner-Lambert, and Agouron,
pursuant to which, among other things (a) WLC Acquisition Corporation
will be merged with and into Agouron, and Agouron will become a wholly
owned subsidiary of Warner-Lambert and (b) each outstanding share of
common stock of Agouron will be converted into the right to receive from
Warner-Lambert a fraction of a share of Warner-Lambert stock. In no event
will you receive less than 0.8108 nor more than 0.9300 of a share of
Warner-Lambert stock for each share of Agouron stock.
2. To transact such other business as may properly be brought before the
special meeting or any adjournment or postponement of the special
meeting.
A copy of the merger agreement is attached as Annex A to the accompanying
Proxy Statement/ Prospectus.
Shareholders of record at the close of business on March 29, 1999, are
entitled to notice of, and to vote at, the special meeting and any adjournment
or postponement of the special meeting. A complete list of shareholders entitled
to vote at the special meeting will be available for inspection by any
shareholder for any purpose germane to the special meeting for 10 days prior to
the special meeting during ordinary business hours at Agouron's headquarters
located at 10350 North Torrey Pines Road, La Jolla, California 92037-1020.
All shareholders are cordially invited to attend the meeting in person.
HOWEVER, SHAREHOLDERS ARE URGED TO VOTE THEIR PROXY PROMPTLY, WHETHER OR NOT
THEY EXPECT TO ATTEND THE SPECIAL MEETING. Shareholders can vote their shares:
(1) by completing, signing, dating and returning the enclosed proxy card
as promptly as possible in the enclosed postage-prepaid envelope; or
(2) via a toll-free telephone call in the U.S. and Canada.
By Order of the Board of Directors,
/s/ Gary E. Friedman
Gary E. Friedman
SECRETARY
La Jolla, California
April 19, 1999
IT IS IMPORTANT THAT THE ENCLOSED PROXY CARD BE SIGNED, DATED AND PROMPTLY
RETURNED IN THE ENCLOSED ENVELOPE OR THAT YOU REGISTER YOUR VOTE BY TELEPHONE BY
FOLLOWING THE INSTRUCTIONS ON YOUR PROXY CARD, SO THAT YOUR SHARES WILL BE
REPRESENTED WHETHER OR NOT YOU PLAN TO ATTEND THE SPECIAL MEETING.
SHAREHOLDERS SHOULD NOT SEND STOCK CERTIFICATES WITH THEIR PROXY CARD.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
QUESTIONS AND ANSWERS ABOUT THE (iii)
MERGER.............................
SUMMARY.............................. 1
SELECTED HISTORICAL FINANCIAL DATA... 6
Warner-Lambert Selected Financial 6
Data.............................
Agouron Selected Financial Data.... 7
WARNER-LAMBERT PRO FORMA COMBINED 8
SELECTED FINANCIAL DATA............
Warner-Lambert Pro Forma Combined 8
Selected Financial Data..........
COMPARATIVE PER SHARE DATA........... 9
MARKET PRICE AND DIVIDEND DATA....... 10
RISK FACTORS......................... 12
CAUTIONARY STATEMENT CONCERNING 13
FORWARD-LOOKING STATEMENTS.........
THE SPECIAL MEETING.................. 14
General; Date, Time and Place...... 14
Purposes of the Special Meeting.... 14
Recommendation of the Agouron 14
Board............................
Shareholders Entitled to Vote; Vote 14
Required.........................
Proxies............................ 15
Dissenters' Rights................. 16
THE COMPANIES........................ 16
Warner-Lambert..................... 16
Agouron............................ 16
THE MERGER........................... 17
General............................ 17
Background of the Merger........... 17
Reasons for the Merger; 19
Recommendation of the Agouron
Board............................
Opinion of PaineWebber............. 20
Material Federal Income Tax 27
Consequences.....................
Accounting Treatment............... 29
Regulatory Approvals............... 29
Federal Securities Laws 29
Consequences.....................
Stock Exchange Quotation........... 30
Dissenters' Rights................. 30
Certain Legal Proceedings.......... 31
EXECUTIVES; EXECUTIVE COMPENSATION; 32
STOCK OWNERSHIP OF DIRECTORS,
EXECUTIVE OFFICERS AND FIVE PERCENT
SHAREHOLDERS.......................
INTERESTS OF CERTAIN PERSONS IN THE 32
MERGER.............................
THE MERGER AGREEMENT................. 34
Closing and Effective Time of the 34
Merger...........................
Exchange and Cancellation of 35
Agouron Stock Options............
Conditions to the Merger........... 35
Representations and Warranties of 37
Warner-Lambert and Agouron.......
Conduct of the Business of Warner- 38
Lambert and Agouron Prior to the
Merger...........................
No Solicitation of Acquisition 39
Transactions.....................
Conduct of the Business of the 40
Combined Companies Following the
Merger...........................
Affiliate Agreements............... 40
Termination, Amendment or Waiver... 41
Termination Fee.................... 42
Expenses........................... 43
Indemnification and Insurance...... 43
STOCK OPTION AGREEMENT............... 44
Terms of the Option................ 44
Repurchase at the Option of Warner- 45
Lambert..........................
Registration Rights................ 45
Substitute Option.................. 46
Limitation of Profit............... 46
Effect of Stock Option Agreement... 46
WARNER-LAMBERT UNAUDITED PRO FORMA 47
CONDENSED COMBINED FINANCIAL
STATEMENTS.........................
DESCRIPTION OF WARNER-LAMBERT CAPITAL 52
STOCK..............................
Authorized Capital Stock........... 52
Common Stock....................... 52
</TABLE>
i
<PAGE>
<TABLE>
<S> <C>
Preferred Stock.................... 52
Transfer Agent and Registrar....... 53
Stock Exchange Listing............. 53
Rights Agreement................... 53
COMPARISON OF SHAREHOLDER RIGHTS..... 53
Election, Number, Classification 54
and Removal of Directors.........
Advance Notice of Shareholder 54
Proposals........................
Right to Call Special Meetings..... 54
Shareholder Action by Written 55
Consent..........................
Transactions with Interested 55
Shareholder; DGCL 203 and CGCL
Section 1203.....................
Amendment of Charter/Articles and 56
Bylaws...........................
Appraisal Rights................... 56
LEGAL MATTERS........................ 57
EXPERTS.............................. 57
WHERE YOU CAN FIND MORE 57
INFORMATION........................
Annex A - Merger Agreement
Annex B - Stock Option Agreement
Annex C - Opinion of PaineWebber
Annex D - Chapter 13 of the
California General
Corporation Law
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS ABOUT THE MERGER
Q: WHY IS AGOURON PROPOSING TO MERGE?
A: Our company is proposing to merge because we believe the resulting
combination will provide Agouron shareholders with substantial benefits, and
will increase Agouron's ability to pursue the development of innovative
therapies for the treatment of cancer, viral diseases and diseases of the
eye.
Q: WHAT WILL I RECEIVE IN THE MERGER?
A: If the merger is approved, each share of Agouron stock will be converted into
the right to receive from Warner-Lambert a fraction of a share of
Warner-Lambert stock equal to the exchange ratio. The exchange ratio is
calculated by dividing $60.00 by the average closing price of Warner-Lambert
stock on the New York Stock Exchange Composite Transaction Tape during the
ten-day trading period ending two trading days before the special meeting.
The exchange ratio will be rounded to the nearest 1/10,000 and in no event
will you receive less than 0.8108 nor more than 0.9300 of a share of
Warner-Lambert stock for each share of Agouron stock. If the average closing
price of Warner-Lambert stock is at least $64.52 and not more than $74.00
during such trading period, you will receive $60.00 worth of Warner-Lambert
stock for each share of Agouron stock. If the average closing price of
Warner-Lambert stock is less than $64.52 during such trading period, you
will receive 0.9300 of a share of Warner-Lambert stock, which may be worth
less than $60.00 a share, for each share of Agouron stock. Conversely, if
the average closing price of Warner-Lambert stock is greater than $74.00
during such trading period, you will receive 0.8108 of a share of
Warner-Lambert stock, which may be worth more than $60.00 a share, for each
share of Agouron stock.
You will not receive fractional shares. Instead, you will receive cash,
without interest, for any fractional share of Warner-Lambert stock you might
otherwise have been entitled to receive based on the market value on the
date the merger occurs.
For example, if you currently own 100 shares of Agouron stock, the following
table shows the applicable exchange ratio and what you will receive in the
merger based on the indicated average closing price of Warner-Lambert stock
during the above-described ten-day trading period:
<TABLE>
<CAPTION>
AVERAGE CLOSING
PRICE EXCHANGE RATIO YOU RECEIVE
- ------------------ --------------- ------------------
<S> <C> <C>
$69.00 0.8696 86 shares of
Warner-Lambert
stock and a check
for the market
value of the 0.96
fractional share
Less than $64.52 0.9300 93 shares of
Warner-Lambert
stock
Greater than 0.8108 81 shares of
$74.00 Warner-Lambert
stock and a check
for the market
value of the 0.08
fractional share
</TABLE>
Shareholders who wish to find out the exact number of Warner-Lambert shares
to be issued on a per share basis may call 1-800-501-2474 after May 12, 1999.
Q: WHAT DO I NEED TO DO NOW?
A: Just indicate on your proxy card how you want to vote, and sign and mail it
in the enclosed return envelope as soon as possible, so that your shares may
be represented at the special meeting. If you sign and send in your proxy
and do not indicate how you want to vote, your proxy will be counted as a
vote in favor of the merger. Alternatively, you may vote via a toll-free
telephone call in the U.S. and Canada. If you do not vote or
iii
<PAGE>
you abstain, it will have the effect of a vote against the merger.
The special meeting will take place on Monday, May 17, 1999. You may attend
the special meeting and vote your shares in person, rather than signing and
mailing your proxy card.
THE AGOURON BOARD UNANIMOUSLY RECOMMENDS VOTING IN FAVOR OF THE PROPOSED
MERGER.
Q: IF MY SHARES ARE HELD IN THE NAME OF MY BROKER, WILL MY BROKER VOTE MY SHARES
FOR ME?
A: Your broker will vote your shares only if you provide instructions on how to
vote. You should instruct your broker to vote your shares following the
directions provided by you. Without instructions, your shares will not be
voted.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES NOW?
A: No. After the merger is completed, Agouron will send you written instructions
for exchanging your share certificates.
Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD OR CONSENT
FORM?
A: You can change your vote at any time before your proxy is voted at the
special meeting. You can do this in one of the following three ways:
- First, you can send a written notice stating that you would like to revoke
your proxy.
- Second, you can complete and submit a new proxy card. If you choose either
of these two methods, you must submit your notice of revocation or your
new proxy card to Agouron at the address on page 58.
- Third, you can attend the special meeting and vote in person. Simply
attending the special meeting, however, will not revoke your proxy; you
must vote at the special meeting. If you have instructed a broker to vote
your shares, you must follow directions received from your broker to
change your vote.
Q: WHEN DO YOU EXPECT THE MERGER TO BE COMPLETED?
A: Warner-Lambert and Agouron are working toward completing the merger as
quickly as possible. Agouron must obtain shareholder approval and hopes to
complete the merger as soon as possible after the special meeting.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE MERGER TO ME?
A: The exchange of your shares for Warner-Lambert stock will be tax-free to you
for federal income tax purposes. However, you will have to pay taxes on cash
received for fractional shares. To review the tax consequences to
shareholders in greater detail, see "The Merger--Material Federal Income Tax
Consequences" on page 27.
Q: WHAT WILL MY TAX BASIS BE IN THE WARNER-LAMBERT STOCK RECEIVED IN THE MERGER?
A: Your tax basis in your total shares of Warner-Lambert stock will equal your
current tax basis in your Agouron stock, reduced by the amount of basis
allocable to fractional shares for which you receive a cash payment.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Agouron currently does not pay dividends on its stock. Although dividends on
Warner-Lambert's stock are subject to approval and declaration by
Warner-Lambert's board, Warner-Lambert has paid dividends every quarter
since 1926. See "Market Price and Dividend Data" on page 10.
iv
<PAGE>
WHO CAN HELP ANSWER YOUR QUESTIONS
If you would like additional copies of this Proxy Statement/Prospectus,
or if you have questions about the merger, you should contact:
Agouron Investor Relations
10350 North Torrey Pines Road
La Jolla, CA 92037-1020
Phone Number: (619) 622-3000
v
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO UNDERSTAND THE
MERGER FULLY AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE
MERGER, YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS TO
WHICH WE HAVE REFERRED YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE
57. THE MERGER AGREEMENT IS ATTACHED AS ANNEX A TO THIS DOCUMENT. WE ENCOURAGE
YOU TO READ THE MERGER AGREEMENT, AS IT IS THE LEGAL DOCUMENT THAT GOVERNS THE
MERGER.
THE COMPANIES (PAGE 16)
WARNER-LAMBERT COMPANY
201 Tabor Road
Morris Plains, NJ 07950-2693
(973) 540-2000
Warner-Lambert develops, manufactures and markets a widely diversified line
of health care and consumer products. Its principal industry segments are
pharmaceutical products, consisting principally of pharmaceuticals, biologicals
and empty hard-gelatin capsules; consumer health care products, consisting
principally of over-the-counter health care, shaving and pet care products; and
confectionery products, consisting principally of chewing gums and breath mints.
Warner-Lambert markets its pharmaceutical products throughout most of the world
under the Parke-Davis name.
AGOURON PHARMACEUTICALS, INC.
10350 North Torrey Pines Road
La Jolla, CA 92037-1020
(619) 622-3000
Agouron is a pharmaceutical company committed to the discovery, development,
manufacturing and marketing of innovative therapeutic products engineered to
inactivate proteins which play key roles in cancer, AIDS and other serious
diseases. Agouron, through its own sales and marketing organization, is
currently marketing in the United States and Canada its first drug,
VIRACEPT-Registered Trademark- for treatment of HIV infection. Agouron is also
conducting pivotal phase III clinical trials for AG3340 for treatment of lung
and prostate cancer. Phase III clinical trials are large-scale studies intended
to demonstrate the effectiveness and safety of the drug and provide an adequate
basis for marketing approval. In addition, Agouron is in the process of
initiating a pivotal phase III clinical trial of Remune-TM-, an immune-based
therapeutic agent for treatment of HIV infection and AIDS being co-developed by
Agouron and The Immune Response Corporation. Further, Agouron has a number of
programs in progress for discovery or development of other new drugs in the
fields of cancer, viral diseases and diseases of the eye.
WLC ACQUISITION CORPORATION
201 Tabor Road
Morris Plains, NJ 07950-2693
(973) 540-2000
WLC Acquisition Corporation, a wholly owned subsidiary of Warner-Lambert, is
a California corporation formed for use in the merger. This is the only business
of WLC Acquisition Corporation.
REASONS FOR THE MERGER (PAGES 19 THROUGH 20)
The Agouron board believes that the merger is in the best interests of
Agouron and its shareholders. In reaching its decision to approve the merger,
the Agouron board considered a number of factors, including the following:
- the increased ability of Agouron to pursue the development of innovative
therapies for the treatment of cancer, viral diseases, and diseases of the
eye;
- the opportunity for Agouron to participate in the discovery of drugs in
therapeutic categories beyond those in which Agouron has established
expertise;
- the increased ability for Agouron to undertake clinical trials of varying
scales and in varying locations that best support
1
<PAGE>
the product development goals of Agouron;
- direct access to the global clinical, manufacturing and marketing
infrastructure of Warner-Lambert which will support the development and
commercial goals of Agouron;
- access to greater financial and technical resources;
- the opportunity for Agouron's shareholders to become shareholders of
Warner-Lambert, which the Agouron board views as a larger, stronger,
better capitalized and more commercially diversified company than Agouron,
and to receive Warner-Lambert stock which has historically paid a
dividend;
- the financial condition, competitive position and prospects of Agouron and
Warner-Lambert both on an historical and future basis and as separate and
combined entities;
- the experience, depth, and competence of Warner-Lambert's operating team;
- the structure of the merger, which is designed to be tax free and
accounted for as a pooling of interests. For a more comprehensive
description of the accounting treatment and the federal income tax
consequences of the merger, see pages 27 through 29; and
- the written opinion of PaineWebber Incorporated that the merger
consideration was fair to the shareholders of Agouron from a financial
point of view.
RECOMMENDATION OF THE AGOURON BOARD (PAGES 19 THROUGH 20)
The Agouron board has unanimously approved the merger agreement and the
transactions contemplated thereby, including the merger, and unanimously
recommends that you vote in favor of the approval and adoption of the merger
agreement.
PURPOSES OF THE SPECIAL MEETING (PAGE 14)
The purposes of the special meeting are to consider and vote upon:
- a proposal to approve and adopt the merger agreement; and
- such other business as may properly be brought before the special meeting.
DATE, TIME AND PLACE OF THE SPECIAL MEETING (PAGE 14)
The special meeting will be held on Monday, May 17, 1999, at the offices of
Shearman & Sterling, 599 Lexington Avenue, New York, New York, commencing at
9:00 a.m., local time.
SHAREHOLDERS ENTITLED TO VOTE AT THE SPECIAL MEETING; VOTE REQUIRED (PAGE 14)
The close of business on March 29, 1999 is the record date for the special
meeting. Only Agouron shareholders on the record date are entitled to notice of
and to vote at the special meeting. On the record date, there were 32,070,024
shares of Agouron stock outstanding. Each share of Agouron stock will be
entitled to one vote on each matter to be acted upon at the special meeting.
A majority vote of the shares of Agouron stock outstanding on the record
date is required to adopt the merger agreement.
Subject to certain conditions, you may demand dissenters' rights under
California law as discussed under "The Merger--Dissenters' Rights." In order to
make such a demand, you must vote against the merger agreement at the special
meeting.
INTERESTS OF CERTAIN PERSONS/STOCK OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
OF AGOURON (PAGES 32 THROUGH 33)
In determining how to vote at the special meeting, you should be aware that
certain officers and directors of Agouron may have interests in the merger that
are different from the interests of other shareholders. These include the
following:
Fourteen officers and senior executives of Agouron entered into employment
agreements,
2
<PAGE>
which become effective on the closing date, for a term of three years. Pursuant
to the employment agreements, each executive is provided with certain
protections, compensation and benefits in the event that the executive resigns
for one of the following reasons:
- reassignment that results in a significant adverse reduction in status or
duties;
- failure of Agouron to pay salary and benefits as provided under the
employment agreement;
- relocation of Agouron's principal place of business that results in an
increase in the executive's commute by over 50 miles; and
- any other material breach of the employment agreement.
As of March 29, 1999, all executive officers and directors of Agouron, as a
group, owned 2.3% of the shares of Agouron stock entitled to vote at the special
meeting.
OPINION OF FINANCIAL ADVISOR (PAGES 20 THROUGH 27)
In deciding to approve the merger, the Agouron board considered the opinion
of its financial advisor, PaineWebber, that the merger consideration was fair to
Agouron shareholders from a financial point of view.
The full text of the written opinion of PaineWebber, which sets forth
assumptions made, matters considered, procedures followed and the scope of the
review undertaken, is attached hereto as Annex C. The written opinion of
PaineWebber is not a recommendation as to how you should vote in regard to the
approval and adoption of the merger agreement. WE ENCOURAGE YOU TO READ THE
OPINION OF PAINEWEBBER IN ITS ENTIRETY.
THE MERGER
THE MERGER (PAGE 17)
In the merger, a subsidiary of Warner-Lambert will be merged with and into
Agouron. Agouron will be the surviving corporation and will become a wholly
owned subsidiary of Warner-Lambert. As a result of the merger, each holder of
Agouron stock will be entitled to receive from Warner-Lambert, in exchange for
each share of Agouron stock, a fraction of a share of Warner-Lambert stock equal
to the exchange ratio.
CONDITIONS TO THE MERGER (PAGES 35 THROUGH 37)
Warner-Lambert's and Agouron's obligations to complete the merger are
subject to the satisfaction or waiver of several conditions, including the
following:
- Agouron shareholders must approve and adopt the merger agreement;
- no court order or law can be in effect that prohibits the merger or makes
the merger illegal;
- the shares of Warner-Lambert to be issued in the merger must be authorized
for listing on the New York Stock Exchange;
- PricewaterhouseCoopers LLP, independent accountants for Agouron and
Warner-Lambert, must deliver opinions that both companies are eligible to
account for the merger as a pooling of interests;
- each of Warner-Lambert and Agouron must certify to the other that its
representations and warranties contained in the merger agreement are true
and correct. Each must also certify to the other that it has performed all
of its material obligations under the merger agreement except for breaches
of representations and warranties that would not have a material adverse
effect on the breaching party;
- each of Warner-Lambert and Agouron must receive an opinion from their
respective tax counsel that the merger will qualify as a tax-free
reorganization;
- no change or event that would have a material adverse effect on Warner-
Lambert's business, financial condition or ability to consummate the
merger has occurred, except for any action which may arise out of the FDA
Advisory Committee meeting related to REZULIN-Registered Trademark- held
on March 26, 1999;
3
<PAGE>
- no change or event that would have a material adverse effect on Agouron's
business, financial condition or ability to consummate the merger or on
the development of its investigational compounds or the marketing of
VIRACEPT-Registered Trademark- has occurred;
- Agouron's shareholders' rights plan must not be triggered; and
- holders of less than 5% of the outstanding shares of Agouron stock shall
have demanded dissenters' rights.
If Warner-Lambert or Agouron waives the condition of receipt of an opinion
from tax counsel and there is a change in the tax consequences of the
transaction, Agouron will amend this Proxy Statement/Prospectus and recirculate
it to all shareholders.
CONSEQUENCES OF A "NO" VOTE ON THE MERGER
If Agouron shareholders vote against the merger and an announced alternative
transaction exists, then Agouron will be required to pay Warner-Lambert a
termination fee equal to $60 million, plus up to $10 million for expenses.
Additionally, the stock option to purchase 19.9% of Agouron stock granted to
Warner-Lambert would be exercisable. See "The Merger Agreement--Termination Fee"
and "The Stock Option Agreement--Terms of the Option."
If Agouron shareholders vote against the merger in the absence of an
announced alternative transaction, no termination fee or expenses would be
payable to Warner-Lambert and the stock option would not be exercisable.
TERMINATION OF THE MERGER AGREEMENT; TERMINATION FEE AND EXPENSES (PAGES 41
THROUGH 43)
Warner-Lambert and Agouron can agree to terminate the merger agreement
without completing the merger, and either company can terminate the merger
agreement if any of the following occurs:
- the merger is not completed by October 31, 1999;
- a court order permanently prohibits the merger;
- Agouron's shareholders fail to approve the merger; or
- the other party breaches any representation or warranty or any covenant in
the merger agreement and such breach would reasonably be expected to have
a material adverse effect on the other party, and such breach is not cured
within 30 days after receiving written notice of such breach.
Agouron may terminate the merger agreement if, as a result of an acquisition
proposal from a potential acquiror:
- the Agouron board determines in good faith based upon written advice of
outside counsel that it is obligated by the fiduciary duties of the
Agouron board under California law to terminate the merger agreement; and
- Agouron pays the termination fee described below.
Warner-Lambert may terminate the merger agreement if either of the following
occurs:
- the Agouron board fails to recommend or withdraws its approval or
recommendation of the merger, takes a position adverse to Warner-Lambert
or its subsidiary participating in the merger, or approves or recommends
an acquisition proposal from a third party; or
- a third party becomes the beneficial owner of at least 20% of the
outstanding shares of Agouron stock or acquires 20% or more of the assets
of Agouron.
If the merger agreement is terminated under certain circumstances, including
the failure of Agouron shareholders to approve the merger in the face of an
announced alternative transaction, Agouron will be required to pay
Warner-Lambert a termination fee equal to $60 million, plus up to $10 million
for expenses. See "The Merger Agreement--Termination Fee" and "The Merger
Agreement--Expenses" for a complete discussion of the circumstances in which
Agouron would be required to pay the termination fee and expenses.
Otherwise, all costs and expenses will be paid by the party incurring them,
other than the
4
<PAGE>
expenses for this Proxy Statement/Prospectus which will be shared equally by
Warner-Lambert and Agouron.
THE STOCK OPTION AGREEMENT (PAGE 44)
As an inducement and condition to entering into the merger agreement,
Warner-Lambert and Agouron have entered into a stock option agreement granting
Warner-Lambert an option to purchase 19.9% of Agouron's stock. The stock option
is only exercisable if certain events occur resulting in the termination of the
merger agreement in which Warner-Lambert would be entitled to the termination
fee from Agouron. Such events include the failure of Agouron shareholders to
approve the merger in the face of an announced alternative transaction.
Once the stock option is exercisable, Warner-Lambert has the right under
certain circumstances to require Agouron to repurchase all or any portion of the
stock option and any securities purchased under the stock option.
Warner-Lambert's total profit allowed under the stock option agreement is $60
million, including any termination fee paid under the merger agreement. Agouron
believes that the exercisability of the stock option could prohibit any other
acquiror of Agouron during the next two years from accounting for any such
acquisition as a pooling of interests. In addition, Warner-Lambert would have a
significant stake in Agouron if it exercised the stock option and held the
stock. See "Stock Option Agreement-- Effect of Stock Option Agreement" on page
44 for a discussion of the effect of the stock option agreement.
REGULATORY APPROVALS (PAGE 29)
The Hart-Scott-Rodino Antitrust Improvements Act prohibits Warner-Lambert
and Agouron from completing the merger until Warner-Lambert and Agouron have
furnished certain information and materials to the Antitrust Division of the
Department of Justice and the Federal Trade Commission and the required waiting
period has ended. Effective February 12, 1999, Warner-Lambert and Agouron each
filed the required notification and report forms. The required waiting period
expired on March 14, 1999. Accordingly, the consummation of the merger will not
be delayed by such requirements.
DISSENTERS' RIGHTS (PAGE 30)
Under California law, Agouron shareholders who demand dissenters' rights may
be entitled to payment by Agouron of the value of their dissenting shares of
Agouron stock instead of the merger consideration of exchanged Warner-Lambert
stock. If holders of less than 5% of the outstanding shares of Agouron stock
demand dissenters' rights, California law does not recognize any dissenters'
rights and Agouron will not have to make any such payments. Additionally, as a
condition to Warner-Lambert's obligation to consummate the merger, holders of
less than 5% of the outstanding shares of Agouron stock must have demanded
dissenters' rights. Warner-Lambert may waive this condition.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES (PAGES 27 THROUGH 28)
It is a condition to the merger that Warner-Lambert and Agouron each have
received an opinion of tax counsel to the effect that the exchange of shares in
the merger will constitute a tax-free reorganization.
ACCOUNTING TREATMENT (PAGE 29)
Warner-Lambert and Agouron expect the merger to qualify as a pooling of
interests for accounting and financial reporting purposes, which means that
Warner-Lambert and Agouron will be treated as if they had always been combined
for accounting and financial reporting purposes.
RISK FACTORS (PAGE 12)
There are risk factors that should be considered by you in evaluating how to
vote at the special meeting. Such risk factors include the following:
- You may receive less than $60 worth of Warner-Lambert stock for each share
of Agouron stock; and
- Unfavorable FDA REZULIN-Registered Trademark- review may have a negative
impact on sales of REZULIN-Registered Trademark- and the profits and stock
price of Warner-Lambert.
5
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
We are providing the following financial information to aid you in your
analysis of the financial aspects of the merger. This information is only a
summary and you should read it in conjunction with the historical financial
statements of Warner-Lambert and Agouron and the related notes contained in
their annual, quarterly and other reports and other information that
Warner-Lambert and Agouron have filed with the SEC. See "Where You Can Find More
Information" on page 57.
Warner-Lambert has a fiscal year ending December 31, and Agouron has a
fiscal year ending June 30. Accordingly, the selected historical financial data
for the periods presented corresponds to each company's applicable fiscal year
end. Agouron data for the year ended June 30, 1997 includes the writeoff of
$57,500,000 of in-process technology associated with the acquisition of Alanex
Corporation, partially offset by the realization of $43,800,000 of deferred tax
assets associated with Agouron's expectation of future taxable income. Agouron
data for the year ended June 30, 1998 includes in-licensing expenses of
$26,000,000 ($15,600,000 after tax) for commercial rights to three development
stage anti-HIV products.
WARNER-LAMBERT SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
---------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1994 1995 1996 1997 1998
------------ ------------ ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Net sales................................. $ 6,416,840 $ 7,039,827 $ 7,231,398 $ 8,179,828 $ 10,213,736
Cost of goods sold........................ 2,155,109 2,427,542 2,346,919 2,407,597 2,629,323
Research and development expense.......... 456,027 501,208 554,840 672,221 877,198
Income before accounting changes.......... 693,950 739,474 786,473 869,547 1,254,015
Net income................................ 693,950 739,474 786,473 869,547 1,254,015
Earnings per share-basic:
Income before accounting changes........ 0.86 0.91 0.97 1.07 1.53
Net income.............................. 0.86 0.91 0.97 1.07 1.53
Earnings per share-diluted:
Income before accounting changes........ 0.86 0.90 0.95 1.04 1.48
Net income.............................. 0.86 0.90 0.95 1.04 1.48
Dividends per common share................ 0.41 0.43 0.46 0.51 0.64
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------------------------------------------------------
1994 1995 1996 1997 1998
------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Working capital............................ $ 161,941 $ 352,767 $ 647,932 $ 708,119 $ 872,342
Total assets............................... 5,532,804 6,100,861 7,197,330 8,030,549 9,230,612
Long-term liabilities...................... 1,362,948 1,429,549 2,479,407 2,606,083 2,388,483
Shareholders'equity........................ 1,816,428 2,246,120 2,581,009 2,835,548 3,612,180
</TABLE>
6
<PAGE>
AGOURON SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED JUNE 30, DECEMBER 31,
--------------------------------------------------------- ----------------------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 1994 1995 1996 1997 1998 1997 1998
--------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
Total revenues.......................... $ 16,301 $ 26,722 $ 55,955 $ 132,063 $ 466,505 $ 196,519 $ 315,646
Product sales........................... -- -- -- 56,969 409,298 171,302 292,063
Cost of product sales................... -- -- -- 24,599 172,644 72,015 131,286
Research and development expense........ 23,957 36,317 71,010 108,137 150,657 57,254 76,709
Net income (loss)....................... (9,462) (12,939) (19,523) (42,806) 13,154 8,552 14,510
Earnings (loss) per share:
Basic................................. (0.66) (0.89) (0.99) (1.59) 0.43 0.28 0.46
Diluted............................... (0.66) (0.89) (0.99) (1.59) 0.40 0.26 0.43
Dividends per common share.............. -- -- -- -- -- -- --
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
-------------------------------------------------------- DECEMBER 31,
1994 1995 1996 1997 1998 1998
--------- --------- ---------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Working capital.................................. $ 21,039 $ 8,837 $ 70,381 $ 115,786 $ 127,728 $ 154,080
Total assets..................................... 37,178 27,097 102,577 266,914 363,337 371,296
Long-term liabilities............................ 2,285 1,884 1,734 7,217 6,915 7,239
Shareholders' equity............................. 24,852 12,591 75,583 191,282 236,169 268,278
</TABLE>
7
<PAGE>
WARNER-LAMBERT PRO FORMA COMBINED SELECTED FINANCIAL DATA
We expect that the merger will be accounted for as a "pooling of interests,"
which means that for accounting and financial reporting purposes, we will treat
the companies as if they had always been combined. For a more detailed
description of pooling of interests accounting see "The Merger-- Accounting
Treatment" on page 29.
We have presented below the unaudited pro forma combined condensed financial
information that reflects the pooling of interests method of accounting and is
intended to give you a better picture of what the businesses might have looked
like had Agouron always been combined with Warner-Lambert, i.e., giving effect
to the merger between Warner-Lambert and Agouron as if it had occurred on
January 1, 1996. The companies may have performed differently if they had been
combined. You should not rely on the pro forma information as being indicative
of the historical results that would have occurred or the future results that
will result after the merger. Pro forma combined dividends per common share are
equal to Warner-Lambert's historical dividends per common share since Agouron
has never declared or paid cash dividends on its stock. See "Warner-Lambert
Unaudited Pro Forma Condensed Combined Financial Statements" on page 47.
Warner-Lambert has a fiscal year ending December 31, and Agouron has a
fiscal year ending June 30. Accordingly, the selected pro forma combined
financial data for the periods presented include Agouron's financial data
conformed to Warner-Lambert's fiscal year end.
WARNER-LAMBERT PRO FORMA COMBINED
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------
1996 1997 1998
------------ ------------ -------------
<S> <C> <C> <C>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
Net sales............................................................. $ 7,299,421 $ 8,475,787 $ 10,799,368
Cost of goods sold.................................................... 2,346,919 2,504,211 2,861,238
Research and development expense...................................... 652,070 784,676 1,047,310
Net income............................................................ 746,602 862,296 1,273,127
Earnings per share:
Basic............................................................... 0.89 1.03 1.50
Diluted............................................................. 0.88 0.99 1.45
Dividends per common share............................................ 0.46 0.51 0.64
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------
1996 1997 1998
------------ ------------ ------------
<S> <C> <C> <C>
Working capital......................................................... $ 767,472 $ 840,621 $ 986,422
Total assets............................................................ 7,344,554 8,362,051 9,601,908
Long-term liabilities................................................... 2,481,031 2,612,059 2,395,722
Shareholders' equity.................................................... 2,668,330 3,011,044 3,840,458
</TABLE>
8
<PAGE>
COMPARATIVE PER SHARE DATA
We are providing the following comparative per share information to aid you
in your analysis of the financial aspects of the merger. You should read this
information in conjunction with the historical financial statements and pro
forma condensed combined financial statements of Warner-Lambert and Agouron and
the related notes contained in reports that Warner-Lambert and Agouron have
previously filed with the SEC and those that are included elsewhere in this
Proxy Statement/Prospectus. The Warner-Lambert pro forma combined per share data
presented below reflects the pooling of interests method of accounting of the
per share results of the businesses of Warner-Lambert and Agouron as if they had
always been combined. The results may have been different if the companies had
been combined. Warner-Lambert has a fiscal year ending December 31, and Agouron
has a fiscal year ending June 30. Accordingly, the unaudited pro forma condensed
combined financial statements for the periods presented include Agouron's
financial data conformed to Warner-Lambert's fiscal year end. The Agouron pro
forma equivalent per share data equals an assumed exchange ratio of 0.88049
multiplied by the Warner-Lambert pro forma combined per share data (the exchange
ratio was determined by dividing $60.00 by Warner-Lambert's average closing
stock price of $68.14 for the ten-day trading period ended April 12, 1999). The
actual exchange ratio will be determined two trading days preceding the special
meeting. The pro forma per share data are not necessarily indicative of the
results that would have occurred, your financial interests in such results, or
the future results that will occur after the merger. See "Warner-Lambert Pro
Forma Combined Selected Financial Data."
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-------------------------------
<S> <C> <C> <C>
1996 1997 1998
--------- --------- ---------
Basic earnings (loss) per common share:
Warner-Lambert historical....................................................... $ 0.97 $ 1.07 $ 1.53
Agouron historical.............................................................. (1.69) (0.25) 0.62
Warner-Lambert pro forma combined............................................... 0.89 1.03 1.50
Agouron pro forma equivalent.................................................... 0.79 0.90 1.32
Diluted earnings (loss) per common share:
Warner-Lambert historical....................................................... 0.95 1.04 1.48
Agouron historical.............................................................. (1.69) (0.25) 0.57
Warner-Lambert pro forma combined............................................... 0.88(1) 0.99(1) 1.45
Agouron pro forma equivalent.................................................... 0.77 0.88 1.28
Cash dividends per common share:
Warner-Lambert historical....................................................... 0.46 0.51 0.64
Agouron historical.............................................................. -- -- --
Warner-Lambert pro forma combined............................................... 0.46 0.51 0.64
Agouron pro forma equivalent.................................................... 0.41 0.45 0.56
</TABLE>
<TABLE>
<CAPTION>
DECEMBER 31, DECEMBER 31,
1997 1998
--------------- ---------------
<S> <C> <C>
Book value per common share:
Warner-Lambert historical.......................................................... $ 3.47 $ 4.40
Agouron historical................................................................. 7.03 8.45
Warner-Lambert pro forma combined(2)............................................... 3.57 4.52
Agouron pro forma equivalent....................................................... 3.14 3.98
</TABLE>
- ------------------------------
(1) For the years ended December 31, 1996 and 1997, stock equivalents
(pre-exchange ratio) of approximately 2,262,000 and 3,327,000 shares were
not used to calculate Agouron's diluted loss per share because of their
anti-dilutive effect. These stock equivalents, adjusted for the exchange
ratio, were used to calculate pro forma combined diluted earnings per share
for the periods presented.
(2) It is estimated that merger-related costs of approximately $40,000,000 will
be incurred, consisting primarily of transaction costs for investment banker
fees, attorneys, accountants, financial printing, and other related charges.
The pro forma combined balance sheet as of December 31, 1997 and 1998, gives
effect to transaction costs of the merger as if they had been incurred as of
these dates, but the pro forma combined statements of income (loss) and per
share data do not give effect to such expenses as they are non-recurring in
nature.
9
<PAGE>
MARKET PRICE AND DIVIDEND DATA
COMPARATIVE MARKET PRICE AND DIVIDEND INFORMATION
AGOURON. The Agouron stock is listed for trading on the Nasdaq National
Market under the symbol "AGPH." The following tables set forth, for the calendar
quarters indicated, the high and low market prices of shares of Agouron stock as
reported on the Nasdaq National Market. Agouron has never declared or paid cash
dividends on its stock.
<TABLE>
<CAPTION>
AGOURON STOCK
--------------------
HIGH LOW
--------- ---------
<S> <C> <C>
1996
Quarter ended March 31, 1996................................................................ $ 23.813 $ 16.375
Quarter ended June 30, 1996................................................................. 23.500 16.000
Quarter ended September 30, 1996............................................................ 23.125 14.500
Quarter ended December 31, 1996............................................................. 35.750 21.125
1997
Quarter ended March 31, 1997................................................................ $ 50.500 $ 33.500
Quarter ended June 30, 1997................................................................. 45.500 29.187
Quarter ended September 30, 1997............................................................ 56.500 39.250
Quarter ended December 31, 1997............................................................. 56.500 26.750
1998
Quarter ended March 31, 1998................................................................ $ 40.000 $ 29.250
Quarter ended June 30, 1998................................................................. 40.250 28.750
Quarter ended September 30, 1998............................................................ 36.125 19.250
Quarter ended December 31, 1998............................................................. 59.750 30.125
</TABLE>
WARNER-LAMBERT. The Warner-Lambert stock is listed for trading on the New
York Stock Exchange under the symbol "WLA." The following tables set forth, for
the calendar quarters indicated, the high and low market prices of shares of
Warner-Lambert stock as reported on the New York Stock Exchange Composite
Transaction Tape and the dividends paid on such shares.
<TABLE>
<CAPTION>
WARNER-LAMBERT STOCK
---------------------------------
<S> <C> <C> <C>
HIGH LOW DIVIDENDS
--------- --------- -----------
1996
Quarter ended March 31, 1996..................................................... $ 18.000 $ 14.875 $ 0.115
Quarter ended June 30, 1996...................................................... 19.250 17.375 0.115
Quarter ended September 30, 1996................................................. 22.042 16.458 0.115
Quarter ended December 31, 1996.................................................. 26.667 20.625 0.115
1997
Quarter ended March 31, 1997..................................................... $ 31.078 $ 23.172 $ 0.127
Quarter ended June 30, 1997...................................................... 41.828 27.875 0.127
Quarter ended September 30, 1997................................................. 49.078 41.438 0.127
Quarter ended December 31, 1997.................................................. 50.875 36.172 0.127
1998
Quarter ended March 31, 1998..................................................... $ 56.875 $ 39.375 $ 0.160
Quarter ended June 30, 1998...................................................... 71.563 55.000 0.160
Quarter ended September 30, 1998................................................. 85.938 64.750 0.160
Quarter ended December 31, 1998.................................................. 82.000 60.125 0.160
</TABLE>
10
<PAGE>
EQUIVALENT PER SHARE DATA. The information presented in the table below
represents closing market prices reported on the New York Stock Exchange
Composite Transaction Tape for shares of Warner-Lambert stock and closing market
prices on the Nasdaq National Market for Agouron stock, on January 25, 1999, the
last full trading day immediately preceding the public announcement of the
proposed merger, and on April 12, 1999, the last practicable day for which
closing prices were available at the time of the mailing of this Proxy
Statement/Prospectus, as well as the "equivalent stock price" of shares of
Agouron stock on such dates. Agouron shareholders should obtain current market
quotations for the shares of Warner-Lambert stock and Agouron stock prior to
making any decision with respect to the merger. The "equivalent stock price" of
shares of Agouron stock represents the per share closing price for
Warner-Lambert stock reported on the New York Stock Exchange Composite
Transaction Tape for Warner-Lambert stock at such specified date, multiplied by
an exchange ratio of 0.88049 (the exchange ratio was determined by dividing
$60.00 by Warner-Lambert's average closing stock price of $68.14 for the ten-day
trading period ended April 12, 1999).
<TABLE>
<CAPTION>
WARNER-LAMBERT AGOURON AGOURON EQUIVALENT
STOCK STOCK STOCK PRICE
(DOLLARS PER SHARE) (DOLLARS PER SHARE) (DOLLARS PER SHARE)
-------------------- -------------------- --------------------
HIGH LOW HIGH LOW HIGH LOW
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
January 25, 1999 $ 68.500 $ 66.375 $ 53.625 $ 52.750 $ 60.314 $ 58.443
April 12, 1999 $ 72.625 $ 70.750 $ 59.500 $ 58.000 $ 63.946 $ 62.295
</TABLE>
Following the consummation of the merger, shares of Agouron stock will cease
to be traded on the Nasdaq National Market.
11
<PAGE>
RISK FACTORS
You should consider the following risk factors in determining how to vote at
the special meeting.
RISKS RELATING TO THE MERGER
AGOURON SHAREHOLDERS MAY RECEIVE LESS THAN $60 WORTH OF WARNER-LAMBERT STOCK
FOR EACH SHARE OF AGOURON STOCK. Upon consummation of the merger, each share of
Agouron stock will be converted into the right to receive a fraction of a share
of Warner-Lambert stock equal to the exchange ratio. If the average closing
price of Warner-Lambert stock is less than $64.52 during the ten-day trading
period ending two days prior to the meeting, you will receive 0.9300 of a share
of Warner-Lambert stock, which may be worth less than $60.00 a share, for each
share of Agouron stock. Agouron cannot terminate the merger agreement in the
event such initial value is below $60.00. The actual number of shares of
Warner-Lambert stock to be issued to holders of Agouron stock will not be
determined until two trading days prior to the special meeting. The market value
of Warner-Lambert stock and/or Agouron stock on the closing date of the merger
may vary significantly from the price as of the date of execution of the merger
agreement, the date hereof or the date on which shareholders vote on the merger,
due to, among other factors, market perception of the synergies expected to be
achieved by the merger, changes in the business, operations or prospects of
Warner-Lambert or Agouron, market assessments of the likelihood that the merger
will be consummated and the timing thereof, and general market and economic
conditions. Because the exchange ratio will not be adjusted after the second
trading day preceding the special meeting, the relative value of the
Warner-Lambert stock issued in the merger may be lower than the relative market
value of such shares at the time the merger is approved by Agouron shareholders.
UNFAVORABLE FDA REVIEW MAY HAVE A NEGATIVE IMPACT ON THE STOCK PRICE OF
WARNER-LAMBERT. The FDA may take action with repect to Warner-Lambert's drug
REZULIN-Registered Trademark- which could have a negative impact on sales of
REZULIN-Registered Trademark- and the profits and stock price of Warner-Lambert.
Since 1997, Warner-Lambert has been marketing REZULIN-Registered Trademark-, an
oral therapy for type 2 diabetes. Worldwide sales for
REZULIN-Registered Trademark- in 1997 were $420 million and in 1998 were $748
million. Warner-Lambert and the FDA have been discussing reports of a small
number of patients suffering liver damage, including liver-related deaths,
associated with REZULIN-Registered Trademark-. Warner-Lambert has modified the
labeling of the product to provide for the monitoring of liver enzymes in an
effort to reduce the occurrence of these rare events. The FDA held a public
meeting of its advisory committee on March 26, 1999, to discuss the
REZULIN-Registered Trademark- post-marketing safety data as well as
Warner-Lambert's supplemental new drug application for using
REZULIN-Registered Trademark- in combination with other drugs used in the
treatment of diabetes. At the meeting, the committee members voted 11-1 that the
benefits of REZULIN-Registered Trademark- outweigh its risks when used in
combination with insulin. The members also voted 12-0 that the benefits of
REZULIN-Registered Trademark- outweigh its risks when used in combination with
sulfonylureas. In addition, at least half of the members voted that with current
labeling the benefits of REZULIN-Registered Trademark- as monotherapy do not
outweigh its risks. Warner-Lambert believes that sales of
REZULIN-Registered Trademark- for monotherapy approximate 15% of total
REZULIN-Registered Trademark- sales. The committee did not vote on whether any
restrictions or limitations should be imposed on future
REZULIN-Registered Trademark- sales, but some members commented that changes to
the current labeling could be made that would serve to improve the benefit to
risk ratio and some members expressed their view that
REZULIN-Registered Trademark- sales should be limited to patients whose diabetes
cannot be controlled by other drugs. The FDA is not bound by the findings of the
committee. While Warner-Lambert remains convinced of the favorable risk/benefit
profile of the drug, it cannot predict what action, if any, the FDA may take. If
further labeling changes, additional monitoring, warnings to patients or
limitations in the patient population should be ordered, it could have an
adverse effect on the sales of REZULIN-Registered Trademark- and the profits and
stock price of Warner-Lambert. In addition, competitive drugs will be reviewed
at upcoming FDA advisory committee meetings in April. If approved, such drugs
could have an adverse effect on the sales of REZULIN-Registered Trademark- and
the profits and stock price of Warner-
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Lambert. The FDA also has the power to order removal of
REZULIN-Registered Trademark- from the market and any such action would
adversely affect the sales and profits of Warner-Lambert and may adversely
affect the value of Warner-Lambert stock being issued in the merger.
CAUTIONARY STATEMENT CONCERNING FORWARD-LOOKING STATEMENTS
In this document, we make forward-looking statements that include
assumptions as to how Agouron and Warner-Lambert may perform in the future. You
will find many of these statements in the following sections:
- "Risk Factors" above;
- "The Companies" on page 16; and
- "The Merger--Reasons for the Merger; Recommendation of the Agouron Board"
beginning on page 17.
These statements may be identified by the use of forward-looking words or
phrases such as "believe," "expect," "anticipate," "should," "planned," "may,"
"estimated" and "potential." These forward-looking statements are based on
Agouron's and Warner-Lambert's current expectations. The Private Securities
Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking
statements. In order to comply with the terms of the safe harbor, Agouron and
Warner-Lambert note that a variety of factors could cause actual results and
experience to differ materially from the anticipated results or other
expectations expressed in such forward-looking statements. Such factors include,
but are not limited to:
- Changes in the favorable market reaction to Agouron's and Warner-Lambert's
significant pharmaceutical products, the cholesterol-lowering agent
LIPITOR-Registered Trademark-, the type 2 diabetes drug
REZULIN-Registered Trademark- and the HIV infection treatment drug
VIRACEPT-Registered Trademark-.
- Competitive factors, including managed care and other groups or
institutions seeking price discounts; technological advances attained by
competitors; and patents granted to or contested by competitors, which
would result in their ability to compete against the companies more
effectively.
- Difficulties or delays in pharmaceutical product development, including,
but not limited to, the inability to identify viable new chemical
compounds, to successfully complete toxicology testing and/or clinical
trials, to obtain regulatory approval for the compounds or to gain market
acceptance of approved products.
- Unexpected safety or efficacy concerns arising with respect to marketed
products, whether or not scientifically justified, leading to product
recalls, withdrawals or other actions which could result in declining
sales.
- The expiration of patents or governmental grants of exclusivity with
respect to the companies' products.
- Government laws and regulations affecting domestic and international
operations, which could include matters affecting drug approval and
pricing; or actions of regulatory agencies with respect to products and/or
manufacturing facilities which could result in fines, product
interruptions or withdrawals, plant closures or consent decrees.
- Changes in economic conditions such as inflation, interest rates and
foreign currency exchange rates in the global marketplace, including
Canada, Japan, Mexico and Western Europe, where Warner-Lambert has
significant businesses.
- Significant litigation adverse to Agouron and Warner-Lambert, including,
particularly, product liability litigation, antitrust litigation and
patent and trademark litigation.
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THE SPECIAL MEETING
GENERAL; DATE, TIME AND PLACE
This Proxy Statement/Prospectus is being furnished by the board of Agouron
to Agouron's shareholders in connection with the solicitation of proxies by the
Agouron board for use at the special meeting of Agouron shareholders to be held
on Monday, May 17, 1999, at the offices of Shearman & Sterling, 599 Lexington
Avenue, New York, New York, commencing at 9:00 a.m., local time, and at any
adjournment or postponement thereof.
This Proxy Statement/Prospectus and the accompanying form of proxy are first
being mailed to shareholders of Agouron on or about Monday, April 19, 1999.
PURPOSES OF THE SPECIAL MEETING
At the special meeting, holders of Agouron stock will be asked to consider
and vote upon the following:
- a proposal to approve and adopt the merger agreement, dated as of January
26, 1999, among Warner-Lambert, its subsidiary participating in the merger
and Agouron; and
- such other matters as may properly be brought before the special meeting
or any adjournment or postponement thereof.
RECOMMENDATION OF THE AGOURON BOARD
THE AGOURON BOARD HAS UNANIMOUSLY APPROVED THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY, INCLUDING THE MERGER, AND RECOMMENDS THAT
HOLDERS OF AGOURON STOCK VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
SHAREHOLDERS ENTITLED TO VOTE; VOTE REQUIRED
The Agouron board has fixed the close of business on March 29, 1999, as the
record date for the determination of the holders of Agouron stock entitled to
notice of and to vote at the special meeting. Accordingly, only holders of
record of Agouron stock on the record date will be entitled to notice of, and to
vote at, the special meeting. As of the record date, there were 32,070,024 total
shares outstanding and entitled to vote, which shares were held by approximately
28,500 holders of record. Each holder of record of shares of Agouron stock on
the record date is entitled to one vote per share, which may be cast either in
person or by properly executed proxy, at the special meeting. The presence, in
person or by properly executed proxy, of the holders of a majority of the
outstanding shares of Agouron stock entitled to vote at the special meeting is
necessary to constitute a quorum at the special meeting.
The approval and the adoption of the merger agreement will require the
affirmative vote of the holders of a majority of the shares of Agouron stock
outstanding on the record date.
Shares of Agouron stock represented in person or by proxy will be counted
for the purpose of determining whether a quorum is present at the special
meeting. Shares which abstain from voting, and shares held in the name of a
broker or other nominee who has not been given the authority to vote on a
particular matter, will be treated as shares that are present and entitled to
vote at the special meeting for purposes of determining whether a quorum exists.
Because the merger agreement must be approved by the holders of a majority of
the shares of Agouron stock outstanding on the record date, abstentions and
shares held in the name of a broker or other nominee who has not been given the
authority to vote will have the same effect as a vote against the merger
agreement.
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PROXIES
This Proxy Statement/Prospectus is being furnished to Agouron shareholders
in connection with the solicitation of proxies by, and on behalf of, the Agouron
board for use at the special meeting and is accompanied by a form of proxy.
All shares of Agouron stock which are entitled to vote and are represented
at the special meeting by properly executed proxies received prior to or at the
special meeting, and not revoked, will be voted at the special meeting in
accordance with the instructions indicated on such proxies. Except in cases
where a broker or other nominee has indicated on a proxy that it does not have
the power to vote, if no instructions are indicated, such proxies will be voted
for approval and adoption of the merger agreement.
If any other matters are properly presented at the special meeting for
consideration, including, among other things, consideration of a motion to
adjourn such special meeting to another time and/or place for such purposes as
soliciting additional proxies or allowing additional time for the satisfaction
of conditions to the merger, the persons named in the enclosed forms of proxy
and acting thereunder will have discretion to vote on such matters in accordance
with their judgment.
Any proxy given pursuant to this solicitation may be revoked by the person
giving it at any time before it is voted. Proxies may be revoked by:
- filing with the Secretary of Agouron, at or before the taking of the vote
at the special meeting, a written notice of revocation bearing a later
date than the proxy;
- duly executing a later-dated proxy relating to the same shares and
delivering it to Agouron before the taking of the vote at the special
meeting; or
- attending the special meeting and voting in person. Attendance at the
special meeting will not in and of itself constitute a revocation of the
proxy.
Any written notice of revocation or subsequent proxy should be sent to
Agouron Pharmaceuticals, Inc., 10350 North Torrey Pines Road, La Jolla,
California 92037-1020, Attention: Secretary, or hand delivered to the Secretary
of Agouron at or before the taking of the vote at the special meeting.
All expenses of Agouron's solicitation of proxies will be borne by Agouron,
and the cost of preparing and mailing this Proxy Statement/Prospectus to Agouron
shareholders will be paid one-half by Warner-Lambert and one-half by Agouron. In
addition to solicitation by use of the mails, proxies may be solicited from
Agouron shareholders by directors, officers and employees of Agouron in person
or by telephone, telegram or other means of communication. Such directors,
officers and employees will not be additionally compensated, but may be
reimbursed for reasonable out-of-pocket expenses in connection with such
solicitation. Agouron has retained D.F. King & Co., Inc., a proxy solicitation
firm, for assistance in connection with the solicitation of proxies for the
special meeting at a cost of approximately $7,500, plus reimbursement of
reasonable out-of-pocket expenses. Arrangements will also be made with brokerage
houses, custodians, nominees and fiduciaries for forwarding of proxy
solicitation materials to beneficial owners of shares held of record by such
brokerage houses, custodians, nominees and fiduciaries, and Agouron will
reimburse such brokerage houses, custodians, nominees and fiduciaries for their
reasonable expenses incurred in connection therewith.
AGOURON SHAREHOLDERS SHOULD NOT SEND ANY STOCK CERTIFICATES WITH THEIR PROXY
CARDS.
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DISSENTERS' RIGHTS
If the principal terms of the merger are approved by Agouron shareholders,
holders of Agouron stock who elect to dissent from the approval of the principal
terms of the merger may, under certain circumstances, be entitled to have their
shares purchased in accordance with Chapter 13 of the California General
Corporation Law, or the CGCL.
IN ORDER FOR AN AGOURON SHAREHOLDER TO EXERCISE DISSENTERS' RIGHTS, A NOTICE
OF SUCH SHAREHOLDER'S INTENTION TO EXERCISE HIS OR HER DISSENTERS' RIGHTS AS
PROVIDED IN THE CGCL MUST BE SENT BY SUCH SHAREHOLDER AND RECEIVED BY AGOURON ON
OR BEFORE THE DATE OF THE SPECIAL MEETING, AND ANY SUCH SHAREHOLDER MUST VOTE
AGAINST THE APPROVAL OF THE MERGER AND COMPLY WITH SUCH OTHER PROCEDURES AS
REQUIRED BY THE CGCL, AS MORE FULLY DESCRIBED IN "THE MERGER--DISSENTERS'
RIGHTS." FAILURE TO SEND SUCH NOTICE, TO VOTE AGAINST THE MERGER OR TO FOLLOW
SUCH OTHER PROCEDURES WILL RESULT IN WAIVER OF SUCH SHAREHOLDER DISSENTERS'
RIGHTS. See page 30 for a discussion of dissenters' rights and Annex D for a
description of the procedures that must be followed to perfect such rights.
THE COMPANIES
WARNER-LAMBERT
BUSINESS. Warner-Lambert develops, manufactures and markets a widely
diversified line of health care and consumer products. Its principal industry
segments are pharmaceutical products, consisting principally of pharmaceuticals,
biologicals and empty hard-gelatin capsules; consumer health care products,
consisting principally of over-the-counter health care, shaving and pet care
products; and confectionery products, consisting principally of chewing gums and
breath mints. Warner-Lambert markets its pharmaceutical products throughout most
of the world under the Parke-Davis name. Warner-Lambert's principal executive
offices are located at 201 Tabor Road, Morris Plains, New Jersey 07950-2693 and
its telephone number is (973) 540-2000.
Additional information concerning Warner-Lambert is included in
Warner-Lambert's reports filed under the Exchange Act that are incorporated by
reference in this Proxy Statement/Prospectus. See "Where You Can Find More
Information" on page 57.
AGOURON
BUSINESS. Agouron is a pharmaceutical company committed to the discovery,
development, manufacturing and marketing of innovative therapeutic products
engineered to inactivate proteins which play key roles in cancer, AIDS and other
serious diseases. Agouron, through its own sales and marketing organization, is
currently marketing in the United States and Canada its first drug,
VIRACEPT-Registered Trademark- for treatment of HIV infection. Agouron is also
conducting pivotal phase III clinical trials for AG3340 for treatment of lung
and prostate cancer. Phase III clinical trials are large-scale studies intended
to demonstrate the effectiveness and safety of the drug and provide an adequate
basis for marketing approval. In addition, Agouron is in the process of
initiating a pivotal phase III clinical trial of Remune-TM-, an immune-based
therapeutic agent for treatment of HIV infection and AIDS being co-developed by
Agouron and The Immune Response Corporation. Further, Agouron has a number of
programs in progress for discovery or development of other new drugs in the
fields of cancer, viral disease and other serious diseases. Agouron's principal
executive offices are located at 10350 North Torrey Pines Road, La Jolla, CA
92037-1020, and its telephone number is (619) 622-3000.
Additional information concerning Agouron is included in Agouron's reports
filed under the Exchange Act that are incorporated by reference in this Proxy
Statement/Prospectus. See "Where You Can Find More Information" on page 57.
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THE MERGER
GENERAL
The following summarizes the material terms of the merger agreement, a copy
of which is included in this Proxy Statement/Prospectus as Annex A and
incorporated herein by reference. We urge you to read the merger agreement in
its entirety for a more complete description of the terms and conditions upon
which the merger is to be effected.
If the merger agreement is approved and adopted by the holders of a majority
of the outstanding shares of Agouron stock entitled to vote at the special
meeting, a subsidiary of Warner-Lambert will be merged with and into Agouron,
which will be the surviving corporation, and Agouron will become a wholly-owned
subsidiary of Warner-Lambert.
BACKGROUND OF THE MERGER
During a one-year period prior to Agouron's initial discussions with
Warner-Lambert, officers, directors or representatives of Agouron participated
in exploratory discussions with at least five major pharmaceutical companies and
at least four significant biotechnology companies concerning strategic business
combinations with Agouron. The parties involved in these exploratory discussions
were deemed by Agouron to include those companies most likely, for strategic
reasons, to be interested in a business combination with Agouron. Some of these
discussions proved to be of short duration; others were extensive. Certain of
these discussions included informal, preliminary discussions of the economic
parameters of a possible merger transaction with Agouron.
In July 1998, Agouron retained PaineWebber Incorporated to assist Agouron in
evaluating possible strategic transactions for Agouron.
On December 11, 1998, Dr. Wendell Wierenga, Senior Vice President of the
Parke-Davis Research division of Warner-Lambert, telephoned Peter Johnson,
Agouron's President and Chief Executive Officer, to discuss the possibility of a
strategic transaction between Agouron and Warner-Lambert. On December 13, 1998,
Mr. Johnson and Lodewijk de Vink, Warner-Lambert's President and Chief Operating
Officer, discussed the possibility of a merger transaction by telephone. On
December 15, 1998 Agouron and Warner-Lambert executed a confidentiality
agreement concerning confidential and proprietary information of Agouron.
On December 17, 1998, several Agouron officers made presentations to
representatives of Warner-Lambert concerning the scientific, commercial and
financial activities of Agouron. Mr. Johnson and representatives of PaineWebber
and Westview Securities Inc., Agouron's financial advisors, also met with Dr.
Anthony Wild, President of Warner-Lambert's Pharmaceutical Sector and
representatives of Goldman Sachs, Warner-Lambert's financial advisor.
Warner-Lambert and its advisors stated that a condition of its further interest
in a merger with Agouron was that the transaction be structured as a
stock-for-stock merger and otherwise qualify as a pooling of interests for
purposes of financial accounting.
On December 18, 1998, Mr. de Vink telephoned Mr. Johnson to indicate that
the informational meeting of the previous day had sustained Warner-Lambert's
favorable impression of Agouron and justified more extensive informational
review. Mr. de Vink reiterated Warner-Lambert's requirement that any merger of
Agouron and Warner-Lambert qualify as a pooling of interests. Mr. de Vink and
Mr. Johnson also discussed a possible range of values for a stock-for-stock
merger transaction. On December 23, 1998, Agouron and Warner-Lambert executed a
confidentiality agreement concerning confidential and proprietary information of
Warner-Lambert.
For the next two weeks, an extensive exchange of documents and other
information occurred in support of a mutual informational review process. On
January 4, 1999, Warner-Lambert provided
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Agouron and its advisors with a draft merger agreement. On January 6, 1999,
representatives of Agouron and Warner-Lambert and their respective legal
advisors met in New York City to discuss the terms of the draft merger
agreement. Representatives of Agouron and Warner-Lambert met at the headquarters
of Warner-Lambert on January 6 and 7, 1999, primarily for further informational
review by Warner-Lambert on Agouron.
On January 14, 1999, Agouron's board held a special meeting to inform the
board members of the discussions between Agouron and Warner-Lambert and the
status of contacts from other companies with whom Agouron had exploratory
discussions concerning a strategic transaction. At this meeting, Agouron's
executive management discussed the strategic implications of the proposed
transaction, the status of the informational review by the two companies and
certain other matters. Outside counsel for Agouron then discussed certain terms
of the draft merger agreement, the fiduciary duties of the Agouron board in
connection with the proposed merger, and certain other legal matters.
Representatives of PaineWebber discussed certain financial aspects of the
proposed transaction.
On January 19, 1999, representatives of Agouron met with representatives of
Warner-Lambert and conducted an extensive informational review of Warner-Lambert
and discussed concepts relating to the possible combination of operations of the
two companies.
On January 22, 1999, at a special meeting of Agouron's board, Agouron's
executive management, financial advisors and outside counsel updated the Agouron
board on matters related to a possible merger with Warner-Lambert. Executive
management of Agouron first discussed a range of values that had been discussed
by representatives of the two companies for the proposed transaction, the
businesses of Warner-Lambert, the strategic implications of the proposed merger
in relation to the businesses of Agouron and certain other matters. Outside
counsel for Agouron then discussed the terms and conditions of the draft merger
agreement proposed by Warner-Lambert, the status of the informational review and
negotiations with Warner-Lambert, the fiduciary duties of the Agouron board in
connection with the proposed merger and certain other legal matters. PaineWebber
made a presentation to the Agouron board concerning valuation methodologies that
would be used to evaluate the financial terms of the proposed merger. Following
discussion, the Agouron board authorized management to continue to pursue the
proposed merger.
During the afternoon and evening of January 22, 1999, Mr. Johnson, Mr. de
Vink and representatives of PaineWebber and Goldman Sachs engaged in a series of
discussions and negotiations by telephone concerning a range of values for the
proposed merger transaction and Warner-Lambert's requirement that Agouron agree
to give Warner-Lambert, as an inducement to entering into a merger agreement, an
option to purchase shares of Agouron stock equal to 19.9% of Agouron's
outstanding shares of common stock. These negotiations resulted in a final
proposal by Warner-Lambert of a merger transaction in which Agouron shareholders
would receive approximately $60.00 worth of Warner-Lambert stock for each share
of Agouron stock, subject to a maximum exchange ratio of 0.9300 and a minimum
exchange ratio of 0.8108. During the period from January 22 through January 26,
1999, counsel for the two companies continued to negotiate the terms of the
proposed merger agreement.
On the morning of January 26, 1999, at a regularly scheduled meeting of the
Warner-Lambert board, Warner-Lambert's senior management made a series of
presentations to the board on the proposed merger, the merger agreement, the
merger consideration and the stock option agreement. Senior management indicated
that Goldman Sachs had prepared an opinion that, based upon the assumptions
made, matters considered and scope of the review as set forth in such opinion,
the merger consideration was fair from a financial point of view to
Warner-Lambert. After discussion, the Warner-Lambert board unanimously
determined that the merger is in the best interests of the shareholders of
Warner-Lambert and approved the merger agreement and the stock option agreement.
On the morning of January 26, 1999, at a special meeting of the Agouron
board, Agouron's executive management updated the board on the proposed merger,
the merger agreement, the merger
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consideration and the stock option agreement. At that meeting, PaineWebber made
a presentation to the Agouron board concerning the financial terms of the
proposed merger and delivered its oral opinion to the Agouron board,
subsequently confirmed in writing, to the effect that, and based upon the
assumptions made, matters considered, procedures followed and the scope of the
review as set forth in such opinion, the merger consideration was fair from a
financial point of view to Agouron's shareholders. Outside legal counsel to
Agouron made a presentation to the board on the terms of the merger agreement,
the stock option agreement and the employment agreements. After discussion, the
Agouron board unanimously determined that the merger was in the best interests
of the shareholders of Agouron, approved the merger agreement, the stock option
agreement and the employment agreements and unanimously resolved to recommend
that the Agouron shareholders vote to adopt the merger agreement and resolved to
amend the Agouron shareholders' rights plan to exempt Warner-Lambert, the merger
and the stock option agreement.
The merger agreement and stock option agreement were signed by both Agouron
and Warner-Lambert on January 26, 1999 and the transaction was announced by a
joint press release.
REASONS FOR THE MERGER; RECOMMENDATION OF THE AGOURON BOARD
The Agouron board has carefully considered the terms and conditions of the
proposed merger and has unanimously determined that the merger is in the best
interests of, and is on terms that are fair to Agouron's shareholders, and has
unanimously approved the merger agreement and the transactions contemplated
thereby, including the merger.
In reaching its unanimous determination to approve the merger agreement and
the transactions contemplated thereby, the Agouron board considered a number of
factors that may result from the merger. Following is a list of all material
factors that were considered by the Agouron board that may result from the
merger:
- the increased ability of Agouron to pursue the development of innovative
therapies for the treatment of cancer, viral diseases, and diseases of the
eye;
- the opportunity to engage in discovery of drugs in therapeutic categories
beyond those in which Agouron has established expertise;
- the increased ability to undertake clinical trials of varying scales and
in varying locations that best support the product development goals of
Agouron;
- direct access to the global clinical, manufacturing and marketing
infrastructure of Warner-Lambert in support of the development and
commercial goals of Agouron;
- access to greater financial and technical resources in support of the
goals of Agouron;
- the opportunity for Agouron shareholders to participate in a larger,
stronger, better capitalized, and more commercially diversified company in
a transaction which is designed to be tax free and accounted for as a
pooling of interests, and to receive Warner-Lambert stock which has
historically paid a dividend;
- information relating to Agouron's prospects, which led the Agouron board
to determine that it is reasonably likely that Agouron will be required to
raise additional capital to attempt to produce shareholder value in excess
of the merger consideration, and the scheduled implementation of Agouron's
divisional stock proposal, previously approved by Agouron shareholders,
the implementation of which might prohibit any acquisition transaction
involving Agouron from using the pooling of interests method of accounting
during the next two years;
- that the Warner-Lambert offer represented premiums of approximately 65.2%,
37.9%, 24.5% and 10.6% over the 180, 90, 60 and 30 day average prices of
Agouron stock, respectively;
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- the market capitalization, revenues, and assets of Warner-Lambert as
compared to Agouron;
- the experience, depth, and competence of Warner-Lambert's operating team;
- the relative liquidity of an investment in Warner-Lambert stock as
compared to an investment in Agouron stock;
- that Agouron may, subject to the merger agreement, terminate the merger
agreement in order to pursue an alternative proposal if the Agouron board
determines upon written advice of outside counsel that it is obligated
under California law to do so by its fiduciary duties to Agouron
shareholders;
- that the amount of the termination fee under the merger agreement was
reasonable in the judgment of the Agouron board in light of the value of
the merger consideration to Agouron's shareholders; and
- the analyses by PaineWebber and its opinion on January 26, 1999, to the
effect that, as of such date and based upon the assumptions made, matters
considered, procedures followed and scope of the review, the merger
consideration was fair to holders of Agouron stock from a financial point
of view. See "--Opinion of PaineWebber."
In reaching its determination that the merger was advisable and in the best
interests of Agouron and its shareholders, the Agouron board also considered and
balanced against the potential benefits of the merger a number of factors,
including without limitation, the factors set forth above under the caption
"Risk Factors," the likelihood of the merger being approved by the appropriate
regulatory authorities, the risks that the merger may not be consummated, the
effect of the public announcement of the merger on the market price of Agouron
stock, and the employment, severance and other arrangements among Agouron,
Warner-Lambert and certain employees of Agouron. After detailed consideration of
these factors, the Agouron board concluded that the expected long-term benefits
of the merger outweighed the potential risks associated with the execution of
the merger agreement.
The foregoing discussion and factors considered by the Agouron board
addresses the material factors considered by the Agouron board in its
consideration of the merger. The Agouron board did not quantify or attach any
particular weight to the various factors that it considered in reaching its
determination that the merger agreement and the transactions contemplated
thereby, including the merger, are advisable and in the best interests of
Agouron's shareholders. Different Agouron board members may have assigned
different weights to different factors. In reaching its determination, the
Agouron board took the various factors into account collectively. The Agouron
board did not perform factor-by-factor analysis, but rather its determination
was made in consideration of all of the factors as a whole.
OPINION OF PAINEWEBBER
PaineWebber, as part of its engagement by Agouron, was retained to render an
opinion as to whether the merger consideration was fair, from a financial point
of view, to the holders of Agouron stock.
The following is a summary of the report presented on January 26, 1999, by
PaineWebber to the Agouron board in connection with the rendering of its oral
opinion.
The full text of the PaineWebber opinion, dated January 26, 1999, which sets
forth the assumptions made, procedures followed, matters considered and scope of
the review undertaken, is attached as Annex C to this document. You should read
the PaineWebber opinion carefully and in its entirety. This section is only a
summary of the written opinion and as a summary is qualified and not a
substitute for the written opinion.
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In connection with the consideration by the Agouron board of the merger
agreement, PaineWebber delivered its written opinion, dated January 26, 1999, to
the effect that, as of that date, and based upon its review and assumptions and
subject to the limitations summarized below, the merger consideration is fair,
from a financial point of view, to the holders of Agouron stock. The PaineWebber
opinion was directed to, and prepared at the request and for the information of,
the Agouron board and does not constitute a recommendation to any holder of
Agouron stock as to how any such shareholder should vote with respect to the
merger.
In arriving at its opinion, PaineWebber, among other things:
- reviewed, among other public information, Agouron's Annual Reports, Forms
10-K and related financial information for the three fiscal years ended
June 30, 1998, and Agouron's Form 10-Q and the related unaudited financial
information for the three months ended September 30, 1998;
- reviewed, among other public information, Warner-Lambert's Annual Reports,
Forms 10-K and related financial information for the three fiscal years
ended December 31, 1997, and Warner-Lambert's Form 10-Q and the related
unaudited financial information for the nine months ended September 30,
1998;
- reviewed certain information, including Agouron's internally prepared
financial forecasts and certain publicly available research estimates of
Warner-Lambert's future performance, relating to the business, earnings,
cash flow, assets and prospects of Agouron and Warner-Lambert, furnished
to PaineWebber by or on behalf of Agouron and Warner-Lambert and
PaineWebber used these financial forecasts in its analyses;
- conducted discussions with members of senior management of Agouron and
Warner-Lambert concerning their respective businesses and prospects;
- conducted discussions with members of senior management of Agouron and
Warner-Lambert concerning information relating to certain strategic,
financial and operational benefits anticipated by such management to
result from the merger;
- compared the historical market prices and trading activity for Agouron
stock and Warner-Lambert stock with those of certain other publicly traded
companies which PaineWebber deemed to be relevant;
- compared the financial position and operating results of Agouron and
Warner-Lambert with those of certain other publicly traded companies which
PaineWebber deemed to be relevant;
- compared the financial terms of the merger with the financial terms of
certain other business combinations which PaineWebber deemed to be
relevant;
- considered the potential pro forma effects of the merger on
Warner-Lambert;
- reviewed the merger agreement; and
- reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as
PaineWebber deemed necessary, including PaineWebber's assessment of
regulatory, general economic, market and monetary conditions.
In preparing the PaineWebber opinion, PaineWebber relied on the accuracy and
completeness of all information that was publicly available, supplied or
otherwise communicated to PaineWebber by or on behalf of Agouron and
Warner-Lambert, and PaineWebber did not assume any responsibility to
independently verify such information. With respect to the financial forecasts
examined by PaineWebber, PaineWebber assumed, with Agouron's consent, that they
were reasonably prepared on bases reflecting the best currently available
estimates and good faith judgments of the management of Agouron and
Warner-Lambert as to the future performance of Agouron and Warner-Lambert.
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PaineWebber also relied upon assurances of the management of Agouron and
Warner-Lambert that they were unaware of any facts that would make the
information or financial forecasts provided to PaineWebber incomplete or
misleading. PaineWebber did not undertake an independent evaluation or appraisal
of the assets or liabilities of Agouron or Warner-Lambert, nor was PaineWebber
furnished with any such evaluations or appraisals. PaineWebber also assumed the
following with Agouron's consent:
- all material assets and liabilities of Agouron and Warner-Lambert were as
set forth in the consolidated financial statements of Agouron and
Warner-Lambert;
- the merger would be accounted for under the pooling of interests
accounting treatment; and
- the merger would qualify as a tax-free reorganization.
The PaineWebber opinion is based upon regulatory, economic, monetary and
market conditions existing on the date of the PaineWebber opinion. Furthermore,
PaineWebber expressed no opinion as to the price or trading ranges at which
Agouron stock or Warner-Lambert stock will trade after the date of the
PaineWebber opinion. The PaineWebber opinion does not address the relative
merits of the merger and any other transactions or business strategies that may
have been discussed by the Agouron board as alternatives to the merger, or the
decision of the Agouron board to proceed with the merger.
The following paragraphs summarize the financial analyses performed by
PaineWebber in arriving at the PaineWebber opinion.
HISTORICAL STOCK PERFORMANCE. PaineWebber reviewed trading prices for the
shares of Agouron stock. This stock performance review indicated that for the
twelve months ended January 25, 1999, the low and high prices of Agouron stock
were $19.25 and $59.63. PaineWebber also reviewed the following Agouron closing
stock price averages over the following periods prior to January 25, 1999:
<TABLE>
<CAPTION>
TRADING PERIOD AVERAGE PRICE
- -------------------------------------------------------------------- -------------
<S> <C>
Latest 10 days...................................................... $ 55.70
Latest 20 days...................................................... $ 56.10
Latest 30 days...................................................... $ 54.26
Latest 60 days...................................................... $ 48.18
Latest 90 days...................................................... $ 43.51
Latest 180 days..................................................... $ 36.32
</TABLE>
PaineWebber also reviewed trading prices for the shares of Warner-Lambert
stock. This stock performance review indicated that for the twelve months ended
January 25, 1999, the low and high prices of Warner-Lambert stock were $44.13
and $85.94. PaineWebber also reviewed the following Warner-Lambert closing stock
price averages over the following periods prior to January 25, 1999:
<TABLE>
<CAPTION>
TRADING PERIOD AVERAGE PRICE
- -------------------------------------------------------------------- -------------
<S> <C>
Latest 10 days...................................................... $ 68.59
Latest 20 days...................................................... $ 71.37
Latest 30 days...................................................... $ 72.16
Latest 60 days...................................................... $ 74.34
Latest 90 days...................................................... $ 73.88
Latest 180 days..................................................... $ 71.99
</TABLE>
SELECTED COMPARABLE PUBLIC COMPANY ANALYSIS. Using publicly available
information, PaineWebber compared selected historical and projected financial,
operating and stock market performance data of Agouron and Warner-Lambert to the
corresponding data of certain publicly traded companies that
22
<PAGE>
PaineWebber deemed to be relevant for Agouron and Warner-Lambert. The Agouron
comparable companies consisted of:
<TABLE>
<S> <C>
Bio-Technology General Corp. The Liposome Company, Inc.
Biochem Pharma Inc. Medimmune, Inc.
NeXstar Pharmaceuticals,
Centocor, Inc. Inc.
North American Vaccine,
Gilead Sciences, Inc. Inc.
Idec Pharmaceuticals Corporation Pathogenesis Corporation
Immunex Corporation
</TABLE>
PaineWebber reviewed, among other information, the Agouron comparable
companies' multiples of total enterprise value, which consists of market value
plus total debt less cash and cash equivalents as of September 30, 1998, to:
- latest twelve months revenue,
- latest twelve months earnings before interest, taxes, depreciation and
amortization, or EBITDA and
- latest twelve months earnings before interest and taxes, or EBIT.
Multiples of total enterprise value represent the value of a particular
company's operating statistics compared to its total enterprise value. These
operating statistics include revenue, EBITDA and EBIT as described above.
PaineWebber also reviewed, among other information, the comparable
companies' multiples of market value to:
- latest twelve months net income,
- calendar year 1999 earnings per share, or EPS, and
- calendar year 2000 EPS. All calendar year 1999 and 2000 EPS results were
based on publicly available estimates from First Call Research.
Multiples of market value represent the value of a particular company's
operating statistics compared to its total market value. These operating
statistics include net income and calendar year 1999 and 2000 EPS. The Agouron
comparable companies analysis resulted in the following range of values as of
January 25, 1999:
<TABLE>
<CAPTION>
ANALYSIS MULTIPLE RANGE
- --------------------------------------------------------------------------- -----------------
<S> <C>
Latest twelve months revenue............................................... 2.52x to 53.97x
Latest twelve months EBITDA................................................ 11.6x to 57.6x
Latest twelve months EBIT.................................................. 13.1x to 92.3x
Latest twelve months net income............................................ 20.5x to 41.7x
Calendar year 1999 EPS..................................................... 14.3x to 53.4x
Calendar year 2000 EPS..................................................... 7.9x to 38.4x
</TABLE>
23
<PAGE>
Based on an implied price of $60.00 for each outstanding share of Agouron
stock, Agouron's implied multiples, calculated on the same basis as the Agouron
comparable companies, were as follows:
<TABLE>
<CAPTION>
AGOURON IMPLIED
ANALYSIS MULTIPLE
- --------------------------------------------------------------------- -----------------------
<S> <C>
Latest twelve months net revenue..................................... 4.17x
Latest twelve months EBITDA.......................................... 72.6x
Latest twelve months EBIT............................................ 112.2x
Latest twelve months net income...................................... 135.5x
Calendar year 1999 EPS............................................... 222.2x
Calendar year 2000 EPS............................................... 52.2x
</TABLE>
Calendar year 1999 and 2000 EPS for Agouron were based on estimates provided
by Agouron management.
The Warner-Lambert comparable companies consisted of:
<TABLE>
<S> <C>
Abbott Laboratories Johnson & Johnson
American Home Products Corporation Merck & Co., Inc.
Amgen, Inc. Pfizer, Inc.
Bristol-Myers Squibb Company Pharmacia & Upjohn, Inc.
Eli Lilly and Company Rhone Poulenc SA
Genzyme Corporation (General Schering-Plough
Division)
Glaxo Wellcome plc SmithKline Beecham plc
</TABLE>
PaineWebber reviewed, among other information, the Warner-Lambert comparable
companies' multiples of total enterprise value, as of January 25, 1999, to:
<TABLE>
<CAPTION>
ANALYSIS MULTIPLE RANGE
- --------------------------------------------------------------------------- -----------------
<S> <C>
Latest twelve months revenue............................................... 1.75x to 11.72x
Latest twelve months EBITDA................................................ 9.5x to 39.8x
Latest twelve months EBIT.................................................. 16.9x to 46.9x
Latest twelve months net income............................................ 23.0x to 68.2x
Calendar year 1999 EPS..................................................... 18.6x to 46.7x
Calendar year 2000 EPS..................................................... 17.0x to 39.0x
</TABLE>
All calendar year 1999 and 2000 EPS results were based on publicly available
estimates from First Call Research. The Warner-Lambert comparable companies
analysis resulted in the above range of values.
Based upon the closing price of Warner-Lambert stock on January 25, 1999, of
$67.50, Warner-Lambert's implied multiples, calculated on the same basis as the
Warner-Lambert comparable companies, were as follows:
<TABLE>
<CAPTION>
ANALYSIS WARNER-LAMBERT IMPLIED MULTIPLE
- ------------------------------------------------------------- -------------------------------
<S> <C>
Latest twelve months net revenue............................. 5.97x
Latest twelve months EBITDA.................................. 27.3x
Latest twelve months EBIT.................................... 31.7x
Latest twelve months net income.............................. 51.8x
Calendar year 1999 EPS....................................... 35.0x
Calendar year 2000 EPS....................................... 28.7x
</TABLE>
24
<PAGE>
SELECTED COMPARABLE MERGERS AND ACQUISITIONS ANALYSIS. PaineWebber reviewed
publicly available financial information for selected mergers and acquisitions
involving companies that are affiliated with the pharmaceuticals sector. The
selected mergers and acquisitions PaineWebber analyzed included the following:
<TABLE>
<CAPTION>
ACQUIROR TARGET
- ------------------------------------ -------------------------------------------------------
<S> <C>
Zeneca Group Astra AB
Sanofi SA Synthelabo SA
Watson Pharmaceuticals, Inc. TheraTech, Inc.
Alza Corporation Sequus Pharmaceuticals, Inc.
Cardinal Health, Inc. R.P. Scherer Corporation
Elan Corporation, plc Neurex Corporation
Alpharma Inc. Arthur Cox (Hoechst AG)
Elan Corporation, plc Carnrick Laboratories, Inc. (GWC Health, Inc.)
Abbott Laboratories MediSense, Inc.
Elan Corporation, plc Athena Neurosciences, Inc.
Sandoz AG Ciba-Geigy
Pharmacia Aktiebolag The Upjohn Company
Rhone Poulenc Rorer Fisons plc
Watson Pharmaceuticals, Inc. Circa Pharmaceutical Incorporated
Hoechst AG Marion Merrell Dow
</TABLE>
PaineWebber reviewed the consideration paid based on stock prices on the day
prior to the announcement of the transaction in the comparable transactions and
calculated multiples of total enterprise value. The comparable transactions
analysis resulted in the following range of values:
<TABLE>
<CAPTION>
ANALYSIS MULTIPLE RANGE
- --------------------------------------------------------------------------- -----------------
<S> <C>
Latest twelve months revenue............................................... 1.54x to 10.34x
Latest twelve months EBITDA................................................ 8.9x to 29.1x
Latest twelve months EBIT.................................................. 10.7x to 46.9x
Latest twelve months net income............................................ 12.2x to 53.5x
Book value................................................................. 2.0x to 20.6x
</TABLE>
Based on an implied price of $60.00 for each outstanding share of Agouron
stock, Agouron's implied multiples, calculated on the same basis as the
comparable transactions, were as follows:
<TABLE>
<CAPTION>
AGOURON IMPLIED
ANALYSIS MULTIPLE
- --------------------------------------------------------------------- -----------------------
<S> <C>
Latest twelve months net revenue..................................... 4.17x
Latest twelve months EBITDA.......................................... 72.6x
Latest twelve months EBIT............................................ 112.2x
Latest twelve months net income...................................... 135.5x
Book Value........................................................... 9.1x
</TABLE>
DISCOUNTED CASH FLOW ANALYSIS. PaineWebber analyzed Agouron based on an
unleveraged discounted cash flow analysis of the projected financial performance
of Agouron. Such projected financial performance was based upon a forecast
period for Agouron provided by Agouron management. The discounted cash flow
analysis determined the discounted present value of the unleveraged after-tax
cash flows generated over the forecast period and then added a terminal value
based upon a range of EBIT multiples and discount rates which PaineWebber deemed
appropriate.
With respect to Warner-Lambert, PaineWebber analyzed Warner-Lambert based on
an unleveraged discounted cash flow analysis of publicly available estimates of
Warner-Lambert. The discounted cash
25
<PAGE>
flow analysis determined the discounted present value of the unleveraged
after-tax cash flow generated over the forecast period and then added a terminal
value based upon a range of revenue, EBIT multiples and discount rates which
PaineWebber deemed appropriate.
PREMIUMS PAID ANALYSIS. PaineWebber reviewed purchase price per share
premiums paid in publicly disclosed stock merger transactions in non-financial
industries announced and completed since January 1, 1997. This analysis
indicated the following premiums to the target's closing stock price:
<TABLE>
<CAPTION>
PERIOD PRIOR TO ANNOUNCEMENT HIGH LOW
- --------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
One day.................................................................... 65.1% (16.1)%
One week................................................................... 92.6% (6.4)%
One month.................................................................. 96.8% (7.3)%
</TABLE>
PaineWebber also reviewed the purchase price per share premiums paid in the
comparable transactions described in "Selected Comparable Mergers and
Acquisitions Analysis" above. This analysis indicated the following premiums to
the target's closing stock price as set forth in the following table:
<TABLE>
<CAPTION>
PERIOD PRIOR TO ANNOUNCEMENT HIGH LOW
- --------------------------------------------------------------------------- --------- ---------
<S> <C> <C>
One day.................................................................... 61.1% (10.3)%
One week................................................................... 81.1% (3.7)%
One month.................................................................. 185.9% (8.3)%
</TABLE>
The implied premiums paid to Agouron based on an implied price of $60.00 per
share one day, one week and one month prior to January 25, 1999 were as set
forth in the following table:
<TABLE>
<CAPTION>
PERIOD PRIOR TO ANNOUNCEMENT AGOURON IMPLIED PREMIUM
- -------------------------------------------------------------------- ---------------------------
<S> <C>
One day............................................................. 12.9%
One week............................................................ 3.9%
One month........................................................... 11.1%
</TABLE>
CONTRIBUTION ANALYSIS. PaineWebber analyzed Agouron's and Warner-Lambert's
relative contribution to the combined entity, for the period ended September 30,
1998, with respect to:
<TABLE>
<CAPTION>
AGOURON CONTRIBUTION
ANALYSIS TO PRO FORMA ENTITY
- ------------------------------------------------------------------------ -------------------------
<S> <C>
Latest twelve months revenue............................................ 5.1%
Latest twelve months EBITDA............................................. 1.4%
Latest twelve months EBIT............................................... 1.0%
Latest twelve months net income......................................... 1.5%
Calendar year 1999 net income........................................... 0.7%
Calendar year 2000 net income........................................... 2.3%
Total assets............................................................ 3.8%
Shareholders' equity.................................................... 6.7%
</TABLE>
Based on an implied price of $60.00, holders of Agouron stock will own
approximately 3.7% of the outstanding stock of Warner-Lambert after giving
effect to the merger.
The results of this contribution analysis are not necessarily indicative of
the contributions that the respective businesses may have in the future.
PRO FORMA MERGER ANALYSIS. PaineWebber performed an analysis of the
potential pro forma effect of the merger on Warner-Lambert's projected EPS. In
performing this analysis, PaineWebber assumed the following with Agouron's
consent:
26
<PAGE>
- that the merger would be accounted for under the pooling of interests
method of accounting; and
- that synergies may be achieved as a result of the merger.
PaineWebber combined the projected operating results of Agouron provided by
Agouron management with the publicly available estimates of Warner-Lambert to
arrive at the combined company projected net income. PaineWebber divided this by
the pro forma fully diluted shares outstanding to arrive at a combined company
fully diluted EPS. PaineWebber then compared the combined company EPS to
Warner-Lambert's EPS based on the publicly available estimates of Warner-Lambert
to determine the pro forma impact on Warner-Lambert's EPS.
The preparation of a fairness opinion involves various determinations as to
the most appropriate and relevant quantitative methods of financial analyses and
the application of those methods to the particular circumstances and, therefore,
such an opinion is not readily susceptible to partial analysis or summary
description. Accordingly, PaineWebber believes that its analysis must be
considered as a whole and that considering any portion of such analysis and of
the factors considered, without considering all analyses and factors, could
create a misleading or incomplete view of the process underlying the PaineWebber
opinion. In its analyses, PaineWebber made numerous assumptions with respect to
industry performance, general business and economic conditions and other
matters, many of which are beyond the control of Agouron and Warner-Lambert. Any
estimates contained in these analyses are not necessarily indicative of actual
values or predictive of future results or values, which may be significantly
more or less favorable than as set forth therein. In addition, analyses relating
to the value of businesses do not purport to be appraisals or to reflect the
prices at which businesses may actually be sold. Accordingly, such analyses and
estimates are inherently subject to substantial uncertainty and neither Agouron
nor PaineWebber assume responsibility for the accuracy of such analyses and
estimates.
Agouron selected PaineWebber to be its financial advisor in connection with
the merger because PaineWebber is a prominent investment banking and financial
advisory firm with experience in the valuation of businesses and their
securities in connection with mergers and acquisitions, negotiated
underwritings, secondary distributions of securities, private placements and
valuations for corporate purposes.
Pursuant to an engagement letter between Agouron and PaineWebber,
PaineWebber earned a fee of $2,000,000 for rendering the opinion. In addition,
PaineWebber will receive a fee, payable upon completion of the merger, of
$12,000,000 less the opinion fee, and will be reimbursed for certain of its
related expenses. PaineWebber will not be entitled to any additional fees or
compensation in the event the merger is not approved or otherwise consummated.
Agouron also agreed, under separate agreement, to compensate PaineWebber, its
related parties and each of its directors, officers, agents and employees and
each person, if any, controlling PaineWebber or any of its related parties for
certain losses or liabilities arising from the merger, including certain losses
or liabilities arising under federal securities laws.
In the past, PaineWebber and its related parties have provided investment
banking services to Agouron and have received customary fees for rendering these
services.
In the ordinary course of PaineWebber's business, PaineWebber may actively
trade the securities of Agouron and Warner-Lambert for its own account and for
the accounts of its customers and, accordingly, may at any time hold long or
short positions in such securities.
MATERIAL FEDERAL INCOME TAX CONSEQUENCES
The following is a summary of the material anticipated U.S. federal income
tax consequences of the merger to owners of Agouron stock who hold the stock as
a capital asset. The term capital asset is
27
<PAGE>
defined in Section 1221 of the Internal Revenue Code of 1986. This summary is
based on the Internal Revenue Code, Treasury regulations, administrative rulings
and court decisions, all as in effect as of the date hereof and all of which are
subject to change at any time, possibly with retroactive effect. This summary is
not a complete description of all the consequences of the merger and, in
particular, may not address U.S. federal income tax considerations applicable to
shareholders subject to special treatment under U.S. federal income tax law,
which would include, for example, non-U.S. persons, financial institutions,
dealers in securities, insurance companies, tax-exempt entities and owners who
hold Agouron stock as part of a hedge, straddle or conversion transaction. In
addition, no information is provided herein with respect to the tax consequences
of the merger under applicable foreign, state or local laws. HOLDERS OF AGOURON
STOCK ARE URGED TO CONSULT WITH THEIR OWN TAX ADVISORS REGARDING THE FEDERAL
INCOME AND OTHER TAX CONSEQUENCES OF THE MERGER TO THEM, INCLUDING THE EFFECTS
OF STATE, LOCAL AND FOREIGN TAX LAWS.
The obligations of the parties to consummate the merger are conditioned upon
the receipt by Warner-Lambert of an opinion from McDermott, Will & Emery, and
the receipt by Agouron of an opinion from Shearman & Sterling, in each case
subject to the qualifications discussed below, regarding the characterization of
the merger as a "reorganization" within the meaning of Section 368(a) of the
Internal Revenue Code. As a reorganization, the merger will have the following
principal U.S. federal income tax consequences:
- no gain or loss will be recognized by Warner-Lambert, its subsidiary
participating in the merger or Agouron as a result of the merger;
- no gain or loss will be recognized by the holders of Agouron stock who
exchange their Agouron stock for Warner-Lambert stock pursuant to the
merger, except with respect to any cash received in lieu of a fractional
share of Warner-Lambert stock;
- the aggregate tax basis of the Warner-Lambert stock received in the merger
by each holder of Agouron stock will be the same as the aggregate tax
basis of the Agouron stock surrendered in exchange therefor, reduced by
any amount of tax basis allocable to a fractional share interest in
Warner-Lambert stock for which cash is received; and
- the holding period of Warner-Lambert stock received in the merger will
include the holding period for the Agouron stock surrendered in exchange
therefor.
Shearman & Sterling and McDermott, Will & Emery have rendered their tax
opinions on the basis of facts, representations and assumptions set forth or
referred to in the opinions which are intended to be consistent with the state
of facts existing at the time the merger is consummated. In rendering its tax
opinion, each such counsel has required and relied upon representations and
covenants including those contained in certificates of officers of
Warner-Lambert, its subsidiary participating in the merger, Agouron and others,
reasonably satisfactory in form and substance to such counsel.
Cash received by a holder of Agouron stock in lieu of a fractional share of
Warner-Lambert stock will be treated as received in disposition of such
fractional share. An Agouron shareholder will generally recognize capital gain
or loss measured by the difference between the amount of cash received and the
portion of the tax basis of his Agouron stock allocable to the fractional share
interest. In the case of individuals, the maximum federal income tax rate
applicable to capital gains is generally as follows:
- the same as ordinary income rates for capital assets held for one year or
less; and
- 20% for capital assets held for more than one year.
28
<PAGE>
ACCOUNTING TREATMENT
The merger is intended to qualify as a pooling of interests. The pooling of
interests method of accounting assumes that the combining companies have been
merged from inception, and the historical financial statements for periods prior
to consummation of the merger may be restated as though the companies had been
combined from inception as required under United States Generally Accepted
Accounting Principles.
It is a condition to the merger that:
- Warner-Lambert shall have received a letter from PricewaterhouseCoopers
LLP, Florham Park, New Jersey, independent accountants for Warner-Lambert,
dated as of the date on which the transactions contemplated by the merger
agreement are consummated, regarding their concurrence with Warner-Lambert
management's conclusion that no condition exists that would preclude
Warner-Lambert's accounting for the merger as a pooling of interests if
the merger is closed and consummated in accordance with the merger
agreement; and
- Agouron shall have received a letter from PricewaterhouseCoopers LLP, San
Diego, California, independent accountants for Agouron, regarding such
firm's concurrence with the conclusions of Agouron's management that no
conditions exist related to Agouron that would preclude Agouron from being
a party to a business combination for which the pooling of interests
method of accounting would be available.
REGULATORY APPROVALS
HART-SCOTT-RODINO. The Federal Trade Commission, or the FTC, and the
Antitrust Division of the Department of Justice, or the DOJ, frequently
scrutinize the legality under the antitrust laws of transactions such as the
merger. At any time before or after the merger, the DOJ or the FTC could take
such action under the antitrust laws as it deems necessary or desirable in the
public interest, including seeking to enjoin the merger or seeking divestiture
of substantial assets of Warner-Lambert or Agouron or their subsidiaries.
Private parties and state attorneys general may also bring an action under the
antitrust laws under certain circumstances. There can be no assurance that a
challenge to the merger on antitrust grounds will not be made or, if such a
challenge is made, of the result.
Effective February 12, 1999, Warner-Lambert and Agouron filed their
respective Pre-Merger Notification and Report Forms with the FTC and the DOJ
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, or the HSR Act.
The HSR Act, and the rules and regulations thereunder, provide that certain
merger transactions, including the merger, may not be consummated until required
information and materials have been furnished to the DOJ and the FTC and certain
waiting periods have expired or been terminated. The required waiting period
expired on March 14, 1999.
FEDERAL SECURITIES LAWS CONSEQUENCES
All shares of Warner-Lambert stock received by Agouron shareholders in the
merger who are not affiliates of Agouron prior to the merger will be freely
transferable. However, shares of Warner-Lambert stock received by persons who
are deemed to be affiliates of Agouron prior to the merger may be resold by them
only in transactions permitted by the resale provisions of Rule 145 promulgated
under the Securities Act of 1933, or Rule 144 promulgated under the Securities
Act in the case of such persons who become affiliates of Warner-Lambert, or as
otherwise permitted under the Securities Act. Persons deemed to be affiliates of
Agouron are those individuals or entities that control, are controlled by, or
are under common control with, Agouron. Affiliates generally include executive
officers and directors of Agouron as well as certain principal shareholders of
Agouron. This Proxy Statement/ Prospectus does not cover any resales of
Warner-Lambert stock received by affiliates of Agouron in the merger.
29
<PAGE>
STOCK EXCHANGE QUOTATION
It is a condition to the merger that the shares of Warner-Lambert stock to
be issued pursuant to the merger agreement be approved for listing on the New
York Stock Exchange, subject to official notice of issuance. An application will
be filed for listing the shares of Warner-Lambert stock to be issued in the
merger on the New York Stock Exchange. Following the merger, Agouron stock will
no longer be registered under the Securities Act or traded on the Nasdaq
National Market.
DISSENTERS' RIGHTS
If the merger is approved and consummated, dissenters' rights may be
available to holders of Agouron stock who exercise such rights in accordance
with Chapter 13 of the California General Corporation Law, or the CGCL. THE
REQUIRED PROCEDURE SET FORTH IN CHAPTER 13 OF THE CGCL MUST BE FOLLOWED EXACTLY
OR ANY DISSENTERS' RIGHTS MAY BE LOST. The information set forth below is a
general summary of dissenters' rights and as a summary is qualified and not a
substitute for the provisions of Chapter 13 of the CGCL, a copy of which is
attached hereto as Annex D. Shareholders should read Annex D in its entirety for
more complete information concerning dissenters' rights. Each holder of shares
of Agouron stock which were outstanding as of the record date who follows the
procedures set forth in Chapter 13 of the CGCL and who votes against the
proposal to approve the merger agreement will be entitled to demand the purchase
of such holder's shares of Agouron stock for a cash purchase price equal to the
fair market value of such holder's shares. The fair market value of shares of
Agouron stock will be determined as of January 25, 1999, the day before the
public announcement of the merger agreement, excluding any appreciation or
depreciation as a consequence of the proposed merger, but adjusted for any stock
split, reverse stock split or share dividend which becomes effective after that
date.
HOWEVER, SHARES OF AGOURON STOCK WILL QUALIFY FOR DISSENTERS' RIGHTS ONLY IF
DEMANDS FOR PAYMENT ARE FILED WITH RESPECT TO 5% OR MORE OF THE OUTSTANDING
SHARES OF AGOURON STOCK.
As a condition to Warner-Lambert's obligation to consummate the merger, the
number of shares of Agouron stock whose holders have made a demand for purchase
under Chapter 13 of the CGCL must constitute less than 5% of the outstanding
shares of Agouron stock. Warner-Lambert may waive this condition.
In order to be entitled to exercise dissenters' rights, a shareholder of
Agouron must vote "against" the merger agreement and the merger. Thus, any
shareholder who wishes to dissent and executes and returns a proxy in the
accompanying form must specify that such holder's shares are to be voted
"against" the proposal to approve the merger agreement and the merger. If the
shareholder returns a proxy without voting instructions or with instructions to
vote "for" or to "abstain" on the proposal to approve the merger agreement and
the merger, such holder's shares will not be voted against the merger agreement
and the merger and the shareholder will lose his or her dissenters' rights.
A shareholder of Agouron electing to exercise dissenters' rights must also
make written demand upon Agouron for the purchase of dissenting shares and
payment to such shareholder in cash of their fair market value. However, no such
demand by a shareholder of Agouron will be effective for any purpose unless it
is received by Agouron or Agouron's transfer agent on or prior to the date of
the special meeting. The demand should specify the number of shares held of
record by such shareholder which the shareholder demands to be purchased and a
statement of what the shareholder claims to be the fair market value of those
shares as of January 25, 1999. Such statement of the fair market value of the
shares of Agouron stock constitutes an offer by the shareholder to sell the
shares at that price. Agouron's transfer agent is ChaseMellon Shareholder
Services, and its address is 400 South Hope St., 4(th) Floor, Los Angeles, CA
90071.
30
<PAGE>
If the merger agreement is approved by Agouron's shareholders and the number
of dissenting shares is greater than 5% of the outstanding shares of Agouron
stock, the merger will not be consummated unless Warner-Lambert waives its
closing condition. If Warner-Lambert has waived its closing condition, Agouron
will have ten days after such approval to mail a notice of such approval to each
shareholder of Agouron who voted against the merger agreement, together with a
copy of Sections 1300 to 1304 of Chapter 13 of the CGCL, a statement of the
price determined by Agouron to represent the fair market value of the dissenting
shares as of January 25, 1999 and a brief description of the procedure to be
followed if the shareholder desires to exercise dissenters' rights.
Within 30 days after the date on which notice of the approval of the merger
agreement is mailed, the dissenting shareholder must surrender to Agouron, at
its principal office or at the office of Agouron's transfer agent, the
certificates representing the dissenting shares to be stamped or endorsed with a
statement that they are dissenting shares or to be exchanged for certificates of
appropriate denomination so stamped or endorsed. Any shares of Agouron stock
that are transferred prior to their submission for endorsement lose their status
as dissenting shares.
If Agouron and the dissenting shareholder agree that the surrendered shares
are dissenting shares and agree upon the price of the shares, the dissenting
shareholder will be entitled to the agreed price with interest thereon at the
legal rate on judgments from the date of such agreement, which is set by law in
California at 10% per year. Subject to the restrictions imposed under the CGCL
on the ability of Agouron to purchase its outstanding shares, payment by Agouron
of the fair market value of the dissenting shares shall be made within 30 days
after the amount thereof has been agreed upon or 30 days after any statutory or
contractual conditions to the merger have been satisfied, whichever is later,
subject to the surrender of the certificates therefor, unless provided otherwise
by agreement.
If Agouron denies that the shares surrendered are dissenting shares, or if
Agouron and the dissenting shareholder fail to agree upon a fair market value of
such shares of Agouron stock, then the dissenting shareholder must, within six
months after the notice of approval of the merger agreement and the merger is
mailed, file a complaint in the Superior Court of San Diego County, California
requesting the court to make such determinations or intervene in any pending
action brought by any other dissenting shareholder. If the complaint is not
filed or intervention in a pending action is not made within the specified
six-month period, the dissenters' rights will be lost. If the fair market value
of the dissenting shares is at issue, the court will determine, or will appoint
one or more impartial appraisers to determine, such fair market value. Any such
determination of the fair market value of any dissenting shares of Agouron may
be more than, less than or equal to the fair market value of the shares of
Agouron stock as of the date of the special meeting or as of the effective time
of the merger.
No dissenting shareholder who has elected to proceed under Chapter 13 of the
CGCL may withdraw his or her dissent or demand for payment unless Agouron
consents to such withdrawal.
CERTAIN LEGAL PROCEEDINGS
On January 27, 1999, an action entitled RUBIN V. AGOURON PHARMACEUTICALS,
INC., ET AL. was filed in San Diego Superior Court against Agouron, members of
the Agouron board and Warner-Lambert. The complaint, which purports to be a
class action filed on behalf of Agouron's shareholders, alleges that the Agouron
board breached fiduciary duties in connection with the decision to enter into
the merger agreement. The complaint purports to seek various forms of relief,
including a preliminary and permanent injunction against consummation of the
merger with Warner-Lambert and/or money damages. The parties have agreed, with
approval of the court, that defendants' time to respond to the complaint will be
indefinitely extended, and that such response will not be due until 10 days
after plaintiffs request such a response. Warner-Lambert and Agouron believe
that the allegations asserted against them, respectively, are without merit
because, among other things, they do not have a basis in fact or in law.
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EXECUTIVES; EXECUTIVE COMPENSATION; STOCK OWNERSHIP OF DIRECTORS, EXECUTIVE
OFFICERS AND FIVE PERCENT SHAREHOLDERS
Information concerning current directors and officers of Warner-Lambert,
executive compensation and ownership of Warner-Lambert stock by management and
principal shareholders is contained in Warner-Lambert's Annual Report on Form
10-K for the fiscal year ended December 31, 1998, and is incorporated herein by
reference.
Information concerning current directors and officers of Agouron, executive
compensation and ownership of Agouron stock by management and principal
shareholders is contained in Agouron's Annual Report on Form 10-K for the fiscal
year ended June 30, 1998, and is incorporated herein by reference.
See "Where You Can Find More Information" on page 57.
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendation of the Agouron board regarding the
adoption of the merger agreement, Agouron shareholders should note that certain
of the individuals who have served as directors or executive officers of Agouron
have interests the merger that are different from the interests of other
shareholders generally.
STOCK OPTIONS. As of the record date, approximately 1,958,623 shares of
Agouron stock were subject to options granted to executive officers and
directors under Agouron's equity-based compensation plans. Agouron's stock
option plans do not provide for the accelerated vesting of Agouron options upon
a change in control, or a merger or other business combination of Agouron with
another entity where Agouron is not the surviving entity, if the stock options
are assumed by the successor or replaced with comparable stock options of the
successor. However, if an employee of Agouron is involuntarily terminated within
one year of the closing of the merger, the existing Agouron stock option plans
call for the employee's unvested stock options to become vested and exercisable.
Pursuant to the merger agreement, Agouron will take all action necessary so
that each Agouron stock option shall cease to represent a right to acquire
shares of Agouron stock and will be converted into an option to acquire an
appropriate number of shares of Warner-Lambert stock, with corresponding
adjustments to the exercise price of such options. Each such option will be
assumed by Warner-Lambert. See "The Merger Agreement--Exchange and Cancellation
of Agouron Options."
EMPLOYMENT AGREEMENTS. On January 26, 1999, employment agreements were
entered into with certain officers and senior executives of Agouron, including
Mr. Johnson, Mr. Snyder, Dr. Quart, Mr. Friedman and Dr. Brown, which become
effective on the closing of the merger, for a term of three years. These
employment agreements provide past service credit for vesting and eligibility
purposes under Warner-Lambert's benefit plans. Under the terms of the employment
agreements, executives meeting age and years of service requirements will also
be provided with past-service credit for benefit accrual purposes under
Warner-Lambert's pension plan if they remain employed for the duration of the
agreement term. The employment agreements also subject the executives to
non-compete and non-solicitation obligations.
If an executive who is a party to an employment agreement resigns from
employment with "good reason" within one year from the closing of the merger,
such executive will be entitled to a lump sum payment equal to his annual base
salary and most recent bonus multiplied by the remainder of the employment
agreement term plus the acceleration of unvested options. If such good reason
occurs more than one year after the closing of the merger, the executive shall
continue as an employee of Agouron for the remainder of the employment agreement
term with such duties to be determined by mutual agreement between the executive
and Agouron. In such capacity, the executive will continue to receive salary,
compensation and benefits coverage, and his stock options will continue to vest
as
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though the good reason had not occurred. The employment agreements provide that
the following events will constitute "good reason":
- reassignment that results in a significant adverse reduction in status or
duties;
- failure by Agouron to pay salary and benefits as provided under the
employment agreement;
- relocation of Agouron's principal place of business that results in an
increase in the executive's commute by over 50 miles; and
- any other material breach of the employment agreement.
If an executive who is a party to an employment agreement is terminated for
"cause," death or disability, the executive shall be entitled to his accrued but
unpaid base salary, vacation, other compensation or benefits and the
past-service bonus. Upon the termination of an executive's employment, Agouron
and the executive may mutually agree to enter into a consultancy agreement. In
the event any payment under the employment agreement or otherwise would result
in an "excess parachute payment" within the meaning of Internal Revenue Code
Section 280G, the executive would be entitled to a gross-up payment for any
excise tax thereon unless the executive resigns without good reason within one
year after the effective time. The employment agreements provide that the
following will constitute "cause":
- an act by an executive of common law fraud against Agouron;
- an executive's conviction for or entry of a plea of no contest with
respect to a felony; and
- willful, deliberate, material violation by an executive of his
responsibilities or of Agouron's policies.
Except in the event of a felony, an executive shall be provided a reason for
termination and afforded an opportunity to remedy the wrong-doing.
The employment agreements also provide certain protections in the event of a
change in control of Warner-Lambert, which is deemed to generally have occurred
upon the acquisition of the voting power of 20% or more of Warner-Lambert's
outstanding securities, a merger, consolidation, sale or disposition of
substantially all of Warner-Lambert's assets or a change in more than half of
Warner-Lambert's board. The change in control provisions provide for severance
benefits, which are payable only if employment is actually or effectively
terminated for other than just cause within three years after a change in
control of Warner-Lambert, of thirty-six months' salary and bonus, and also
provide for limited rights in connection with Warner-Lambert stock options. The
limited rights provide for a cash payment to the holder upon a change in control
equal to the amount by which the fair market value of a share of Warner-Lambert
stock exceeds the fair market value on the date the stock option was granted,
multiplied by the number of shares with respect to which the limited rights
apply. The fair market value is determined by the higher of the sale price on
the New York Stock Exchange prior to the change in control or the highest price
used in the transaction. In certain instances, conversion rights for stock
options are provided as an alternative to limited rights. The change in control
provisions also provide special payments to the executives to reimburse them for
any federal excise tax or similar state or local tax that may be imposed on
payments received following such a change in control.
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THE MERGER AGREEMENT
The merger agreement contemplates the merger of a subsidiary of
Warner-Lambert into Agouron, with Agouron continuing as the surviving
corporation. This section of the Proxy Statement/Prospectus describes material
provisions of the merger agreement. Because the description of the merger
agreement contained in this Proxy Statement/Prospectus is a summary, it does not
contain all the information that may be important to you. You should carefully
read the entire copy of the merger agreement attached as Annex A to this Proxy
Statement/Prospectus before you decide how to vote.
CLOSING AND EFFECTIVE TIME OF THE MERGER
CLOSING. Unless the parties agree otherwise, the closing of the merger will
take place on the second business day after the date on which all closing
conditions have been satisfied or waived or such other time as agreed to in
writing by Warner-Lambert and Agouron. The closing is expected to take place
shortly after the approval of the merger by the Agouron shareholders.
EFFECTIVE TIME. The merger will be effective upon the filing of a
certificate of merger with the Secretary of State of the State of California.
Such filing of the certificate of merger shall be made simultaneously with, or
as soon as practicable after, the closing of the transactions contemplated by
the merger agreement. See "--Conditions to the Merger."
SHARE CERTIFICATES SHOULD NOT BE SURRENDERED FOR EXCHANGE BY SHAREHOLDERS OF
AGOURON PRIOR TO APPROVAL OF THE MERGER AND THE RECEIPT OF A TRANSMITTAL FORM.
No fractional shares of Warner-Lambert stock will be issued to any Agouron
shareholder upon surrender of certificates previously representing Agouron
stock. In lieu of such fractional shares, each holder of shares of Agouron stock
exchanged pursuant to the merger who would otherwise have been entitled to
receive a fraction of a share will receive cash without interest in an amount
equal to the product of:
- such fractional part of a share multiplied by
- the closing price for a share of Warner-Lambert stock on the New York
Stock Exchange on the trading day on which the effective time occurs.
No dividend or distribution with respect to Warner-Lambert stock will be
payable with respect to any fractional share and such fractional share interests
will not entitle their owners to any rights of a shareholder of Warner-Lambert.
As soon as reasonably practicable after the effective time, transmittal
forms and exchange instructions will be mailed to each holder of record of
Agouron stock to be used to surrender and exchange certificates formerly
evidencing shares of Agouron stock for certificates evidencing the shares of
Warner-Lambert stock to which such holder has become entitled. After receipt of
such transmittal forms, each holder of certificates formerly representing
Agouron stock will be able to surrender such certificates to the exchange agent,
and each such holder will receive in exchange therefor certificates evidencing
the number of whole shares of Warner-Lambert stock to which such holder is
entitled, any cash which may be payable in lieu of a fractional share of
Warner-Lambert stock and any dividends or other distributions with respect to
Warner-Lambert stock with a record date after the effective time declared or
made after the effective time. AGOURON SHAREHOLDERS SHOULD NOT SEND IN THEIR
CERTIFICATES UNTIL THEY RECEIVE A TRANSMITTAL FORM.
After the effective time, each certificate formerly representing Agouron
stock, until so surrendered and exchanged, shall be deemed, for all purposes, to
evidence only the right to receive the number of whole shares of Warner-Lambert
stock which the holder of such certificate is entitled to receive in the merger,
any cash payment in lieu of a fractional share of Warner-Lambert stock and any
dividend or other distribution with respect to Warner-Lambert stock as described
above. The holder of such
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unexchanged certificate will not be entitled to receive any dividends or other
distributions payable by Warner-Lambert until the certificate has been
exchanged. Subject to applicable laws, following surrender of such certificates,
such dividends and distributions, together with any cash payment in lieu of a
fractional share of Warner-Lambert stock, will be paid without interest.
EXCHANGE AND CANCELLATION OF AGOURON STOCK OPTIONS
At the effective time, automatically and without any action on the part of
the holder thereof, each outstanding Agouron stock option shall be assumed by
Warner-Lambert and shall be converted into an option to acquire that number of
shares of Warner-Lambert stock obtained by multiplying the number of shares of
Agouron stock by the exchange ratio rounded, if necessary, to the nearest whole
share of Warner-Lambert stock issuable upon the exercise of such option at an
exercise price per share equal to the per share exercise price of such option
divided by the exchange ratio, and otherwise upon the same terms and conditions
as the outstanding Agouron stock options; provided, however, that in the case of
any Agouron stock option to which Section 421 of the Internal Revenue Code
applies by reason of the qualifications under Section 422 of the Internal
Revenue Code, the exercise price, the number of shares purchasable pursuant to
such Agouron stock option shall be determined in order to comply with Section
424(a) of the Internal Revenue Code. No Agouron stock options will be cancelled
following the consummation of the merger.
Warner-Lambert will take all corporate actions necessary to reserve for
issuance a sufficient number of shares of Warner-Lambert stock for delivery upon
exercise of the Agouron stock options assumed by Warner-Lambert. As promptly as
practicable after the effective time, Warner-Lambert will file a Registration
Statement on Form S-3 or Form S-8 with respect to the shares of Warner-Lambert
stock subject to the Agouron stock options and shall use its reasonable efforts
to maintain the effectiveness of such registration statement or registration
statements for so long as such Agouron stock options remain outstanding. Except
as provided in the merger agreement or as otherwise agreed by Agouron and
Warner-Lambert, each of Agouron's stock option plans providing for the issuance
or grant of Agouron stock options will be assumed as of the effective time by
Warner-Lambert with such amendments thereto as may be required to reflect the
merger.
CONDITIONS TO THE MERGER
CONDITIONS TO EACH PARTY'S OBLIGATIONS TO CONSUMMATE THE MERGER. The
respective obligations of Agouron, Warner-Lambert and its subsidiary
participating in the merger to effect the merger are subject to the fulfillment,
at or prior to the effective time, of the following conditions, unless waived by
the parties:
- SHAREHOLDER APPROVAL. The merger agreement and the transactions
contemplated thereby shall have been approved and adopted by the requisite
vote of the shareholders of Agouron under applicable law and applicable
listing requirements;
- STOCK EXCHANGE LISTING. The shares of Warner-Lambert stock issuable in the
merger and those to be reserved for issuance upon exercise of stock
options shall have been authorized for listing on the New York Stock
Exchange;
- HSR ACT. The waiting period applicable to consummation of the merger under
the HSR Act shall have expired or been terminated;
- EFFECTIVE REGISTRATION STATEMENT. The Registration Statement on Form S-4
filed by Warner-Lambert shall have become effective, and no stop order
suspending such effectiveness shall have been issued and remain in effect
and no proceeding for that purpose shall have been instituted by the SEC
or any state regulatory authorities;
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- NO PROCEEDINGS. No governmental order, writ, injunction or decree shall be
in effect, and no governmental proceeding or action shall have been
instituted before any governmental body that would make the merger illegal
or otherwise would prohibit the consummation of the merger; and
- ACCOUNTANT'S LETTER. Agouron's independent public accountants shall have
issued a letter to Agouron stating that Agouron is an entity eligible to
engage in a pooling of interests transaction, and Warner-Lambert's
independent public accountants shall have issued a letter to Warner-
Lambert stating that accounting for the merger as a pooling of interests
is appropriate.
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF AGOURON. The obligation of
Agouron to effect the merger is further subject to the fulfillment, at or prior
to the effective time, of the following additional conditions, unless waived by
Agouron:
- PERFORMANCE OF OBLIGATIONS/REPRESENTATIONS AND WARRANTIES. Warner-Lambert
and its subsidiary participating in the merger shall have performed and
complied with all their agreements and covenants in the merger agreement,
and the representations and warranties of Warner-Lambert and its
subsidiary participating in the merger contained in the merger agreement
shall be true and correct when made and on and as of the closing date as
if made at and as of such date, except for any inaccuracies or failures to
perform that would not reasonably be expected to have a material adverse
effect on Warner-Lambert;
- TAX OPINION. Agouron shall have received a written opinion of Shearman &
Sterling that: (i) the merger will constitute a reorganization within the
meaning of Section 368(a) of the Internal Revenue Code and (ii) Agouron,
Warner-Lambert and its subsidiary participating in the merger will each be
a party to the reorganization within the meaning of Section 368(b) of the
Internal Revenue Code. See "The Merger--Material Federal Income Tax
Consequences"; and
- NO MATERIAL ADVERSE EFFECT. At any time on or after the date of the merger
agreement, except for any action which may arise out of the Advisory
Committee meeting related to REZULIN-Registered Trademark- held on March
26, 1999, no change, circumstance or event shall have occurred that has
had or would reasonably be expected to have a material adverse effect on
Warner Lambert's business, financial condition or ability to consummate
the merger.
ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF WARNER-LAMBERT AND ITS
SUBSIDIARY PARTICIPATING IN THE MERGER. The obligation of Warner-Lambert and its
subsidiary participating in the merger to effect the merger is further subject
to the fulfillment, at or prior to the effective time, of the following
additional conditions, unless waived by Warner-Lambert and its subsidiary
participating in the merger:
- PERFORMANCE OF OBLIGATIONS/REPRESENTATIONS AND WARRANTIES. Agouron shall
have performed and complied with all its agreements and covenants in the
merger agreement, and the representations and warranties of Agouron
contained in the merger agreement shall be true and correct when made and
on and as of the closing date as if made at and as of such date, except
for any inaccuracies or failures to perform that would not reasonably be
expected to have a material adverse effect on Agouron;
- TAX OPINION. Warner-Lambert shall have received a written opinion of
McDermott, Will & Emery that: (i) the merger will constitute a
reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and (ii) Agouron, Warner-Lambert and its subsidiary
participating in the merger will each be a party to the reorganization
within the meaning of Section 368(b) of the Internal Revenue Code. See
"The Merger--Material Federal Income Tax Consequences";
- NO MATERIAL ADVERSE EFFECT. At any time on or after the date of the merger
agreement, no change, circumstance or event shall have occurred that has
had or would reasonably be expected to have a material adverse effect on
Agouron's business, financial condition, ability to
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consummate the merger or on the development of its investigational
compounds, which include AG3340, Remune-TM-, AG1549, AG7088 and AG1776, or
the marketing of VIRACEPT-Registered Trademark-;
- RIGHTS AGREEMENT. No triggering event of Agouron's shareholders' rights
plan shall have occurred; and
- DISSENTING AGOURON SHARES. Holders of less than 5% of all shares of
Agouron stock outstanding as of the date of the special meeting shall have
demanded dissenters' rights under Chapter 13 of the CGCL.
REPRESENTATIONS AND WARRANTIES OF WARNER-LAMBERT AND AGOURON
The merger agreement contains various customary representations and
warranties of Agouron and Warner-Lambert relating to, among other things:
- proper organization and good standing of Agouron, Warner-Lambert and their
respective subsidiaries;
- the capitalization of Agouron and Warner-Lambert;
- the corporate authorization and enforceability of the merger agreement;
- the filing of SEC reports and the preparation of financial statements;
- the absence of any undisclosed liabilities;
- the absence of certain material adverse changes or events;
- litigation;
- this Proxy Statement/Prospectus;
- compliance with laws;
- the classification of the merger as a reorganization under the Internal
Revenue Code;
- the classification of the merger as a pooling of interests transaction;
- environmental matters;
- brokers and finders; and
- the opinion of a financial advisor.
The merger agreement contains additional customary representations and
warranties of Agouron relating to:
- taxes;
- employee benefit matters;
- labor controversies;
- intellectual property matters;
- the required shareholder vote for the approval of the merger;
- the opinion of a financial advisor;
- affiliate transactions;
- material contract defaults;
- insurance;
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- Year 2000 compliance;
- development of the investigational compounds and the marketing of
VIRACEPT-Registered Trademark-; and
- compliance with the Generic Drug Enforcement Act.
CONDUCT OF THE BUSINESS OF WARNER-LAMBERT AND AGOURON PRIOR TO THE MERGER
Pursuant to the merger agreement, Agouron has agreed that, prior to the
effective time or earlier termination of the merger agreement, it shall, and
shall cause each of its subsidiaries to:
- conduct their respective businesses in the ordinary course of business and
consistent with past practice;
- use all reasonable efforts to preserve intact their respective business
organizations and goodwill, keep available the service of their respective
present officers, significant employees and consultants of Agouron,
preserve the goodwill and business relationships with customers and others
having business relationships with them;
- not amend or propose to amend their respective organizational documents;
- not issue, deliver, sell, pledge, dispose of or encumber any shares of any
class of capital stock, any options, other rights of any kind to acquire
any shares of capital stock, or any other ownership interest, of Agouron
or any of its subsidiaries, except for the issuance of up to 6,108,552
shares of Agouron stock issuable in accordance with the terms of Agouron
stock option plans outstanding as of December 31, 1998;
- not deliver, sell, pledge, dispose of or encumber any assets of Agouron or
any of its subsidiaries, except for sales of products pursuant to existing
contracts in the ordinary course of business;
- not declare, set aside or pay any dividend or distribution payable in
cash, stock, property or otherwise;
- not split, combine or reclassify, repurchase or redeem their outstanding
capital stock;
- not adopt a plan of liquidation, dissolution, merger, consolidation,
restructuring, recapitalization or other reorganization, other than the
merger;
- not incur any indebtedness or issue any debt securities other than
borrowings incurred with the prior written consent of Warner-Lambert up to
$5,000,000;
- not take any action that would jeopardize the treatment of the merger as a
pooling of interests under APB opinion No. 16, applicable rules and
authoritative literature;
- not take any action that would cause the merger not to qualify as a
reorganization under Section 368(a) of the Internal Revenue Code;
- not make any acquisition of any assets or businesses other than
expenditures for current assets in the ordinary course of business;
- not enter into any agreement as licensee or licensor;
- not enter into or amend any contract, agreement, commitment or arrangement
with respect to any of the foregoing actions;
- not enter into any material contract or agreement or amend or terminate
joint venture arrangements;
- not enter into any commitments or transactions material to Agouron and its
subsidiaries;
- not settle or compromise any material pending suit, action or claim;
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- not authorize any single capital expenditure which is in excess of
$300,000 or capital expenditures which are, in the aggregate, in excess of
$750,000 for Agouron and its subsidiaries other than those expenditures
planned for in Agouron's fiscal 1999 budget;
- not increase the compensation of directors or executive officers, except
in the ordinary course of business and consistent with past practice or as
required by an existing agreement, or otherwise increase employee
benefits;
- not make changes in accounting methods, except as required by GAAP;
- not make any tax election or settle any material tax liability;
- not pay, discharge or satisfy any claims, liabilities or obligations,
except in the ordinary course of business and consistent with past
practice;
- not effectuate a plant closing or mass layoff affecting any site of
employment, facility, operating unit or employee;
- maintain insurance, with financially responsible insurance companies, on
its tangible assets and its businesses in such amounts and against such
risks and losses as are consistent with past practice;
- not amend, modify or waive any provision of its rights agreement, except
as provided in the merger agreement, and not take any action to redeem the
rights or render the rights inapplicable to any transaction, other than
the merger; and
- notify and consult with Warner-Lambert:
- after receipt from or submission of any material communication with the
FDA with respect to VIRACEPT-Registered Trademark- or any of Agouron's
investigational compounds;
- prior to making any material change to a study protocol, the addition
of new trials, or to a development timeline for the investigational
compounds; and
- prior to making any material public announcement with respect to
VIRACEPT-Registered Trademark- or any of the investigational compounds.
Pursuant to the merger agreement, Warner-Lambert has agreed that prior to
the effective time or earlier termination of the merger agreement, it shall, and
shall cause each of its subsidiaries to:
- conduct their respective businesses in the ordinary course of business and
consistent with past practice;
- not amend or propose to amend their respective certificate of
incorporation or bylaws;
- not combine or reclassify their outstanding capital stock;
- not issue or authorize the issuance of any securities in substitution for
their capital stock;
- not take any action that would jeopardize the treatment of the merger as a
pooling of interests under APB No. 16, applicable rules and authoritative
literature; and
- not take any action which, it believes, would cause the merger not to
qualify as a reorganization under Section 368(a) of the Internal Revenue
Code.
NO SOLICITATION OF ACQUISITION TRANSACTIONS
The merger agreement provides that prior to the effective time or earlier
termination of the merger agreement, Agouron shall not, and shall not permit any
of its subsidiaries to, initiate, solicit,
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negotiate, encourage, facilitate or provide confidential information to
facilitate any acquisition proposals consisting of:
- a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving it or any of its subsidiaries, or
- any purchase or sale of all or any substantial part of the business or
properties of Agouron or 10% or more of the capital stock of Agouron or
its subsidiaries.
In addition, Agouron shall not, and shall use its reasonable efforts to
cause any officer, director or employee of Agouron, or any attorney, accountant,
investment banker, financial advisor or any other agent retained by it or any of
its subsidiaries not to, negotiate or provide nonpublic or confidential
information to facilitate an acquisition proposal. However, if the Agouron board
determines in good faith, based on written advice of its outside legal counsel,
that it is obligated by its fiduciary duties in accordance with California law,
it may:
- take and disclose to Agouron's shareholders a position concerning a third
party tender offer contemplated by Rule 14e-2 under the Exchange Act; or
- engage in any discussions or negotiations with, or provide information to,
any person in response to an unsolicited bona fide written acquisition
proposal, with the party pursuing the acquisition proposal executing a
confidentiality agreement.
The merger agreement requires that the Agouron board promptly notify
Warner-Lambert after receipt of any acquisition proposal, indication of interest
or request for nonpublic information relating to Agouron or its subsidiaries in
connection with an acquisition proposal or for access to the properties, books
or records of Agouron or any subsidiary by any person or entity that informs the
Agouron board or the board of directors of such subsidiary that it is
considering making, or has made, an acquisition proposal. Such notice to
Warner-Lambert shall indicate in reasonable detail the identity of the offeror
and the terms and conditions of such proposal, inquiry or contact.
CONDUCT OF THE BUSINESS OF THE COMBINED COMPANIES FOLLOWING THE MERGER
Following the merger, Agouron will be a wholly owned subsidiary of
Warner-Lambert. Pursuant to the merger agreement, the certificate of
incorporation of Agouron, as in effect immediately prior to the effective time,
shall be amended as of the effective time and shall be the certificate of
incorporation of the surviving corporation and thereafter may be amended in
accordance with its terms as provided in the CGCL. Pursuant to the merger
agreement, the bylaws of the Warner-Lambert subsidiary participating in the
merger as in effect immediately prior to the effective time shall be the bylaws
of Agouron as the surviving corporation.
AFFILIATE AGREEMENTS
Each of Warner-Lambert and Agouron has agreed to provide to the other party
a letter identifying all persons who, in the opinion of Warner-Lambert or
Agouron, as the case may be, may be deemed affiliates of such party for purposes
of Rule 145 under the Securities Act or for purposes of the applicable SEC
accounting releases with respect to pooling-of-interest accounting treatment.
Each of Warner-Lambert and Agouron has further agreed to use its reasonable best
efforts to deliver to the other party, not less than 30 days prior to the
effective time, a letter from each such affiliate agreeing, among other things,
to abide by certain transfer restrictions pursuant to Rule 145 and the
accounting releases. Warner-Lambert has agreed to use its best reasonable
efforts to publish, no later than 60 days after the end of the first full month
following the merger, certain combined sales and net income figures.
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TERMINATION, AMENDMENT OR WAIVER
TERMINATION. The merger agreement may be terminated at any time prior to
the closing date, whether before or after the approval by the shareholders of
Agouron:
- by the mutual written consent of Agouron and Warner-Lambert;
- by either Warner-Lambert or Agouron if:
- the merger is not completed by the termination date, which is October 31,
1999, so long as the delay or default was not on the part of the
terminating party;
- any required approval of the merger or merger agreement by the
shareholders of Agouron is not obtained due to the failure to obtain the
required vote at the special meeting;
- the merger is restrained, enjoined or otherwise prohibited by a final,
unappealable court order;
- upon a material breach of a representation or warranty of the
non-terminating party contained in the merger agreement which has not
been cured in all material respects and which has caused certain
conditions to the obligations of the terminating party to effect the
merger to be incapable of being satisfied by the termination date; or
- the non-terminating party:
- fails to perform or comply with in any material respect any of its
material covenants in the merger agreement; and
- does not cure such default in all material respects within 30 days
after written notice of such default specifying such default in
reasonable detail is given to the non-terminating party by the
terminating party;
- by Warner-Lambert if:
- the Agouron board has failed to recommend or withdrawn, modified or
amended in any respect adverse to Warner-Lambert or its subsidiary
participating in the merger its approval or recommendation of the merger,
the merger agreement or any of the other transactions contemplated in the
merger agreement;
- the Agouron board has approved or recommended an acquisition proposal;
- Agouron materially breaches any of its agreements described in "--No
Solicitation of Acquisition Transactions" above; or
- any person or group other than Warner-Lambert, its subsidiary
participating in the merger or any of their affiliates, shall have become
the beneficial owner of at least 20% of the outstanding shares of Agouron
stock or shall have acquired 20% or more of the assets of Agouron and its
subsidiaries; and
- by Agouron if, as a result of an acquisition proposal, the Agouron board
determines, in good faith and after receipt of written advice of its
outside legal counsel, that the directors are obligated by their fiduciary
duties under California law to terminate the merger agreement and approve
the acquisition proposal, provided that such termination shall not be
effective until Warner-Lambert has received the termination fee required
to be paid by Agouron pursuant to the merger agreement.
AMENDMENT. The merger agreement may not be amended except by action taken
by the parties' respective boards of directors and then only by an instrument in
writing signed on behalf of each party and in compliance with applicable law.
Such amendment may take place at any time prior to the
41
<PAGE>
closing date, and, subject to applicable law, whether before or after approval
by the shareholders of Agouron.
WAIVER. At any time prior to the effective time, either party to the merger
agreement may, to the extent legally allowed:
- extend the time for the performance of any of the obligations or other
acts of the other party thereto,
- waive any inaccuracies in the representations and warranties of the other
party contained therein or in any document delivered pursuant thereto and
- waive compliance by the other party with any of the agreements or
conditions contained therein.
TERMINATION FEE
Agouron has agreed to pay a termination fee to Warner-Lambert equal to $60
million if:
- Warner-Lambert terminates the merger agreement because:
- the Agouron board has failed to recommend or withdrawn, modified or
amended in any respect adverse to Warner-Lambert or its subsidiary
participating in the merger its approval or recommendation of the merger,
the merger agreement or any of the other transactions contemplated in the
merger agreement;
- the Agouron board has approved or recommended an acquisition proposal;
- Agouron materially breached any of its agreements described in "--No
Solicitation of Acquisition Transactions" above; or
- any person or group other than Warner-Lambert, its subsidiary
participating in the merger or any of their affiliates, shall have become
the beneficial owner of at least 20% of the outstanding shares of Agouron
stock or shall have acquired 20% or more of the assets of Agouron and its
subsidiaries;
- Agouron terminates the merger agreement because as a result of an
acquisition proposal, the Agouron board determined, in good faith and
after receipt of written advice of its outside legal counsel, that the
directors were obligated by their fiduciary duties under California law to
terminate the merger agreement and approve the acquisition proposal,
provided that such termination shall not be effective until Warner-Lambert
has received the termination fee required to be paid by Agouron pursuant
to the merger agreement;
- either Warner-Lambert or Agouron terminates the merger agreement because:
- any required approval of the merger or merger agreement by the
shareholders of Agouron was not obtained due to the failure to obtain the
required vote at the special meeting and an alternative transaction was
publicly outstanding and not withdrawn prior to the special meeting; and
- with respect to such alternative transaction, Agouron entered into an
agreement or consummated an alternative transaction within 12 months of
termination; or
- Warner-Lambert terminates the merger agreement:
- upon a material breach of a representation or warranty by Agouron
contained in the merger agreement which had not been cured in all
material respects and which had caused certain conditions to the
obligations of Agouron to effect the merger to be incapable of being
satisfied by the termination date and such breach was not cured within 30
days after written
42
<PAGE>
notice to Agouron, and an alternative transaction was publicly
outstanding and not withdrawn prior to the special meeting; and
- with respect to such alternative transaction, Agouron entered into an
agreement or consummated an alternative transaction within 12 months of
termination.
EXPENSES
The merger agreement provides that Agouron will pay all of Warner-Lambert's
costs and expenses incurred in connection with the merger up to a maximum of $10
million if:
- Warner-Lambert terminates the merger agreement because:
- the Agouron board has failed to recommend or withdrawn, modified or
amended in any respect adverse to Warner-Lambert or its subsidiary
participating in the merger its approval or recommendation of the merger,
the merger agreement or any of the other transactions contemplated in the
merger agreement;
- the Agouron board has approved or recommended an acquisition proposal;
- Agouron materially breaches any of its agreements described in "--No
Solicitation of Acquisition Transactions" above; or
- any person or group other than Warner-Lambert, its subsidiary
participating in the merger or any of their affiliates, shall have become
the beneficial owner of at least 20% of the outstanding shares of Agouron
stock or shall have acquired 20% or more of the assets of Agouron and its
subsidiaries;
- Agouron terminates the merger agreement because as a result of an
acquisition proposal, the Agouron board determined, in good faith and
after receipt of written advice of its outside legal counsel, that the
directors were obligated by their fiduciary duties under California law to
terminate the merger agreement and approve the acquisition proposal,
provided that such termination shall not be effective until Warner-Lambert
has received the termination fee required to be paid by Agouron pursuant
to the merger agreement;
- either Warner-Lambert or Agouron terminates the merger agreement because
any required approval of the merger or merger agreement by the
shareholders of Agouron was not obtained due to the failure to obtain the
required vote at the special meeting and an alternative transaction was
publicly outstanding and not withdrawn prior to the special meeting; or
- Warner-Lambert terminates the merger agreement upon a material breach of a
representation or warranty by Agouron contained in the merger agreement
which had not been cured in all material respects and which had caused
certain conditions to the obligations of Agouron to effect the merger to
be incapable of being satisfied by the termination date and such breach
was not cured within 30 days after written notice to Warner-Lambert, and
the Agouron Board was aware of an alternative transaction and the
alternative transaction was not withdrawn prior to the breach.
Otherwise, the merger agreement provides that all costs and expenses
incurred in connection with the merger agreement and the transactions
contemplated thereby shall be paid by the party incurring such expenses, except
that those expenses incurred in connection with printing and filing this Proxy
Statement/Prospectus shall be shared equally by Warner-Lambert and Agouron.
INDEMNIFICATION AND INSURANCE
The merger agreement provides that following the merger, Agouron as the
surviving corporation will compensate for the losses of and hold harmless, and
provide advancement of expenses to, all past
43
<PAGE>
and present directors, officers and employees of Agouron and their subsidiaries
to the same extent such persons are compensated for loss or have the right to
advancement of expenses pursuant to Agouron's certificate of incorporation,
by-laws or other indemnification agreements, for acts or omissions occurring at
or prior to the merger including for acts or omissions occurring in connection
with the approval of the merger agreement and the merger and other transactions
contemplated thereby.
Following the merger, the surviving corporation will maintain for a period
of six years the current policies of directors' and officers' liability
insurance and fiduciary liability insurance maintained by Agouron, or policies
of at least the same coverage and amounts containing terms and conditions which
are, in the aggregate, no less advantageous to the insured, with respect to
claims arising from facts or events that occurred on or before the merger. In no
event will the surviving corporation be required to spend in any one year an
amount more than 200% of the annual premiums currently paid by Agouron for such
insurance, and if the annual premiums of such insurance coverage exceed such
amount, the surviving corporation will be obligated to obtain a policy with the
greatest coverage available for a cost not exceeding such amount.
STOCK OPTION AGREEMENT
As a condition and inducement to entering into the merger agreement, Agouron
granted to Warner-Lambert an option to purchase shares of its common stock equal
to 19.9% of its currently outstanding shares pursuant to a stock option
agreement. Because the description of the stock option agreement contained in
this Proxy Statement/Prospectus is a summary, it does not contain all the
information that may be important to you. You should carefully read the entire
copy of the stock option agreement attached as Annex B to this Proxy
Statement/Prospectus.
TERMS OF THE OPTION
NUMBER OF SHARES AND EXERCISE PRICE. Under the stock option agreement,
Agouron has granted to Warner-Lambert an option to purchase up to 19.9% of
Agouron stock at an exercise price per share equal to $60.00.
The number and type of securities subject to the stock option and the
related exercise price will be adjusted for any change in or distribution in
respect of Agouron's stock by reason of a reclassification, recapitalization,
stock split, split-up, combination, exchange of shares, stock dividend, dividend
payable in any other securities, or any similar event so as to fully preserve
the economic benefits provided under the stock option agreement. The number of
shares of Agouron's stock subject to the stock option will also be adjusted in
the event Agouron issues additional shares of its stock such that the number of
shares of Agouron stock subject to the stock option, together with shares
previously purchased pursuant thereto, represents 19.9% of Agouron's stock then
issued and outstanding, without giving effect to shares subject to or issuable
pursuant to the stock option.
EXERCISE RIGHTS. Warner-Lambert may exercise the stock option in the event
that the merger agreement is terminated under circumstances which entitle
Warner-Lambert to receive a termination fee, as described in "The Merger
Agreement--Termination Fee" beginning on page 42. These purchase event
circumstances generally involve:
- the withdrawal or adverse modification of the Agouron board's
recommendation of the approval of the merger agreement or the approval or
recommendation by the Agouron board of an alternative acquisition
proposal;
- Agouron materially breaches any of its no-shop agreements set forth in the
merger agreement;
- any third party becoming the beneficial owner of at least 20% of the
outstanding shares of Agouron stock or acquiring 20% or more of the assets
of Agouron and its subsidiaries, taken as a whole;
44
<PAGE>
- if the Agouron board determines, in good faith and after receipt of
written advice of its outside legal counsel, that the directors are
obligated to terminate the merger agreement by their fiduciary duties in
accordance with California law;
- the Agouron shareholders do not approve the merger agreement provided that
an alternative transaction or the intention to propose an alternative
transaction shall have been publicly announced and not withdrawn prior to
the meeting of shareholders, and within 12 months of such termination
Agouron enters into an agreement with respect to an alternative
transaction or an alternative transaction is consummated; or
- a breach by Agouron of its representations, warranties, covenants or
agreements if the Agouron board was aware of the existence of an
alternative transaction or the intention to propose an alternative
transaction and such alternative transaction had not been withdrawn prior
to such breach, and within 12 months of such termination Agouron enters
into an agreement with respect to an alternative transaction or an
alternative transaction is consummated.
EXPIRATION. To the extent the stock option has not been exercised, the
stock option agreement will expire upon the earliest of:
- the merger,
- twelve months after the first purchase event or
- the termination of the merger agreement prior to a purchase event.
REPURCHASE AT THE OPTION OF WARNER-LAMBERT
Pursuant to the stock option agreement, Warner-Lambert has the right to
require Agouron to repurchase the stock option and any stock option shares of
Agouron stock purchased by Warner-Lambert pursuant to the stock option for a
period of 90 days after the occurrence of a purchase event followed by the
consummation of an alternative transaction pursuant to an acquisition proposal.
REPURCHASE PRICE. The price per share Agouron will pay upon a repurchase
event is equal to the higher of the highest price offered in a tender offer or
exchange offer or paid or to be paid by a third party in connection with:
- an acquisition proposal for shares of Agouron stock and
- the highest closing price of Agouron's stock for the prior business day,
minus, in the case of repurchase of the stock option, the exercise price.
REGISTRATION RIGHTS
Pursuant to the stock option agreement, Warner-Lambert has the right to
require Agouron to file up to two registration statements under the Securities
Act in order to permit the sale or other disposition of any stock option shares.
In addition, if Agouron files a registration statement for other shares of its
stock, Agouron will allow Warner-Lambert to participate in such registration,
subject to certain limitations. In connection with any registration described
above, Agouron and Warner-Lambert will provide to each other and any underwriter
of the offering customary representations, warranties, covenants,
indemnifications and contributions.
45
<PAGE>
SUBSTITUTE OPTION
The stock option shall be converted into a substitute option for shares of,
at the election of Warner-Lambert, either the surviving or acquiring entity if
Agouron enters into an agreement to:
- consolidate with or merge into any person in a transaction in which it is
not the surviving corporation or in which its common stock represents less
than 50% of the voting securities of the surviving corporation or
- sell all or substantially all of its assets.
The terms of the substitute option would be substantially identical to the
terms of the stock option, except that the substitute option would be
immediately exercisable and subject to immediate repurchase by Agouron at the
election of Warner-Lambert at the price specified in the stock option agreement.
LIMITATION OF PROFIT
Warner-Lambert's total profit under the stock option agreement shall in no
event exceed $60 million. The total profit under the stock option agreement is
the sum of any termination fee paid by Agouron to Warner-Lambert pursuant to the
merger agreement plus any net cash proceeds received by Warner-Lambert from the
transfer or sale of the stock option or any stock option shares.
EFFECT OF STOCK OPTION AGREEMENT
The stock option agreement increases the likelihood that the merger will be
consummated in accordance with the terms of the merger agreement. The stock
option agreement would have the effect of making an acquisition or other
combination of Agouron by or with a third party more costly because of the need
in any such transaction to acquire, account for or pay the price of the stock
option shares that would be issued under the stock option agreement. Agouron
believes that the exercisability of the stock option could prohibit any other
acquiror of Agouron during the next two years from accounting for any such
acquisition by using the pooling of interests accounting method. Accordingly,
the stock option agreement may discourage a third party who might be interested
in effecting such an acquisition or combination from considering or proposing
the transaction or may cause such third party to offer to pay a lower price than
such party would have proposed if pooling of interest accounting were available.
In addition, Warner-Lambert would have a significant stake in Agouron if it
exercised the stock option and held the stock.
46
<PAGE>
WARNER-LAMBERT UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL STATEMENTS
The following unaudited pro forma condensed combined balance sheet as of
December 31, 1998, illustrates the effect of the merger as if it had occurred on
December 31, 1998. The following unaudited pro forma condensed combined
statements of income (loss) for the three years ended December 31, 1998,
illustrates the effect of the merger as if it had occurred as of the earliest
date presented. There were no material differences between the accounting
policies of Warner-Lambert and Agouron and, therefore, no adjustments have been
made to the pro forma financial statements. The pro forma condensed combined
financial statements are presented for comparative purposes only and are not
necessarily indicative of the combined financial position or results of
operations of future periods or the results that actually would have been
realized had Warner-Lambert and Agouron been a single entity during the periods
presented.
Pursuant to the terms of the merger, each share of Agouron stock will be
converted into the right to receive one share of Warner-Lambert stock multiplied
by the exchange ratio. The pro forma condensed combined financial statements
have been derived from the respective historical audited and unaudited
consolidated financial statements of Warner-Lambert and Agouron and should be
read in conjunction with such financial statements and the notes thereto that
are incorporated herein by reference.
WARNER-LAMBERT
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) COMBINED
WARNER- AGOURON ------------
LAMBERT HISTORICAL
HISTORICAL ----------
------------ (1)(2)
(1)
<S> <C> <C> <C>
Net sales........................................................... $ 7,231,398 $ 68,023 $ 7,299,421
------------ ---------- ------------
Costs and expenses:
Costs of goods sold............................................... 2,346,919 -- 2,346,919
Selling, general and administrative............................... 3,115,789 15,521 3,131,310
Research and development.......................................... 554,840 97,230 652,070
Other expense (income), net....................................... 37,129 (6,145) 30,984
------------ ---------- ------------
6,054,677 106,606 6,161,283
------------ ---------- ------------
Income (loss) before income taxes and minority interests............ 1,176,721 (38,583) 1,138,138
Income tax provision................................................ 321,269 1,288 322,557
Minority interests.................................................. 68,979 -- 68,979
------------ ---------- ------------
Net income (loss)................................................... $ 786,473 $ (39,871) $ 746,602
------------ ---------- ------------
------------ ---------- ------------
Earnings (loss) per share:
Basic............................................................. $ 0.97 $ (1.69) $ 0.89(3)
------------ ---------- ------------
------------ ---------- ------------
Diluted........................................................... $ 0.95 $ (1.69) $ 0.88(3)(4)
------------ ---------- ------------
------------ ---------- ------------
Shares used in calculation of:
Basic............................................................. 813,660 23,662 834,494(3)
Diluted........................................................... 827,082 23,662 849,907(3)(4)
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
47
<PAGE>
WARNER-LAMBERT
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME (LOSS)
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) COMBINED
WARNER- AGOURON ------------
LAMBERT HISTORICAL
HISTORICAL ----------
------------ (1)(2)
(1)
<S> <C> <C> <C>
Net sales................................................................. $ 8,179,828 $ 295,959 $ 8,475,787
------------ ---------- ------------
Costs and expenses:
Costs of goods sold..................................................... 2,407,597 96,614 2,504,211
Selling, general and administrative..................................... 3,676,304 50,010 3,726,314
Research and development................................................ 672,221 112,455 784,676
Other expense (income), net............................................. 190,285 81,619 271,904
------------ ---------- ------------
6,946,407 340,698 7,287,105
------------ ---------- ------------
Income (loss) before income taxes......................................... 1,233,421 (44,739) 1,188,682
Income tax provision (benefit)............................................ 363,874 (37,488) 326,386
------------ ---------- ------------
Net income (loss)......................................................... $ 869,547 $ (7,251) $ 862,296
------------ ---------- ------------
------------ ---------- ------------
Earnings (loss) per share:
Basic................................................................... $ 1.07 $ (0.25) $ 1.03(3)
------------ ---------- ------------
------------ ---------- ------------
Diluted................................................................. $ 1.04 $ (0.25) $ 0.99(3)(4)
------------ ---------- ------------
------------ ---------- ------------
Shares used in calculation of:
Basic................................................................... 815,187 29,018 840,737(3)
Diluted................................................................. 839,190 29,018 867,669(3)(4)
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
48
<PAGE>
WARNER-LAMBERT
PRO FORMA CONDENSED COMBINED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) COMBINED
WARNER- AGOURON -------------
LAMBERT HISTORICAL
HISTORICAL ----------
------------- (1)(2)
(1)
<S> <C> <C> <C>
Net sales.............................................................. $ 10,213,736 $ 585,632 $ 10,799,368
------------- ---------- -------------
Costs and expenses:
Costs of goods sold.................................................. 2,629,323 231,915 2,861,238
Selling, general and administrative.................................. 4,788,114 69,264 4,857,378
Research and development............................................. 877,198 170,112 1,047,310
Other expense (income), net.......................................... 152,882 89,599 242,481
------------- ---------- -------------
8,447,517 560,890 9,008,407
------------- ---------- -------------
Income before income taxes............................................. 1,766,219 24,742 1,790,961
Income tax provision................................................... 512,204 5,630 517,834
------------- ---------- -------------
Net income............................................................. $ 1,254,015 $ 19,112 $ 1,273,127
------------- ---------- -------------
------------- ---------- -------------
Earnings per share:
Basic................................................................ $ 1.53 $ 0.62 $ 1.50
------------- ---------- -------------
------------- ---------- -------------
Diluted.............................................................. $ 1.48 $ 0.57 $ 1.45
------------- ---------- -------------
------------- ---------- -------------
Shares used in calculation of:
Basic................................................................ 819,971 31,064 847,323
Diluted.............................................................. 849,076 33,456 878,534
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
49
<PAGE>
WARNER-LAMBERT
PRO FORMA CONDENSED COMBINED BALANCE SHEET
AS OF DECEMBER 31, 1998
<TABLE>
<CAPTION>
PRO FORMA
(IN THOUSANDS) ADJUSTMENT COMBINED
WARNER- AGOURON ----------- ------------
LAMBERT HISTORICAL
HISTORICAL ----------
------------ (1)(2)
(1)
<S> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................. $ 911,333 $ 34,547 $ -- $ 945,880
Receivables, net...................................... 1,694,804 68,560 1,763,364
Inventories........................................... 888,384 104,419 992,803
Prepaid expenses and other current assets............. 607,770 42,333 650,103
------------ ---------- ----------- ------------
Total current assets.................................. 4,102,291 249,859 -- 4,352,150
Investments and other assets............................ 625,806 71,680 697,486
Property, plant and equipment, net...................... 2,775,288 46,557 2,821,845
Intangible assets....................................... 1,727,227 3,200 1,730,427
------------ ---------- ----------- ------------
$ 9,230,612 $ 371,296 $ -- $ 9,601,908
------------ ---------- ----------- ------------
------------ ---------- ----------- ------------
LIABILITIES & SHAREHOLDERS' EQUITY
Current liabilities:
Short-term debt....................................... $ 256,350 $ 7,880 $ -- $ 264,230
Accounts payable, trade............................... 1,575,201 24,858 1,600,059
Accrued compensation.................................. 225,086 8,247 233,333
Other current liabilities............................. 927,522 52,347 40,000(5) 1,019,869
Federal, state and foreign income taxes............... 245,790 2,447 248,237
------------ ---------- ----------- ------------
Total current liabilities............................. 3,229,949 95,779 40,000 3,365,728
Long-term liabilities:
Long-term debt........................................ 1,260,317 6,375 1,266,692
Other noncurrent liabilities.......................... 1,128,166 864 -- 1,129,030
------------ ---------- ----------- ------------
Total long-term liabilities........................... 2,388,483 7,239 -- 2,395,722
------------ ---------- ----------- ------------
Shareholders' equity:
Common stock.......................................... 961,982 366,626 (366,626)(3) 961,982
Capital in excess of par.............................. 182,282 -- 338,356(3) 520,638
Retained earnings (deficit)........................... 4,254,993 (98,187) (156,719) (5) 4,000,087
Treasury stock, at cost............................... (1,387,972) -- 144,989(3) (1,242,983)
Accumulated other comprehensive income................ (399,105) (161) -- (399,266)
------------ ---------- ----------- ------------
Total shareholders' equity............................ 3,612,180 268,278 (40,000) 3,840,458
------------ ---------- ----------- ------------
$ 9,230,612 $ 371,296 $ -- $ 9,601,908
------------ ---------- ----------- ------------
------------ ---------- ----------- ------------
</TABLE>
See accompanying notes to pro forma condensed combined financial statements.
50
<PAGE>
Notes to pro forma condensed combined financial statements (in thousands
except for per share amounts):
(1) These columns represent historical results of operations and financial
position.
(2) Warner-Lambert has a fiscal year ending December 31, and Agouron has a
fiscal year ending June 30. Accordingly, Agouron's financial data has been
conformed to Warner-Lambert's fiscal year end by combining financial results
for six-month periods ending June 30 and December 31. For example, Agouron's
1998 net income was conformed as follows:
<TABLE>
<S> <C>
Year ended June 30, 1998........................................... $ 13,154
Less: Six-months ended December 31, 1997........................... (8,552)
Add: Six-months ended December 31, 1998............................ 14,510
---------
Net income, year ended December 31, 1998........................... $ 19,112
---------
---------
</TABLE>
Agouron's financial results for the six-month periods ended December 31,
1995, 1996 and 1997 can be found in Agouron's applicable 10-Qs, as filed with
the SEC. Agouron's financial results for the six-month period ended December 31,
1998 can be found in Agouron's 10-Q which is incorporated by reference in the
section entitled "Where You Can Find More Information" on page 57.
(3) Amounts calculated assume an exchange ratio of 0.88049 shares of
Warner-Lambert stock for each share of Agouron stock, which was determined
by dividing $60.00 by Warner-Lambert's average closing price of $68.14 for
the ten-day trading period ended April 12, 1999. Pro forma adjustments were
made to the following shareholder's equity line items:
- Common stock reflects the elimination of Agouron's historical common
stock. Agouron shareholders will receive Warner-Lambert common stock upon
the finalization of the merger and Agouron common stock will no longer
exist.
- Capital in excess of par reflects the issuance of 28,270 shares of newly
issued Warner-Lambert common stock in exchange for Agouron common stock.
- Retained earnings includes a charge of $116,719 for the retirement of
28,270 shares of Warner-Lambert treasury stock, which represents the
excess of the cost of Warner-Lambert treasury stock over the par value of
Warner-Lambert common stock.
- Treasury stock reflects the elimination of 28,270 Warner-Lambert treasury
shares, which have been retired on a first-in, first-out cost basis.
(4) For the years ended December 31, 1996 and 1997, common stock equivalents
(pre-exchange ratio) of approximately 2,262 and 3,327 shares were not used
to calculate Agouron's diluted loss per share because of their anti-dilutive
effect. These common stock equivalents, adjusted for the exchange ratio,
were used to calculate pro forma combined diluted earnings per share for the
periods presented.
(5) It is estimated that merger-related costs of approximately $40,000 will be
incurred, consisting primarily of transaction costs for investment banker
fees, attorneys, accountants, financial printing, and other related charges.
The pro forma combined balance sheet as of December 31, 1998, gives effect
to transaction costs of the merger as if they had been incurred as of
December 31, 1998, but the pro forma combined statements of income (loss)
and per share data do not give effect to such expenses as they are
non-recurring in nature and accordingly, $40,000 is charged directly to
retained earnings.
51
<PAGE>
DESCRIPTION OF WARNER-LAMBERT CAPITAL STOCK
The information set forth below is a general summary of the capital stock
structure of Warner-Lambert. As a summary, this section is qualified and not a
substitute for the provisions of Warner-Lambert's Restated Certificate of
Incorporation, as amended, Warner-Lambert's By-laws, as amended, and
Warner-Lambert's Amended and Restated Rights Agreement referred to below, all of
which are on file with the SEC.
AUTHORIZED CAPITAL STOCK
Warner-Lambert's authorized capital stock consists of 1,200,000,000 shares
of common stock, par value $1.00 per share, and 5,000,000 shares of preferred
stock, par value $1.00 per share.
COMMON STOCK
As of April 12, 1999, 823,015,553 shares of Warner-Lambert common stock were
outstanding. In addition, 138,966,055 shares of Warner-Lambert common stock were
held in the treasury of Warner-Lambert, and 172,847,283 shares of Warner-Lambert
common stock were reserved for issuance pursuant to Warner-Lambert's employee
benefit plans. On a pro forma basis immediately following the merger 851,285,360
shares of Warner-Lambert common stock will be outstanding and 180,296,085 shares
of Warner-Lambert common stock will be reserved for issuance pursuant to
Warner-Lambert's employee benefit plans.
The holders of Warner-Lambert common stock are entitled to receive ratably,
from funds legally available for the payment thereof, dividends when and as
declared by resolution of the Warner-Lambert board, subject to any preferential
dividend rights which may be granted to holders of any preferred stock
authorized and issued by the Warner-Lambert board. Traditionally, Warner-Lambert
has declared and paid dividends each quarter since 1926. In the event of
liquidation, each share of Warner-Lambert stock is entitled to share pro rata in
any distribution of Warner-Lambert's assets after payment or providing for the
payment of liabilities and any liquidation preference of any preferred stock
authorized and issued by the Warner-Lambert board. Each holder of Warner-Lambert
common stock is entitled to one vote for each share of Warner-Lambert common
stock held of record on the applicable record date on all matters submitted to a
vote of shareholders, including the election of directors.
Holders of Warner-Lambert common stock have no cumulative voting rights or
preemptive rights to purchase or subscribe for any stock or other securities,
and there are no conversion rights or redemption rights or sinking fund
provisions with respect to Warner-Lambert common stock. The outstanding shares
of Warner-Lambert common stock are, and the shares of Warner-Lambert common
stock issued pursuant to the merger will be, duly authorized, validly issued,
fully paid and nonassessable.
PREFERRED STOCK
As of April 12, 1999, no shares of preferred stock were outstanding. 400,000
shares are designated Series A Junior Participating preferred stock and reserved
for issuance upon exercise of the rights distributed to the holders of
Warner-Lambert stock pursuant to the Warner-Lambert's rights agreement referred
to below.
The Warner-Lambert board has the authority, without further shareholder
approval to create other series of preferred stock, to issue shares of preferred
stock in such series up to the maximum number of shares of the relevant class of
preferred stock authorized, and to determine the preferences, rights, privileges
and restrictions of any such series, including the dividend rights, voting
rights, rights and terms of redemption, liquidation preferences, the number of
shares constituting any such series and the designation of such series.
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TRANSFER AGENT AND REGISTRAR
First Chicago Trust Company, a division of EquiServe, is the transfer agent
and registrar for the Warner-Lambert stock.
STOCK EXCHANGE LISTING
The Warner-Lambert stock is listed on the New York Stock Exchange under the
symbol "WLA." Warner-Lambert will cause the shares of Warner-Lambert stock
issuable in the merger to be approved for listing on the New York Stock Exchange
on or prior to the merger, subject to official notice of issuance.
RIGHTS AGREEMENT
Warner-Lambert has adopted the Amended and Restated Rights Agreement, dated
as of March 25, 1997, which provides for the issuance of one-third of a right to
the holder of each share of Warner-Lambert stock. Ten days after any person or
group acquires or announces its intention to acquire 15% or more of the
outstanding Warner-Lambert stock, each Warner-Lambert right will entitle the
holder, other than the acquiring person or group, to purchase one one-thousandth
of a share of Series A Junior Participating preferred stock, $1.00 par value, at
an exercise price of $400 subject to certain antidilution adjustments.
If a person or group announces its intention to acquire 15% or more of the
outstanding Warner-Lambert stock or if Warner-Lambert is acquired in a merger or
other business combination or sells 50% or more of its assets or earning power,
each Warner-Lambert right, other than a Warner-Lambert right beneficially owned
by the acquiring person or group, which will be void, will entitle the holder to
purchase, at the exercise price, common stock of the acquiring person or group
having a current market value of two times the exercise price of the right.
Prior to a person or group acquiring 50% or more of the outstanding
Warner-Lambert stock, the Warner-Lambert board may also elect to issue a share
of Warner-Lambert stock in exchange for each Warner-Lambert right, other than
Warner-Lambert rights held by the acquiring person or group.
The Warner-Lambert rights expire on March 25, 2007, unless this expiration
date is extended or the Warner-Lambert rights are exchanged or redeemed by
Warner-Lambert before such date. Prior to an announcement by a person or group
of its intent to acquire 15% or more of the outstanding Warner-Lambert stock,
Warner-Lambert may redeem the Warner-Lambert rights in whole, but not in part,
for $0.01 per Warner-Lambert right, or it may amend the Warner-Lambert rights
agreement in any way without the consent of the holders of the Warner-Lambert
rights.
COMPARISON OF SHAREHOLDER RIGHTS
As a result of the merger, holders of Agouron stock will become holders of
Warner-Lambert stock. The following is a summary of certain of the material
differences between the rights of holders of Agouron stock and the rights of
holders of Warner-Lambert stock. Agouron is organized under the laws of the
State of California, while Warner-Lambert is organized under the laws of the
State of Delaware. Such differences arise from differences between the
California and Delaware state laws, as well as under the various provisions of
the Agouron articles of incorporation and bylaws and the Warner-Lambert
certificate of incorporation and bylaws.
The following summary does not purport to be a complete statement of the
rights of holders of Warner-Lambert stock and Agouron stock. You should also
refer to the Delaware General Corporation Law, or the DGCL, the CGCL, and the
certificates of incorporation and bylaws of Warner-Lambert and Agouron. See
"Description of Warner-Lambert Capital Stock" for a summary of certain other
rights relating to the Warner-Lambert stock.
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ELECTION, NUMBER, CLASSIFICATION AND REMOVAL OF DIRECTORS
The number of directors of Warner-Lambert shall be fixed by the
Warner-Lambert board and shall not be less than seven nor more than twenty. The
Warner-Lambert board is not divided into separate classes. Directors serve until
the next annual meeting of shareholders and until their successors are elected
and qualified.
The number of directors of Agouron shall not be less than six nor more than
eleven. The Agouron board is currently fixed at nine directors.
Warner-Lambert's certificate of incorporation does not provide for
cumulative voting of directors, which is consistent with the Delaware General
Corporation Law, or the DGCL. Under the CGCL, with limited exceptions
inapplicable to Agouron, any shareholder of a corporation is entitled to
cumulate his votes for the election of directors provided that at least one
shareholder has given notice at the meeting prior to the voting of such
shareholder's intention to cumulate his or her votes. Cumulative votes may only
be cast for candidates who have been nominated before the voting. Accordingly,
Agouron shareholders are entitled to cumulative votes for the election of
directors.
Any one or more of the directors of Warner-Lambert may be removed from
office at any time, by the holders of a majority of the shares then entitled to
vote in an election of directors. The Agouron board is not divided into separate
classes of directors. Directors serve until the next annual meeting of
shareholders and until their successors are elected and qualified. Under the
CGCL, the holders of at least 10% of the number of outstanding shares of any
class of stock may initiate a court action to remove any director for cause. In
addition, any or all of the directors of a California corporation may be removed
without cause by the affirmative vote of a majority of the outstanding shares
entitled to vote. Unless the entire board is removed, however, no director may
be removed when the votes cast against removal would be sufficient to elect the
director if voted cumulatively at an election at which the same total number of
votes were cast and the entire number of the directors authorized at the time of
the director's most recent election were then being elected.
ADVANCE NOTICE OF SHAREHOLDER PROPOSALS
The bylaws of Warner-Lambert provide that a shareholder must give advance
written notice if the shareholder intends to bring any business before a meeting
of shareholders or to make nominations for the board of directors.
The bylaws of Warner-Lambert require that, for business to be properly
brought by a shareholder before an annual meeting, notice must be delivered to
or mailed by the shareholder and received by Warner-Lambert not less than 120
days prior to the anniversary of the prior year's annual meeting or not later
than ten days after notice or public disclosure of the date of the annual
meeting shall be given or made to shareholders, whichever date is earlier.
For nominations of directors to the Warner-Lambert board, notice must be
delivered to or mailed by the shareholder and received by Warner-Lambert not
later than
- with respect to an election to be held at an annual meeting of
shareholders, 120 days prior to the anniversary of the prior year's annual
meeting and
- with respect to an election to be held at a special meeting of
shareholders for the election of directors, seven days following the date
on which notice shall be given to shareholders.
RIGHT TO CALL SPECIAL MEETINGS
The bylaws of Warner-Lambert provide that special meetings of shareholders
may be called by the chairman, the president or by a majority of directors.
Under the CGCL, a special meeting of shareholders may be called by the board
of directors, the chairman of the board, the president or the holders of shares
entitled to cast not less than 10% of the
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votes at the meeting, or by such additional persons as may be provided in the
charter or bylaws. Neither the Agouron articles nor its bylaws permit any other
person to call a special meeting.
SHAREHOLDER ACTION BY WRITTEN CONSENT
Unless otherwise provided in the charter, under the DGCL, any action which
is required to be taken or may be taken at a meeting of shareholders, including
the election of directors, may be taken by a written consent signed by the
holders of outstanding stock having not less than the minimum number of votes
that would be necessary to take such action at a meeting. Warner-Lambert's
certificate of incorporation contains no provisions to the contrary.
Under the CGCL and Agouron's bylaws, any action which may be taken at a
meeting of shareholders may also be taken by the written consent of the holders
of at least the same proportion of outstanding shares as would be necessary to
take such action at a meeting at which all shares entitled to vote were present
and voted, except that the election of directors by written consent generally
requires the unanimous consent of all shares entitled to vote.
TRANSACTIONS WITH INTERESTED SHAREHOLDER; DGCL SECTION 203 AND CGCL SECTION 1203
Warner-Lambert is subject to Section 203 of the DGCL. Under Section 203, an
interested stockholder, defined generally as a person owning 15% or more of a
corporation's outstanding voting stock, is prevented from engaging in a business
combination with the corporation for three years after becoming an interested
stockholder unless:
- the board approved the transaction in which the interested stockholder
became an interested stockholder;
- the interested stockholder owns more than 85% of the stock after the
consummation of the transaction in which the stockholder became
interested; or
- the board approves the business combination and 2/3 of the outstanding
voting stock of the corporation not owned by the interested stockholder
approves the business combination.
Agouron is subject to Section 1203 of the CGCL. Under Section 1203, if a
tender offer or a written proposal for approval of a reorganization or for a
sale of assets is made to some or all of a corporation's shareholders by an
"interested party," an affirmative opinion in writing as to the fairness of the
consideration to the shareholders of that corporation shall be delivered as
follows:
- if no shareholder approval or acceptance is required for the consummation
of the transaction, the opinion shall be delivered to the corporation's
board of directors not later than the time that consummation of the
transaction is authorized and approved by the board of directors;
- if a tender offer is made to the corporation's shareholders, the opinion
shall be delivered to the stockholders at the time that the tender offer
is first made in writing to the shareholders;
- if a shareholders' meeting is to be held to vote on approval of the
transaction, the opinion shall be delivered to the shareholders with the
notice of the meeting;
- if consents of all shareholders entitled to vote are solicited in writing,
the opinion shall be delivered at the same time as that solicitation; or
- if the consents of all shareholders are not solicited in writing, the
opinion shall be delivered to each shareholder whose consent is solicited
prior to that shareholder's consent being given, and to all other
shareholders at the time they are given notice of any shareholder approval
by less than unanimous written consent.
An "interested party" as defined in Section 1203 means a person who is a
party to the transaction and:
- directly or indirectly controls the corporation that is the subject of the
tender offer or proposal;
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- is, or is directly or indirectly controlled by, an officer or director of
the subject corporation; or
- is an entity in which a material financial interest is held by any
director or executive officer of the subject corporation.
AMENDMENT OF CHARTER/ARTICLES AND BYLAWS
AMENDMENT OF CHARTER. The Warner-Lambert certificate of incorporation may
be amended by a vote of a majority of the outstanding shares of Warner-Lambert
stock.
The CGCL contains a similar provision. The vote of a majority of the
outstanding shares of Agouron stock entitled to vote thereon, and the vote of a
majority of the outstanding shares of Agouron stock of each class entitled to
vote thereon as a class, are necessary to approve an amendment to the Agouron
articles.
AMENDMENT OF BYLAWS. The Warner-Lambert board may adopt, amend or repeal
the bylaws of Warner-Lambert, or adopt new bylaws, without any action on the
part of the shareholders; provided, however, that no such adoption, amendment or
repeal shall be valid with respect to bylaw provisions which have been adopted,
amended or repealed by the shareholders; and further provided that bylaws
adopted or amended by the Warner-Lambert board and any powers thereby conferred
may be amended, altered or repealed by the shareholders.
The Agouron bylaws provide that, subject to the provisions of the articles
and the provisions of the CGCL, the power to amend, alter or repeal bylaws and
to adopt new bylaws may be exercised by the board of directors or by the
shareholders.
APPRAISAL RIGHTS
Under the CGCL, in connection with the merger of a corporation for which the
approval of outstanding shares is required, dissenting shareholders of such
corporation who follow prescribed statutory procedures are entitled to receive
payment of the fair market value of their shares. See "The Merger--Dissenters'
Rights" on page 30.
Under the DGCL, a stockholder of a corporation who does not vote in favor of
or consent in writing to certain merger transactions and who demands appraisal
of his or her shares in connection therewith may, under varying circumstances,
be entitled to dissenters' rights pursuant to which such stockholder may receive
cash in the amount determined by a Delaware court to be the fair value of his or
her shares together with a fair rate of interest, if any, in lieu of the
consideration he or she would otherwise receive in the transaction. Unless the
corporation's certificate of incorporation provides otherwise such appraisal
rights are not available in certain circumstances, including without limitation
(a) the sale, lease or exchange of all or substantially all of the assets of a
corporation, (b) the merger or consolidation of a corporation the shares of
which are either listed on a national securities exchange or on Nasdaq or are
held of record by more than 2,000 holders if such stockholders receive only
shares of the surviving corporation or shares of any other corporation which are
either listed on a national securities exchange or on Nasdaq or held of record
by more than 2,000 holders, plus cash in lieu of fractional shares or (c) to
stockholders of a corporation surviving a merger if no vote of the stockholders
of the surviving corporation is required to approve the merger because the
merger agreement does not amend the existing certificate of incorporation, each
share of the surviving corporation outstanding prior to the merger is an
identical outstanding or treasury share after the merger, and the number of
shares to be issued in the merger does not exceed 20% of the shares of the
surviving corporation outstanding immediately prior to the merger and if certain
other conditions are met. The concept of "fair value" in payment for shares upon
exercise of appraisal rights, under the DGCL, must be determined exclusive of
any element of value arising from the accomplishment or expectation of the
relevant transaction.
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LEGAL MATTERS
The validity of the Warner-Lambert stock to be issued in connection with the
merger will be passed upon by the General Counsel of Warner-Lambert. Certain tax
matters relating to the merger will be passed upon by McDermott, Will & Emery
for Warner-Lambert and by Shearman & Sterling for Agouron. See "The
Merger--Material Federal Income Tax Consequences."
EXPERTS
The financial statements of Warner-Lambert incorporated in this Proxy
Statement/Prospectus by reference to Warner-Lambert's Annual Report on Form 10-K
for the year ended December 31, 1998, have been so incorporated in reliance on
the report of PricewaterhouseCoopers LLP, Florham Park, New Jersey, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
The financial statements of Agouron incorporated in this Proxy
Statement/Prospectus by reference to Agouron's Annual Report on Form 10-K for
the year ended June 30, 1998, have been so incorporated in reliance on the
report of PricewaterhouseCoopers LLP, San Diego, California, independent
accountants, given on the authority of said firm as experts in auditing and
accounting.
WHERE YOU CAN FIND MORE INFORMATION
Warner-Lambert and Agouron are each subject to the informational
requirements of the Exchange Act and, in accordance therewith file reports,
proxy statements and other information with the SEC. The reports, proxy
statements and other information filed by Warner-Lambert and Agouron with the
SEC can be inspected and copied at the public reference facilities maintained by
the SEC at Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549, and at the
SEC Regional Offices located at 7 World Trade Center, 13th floor, New York, New
York 10048 and 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such material also can be obtained at prescribed rates from the Public
Reference Section of the SEC at 450 Fifth Street, Washington, D.C. 20549.
Information regarding the Public Reference Room may be obtained by calling the
SEC at (800) 732-0330. In addition, Warner-Lambert and Agouron are each required
to file electronic versions of such material with the SEC through the SEC's
Electronic Data Gathering, Analysis and Retrieval (EDGAR) system. The SEC
maintains a World Wide Web site at http://www.sec.gov that contains reports,
proxy and information statements and other information regarding registrants
that file electronically with the SEC. Warner-Lambert stock is listed on the New
York Stock Exchange and reports and other information concerning Warner-Lambert
can also be inspected at the offices of the New York Stock Exchange, 20 Broad
Street, New York, New York 10005. Agouron stock is listed on the Nasdaq National
Market and reports and other information concerning Agouron can also be
inspected at the offices of the National Association of Securities Dealers, Inc.
at 1735 K Street, N.W., Washington, D.C. 20001-1500.
Warner-Lambert has filed with the SEC a Registration Statement on Form S-4
under the Exchange Act with respect to the shares of Warner-Lambert stock to be
issued pursuant to the merger agreement.
The SEC allows Warner-Lambert and Agouron to "incorporate by reference"
information into this Proxy Statement/Prospectus, which means that
Warner-Lambert and Agouron can disclose important information to you by
referring you to another document filed separately with the SEC. Statements
contained in this Proxy Statement/Prospectus or in any document incorporated by
reference in this Proxy Statement/Prospectus as to the contents of any contract
or other document referred to herein or therein are not necessarily complete,
and in each instance reference is made to the copy of such contract or other
document filed as an exhibit to the Registration Statement or such other
document, each such statement being qualified in all respects by such reference.
The information incorporated by reference is deemed to be part of this Proxy
Statement/Prospectus. This Proxy Statement/Prospectus
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incorporates by reference the documents set forth below that Warner-Lambert and
Agouron have previously filed with the SEC. These documents contain important
information about Warner-Lambert and Agouron and their finances.
<TABLE>
<S> <C>
WARNER-LAMBERT SEC FILINGS (FILE NO. 1-03608) PERIOD
Annual Report on Form 10-K Year ended December 31, 1998
Current Reports on Form 8-K Filed on January 28, 1999
AGOURON SEC FILINGS (FILE NO. 0-15609) PERIOD
Annual Report on Form 10-K Year ended June 30, 1998
Quarterly Report on Form 10-Q Quarters ended September 30, 1998 and
December 31, 1998
Current Reports on Form 8-K Filed on January 19, 1999 and January 28,
1999
</TABLE>
We are also incorporating by reference additional documents that we file
with the Securities and Exchange Commission between the date of this Proxy
Statement/Prospectus and the date of the special meeting.
Warner-Lambert has supplied all information contained or incorporated by
reference in this Proxy Statement/Prospectus relating to Warner-Lambert and
Agouron has supplied all such information relating to Agouron.
If you are a shareholder, Warner-Lambert or Agouron may have sent you some
of the documents incorporated by reference, but you can obtain any of them
through Warner-Lambert and Agouron or the SEC. Documents incorporated by
reference are available from Warner-Lambert and Agouron without charge,
excluding all exhibits unless Agouron or Warner-Lambert have specifically
incorporated by reference an exhibit in this Proxy Statement/Prospectus.
Shareholders may obtain documents incorporated by reference in this Proxy
Statement/Prospectus by requesting them in writing or by telephone from the
appropriate party at the following addresses:
<TABLE>
<S> <C>
WARNER-LAMBERT COMPANY AGOURON PHARMACEUTICALS, INC.
Secretary Secretary
201 Tabor Road 10350 North Torrey Pines Road
Morris Plains, New Jersey 07950-2693 La Jolla, California 92037-1020
(973) 540-2000 (619) 622-3000
</TABLE>
If you would like to request documents from us, please do so by May 7, 1999
in order to receive them before the special meeting.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS PROXY STATEMENT/PROSPECTUS TO VOTE ON THE MERGER.
WARNER-LAMBERT AND AGOURON HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH
INFORMATION THAT IS DIFFERENT FROM WHAT IS CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS. THIS PROXY STATEMENT/PROSPECTUS IS DATED APRIL 19, 1999.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS PROXY
STATEMENT/PROSPECTUS IS ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND
NEITHER THE MAILING OF THIS PROXY STATEMENT/PROSPECTUS TO SHAREHOLDERS OF
AGOURON NOR THE ISSUANCE OF WARNER-LAMBERT STOCK IN THE MERGER SHALL CREATE ANY
IMPLICATION TO THE CONTRARY.
By Order of the Board of Directors
/s/ Gary E. Friedman
Gary E. Friedman
SECRETARY
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ANNEX A
CONFORMED COPY
AGREEMENT AND PLAN OF MERGER
DATED AS OF JANUARY 26, 1999
AMONG
WARNER-LAMBERT COMPANY,
WLC ACQUISITION CORPORATION
AND
AGOURON PHARMACEUTICALS, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
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ARTICLE I
THE MERGER.................................................................................................... A-2
1.1 The Merger........................................................................................ A-2
1.2 Closing........................................................................................... A-2
1.3 Effective Time.................................................................................... A-2
1.4 Effects of the Merger............................................................................. A-2
1.5 Certificate of Incorporation...................................................................... A-2
1.6 By-Laws........................................................................................... A-2
1.7 Officers and Directors of Surviving Corporation................................................... A-2
1.8 Effect of Merger on Capital Stock................................................................. A-3
1.9 Dissenting Agouron Common Shares.................................................................. A-3
1.10 Agouron Stock Options............................................................................. A-3
1.11 Certain Adjustments............................................................................... A-4
ARTICLE II
EXCHANGE OF CERTIFICATES...................................................................................... A-4
2.1 Exchange Fund..................................................................................... A-4
2.2 Exchange Procedures............................................................................... A-4
2.3 Distributions with Respect to Unexchanged Shares.................................................. A-5
2.4 No Further Ownership Rights in Agouron Common Stock............................................... A-5
2.5 No Fractional Shares of Warner-Lambert Common Stock............................................... A-5
2.6 Termination of Exchange Fund...................................................................... A-6
2.7 No Liability...................................................................................... A-6
2.8 Investment of the Exchange Fund................................................................... A-6
2.9 Lost Certificates................................................................................. A-6
2.10 Withholding Rights................................................................................ A-6
2.11 Further Assurances................................................................................ A-7
2.12 Stock Transfer Books.............................................................................. A-7
ARTICLE III
REPRESENTATIONS AND WARRANTIES................................................................................ A-7
3.1 Representations and Warranties of Warner-Lambert.................................................. A-7
(a) Organization, Standing and Power; Subsidiaries......................................... A-7
(b) Capital Structure...................................................................... A-8
(c) Authority; No Conflicts................................................................ A-9
(d) Reports and Financial Statements....................................................... A-10
(e) Information Supplied................................................................... A-11
(f) Board Approval......................................................................... A-11
(g) Litigation; Compliance with Laws....................................................... A-11
(h) Absence of Certain Changes or Events................................................... A-11
(i) Environmental Matters.................................................................. A-12
(j) Brokers or Finders..................................................................... A-12
(k) Opinion of Warner-Lambert Financial Advisor............................................ A-12
(l) Accounting Matters..................................................................... A-12
3.2 Representations and Warranties of Agouron......................................................... A-12
(a) Organization, Standing and Power; Subsidiaries......................................... A-12
(b) Capital Structure...................................................................... A-13
(c) Authority; No Conflicts................................................................ A-14
</TABLE>
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(d) Reports and Financial Statements....................................................... A-14
(e) Information Supplied................................................................... A-15
(f) Board Approval......................................................................... A-15
(g) Vote Required.......................................................................... A-16
(h) Litigation; Compliance with Laws....................................................... A-16
(i) Absence of Certain Changes or Events................................................... A-16
(j) Environmental Matters.................................................................. A-16
(k) Intellectual Property.................................................................. A-17
(l) Rights Agreement....................................................................... A-18
(m) Brokers or Finders..................................................................... A-18
(n) Opinion of Agouron Financial Advisor................................................... A-18
(o) Accounting Matters..................................................................... A-18
(p) Taxes.................................................................................. A-18
(q) Certain Contracts...................................................................... A-19
(r) Employee Benefit Plans................................................................. A-20
(s) Labor Matters.......................................................................... A-21
(t) Affiliate Transactions................................................................. A-21
(u) Material Contract Defaults............................................................. A-21
(v) Insurance.............................................................................. A-22
(w) Year 2000 Compliance................................................................... A-22
(x) Supply................................................................................. A-22
(y) Investigational Compounds and Viracept................................................. A-22
(z) Generic Drug Enforcement Act........................................................... A-22
3.3 Representations and Warranties of Warner-Lambert and Merger Sub................................... A-22
(a) Organization........................................................................... A-22
(b) Corporate Authorization................................................................ A-22
(c) Non-Contravention...................................................................... A-23
(d) No Business Activities................................................................. A-23
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS..................................................................... A-23
4.1 Conduct of Business of Agouron Pending the Merger................................................. A-23
4.2 Conduct of Business of Warner-Lambert Pending the Merger.......................................... A-25
4.3 Governmental Filings.............................................................................. A-26
4.4 Control of Other Party's Business................................................................. A-26
ARTICLE V
ADDITIONAL AGREEMENTS......................................................................................... A-26
5.1 Preparation of Form S-4 and the Proxy Statement; Stockholders Meeting............................. A-26
5.2. Accountant's Letters.............................................................................. A-27
5.3 Access to Information............................................................................. A-28
5.4 Reasonable Best Efforts........................................................................... A-28
5.5 No Solicitation of Transactions................................................................... A-29
5.6 Employee Benefits Matters......................................................................... A-30
5.7 Directors' and Officers' Indemnification and Insurance............................................ A-32
5.8 Notification of Certain Matters................................................................... A-32
5.9 Public Announcements.............................................................................. A-32
5.10 Listing of Shares of Warner-Lambert Common Stock.................................................. A-32
5.11 Affiliates........................................................................................ A-33
5.12 Amendment to the Rights Agreement................................................................. A-33
5.13 Divisional Stock Proposal......................................................................... A-33
</TABLE>
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ARTICLE VI
CONDITIONS PRECEDENT.......................................................................................... A-33
6.1 Conditions to Each Party's Obligation to Effect the Merger........................................ A-33
(a) Stockholder Approval................................................................... A-33
(b) No Injunctions or Restraints, Illegality............................................... A-33
(c) HSR Act................................................................................ A-34
(d) NYSE Listing........................................................................... A-34
(e) Effectiveness of the Form S-4.......................................................... A-34
(f) Pooling................................................................................ A-34
6.2 Additional Conditions to Obligations of Warner-Lambert and Merger Sub............................. A-34
(a) Representations and Warranties......................................................... A-34
(b) Performance of Obligations of Agouron.................................................. A-34
(c) Tax Opinion............................................................................ A-35
(d) No Material Adverse Change............................................................. A-35
(e) Rights Agreement....................................................................... A-35
(f) Dissenting Agouron Shares.............................................................. A-35
6.3 Additional Conditions to Obligations of Agouron................................................... A-35
(a) Representations and Warranties......................................................... A-35
(b) Performance of Obligations of Warner-Lambert........................................... A-35
(c) Tax Opinion............................................................................ A-35
(d) No Material Adverse Change............................................................. A-35
ARTICLE VII
TERMINATION AND AMENDMENT..................................................................................... A-36
7.1 Termination....................................................................................... A-36
7.2 Effect of Termination............................................................................. A-37
7.3 Fees and Expenses................................................................................. A-37
7.4 Amendment......................................................................................... A-38
7.5 Extension; Waiver................................................................................. A-38
ARTICLE VIII
GENERAL PROVISIONS............................................................................................ A-38
8.1 Non-Survival of Representations, Warranties and Agreements........................................ A-38
8.2 Notices........................................................................................... A-38
8.3 Interpretation.................................................................................... A-39
8.4 Counterparts...................................................................................... A-39
8.5 Entire Agreement; No Third Party Beneficiaries.................................................... A-39
8.6 Governing Law..................................................................................... A-40
8.7 Severability...................................................................................... A-40
8.8 Assignment........................................................................................ A-40
8.9 Submission to Jurisdiction; Waivers............................................................... A-40
8.10 Enforcement....................................................................................... A-40
8.11 Definitions....................................................................................... A-41
</TABLE>
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LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT TITLE
- --------- --------------------------------------------------------------------------------------------------
<C> <S>
1.5 Certificate of Incorporation
1.7 Board of Directors of Surviving Corporation
3.2(z) Generic Drug Enforcement Act Barred Individuals
5.6(a) Employees Excluded from Certain Benefit Plans
5.11 Form of Affiliate Letter
</TABLE>
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AGREEMENT AND PLAN OF MERGER, dated as of January 26, 1999 (this
"AGREEMENT"), among WARNER-LAMBERT COMPANY, a Delaware corporation
("WARNER-LAMBERT"), WLC ACQUISITION CORPORATION, a California corporation and a
direct wholly-owned subsidiary of Warner-Lambert ("MERGER SUB"), and AGOURON
PHARMACEUTICALS, INC., a California corporation ("AGOURON").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Agouron and Warner-Lambert deem it
advisable and in the best interests of each corporation and its respective
stockholders that Agouron and Warner-Lambert engage in a business combination in
order to advance the long-term strategic business interests of Agouron and
Warner-Lambert;
WHEREAS, the combination of Agouron and Warner-Lambert shall be effected by
the terms of this Agreement through a merger as outlined below (the "MERGER");
WHEREAS, in furtherance thereof, the respective Boards of Directors of
Agouron and Warner-Lambert have approved the Merger, upon the terms and subject
to the conditions set forth in this Agreement, pursuant to which each share of
common stock, without par value, of Agouron ("AGOURON COMMON STOCK") issued and
outstanding immediately prior to the Effective Time (as defined in Section 1.3),
other than shares owned or held directly or indirectly by Agouron, will be
converted into the right to receive shares of voting common stock, par value
$1.00 per share, of Warner-Lambert ("WARNER-LAMBERT COMMON STOCK") as set forth
in Section 1.8;
WHEREAS, for Federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "CODE"), and the regulations
promulgated thereunder;
WHEREAS, for accounting purposes, it is intended that the Merger shall be
accounted for as a pooling of interests transaction under United States
generally accepted accounting principles ("GAAP"); and
WHEREAS, as a condition to its willingness to enter into this Agreement,
Warner-Lambert has required that, simultaneously with the execution hereof,
Agouron enter into the option agreement ("STOCK OPTION AGREEMENT"), dated as of
the date hereof, with Warner-Lambert, pursuant to which Agouron is granting to
Warner-Lambert an option to purchase up to 19.9% of Agouron Common Stock on the
terms and conditions set forth therein.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth in this
Agreement and the Stock Option Agreement, and intending to be legally bound
hereby, the parties hereto agree as follows:
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ARTICLE I
THE MERGER
1.1. THE MERGER. Upon the terms and subject to the conditions set forth in
this Agreement, and in accordance with the California General Corporation Law
(the "CGCL"), Merger Sub shall be merged with and into Agouron at the Effective
Time. Immediately, following the Merger, the separate corporate existence of
Merger Sub shall cease and Agouron shall continue as the surviving corporation
(the "SURVIVING CORPORATION") under the name Agouron.
1.2 CLOSING. Subject to the terms and conditions hereof, the closing of
the Merger and the transactions contemplated by this Agreement (the "CLOSING")
will take place on the second Business Day after the satisfaction or waiver
(subject to applicable law) of the conditions set forth in Article VI (other
than any such conditions which by their terms cannot be satisfied until the
Closing Date, which shall be required to be so satisfied or waived on the
Closing Date), unless another time or date is agreed to in writing by the
parties hereto (the actual time and date of the Closing being referred to herein
as the "CLOSING DATE"). The Closing shall be held at the offices of Simpson
Thacher & Bartlett, 425 Lexington Avenue, New York, New York, 10017, unless
another place is agreed to in writing by the parties hereto.
1.3 EFFECTIVE TIME. At the Closing the parties shall (i) file a
certificate of merger (the "CERTIFICATE OF MERGER") in such form as is required
by and executed in accordance with the relevant provisions of the CGCL and (ii)
make all other filings or recordings required under the CGCL. The Merger shall
become effective at such time as the Certificate of Merger is duly filed with
the California Secretary of State or at such subsequent time as Warner-Lambert
and Agouron shall agree and as shall be specified in the Certificate of Merger
(the date and time the Merger becomes effective being the "EFFECTIVE TIME").
1.4 EFFECTS OF THE MERGER. At and after the Effective Time, the Merger
will have the effects set forth in the CGCL. Without limiting the generality of
the foregoing, and subject thereto, at the Effective Time all the property,
rights, privileges, powers and franchises of Agouron and Merger Sub shall be
vested in the Surviving Corporation, and all debts, liabilities and duties of
Agouron and Merger Sub shall be the debts, liabilities and duties of the
Surviving Corporation.
1.5 CERTIFICATE OF INCORPORATION. The certificate of incorporation of
Agouron, as in effect immediately prior to the Effective Time, shall be amended
and restated as of the Effective Time so as to read in its entirety in the form
set forth as Exhibit 1.5 and, as so amended and restated, shall be the
certificate of incorporation of the Surviving Corporation, until thereafter
changed or amended as provided therein or by applicable law.
1.6 BY-LAWS. At the Effective Time and without any further action on the
part of Agouron and Merger Sub, the By-Laws of Merger Sub shall be the By-Laws
of the Surviving Corporation and thereafter may be amended or repealed in
accordance with their terms or the Certificate of Incorporation of the Surviving
Corporation and as provided by law.
1.7 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION. The officers of
Agouron as of the Effective Time shall be the officers of the Surviving
Corporation, until the earlier of their resignation or removal or otherwise
ceasing to be an officer or until their respective successors are duly elected
and qualified, as the case may be. The directors of the Surviving Corporation as
of the Effective Time shall be as provided in Exhibit 1.7, which individuals
will serve as directors of the Surviving Corporation until the earlier of their
resignation or removal or otherwise ceasing to be a director or until their
respective successors are duly elected and qualified.
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1.8 EFFECT OF MERGER ON CAPITAL STOCK.
(a) At the Effective Time by virtue of the Merger and without any action on
the part of the holder thereof, each share of Agouron Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares of
Agouron Common Stock held by Agouron, all of which shall be canceled as provided
in Section 1.8(c)) shall be converted into the right to receive from Warner-
Lambert a fraction of a share of Warner-Lambert Common Stock equal to the
Exchange Ratio (as defined in Section 8.11), including the corresponding
percentage of a right to purchase shares of Warner-Lambert's Series A Preferred
Stock (as defined in Section 3.1(b)) pursuant to the Warner-Lambert Rights
Agreement (as defined in Section 3.1(b)), of Warner-Lambert Common Stock
(together with any cash in lieu of fractional shares of Warner-Lambert Common
Stock to be paid pursuant to Section 2.5, the "MERGER CONSIDERATION").
(b) As a result of the Merger and without any action on the part of the
holders thereof, at the Effective Time, all shares of Agouron Common Stock shall
cease to be outstanding and shall be canceled and retired and shall cease to
exist, and each holder of a certificate which immediately prior to the Effective
Time represented any such shares of Agouron Common Stock (a "CERTIFICATE") shall
thereafter cease to have any rights with respect to such shares of Agouron
Common Stock, except as provided herein or by law.
(c) Each share of Agouron Common Stock issued and owned or held by Agouron
at the Effective Time shall, by virtue of the Merger, cease to be outstanding
and shall be canceled and retired and no stock of Warner-Lambert or other
consideration shall be delivered in exchange therefor.
(d) Each share of common stock, no par value, of Merger Sub issued and
outstanding immediately prior to the Effective Time, shall be converted into
issued, outstanding and unchanged as validly issued, fully paid and
nonassessable shares of common stock, no par value, of the Surviving Corporation
as of the Effective Time.
1.9 DISSENTING AGOURON COMMON SHARES. Notwithstanding anything in this
Agreement to the contrary, shares of Agouron Common Stock whose holders have
perfected dissenters' rights under Section 1300 et seq. of the CGCL ("DISSENTING
AGOURON COMMON SHARES") shall not be converted into the right to receive or be
exchangeable for, the Merger Consideration provided for in Section 1.8 hereof,
but, instead, the holders thereof shall be entitled to payment, by Agouron, of
the value of such Dissenting Agouron Common Shares as agreed upon or determined
in accordance with the provisions of Section 1300 et seq. of the CGCL.
1.10 AGOURON STOCK OPTIONS
(a) On or prior to the Effective Time, Agouron will take all action
necessary such that each Agouron Stock Option (as defined in Section 3.2(b))
that was granted pursuant to the Agouron Stock Option Plans (as defined in
Section 3.2(b)) prior to the Effective Time and which remains outstanding
immediately prior to the Effective Time shall cease to represent a right to
acquire shares of Agouron Common Stock and shall be converted, at the Effective
Time, into an option to acquire, on the same terms and conditions as were
applicable under the Agouron Stock Option, that number of shares of
Warner-Lambert Common Stock determined by multiplying the number of shares of
Agouron Common Stock subject to such Agouron Stock Option by the Exchange Ratio,
rounded, if necessary, to the nearest whole share of Warner-Lambert Common
Stock, at a price per share equal to the per share exercise price specified in
such Agouron Stock Option divided by the Exchange Ratio all adjusted for any
fractional shares eliminated by rounding to ensure the intrinsic value of the
option at consummation is preserved; provided, however, that in the case of any
Agouron Stock Option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code, the option price, the number of
shares subject to such option and the terms and conditions of exercise of
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<PAGE>
such option shall be determined in a manner consistent with the requirements of
Section 424(a) of the Code.
(b) As soon as practicable after the Effective Time, Warner-Lambert shall
deliver to the holders of Agouron Stock Options appropriate notices setting
forth such holders' rights pursuant to the Agouron Stock Option Plans and the
agreements evidencing the grants of such Agouron Stock Options shall continue in
effect on the same terms and conditions (subject to the adjustments required by
this Section 1.10 after giving effect to the Merger and the terms of the Agouron
Stock Option Plans). To the extent permitted by law, Warner-Lambert shall comply
with the terms of the Agouron Stock Option Plans and shall take such reasonable
steps as are necessary or required by, and subject to the provisions of, such
Agouron Stock Option Plans, to have the Agouron Stock Options which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options of Warner-Lambert after the Effective Time.
(c) Warner-Lambert shall take all corporate action necessary to reserve for
issuance a sufficient number of shares of Warner-Lambert Common Stock for
delivery upon exercise of Agouron Stock Options in accordance with this Section
1.10. Promptly after the Effective Time, Warner-Lambert shall file a
registration statement on Form S-3 or Form S-8, as the case may be (or any
successor or other appropriate forms), with respect to the shares of
Warner-Lambert Common Stock subject to such options and shall use commercially
reasonable efforts to maintain the effectiveness of such registration statement
or registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options remain outstanding.
With respect to those individuals who subsequent to the Merger will be subject
to the reporting requirements under Section 16(a) of the Securities Exchange Act
of 1934, as amended (the "EXCHANGE ACT"), where applicable, Warner-Lambert shall
administer the Agouron Stock Option Plans in a manner consistent with the
exemptions provided by Rule 16b-3 promulgated under the Exchange Act.
1.11 CERTAIN ADJUSTMENTS. If, between the date of this Agreement and the
Effective Time, the outstanding Warner-Lambert Common Stock or Agouron Common
Stock shall have been changed into a different number of shares or different
class by reason of any reclassification, recapitalization, stock split,
split-up, combination or exchange of shares or a stock dividend or dividend
payable in any other securities shall be declared with a record date within such
period, or any similar event shall have occurred, the Exchange Ratio shall be
appropriately adjusted to provide to the holders of Agouron Common Stock the
same economic effect as contemplated by this Agreement prior to such event.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 EXCHANGE FUND. Prior to the Effective Time, Warner-Lambert shall
appoint a commercial bank or trust company having net capital of not less than
$100,000,000, or a subsidiary thereof, to act as exchange agent hereunder for
the purpose of exchanging Certificates for the Merger Consideration (the
"EXCHANGE AGENT"). At or prior to the Effective Time, Warner-Lambert shall
deposit with the Exchange Agent, in trust for the benefit of holders of shares
of Agouron Common Stock, certificates representing the Warner-Lambert Common
Stock issuable pursuant to Section 1.8 in exchange for outstanding shares of
Agouron Common Stock. Warner-Lambert agrees to make available to the Exchange
Agent from time to time as needed, cash sufficient to pay cash in lieu of
fractional shares pursuant to Section 2.5 and any dividends and other
distributions pursuant to Section 2.3. Any cash and certificates of
Warner-Lambert Common Stock deposited with the Exchange Agent shall hereinafter
be referred to as the "EXCHANGE FUND".
2.2 EXCHANGE PROCEDURES. As soon as reasonably practicable after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to mail
to each holder of a Certificate (i) a
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letter of transmittal which shall specify that delivery shall be effected, and
risk of loss and title to the Certificates shall pass, only upon delivery of the
Certificates to the Exchange Agent, and which letter shall be in customary form
and have such other provisions as Warner-Lambert may reasonably specify and (ii)
instructions for effecting the surrender of such Certificates in exchange for
the applicable Merger Consideration. Upon surrender of a Certificate to the
Exchange Agent together with such letter of transmittal, duly executed and
completed in accordance with the instructions thereto, and such other documents
as may reasonably be required by the Exchange Agent, the holder of such
Certificate shall be entitled to receive in exchange therefor (A) one or more
shares of Warner-Lambert Common Stock (which shall be in uncertificated
book-entry form unless a physical certificate is requested) representing, in the
aggregate, the whole number of shares that such holder has the right to receive
pursuant to Section 1.8 (after taking into account all shares of Agouron Common
Stock then held by such holder) and (B) a check in the amount equal to the cash
that such holder has the right to receive pursuant to the provisions of this
Article II, including cash in lieu of any fractional shares of Warner-Lambert
Common Stock pursuant to Section 2.5 and dividends and other distributions
pursuant to Section 2.3. No interest will be paid or will accrue on any cash
payable pursuant to Section 2.3 or Section 2.5. In the event of a transfer of
ownership of Agouron Common Stock which is not registered in the transfer
records of Agouron, one or more shares of Warner-Lambert Common Stock
evidencing, in the aggregate, the proper number of shares of Warner-Lambert
Common Stock, a check in the proper amount of cash in lieu of any fractional
shares of Warner-Lambert Common Stock pursuant to Section 2.5 and any dividends
or other distributions to which such holder is entitled pursuant to Section 2.3,
may be issued with respect to such Agouron Common Stock to such a transferee if
the Certificate representing such shares of Agouron Common Stock is presented to
the Exchange Agent, accompanied by all documents required to evidence and effect
such transfer and to evidence that any applicable stock transfer taxes have been
paid.
2.3 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES. No dividends or
other distributions declared or made with respect to shares of Warner-Lambert
Common Stock with a record date after the Effective Time shall be paid to the
holder of any unsurrendered Certificate with respect to the shares of
Warner-Lambert Common Stock that such holder would be entitled to receive upon
surrender of such Certificate and no cash payment in lieu of fractional shares
of Warner-Lambert Common Stock shall be paid to any such holder pursuant to
Section 2.5 until such holder shall surrender such Certificate in accordance
with Section 2.2. Subject to the effect of applicable laws, following surrender
of any such Certificate, there shall be paid to such holder of shares of
Warner-Lambert Common Stock issuable in exchange therefor, without interest, (a)
promptly after the time of such surrender, the amount of any cash payable in
lieu of fractional shares of Warner-Lambert Common Stock to which such holder is
entitled pursuant to Section 2.5, and (b) at the appropriate payment date, the
amount of dividends or other distributions with a record date after the
Effective Time but prior to such surrender and a payment date subsequent to such
surrender payable with respect to such shares of Warner-Lambert Common Stock.
2.4 NO FURTHER OWNERSHIP RIGHTS IN AGOURON COMMON STOCK. All shares of
Warner-Lambert Common Stock issued and cash paid upon conversion of shares of
Agouron Common Stock in accordance with the terms of Article I and this Article
II (including any cash paid pursuant to Section 2.3 or 2.5) shall be deemed to
have been issued or paid in full satisfaction of all rights pertaining to the
shares of Agouron Common Stock. Until surrendered as contemplated by this
Article II, each Certificate shall be deemed at any time after the Effective
Time to represent only the right to receive upon such surrender the Merger
Consideration.
2.5 NO FRACTIONAL SHARES OF WARNER-LAMBERT COMMON STOCK.
(a) No certificates or scrip or shares of Warner-Lambert Common Stock
representing fractional shares of Warner-Lambert Common Stock or book-entry
credit of the same shall be issued upon the surrender for exchange of
Certificates and such fractional share interests will not entitle the owner
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thereof to vote or to have any rights of a shareholder of Warner-Lambert or a
holder of shares of Warner-Lambert Common Stock.
(b) Notwithstanding any other provision of this Agreement, each holder of
shares of Agouron Common Stock exchanged pursuant to the Merger who would
otherwise have been entitled to receive a fraction of a share of Warner-Lambert
Common Stock (after taking into account all Certificates delivered by such
holder) shall receive, in lieu thereof, cash (without interest) in an amount
equal to the product of (i) such fractional part of a share of Warner-Lambert
Common Stock multiplied by (ii) the closing price for a share of Warner-Lambert
Common Stock on the New York Stock Exchange, Inc. ("NYSE") Composite
Transactions Tape on the date of the Effective Time or, if such date is not a
Business Day, the Business Day immediately following the date on which the
Effective Time occurs. As promptly as practicable after the determination of the
amount of cash, if any, to be paid to holders of fractional interests, the
Exchange Agent shall so notify Warner-Lambert, and Warner-Lambert shall cause
the Surviving Corporation to deposit such amount with the Exchange Agent and
shall cause the Exchange Agent to forward payments to such holders of fractional
interests subject to and in accordance with the terms hereof.
2.6 TERMINATION OF EXCHANGE FUND. Any portion of the Exchange Fund which
remains undistributed to the holders of Certificates for six months after the
Effective Time shall be delivered to Warner-Lambert or otherwise on the
instruction of Warner-Lambert and any holders of the Certificates who have not
theretofore complied with this Article II shall thereafter look only to the
Surviving Corporation and Warner-Lambert for the Merger Consideration with
respect to the shares of Agouron Common Stock formerly represented thereby to
which such holders are entitled pursuant to Section 1.8 and Section 2.2, any
cash in lieu of fractional shares of Warner-Lambert Common Stock to which such
holders are entitled pursuant to Section 2.5 and any dividends or distributions
with respect to shares of Warner-Lambert Common Stock to which such holders are
entitled pursuant to Section 2.3. Any such portion of the Exchange Fund
remaining unclaimed by holders of shares of Agouron Common Stock five years
after the Effective Time (or such earlier date immediately prior to such time as
such amounts would otherwise escheat to or become property of any Governmental
Entity (as defined in Section 3.1(c)(iii)) shall, to the extent permitted by
law, become the property of Warner-Lambert free and clear of any claims or
interest of any Person previously entitled thereto.
2.7 NO LIABILITY. None of Warner-Lambert, Merger Sub, Agouron, the
Surviving Corporation or the Exchange Agent shall be liable to any Person in
respect of any Merger Consideration from the Exchange Fund delivered to a public
official pursuant to any applicable abandoned property, escheat or similar law.
2.8 INVESTMENT OF THE EXCHANGE FUND. The Exchange Agent shall invest any
cash included in the Exchange Fund as directed by Warner-Lambert on a daily
basis. Any interest and other income resulting from such investments shall
promptly be paid to Warner-Lambert.
2.9 LOST CERTIFICATES. If any Certificate shall have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the Person claiming
such Certificate to be lost, stolen or destroyed and, if required by the
Surviving Corporation, the posting by such Person of a bond in such reasonable
amount as the Surviving Corporation may direct as indemnity against any claim
that may be made against it with respect to such Certificate, the Exchange Agent
will deliver in exchange for such lost, stolen or destroyed Certificate the
applicable Merger Consideration with respect to the shares of Agouron Common
Stock formerly represented thereby, any cash in lieu of fractional shares of
Warner-Lambert Common Stock, and unpaid dividends and distributions on shares of
Warner-Lambert Common Stock deliverable in respect thereof, pursuant to this
Agreement.
2.10 WITHHOLDING RIGHTS. Each of the Surviving Corporation and
Warner-Lambert shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of Agouron
Common Stock such amounts as it is required to deduct and
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withhold with respect to the making of such payment under the Code and the rules
and regulations promulgated thereunder, or any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by the Surviving
Corporation or Warner-Lambert, as the case may be, such withheld amounts shall
be treated for all purposes of this Agreement as having been paid to the holder
of the shares of Agouron Common Stock in respect of which such deduction and
withholding was made by the Surviving Corporation or Warner-Lambert, as the case
may be.
2.11 FURTHER ASSURANCES. At and after the Effective Time, the officers and
directors of the Surviving Corporation will be authorized to execute and
deliver, in the name and on behalf of Agouron or Merger Sub, any deeds, bills of
sale, assignments or assurances and to take and do, in the name and on behalf of
Agouron or Merger Sub, any other actions and things to vest, perfect or confirm
of record or otherwise in the Surviving Corporation any and all right, title and
interest in, to and under any of the rights, properties or assets acquired or to
be acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
2.12 STOCK TRANSFER BOOKS. The stock transfer books of Agouron shall be
closed immediately upon the Effective Time and there shall be no further
registration of transfers of shares of Agouron Common Stock thereafter on the
records of Agouron. On or after the Effective Time, any Certificates presented
to the Exchange Agent or Warner-Lambert for any reason shall be converted into
the Merger Consideration with respect to the shares of Agouron Common Stock
formerly represented thereby, any cash in lieu of fractional shares of
Warner-Lambert Common Stock to which the holders thereof are entitled pursuant
to Section 2.5 and any dividends or other distributions to which the holders
thereof are entitled pursuant to Section 2.3.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 REPRESENTATIONS AND WARRANTIES OF WARNER-LAMBERT. Except as set forth
in the Warner-Lambert Disclosure Schedule delivered by Warner-Lambert to Agouron
prior to the execution of this Agreement (the "WARNER-LAMBERT DISCLOSURE
SCHEDULE") (each section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified therein)
Warner-Lambert represents and warrants to Agouron as follows:
(a) ORGANIZATION, STANDING AND POWER; SUBSIDIARIES.
(i) Each of Warner-Lambert and each of its Subsidiaries (as defined in
Section 8.11) is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation or
organization, has the requisite power and authority to own, lease and
operate its properties and to carry on its business as now being conducted,
except where the failure to be so organized, existing and in good standing
or to have such power and authority would not reasonably be expected to have
a Material Adverse Effect (as defined in Section 8.11) on Warner-Lambert,
and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing
of its properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify or to be in good standing
would not reasonably be expected to have a Material Adverse Effect on
Warner-Lambert. The copies of the certificate of incorporation and by-laws
of Warner-Lambert which were previously furnished or made available to
Agouron are true, complete and correct copies of such documents as in effect
on the date of this Agreement.
(ii) Exhibit 21 to Warner-Lambert's Annual Report on Form 10-K for the
year ended December 31, 1997 includes all the Subsidiaries of Warner-Lambert
which as of the date of this Agreement are Significant Subsidiaries (as
defined in Rule 1-02 of Regulation S-X of the SEC). All the outstanding
shares of capital stock of, or other equity interests in each such
Significant
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Subsidiary have been validly issued and are fully paid and nonassessable and
are owned directly or indirectly by Warner-Lambert, free and clear of all
pledges, claims, liens, charges, encumbrances and security interests of any
kind or nature whatsoever (collectively "Liens") and free of any other
restriction (including any restriction on the right to vote, sell or
otherwise dispose of such capital stock or other ownership interests) other
than Liens or restrictions that do not have a Material Adverse Effect on
Warner-Lambert. Except as set forth in the Warner-Lambert SEC Reports (as
defined in Section 3.1(d)), as of the date of this Agreement, neither
Warner-Lambert nor any of its Subsidiaries directly or indirectly owns any
equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any corporation, partnership, joint venture
or other business association or entity (other than Subsidiaries), that is
or would reasonably be expected to be material to Warner-Lambert and its
Subsidiaries taken as a whole.
(b) CAPITAL STRUCTURE.
(i) As of December 31, 1998, the authorized capital stock of
Warner-Lambert consisted of (A) 1,200,000,000 shares of Warner-Lambert
Common Stock of which 821,552,156 shares were outstanding and 140,429,452
shares were held in the treasury of Warner-Lambert and (B) 5,000,000 shares
of Preferred Stock, par value $1.00 per share, none of which were
outstanding and 400,000 shares of which have been designated as Series A
Junior Participating Preferred Stock (the "SERIES A PREFERRED STOCK") and
reserved for issuance upon exercise of certain rights as set forth in the
Amended and Restated Rights Agreement dated as of March 25, 1997 between
Warner-Lambert and First Chicago Trust Company of New York, as rights agent
(the "Warner-Lambert Rights Agreement"). Since December 31, 1998 to the date
of this Agreement, there have been no issuances of shares of the capital
stock of Warner-Lambert or any other securities of Warner-Lambert other than
issuances of shares pursuant to options or rights outstanding as of December
31, 1998 under the Benefit Plans (as defined in Section 8.11) of
Warner-Lambert. All issued and outstanding shares of the capital stock of
Warner-Lambert are duly authorized, validly issued, fully paid and
nonassessable, and no class of capital stock is entitled to preemptive
rights. There were outstanding as of December 31, 1998 no options, warrants
or other rights to acquire capital stock from Warner-Lambert other than
options, restricted stock and share equivalents representing in the
aggregate the right to purchase 182,942,041 shares of Warner-Lambert Common
Stock under the Warner-Lambert Company 1989 Stock Plan, as amended to
January 27, 1998, Warner-Lambert Company 1992 Stock Plan, as amended to
January 27, 1998, Warner-Lambert Company 1996 Stock Plan, as amended to
January 27, 1998 and Restricted Stock Plan for Directors of Warner-Lambert
Company, as amended to January 28, 1992 (collectively, the "WARNER-LAMBERT
STOCK PLANS").
(ii) No bonds, debentures, notes or other indebtedness of Warner-Lambert
having the right to vote on any matters on which holders of capital stock of
Warner-Lambert may vote ("WARNER-LAMBERT VOTING DEBT") are issued or
outstanding.
(iii) Except as otherwise set forth in this Section 3.1(b) and as
contemplated by Section 1.8 and Section 1.10, as of the date of this
Agreement, there are no securities, options, warrants, calls, rights,
commitments, agreements, arrangements or undertakings of any kind to which
Warner-Lambert or any of its Subsidiaries is a party or by which any of them
is bound obligating Warner-Lambert to issue, deliver or sell, or cause to be
issued, delivered or sold, additional shares of capital stock or other
voting securities of Warner-Lambert or obligating Warner-Lambert to issue,
grant, extend or enter into any such security, option, warrant, call, right,
commitment, agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding obligations of Warner-Lambert to
repurchase, redeem or otherwise acquire any shares of capital stock of
Warner-Lambert.
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(c) AUTHORITY; NO CONFLICTS.
(i) Warner-Lambert has all requisite corporate power and authority to
enter into this Agreement and the Stock Option Agreement and to consummate
the transactions contemplated hereby and thereby, including, without
limitation, the issuance of the shares of Warner-Lambert Common Stock to be
issued in the Merger (the "Share Issuance"). The execution and delivery of
this Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Warner-Lambert. Each of this
Agreement and the Stock Option Agreement has been duly executed and
delivered by Warner-Lambert and constitutes a valid and binding agreement of
Warner-Lambert, enforceable against it in accordance with its terms, except
as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and similar laws relating to or affecting
creditors generally or by general equity principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law) or by
an implied covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement and the Stock Option
Agreement by Warner-Lambert does not or will not, as the case may be, and
the consummation by Warner-Lambert of the Merger and the other transactions
contemplated hereby and thereby will not, conflict with, or result in any
violation of, or constitute a default (with or without notice or lapse of
time, or both) under, or give rise to a right of termination, amendment,
cancellation or acceleration of any obligation or the loss of a material
benefit under, or the creation of a Lien on any assets (any such conflict,
violation, default, right of termination, amendment, cancellation or
acceleration, loss or creation, is hereinafter referred to as a "Violation")
pursuant to: (A) any provision of the certificate of incorporation or
by-laws of Warner-Lambert or any material Subsidiary of Warner-Lambert or
(B) except as would not reasonably be expected to have a Material Adverse
Effect on Warner-Lambert, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and filings
referred to in paragraph (iii) below, any loan or credit agreement, note,
mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation applicable to
Warner-Lambert or any Subsidiary of Warner-Lambert, or their respective
properties or assets.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any supranational, national, state, municipal,
local or foreign government, any instrumentality, subdivision, court,
administrative agency or commission or other authority thereof, or any
quasi-governmental or private body exercising any regulatory, taxing,
importing or other governmental or quasi-governmental authority (a
"GOVERNMENTAL ENTITY"), is required by or with respect to Warner-Lambert or
any Subsidiary of Warner-Lambert in connection with the execution and
delivery of this Agreement or the Stock Option Agreement by Warner-Lambert
or the consummation of the Merger and the other transactions contemplated
hereby, except for those required under or in relation to (A) the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
ACT"), (B) state securities or "blue sky" laws (the "BLUE SKY LAWS"), (C)
the Securities Act, (D) the Exchange Act, (E) the CGCL with respect to the
filing of the Certificate of Merger, (F) rules and regulations of the NYSE
and the Nasdaq National Market, (G) antitrust or other competition laws of
other jurisdictions, (H) the Consent Decree of Permanent Injunction, dated
August 16, 1993 between Warner-Lambert and the United States, (I) the
Investment Canada Act, and (J) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failure of which
to make or obtain would not reasonably be expected to have a Material
Adverse Effect on Warner-Lambert. Consents, approvals, orders,
authorizations, registrations, declarations and filings required under or in
relation to any of the foregoing clauses (A) through (I) are hereinafter
referred to as "NECESSARY CONSENTS".
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(d) REPORTS AND FINANCIAL STATEMENTS.
(i) Warner-Lambert has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
required to be filed by it with the SEC since January 1, 1998 (collectively,
including all exhibits thereto, the "WARNER-LAMBERT SEC REPORTS"). Since
such date, no Subsidiary of Warner-Lambert is required to file any form,
report, registration statement, prospectus or other document with the SEC.
None of the Warner-Lambert SEC Reports, as of their respective dates (and,
if amended or superseded by a filing prior to the date of this Agreement or
the Closing Date, then on the date of such filing), contained or will
contain any untrue statement of a material fact or omitted or will omit to
state a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading. The Warner-Lambert SEC Reports together with any
public announcements in a news release issued by the Dow Jones news service,
PR Newswire or any equivalent service (collectively, a "DOW JONES NEWS
RELEASE") made by Warner-Lambert after the date hereof, taken as a whole, as
of the Effective Time will not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances
existing as of the Effective Time, not misleading. Each of the financial
statements (including the related notes) included in the Warner-Lambert SEC
Reports presents fairly, in all material respects, the consolidated
financial position and consolidated results of operations and cash flows of
Warner-Lambert and its Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP applied on
a consistent basis throughout the periods involved except as otherwise noted
therein, and subject, in the case of the unaudited interim financial
statements, to normal and recurring adjustments that were not or are not
expected to be material in amount. All of such Warner-Lambert SEC Reports,
as of their respective dates (and as of the date of any amendment to the
respective Warner-Lambert SEC Report), complied as to form in all material
respects with the applicable requirements of the Securities Act and the
Exchange Act and the rules and regulations promulgated thereunder.
(ii) Except as disclosed in the Warner-Lambert SEC Reports filed prior
to the date hereof, since December 31, 1997, Warner-Lambert and its
Subsidiaries have not incurred any liabilities that are of a nature that
would be required to be disclosed on a balance sheet of Warner-Lambert and
its Subsidiaries or the footnotes thereto prepared in conformity with GAAP,
other than (A) liabilities incurred in the ordinary course of business or
(B) liabilities that would not, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on Warner-Lambert.
(e) INFORMATION SUPPLIED.
(i) None of the information supplied or to be supplied by Warner-Lambert
for inclusion or incorporation by reference in (A) the registration
statement on Form S-4 to be filed with the SEC by Warner-Lambert in
connection with the issuance of shares of Warner-Lambert Common Stock in
connection with the Merger, or any of the amendments or supplements thereto
(collectively, the "FORM S-4") will, at the time the Form S-4 is filed with
the SEC, at any time it is amended or supplemented or at the time it becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading and (B)
the proxy statement for use relating to the adoption by the stockholders of
Agouron of this Agreement or any of the amendments or supplements thereto
(collectively, the "PROXY STATEMENT") will, on the date it is first mailed
to Agouron stockholders or at the time of the Agouron Stockholders Meeting
(as defined in Section 5.1), contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Form S-4 will
comply as to form
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in all material respects with the requirements of the Exchange Act and the
Securities Act and the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section 3.1(e), no
representation or warranty is made by Warner-Lambert with respect to
statements made or incorporated by reference in the Form S-4 based on
information supplied by Agouron for inclusion or incorporation by reference
therein.
(f) BOARD APPROVAL. The Board of Directors of Warner-Lambert, by
resolutions duly adopted by unanimous vote at a meeting duly called and held and
not subsequently rescinded or modified in any way (the "WARNER-LAMBERT BOARD
APPROVAL"), has duly (i) determined that this Agreement and the Stock Option
Agreement, and the Merger are fair to and in the best interests of
Warner-Lambert and its stockholders, and (ii) approved this Agreement and the
Stock Option Agreement, the Merger and the Share Issuance. To the Knowledge of
Warner-Lambert, no state takeover statute is applicable to the Merger or the
Stock Option Agreement or the other transactions contemplated hereby.
(g) LITIGATION; COMPLIANCE WITH LAWS.
(i) Except as disclosed in the Warner-Lambert SEC Reports filed prior to
the date of this Agreement and except for any FDA action which may arise out
of the Advisory Committee meeting related to Rezulin that is currently
scheduled for March 26, 1999, there is no suit, action, investigation or
proceeding pending or, to the Knowledge of Warner-Lambert, threatened,
against or affecting Warner-Lambert or any Subsidiary of Warner-Lambert
having, or which would reasonably be expected to have a Material Adverse
Effect on Warner-Lambert, nor is there any judgment, decree, injunction,
rule or order of any Governmental Entity or arbitrator outstanding against
Warner-Lambert or any Subsidiary of Warner-Lambert having, or which
reasonably would be expected to have a Material Adverse Effect on
Warner-Lambert.
(ii) Except as disclosed in the Warner-Lambert SEC Reports filed prior
to the date of this Agreement and except as would not reasonably be expected
to have a Material Adverse Effect on Warner-Lambert, Warner-Lambert and its
Subsidiaries hold all permits, licenses, variances, exemptions, orders and
approvals of all Governmental Entities which are necessary for the operation
of the businesses of Warner-Lambert and its Subsidiaries, taken as a whole
(the "WARNER-LAMBERT PERMITS"). Warner-Lambert and its Subsidiaries are in
compliance with the terms of the Warner-Lambert Permits, except where the
failure so to comply would not reasonably be expected to have a Material
Adverse Effect on Warner-Lambert. Except as disclosed in the Warner-Lambert
SEC Reports filed prior to the date of this Agreement, the businesses of
Warner-Lambert and its Subsidiaries are not being conducted in violation of,
and Warner-Lambert has not received any notices of violations with respect
to, any law, ordinance or regulation of any Governmental Entity, except for
possible violations which would not reasonably be expected to have a
Material Adverse Effect on Warner-Lambert.
(h) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities incurred
in connection with this Agreement and the Stock Option Agreement, or the
transactions contemplated hereby, except as disclosed in the Warner-Lambert SEC
Reports filed prior to the date of this Agreement, except for any FDA action
which may arise out of the Advisory Committee meeting related to Rezulin that is
currently scheduled for March 26, 1999, and except as permitted by Section 4.2,
since January 1, 1999, Warner-Lambert and its Subsidiaries have conducted their
business only in the ordinary course and there has not been (i) any change,
circumstance or event which has had, or would reasonably be expected to have, a
Material Adverse Effect on Warner-Lambert or (ii) any action taken by Warner-
Lambert or any of its Subsidiaries during the period from January 1, 1999
through the date of this Agreement that, if taken during the period from the
date of this Agreement through the Effective Time, would constitute a breach of
Section 4.2.
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(i) ENVIRONMENTAL MATTERS. Except as would not reasonably be expected to
have a Material Adverse Effect on Warner-Lambert, (i) the operations of
Warner-Lambert and, to the Knowledge of Warner-Lambert, any entity for which
Warner-Lambert may be responsible, has been and is in compliance with all
applicable Environmental Laws (as defined in Section 3.2(j)) and with all
Environmental Permits (as defined in Section 3.2(j)), and (ii) there are no
pending or, to the Knowledge of Warner-Lambert, threatened, actions, suits,
claims, investigations or other proceedings (collectively, "ACTIONS") under or
pursuant to Environmental Laws against Warner-Lambert or, to the Knowledge of
Warner-Lambert, any entity for which Warner-Lambert may be responsible, or
involving any real property currently or, to the Knowledge of Warner-Lambert,
formerly owned, operated or leased by Warner-Lambert.
(j) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement or the Stock Option Agreement,
based upon arrangements made by or on behalf of Warner-Lambert, except Goldman,
Sachs & Co. (the "WARNER-LAMBERT FINANCIAL ADVISOR"), whose fees and expenses
will be paid by Warner-Lambert in accordance with Warner-Lambert's agreement
with such firm.
(k) OPINION OF WARNER-LAMBERT FINANCIAL ADVISOR. Warner-Lambert has
received the opinion of the Warner-Lambert Financial Advisor, dated the date of
this Agreement, to the effect that, as of such date, the Exchange Ratio is fair,
from a financial point of view, to Warner-Lambert, a copy of which opinion has
been made available to Agouron.
(l) ACCOUNTING MATTERS. To the Knowledge of Warner-Lambert, neither
Warner-Lambert nor any of its affiliates has taken or agreed to take any action
that would prevent Warner-Lambert from accounting for the Merger as a "pooling
of interests". At or prior to the Closing Date, Warner-Lambert has received a
letter from its independent public accountants addressed to Warner-Lambert, to
the effect that, based upon representations provided by Warner-Lambert,
accounting for the Merger as a pooling of interests under Opinion 16 of the
Accounting Principles Board, applicable SEC rules and regulations and other
authoritative literature is appropriate if the Merger is consummated and closed
as contemplated by this Agreement.
3.2 REPRESENTATIONS AND WARRANTIES OF AGOURON. Except as set forth in the
Agouron Disclosure Schedule delivered by Agouron to Warner-Lambert prior to the
execution of this Agreement (the "AGOURON DISCLOSURE SCHEDULE") (each section of
which qualifies the correspondingly numbered representation and warranty or
covenant to the extent specified therein), Agouron represents and warrants to
Warner-Lambert as follows:
(a) ORGANIZATION, STANDING AND POWER; SUBSIDIARIES.
(i) Each of Agouron and each of its Subsidiaries is a corporation duly
organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation or organization, has the requisite power and
authority to own, lease and operate its properties and to carry on its
business as now being conducted, except where the failure to be so
organized, existing and in good standing or to have such power and authority
would not reasonably be expected to have a Material Adverse Effect on
Agouron and is duly qualified and in good standing to do business in each
jurisdiction in which the nature of its business or the ownership or leasing
of its properties makes such qualification necessary other than in such
jurisdictions where the failure so to qualify or to be in good standing
would not reasonably be expected to have a Material Adverse Effect on
Agouron. The copies of the certificate of incorporation and by-laws of
Agouron which were previously furnished or made available to Warner-Lambert
are true, complete and correct copies of such documents as in effect on the
date of this Agreement.
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(ii) Exhibit 21 to Agouron's Annual Report on Form 10-K for the year
ended June 30, 1998, as amended ("AGOURON 10-K", together with Agouron's
Form 10-Q for the quarterly period ended September 30, 1998 ("AGOURON
SEPTEMBER 98 10Q"), the "AGOURON REPORTS") includes all the Subsidiaries of
Agouron which as of the date of this Agreement are Significant Subsidiaries
(as defined in Rule 1-02 of Regulation S-X of the SEC). All the outstanding
shares of capital stock of, or other equity interests in, each such
Significant Subsidiary have been validly issued and are fully paid and
nonassessable and are owned directly or indirectly by Agouron, free and
clear of all Liens and free of any other restriction (including any
restriction on the right to vote, sell or otherwise dispose of such capital
stock or other ownership interests). Except as set forth in the Agouron
Reports, neither Agouron nor any of its Subsidiaries directly or indirectly
owns any equity or similar interest in, or any interest convertible into or
exchangeable or exercisable for, any corporation, partnership, joint venture
or other business association or entity, that is or would reasonably be
expected to be material to Agouron and its Subsidiaries taken as a whole.
(b) CAPITAL STRUCTURE.
(i) As of December 31, 1998, the authorized capital stock of Agouron
consisted of (A) 75,000,000 shares of Agouron Common Stock, of which
31,728,847 shares were outstanding and (B) 2,000,000 shares of Preferred
Stock, without par value, none of which were outstanding and 2,000 shares of
which have been designated Series B Participating Preferred Stock and
reserved for issuance upon exercise of the rights (the "RIGHTS") distributed
to the holders of Agouron Common Stock pursuant to the Amended and Restated
Rights Agreement dated as of November 10, 1998, between Agouron and Chase
Mellon Shareholder Services, L.L.C., as Rights Agent, as amended (the
"RIGHTS AGREEMENT"). Since December 31, 1998 to the date of this Agreement,
there have been no issuances of shares of the capital stock of Agouron or
any other securities of Agouron other than issuances of shares (and
accompanying Rights) pursuant to options or rights outstanding as of
December 31, 1998 under the Benefit Plans of Agouron. All issued and
outstanding shares of the capital stock of Agouron are duly authorized,
validly issued, fully paid and nonassessable, and no class of capital stock
is entitled to preemptive rights. There were outstanding as of December 31,
1998 no options, warrants or other rights to acquire capital stock from
Agouron other than (x) the Rights and (y) options representing in the
aggregate the right to purchase no more than 8,747,636 shares of Agouron
Common Stock (collectively, the "AGOURON STOCK OPTIONS") under the Agouron
Restated 1996 Stock Option Plan, Agouron 1985 Stock Option Plan, Agouron
1990 Stock Option Plan, Agouron 1998 Stock Option Plan, Agouron Restated
Employee Stock Purchase Plan, the Alanex Corporation 1993 Stock Plan and the
Alanex Corporation 1996 Equity Incentive Plan and other individual Alanex
stock option agreements, as each such plan has been amended (collectively,
the "AGOURON STOCK OPTION PLANS"). Section 3.2(b) of the Agouron Disclosure
Schedule sets forth a complete and correct list, as of December 31, 1998, of
the number of shares of Agouron Common Stock subject to Agouron Stock
Options or other rights to purchase or receive Agouron Common Stock granted
under the Benefit Plans of Agouron or otherwise, the dates of grant and the
exercise prices thereof. No options or warrants or other rights to acquire
capital stock from Agouron have been issued or granted since December 31,
1998 to the date of this Agreement, other than pursuant to the Stock Option
Agreement or as permitted under Section 4.1 of this Agreement.
(ii) No bonds, debentures, notes or other indebtedness of Agouron having
the right to vote on any matters on which stockholders may vote ("AGOURON
VOTING DEBT") are issued or outstanding.
(iii) Except as otherwise set forth in this Section 3.2(b), as of the
date of this Agreement, there are no securities, options, warrants, calls,
rights, commitments, agreements, arrangements or undertakings of any kind to
which Agouron or any of its Subsidiaries is a party or by which any of them
is bound obligating Agouron or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock or other voting securities of Agouron or
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<PAGE>
any of its Subsidiaries or obligating Agouron or any of its Subsidiaries to
issue, grant, extend or enter into any such security, option, warrant, call,
right, commitment, agreement, arrangement or undertaking. As of the date of
this Agreement, there are no outstanding obligations of Agouron or any of
its Subsidiaries to repurchase, redeem or otherwise acquire any shares of
capital stock of Agouron or any of its Subsidiaries.
(c) AUTHORITY; NO CONFLICTS.
(i) Agouron has all requisite corporate power and authority to enter
into this Agreement and the Stock Option Agreement and to consummate the
transactions contemplated hereby and thereby, subject in the case of the
consummation of the Merger to the adoption of this Agreement by the Required
Agouron Vote (as defined in Section 3.2(g)). The execution and delivery of
this Agreement and the Stock Option Agreement and the consummation of the
transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of Agouron, subject in the case
of the consummation of the Merger to the adoption of this Agreement by the
Required Agouron Vote. Each of this Agreement and the Stock Option Agreement
has been duly executed and delivered by Agouron and constitutes a valid and
binding agreement of Agouron, enforceable against it in accordance with its
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to or
affecting creditors generally or by general equity principles (regardless of
whether such enforceability is considered in a proceeding in equity or at
law) or by an implied covenant of good faith and fair dealing.
(ii) The execution and delivery of this Agreement and the Stock Option
Agreement by Agouron does not or will not, as the case may be, and the
consummation by Agouron of the Merger and the other transactions
contemplated hereby and thereby will not, conflict with, or result in a
Violation pursuant to: (A) any provision of the certificate of incorporation
or by-laws of Agouron or any Subsidiary of Agouron or (B) except as would
not reasonably be expected to have a Material Adverse Effect on Agouron,
subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to in
paragraph (iii) below, any loan or credit agreement, note, mortgage, bond,
indenture, lease, benefit plan or other agreement, obligation, instrument,
permit, concession, franchise, license, judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Agouron or any Subsidiary
of Agouron or their respective properties or assets.
(iii) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity is required by or with
respect to Agouron or any Subsidiary of Agouron in connection with the
execution and delivery of this Agreement or the Stock Option Agreement by
Agouron or the consummation of the Merger and the other transactions
contemplated hereby, except the Necessary Consents and such consents,
approvals, orders, authorizations, registrations, declarations and filings
the failure of which to make or obtain would not reasonably be expected to
have a Material Adverse Effect on Agouron.
(d) REPORTS AND FINANCIAL STATEMENTS.
(i) Agouron has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
required to be filed by it with the SEC since July 1, 1998 (collectively,
including all exhibits thereto, the "AGOURON SEC REPORTS"). No Subsidiary of
Agouron is required to file any form, report, registration statement or
prospectus or other document with the SEC. None of the Agouron SEC Reports,
as of their respective dates (and, if amended or superseded by a filing
prior to the date of this Agreement or the Closing Date, then on the date of
such filing), contained or will contain any untrue statement of a material
fact or omitted or will omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Agouron
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SEC Reports together with any public announcements in a Dow Jones News
Release made by Agouron after the date hereof, taken as a whole, as of the
Effective Time will not contain any untrue statement of a material fact or
omit to state a material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances existing as of
the Effective Time, not misleading. Each of the financial statements
(including the related notes) included in the Agouron SEC Reports presents
fairly, in all material respects, the consolidated financial position and
consolidated results of operations and cash flows of Agouron and its
Subsidiaries as of the respective dates or for the respective periods set
forth therein, all in conformity with GAAP applied on a consistent basis
throughout the periods involved except as otherwise noted therein, and
subject, in the case of the unaudited interim financial statements, to
normal and recurring adjustments that were not or are not expected to be
material in amount. All of such Agouron SEC Reports, as of their respective
dates (and as of the date of any amendment to the respective Agouron SEC
Report), complied as to form in all material respects with the applicable
requirements of the Securities Act and the Exchange Act and the rules and
regulations promulgated thereunder.
(ii) Except as disclosed in the Agouron Reports filed prior to the date
hereof, since June 30, 1998, Agouron and its Subsidiaries have not incurred
any liabilities that are of a nature that would be required to be disclosed
on a balance sheet of Agouron and its Subsidiaries or the footnotes thereto
prepared in conformity with GAAP, other than (A) liabilities incurred in the
ordinary course of business or (B) liabilities that would not, either
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect on Agouron.
(e) INFORMATION SUPPLIED.
(i) None of the information supplied or to be supplied by Agouron for
inclusion or incorporation by reference in (A) the Form S-4 will, at the
time the Form S-4 is filed with the SEC, at any time it is amended or
supplemented or at the time it becomes effective under the Securities Act,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary to make the
statements therein not misleading, and (B) the Proxy Statement will, on the
date it is first mailed to Agouron stockholders or at the time of the
Agouron Stockholders Meeting, contain any untrue statement of a material
fact or omit to state any material fact required to be stated therein or
necessary in order to make the statements therein, in light of the
circumstances under which they were made, not misleading. The Proxy
Statement will comply as to form in all material respects with the
requirements of the Exchange Act and the Securities Act and the rules and
regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of this Section 3.2(e), no
representation or warranty is made by Agouron with respect to statements
made or incorporated by reference in the Form S-4 or the Proxy Statement
based on information supplied by Warner-Lambert or Merger Sub for inclusion
or incorporation by reference therein.
(f) BOARD APPROVAL. The Board of Directors of Agouron, by resolutions duly
adopted by unanimous vote of those voting at a meeting duly called and held and
not subsequently rescinded or modified in any way (the "AGOURON BOARD
APPROVAL"), has duly (i) determined that this Agreement and the Merger are fair
to and in the best interests of Agouron and its stockholders, (ii) approved this
Agreement and the Stock Option Agreement, and the Merger, (iii) recommended that
the stockholders of Agouron adopt this Agreement, and approve the Merger and
directed that this Agreement, and the transactions contemplated hereby be
submitted for consideration by Agouron's stockholders at the Agouron
Stockholders Meeting and (iv) confirmed that the Agouron Stock Options will not
accelerate as a result of the Merger unless the optionee is involuntarily
terminated by the Surviving Corporation within one year of the Effective Time.
To the Knowledge of Agouron, no state takeover statute is applicable to the
Merger or the Stock Option Agreement or the other transactions contemplated
hereby and thereby.
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(g) VOTE REQUIRED. The affirmative vote of the holders of a majority of
the outstanding shares of Agouron Common Stock to approve the Merger (the
"REQUIRED AGOURON VOTE") is the only vote of the holders of any class or series
of Agouron capital stock necessary to adopt this Agreement and approve the
Merger and the other transactions contemplated hereby.
(h) LITIGATION; COMPLIANCE WITH LAWS.
(i) Except as disclosed in the Agouron Reports filed prior to the date
of this Agreement, there is no suit, action, investigation or proceeding
pending or, to the Knowledge of Agouron, threatened, against or affecting
Agouron or any Subsidiary of Agouron having, or which would reasonably be
expected to have a Material Adverse Effect on Agouron, nor is there any
judgment, decree, injunction, rule or order of any Governmental Entity or
arbitrator outstanding against Agouron or any Subsidiary of Agouron having,
or which reasonably would be expected to have a Material Adverse Effect on
Agouron.
(ii) Except as disclosed in the Agouron Reports filed prior to the date
of the Agreement and except as would not reasonably be expected to have a
Material Adverse Effect on Agouron, Agouron and its Subsidiaries hold all
permits, licenses, variances, exemptions, orders and approvals of all
Governmental Entities necessary for the operation of the businesses of
Agouron and its Subsidiaries, taken as a whole (the "AGOURON PERMITS").
Agouron and its Subsidiaries are in compliance with the terms of the Agouron
Permits, except where the failure so to comply would not reasonably be
expected to have a Material Adverse Effect on Agouron. Except as disclosed
in the Agouron Reports filed prior to the date of this Agreement, the
businesses of Agouron and its Subsidiaries are not being conducted in
violation of, and Agouron has not received any notices of violations with
respect to, any law, ordinance or regulation of any Governmental Entity,
except for possible violations which would not reasonably be expected to
have a Material Adverse Effect on Agouron.
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS. Except for liabilities incurred
in connection with this Agreement and the Stock Option Agreement or the
transactions contemplated hereby and thereby, except as disclosed in the Agouron
Reports filed prior to the date of this Agreement, and except as permitted by
Section 4.1, since June 30, 1998, Agouron and its Subsidiaries have conducted
their business only in the ordinary course and there has not been (i) any
change, circumstance or event which has had, or would reasonably be expected to
have, a Material Adverse Effect on Agouron or (ii) any action taken by Agouron
or any of its Subsidiaries during the period from June 30, 1998 through the date
of this Agreement that, if taken during the period from the date of this
Agreement through the Effective Time, would constitute a breach of Section 4.1.
(j) ENVIRONMENTAL MATTERS. Except as disclosed in Section 3.2(j) of the
Agouron Disclosure Schedule and except as would not reasonably be expected to
have a Material Adverse Effect on Agouron, (i) the operations of Agouron and its
Subsidiaries and, to the Knowledge of Agouron, any entity for which any of them
may be responsible, have been and are in compliance with all applicable
Environmental Laws and with all Environmental Permits, (ii) there are no pending
or, to the Knowledge of Agouron, threatened, actions, suits, claims,
investigations or other proceedings (collectively, "ACTIONS") under or pursuant
to Environmental Laws against Agouron or its Subsidiaries or, to the Knowledge
of Agouron, any entity for which any of them may be responsible, or involving
any real property currently or, to the Knowledge of Agouron, formerly owned,
operated or leased by Agouron or its Subsidiaries, (iii) Agouron and its
Subsidiaries and, to the Knowledge of Agouron, any entity for which any of them
may be responsible, are not subject to any Environmental Liabilities and, to the
Knowledge of Agouron, no facts, circumstances or conditions relating to, arising
from, associated with or attributable to any real property currently or, to the
Knowledge of Agouron, formerly owned, operated or leased by Agouron or its
Subsidiaries or any entity for which any of them may be responsible, or
operations thereon would reasonably be expected to result in Environmental
Liabilities,
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(iv) to the Knowledge of Agouron, all real property owned and all real property
operated or leased by Agouron or its Subsidiaries or any entity for which any of
them may be responsible is free of Hazardous Materials in conditions or
concentrations that would reasonably be expected to have an adverse effect on
human health or the environment and none of Agouron, any of its Subsidiaries and
any entity for which any of them may be responsible has disposed of any
Hazardous Materials on or about such premises, (v) to the Knowledge of Agouron,
no release, discharge, spillage or disposal of any Hazardous Material and no
soil, water or air contamination by any Hazardous Material has occurred or is
occurring in, from or on the premises the result of which would have a Material
Adverse Effect on Agouron, and (vi) Agouron has provided to Warner-Lambert all
Environmental Reports prepared or dated since January 1, 1990, and any prior
material Environmental Reports, in the possession or control of Agouron or any
of its Subsidiaries.
As used in this Agreement, "ENVIRONMENTAL LAWS" means any and all laws,
rules, orders, regulations, statutes, ordinances, guidelines, codes, decrees, or
other legally enforceable requirements (including, without limitation, common
law) of any international authority, foreign government, the United States, or
any state, local, municipal or other Governmental Entity, regulating, relating
to or imposing liability or standards of conduct concerning protection of the
environment or of human health, or employee health and safety, including without
limitation the Comprehensive Environmental Response, Compensation and Liability
Act, 42 U.S.C. SectionSection 9601 ET SEQ., the Hazardous Materials
Transportation Act, 49 U.S.C. SectionSection 1801 ET SEQ., the Resource
Conservation and Recovery Act, 42 U.S.C. SectionSection 6901 ET SEQ., the Clean
Water Act, 33 U.S.C. SectionSection 1251 ET SEQ., the Clean Air Act, 42 U.S.C.
SectionSection 7401 ET SEQ., the Toxic Substances Control Act, 15 U.S.C.
SectionSection 2601 ET SEQ., the Federal Insecticide, Fungicide and Rodenticide
Act, 7 U.S.C., SectionSection 136 ET SEQ., Occupational Safety and Health Act 29
U.S.C. SectionSection 651 ET SEQ. and the Oil Pollution Act of 1990, 33 U.S.C.
SectionSection 2701 ET SEQ., as such laws have been amended or supplemented, and
the regulations promulgated pursuant thereto, and all analogous state or local
statutes. As used in this Agreement, "ENVIRONMENTAL LIABILITIES" with respect to
any person means any and all liabilities of or relating to such person or any of
its Subsidiaries (including any entity which is, in whole or in part, a
predecessor of such person or any of such Subsidiaries), whether vested or
unvested, contingent or fixed, actual or potential, known or unknown, which (i)
arise under or relate to matters covered by Environmental Laws or with respect
to Hazardous Materials, and (ii) relate to actions occurring or conditions
existing on or prior to the Closing Date. As used in this Agreement,
"ENVIRONMENTAL PERMITS" means any and all permits, consents, licenses,
approvals, registrations, notifications, exemptions and any other authorization
required under any applicable Environmental Law. As used in this Agreement,
"ENVIRONMENTAL REPORT" means any report, study, assessment, audit, or other
similar document that addresses any issue of noncompliance with, or liability
under, any Environmental Law that may affect Agouron or any of its Subsidiaries.
As used in this Agreement, "HAZARDOUS MATERIALS" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products,
polychlorinated biphenyls, urea-formaldehyde insulation, asbestos, pollutants,
contaminants, radioactivity, and any other substances of any kind, whether or
not any such substance is defined as hazardous or toxic under any Environmental
Law, that is regulated pursuant to or could give rise to liability under any
Environmental Law.
(k) INTELLECTUAL PROPERTY. Except as would not reasonably be expected to
have a Material Adverse Effect on Agouron, (a) Agouron and each of its
Subsidiaries owns, or is licensed to use (in each case, free and clear of any
Liens), all Intellectual Property used in or necessary for the conduct of its
business as currently conducted; (b) to the Knowledge of Agouron, the use of any
Intellectual Property by Agouron and its Subsidiaries does not infringe on or
otherwise violate the rights of any Person and is in accordance with any
applicable license pursuant to which Agouron or any Subsidiary acquired the
right to use any Intellectual Property; (c) to the Knowledge of Agouron, no
Person is challenging, infringing on or otherwise violating any right of Agouron
or any of its Subsidiaries with respect to any Intellectual Property owned by or
licensed to Agouron or its Subsidiaries; and (d) neither Agouron nor any of its
Subsidiaries has received any written notice of any pending claim with respect
to any
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Intellectual Property used by Agouron and its Subsidiaries and to the Knowledge
of Agouron no Intellectual Property owned or licensed by Agouron or its
Subsidiaries is being used or enforced in a manner that would result in the
abandonment, cancellation or unenforceability of such Intellectual Property.
For purposes of this Agreement, "INTELLECTUAL PROPERTY" shall mean
trademarks, service marks, brand names, certification marks, trade dress and
other indications of origin, the goodwill associated with the foregoing and
registrations in any jurisdiction of, and applications in any jurisdiction to
register, the foregoing, including any extension, modification or renewal of any
such registration or application; inventions, discoveries and ideas, whether
patentable or not, in any jurisdiction; patents, applications for patents
(including, without limitation, divisions, continuations, continued prosecution
applications, continuations in part and renewal applications), and any renewals,
extensions or reissues thereof, in any jurisdiction; know-how, trade secrets and
confidential information and rights in any jurisdiction to limit the use or
disclosure thereof by any person; writings and other works, whether
copyrightable or not, in any jurisdiction; registrations or applications for
registration of copyrights in any jurisdiction, and any renewals or extensions
thereof; and any similar intellectual property or proprietary rights.
(l) RIGHTS AGREEMENT. The Board of Directors has approved an amendment
(such amendment is hereinafter referred to as the "RIGHTS AMENDMENT") to the
Rights Agreement so as to provide that: neither Warner-Lambert nor Merger Sub
will become an "Acquiring Person" and that no "Stock Acquisition Date" or
"Distribution Date" (as such terms are defined in the Rights Agreement) will
occur as a result of the approval, execution and delivery of this Agreement or
the Stock Option Agreement and the consummation of the transactions contemplated
hereby or thereby, and the Rights (as defined in the Rights Agreement) will
expire immediately prior to the Effective Time. Promptly following the execution
and delivery of this Agreement, Agouron shall take all action necessary to make
the Rights Amendment effective.
(m) BROKERS OR FINDERS. No agent, broker, investment banker, financial
advisor or other firm or Person is or will be entitled to any broker's or
finder's fee or any other similar commission or fee in connection with any of
the transactions contemplated by this Agreement or the Stock Option Agreement,
based upon arrangements made by or on behalf of Agouron except PaineWebber
Incorporated and Westview Securities Inc. (the "AGOURON FINANCIAL ADVISORS"),
whose fees and expenses will be paid by Agouron in accordance with Agouron's
agreements with such firms, copies of which have been provided to
Warner-Lambert.
(n) OPINION OF AGOURON FINANCIAL ADVISOR. Agouron has received the opinion
of PaineWebber Incorporated, dated the date of this Agreement, to the effect
that, as of such date, the Merger Consideration is fair, from a financial point
of view, to the holders of Agouron Common Stock, a copy of which opinion has
been made available to Warner-Lambert.
(o) ACCOUNTING MATTERS. To the Knowledge of Agouron, neither Agouron nor
any of its affiliates has taken or agreed to take any action that would prevent
Warner-Lambert from accounting for the Merger as a "pooling of interests". At or
prior to the Closing Date, Agouron has received a letter from its independent
public accountants addressed to Agouron, to the effect that, based upon
representations provided by Agouron, accounting for the Merger as a pooling of
interests under Opinion 16 of the Accounting Principles Board, applicable SEC
rules and regulations and other authoritative literature is appropriate if the
Merger is consummated and closed as contemplated by this Agreement.
(p) TAXES. Except as previously discussed between the parties, Agouron and
each of its Subsidiaries (which, for the purposes of this Section 3.2(p), shall
include any predecessor of any Subsidiary and any incorporated or unincorporated
organization in which Agouron alone or together with its Subsidiaries holds an
interest of 40% or more of profits or losses) (i) have prepared in good
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faith and duly and timely filed (taking into account any extension of time
within which to file) all material Tax Returns (as defined below) required to be
filed by any of them and all such filed Tax Returns are complete and accurate in
all material respects; (ii) to the Knowledge of Agouron, have paid all Material
Taxes that are shown as due and payable on such filed Tax Returns or that
Agouron or any of its Subsidiaries are obligated to pay without the filing of a
Tax Return; (iii) to the Knowledge of Agouron, have paid all other Material
charges, claims and assessments received to date in respect of Taxes other than
those being contested in good faith for which provision has been made in
accordance with GAAP on the most recent balance sheet included in the Agouron
10-K; (iv) have properly accrued on the balance sheet, in accordance with GAAP,
all material contingent or deferred Taxes that have not become due; (v) to the
Knowledge of Agouron, have withheld from amounts owing to any employee, creditor
or other Person all Material Taxes required by law to be withheld and have paid
over to the proper governmental authority in a timely manner all such withheld
amounts to the extent due and payable; (vi) as of the date hereof, have neither
extended nor waived any applicable statute of limitations with respect to United
States federal or state income or franchise Taxes and have not otherwise agreed
to any extension of time with respect to a United States federal or state income
or franchise Tax assessment or deficiency; (vii) have never been members of any
consolidated group for income tax purposes other than the consolidated group of
which Agouron is the common parent; and (viii) are not parties to any tax
sharing agreement or arrangement other than with each other. As of the date
hereof, there are not pending or threatened in writing any audits, examinations,
investigations, litigation, or other proceedings in respect of Taxes of Agouron
or any Subsidiary. No liens for Taxes exist with respect to any of the assets or
properties of Agouron or its Subsidiaries, except for statutory liens for Taxes
not yet due or payable or that are being contested in good faith. Agouron has
made available to Warner-Lambert true and correct copies of the United States
federal income Tax Returns filed by Agouron and its Subsidiaries for each of the
fiscal years ended June 30, 1998, 1997 and 1996. There is no contract or
agreement, plan or arrangement by Agouron or its Subsidiaries covering any
person that, individually or collectively, could give rise to the payment of any
amount that would not be deductible by Agouron or its Subsidiaries by reason of
Section 280G of the Code or would constitute compensation in excess of the
limitation set forth in Section 162(m) of the Code. As used in clauses (ii),
(iii), and (v) of this Section 3.2(p), the term "Material" shall mean an amount
which, in the aggregate, exceeds $1,000,000.
As used in this Agreement, (i) the term "Tax" (including, with correlative
meaning, the terms "Taxes" and "Taxable") includes all federal, state, local and
foreign income, profits, premium, franchise, gross receipts, environmental,
customs duty, capital stock, severance, stamp, payroll, sales, employment,
unemployment, disability, use, property, withholding, excise, production, value
added, occupancy and other taxes, duties or governmental levies of any nature
whatsoever, together with all interest, penalties and additions imposed with
respect to such amounts or filing requirements and any interest in respect of
such penalties and additions, and (ii) the term "Tax Return" includes all
returns and reports (including elections, declarations, disclosures, schedules,
estimates, information returns, claim for refund, and amended returns) required
to be supplied to a Tax authority relating to Taxes.
(q) CERTAIN CONTRACTS. As of the date hereof except as filed as part of
the Agouron Reports, neither Agouron nor any of its Subsidiaries is a party to
or bound by (i) any "material contract" (as such term is defined in Item
601(b)(10) of Regulation S-K of the SEC) or (ii) any non-competition agreement
or any other agreement or arrangement that limits or otherwise restricts Agouron
or any of its Subsidiaries or any of their respective affiliates or any
successor thereto or that would, after the Effective Time, to the Knowledge of
Agouron, limit or restrict Warner-Lambert or any of its affiliates (including
the Surviving Corporation) or any successor thereto, from engaging or competing
in any line of business or in any geographic area, which agreement or
arrangement would reasonably be expected to have a Material Adverse Effect on
Warner-Lambert and its Subsidiaries (including the Surviving Corporation and its
Subsidiaries), taken together, after giving effect to the Merger.
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(r) EMPLOYEE BENEFIT PLANS.
(i) Section 3.2(r)(i) of the Agouron Disclosure Schedule contains a true
and complete list of each "employee benefit plan" (within the meaning of
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA"), (including without limitation multiemployer plans within
the meaning of ERISA Section 3(37)), stock purchase, stock option,
severance, employment, change-in-control, fringe benefit, collective
bargaining, bonus, incentive, deferred compensation and all other employee
benefit plans, agreements, programs, policies or other arrangements, whether
or not subject to ERISA, whether formal or informal, oral or written,
legally binding or not under which any employee or former employee of
Agouron or any of its Subsidiaries has any present or future right to
benefits or under which Agouron or any of its Subsidiaries has any present
or future liability. All such plans, agreements, programs, policies and
arrangements shall be collectively referred to as the "PLANS".
(ii) With respect to each Plan, Agouron has delivered or made available
to Warner-Lambert a current, accurate and complete copy (or, to the extent
no such copy exists, an accurate description) thereof and, to the extent
applicable, (A) any related trust agreement, annuity contract or other
funding instrument; (B) the most recent determination letter; (C) any
summary plan description and other written communications (or a description
of any oral communications) by Agouron or any of its Subsidiaries to its
employees concerning the extent of the benefits provided under a Plan; and
(D) for the three most recent years: (I) the Form 5500 and attached
schedules; (II) audited financial statements; (III) actuarial valuation
reports; and (IV) attorney responses to auditors' requests for information.
(iii) (A) Each Plan has been established and administered in accordance
with its terms, and in compliance with the applicable provisions of ERISA,
the Code and other applicable laws, rules and regulations and if intended to
be qualified within the meaning of Section 401(a) of the Code is so
qualified; (B) with respect to any Plan, no actions, suits or claims (other
than routine claims for benefits in the ordinary course) are pending or
threatened; (C) neither Agouron nor any other party has engaged in a
prohibited transaction, as such term is defined under Section 4975 of the
Code or Section 406 of ERISA, which would subject Agouron, the Surviving
Corporation, any of their Subsidiaries, Merger Sub or Warner-Lambert to any
taxes, penalties or other liabilities under Section 4975 of the Code or
Sections 409 or 502(i) of ERISA and Agouron has no other liability under the
Code with respect to any Plan, including liability under any other provision
of Chapter 43 of the Code; (D) no Plan provides for an increase in benefits
on or after the Closing Date; and (E) each Plan may be amended or terminated
without obligation or liability (other than those obligations and
liabilities for which specific assets have been set aside in a trust or
other funding vehicle or reserved for on Agouron's September 30, 1998
balance sheet included in the Agouron September 98 10Q).
(iv) Neither Agouron nor any member of its Controlled Group has ever
maintained, sponsored, administered or contributed to an employee benefit
plan subject to Title IV of ERISA, a multiemployer plan (within the meaning
of Section 4001(a)(3) of ERISA) or a welfare benefit plan that provide
coverage or benefits to former employees (other than benefit continuation
rights under the Consolidated Omnibus Budget Reconciliation Act of 1985, as
amended).
(v) No Plan exists which could result in the payment to any employee of
Agouron or any of its Subsidiaries of any money or other property or rights
or accelerate or provide any other rights or benefits to any such employee
as a result of the transactions contemplated by this Agreement.
(vi) All individuals who are or have been eligible to participate in the
Plans based upon the eligibility provisions set forth therein or under
applicable law have been provided with a timely opportunity to participate.
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(s) LABOR MATTERS. (1) Neither Agouron nor any of its Subsidiaries is a
party to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization; (2) to the
Knowledge of Agouron, neither Agouron nor any of its Subsidiaries is the subject
of any proceeding asserting that it or any Subsidiary has committed an unfair
labor practice or sex, age, race or other discrimination or seeking to compel it
to bargain with any labor organization as to wages or conditions of employment;
(3) there are no current or threatened organizational activities or demands for
recognition by a labor organization seeking to represent employees of Agouron or
any Subsidiary, or labor strike and no such activities have occurred during the
past 24 months; (4) no grievance, arbitration, complaint or investigation is
pending or, to the Knowledge of Agouron, threatened against Agouron or any of
its Subsidiaries which, individually or in the aggregate, would reasonably be
expected to have a Material Adverse Effect with respect to Agouron; (5) to the
Knowledge of Agouron, Agouron and each Subsidiary is in compliance with all
applicable laws (domestic and foreign), agreements, contracts, and policies
relating to employment, employment practices, wages, hours, and terms and
conditions of employment except for failures so to comply, if any, that
individually or in the aggregate could not reasonably be expected to have a
Material Adverse Effect with respect to Agouron; (6) Agouron has complied in all
material respects with its payment obligations to all employees of Agouron and
its Subsidiaries in respect of all wages, salaries, commissions, bonuses,
benefits and other compensation due and payable to such employees under any
Agouron policy, practice, agreement, plan, program or any statute or other law;
(7) Agouron is not liable for any severance pay or other payments to any
employee or former employee arising from the termination of employment under any
benefit or severance policy, practice, agreement, plan, or program of Agouron,
nor to the Knowledge of Agouron will Agouron have any liability which exists or
arises, or may be deemed to exist or arise, under any applicable law or
otherwise, as a result of or in connection with the transactions contemplated
hereunder or as a result of the termination by Agouron of any persons employed
by Agouron or any of its Subsidiaries on or prior to the Effective Time of the
Merger except as required by Code Section 4980B; and (8) Agouron is in
compliance with its obligations pursuant to the Worker Adjustment and Retraining
Notification Act of 1988 ("WARN") and part 6 and 7 of Title I of ERISA, to the
extent applicable, and all other employee notification and bargaining
obligations arising under any collective bargaining agreement or statute.
(t) AFFILIATE TRANSACTIONS. Except as disclosed in Section 3.2(t) of the
Agouron Disclosure Schedule, there are no material contracts, commitments,
agreements, arrangements or other transactions between Agouron or any of its
Subsidiaries, on the one hand, and any (i) officer or director of Agouron or any
of its Subsidiaries, (ii) record or beneficial owner of five percent or more of
the voting securities of Agouron or (iii) affiliate (as such term is defined in
Regulation 12b-2 promulgated under the Exchange Act) of any such officer,
director or beneficial owner, on the other hand.
(u) MATERIAL CONTRACT DEFAULTS.
(i) Agouron has provided or made available to Warner-Lambert copies, and
has provided a true and correct list to Warner-Lambert, of all material
contracts, agreements, commitments, arrangements, leases, policies or other
instruments to which it or any of its Subsidiaries is a party or by which it
or any such Subsidiary is bound ("MATERIAL CONTRACTS"). Neither Agouron nor
any of its Subsidiaries is, or has received any notice or has any Knowledge
that any other party is, in default (or would be in default but for the
lapse of time or the giving of notice or both) in any respect under any such
Material Contract, except for those defaults which could not, individually
or in the aggregate, reasonably be expected to have a Material Adverse
Effect on Agouron.
(ii) Agouron has made available to Warner-Lambert (x) true and correct
copies of all loan or credit agreements, notes, bonds, mortgages, indentures
and other agreements and instruments pursuant to which any indebtedness for
borrowed money of Agouron or any of its Subsidiaries in an aggregate
principal amount in excess of $200,000 is outstanding or may be incurred and
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(y) accurate information regarding the respective principal amounts
currently outstanding thereunder.
(v) INSURANCE. Agouron has provided or made available to Warner-Lambert
true, correct and complete copies of all policies of insurance to which Agouron
is a party or is a beneficiary or named insured. Agouron maintains insurance
coverage with reputable insurers in such amounts and covering such risks as are
in accordance with normal industry practice for companies engaged in businesses
similar to that of Agouron (taking into account the cost and availability of
such insurance).
(w) YEAR 2000 COMPLIANCE.
(i) Except as disclosed on Section 3.2(w) of the Agouron Disclosure
Schedule, all computer hardware, firmware, software, systems, databases,
devices, machinery, equipment and related items (including embedded
microcontrollers in non-computer equipment), embedded within their products,
and/or necessary for Agouron and its Subsidiaries to carry on their business
as presently conducted ("Systems") are Year 2000 Compliant, or will be Year
2000 Compliant in sufficient time so as to avoid causing a Material Adverse
Effect with respect to Agouron. For purposes hereof, "Year 2000 Compliant"
means, when used with respect to the Systems, that such Systems, whether
used alone or in combination, will retain full functionality and, without
interruption, will correctly differentiate between years, in different
centuries, and will accurately process date/time data from, into and between
the twentieth and twenty-first centuries, including leap year calculations
and unusual date situations (e.g., 9/9/99).
(ii) Agouron and its Subsidiaries have (A) undertaken an assessment of
all Systems that could be adversely affected by a failure to be Year 2000
Compliant on a timely basis, (B) developed a plan and time line for
becoming, and for ensuring that their material suppliers become, Year 2000
Compliant on a timely basis and (C) to date, implemented such plan in
accordance with such timetable in all material respects. Based on such
inventory, review and assessment, Agouron hereby represents and warrants to
Warner-Lambert that the estimated total remaining cost of rendering the
Systems Year 2000 Compliant is not expected to exceed $1,000,000.
(x) SUPPLY. As of the date hereof, to the Knowledge of Agouron, there are
no circumstances or facts concerning third party suppliers of active ingredient,
bulk product and finished product to Agouron (as they relate to Viracept) that
would have a material adverse effect on the continued supply of such materials.
(y) INVESTIGATIONAL COMPOUNDS AND VIRACEPT. As of the date hereof, Agouron
has provided to Warner-Lambert all material information relating to AG3340,
Remune, AG1549, AG7088 and AG1776 (the "INVESTIGATIONAL COMPOUNDS") and Viracept
and to the Knowledge of Agouron, there are no circumstances or facts relating to
the Investigational Compounds or Viracept that would individually or in the
aggregate be reasonably likely to have a material adverse effect on the
development of the Investigational Compounds or the marketing of Viracept.
(z) GENERIC DRUG ENFORCEMENT ACT. To the Knowledge of Agouron, none of the
individuals set forth on Exhibit 3.2(z) have ever (i) been employed or
contracted for services by Agouron, or (ii) contributed to the development of
any of the Investigational Compounds.
3.3 REPRESENTATIONS AND WARRANTIES OF WARNER-LAMBERT AND MERGER
SUB. Warner-Lambert and Merger Sub represent and warrant to Agouron as follows:
(a) ORGANIZATION. Merger Sub is a corporation duly incorporated, validly
existing and in good standing under the laws of California and Merger Sub is a
direct wholly-owned subsidiary of Warner-Lambert.
(b) CORPORATE AUTHORIZATION. Merger Sub has all requisite corporate power
and authority to enter into this Agreement and to consummate the transactions
contemplated hereby. The execution, delivery
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and performance by Merger Sub of this Agreement and the consummation by Merger
Sub of the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Merger Sub. This Agreement has been
duly executed and delivered by Merger Sub and constitutes a valid and binding
agreement of Merger Sub, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium and other similar laws relating to or affecting
creditors generally or by general equity principles (regardless of whether such
enforceability is considered in a proceeding in equity or at law) or by an
implied covenant of good faith and fair dealing.
(c) NON-CONTRAVENTION. The execution, delivery and performance by Merger
Sub of this Agreement and the consummation by Merger Sub of the transactions
contemplated hereby do not and will not contravene or conflict with the
certificate of incorporation or by-laws of Merger Sub.
(d) NO BUSINESS ACTIVITIES. Merger Sub has not conducted any activities
other than in connection with the organization of Merger Sub, the negotiation
and execution of this Agreement and the consummation of the transactions
contemplated hereby. Merger Sub has no Subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 CONDUCT OF BUSINESS OF AGOURON PENDING THE MERGER. Agouron covenants
and agrees that, during the period from the date hereof to the Effective Time,
unless Warner-Lambert shall otherwise agree in writing in advance, the
businesses of Agouron and its Subsidiaries shall be conducted only in, and
Agouron and its Subsidiaries shall not take any action except in, the ordinary
course of business and in a manner consistent with past practice and in
compliance with applicable laws; and Agouron and its Subsidiaries shall each use
its commercially reasonable efforts to preserve substantially intact the
business organization of Agouron and its Subsidiaries, to keep available the
services of the present officers, significant employees and consultants of
Agouron and its Subsidiaries and to preserve the present relationships of
Agouron and its subsidiaries with such of the customers, suppliers, licensors,
licensees, or distributors with which Agouron or any of its Subsidiaries has
significant business relations. By way of amplification and not limitation,
neither Agouron nor any of its Subsidiaries shall, between the date of this
Agreement and the Effective Time, except as set forth in Section 4.1 of the
Agouron Disclosure Schedule, directly or indirectly do, or propose or commit to
do, any of the following without the prior written consent of Warner-Lambert,
which consent shall not be unreasonably delayed (but may be withheld):
(a) Amend its Certificate of Incorporation or By-Laws or equivalent
organizational documents;
(b) Issue, deliver, sell, pledge, dispose of or encumber, or authorize
or commit to the issuance, sale, pledge, disposition or encumbrance of, (A)
any shares of capital stock of any class, or any options, warrants,
convertible securities or other rights of any kind to acquire any shares of
capital stock, or any other ownership interest (including but not limited to
stock appreciation rights or phantom stock), of Agouron or any of its
Subsidiaries (except for the issuance of up to 6,108,552 shares of Agouron
Common Stock issuable upon exercise of outstanding options granted under the
Agouron Stock Option Plans) or (B) any assets of Agouron or any of its
Subsidiaries, except for sales of products and payments made pursuant to
existing contracts in the ordinary course of business and in a manner
consistent with past practice;
(c) Declare, set aside, make or pay any dividend or other distribution,
payable in cash, stock, property or otherwise, with respect to any of its
capital stock;
(d) Reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock;
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(e) (i) Acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or
division thereof or (except for the purchase of inventory in the ordinary
course of business) any assets; (ii) transfer, lease, mortgage, or otherwise
dispose of or subject to any lien any of its assets (including capital stock
of Subsidiaries), (iii) incur any indebtedness for borrowed money or issue
any debt securities or assume, guarantee (other than guarantees for purchase
orders made in the ordinary course of business) or endorse, or otherwise as
an accommodation become responsible for, the obligations of any person, or
make any loans, advances or capital contributions to, or investments in, any
other person (other than borrowings incurred with the prior written consent
of Warner-Lambert (which consent shall not be unreasonably withheld or
delayed), in an aggregate amount not to exceed $5,000,000); (iv) enter into
any material contract or agreement or enter into, or amend or terminate any
joint venture arrangements; (v) enter into any agreement as licensee or
licensor, (vi) enter into any commitments or transactions material,
individually or in the aggregate, to Agouron and its Subsidiaries taken as a
whole; (vii) authorize any single capital expenditure which is in excess of
$300,000 or capital expenditures which are, in the aggregate, in excess of
$750,000 for Agouron and its Subsidiaries taken as a whole other than
capital expenditures reflected in Agouron's fiscal 1998 budget, a copy of
which has been delivered to Warner-Lambert; or (viii enter into or amend
(other than a non-material amendment) any contract, agreement, commitment or
arrangement with respect to any of the matters set forth in this Section
4.1(e);
(f) Except to the extent required under this Agreement or under any
existing employee and director benefit plans, agreements or arrangements as
in effect on the date of this Agreement and previously delivered to
Warner-Lambert, increase the compensation or fringe benefits of any of its
directors, officers or employees, except for increases in salary or wages of
employees of Agouron or its Subsidiaries in the ordinary course of business
in accordance with past practice and bonuses paid for fiscal year 1998 in
accordance with Section 5.6(a) hereof, or grant any severance or termination
pay not currently required to be paid under existing severance plans or
enter into, or amend, any employment, consulting or severance agreement or
arrangement with any present or former director, officer or other employee
of Agouron or any of its Subsidiaries, or establish, adopt, enter into or
amend or terminate any collective bargaining, bonus, profit sharing, thrift,
compensation, stock option, restricted stock, pension, retirement, deferred
compensation, employment, termination, welfare, severance or other plan,
agreement, trust, fund, policy or arrangement for the benefit of any
directors, officers or employees;
(g) Except as may be required as a result of a change in law or in
generally accepted accounting principles, change any of the accounting
practices or principles used by it;
(h) Take, or permit any of its Subsidiaries to take, any action that
(without regard to any action taken or agreed to be taken by Warner-Lambert
or any of its affiliates) would prevent (x) Warner-Lambert from accounting
for the business combination to be effected by the Merger as a pooling of
interests or (y) the Merger from qualifying as a reorganization within the
meaning of Section 368(a) of the Code;
(i) Make any Tax election or settle or compromise any material federal,
state, local or foreign Tax liability, change any annual tax accounting
period, change any method of Tax accounting, enter into any closing
agreement relating to any Tax, surrender any right to claim a Tax refund, or
consent to any extension or waiver of the limitations period applicable to
any Tax claim or assessment;
(j) Settle or compromise any pending or threatened suit, action or claim
which is material or which relates to the transactions contemplated hereby;
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(k) Adopt a plan of complete or partial liquidation, dissolution,
merger, consolidation, restructuring, recapitalization or other
reorganization of Agouron or any of its Subsidiaries (other than the
Merger);
(l) Pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other
than the payment, discharge or satisfaction, in the ordinary course of
business and consistent with past practice, of liabilities reflected or
reserved against in the financial statements of Agouron or incurred in the
ordinary course of business and consistent with past practice;
(m) Effectuate a "plant closing" or "mass layoff", as those terms are
defined in WARN, affecting in whole or in part any site of employment,
facility, operating unit or employee of Agouron or any of its Subsidiaries;
(n) Fail to maintain in full force and effect the existing insurance
policies covering Agouron and its Subsidiaries and their respective
properties, assets and businesses or comparable replacement policies to the
extent available for a cost not exceeding the current cost of such policy;
(o) Except as provided in Section 3.2(l), amend, modify or waive any
provision of the Rights Agreement, and shall not take any action to redeem
the Rights or render the Rights inapplicable to any transaction (other than
the Merger);
(p) Take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 4.1(a) through 4.1(o)
(other than an action described in Section 4.1(k) or 4.1(o), to the extent
such action is permitted pursuant to Section 5.5) or any action which would
make any of the representations or warranties of Agouron contained in this
Agreement untrue and incorrect as of the date when made if such action had
then been taken or would result in any of the conditions set forth in
Article VI not being satisfied or materially delay the Closing.
Between the date of this Agreement and the Effective Time, Agouron and its
Subsidiaries shall:
(A) Notify and consult with Warner-Lambert immediately (i) after receipt
of any material communication from the FDA or, before giving any material
submission to the FDA (including any IND Safety Reports, Fifteen-day Alert
Reports or Field Alert Reports, as the case may be) with respect to Viracept
or any of the Investigational Compounds or (ii) prior to making any material
change to a study protocol, the addition of new trials, or a material change
to the development timeline for any of the Investigational Compounds; and
(B) Notify and consult with Warner-Lambert prior to making any material
public announcement with respect to Viracept or any of the Investigational
Compounds.
4.2 CONDUCT OF BUSINESS OF WARNER-LAMBERT PENDING THE MERGER. (a) During
the period from the date of this Agreement to the Effective Time of the Merger
(except as otherwise contemplated by the terms of this Agreement),
Warner-Lambert shall use its reasonable best efforts to keep available the
services of their current officers and significant employees and preserve their
relationships with customers, suppliers, licensors, licensees, or distributors
having business dealings with them to the end that their goodwill and ongoing
businesses shall be unimpaired at the Effective Time of the Merger.
(b) Without limiting the generality of the foregoing, during the period from
the date of this Agreement to the Effective Time, Warner-Lambert shall not,
without the prior consent of Agouron:
(i) Amend Warner-Lambert's certificate of incorporation or by-laws in a
manner that would be materially adverse to the holders of Warner-Lambert
Common Stock;
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(ii) Combine or reclassify or otherwise alter the Warner-Lambert Common
Stock or issue or authorize the issuance of any other securities in respect
of, in lieu of or in substitution for shares of its capital stock; or
(iii) Take, or offer or propose to take, or agree to take in writing or
otherwise, any of the actions described in Sections 4.2(b)(i) through
4.2(b)(ii) or any action which would make any of the representations or
warranties of Warner-Lambert contained in this Agreement untrue and
incorrect as of the date when made if such action had then been taken or
(except as otherwise provided herein) would result in any of the conditions
set forth in Article VI not being satisfied.
(c) Warner-Lambert shall not, and shall not permit any of its Subsidiaries
to, take any action that (without regard to any action taken or agreed to be
taken by Agouron or any of its affiliates) would (x) prevent Warner-Lambert from
accounting for the business combination to be effected by the Merger as a
pooling of interests, (y), it believes, prevent the Merger from qualifying as a
reorganization within the meaning of Section 368(a) of the Code or (z) make any
of the representations or warranties of Warner-Lambert contained in this
Agreement untrue and incorrect such that it would have a Material Adverse Effect
on Warner-Lambert or that would result in any of the conditions set forth in
Article VI not being satisfied or materially delay the Closing.
4.3 GOVERNMENTAL FILINGS. Each of Warner-Lambert (to the extent
operational matters directly relate to this Agreement and the Merger) and
Agouron shall (a) confer on a regular and frequent basis with the other and (b)
report (to the extent permitted by law or regulation or any applicable
confidentiality agreement) on operational matters. Agouron and Warner-Lambert
shall file all reports required to be filed by each of them with the SEC (and
all other Governmental Entities) between the date of this Agreement and the
Effective Time and each of Warner-Lambert (to the extent any report,
announcement and publication relates to this Agreement and the Merger or
materially impacts the Merger) and Agouron shall (to the extent permitted by law
or regulation or any applicable confidentiality agreement) deliver to the other
party copies of all such reports, announcements and publications promptly after
the same are filed.
4.4 CONTROL OF OTHER PARTY'S BUSINESS. Nothing contained in this Agreement
shall give Agouron, directly or indirectly, the right to control or direct
Warner-Lambert's operations prior to the Effective Time. Nothing contained in
this Agreement shall give Warner-Lambert, directly or indirectly, the right to
control or direct Agouron's operations prior to the Effective Time. Prior to the
Effective Time, each of Agouron and Warner-Lambert shall exercise, consistent
with the terms and conditions of this Agreement, complete control and
supervision over its respective operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 PREPARATION OF FORM S-4 AND THE PROXY STATEMENT; STOCKHOLDERS
MEETING. (a) Promptly following the date of this Agreement, Agouron and
Warner-Lambert shall prepare and Agouron shall file with the SEC the Proxy
Statement, and Warner-Lambert shall prepare and file with the SEC the Form S-4,
in which the Proxy Statement will be included as a prospectus. Each of Agouron
and Warner-Lambert shall use its reasonable best efforts to have the Form S-4
declared effective under the Securities Act as promptly as practicable after
such filing. Agouron will use its reasonable best efforts to cause the Proxy
Statement to be mailed to its stockholders as promptly as practicable after the
Form S-4 is declared effective under the Securities Act. Warner-Lambert shall
also take any action (other than qualifying to do business in any jurisdiction
in which it is not now so qualified) required to be taken under any applicable
state securities law in connection with the issuance of Warner-Lambert Common
Stock in connection with the Merger, and Agouron shall furnish all information
concerning Agouron and the holders of Agouron Common Stock and rights to acquire
Agouron Common Stock pursuant to the Agouron Stock Option Plans as may be
reasonably required in connection with any
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such action. Each of Warner-Lambert and Agouron shall furnish all information
concerning itself to the other as may be reasonably requested in connection with
any such action and the preparation, filing and distribution of the Form S-4 and
the preparation, filing and distribution of the Proxy Statement. Agouron,
Warner-Lambert and Merger Sub each agree to correct any information provided by
it for use in the Form S-4 or the Proxy Statement which shall have become false
or misleading.
(b) Agouron, acting through its Board of Directors, shall, subject to and in
accordance with its Certificate of Incorporation and By-Laws, promptly and duly
call, give notice of, convene and hold as soon as practicable following the date
upon which the Form S-4 becomes effective a meeting of the holders of Agouron
Common Stock (the "Agouron Stockholders Meeting") for the purpose of voting to
approve and adopt this Agreement and the transactions contemplated hereby, and
(i) recommend approval and adoption of this Agreement and the transactions
contemplated hereby, by the stockholders of Agouron and include in the Proxy
Statement such recommendation and (ii) take all reasonable and lawful action to
solicit and obtain such approval. The Board of Directors of Agouron shall not
withdraw, amend or modify in a manner adverse to Warner-Lambert its
recommendation referred to in clause (i) of the preceding sentence (or announce
publicly its intention to do so), except that such Board of Directors shall be
permitted to withdraw, amend or modify its recommendation (or publicly announce
its intention to do so) if such Board of Directors determines in good faith,
based upon written advice of outside counsel, that it is obligated by their
fiduciary duties in accordance with California law to do so. Without limiting
the generality of the foregoing, (i) Agouron agrees that its obligation to duly
call, give notice of, convene and hold a meeting of the holders of Agouron
Common Stock, as required by this Section 5.1, shall not be affected by the
withdrawal, amendment or modification of the Board of Directors' recommendation
of approval and adoption of this Agreement and the transactions contemplated
hereby and (ii) subject to Agouron's rights pursuant to Sections 5.5 and 7.1(h),
Agouron agrees that its obligations under this Section 5.1(b) shall not be
affected by the commencement, public proposal, public disclosure or
communication to Agouron of any Acquisition Proposal (as defined in Section
5.5).
(c) Agouron will cause its transfer agent to make stock transfer records
relating to Agouron available to the extent reasonably necessary to effectuate
the intent of this Agreement.
5.2. ACCOUNTANT'S LETTERS. (a) Warner-Lambert shall use reasonable best
efforts to cause to be delivered to Agouron a letter from Warner-Lambert's
independent public accountants, dated the date on which the Form S-4 shall
become effective, addressed to Warner-Lambert, in form and substance reasonably
satisfactory to Agouron and customary in scope and substance for comfort letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4. Warner-Lambert shall use reasonable best
efforts to cause to be delivered to Agouron a letter from Warner-Lambert's
independent accountants dated as of the Closing Date, stating that accounting
for the Merger as a pooling of interests under Opinion 16 of the Accounting
Principles Board, applicable SEC rules and regulations and other authoritative
literature is appropriate if the Merger is closed and consummated as
contemplated by this Agreement.
(b) Agouron shall use reasonable best efforts to cause to be delivered to
Warner-Lambert a letter from Agouron's independent public accountants, dated the
date on which the Form S-4 shall become effective, addressed to Agouron and
Warner-Lambert, in form and substance reasonably satisfactory to Warner-Lambert
and customary in scope and substance for comfort letters delivered by
independent public accountants in connection with registration statements
similar to the Form S-4. Agouron shall use reasonable best efforts to cause to
be delivered to Warner-Lambert a letter from Agouron's independent public
accountants, addressed to Agouron and Warner-Lambert, dated as of the Closing
Date, stating that accounting for the Merger as a pooling of interests under
Opinion 16 of the Accounting Principles Board, applicable SEC rules and
regulations and other authoritative literature is appropriate if the Merger is
closed and consummated as contemplated by this Agreement.
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(c) Each of Warner-Lambert and Agouron shall use reasonable best efforts to
cause (i) the transactions contemplated by this Agreement, including the Merger,
to be accounted for as a pooling of interests under Opinion 16 of the Accounting
Principles Board, applicable SEC rules and regulations and other authoritative
literature, and (ii) such accounting treatment to be accepted by the SEC.
5.3 ACCESS TO INFORMATION. Upon reasonable notice, each party shall (and
shall cause its Subsidiaries to) afford to the officers, employees, accountants,
counsel, financial advisors and other representatives of the other party
reasonable access during normal business hours, during the period prior to the
Effective Time, to such of its properties, books, contracts, commitments,
records, officers and employees as the other party may reasonably request and,
during such period, such party shall (and shall cause its Subsidiaries to)
furnish promptly to the other party (a) a copy of each report, schedule,
registration statement and other document filed, published, announced or
received by it during such period pursuant to the requirements of Federal or
state securities laws, as applicable (other than documents which such party is
not permitted to disclose under applicable law), and (b) consistent with its
legal obligations, all other information concerning it and its business,
properties and personnel as such other party may reasonably request; PROVIDED,
HOWEVER, that either party may restrict the foregoing access to the extent that
any law, treaty, rule or regulation of any Governmental Entity applicable to
such party requires such party or its Subsidiaries to restrict access to any
properties or information. The parties will hold any such information which is
non-public in confidence to the extent required by, and in accordance with, the
provisions of the confidential disclosure agreements dated December 15, 1998 and
December 23, 1998 between Agouron and Warner-Lambert (the "CONFIDENTIALITY
AGREEMENTS"). Any investigation by Warner-Lambert or Agouron shall not affect
the representations and warranties of Agouron or Warner-Lambert, as the case may
be.
5.4 REASONABLE BEST EFFORTS.
(a) Subject to the terms and conditions of this Agreement, each party will
use its reasonable best efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the Merger and the other
transactions contemplated by this Agreement as soon as practicable after the
date hereof, including (i) preparing and filing as promptly as practicable all
documentation to effect all necessary applications, notices, petitions, filings,
tax ruling requests and other documents and to obtain as promptly as practicable
all consents, waivers, licenses, orders, registrations, approvals, permits, tax
rulings and authorizations necessary or advisable to be obtained from any third
party and/or any Governmental Entity in order to consummate the Merger or any of
the other transactions contemplated by this Agreement and (ii) taking all
reasonable steps as may be necessary to obtain all such material consents,
waivers, licenses, registrations, permits, authorizations, tax rulings, orders
and approvals. In furtherance and not in limitation of the foregoing, each party
hereto agrees to make an appropriate filing of a Notification and Report Form
pursuant to the HSR Act and any other Regulatory Law (as defined below) with
respect to the transactions contemplated hereby as promptly as practicable after
the date hereof and to supply as promptly as practicable any additional
information and documentary material that may be requested pursuant to the HSR
Act and any other Regulatory Law and to take all other actions necessary to
cause the expiration or termination of the applicable waiting periods under the
HSR Act as soon as practicable. Nothing in this Section 5.4(a) shall require any
of Warner-Lambert and its Subsidiaries or Agouron and its Subsidiaries to sell,
hold separate or otherwise dispose of or conduct their business in a specified
manner, or agree to sell, hold separate or otherwise dispose of or conduct their
business in a specified manner, or permit the sale, holding separate or other
disposition of, any assets of Warner-Lambert, Agouron or their respective
Subsidiaries or the conduct of their business in a specified manner, whether as
a condition to obtaining any approval from a Governmental Entity or any other
Person or for any other reason, if such sale, holding separate or other
disposition or the conduct of their business in a specified manner would
reasonably be expected to have a Material Adverse Effect on Warner-Lambert and
its Subsidiaries (including the Surviving Corporation and its Subsidiaries),
taken together, after giving effect to the Merger.
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(b) Each of Warner-Lambert and Agouron shall, in connection with the efforts
referenced in Section 5.4(a) to obtain all requisite material approvals and
authorizations for the transactions contemplated by this Agreement under the HSR
Act or any other Regulatory Law, use its reasonable best efforts to (i)
cooperate in all respects with each other in connection with any filing or
submission and in connection with any investigation or other inquiry, including
any proceeding initiated by a private party, (ii) promptly inform the other
party of any communication received by such party from, or given by such party
to, the Antitrust Division of the Department of Justice (the "DOJ") or any other
Governmental Entity and of any material communication received or given in
connection with any proceeding by a private party, in each case regarding any of
the transactions contemplated hereby, and (iii) permit the other party to review
any communication given by it to, and consult with each other in advance of any
meeting or conference with, the DOJ or any such other Governmental Entity or, in
connection with any proceeding by a private party, with any other Person, and to
the extent permitted by the DOJ or such other applicable Governmental Entity or
other Person, give the other party the opportunity to attend and participate in
such meetings and conferences. For purposes of this Agreement, "REGULATORY LAW"
means the Sherman Act, as amended, the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other federal, state and
foreign, if any, statutes, rules, regulations, orders, decrees, administrative
and judicial doctrines and other laws that are designed or intended to prohibit,
restrict or regulate actions having the purpose or effect of monopolization or
restraint of trade or lessening of competition.
(c) Subject to the terms and conditions of this Agreement, in furtherance
and not in limitation of the covenants of the parties contained in Sections
5.4(a) and 5.4(b), if any administrative or judicial action or proceeding,
including any proceeding by a private party, is instituted (or threatened to be
instituted) challenging any transaction contemplated by this Agreement as
violative of any Regulatory Law, each of Warner-Lambert and Agouron shall
cooperate in all respects with each other and use its respective reasonable best
efforts to contest and resist any such action or proceeding and to have vacated,
lifted, reversed or overturned any decree, judgment, injunction or other order,
whether temporary, preliminary or permanent, that is in effect and that
prohibits, prevents or restricts consummation of the transactions contemplated
by this Agreement. Notwithstanding the foregoing or any other provision of this
Agreement, nothing in this Section 5.4 shall limit a party's right to terminate
this Agreement pursuant to Article VII.
(d) If any objections are asserted with respect to the transactions
contemplated hereby under any Regulatory Law or if any suit is instituted by any
Governmental Entity or any private party challenging any of the transactions
contemplated hereby as violative of any Regulatory Law, each of Warner-Lambert
and Agouron shall use its reasonable best efforts to resolve any such objections
or challenge as such Governmental Entity or private party may have to such
transactions under such Regulatory Law so as to permit consummation of the
transactions contemplated by this Agreement.
(e) From and after the Effective Time, Warner-Lambert will not take or cause
or permit the Surviving Corporation to take, any action that it believes would
cause the Merger not to qualify as a tax free reorganization under Section
368(a) of the Code.
5.5 NO SOLICITATION OF TRANSACTIONS. Agouron agrees that neither it nor
any of its Subsidiaries nor any of the officers and directors of it or its
Subsidiaries shall, and that it shall direct and cause its and its Subsidiaries'
employees, agents and representatives (including any investment banker, attorney
or accountant retained by it or any of its Subsidiaries) not to, directly or
indirectly, initiate or solicit or take any action designed to encourage or
facilitate (including by way of furnishing information) any inquiries or the
making of any proposal or offer with respect to (i) a merger, reorganization,
share exchange, consolidation, business combination, recapitalization,
liquidation, dissolution or similar transaction involving it or any of its
Subsidiaries, or (ii) any purchase or sale of all or any significant portion of
the assets or 10% or more of the equity securities of it or any of its
Subsidiaries (any such proposal or offer being hereinafter referred to as an
"ACQUISITION PROPOSAL"). Agouron further agrees
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that neither it nor any of its Subsidiaries nor any of the officers and
directors of it or its Subsidiaries shall, and that it shall direct and cause
its and its Subsidiaries' employees, agents and representatives (including any
investment banker, attorney or accountant retained by it or any of its
Subsidiaries) not to, directly or indirectly, have any discussion with or
provide any confidential information or data to any person relating to an
Acquisition Proposal, or engage in any negotiations concerning an Acquisition
Proposal. Notwithstanding the foregoing, Agouron or its Board of Directors shall
be permitted to (A) to the extent applicable, comply with Rule 14e-2(a)
promulgated under the Exchange Act with regard to an Acquisition Proposal, or
(B) engage in any discussions or negotiations with, or provide any information
to, any person in response to an unsolicited bona fide written Acquisition
Proposal by any such person, if and only to the extent that, in the case of the
actions referred to in clause (B), (i) the Board of Directors of Agouron
concludes in good faith, based on the written advice of its outside legal
counsel, that the provision of such information or the engaging in such
negotiations or discussions is obligated by the directors' fiduciary duties in
accordance with California law, (ii) prior to providing any information or data
to any Person in connection with an Acquisition Proposal by any such Person, the
Board of Directors of Agouron receives from such person an executed
confidentiality agreement containing customary terms and provisions and (iii)
prior to providing any information or data to any Person or entering into
discussions or negotiations with any Person, the Board of Directors of Agouron
notifies Warner-Lambert promptly of such inquiries, proposals or offers received
by, any such information requested from, or any such discussions or negotiations
sought to be initiated or continued with, any of its representatives indicating,
in connection with such notice, the name of such Person and the material terms
and conditions of any proposals or offers. Agouron agrees that it will keep
Warner-Lambert informed, on a prompt basis, of the status and terms of any such
proposals or offers and the status of any such discussions or negotiations.
Agouron agrees that it will immediately cease and cause to be terminated any
existing activities, discussions or negotiations with any parties conducted
heretofore with respect to any Acquisition Proposal or similar transaction or
arrangement and will not waive any rights under any confidentiality agreements
entered into with such parties. Agouron agrees that it will take the necessary
steps to promptly inform the individuals or entities referred to in the first
sentence of this Section 5.5 of the obligations undertaken in this Section 5.5.
5.6 EMPLOYEE BENEFITS MATTERS.
(a) CONTINUATION AND COMPARABILITY OF BENEFITS. From the Effective Time
until December 31, 2000, the Surviving Corporation shall provide compensation
and employee benefits under the Plans (as defined in Section 3.2(r)) to the
employees of Agouron and its Subsidiaries employed as of the Effective Time
(except the employees entering into employment agreements and listed on Exhibit
5.6(a)) (the "AGOURON EMPLOYEES") that are in the aggregate no less favorable
than those provided to such persons pursuant to the Plans in effect on the date
hereof; PROVIDED, HOWEVER, that (i) the Agouron Stock Purchase Plan shall be
terminated as soon as practicable after the Effective Time and shall not be
considered in determining aggregate favorability under this clause (a), (ii) the
Surviving Corporation shall cause the Agouron 401(k) plan to be amended,
effective as of the Effective Time (unless prohibited as a tax-qualification
matter) to provide for an additional matching company contribution on behalf of
eligible participants determined as follows:
<TABLE>
<S> <C>
ADDITIONAL MATCHING ANNUAL REPORTED EARNINGS
COMPANY CONTRIBUTIONS (made with PER SHARE GROWTH (determined in the
respect to each eligible participant's same manner as provided under the Warner-
elective Lambert Savings & Stock Plan)
salary deferral) --------------------------------------------
- --------------------------------------------
10% 12.0% or greater, but less than 16.0%
25% 16.0% or greater, but less than 20.0%
35% 20.0% or greater
</TABLE>
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(iii) the Agouron Employees shall be eligible to enroll in the Warner-Lambert
Retirement Plan as of January 1, 2000, and (iv) the vacation entitlement of the
Agouron Employees accrued as of the Effective Time shall not be reduced and will
apply after the Effective Time with respect to these Agouron Employees. Nothing
herein shall prohibit any changes to the Plans that may be (i) required by law
(including, without limitation, any applicable qualification requirements of
Section 401(a) of the Code), (ii) necessary as a technical matter to reflect the
transactions contemplated hereby or (iii) required for Agouron to provide or
permit investment in its securities. Furthermore, nothing herein shall require
Surviving Corporation to continue any particular Plan or prevent the amendment
or termination thereof (subject to the maintenance, in the aggregate, of the
benefits as provided in the preceding sentence). Notwithstanding the foregoing,
not later then January 1, 2001, Agouron Employees shall be transitioned to the
compensation-related programs (including salary structure, grades, bonus
policies and programs, salary administration practices, stock option and other
stock-related programs) of Warner-Lambert as determined by Warner-Lambert,
PROVIDED, HOWEVER, that the base salary of any such employee will not be reduced
for a period of two years. Warner-Lambert will provide non-qualified
Warner-Lambert stock option grants to the management-level employees of Agouron
on or about June 30, 1999, in accordance with Warner-Lambert's grant guidelines
and effective as of January 1, 2000, such management employees of Agouron will
be eligible for stock options on a pro-rata basis, in accordance with
Warner-Lambert's grant guidelines. For the fiscal year ending June 30, 1999, the
Surviving Corporation will administer Agouron's bonus program in accordance with
the past practice of Agouron, subject to approval by Warner-Lambert management.
For the period beginning on July 1, 1999 and ending December 31, 1999,
management employees of Agouron shall be eligible for a bonus on a pro-rata
basis reflecting the performance of Warner-Lambert and such employee, subject to
the approval of Warner-Lambert's management.
(b) PRE-EXISTING LIMITATIONS; SERVICE CREDIT. With respect to any Benefit
Plans in which any Agouron Employees first become eligible to participate, on or
after the Effective Time, and which are plans that the Agouron Employees did not
participate in prior to the Effective Time (the "New Agouron Plans"),
Warner-Lambert shall: (A) waive all pre-existing conditions, exclusions and
waiting periods with respect to participation and coverage requirements
applicable to the Agouron Employees under any New Agouron Plans in which such
employees may be eligible to participate after the Effective Time; provided that
such Agouron Employee and covered family members were enrolled in comparable
coverage under the Benefit Plans of Agouron on the Effective Time and
continuously thereafter until the effective time of coverage in the New Agouron
Plans, and to the extent such waiver is permissible under the insurance
contracts of Warner-Lambert, and (B) recognize service of the Agouron Employees
with Agouron accrued prior to the Effective Time for purposes of eligibility to
participate and vesting credit in any New Agouron Plan in which such employees
may be eligible to participate after the Effective Time, to the extent such
service is taken into account under the applicable New Agouron Plan.
(c) REDUNDANCIES. Agouron Employees whose jobs are eliminated as a result
of the consummation of the transaction contemplated under this Agreement shall
receive severance payments in an amount due under the severance policy of
Warner-Lambert plus a completion bonus if such employee performs in good faith
in the job during a transition period determined by the Chief Executive Officer
of Agouron and approved by Warner-Lambert. The amount of the completion bonus
shall be based upon base salary and shall be determined as follows:
<TABLE>
<S> <C> <C>
Years of service
with Agouron and Warner-
Lambert 0-4 years More than 4 years
- ---------------------------- ---------------------------- ----------------------------
Below manager 3 months 4 months
Manager 4 months 6 months
Director 9 months 12 months
</TABLE>
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5.7 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE. The Surviving
Corporation shall, and Warner-Lambert shall cause the Surviving Corporation to,
(i) indemnify and hold harmless, and provide advancement of expenses to, all
past and present directors, officers and employees of Agouron and its
Subsidiaries to the same extent such persons are indemnified or have the right
to advancement of expenses as of the date of this Agreement by Agouron pursuant
to Agouron's certificate of incorporation, by-laws and indemnification
agreements, if any, in existence on the date hereof with any directors, officers
and employees of Agouron and its Subsidiaries for acts or omissions occurring at
or prior to the Effective Time (including for acts or omissions occurring in
connection with the approval of this Agreement and the consummation of the
transactions contemplated hereby), and (ii) cause to be maintained for a period
of six years after the Effective Time the current policies of directors' and
officers' liability insurance and fiduciary liability insurance maintained by
Agouron (PROVIDED that the Surviving Corporation (or any successor) may
substitute therefor policies of at least the same coverage and amounts
containing terms and conditions which are, in the aggregate, no less
advantageous to the insured) with respect to claims arising from facts or events
that occurred on or before the Effective Time; PROVIDED, HOWEVER, that in no
event shall the Surviving Corporation be required to expend in any one year an
amount in excess of 200% of the annual premiums currently paid by Agouron for
such insurance; and, provided, further, that if the annual premiums of such
insurance coverage exceed such amount, the Surviving Corporation shall be
obligated to obtain a policy with the greatest coverage available for a cost not
exceeding such amount.
5.8 NOTIFICATION OF CERTAIN MATTERS. Agouron shall give prompt notice to
Warner-Lambert, and Warner-Lambert shall give prompt notice to Agouron, of (i)
the occurrence or non-occurrence of any event the occurrence or non-occurrence
of which would be likely to cause any representation or warranty contained in
this Agreement to be untrue or inaccurate and (ii) any failure of Agouron,
Warner-Lambert or Merger Sub, as the case may be, to comply with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder; PROVIDED, HOWEVER, that the delivery of any notice pursuant to this
Section 5.8 shall not limit or otherwise affect the remedies available hereunder
to the party receiving such notice.
5.9 PUBLIC ANNOUNCEMENTS. Warner-Lambert and Agouron shall develop a joint
communications plan and each party shall (i) ensure that all press releases and
other public statements with respect to this Agreement, the Stock Option
Agreement or the transactions contemplated hereby shall be consistent with such
joint communications plan, and (ii) unless otherwise required by applicable law
or by obligations pursuant to any listing agreement with or rules of any
securities exchange, consult with each other before issuing any press release or
otherwise making any public statement with respect to this Agreement, the Stock
Option Agreement or the transactions contemplated hereby. In addition to the
foregoing, except to the extent disclosed in or consistent with the Proxy
Statement in accordance with the provisions of Section 5.1, neither
Warner-Lambert nor Agouron shall issue any press release or otherwise make any
public statement or disclosure concerning the other party or the other party's
business, financial condition or results of operations without the consent of
the other party, which consent shall not be unreasonably withheld or delayed.
5.10 LISTING OF SHARES OF WARNER-LAMBERT COMMON STOCK. Warner-Lambert
shall use its reasonable best efforts to cause the shares of Warner-Lambert
Common Stock to be issued in the Merger to be approved for listing on the NYSE,
subject to official notice of issuance, prior to the Closing Date.
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5.11 AFFILIATES. (a) Promptly after execution and delivery of this
Agreement, Agouron shall deliver to Warner-Lambert a letter identifying all
persons who, in the opinion of Agouron, may be deemed at the time this Agreement
is submitted for adoption by the stockholders of Agouron, "affiliates" of
Agouron for purposes of Rule 145 under the Securities Act or for purposes of
qualifying the Merger for pooling of interests accounting treatment under
Opinion 16 of the Accounting Principles Board and applicable SEC rules and
regulations, and such list shall be updated as necessary to reflect changes from
the date thereof. Agouron shall use reasonable best efforts to cause each person
identified on such list to deliver to Warner-Lambert not less than 30 days prior
to the Effective Time, a written agreement substantially in the form attached as
Exhibit 5.11 hereto (an "Affiliate Agreement"). Promptly after execution and
delivery of this Agreement, Warner-Lambert shall deliver to Agouron a letter
identifying all persons who, in the opinion of Warner-Lambert, may be deemed
"affiliates" of Warner-Lambert for purposes of qualifying the Merger for pooling
of interests accounting treatment under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations, and such list shall be updated
as necessary to reflect changes from the date hereof. Warner-Lambert shall use
reasonable best efforts to cause each person identified on such list to deliver
to Agouron not less than 30 days prior to the Effective Time, a written
agreement including the substance of paragraphs (C), (D) and (E) of Exhibit 5.11
hereto.
(b) Warner-Lambert shall use its reasonable best efforts to publish no later
than 60 days after the end of the first month after the Effective Time in which
there are at least 30 days of post-Merger combined operations (which month may
be the month in which the Effective Time occurs), combined sales and net income
figures as contemplated by and in accordance with the terms of SEC Accounting
Series Release No. 135.
5.12 AMENDMENT TO THE RIGHTS AGREEMENT. Except as expressly contemplated
by Section 3.2(1) of this Agreement, Agouron agrees that it will not amend,
modify or waive any provision of the Rights Agreement and shall not take any
action to redeem the Rights or render the Rights inapplicable to any
transaction, other than to permit another transaction that the Board of
Directors of Agouron has determined to accept pursuant to Section 5.5.
5.13 DIVISIONAL STOCK PROPOSAL. Agouron agrees not to implement the
proposal (the "Divisional Stock Proposal"), which such proposal would (i)
increase the number of shares of authorized common stock to 150,000,000 shares,
(ii) create two series of common stock to reflect separately the performances of
Agouron's Oncology Division and its other businesses and (iii) authorize the
issuance of one or more additional series of common stock from undesignated
shares of common stock.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of Agouron, Warner-Lambert and Merger Sub to effect the
Merger are subject to the satisfaction or waiver on or prior to the Closing Date
of the following conditions:
(a) STOCKHOLDER APPROVAL. Agouron shall have obtained the Required Agouron
Vote in connection with the adoption of this Agreement by the stockholders of
Agouron.
(b) NO INJUNCTIONS OR RESTRAINTS, ILLEGALITY. (i) No Governmental Entity
or federal or state court of competent jurisdiction shall have enacted, issued,
promulgated, enforced or entered any statute, rule, regulation, executive order,
decree, judgment, injunction or other order (whether temporary, preliminary or
permanent), in any case which is in effect and which prevents or prohibits
consummation of the Merger or any other transactions contemplated in this
Agreement; and (ii) no Governmental Entity shall have instituted any action or
proceeding (which remains pending at what would otherwise be the Closing Date)
before any United States court or other governmental body of
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competent jurisdiction seeking to enjoin, restrain or otherwise prohibit
consummation of the transactions contemplated by this Agreement.
(c) HSR ACT. The waiting period (and any extension thereof) applicable to
the Merger under the HSR Act shall have been terminated or shall have expired.
(d) NYSE LISTING. The shares of Warner-Lambert Common Stock to be issued
in the Merger and such other shares to be reserved for issuance in connection
with the Merger shall have been approved for listing on the NYSE, subject to
official notice of issuance.
(e) EFFECTIVENESS OF THE FORM S-4. The Form S-4 shall have been declared
effective by the SEC under the Securities Act. No stop order suspending the
effectiveness of the Form S-4 shall have been issued by the SEC and no
proceedings for that purpose shall have been initiated or threatened by the SEC.
(f) POOLING. Agouron shall have received and delivered to Warner-Lambert
and Warner-Lambert's independent public accountants, a letter from its
independent public accountants, dated as of the Closing Date, stating that
Agouron qualifies as a "combining company" in accordance with the criteria set
forth in Opinion 16 of the Accounting Principles Board, applicable SEC rules and
regulations and other authoritative literature and accordingly is a poolable
entity. Warner-Lambert shall have received and delivered to Agouron, a letter
from its independent public accountants, dated as of the Closing Date, stating
that accounting for the Merger as a pooling of interests under Opinion 16 of the
Accounting Principles Board, applicable SEC rules and regulations and other
authoritative literature is appropriate if the Merger is closed and consummated
as contemplated by this Agreement. Notwithstanding the foregoing, the
satisfaction of this Section 6.1(f) shall not be a condition to the obligations
of a party to effect the Merger if the failure to satisfy this condition results
from any action taken or agreed to be taken by or on behalf of such party.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF WARNER-LAMBERT AND MERGER
SUB. The obligations of Warner-Lambert and Merger Sub to effect the Merger are
subject to the satisfaction of, or waiver by Warner-Lambert, on or prior to the
Closing Date of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES.
(i) Each of the representations and warranties of Agouron set forth in
this Agreement (read without any materiality, Material or Material Adverse
Effect qualifications) shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date (except to the extent in either case that such representations and
warranties speak as of another date), except to the extent inaccuracies and
breaches therein, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Agouron. Warner-Lambert shall
have received a certificate of the chief executive officer and the chief
financial officer of Agouron to such effect.
(ii) There has been no intentional breach of the representations and
warranties of Agouron.
(b) PERFORMANCE OF OBLIGATIONS OF AGOURON.
(i) Agouron shall have performed or complied with all agreements and
covenants required to be performed by it under this Agreement at or prior to
the Closing Date, except where the failure to so perform or comply would not
reasonably be expected to have, individually or in the aggregate, a Material
Adverse Effect on Agouron, and Warner-Lambert shall have received a
certificate of the chief executive officer and the chief financial officer
of Agouron to such effect.
(ii) Agouron shall not have intentionally breached any agreement or
covenant required to be performed by Agouron under this Agreement.
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<PAGE>
(c) TAX OPINION. Warner-Lambert shall have received from McDermott, Will &
Emery, special tax counsel to Warner-Lambert, on or before the date the Form S-4
shall become effective and, subsequently, on the Closing Date, a written opinion
dated as of such dates, based on appropriate representations of Agouron and
Warner-Lambert, to the effect that (i) the Merger will be treated for federal
income tax purposes as a reorganization within the meaning of Section 368(a) of
the Code and (ii) Agouron, Warner-Lambert and Merger Sub will each be a party to
the reorganization within the meaning of Section 368(b) of the Code.
(d) NO MATERIAL ADVERSE CHANGE. At any time on or after the date of this
Agreement there shall not have occurred any change, circumstance or event that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on Agouron.
(e) RIGHTS AGREEMENT. No Share Acquisition Date or Distribution Date shall
have occurred pursuant to the Rights Agreement.
(f) DISSENTING AGOURON SHARES. The aggregate number of shares of Agouron
Common Stock owned by Persons who have made a demand for purchase under Section
1301 of the CGCL shall constitute less than 5% of all shares of Agouron Common
Stock outstanding as of the date of the meeting of the Agouron Shareholders
called for the purpose of voting on the Merger.
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF AGOURON. The obligations of
Agouron to effect the Merger are subject to the satisfaction of, or waiver by
Agouron, on or prior to the Closing Date of the following additional conditions:
(a) REPRESENTATIONS AND WARRANTIES.
(i) Each of the representations and warranties of Warner-Lambert set
forth in this Agreement (read without any materiality or Material Adverse
Effect qualifications) shall be true and correct as of the date of this
Agreement and as of the Closing Date as though made on and as of the Closing
Date (except to the extent in either case that such representations and
warranties speak as of another date), except to the extent inaccuracies and
breaches therein, individually or in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on Warner-Lambert. Agouron shall
have received a certificate of the chief executive officer and the chief
financial officer of Warner-Lambert to such effect.
(ii) There has been no intentional breach of the representations and
warranties of Warner-Lambert.
(b) PERFORMANCE OF OBLIGATIONS OF WARNER-LAMBERT.
(i) Warner-Lambert shall have performed or complied with all agreements
and covenants required to be performed by it under this Agreement at or
prior to the Closing Date, except where the failure to so perform or comply
would not reasonably be expected to have, individually or in the aggregate,
a Material Adverse Effect on Warner-Lambert. Agouron shall have received a
certificate of the chief executive officer and the chief financial officer
of Warner-Lambert to such effect.
(ii) Warner-Lambert shall not have intentionally breached any agreement
or covenant required to be performed by Warner-Lambert under this Agreement.
(c) TAX OPINION. Agouron shall have received from Shearman & Sterling
counsel to Agouron, on or before the date the Form S-4 shall become effective
and, subsequently, on the Closing Date, a written opinion dated as of such
dates, based on appropriate representations of Agouron and Warner-Lambert, to
the effect that (i) the Merger will be treated for federal income tax purposes
as a reorganization within the meaning of Section 368(a) of the Code; and (ii)
Agouron, Warner-Lambert
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<PAGE>
and Merger Sub will each be a party to the reorganization within the meaning of
Section 368(b) of the Code.
(d) NO MATERIAL ADVERSE CHANGE. At any time on or after the date of this
Agreement, except for any FDA action which may arise out of the Advisory
Committee meeting related to Rezulin that is currently scheduled for March 26,
1999, there shall not have occurred any change, circumstance or event that,
individually or in the aggregate, has had or would reasonably be expected to
have a Material Adverse Effect on Warner-Lambert.
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 TERMINATION. This Agreement may be terminated and the Merger
contemplated hereby may be abandoned at any time prior to the Closing Date,
whether before or after approval of matters presented in connection with the
Merger by the stockholders of Agouron (except as otherwise stated herein):
(a) By mutual written consent of Warner-Lambert and Agouron;
(b) By either Warner-Lambert or Agouron, if the Merger shall not have
been consummated on or before October 31, 1999 (other than due to the
failure of the party seeking to terminate this Agreement to perform its
obligations under this Agreement required to be performed at or prior to the
Effective Time);
(c) By Warner-Lambert or Agouron, if any required approval of the
stockholders of Agouron for this Agreement or the Merger shall not have been
obtained by reason of the failure to obtain the required vote upon a vote
held at a duly held meeting of stockholders or at any adjournment thereof;
(d) By Warner-Lambert or Agouron if any court or other governmental body
of competent jurisdiction shall have issued a final order, decree or ruling
or taken any other final action restraining, enjoining or otherwise
prohibiting the Merger and such order, decree, ruling or other action is or
shall have become final and nonappealable;
(e) By Agouron if prior to the Closing Date there shall have been a
breach of any representation, warranty, covenant or agreement on the part of
Warner-Lambert contained in this Agreement, which breach would (i) give rise
to the failure of a condition set forth in Section 6.3(a) or (b) and (ii) is
incapable of being cured by Warner-Lambert or is not cured within 30 days of
notice of such breach;
(f) By Warner-Lambert if prior to the Closing Date there shall have been
a breach of any representation, warranty, covenant or agreement on the part
of Agouron contained in this Agreement, which breach would (i) give rise to
the failure of a condition set forth in Section 6.2(a) or (b) and (ii) is
incapable of being cured by Agouron or is not cured within 30 days of notice
of such breach; or the condition set forth in Section 6.2(d) has not or
cannot be satisfied;
(g) By Warner-Lambert (i) if the Board of Directors of Agouron shall
have (a) failed to recommend or withdrawn, modified or amended in any
respect adverse to Warner-Lambert or Merger Sub its approval or
recommendation of this Agreement, the Merger or any of the other
transactions contemplated herein or resolved to do so, or (b) approved or
recommended an Acquisition Proposal from a Person (other than
Warner-Lambert) or resolved to do so, or (ii) Agouron materially breaches
any of its agreements set forth in Section 5.5;
(h) By Agouron, if as a result of an Acquisition Proposal the Board of
Directors, shall have determined in good faith, based upon its receipt of
the written advice of outside legal counsel, that
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<PAGE>
the directors are obligated by their fiduciary duties in accordance with
California law to terminate this Agreement and to approve the Acquisition
Proposal; provided, however, that it shall be a condition precedent to the
termination of this Agreement by Agouron pursuant to this Section 7.1(h)
that Agouron shall have made the payment of the fee and expenses required by
Section 7.3; or
(i) By Warner-Lambert, if any person or group (as defined in Section
13(d)(3)of the Exchange Act) (other than Warner-Lambert, Merger Sub or any
of their affiliates) shall have become (x) the beneficial owner (as defined
in Rule 13d-3 promulgated under the Exchange Act) of at least 20% of the
outstanding shares of Agouron Common Stock or (y) shall have acquired 20% or
more of the assets of Agouron and its Subsidiaries, taken as a whole.
7.2 EFFECT OF TERMINATION. In the event of the termination of this
Agreement pursuant to Section 7.1, this Agreement shall forthwith become void
and there shall be no liability on the part of any party hereto except as set
forth in the confidentiality provisions of Section 5.3 and Sections 5.9, 7.3 and
8.1; provided, however, that nothing herein shall relieve any party from
liability for any willful breach hereof.
7.3 FEES AND EXPENSES.
(a) If:
(i) This Agreement is terminated pursuant to Sections 7.1(g),(h) or (i);
or
(ii) (x)(A) Warner-Lambert or Agouron terminate this Agreement pursuant
to Section 7.1(c) if an Alternative Transaction or the intention to propose
an Alternative Transaction shall have been publicly announced and not
withdrawn prior to the Agouron Stockholders Meeting, or (B) Warner-Lambert
terminates this Agreement pursuant to Section 7.1(f) if the Board of
Directors of Agouron were aware of the existence of an Alternative
Transaction or the intention to propose an Alternative Transaction and such
Alternative Transaction had not been withdrawn prior to such breach and (y)
in the case of (A) or (B), within 12 months thereafter, Agouron enters into
an agreement with respect to an Alternative Transaction or an Alternative
Transaction is consummated;
then Agouron shall pay to Warner-Lambert and Merger Sub, (A) simultaneously with
any termination by Agouron contemplated by Section 7.3(a)(i), (B) within one
business day following any termination by Warner-Lambert contemplated by Section
7.3(a)(i), and (C) within one business day following the occurrence of one of
the events described in clause (y) of Section 7.3(a)(ii), a fee, in cash, of $60
million provided, however, that Agouron shall in no event be obligated to pay
more than one such fee with respect to all such occurrences and such
termination.
(b) Within one business day after the termination of this Agreement pursuant
to (i) Section 7.1(c) if an Alternative Transaction or the intention to propose
an Alternative Transaction shall have been publicly announced and not withdrawn
prior to the Agouron Stockholders Meeting, (ii) Section 7.1(f) if the Board of
Directors of Agouron were aware of the existence of an Alternative Transaction
or the intention to propose an Alternative Transaction and such Alternative
Transaction had not been withdrawn prior to such breach or (iii) Sections
7.1(g),(h) or (i), Agouron shall pay all of Warner-Lambert's and Merger Sub's
Expenses (as defined below) up to a maximum of $10 million in the aggregate.
For purposes of this Section 7.3, "ALTERNATIVE TRANSACTION" means any of the
following events: (i) the acquisition of Agouron by merger, reorganization,
share exchange, consolidation, business combination, recapitalization,
dissolution or otherwise by any person other than Warner-Lambert, Merger Sub or
any affiliate thereof (a "THIRD PARTY"); (ii) the acquisition by a Third Party
of 20% or more of the assets of Agouron and its Subsidiaries, taken as a whole;
(iii) the acquisition by a Third
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Party of 20% or more of the outstanding shares of Agouron Common Stock; (iv) the
adoption by Agouron of a plan of liquidation or the declaration or payment of an
extraordinary dividend other than the Divisional Stock Proposal; or (v) the
repurchase by Agouron or any of its Subsidiaries of 20% or more of the
outstanding shares of Agouron Common Stock.
(c) Except as otherwise specifically provided herein, each party shall bear
its own Expenses in connection with this Agreement, the Stock Option Agreement
and the transactions contemplated hereby, except that each of Warner-Lambert and
Agouron shall bear and pay one-half of the costs and expenses incurred in
connection with the filing, printing and mailing of the Form S-4 and the Proxy
Statement. As used in this Agreement, "EXPENSES" includes all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto and
its affiliates) incurred by a party or on its behalf in connection with or
related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing of the Proxy Statement
and the solicitation of stockholder approvals and all other matters related to
the transactions contemplated hereby.
7.4 AMENDMENT. This Agreement may be amended by the parties hereto, by
action taken or authorized by their respective Boards of Directors, at any time
before or after approval of the matters presented in connection with the Merger
by the stockholders of Agouron, but, after any such approval, no amendment shall
be made which by law or in accordance with the rules of any relevant stock
exchange requires further approval by such stockholders without such further
approval. This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the parties hereto.
7.5 EXTENSION; WAIVER. At any time prior to the Effective Time, the
parties hereto, by action taken or authorized by their respective Boards of
Directors, may, to the extent legally allowed, (i) extend the time for the
performance of any of the obligations or other acts of the other parties hereto,
(ii) waive any inaccuracies in the representations and warranties contained
herein or in any document delivered pursuant hereto and (iii) waive compliance
with any of the agreements or conditions contained herein. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in a written instrument signed on behalf of such party. The failure of
any party to this Agreement to assert any of its rights under this Agreement or
otherwise shall not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS. None of
the representations, warranties, covenants and other agreements in this
Agreement or in any instrument delivered pursuant to this Agreement, including
any rights arising out of any breach of such representations, warranties,
covenants and other agreements, shall survive the Effective Time or the
termination of this Agreement pursuant to Section 7.1, as the case may be,
except for those covenants and agreements contained herein and therein that by
their terms apply or are to be performed in whole or in part after the Effective
Time. Notwithstanding the foregoing, this Article VIII shall survive the
Effective Time and the confidentiality provisions of Section 5.3, and Sections
5.9 and 7.3 shall survive the termination of this Agreement.
8.2 NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed duly given (a) on the date of delivery if delivered
personally, or by telecopy upon confirmation of receipt, (b) on the first
Business Day following the date of dispatch if delivered by a recognized
next-day courier service, or (c) on the third Business Day following the date of
mailing if delivered by registered or certified mail, return receipt requested,
postage prepaid. All notices hereunder shall be
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delivered as set forth below, or pursuant to such other instructions as may be
designated in writing by the party to receive such notice:
(a) if to Warner-Lambert or Merger Sub, to
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Fax: (973) 540-3927
Attention: Vice President and General Counsel
with a copy to
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: James Cotter
Gary Horowitz
(b) if to Agouron, to
Agouron Pharmaceuticals, Inc.
10350 North Torrey Pines Rd.
La Jolla, California 92037
Fax: (619) 622-3297
Attention: Vice President and General Counsel
with a copy to
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Fax: (212) 848-7180
Attention: Mark Kessel
Creighton Condon
8.3 INTERPRETATION. When a reference is made in this Agreement to
Sections, Exhibits or Schedules, such reference shall be to a Section of or
Exhibit or Schedule to this Agreement unless otherwise indicated. The table of
contents and headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation".
8.4 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that both
parties need not sign the same counterpart.
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES.
(a) This Agreement, the Stock Option Agreement and the Confidentiality
Agreements constitute the entire agreement and supersede all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof.
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(b) This Agreement shall be binding upon and inure solely to the benefit of
each party hereto, and nothing in this Agreement, express or implied, is
intended to or shall confer upon any other Person any right, benefit or remedy
of any nature whatsoever under or by reason of this Agreement, other than
Section 5.7 (which is intended to be for the benefit of the Persons covered
thereby and may be enforced by such Persons).
8.6 GOVERNING LAW. This Agreement shall be governed and construed in
accordance with the laws of the State of Delaware regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws.
8.7 SEVERABILITY. If any term or other provision of this Agreement is
invalid, illegal or incapable of being enforced by any law or public policy, all
other terms and provisions of this Agreement shall nevertheless remain in full
force and effect so long as the economic or legal substance of the transactions
contemplated hereby is not affected in any manner materially adverse to any
party. Upon such determination that any term or other provision is invalid,
illegal or incapable of being enforced, the parties hereto shall negotiate in
good faith to modify this Agreement so as to effect the original intent of the
parties as closely as possible in an acceptable manner in order that the
transactions contemplated hereby are consummated as originally contemplated to
the greatest extent possible.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other party, and any attempt to make any such assignment without
such consent shall be null and void, except that Merger Sub may assign, in its
sole discretion, any or all of its rights, interests and obligations under this
Agreement to any direct wholly owned Subsidiary of Warner-Lambert without the
consent of Agouron, but no such assignment shall relieve Merger Sub of any of
its obligations under this Agreement. Subject to the preceding sentence, this
Agreement will be binding upon, inure to the benefit of and be enforceable by
the parties and their respective successors and assigns.
8.9 SUBMISSION TO JURISDICTION; WAIVERS. Each of Warner-Lambert and
Agouron irrevocably agrees that any legal action or proceeding with respect to
this Agreement or for recognition and enforcement of any judgment in respect
hereof brought by the other party hereto or its successors or assigns may be
brought and determined in the Courts of the State of New York and each of
Warner-Lambert and Agouron hereby irrevocably submits with regard to any such
action or proceeding for itself and in respect to its property, generally and
unconditionally, to the nonexclusive jurisdiction of the aforesaid courts. Each
of Warner-Lambert and Agouron hereby irrevocably waives, and agrees not to
assert, by way of motion, as a defense, counterclaim or otherwise, in any action
or proceeding with respect to this Agreement, (a) any claim that it is not
personally subject to the jurisdiction of the above-named courts for any reason
other than the failure to lawfully serve process, (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal process
commenced in such courts (whether through service of notice, attachment prior to
judgment, attachment in aid of execution of judgment, execution of judgment or
otherwise), and (c) to the fullest extent permitted by applicable law, that (i)
the suit, action or proceeding in any such court is brought in an inconvenient
forum, (ii) the venue of such suit, action or proceeding is improper and (iii)
this Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
8.10 ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
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8.11 DEFINITIONS. As used in this Agreement:
(a) "BENEFICIAL OWNERSHIP" or "BENEFICIALLY OWN" SHALL HAVE THE MEANING
UNDER SECTION 13(D) OF THE EXCHANGE ACT AND THE RULES AND REGULATIONS
THEREUNDER.
(b) "BENEFIT PLANS" means, with respect to any Person, each employee benefit
plan, program, arrangement and contract (including, without limitation, any
"employee benefit plan," as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") and any bonus, deferred
compensation, stock bonus, stock purchase, restricted stock, stock option,
employment, termination, stay agreement or bonus, change in control and
severance plan, program, arrangement and contract) in effect on the date of this
Agreement or disclosed on the Agouron Disclosure Schedule or the Warner-Lambert
Disclosure Schedule, as the case may be, to which such Person or its Subsidiary
is a party, which is maintained or contributed to by such Person, or with
respect to which such Person could incur material liability under Section 4069,
4201 or 4212(c) of ERISA.
(c) "BOARD OF DIRECTORS" means the Board of Directors of any specified
Person and any committees thereof.
(d) "BUSINESS DAY" means any day on which banks are not required or
authorized to close in the City of New York.
(e) "CONTROLLED GROUP" means any trade or business (whether or not
incorporated) under common control with Agouron within the meaning of Sections
414(b), (c), (m) or (o) of the Code.
(f) "EXCHANGE RATIO" means $60.00 divided by the Warner-Lambert Common Stock
Price, rounded to the nearest 1/10,000, provided that the Exchange Ratio shall
not be less than .8108 nor more than .9300.
(g) "KNOWN" or "KNOWLEDGE" means, (i) with respect to Agouron, the knowledge
of such party's President, Chief Financial Officer, General Counsel, Senior Vice
President-Commercial Affairs, Senior Vice President-Development or Corporate
Vice President--Head of Operations and (ii) with respect to Warner-Lambert, the
knowledge of such party's Chief Executive Officer, Chief Financial Officer,
General Counsel, Vice President-Pharmaceutical Sector or Vice President,
Corporate Development and Licensing.
(h) "MATERIAL ADVERSE EFFECT" means, with respect to any entity, an effect,
individually or in the aggregate, materially adverse to (i) the business,
financial condition or results of operations of such entity and its Subsidiaries
(including in the case of Warner-Lambert, following the Merger, the Surviving
Corporation and its Subsidiaries) taken as a whole, (ii) the development of the
Investigational Compounds, taken as a whole, or the marketing of Viracept or
(iii) the ability of such party to consummate the transactions contemplated by
this Agreement and the Stock Option Agreement.
(i) "THE OTHER PARTY" means, with respect to Agouron, Warner-Lambert and
means, with respect to Warner-Lambert, Agouron.
(j) "PERSON" means an individual, corporation, limited liability company,
partnership, association, trust, unincorporated organization, other entity or
group (as defined in the Exchange Act).
(k) "SEC" means the Securities and Exchange Commission.
(l) "SUBSIDIARY" when used with respect to any party means any corporation
or other organization, whether incorporated or unincorporated, (i) of which such
party or any other Subsidiary of such party is a general partner (excluding
partnerships, the general partnership interests of which held by such party or
any Subsidiary of such party do not have a majority of the voting interests in
such partnership) or (ii) at least a majority of the securities or other
interests of which having by their terms ordinary voting power to elect a
majority of the Board of Directors or others performing similar functions with
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respect to such corporation or other organization is directly or indirectly
owned or controlled by such party or by any one or more of its Subsidiaries, or
by such party and one or more of its Subsidiaries.
(m) "WARNER-LAMBERT COMMON STOCK PRICE" means the average of the closing
sales prices of Warner-Lambert Common Stock on the New York Stock Exchange
Composite Transactions Tape on each of the 10 consecutive trading days up to and
including the second immediately preceding trading day prior to the date of the
Agouron Stockholders Meeting.
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IN WITNESS WHEREOF, Warner-Lambert, Merger Sub and Agouron have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
WARNER-LAMBERT COMPANY
By: /s/ LODEWIJK J.R. DE VINK
-----------------------------------------
Name: Lodewijk J.R. de Vink
Title: President and Chief Operating
Officer
By: /s/ RAE G. PALTIEL
-----------------------------------------
Name: Rae G. Paltiel
Title: Secretary
WLC ACQUISITION CORPORATION
By: /s/ ANTHONY H. WILD
-----------------------------------------
Name: Anthony H. Wild
Title: President
By: /s/ RICHARD B. VAN DUYNE
-----------------------------------------
Name: Richard B. Van Duyne
Title: Secretary
AGOURON PHARMACEUTICALS, INC.
By: /s/ PETER JOHNSON
-----------------------------------------
Name: Peter Johnson
Title: President
By: /s/ GARY FRIEDMAN
-----------------------------------------
Name: Gary Friedman
Title: Secretary
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ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of January 26, 1999 (the "Agreement"), by
and between Agouron Pharmaceuticals, Inc, a California corporation ("Issuer"),
and Warner-Lambert Company, a Delaware corporation ("Grantee").
WHEREAS, Grantee, Issuer and WLC Acquisition Corporation, a California
corporation and a wholly owned subsidiary of Grantee ("Sub") are concurrently
herewith entering into an Agreement and Plan of Merger, dated as of the date
hereof (the "Merger Agreement"; capitalized terms not defined herein shall have
the meanings set forth in the Merger Agreement), providing for, among other
things, the merger of Sub with and into Issuer with Issuer as the surviving
corporation; and
WHEREAS, as a condition and inducement to Grantee's willingness to enter
into the Merger Agreement, Grantee is requiring that Issuer agree, and Issuer
has agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, Issuer and Grantee agree as follows:
1. GRANT OF OPTION. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "OPTION") to purchase
up to such number of shares (as adjusted as set forth herein) (the "OPTION
SHARES") of Common Stock, no par value, of Issuer (the "ISSUER COMMON STOCK") as
equals 19.9% of the issued and outstanding shares of Issuer Common Stock at a
purchase price of $60.00 per Option Share (the "PURCHASE PRICE").
2. EXERCISE OF OPTION. (a) If not in material breach of the Merger
Agreement, Grantee may exercise the Option, in whole or in part, at any time or
from time to time following the occurrence of a Purchase Event (as defined
below); PROVIDED that, except as otherwise provided herein, the Option shall
terminate and be of no further force and effect upon the earliest to occur of
(i) the Effective Time of the Merger, (ii) 12 months after the first occurrence
of a Purchase Event or (iii) termination of the Merger Agreement prior to the
occurrence of a Purchase Event (unless such termination itself constitutes a
Purchase Event). Notwithstanding the termination of the Option, Grantee shall be
entitled to purchase those Option Shares with respect to which it has exercised
the Option pursuant to this Section 2(a) in accordance with the terms hereof
prior to the termination of the Option. The termination of the Option shall not
affect any rights hereunder which by their terms extend beyond the date of such
termination.
(b) As used herein, a "PURCHASE EVENT" means the termination of the Merger
Agreement under any circumstance which would entitle Grantee to receive a fee
from the Issuer pursuant to Section 7.3(a) of the Merger Agreement.
(c) In the event Grantee wishes to exercise the Option, it shall send to
Issuer a written notice (the date of which being herein referred to as the
"Notice Date") specifying (i) the total number of Option Shares it intends to
purchase pursuant to such exercise and (ii) a place and date not earlier than
three business days nor later than 20 business days from such Notice Date for
the closing of such purchase (a "CLOSING"; and the date of such Closing, a
"CLOSING DATE"); PROVIDED that such Closing shall be held only if (A) such
purchase would not otherwise violate or cause the violation of applicable law
(including the HSR Act) and (B) no law, rule or regulation shall have been
adopted or promulgated, and no temporary restraining order, preliminary or
permanent injunction or other order, decree or ruling issued by a court or other
Governmental Entity of competent jurisdiction shall be in effect, which
prohibits delivery of such Option Shares (and the parties hereto shall use their
reasonable best efforts to have any such order, injunction, decree or ruling
vacated or reversed). If such Closing cannot
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be consummated by reason of a restriction set forth in clause (A) or (B) above,
notwithstanding the provisions of Section 2(a), such Closing Date shall be
within 10 business days following the elimination of such restriction.
3. PAYMENT AND DELIVERY OF CERTIFICATES. (a) On each Closing Date, Grantee
shall pay to Issuer in immediately available funds by wire transfer to a bank
account designated by Issuer an amount equal to the Purchase Price multiplied by
the Option Shares to be purchased on such Closing Date.
(b) At each Closing, simultaneously with the delivery of immediately
available funds as provided in Section 3(a), Issuer shall deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such Closing, which Option Shares shall be free and clear of all Liens, and
Grantee shall deliver to Issuer a letter agreeing that Grantee shall not offer
to sell or otherwise dispose of such Option Shares in violation of applicable
law or the provisions of this Agreement. If, at the time of issuance of any
Option Shares pursuant to an exercise of all or part of the Option hereunder,
Issuer shall not have redeemed the Rights, or shall have issued any similar
securities, then each Option Share issued pursuant to such exercise shall also
represent a corresponding Right or new rights with terms substantially the same
as and at least as favorable to Grantee as are provided under the Rights
Agreement or any similar agreement then in effect.
(c) Certificates for the Option Shares delivered at each Closing shall be
endorsed with a restrictive legend which shall read substantially as follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF JANUARY 26,
1999. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act and
(ii) the reference to restrictions pursuant to this Agreement in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions of
this Agreement under circumstances that do not require the retention of such
reference.
4. AUTHORIZED STOCK. Issuer hereby represents and warrants to Grantee that
Issuer has taken all necessary corporate and other action to authorize and
reserve and to permit it to issue, and, at all times from the date hereof until
the obligation to deliver Issuer Common Stock upon the exercise of the Option or
any Substitute Option (as hereinafter defined) terminates, will have reserved
for issuance, upon exercise of the Option or any Substitute Option, shares of
Issuer Common Stock necessary for Grantee to exercise the Option or Substitute
Option, and Issuer will take all necessary corporate action to authorize and
reserve for issuance all additional shares of Issuer Common Stock or other
securities which may be issued pursuant to Section 6 upon exercise of the Option
or Substitute Option. The shares of Issuer Common Stock to be issued upon due
exercise of the Option or Substitute Option, including all additional shares of
Issuer Common Stock or other securities which may be issuable upon exercise of
the Option or Substitute Option pursuant to Section 6, upon issuance pursuant
hereto, shall be duly and validly issued, fully paid and nonassessable, and
shall be delivered free and clear of all Liens, including any preemptive rights
of any stockholder of Issuer.
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5. PURCHASE NOT FOR DISTRIBUTION. Grantee hereby represents and warrants to
Issuer that any Option Shares or other securities acquired by Grantee upon
exercise of the Option or Substitute Option will not be taken with a view to the
public distribution thereof and will not be transferred or otherwise disposed of
except in a transaction registered or exempt from registration under the
Securities Act.
6. ADJUSTMENT UPON CHANGES IN CAPITALIZATION, ETC. (a) In the event of any
change in Issuer Common Stock by reason of a reclassification, recapitalization,
stock split, split-up, combination, exchange of shares, stock dividend, dividend
payable in any other securities, or any similar event, the type and number of
shares or securities subject to the Option, and the Purchase Price therefor,
shall be adjusted appropriately, and proper provision shall be made in the
agreements governing such transaction, so that Grantee shall receive upon
exercise of the Option the number and class of shares or other securities or
property that Grantee would have received in respect of Issuer Common Stock if
the Option had been exercised immediately prior to such event or the record date
therefor, as applicable. If any additional shares of Issuer Common Stock are
issued after the date of this Agreement (other than pursuant to an event
described in the immediately preceding sentence), the number of shares of Issuer
Common Stock subject to the Option shall be adjusted so that, after such
issuance, it equals 19.9% of the number of shares of Issuer Common Stock then
issued and outstanding, without giving effect to any shares subject to or issued
pursuant to the Option.
(b) In the event that Issuer shall enter into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
Subsidiaries, and shall not be the continuing or surviving corporation of such
consolidation or merger, (ii) to permit any person, other than Grantee or one of
its Subsidiaries, to merge into Issuer and Issuer shall be the continuing or
surviving corporation, but, in connection with such merger, the shares of Issuer
Common Stock outstanding immediately prior to the consummation of such merger
shall be changed into or exchanged for stock or other securities of Issuer or
any other person or cash or any other property, or the shares of Issuer Common
Stock outstanding immediately prior to the consummation of such merger shall
after such merger represent less than 50% of the outstanding voting securities
of the merged company, or (iii) to sell or otherwise transfer all or
substantially all of its assets to any person, other than Grantee or one of its
Subsidiaries, then, and in each such case, the agreement governing such
transaction shall make proper provisions so that the Option shall, upon the
consummation of any such transaction and upon the terms and conditions set forth
herein, be converted into, or exchanged for, an option (the "Substitute
Option"), at the election of Grantee, of either (I) the Acquiring Corporation
(as defined below) or (II) any person that controls the Acquiring Corporation
(any such person specified in clause (I) or (II) being referred to as
"SUBSTITUTE OPTION ISSUER").
(c) The Substitute Option shall have the same terms as the Option; PROVIDED
that the exercise price therefor and number of shares subject thereto shall be
as set forth in this Section 6 and the repurchase rights relating thereto shall
be as set forth in Section 8; PROVIDED, FURTHER, that the Substitute Option
shall be exercisable immediately upon issuance without the occurrence of a
Purchase Event; and PROVIDED, FURTHER, that if the terms of the Substitute
Option cannot, for legal reasons, be the same as the Option (subject to the
variations described in the foregoing provisos), such terms shall be as similar
as possible and in no event less advantageous to Grantee. Substitute Option
Issuer shall also enter into an agreement with Grantee in substantially the same
form as this Agreement (subject to the variations described in the foregoing
provisos), which shall be applicable to the Substitute Option.
(d) The Substitute Option shall be exercisable for such number of shares of
Substitute Common Stock (as defined below) as is equal to the Assigned Value (as
defined below) multiplied by the number of shares of Issuer Common Stock for
which the Option was theretofore exercisable, divided by the Average Price (as
defined below), rounded up to the nearest whole share. The exercise price per
share of Substitute Common Stock of the Substitute Option (the "SUBSTITUTE
OPTION PRICE") shall then be equal to the Purchase Price multiplied by a
fraction in which the numerator is the number of shares
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of Issuer Common Stock for which the Option was theretofore exercisable and the
denominator is the number of shares of Substitute Common Stock for which the
Substitute Option is exercisable.
(e) In no event, pursuant to any of the foregoing paragraphs, shall the
Substitute Option be exercisable for more than 19.9% of the aggregate of the
shares of Substitute Common Stock outstanding prior to exercise of the
Substitute Option. In the event that the Substitute Option would be exercisable
for more than 19.9% of the aggregate of the shares of outstanding Substitute
Common Stock but for the limitation in the first sentence of this Section 6(e),
Substitute Option Issuer shall make a cash payment to Grantee equal to the
excess of (i) the value of the Substitute Option without giving effect to the
limitation in the first sentence of this Section 6(e) over (ii) the value of the
Substitute Option after giving effect to the limitation in the first sentence of
this Section 6(e). This difference in value shall be determined in good faith by
a nationally recognized investment banking firm selected by Grantee.
(f) Issuer shall not enter into any transaction described in Section 6(b)
unless the Acquiring Corporation and, if applicable, any beneficial owner of 50%
or more of the outstanding voting stock of the Acquiring Corporation (after
giving effect to the transaction) assume in writing all the obligations of
Issuer hereunder and take all other actions that may be necessary so that the
provisions of this Agreement are given full force and effect (including, without
limitation, any action that may be necessary so that the holders of the other
shares of common stock issued by Substitute Option Issuer are not entitled to
exercise any rights comparable to the Rights by reason of the issuance or
exercise of the Substitute Option and the shares of Substitute Common Stock are
otherwise in no way distinguishable from or have lesser economic value than
other shares of common stock issued by Substitute Option Issuer (other than any
diminution in value resulting from the fact, if applicable, that the shares of
Substitute Common Stock are restricted securities, as defined in Rule 144 under
the Securities Act or any successor provision)).
(g) For purposes of this Agreement, the following terms have the following
meanings:
(1) "ACQUIRING CORPORATION" means (i) the continuing or surviving
corporation of a consolidation or merger with Issuer (if other than Issuer),
(ii) Issuer in a merger in which Issuer is the continuing or surviving
corporation and (iii) the transferee of all or substantially all of Issuer's
assets.
(2) "ASSIGNED VALUE" means the highest of (w) the price per share of
Issuer Common Stock at which a tender offer or exchange offer for Issuer
Common Stock has been made after the date hereof and prior to the
consummation of the consolidation, merger or sale referred to in Section
6(b), (x) the price per share to be paid by any third party or the
consideration per share to received by holders of Issuer Common Stock, in
each case pursuant to the agreement with Issuer with respect to the
consolidation, merger or sale referred to in Section 6(b), (y) the highest
closing sales price per share for Issuer Common Stock quoted on the NYSE (or
if such Issuer Common Stock is not quoted on the NYSE, the highest bid price
per share as quoted on the National Association of Securities Dealers
Automated Quotation System or, if the shares of Issuer Common Stock are not
quoted thereon, on the principal trading market on which such shares are
traded as reported by a recognized source) during the period from the date
hereof to the date of exercise of the Option and (z) in the event the
transaction referred to in Section 6(b) is a sale of all or substantially
all of Issuer's assets, an amount equal to (i) the sum of the price paid in
such sale for such assets (including assumed liabilities) and the current
market value of the remaining assets of Issuer, as determined in good faith
by a nationally recognized investment banking firm selected by Grantee,
divided by (ii) the number of shares of Issuer Common Stock outstanding at
such time. In the event that a tender offer or exchange offer is made for
Issuer Common Stock or an agreement is entered into for a merger or
consolidation involving consideration other than cash, the value of the
securities or other property issuable or deliverable in exchange for Issuer
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Common Stock shall be determined in good faith by a nationally recognized
investment banking firm selected by Grantee.
(3) "AVERAGE PRICE" means the average closing sales price per share of a
share of Substitute Common Stock quoted on the NYSE (or if such Substitute
Common Stock is not quoted on the NYSE, the highest bid price per share as
quoted on the National Association of Securities Dealers Automated Quotation
System or, if the shares of Substitute Common Stock are not quoted thereon,
on the principal trading market on which such shares are traded as reported
by a recognized source) for the twenty trading days immediately preceding
the fifth business day prior to the consolidation, merger or sale in
question, but in no event higher than the closing price of the shares of
Substitute Common Stock on the day preceding such consolidation, merger or
sale; PROVIDED that if Substitute Option Issuer is Issuer, the Average Price
shall be computed with respect to a share of common stock issued by Issuer,
the person merging into Issuer or by any company which controls such person,
as Grantee may elect.
(4) "SUBSTITUTE COMMON STOCK" means the shares of capital stock (or
similar equity interest) with the greatest voting power in respect of the
election of directors (or persons similarly responsible for the direction of
the business and affairs) of the Substitute Option Issuer.
7. REPURCHASE OF OPTION AND OPTION SHARES. (a) Notwithstanding the
provisions of Section 2(a), at any time commencing upon the first occurrence of
a Repurchase Event (as defined below) and ending 90 days thereafter, Issuer (or
any successor entity thereof) shall:
(i) at the request of Grantee, repurchase from Grantee the Option (if
and to the extent not previously exercised or terminated) at a price equal
to the excess, if any, of (x) the Applicable Price (as defined below) as of
the Section 7 Request Date (as defined below) for a share of Issuer Common
Stock over (y) the Purchase Price (subject to adjustment pursuant to Section
6(a)), multiplied by the number of shares of Issuer Common Stock with
respect to which the Option has not been exercised (the "OPTION REPURCHASE
PRICE"); and
(ii) at the request of an owner of Option Shares from time to time,
repurchase such number of Option Shares as such owner shall designate at a
price equal to the Applicable Price as of the Section 7 Request Date
multiplied by the number of Option Shares requested to be repurchased by
such owner (the "OPTION SHARE REPURCHASE PRICE").
(b) If Grantee or an owner of Option Shares exercises its rights under this
Section 7, Issuer shall, within 10 business days after the Section 7 Request
Date, pay the Option Repurchase Price or Option Share Repurchase Price, as the
case may be, in immediately available funds, and Grantee or such owner, as the
case may be, shall surrender to Issuer the Option or Option Shares, as the case
may be.
(c) For purposes of this Agreement, the following terms have the following
meanings:
(i) "APPLICABLE PRICE", as of any date, means the highest of (A) the
highest price per share at which a tender offer or exchange offer has been
made for shares of Issuer Common Stock after the date hereof and on or prior
to such date, (B) the highest price per share to be paid by any third party
for shares of Issuer Common Stock or the consideration per share to be
received by holders of Issuer Common Stock, in each case pursuant to an
agreement for an Acquisition Proposal with Issuer entered into on or prior
to such date or (C) closing sales price per share of Issuer Common Stock
quoted on the NYSE (or if Issuer Common Stock is not quoted on the NYSE, the
highest bid price per share as quoted on the National Association of
Securities Dealers Automated Quotations System or, if the shares of Issuer
Common Stock are not quoted thereon, on the principal trading market on
which such shares are traded as reported by a recognized source) on the day
preceding such date. If the consideration to be offered, paid or received
pursuant to either of the foregoing clauses (A) or (B) shall be other than
in cash, the value of
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such consideration shall be determined in good faith by an independent
nationally recognized investment banking firm selected by Grantee.
(ii) "REPURCHASE EVENT" means the occurrence of a Purchase Event
followed by the consummation of any transaction the proposal of which would
constitute an Acquisition Proposal.
(iii) "SECTION 7 REQUEST DATE" means the date on which Grantee or an
owner of Option Shares exercises its rights under this Section.
8. REPURCHASE OF SUBSTITUTE OPTION. (a) At any time after issuance of the
Substitute Option and prior to the expiration of the Substitute Option,
Substitute Option Issuer (or any successor entity thereof) shall:
(i) at the request of Grantee, repurchase from Grantee the Substitute
Option (if and to the extent not previously exercised or terminated) at a
price equal to the excess, if any, of (x) the Highest Closing Price as of
the Section 8 Request Date (as defined below) for a share of Substitute
Common Stock over (y) the Purchase Price (subject to adjustment pursuant to
Section 6(a)), multiplied by the number of shares of Substitute Common Stock
with respect to which the Substitute Option has not been exercised (the
"SUBSTITUTE OPTION REPURCHASE PRICE"); and
(ii) at the request of an owner of shares of Substitute Common Stock
issued upon exercise of the Substitute Option, repurchase such number of
shares of Substitute Common Stock as such owner shall designate at a price
equal to the Highest Closing Price as of the Section 8 Request Date
multiplied by the number of shares of Substitute Common Stock requested to
be repurchased by such owner (the "SUBSTITUTE SHARE REPURCHASE PRICE").
(b) If Grantee or an owner of shares of Substitute Common Stock issued upon
exercise of the Substitute Option exercises its rights under this Section 8,
Substitute Option Issuer shall, within 10 business days after the Section 8
Request Date, pay the Substitute Option Repurchase Price or Substitute Share
Repurchase Price, as the case may be, in immediately available funds, and
Grantee or such owner, as the case may be, shall surrender to Issuer the Option
or shares of Substitute Common Stock, as the case may be.
(c) For purposes of this Agreement, the following terms have the following
meanings:
(i) "HIGHEST CLOSING PRICE" means the highest closing sales price for
shares of Substitute Common Stock quoted on the NYSE (or if the Substitute
Common Stock is not quoted on the NYSE, the highest bid price per share as
quoted on the National Association of Securities Dealers Automated
Quotations System or, if the shares of Substitute Common Stock are not
quoted thereon, on the principal trading market on which such shares are
traded as reported by a recognized source) during the six-month period
preceding the Section 8 Request Date; and
(ii) "SECTION 8 REQUEST DATE" means the date on which Grantee or an
Owner exercises its rights under this Section.
9. REGISTRATION RIGHTS. Issuer shall, if requested by Grantee or any owner
of Option Shares (collectively with Grantee, the "OWNERS") at any time and from
time to time within three years of the first exercise of the Option, as
expeditiously as possible prepare and file up to two registration statements
under the Securities Act if such registration is necessary in order to permit
the sale or other disposition of any or all shares of securities that have been
acquired by or are issuable to such Owners upon exercise of the Option in
accordance with the intended method of sale or other disposition stated by such
Owners, including a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer shall use its best efforts
to qualify such shares or other securities under any applicable state securities
laws. Issuer shall use all reasonable efforts to cause each such registration
statement to become effective, to obtain all consents or waivers of other
parties which are required therefor and to keep such registration statement
effective for such period not in excess of
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<PAGE>
180 days from the day such registration statement first becomes effective as may
be reasonably necessary to effect such sale or other disposition. The
obligations of Issuer hereunder to file a registration statement and to maintain
its effectiveness may be suspended for one or more periods of time not exceeding
30 days in the aggregate if the Board of Directors of Issuer shall have
determined that the filing of such registration statement or the maintenance of
its effectiveness would require disclosure of nonpublic information that would
materially and adversely affect Issuer. Any registration statement prepared and
filed under this Section 9, and any sale covered thereby, shall be at Issuer's
expense except for underwriting discounts or commissions, brokers' fees and the
fees and disbursements of Owners' counsel related thereto. The Owners shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If during the time period referred
to in the first sentence of this Section 9 Issuer effects a registration under
the Securities Act of Issuer Common Stock for its own account or for any other
stockholders of Issuer (other than on Form S-4 or Form S-8, or any successor
form), it shall allow the Owners the right to participate in such registration,
and such participation shall not affect the obligation of Issuer to effect two
registration statements for the Owners under this Section 9; PROVIDED that, if
the managing underwriters of such offering advise Issuer in writing that in
their opinion the number of shares of Issuer Common Stock requested to be
included in such registration exceeds the number which can be sold in such
offering, Issuer shall include the shares requested to be included therein by
the Owners pro rata with the shares intended to be included therein by Issuer.
In connection with any registration pursuant to this Section 9, Issuer and the
Owners shall provide each other and any underwriter of the offering with
customary representations, warranties, covenants, indemnification and
contribution in connection with such registration.
10. LISTING; REASONABLE BEST EFFORTS. (a) If Issuer Common Stock or any
other securities to be acquired upon exercise of the Option are then listed on
the NYSE or any other securities exchange or market, Issuer, upon the request of
any Owner, will promptly file an application to list the shares of Issuer Common
Stock or other securities to be acquired upon exercise of the Option on the NYSE
or such other securities exchange or market and will use its best efforts to
obtain approval of such listing as soon as practicable.
(b) Issuer will use its reasonable best efforts to take, or cause to be
taken, all actions and to do, or cause to be done, all things necessary, proper
or advisable under applicable laws and regulations to permit the exercise of the
Option or the Substitute Option in accordance with the terms and conditions
hereof, as soon as practicable after the date hereof, including making any
appropriate filing of pursuant to the HSR Act and any other Regulatory Law,
supplying as promptly as practicable any additional information and documentary
material that may be requested pursuant to the HSR Act and any other Regulatory
Law, and taking all other actions necessary to cause the expiration or
termination of the applicable waiting periods under the HSR Act as soon as
practicable.
11. LIMITATION OF GRANTEE PROFIT. (a) Notwithstanding any other provision
herein, in no event shall Grantee's Total Profit (as defined below) exceed $60
million (the "Maximum Profit") and, if it otherwise would exceed such amount,
Grantee, at its sole discretion, shall either (i) reduce the number of shares
subject to the Option, (ii) deliver to Issuer for cancellation shares of Issuer
Common Stock (or other securities into which such Option Shares are converted or
exchanged), (iii) pay cash to Issuer, or (iv) any combination of the foregoing,
so that Grantee's actually realized Total Profit shall not exceed the Maximum
Profit after taking into account the foregoing actions.
(b) For purposes of this Agreement, "TOTAL PROFIT" shall mean: (i) the
aggregate amount of (A) any excess of (x) the net cash amounts received by
Grantee pursuant to a sale of Option Shares (or securities into which such
shares are converted or exchanged) to any unaffiliated third party within 12
months after the exercise of the Option, over (y) the Grantee's aggregate
purchase price for such Option Shares (or other securities), PLUS (B) any
amounts received by Grantee on the transfer of the Option (including amounts
payable to Grantee pursuant to Section 7), PLUS (C) any equivalent amounts
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with respect to the Substitute Option (including Section 6(e) hereof), PLUS (D)
any amounts received by Grantee pursuant to Section 7.3(a) of the Merger
Agreement, MINUS (ii) the sum of amounts of any cash previously paid to Issuer
pursuant to this Section 11 plus the value of the Option Shares (or other
securities) previously delivered to Issuer for cancellation pursuant to this
Section 11.
(c) Notwithstanding any other provision of this Agreement, nothing in this
Agreement shall affect the ability of Grantee to receive, nor relieve Issuer's
obligation to pay, any payment provided for in Section 7.3 of the Merger
Agreement; PROVIDED that if and to the extent the Total Profit received by
Grantee would exceed the Maximum Profit following receipt of such payment,
Grantee shall be obligated to comply with the terms of Section 11(a) within 15
days of the latest of (i) the date of receipt of such payment, (ii) the date of
receipt of the net cash by Grantee pursuant to the sale of Option Shares (or
securities into which such Option Shares are converted or exchanged) to any
unaffiliated party within 12 months after the exercise of this Option with
respect to such Option Shares, (iii) the date of receipt of net cash from
disposition of the Option and (iv) the date of receipt of equivalent amounts
pursuant to the sale of the Substitute Option or shares of Substitute Common
Stock (or other securities into which such Substitute Common Stock is converted
or exchanged).
(d) For purposes of Section 11(a) and clause (ii) of Section 11(b), the
value of any Option Shares delivered to Issuer shall be the Assigned Value of
such Option Shares and the value of any Substitute Common Stock delivered to
Issuer shall be the Highest Closing Price of such Substitute Common Stock.
12. LOSS, THEFT, ETC. OF AGREEMENT. This Agreement (and the Option granted
hereby) is exchangeable, without expense, at the option of Grantee, upon
presentation and surrender of this Agreement at the principal office of Issuer
for other Agreements providing for Options of different denominations entitling
the holder thereof to purchase in the aggregate the same number of shares of
Issuer Common Stock purchasable hereunder. The terms "Agreement" and "Option" as
used herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft, destruction
or mutilation of this Agreement, and (in the case of loss, theft or destruction)
of reasonably satisfactory indemnification, and upon surrender and cancellation
of this Agreement, if mutilated, Issuer will execute and deliver a new Agreement
of like tenor and date. Any such new Agreement executed and delivered shall
constitute an additional contractual obligation on the part of Issuer, whether
or not the Agreement so lost, stolen, destroyed or mutilated shall at any time
be enforceable by anyone.
13. MISCELLANEOUS. (a) EXPENSES. Except as otherwise provided in Section 9
hereof or in the Merger Agreement, each of the parties hereto shall bear and pay
all Expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) WAIVER AND AMENDMENT. Any provision of this Agreement may be waived at
any time by the party that is entitled to the benefits of such provision. This
Agreement may not be modified, amended, altered or supplemented except upon the
execution and delivery of a written agreement executed by the parties hereto.
(c) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARY; SEVERABILITY.Except as
otherwise set forth in the Merger Agreement, this Agreement, together with the
Merger Agreement, (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter hereof and (b) is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder. If any
term, provision, covenant or restriction of this Agreement is held by a court of
competent jurisdiction or a federal or state regulatory agency to be invalid,
void or unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Agreement shall remain in full force and effect and shall
in no way
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<PAGE>
be affected, impaired or invalidated. If for any reason such court or regulatory
agency determines that the Option does not permit Grantee to acquire, or does
not require Issuer (or Substitute Option Issuer) to repurchase, the full number
of shares of Issuer Common Stock (or Substitute Common Stock) as provided in
Sections 2 and 7 (or in the case of Substitute Common Stock Sections 2 and 8),
as adjusted pursuant to Section 6, it is the express intention of Issuer to
allow Grantee to acquire or to require Issuer to repurchase such lesser number
of shares as may be permissible without any amendment or modification hereof.
(d) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE REGARDLESS OF THE LAWS THAT
MIGHT OTHERWISE GOVERN UNDER APPLICABLE PRINCIPLES OF CONFLICTS OF LAWS.
(e) DESCRIPTIVE HEADINGS. The descriptive headings contained herein are for
convenience of reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
(f) NOTICES. All notices and other communications hereunder shall be in
writing and shall be deemed given as set forth in Section 8.2 of the Merger
Agreement.
(g) COUNTERPARTS. This Agreement and any amendments hereto may be executed
in two counterparts, each of which shall be considered one and the same
agreement and shall become effective when both counterparts have been signed by
each of the parties and delivered to the other party, it being understood that
both parties need not sign the same counterpart.
(h) ASSIGNMENT. Grantee may assign this Agreement in whole to any affiliate
of Grantee at any time. Except as provided in the next sentence and by operation
of law, Grantee may not, without the prior written consent of Issuer (which
shall not be unreasonably withheld), assign this Agreement to any other person.
Upon the occurrence of a Purchase Event, Grantee may sell, transfer, assign or
otherwise dispose of, in whole at any time, its rights and obligations
hereunder. In the case of any sale, transfer, assignment or disposition of this
Option, Issuer shall do all things reasonably necessary to facilitate such
transaction. This Agreement shall not be assignable by Issuer except by
operation of law. Subject to the preceding sentence, this Agreement shall be
binding upon, inure to the benefit of and be enforceable by the parties and
their respective successors and assigns.
(i) REPRESENTATIONS AND WARRANTIES. The representations and warranties
contained in Sections 3.1(a) and 3.2(a) of the Merger Agreement, and, to the
extent they relate to this Stock Option Agreement, in Sections 3.1(c), (f) and
(i) and 3.2(c), (f), (l) and (m) of the Merger Agreement, are incorporated
herein by reference.
(j) RIGHTS PLAN. Until the Option has been exercised or terminated in full
and Grantee no longer holds any Option Shares, Issuer shall not amend, modify or
waive any provision of the Rights Agreement (the "RIGHTS AGREEMENT") or take any
other action which would cause Grantee or any of its "Affiliates" or
"Associates" to become an "Acquiring Person", or which would cause a "Stock
Acquisition Date" or "Distribution Date", any event specified in Section
11(a)(ii) or 13 of the Rights Agreement or any similar event with respect to the
Rights to occur, by reason of the existence or exercise (in whole or in part) of
the Option, the beneficial ownership by Grantee or any of its "Affiliates" or
"Associates" of any of the Option Shares, or the consummation of the other
transactions contemplated hereby (all terms in quotes are used as defined in the
Rights Agreement). This covenant shall also apply to any Substitute Option or
shares of Substitute Common Stock issued in respect thereof, and to any
securities into which any Option Shares or Substitute Common Stock are converted
or exchanged.
(k) FURTHER ASSURANCES. In the event of any exercise of the Option by
Grantee, Issuer and Grantee shall execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in order
to consummate the transactions provided for by such exercise.
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(l) ENFORCEMENT. The parties agree that irreparable damage would occur in
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms. It is accordingly agreed that the parties
shall be entitled to specific performance of the terms hereof, this being in
addition to any other remedy to which they are entitled at law or in equity.
Both parties further agree to waive any requirement for the securing or posting
of any bond in connection with the obtaining of any such equitable relief and
that this provision is without prejudice to any other rights that the parties
hereto may have for any failure to perform this Agreement.
(m) SUBMISSION TO JURISDICTION; WAIVERS. Each of Issuer and Grantee
irrevocably agrees that any legal action or proceeding with respect to this
Agreement or for recognition and enforcement of any judgment in respect hereof
brought by the other party hereto or its successors or assigns may be brought
and determined in the Courts of the State of New York, and each of Issuer and
Grantee hereby irrevocably submits with regard to any such action or proceeding
for itself and in respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each of Issuer and Grantee
hereby irrevocably waives, and agrees not to assert, by way of motion, as a
defense, counterclaim or otherwise, in any action or proceeding with respect to
this Agreement, (a) any claim that it is not personally subject to the
jurisdiction of the above-named courts for any reason other than the failure to
lawfully serve process, (b) that it or its property is exempt or immune from
jurisdiction of any such court or from any legal process commenced in such
courts (whether through service of notice, attachment prior to judgment,
attachment in aid of execution of judgment, execution of judgment or otherwise),
and (c) to the fullest extent permitted by applicable law, that (i) the suit,
action or proceeding in any such court is brought in an inconvenient forum, (ii)
the venue of such suit, action or proceeding is improper and (iii) this
Agreement, or the subject matter hereof, may not be enforced in or by such
courts.
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<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock Option
Agreement to be signed by their respective officers thereunto duly authorized as
of the day and year first written above.
<TABLE>
<S> <C> <C>
WARNER-LAMBERT COMPANY
By: /s/ LODEWIJK J.R. DE VINK
-----------------------------------------
Name: Lodewijk J.R. de Vink
Title: President and Chief Operating
Officer
AGOURON PHARMACEUTICALS, INC.
By: /s/ PETER JOHNSON
-----------------------------------------
Name: Peter Johnson
Title: President
</TABLE>
B-11
<PAGE>
ANNEX C
January 26, 1999
[LOGO]
Board of Directors
Agouron Pharmaceuticals, Inc.
10350 North Torrey Pines Road
La Jolla, CA 92037
Ladies and Gentlemen:
Agouron Pharmaceuticals, Inc. (the "Company") proposes to enter into an
Agreement and Plan of Merger (the "Agreement") with Warner-Lambert Company
("Parent") and W SUB, INC. ("Sub"), a wholly-owned subsidiary of Parent,
pursuant to which Sub will be merged with and into the Company (the "Merger").
At the Effective Time of the Merger (as defined in the Agreement), each
outstanding share of common stock (other than shares owned by the Company,
Parent or any of their respective subsidiaries), no par value, of the Company
("Company Common Stock"), will be converted into the right to receive the Merger
Consideration (as hereinafter defined). The "Merger Consideration" means that
number of shares of common stock, par value $1.00 per share of Parent ("Parent
Common Stock") equal to (i) $60.00, divided by (ii) the Parent Common Stock
Price (as hereinafter defined) provided that the Merger Consideration shall not
be less than 0.8108 nor more than 0.9300 of a share of Parent Common Stock. The
"Parent Common Stock Price" means the average of the closing sales prices of
Parent Common Stock on each of the 10 consecutive trading days immediately
preceding the second trading day prior to Alpha's Stockholders Meeting.
You have asked us whether or not, in our opinion, the Merger Consideration
is fair, from a financial point of view, to the holders of Company Common Stock
(other than Parent and its affiliates).
In arriving at the opinion set forth below, we have, among other things:
(1) Reviewed, among other public information, the Company's Annual
Reports, Forms 10-K and related financial information for the three
fiscal years ended June 30, 1998 and the Company's Form 10-Q and the
related unaudited financial information for the three months ended
September 30, 1998;
(2) Reviewed, among other public information, Parent's Annual Reports,
Forms 10-K and related financial information for the three fiscal
years ended December 31, 1997 and the Parent's Form 10-Q and the
related unaudited financial information for the nine months ended
September 30, 1998;
(3) Reviewed certain information, including financial forecasts
(including, with respect to the Company, internally prepared financial
forecasts and, with respect to Parent, certain publicly available
estimates of future performance, collectively, (the "Projections")),
relating to the business, earnings, cash flow, assets and prospects of
the Company and Parent, furnished to us by or on behalf of the Company
and Parent, respectively;
(4) Conducted discussions with members of senior management of the Company
and Parent concerning their respective businesses and prospects;
C-1
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Board of Directors
Agouron Pharmaceuticals, Inc.
10350 North Torrey Pines Road
La Jolla, CA 92037
Page 2
<TABLE>
<S> <C>
(5) Conducted discussions with members of senior management of the Company
and Parent concerning information relating to certain strategic,
financial and operational benefits anticipated by such management to
result from the Merger;
</TABLE>
(6) Compared the historical market prices and trading activity for the
Company Common Stock and the Parent Common Stock with those of certain
publicly traded companies which we deemed relevant;
(7) Compared the financial position and operating results of the Company
and Parent with those of certain other publicly traded companies which
we deemed relevant;
(8) Compared the financial terms of the Merger with the financial terms of
certain other business combinations which we deemed relevant;
(9) Considered the potential pro forma effects of the Merger on Parent;
(10) Reviewed a draft of the Agreement dated January 26, 1999; and
(11) Reviewed such other financial studies and analyses and performed such
other investigations and took into account such other matters as we
deemed necessary, including our assessment of regulatory, general
economic, market and monetary conditions.
In preparing our opinion, we have relied on the accuracy and completeness of
all information that was publicly available, supplied or otherwise communicated
to us by or on behalf of the Company and Parent, and we have not assumed any
responsibility to independently verify such information. With respect to the
Projections, we have assumed, with your consent, that they were reasonably
prepared on bases reflecting the best currently available estimates and good
faith judgments of the management of the Company and Parent, respectively, as to
the future performance of the Company and Parent, respectively. We have also
relied upon assurances of the management of the Company and the Parent,
respectively, that they are unaware of any facts that would make the information
or Projections provided to us incomplete or misleading. We have not undertaken
an independent evaluation or appraisal of the assets or liabilities (contingent
or otherwise, known or unknown) of the Company or Parent, nor have we been
furnished with any such evaluations or appraisals. We have also assumed, with
your consent, that (i) all material assets and liabilities (contingent or
otherwise, known or unknown) of the Company and Parent are as set forth in their
respective financial statements; and (ii) the Merger will be accounted for under
the pooling-of-interests method of accounting and will qualify as a tax-free
reorganization. Our opinion is based upon regulatory, economic, monetary and
market conditions existing on the date hereof. Furthermore, we express no
opinion as to the price or trading ranges at which the Company Common Stock or
Parent Common Stock will trade from the date hereof.
Our opinion is directed to the Board of Directors of the Company and does
not constitute a recommendation to any stockholder of the Company as to how any
such stockholder should vote on the Merger. This opinion does not address the
relative merits of the Merger and other transactions or business strategies, if
any, that may have been discussed by the Board of Directors of the Company as
alternatives to the Merger or the decision of the Board of Directors of the
Company to proceed with the Merger.
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<PAGE>
Board of Directors
Agouron Pharmaceuticals, Inc.
10350 North Torrey Pines Road
La Jolla, CA 92037
Page 3
PaineWebber Incorporated is currently acting as financial advisor to the
Board of Directors of the Company in connection with the Merger and will receive
a fee upon the delivery of this opinion and upon consummation of the Merger. In
the past, PaineWebber Incorporated and its affiliates have provided investment
banking and other financial services to the Company and have received fees for
rendering these services.
In the ordinary course of business, PaineWebber Incorporated may trade the
securities of the Company and Parent for our own account and for the accounts of
our customers and, accordingly, may at any time hold long or short positions in
such securities.
On the basis of, and subject to the foregoing, we are of the opinion that,
as of the date hereof, the Merger Consideration is fair, from a financial point
of view, to the holders of Company Common Stock (other than Parent and its
affiliates).
This opinion has been prepared at the request and for the use of the Board
of Directors of the Company in connection with the Merger and shall not be
reproduced, summarized, described or referred to or given to any other person or
otherwise made public or used for any other purpose without the prior written
consent of PaineWebber Incorporated; provided, however, that this letter may be
reproduced in full in the Proxy Statement/Prospectus relating to the Merger.
Very truly yours,
PAINEWEBBER INCORPORATED
[LOGO]
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<PAGE>
ANNEX D
CHAPTER 13 OF THE CALIFORNIA GENERAL CORPORATION LAW
CHAPTER 13. DISSENTERS' RIGHTS
1300 SHORT FORM MERGER; PURCHASE OF SHARES AT FAIR MARKET VALUE; "DISSENTING
SHARES" AND DISSENTING SHAREHOLDER.--(a) If the approval of the outstanding
shares (Section 152) of a corporation is required for a reorganization under
subdivisions (a) and (b) or subdivision (e) or (f) of Section 1201, each
shareholder of the corporation entitled to vote on the transaction and each
shareholder of a subsidiary corporation is a short-form merger may, by complying
with this chapter, require the corporation in which the shareholder holds shares
to purchase for cash at their fair market value the shares owned by the
shareholder which are dissenting shares as defined in subdivision (b). The fair
market value shall be determined as of the day before the first announcement of
the terms of the proposed reorganization or short-form merger, excluding any
appreciation or depreciation in consequence of the proposed action, but adjusted
for any stock split, reverse stock split, or share dividend which becomes
effective thereafter.
(b) As used in this chapter, "dissenting shares" means shares which come
within all of the following descriptions:
(1) Which were not immediately prior to the reorganization or short-form
merger either (A) listed on any national securities exchange certified by
the Commissioner of Corporations under subdivision (o) of Section 25100 or
(B) listed on the list of OTC margin stocks issued by the Board of Governors
of the Federal Reserve System, and the notice of meeting of shareholders to
act upon the reorganization summarizes this section and Sections 1301, 1302,
1303 and 1304; provided, however, that this provision does not apply to any
shares with respect to which there exists any restriction on transfer
imposed by the corporation or by any law or regulation; and provided,
further, that this provision does not apply to any class of shares described
in subparagraph (A) or (B) if demands for payment are filed with respect to
5 percent or more of the outstanding shares of that class.
(2) Which were outstanding on the date for the determination of
shareholders entitled to vote on the reorganization and (A) were not votes
in favor or the reorganization or, (B) if described in subparagraph (A) or
(B) of paragraph (1) (without regard to the provisos in that paragraph),
were voted against the reorganization, or which were held of record on the
effective date of a short-form merger; provided, however, that subparagraph
(A) rather than subparagraph (B) of this paragraph applies in any case where
the approval required by Section 1201 is sought by written consent rather
than at a meeting.
(3) Which the dissenting shareholder has demanded that the corporation
purchase at their fair market value, in accordance with Section 1301.
(4) Which the dissenting shareholder has submitted for endorsement, in
accordance with Section 1302.
(c) As used in this chapter, "dissenting shareholder" means the recordholder
of dissenting shares and includes a transferee of record.
1301 DISSENTER'S RIGHTS; DEMAND ON CORPORATION FOR PURCHASE OF SHARES.-- (a)
If, in the case of a reorganization, any shareholders of a corporation have a
right under Section 1300, subject to compliance with paragraphs (3) and (4) of
subdivision (b) thereof, to require the corporation to purchase their shares for
cash, such corporation shall mail to each such shareholder a notice of the
approval of the reorganization by its outstanding shares (Section 152) within 10
days
D-1
<PAGE>
after the date of such approval, accompanied by a copy of Section 1300, 1302,
1303, 1304 and this section, a statement of the price determined by the
corporation to represent the fair market value of the dissenting shares, and a
brief description of the procedure to be followed if the shareholder desires to
exercise the shareholder's right under such sections. The statement of price
constitutes an offer by the corporation to purchase at the price stated any
dissenting shares as defined in subdivision (b) of Section 1300, unless they
lose their status as dissenting shares under Section 1309.
(b) Any shareholder who has a right to require the corporation to purchase
the shareholder's shares for cash under Section 1300, subject to compliance with
paragraphs (3) and (4) of subdivision (b) thereof, and who desires the
corporation to purchase such shares shall make written demand upon the
corporation for the purchase of such shares and payment to the shareholder in
cash of their fair market value. The demand is not effective for any purpose
unless it is received by the corporation or any transfer agent thereof (1) in
the case of shares described in clause (i) or (ii) of paragraph (1) of
subdivision (b) of Section 1300 (without regard to the provisos in that
paragraph), not later than the date of the shareholders' meeting to vote upon
the reorganization, or (2) in any other case within 30 days after the date on
which the notice of the approval by the outstanding shares pursuant to
subdivision (a) or the notice pursuant to subdivision (i) of Section 1110 was
mailed to the shareholder.
(c) The demand shall state the number and class of the shares held of record
by the shareholder which the shareholder demands that the corporation purchase
and shall contain a statement of what such shareholder claims to be the fair
market value of those shares as of the day before the announcement of the
proposed reorganization of short-form merger. The statement of fair market value
constitutes an offer by the shareholder to sell the shares at such price.
1302 DISSENTING SHARES, STAMPING OR ENDORSING.--Within 30 days after the
date on which notice of the approval by the outstanding shares or the notice
pursuant to subdivision (i) of Section 1110 was mailed to the shareholder, the
shareholder shall submit to the corporation at its principal office or at the
office of any transfer agent thereof, (a) if the shares are certificated
securities, the shareholder's certificates representing any shares which the
shareholder demands that the corporation purchase, to be stamped or endorsed
with a statement that the shares are dissenting shares or to be exchanged for
certificates of appropriate denomination so stamped or endorsed or (b) if the
shares are uncertificated securities, written notice of the number of shares
which the shareholder demands that the corporation purchase. Upon subsequent
transfers of the dissenting shares on the books of the corporation the new
certificates, initial transaction statement, and other written statements issued
therefor shall bear a like statement, together with the name of the original
dissenting holder of the shares.
1303 DISSENTING SHAREHOLDER ENTITLED TO AGREED PRICE WITH INTEREST; TIME OF
PAYMENT.--(a) If the corporation and the shareholder agree that the shares are
dissenting shares and agree upon the price of the shares, the dissenting
shareholder is entitled to the agreed price with interest thereon at the legal
rate on judgments from the date of the agreement. Any agreements fixing the fair
market value of any dissenting shares as between the corporation and the holders
thereof shall be filed with the secretary of the corporation.
(b) Subject to the provisions of Section 1306; payment of the fair market
value of dissenting shares shall be made within 30 days after the amount thereof
has been agreed or within 30 days after any statutory or contractual conditions
to the reorganization are satisfied, whichever is later, and in the case of
certificated securities, subject to surrender of the certificates therefor,
unless provided otherwise by agreement.
1304 DISSENTERS ACTIONS; JOINDER; CONSOLIDATION; APPOINTMENT OF
APPRAISERS.--(a) If the corporation denies that the shares are dissenting
shares, or the corporation and the shareholder fail to agree upon the fair
market values of the shares, then the shareholder demanding purchase of such
shares as dissenting shares or any interested corporation, within six
D-2
<PAGE>
months after the date on which notice of the approval by the outstanding shares
(Section 152) or notice pursuant to subdivision (i) of Section 1110 was mailed
to the shareholder, but not thereafter, may file a complaint in the superior
court of the proper county praying the court to determine whether the shares are
dissenting shares or the fair market value of the dissenting shares or both or
may intervene in any action pending on such a complaint.
(b) Two or more dissenting shareholders may join as plaintiff, or be joined
as defendants in any such action and two or more such actions may be
consolidated.
(c) On the trial of the action, the court shall determine the issues. If the
status of the shares as dissenting shares is in issue, the court shall first
determine that issue. If the fair market value of the dissenting shares is in
issue, the court shall determine, or shall appoint one or more impartial
appraisers to determine, the fair market value of the shares.
1305 APPRAISERS DUTY AND REPORT; COURT JUDGEMENT; PAYMENT; APPEAL; COSTS OF
ACTION.--(a) If the court appoints an appraiser or appraisers, they shall
proceed forthwith to determine the fair market value per share. Within the time
fixed by the court, the appraisers, or a majority of them, shall make and file a
report in the office of the clerk of the court. Thereupon, on the motion of any
party, the report shall be submitted to the court and considered on such
evidence as the court considers relevant. If the court finds the report
reasonable, the court may confirm it.
(b) If a majority of the appraisers appointed fail to make and file a report
within 10 days from the date of their appointment or within such further time as
may be allowed by the court or the report is not confirmed by the court, the
court shall determine the fair market value of the dissenting shares.
(c) Subject to the provisions of Section 1306, judgment shall be rendered
against the corporation for payment of an amount equal to the fair market value
of each dissenting share multiplied by the number of dissenting shares which any
dissenting shareholder who is a party, or who has intervened, is entitled to
require the corporation to purchase, with interest thereon at the legal rate
from the date on which judgment was entered.
(d) Any such judgment shall be payable forthwith with respect to
uncertificated securities and, with respect to certificated securities, only
upon the endorsement and delivery to the corporation of the certificates for the
shares described in the judgment. Any party may appeal from the judgment.
(e) The costs of the action, including reasonable compensation to the
appraisers to be fixed by the court, shall be assessed or apportioned as the
court considers equitable, but, if the appraisal exceeds the price offered by
the corporation, the corporation shall pay the costs (including in the
discretion of the court attorneys' fees, fees of expert witnesses and interest
at the legal rate on judgments from the date of compliance with Sections 1300,
1301 and 1302 if the value awarded by the court for the shares is more than 125
percent of the price offered by the corporation under subdivision (a) of Section
1301).
1306 DISSENTING SHAREHOLDERS: EFFECT OF PREVENTION OF PAYMENT OF FAIR MARKET
VALUE.--To the extent that the provisions of Chapter 5 prevent the payment to
any holders of dissenting shares of their fair market value, they shall become
creditors of the corporation for the amount thereof together with interest at
the legal rate on judgments until the date of payment, but subordinate to all
other creditors in any liquidation proceeding, such debt to be payable when
permissible under the provisions of Chapter 5.
1307 DISSENTING SHARES, DISPOSITION OF DIVIDENDS.--Cash dividends declared
and paid by the corporation upon the dissenting shares after the date of
approval of the reorganization by the outstanding shares (Section 152) and prior
to payment for the shares by the corporation shall be credited against the total
amount to be paid by the corporation therefor.
1308 DISSENTING SHARES, RIGHTS AND PRIVILEGES.--Except as expressly limited
in this chapter, holders of dissenting shares continue to have all the rights
and privileges incident to their
D-3
<PAGE>
shares, until the fair market value of their shares is agreed upon or
determined. A dissenting shareholder may not withdraw a demand for payment
unless the corporation consents thereto.
1309 DISSENTING SHARES, LOSS OF STATUS.--Dissenting shares lose their status
as dissenting shares and the holders thereof cease to be dissenting shareholders
and cease to be entitled to require the corporation to purchase their shares
upon the happening of any of the following:
(a) The corporation abandons the reorganization. Upon abandonment of the
reorganization, the corporation shall pay on demand to any dissenting
shareholder who has initiated proceedings in good faith under this chapter
all necessary expenses incurred in such proceedings and reasonable
attorneys' fees.
(b) The shares are transferred prior to their submission for endorsement
in accordance with Section 1302 or are surrendered for conversion into
shares of another class in accordance with the articles.
(c) The dissenting shareholder and the corporation do not agree upon the
status of the shares as dissenting shares or upon the purchase price of the
shares, and neither files a complaint or intervenes in a pending action as
provided in Section 1304, within six months after the date on which notice
of the approval by the outstanding shares or notice pursuant to subdivision
(i) of Section 1110 was mailed to the shareholder.
(d) The dissenting shareholder, with the consent of the corporation,
withdraws the shareholder's demand for purchase of the dissenting shares.
1310 SUSPENSION OF CERTAIN PROCEEDINGS WHILE LITIGATION IS PENDING.--If
litigation is instituted to test the sufficiency or regularity of the votes of
the shareholders in authorizing a reorganization, any proceeding under Sections
1304 and 1305 shall be suspended until final determination of such litigation.
1311 CHAPTER INAPPLICABLE TO CERTAIN CLASSES OF SHARES.--This chapter,
EXCEPT SECTION 1312, does not apply to classes of shares whose terms and
provisions specifically set forth the amount to be paid in respect to such
shares in the event of a reorganization or merger.
1312 VALIDITY OF REORGANIZATION OR SHORT FORM MERGER, ATTACK ON;
SHAREHOLDERS' RIGHTS; BURDEN OF PROOF.--(a) No shareholder of a corporation who
has a right under this chapter to demand payment of cash for the shares held by
the shareholder shall have any right at law or in equity to attack the validity
of the reorganization or short-form merger, or to have the reorganization or
short-form merger set aside or rescinded, except in an action to test whether
the number of shares required to authorize or approve the reorganization have
been legally voted in favor thereof; but any holder of shares of a class whose
terms and provisions specifically set forth the amount to be paid in respect to
them in the event of a reorganization or short-form merger is entitled to
payment in accordance with those terms and provisions or, if the principal terms
of the reorganization are approved pursuant to subdivision (b) of Section 1202,
is entitled to payment in accordance with the terms and provisions of the
approved reorganization.
(b) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, subdivision (a) shall not
apply to any shareholder of such party who has not demanded payment of cash for
such shareholder's shares pursuant to this chapter; but if the shareholder
institutes any action to attack the validity of the reorganization or short-form
merger or to have the reorganization or short-form merger set aside or
rescinded, the shareholder shall not thereafter have any right to demand payment
of cash for the shareholder's shares pursuant to this chapter. The court in any
action attacking the validity of the reorganization or short-form merger or to
have the reorganization or short-form merger set aside or rescinded shall not
restrain or enjoin the
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<PAGE>
consummation of the transaction except upon 10 days, prior notice to the
corporation and upon a determination by the court that clearly no other remedy
will adequately protect the complaining shareholder or the class of shareholders
of which such shareholder is a member.
(c) If one of the parties to a reorganization or short-form merger is
directly or indirectly controlled by, or under common control with, another
party to the reorganization or short-form merger, in any action to attack the
validity of the reorganization or short-form merger or to have the
reorganization or short-form merger set aside or rescinded, (1) a party to a
reorganization or short-form merger which controls another party to the
reorganization or short-form merger shall have the burden of proving that the
transaction is just and reasonable as to the shareholders of the controlled
party, and (2) a person who controls two or more parties to a reorganization
shall have the burden of proving that the transaction is just and reasonable as
to the shareholders of any party so controlled.
D-5
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<C> <S> <C>
2.1 -- Agreement and Plan of Merger, dated as of January 26, 1999, among Warner-Lambert Company, WLC
Acquisition Corporation and Agouron Pharmaceuticals, Inc. (attached as Annex A to the Proxy
Statement/Prospectus contained in this Registration Statement).
2.2 -- Stock Option Agreement, dated as of January 26, 1999, between Agouron Pharmaceuticals, Inc. and
Warner-Lambert Company (attached as Annex B to the Proxy Statement/Prospectus contained in this
Registration Statement).
3.1 -- Restated Certificate of Incorporation of Warner-Lambert Company (incorporated by reference to
Exhibit 3 of Warner-Lambert's Quarterly Report on Form 10-Q for fiscal quarter ended June 30, 1998).
3.2 -- Amended and Restated By-Laws of Warner-Lambert Company (incorporated by reference to Exhibit 19(A)
of Warner-Lambert's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1988).
4 -- Amended Restated Rights Agreement dated as of March 25, 1997 between Warner-Lambert Company and
First Chicago Trust Company of New York (incorporated by reference to Exhibit 1 of Warner-Lambert's
amended Registration Statement on Form 8-A/A dated March 27, 1997).
5 -- Opinion of the General Counsel of Warner-Lambert regarding the legality of the shares of
Warner-Lambert Company Common Stock to be registered under this Registration Statement.
8.1 -- Opinion of McDermott, Will & Emery regarding certain United States federal income tax consequences
of the Merger.
8.2 -- Opinion of Shearman & Sterling regarding certain United States federal income tax consequences of
the Merger.
23.1 -- Consent of PricewaterhouseCoopers LLP, Florham Park, New Jersey.
23.2 -- Consent of PricewaterhouseCoopers LLP, San Diego, California.
23.3 -- Consent of the General Counsel of Warner-Lambert Company (contained in Exhibit 5).
23.4 -- Consent of McDermott, Will & Emery (contained in Exhibit 8.1).
23.5 -- Consent of Shearman & Sterling (contained in Exhibit 8.2).
23.6 -- Consent of PaineWebber Incorporated.
99.1 -- Opinion of PaineWebber Incorporated (included as Annex C to the Proxy Statement/ Prospectus
contained in this Registration Statement).
99.2 -- Form of Proxy for holders of Agouron Pharmaceuticals, Inc. Common Stock.
</TABLE>
- ------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
As permitted by Section 102(b)(7) of the General Corporation Law of the
State of Delaware (the "Delaware Law"), the Company's Certificate of
Incorporation includes a provision that eliminates the personal liability of a
director to the Company or its stockholders for monetary damages arising out of
the director's breach of his or her fiduciary duty of care, except as follows. A
director remains potentially liable for monetary damages (unless otherwise
permitted by applicable law) for (a) breach of the director's duty of loyalty to
the Company or its stockholders, (b) acts or omissions not in good faith or
which involve misconduct or a knowing violation of law, (c) an improper payment
of a dividend or an improper redemption or repurchase of the Company's stock (as
provided in Section 174 of the Delaware Law) or (d) any transaction from which a
director derives an improper personal benefit. Any repeal or modification of
this provision will not affect any right or protection of a director that exists
at the time of such repeal or modification.
Section 145 of the Delaware Law empowers a Delaware corporation to indemnify
any persons who are, or are threatened to be made, parties to any threatened,
pending or completed legal action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of such
corporation) by reason of the fact that such person is or was an officer,
director, employee or agent of such corporation, or is or was serving at the
request of such corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise. The
indemnity may include expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, provided that such officer,
director, employee or agent acted in good faith and in a manner he or she
reasonably believed to be in or not opposed to the corporation's best interests,
and, for criminal proceedings, had no reasonable cause to believe his or her
conduct was unlawful. A Delaware corporation may indemnify officers and
directors in an action by or in the right of the corporation under the same
conditions, except that no indemnification is permitted without judicial
approval if the officer or director is adjudged to be liable to the corporation.
Where an officer or director is successful on the merits or otherwise in the
defense of any action referred to above, the corporation must indemnify him or
her against the expenses which such officer or director actually and reasonably
incurred.
Article VII of the By-Laws of the Company provides in terms similar to those
of Section 145 of the Delaware Law that the Company shall have power and shall
be required to indemnify its directors and officers in accordance with the
Delaware Law.
Under the terms of various Directors and Officers Liability and Corporation
Reimbursement Liability Policies, the directors and officers of the Company are
insured, subject to applicable policy exclusions, limits and deductibles,
against any loss incurred in connection with any claim made against them or any
of them for any actual or alleged breach of duty, neglect, error, misstatement,
misleading statement, omission or other act done or wrongfully attempted, or any
matter not excluded by the terms and conditions of the policy, claimed against
them solely by reason of their being directors or officers of the Company. The
foregoing statements are subject to the detailed provisions of such Policies.
The Company has entered into indemnification agreements with each of its
directors and officers. Such indemnification agreements provide that the Company
will pay certain amounts incurred by a director or officer in connection with
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative, and specifically including actions by
or in the name of the Company (referred to as derivative suits), where the
individual's involvement is by reason of the fact that he or she is or was a
director or officer. Such amounts include, to the maximum extent
II-1
<PAGE>
permitted by law, attorneys' fees, judgments, civil or criminal fines,
settlement amounts, and other expenses customarily incurred in connection with
legal proceedings. Under each indemnification agreement, a director or officer
will not be indemnified if he or she is found not to have acted in good faith
and in a manner he or she reasonably believed to be in or not opposed to the
best interests of the Company. Each indemnification agreement provides a number
of procedures and presumptions used in the determination of the right to
indemnification, as well as a requirement that in order to receive an
advancement of expenses, the director or officer must submit an undertaking to
repay any expenses advanced on his or her behalf with respect to which it is
later determined the director or officer was not entitled to receive. Each
indemnification agreement is effective for actions arising out of acts or
omissions which may have occurred before or after the execution of such
indemnification agreement. The foregoing statements are subject to the detailed
provisions of such indemnification agreements.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) The following Exhibits are filed herewith unless otherwise indicated:
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<C> <S> <C>
2.1 -- Agreement and Plan of Merger, dated as of January 26, 1999, among Warner-Lambert Company, WLC
Acquisition Corporation and Agouron Pharmaceuticals, Inc. (attached as Annex A to the Proxy
Statement/Prospectus contained in this Registration Statement).
2.2 -- Stock Option Agreement, dated as of January 26, 1999, between Agouron Pharmaceuticals, Inc. and
Warner-Lambert Company (attached as Annex B to the Proxy Statement/Prospectus contained in this
Registration Statement).
3.1 -- Restated Certificate of Incorporation of Warner-Lambert Company (incorporated by reference to
Exhibit 3 of Warner-Lambert's Quarterly Report on Form 10-Q for fiscal quarter ended June 30, 1998).
3.2 -- Amended and Restated By-Laws of Warner-Lambert Company (incorporated by reference to Exhibit 19(A)
of Warner-Lambert's Quarterly Report on Form 10-Q for the fiscal quarter ended September 30, 1988).
4 -- Amended Restated Rights Agreement dated as of March 25, 1997 between Warner-Lambert Company and
First Chicago Trust Company of New York (incorporated by reference to Exhibit 1 of Warner-Lambert's
amended Registration Statement on Form 8-A/A dated March 27, 1997).
5 -- Opinion of the General Counsel of Warner-Lambert regarding the legality of the shares of
Warner-Lambert Company Common Stock to be registered under this Registration Statement.
8.1 -- Opinion of McDermott, Will & Emery regarding certain United States federal income tax consequences
of the Merger.
8.2 -- Opinion of Shearman & Sterling regarding certain United States federal income tax consequences of
the Merger.
23.1 -- Consent of PricewaterhouseCoopers LLP, Florham Park, New Jersey.
23.2 -- Consent of PricewaterhouseCoopers LLP, San Diego, California.
23.3 -- Consent of the General Counsel of Warner-Lambert Company (contained in Exhibit 5).
23.4 -- Consent of McDermott, Will & Emery (contained in Exhibit 8.1).
</TABLE>
II-2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
- ----------- ----------------------------------------------------------------------------------------------------
<C> <S> <C>
23.5 -- Consent of Shearman & Sterling (contained in Exhibit 8.2).
23.6 -- Consent of PaineWebber Incorporated.
99.1 -- Opinion of PaineWebber Incorporated (included as Annex C to the Proxy Statement/ Prospectus
contained in this Registration Statement).
99.2 -- Form of Proxy for holders of Agouron Pharmaceuticals, Inc. Common Stock.
</TABLE>
- ------------------------
(b) Financial Data Schedule.
Schedules are omitted because they either are not required or are not
applicable or because equivalent information has been included in the financial
statements, the notes thereto or elsewhere herein.
ITEM 22. UNDERTAKINGS.
The undersigned registrant hereby undertakes:
that, for purposes of determining any liability under the Securities Act of
1933, as amended (the "Securities Act"), each filing of the registrant's
annual report pursuant to Section 13(a) or 15(d) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act") (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d)
of the Exchange Act) that is incorporated by reference in the registration
statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial BONA FIDE offering thereof;
that prior to any public reoffering of the securities registered hereunder
through use of a prospectus which is a part of this registration statement,
by any person or party who is deemed to be an underwriter within the meaning
of Rule 145(c), the issuer undertakes that such reoffering prospectus will
contain the information called for by this form with respect to reofferings
by persons who may be deemed underwriters, in addition to the information
called for by the other Items of this form;
that every prospectus (i) that is filed pursuant to paragraph (2)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act and is used in connection with an
offering of securities subject to Rule 415, will be filed as a part of an
amendment to this registration statement and will not be used until such
amendment is effective, and that, for purposes of determining any liability
under the Securities Act, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof;
insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers and controlling persons of the
registrant pursuant to the foregoing provisions, or otherwise, the
registrant has been advised that in the opinion of the Securities and
Exchange Commission such indemnification is against public policy as
expressed in the Securities Act and is, therefore, unenforceable. In the
event that a claim for indemnification against such liabilities (other than
the payment by the registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of
any action, suit or proceeding) is asserted by such director, officer or
controlling person in connection with the securities being registered, the
registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such
II-3
<PAGE>
indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue;
to respond to requests for information that is incorporated by reference
into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this form,
within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request; and
to supply by means of a post-effective amendment all information concerning
a transaction, and the company being acquired involved therein, that was not
the subject of and included in this registration statement when it became
effective.
II-4
<PAGE>
Pursuant to the requirements of the Securities Act of 1933, as amended,
Warner-Lambert Company has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized, in Morris Plains,
New Jersey, on April 19, 1999.
<TABLE>
<S> <C> <C>
WARNER-LAMBERT COMPANY
(Registrant)
By: /s/ MELVIN R. GOODES
-----------------------------------------
Name: Melvin R. Goodes
Title: Chairman of the Board and
Chief Executive Officer
</TABLE>
Pursuant to the requirements of the Securities Act of 1933, as amended, this
registration statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
Chairman of the Board and
/s/ MELVIN R. GOODES Chief Executive Officer
- ------------------------------ (Principal Executive April 19, 1999
Melvin R. Goodes Officer) and Director
Vice President and Chief
/s/ ERNEST J. LARINI Financial Officer
- ------------------------------ (Principal Financial April 19, 1999
Ernest J. Larini Officer)
/s/ JOSEPH E. LYNCH Vice President and
- ------------------------------ Controller (Principal April 19, 1999
Joseph E. Lynch Accounting Officer)
/s/ ROBERT N. BURT
- ------------------------------ Director April 19, 1999
Robert N. Burt
/s/ DONALD C. CLARK
- ------------------------------ Director April 19, 1999
Donald C. Clark
/s/ LODEWIJK J.R. DE VINK
- ------------------------------ Director April 19, 1999
Lodewijk J.R. de Vink
/s/ JOHN A. GEORGES
- ------------------------------ Director April 19, 1999
John A. Georges
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
NAME TITLE DATE
- ------------------------------ -------------------------- -------------------
<C> <S> <C>
/s/ WILLIAM H. GRAY III
- ------------------------------ Director April 19, 1999
William H. Gray III
/s/ WILLIAM R. HOWELL
- ------------------------------ Director April 19, 1999
William R. Howell
/s/ LASALLE D. LEFFALL, JR.,
M.D.
- ------------------------------ Director April 19, 1999
LaSalle D. Leffall, Jr., M.D.
/s/ GEORGE A. LORCH
- ------------------------------ Director April 19, 1999
George A. Lorch
/s/ ALEX J. MANDL
- ------------------------------ Director April 19, 1999
Alex J. Mandl
/s/ LAWRENCE G. RAWL
- ------------------------------ Director April 19, 1999
Lawrence G. Rawl
/s/ MICHAEL I. SOVERN
- ------------------------------ Director April 19, 1999
Michael I. Sovern
</TABLE>
II-6
<PAGE>
Exhibit 5
April 19, 1999
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Ladies & Gentlemen:
I have acted as counsel to Warner-Lambert Company, a Delaware
corporation (the "Company"), in connection with the Registration Statement on
Form S-4 (the "Registration Statement") which the Company has filed with the
Securities and Exchange Commission under the Securities Act of 1933, as amended,
relating to up to 29,874,346 shares of the Company's common stock, par value
$1.00 per share (the "Common Stock") to be issued in connection with the
Agreement and Plan of Merger, dated as of January 26, 1999 (the "Merger
Agreement") among the Company, WLC Acquisition Corporation, a California
corporation and a wholly owned subsidiary of the Company ("Merger Sub"), and
Agouron Pharmaceuticals, Inc. ("Agouron"). Subject to the satisfaction or waiver
of the conditions set forth in the Merger Agreement, Merger Sub will be merged
with and into Agouron and each outstanding share of common stock, no par value,
of Agouron will be converted into shares of the Common Stock, all as more fully
described in the Registration Statement.
In connection with my opinions expressed below, I or members of the
Legal Division of the Company have examined copies of the Registration Statement
(including the exhibits thereto) and the proxy statement/prospectus contained
therein. In addition, I or members of the Legal Division of the Company have
examined, and have relied as to matters of fact upon, the originals or copies,
certified or otherwise identified to my satisfaction, of such corporate records,
agreements, documents and other instruments and such certificates or comparable
documents of public officials and of officers and representatives of the
Company, and have made such other and further investigations, as I have deemed
relevant and necessary as a basis for the opinions hereinafter set forth.
In such examination, I or members of the Legal Division of the Company
have assumed the genuineness of all signatures, the legal capacity of natural
persons, the authenticity of all documents submitted to me as originals, the
conformity to original documents of all documents submitted to me as certified
or photostatic copies, and the authenticity of the originals of such latter
documents.
Based upon the foregoing, I am of the opinion that the shares of Common
Stock have been duly authorized and, when issued in accordance with the terms of
the Merger Agreement, such shares will be validly issued, fully paid and
non-assessable shares of Common Stock of the Company.
<PAGE>
I am a member of the Bar of the State of New York and I do not express
any opinion herein concerning any law other than the law of the State of New
York and the Delaware General Corporation Law.
I hereby consent to the filing of this opinion letter as an Exhibit to
the Registration Statement.
Very truly yours,
/s/ Gregory L. Johnson
<PAGE>
[MCDERMOTT, WILL & EMERY LETTERHEAD]
April 16, 1999
Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
Re: Merger of WLC Acquisition Corporation with
and into Agouron Pharmaceuticals, Inc.
------------------------------------------
Dear Ladies and Gentlemen:
You have requested our opinion, as counsel to Warner-Lambert
Company, a Delaware corporation ("Warner-Lambert"), as to certain United
States federal income tax consequences of the merger (the "Merger") of WLC
Acquisition Corporation ("Merger Sub"), a California corporation and a
directly-owned subsidiary of Warner-Lambert with and into Agouron
Pharmaceuticals, Inc. ("Agouron"), a California corporation, pursuant to the
Agreement and Plan of Merger, dated January 26, 1999, by and among
Warner-Lambert, Merger Sub, and Agouron (the "Merger Agreement"). All
capitalized terms used but not defined herein shall have the meaning ascribed
to such terms in the Merger Agreement.
<PAGE>
Warner-Lambert Company
April 16, 1999
Page 2
In preparing our opinion, we have assumed that (i) the Merger will be
consummated in accordance with the terms, conditions and other provisions of
(a) the Merger Agreement, (b) the Stock Option Agreement dated as of January
26, 1999, and (c) the Amended and Restated Rights Agreement dated as of March
25, 1997, (collectively referred to herein as the "Agreements"), copies of
which have been provided to us; and, (ii) all of the factual information,
descriptions, representations and assumptions set forth or referred to (a) in
this letter (an advance copy of which has been provided to you), (b) in the
documents described in clause (i) of this paragraph, and (c) in the Proxy
Statement to be filed on Form S-4 on April 19, 1999, that will be mailed to
the holders of Agouron Common Stock in connection with the special meeting at
which such shareholders will vote on the Plan of Merger, are accurate and
complete and will be accurate and complete at the Effective Time. In
addition, we have assumed that representations will be made by Warner-Lambert
and Agouron in letters to us substantially in the forms attached hereto and
have assumed that such representations will be true and accurate as of the
Effective Time.
In our examination of such materials, we have assumed the genuineness of
all signatures, the legal capacity of all natural persons, the authenticity of
all documents submitted to us as originals, the conformity to the original
documents of all documents submitted to us as certified or photostatic copies
and the authenticity of the originals of such documents. We have not
independently verified any factual matters relating to the
<PAGE>
Warner-Lambert Company
April 16, 1999
Page 3
Merger in connection with or apart from our preparation of this opinion.
Accordingly, our opinion does not take into account any matters not set forth
herein which might have been disclosed by independent verification.
Based upon the foregoing, in reliance thereon and subject thereto, it
is our opinion that for United States federal income tax purposes: (i) the
Merger will constitute a "reorganization" within the meaning of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code"); and,
(ii) each of Warner-Lambert, Merger Sub and Agouron will be "a party to the
reorganization" within the meaning of Section 368(b) of the Code.
Our opinion is limited to the foregoing United States federal income tax
consequences of the Merger. We do not address any other United States federal
income tax consequences of the Merger or other matters of federal law and have
not considered matters (including state, local or foreign tax consequences)
arising under the laws of any jurisdiction other than matters of federal law
arising under the laws of the United States.
Our opinion is based on the understanding that the relevant facts are, and
will be at the Effective Time, as set forth or referred to in this letter. If
this understanding is incorrect or incomplete in any respect, our opinion could
be affected.
Our opinion is also based on the Code, Treasury Regulations, case law, and
<PAGE>
Warner-Lambert Company
April 16, 1999
Page 3
Internal Revenue Service rulings as they now exist. These authorities are all
subject to change and such change may be made with retroactive effect. We can
give no assurance that after any such change, our opinion would not be
different.
This opinion letter is being rendered to you in connection with the
Merger and in satisfaction of the requirement set forth in Section 6.2(c) of the
Merger Agreement. This opinion letter (and the opinions expressed herein) may
not be relied upon by you for any other purpose, or relied upon by, or furnished
to, any other person, firm or corporation without our prior written consent. We
undertake no responsibility to update or supplement our opinion.
We hereby consent to the filing of this opinion letter as an Exhibit
to the Registration Statement.
Very truly yours,
/s/ McDermott, Will & Emery
<PAGE>
Exhibit 8.2
[Shearman & Sterling Letterhead]
April 16, 1999
Agouron Pharmaceuticals, Inc.
10350 North Torrey Pines Road
La Jolla, California 92037-3000
Re: Merger of WLC Acquisition Corporation with and into Agouron
Pharmaceuticals, Inc.
-----------------------------------------------------------
Dear Ladies and Gentlemen:
You have requested our opinion, as counsel to Agouron
Pharmaceuticals, Inc., a California Corporation ("Agouron"), as to certain
United States federal income tax consequences of the merger (the "Merger") of
WLC Acquisition Corporation ("Merger Sub"), a California corporation and a
directly-owned subsidiary of Warner-Lambert Company, a Delaware corporation
("Warner- Lambert"), with and into Agouron, pursuant to the Agreement and Plan
of Merger, dated January 26, 1999, by and among Warner-Lambert, Merger Sub, and
Agouron (the "Merger Agreement"). All capitalized terms used but not defined
herein shall have the meaning ascribed to such terms in the Merger Agreement.
In preparing our opinion, we have assumed that (i) the Merger will
be consummated in accordance with the terms, conditions and other provisions of
(a) the Merger Agreement, (b) the Stock Option Agreement, and (c) the Rights
Agreement, copies of which have been provided to us (which collectively are
referred to herein as the "Agreements"); and (ii) all of the factual
information, descriptions, representations and assumptions set forth or referred
to (a) in this letter (an advance copy of which has been provided to you), (b)
in the documents described in clause (i) of this paragraph, and (c) in the Proxy
Statement to be filed on Form S-4 on April 19, 1999, that will be mailed to the
holders of Agouron Common Stock in connection with the special meeting at which
such shareholders will vote on the Plan of Merger, are accurate and complete and
will be accurate
<PAGE>
Page 2
and complete at the Effective Time. In addition, we have assumed that
representations will be made by Warner-Lambert and Agouron in letters to us
substantially in the forms attached hereto and have assumed that such
representations will be true and accurate as of the Effective Time.
In our examination of such materials, we have assumed the
genuineness of all signatures, the legal capacity of all natural persons, the
authenticity of all documents submitted to us as originals, the conformity to
the original documents of all documents submitted to us as certified or
photostatic copies and the authenticity of the originals of such documents. We
have not independently verified any factual matters relating to the Merger in
connection with or apart from our preparation of this opinion. Accordingly, our
opinion does not take into account any matters not set forth herein which might
have been disclosed by independent verification.
Based upon the foregoing, in reliance thereon and subject thereto,
it is our opinion that for United States federal income tax purposes: (i) the
Merger will constitute a "reorganization" within the meaning of Section 368(a)
of the Internal Revenue Code of 1986, as amended (the "Code"); and, (ii)
Agouron, Warner-Lambert and Merger Sub will each be a party to the
reorganization within the meaning of Section 368(b) of the Code.
Our opinion is limited to the foregoing United States federal income
tax consequences of the Merger. We do not address any other United States
federal income tax consequences of the Merger or other matters of federal law
and have not considered matters (including state, local or foreign tax
consequences) arising under the laws of any jurisdiction other than matters of
federal law arising under the laws of the United States.
Our opinion is based on the understanding that the relevant facts
are, and will be at the Effective Time, as set forth or referred to in this
letter. If this understanding is incorrect or incomplete in any respect, our
opinion could be affected.
Our opinion is also based on the Code, Treasury Regulations, case
law, and Internal Revenue Service rulings as they now exist. These authorities
are all subject to change and such change may be made with retroactive effect.
We can give no assurance that after any such change, our opinion would not be
different.
<PAGE>
Page 3
This opinion letter is being rendered to you in connection with the
Merger and in satisfaction of the requirement set forth in Section 6.3(c) of the
Merger Agreement. This opinion letter (and the opinions expressed herein) may
not be relied upon by you for any other purpose, or relied upon by, or furnished
to, any other person, firm or corporation without our prior written consent. We
undertake no responsibility to update or supplement our opinion.
We hereby consent to the filing of this opinion letter as an Exhibit
to the Registration Statement.
Very truly yours,
/s/ Shearman & Sterling
MKW/PMM
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Warner-Lambert Company of our report dated January 25, 1999 appearing on
page 46 of Warner-Lambert Company's 1998 Annual Report on Form 10-K, as amended,
for the year ended December 31, 1998. We also consent to the incorporation by
reference of our report on the Financial Statement Schedule, which appears on
page 18 of such Annual Report on Form 10-K, as amended. We also consent to the
reference to us under the heading "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
Florham Park, New Jersey
April 19, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
S-4 of Warner-Lambert Company of our report dated July 16, 1998 appearing on
page F-1 of Agouron Pharmaceuticals, Inc.'s Annual Report on Form 10-K for the
year ended June 30, 1998. We also consent to the reference to us under the
heading "Experts" in such Prospectus.
PRICEWATERHOUSECOOPERS LLP
San Diego, California
April 16, 1999
<PAGE>
EXHIBIT 23.6
CONSENT OF PAINEWEBBER INCORPORATED
We hereby consent to the use of our opinion letter dated January 26, 1999 to
the Board of Directors of Agouron Pharmaceuticals, Inc. included as Annex C to
the Proxy Statement/Prospectus which forms a part of the Registration Statement
on Form S-4 relating to the proposed merger Agouron Pharmaceuticals, Inc. with
Warner-Lambert Company and to the references to such opinion in such
Prospectus/Proxy Statement in the "Summary", "The Merger: Background of the
Merger", "The Merger: Reasons for the Merger; Recommendation of the Agouron
Board", and "Opinion of PaineWebber" sections. In giving such consent, we do not
admit and we disclaim that we come within the category of persons whose consent
is required under Section 7 of the Securities Act of 1933, as amended, or the
rules and regulations issued by the Securities and Exchange Commission
thereunder.
Very truly yours,
PAINEWEBBER INCORPORATED
By /s/ PaineWebber Incorporated
April 16, 1999
New York, New York
<PAGE>
- --------------------------------------------------------------------------------
AGOURON PHARMACEUTICALS, INC.
10350 NORTH TORREY PINES ROAD
LA JOLLA, CALIFORNIA 92037-1020
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Peter Johnson and Gary E. Friedman, and
each of them, with full power of substitution, as proxies to represent and to
vote, as designated below, all the shares of common stock of Agouron
Pharmaceuticals, Inc., held of record by the undersigned on March 29, 1999, at
the Special Meeting of Shareholders to be held on May 17, 1999 and at any
adjournments or postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO OTHER DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
(continued on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[LOGO]
AGOURON
PHARMACEUTICALS, INC.
Please check the appropriate box on the voting card
to R.S.V.P. your attendance at the Special Meeting on May 17, 1999 at 9:00 a.m.
or phone Agouron Investor Relations at 1-800-501-2474.
You can vote in one of two ways:
(1) complete, sign, date and return the enclosed proxy card in the
enclosed postage-paid envelope; or
(2) call 1-800-840-1208 on a touch-tone phone and follow the
instructions provided.
<PAGE>
- --------------------------------------------------------------------------------
Please mark
your vote as /X/
indicated in
this example
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 1.
FOR AGAINST ABSTAIN
1. Proposal 1-
Proposal to approve and adopt the / / / / / /
Agreement and Plan of Merger dated
as of January 26, 1999 among
Agouron Pharmaceuticals, Inc.,
Warner-Lambert Company and WLC
Acquisition Corporation.
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. HOWEVER, NO PROXY THAT
IS VOTED AGAINST THE APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF
MERGER WILL BE VOTED IN FAVOR OF POSTPONEMENT OR ADJOURNMENT OF THE
MEETING FOR THE PURPOSE OF ALLOWING ADDITIONAL TIME TO SOLICIT ADDITIONAL
VOTES "FOR" THE MERGER.
Check here if you plan to / /
attend the Special Meeting.
Signature(s)______________________________________ Date__________________, 1999
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
<PAGE>
- --------------------------------------------------------------------------------
AGOURON PHARMACEUTICALS, INC.
10350 NORTH TORREY PINES ROAD
LA JOLLA, CALIFORNIA 92037-1020
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Peter Johnson and Gary E. Friedman, and
each of them, with full power of substitution, as proxies to represent and to
vote, as designated below, all the shares of common stock of Agouron
Pharmaceuticals, Inc., held of record by the undersigned on March 29, 1999, at
the Special Meeting of Shareholders to be held on May 17, 1999 and at any
adjournments or postponements thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED SHAREHOLDER. IF NO OTHER DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR PROPOSAL 1.
(continued on reverse side)
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
[LOGO]
AGOURON
PHARMACEUTICALS, INC.
Please check the appropriate box on the voting card
to R.S.V.P. your attendance at the Special Meeting on May 17, 1999 at 9:00 a.m.
or phone Agouron Investor Relations at 1-800-501-2474.
<PAGE>
- --------------------------------------------------------------------------------
Please mark
your vote as /X/
indicated in
this example
THE BOARD RECOMMENDS A VOTE FOR PROPOSAL 1.
FOR AGAINST ABSTAIN
1. Proposal 1-
Proposal to approve and adopt the / / / / / /
Agreement and Plan of Merger dated
as of January 26, 1999 among
Agouron Pharmaceuticals, Inc.,
Warner-Lambert Company and WLC
Acquisition Corporation.
2. IN THEIR DISCRETION, THE PROXIES ARE AUTHORIZED TO VOTE UPON SUCH OTHER
BUSINESS AS MAY PROPERLY COME BEFORE THE MEETING. HOWEVER, NO PROXY THAT
IS VOTED AGAINST THE APPROVAL AND ADOPTION OF THE AGREEMENT AND PLAN OF
MERGER WILL BE VOTED IN FAVOR OF POSTPONEMENT OR ADJOURNMENT OF THE
MEETING FOR THE PURPOSE OF ALLOWING ADDITIONAL TIME TO SOLICIT ADDITIONAL
VOTES "FOR" THE MERGER.
Check here if you plan to / /
attend the Special Meeting.
Signature(s)______________________________________ Date__________________, 1999
NOTE: Please sign as name appears hereon. Joint owners should each sign. When
signing as attorney, executor, administrator, trustee or guardian, please give
full title as such.
- --------------------------------------------------------------------------------
FOLD AND DETACH HERE
