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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4)
OF THE SECURITIES EXCHANGE ACT OF 1934
AMERICAN CYANAMID COMPANY
(Name of Subject Company)
AMERICAN CYANAMID COMPANY
(Name of Person(s) Filing Statement)
COMMON STOCK, PAR VALUE $5.00 PER SHARE,
INCLUDING THE ASSOCIATED RIGHTS TO PURCHASE
SERIES A JUNIOR PARTICIPATING PREFERRED STOCK,
PAR VALUE $1.00 PER SHARE
(Title of Class of Securities)
025321100
(CUSIP Number of Class of Securities)
JOSEPH S. MCAULIFFE, ESQ.
VICE PRESIDENT AND GENERAL COUNSEL
AMERICAN CYANAMID COMPANY
ONE CYANAMID PLAZA
WAYNE, NEW JERSEY 07470
(201) 831-2000
COPY TO:
PETER D. LYONS, ESQ.
SHEARMAN & STERLING
599 LEXINGTON AVENUE
NEW YORK, NEW YORK 10022
(212) 848-4000
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ITEM 1. SECURITY AND SUBJECT COMPANY.
The name of the subject company is American Cyanamid Company, a Maine
corporation ("American Cyanamid" or the "Company"), and the address of its
principal executive offices is One Cyanamid Plaza, Wayne, New Jersey 07470. The
title of the class of equity securities to which this statement relates is the
Common Stock, par value $5.00 per share, of American Cyanamid (the "Shares"),
including the associated rights (the "Rights") to purchase shares of Series A
Junior Participating Preferred Stock, par value $1.00 per share, of American
Cyanamid issued pursuant to the Rights Agreement, dated as of March 10, 1986, as
amended, between American Cyanamid and Mellon Bank, N.A., as successor Rights
Agent (the "Rights Agreement"). Unless the context otherwise requires, all
references herein to the Shares shall include the associated Rights.
ITEM 2. TENDER OFFER OF THE BIDDER.
This statement relates to the revised tender offer disclosed in a Tender
Offer Statement on Schedule 14D-1 dated August 10, 1994, as amended through the
date hereof (the "Schedule 14D-1"), of AC Acquisition Corp. a Delaware
corporation (the "Purchaser") and a wholly owned subsidiary of American Home
Products Corporation, a Delaware corporation ("American Home Products" or
"Parent"), to purchase all outstanding Shares at a price of $101 per Share net
to the seller in cash, upon the terms and subject to the conditions set forth in
the Offer to Purchase dated August 10, 1994 (the "Offer to Purchase"), as
amended through the date hereof and as supplemented by the First Supplement
thereto dated August 23, 1994, and the related Letter of Transmittal and any
supplement thereto (which together constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger among
Parent, the Purchaser and the Company dated August 17, 1994 (the "Merger
Agreement"). The Merger Agreement provides that, upon the terms and subject to
the conditions contained therein, as promptly as practicable after the purchase
of Shares pursuant to the Offer and, if required by the Business Corporation Act
of the State of Maine ("Maine Law"), the approval and adoption by the
affirmative vote of the shareholders of the Company in accordance with Maine Law
and the Company's Restated Articles of Incorporation, the Purchaser will be
merged with and into the Company (the "Merger") and each then outstanding Share
(other than Shares held in the treasury of the Company, Shares owned by Parent
or the Purchaser or any other direct or indirect wholly owned subsidiary of
Parent or the Company, any Dissenting Shares and any Section 910 Shares (as such
terms are defined in the Merger Agreement)) will be converted automatically into
the right to receive $101 in cash.
According to the Schedule 14D-1, the address of the principal executive
offices of American Home Products is Five Giralda Farms, Madison, New Jersey
07940.
ITEM 3. IDENTITY AND BACKGROUND.
(a) The name and address of American Cyanamid, which is the person filing
this statement, are set forth in Item 1 above.
(b) (1) Certain contracts, agreements, arrangements or understandings
between American Cyanamid and certain of its directors, executive officers are
described on pages 7 through 11, 14 through 21 and 24 through 29 of American
Cyanamid's Proxy Statement dated March 8, 1994 for American Cyanamid's 1994
Annual Meeting of Stockholders (the "1994 Annual Meeting Proxy Statement"). A
copy of pages 7 through 11, 14 through 21 and 24 through 29 of the 1994 Annual
Meeting Proxy Statement is filed as Exhibit 2 hereto and is incorporated herein
by reference. See also "Certain Employee Benefits Matters" under Item 2(b)(ii)
below.
On August 17, 1994, the Board of Directors adopted an amendment (the
"Amendment") to the provisions of Article IV of the By-Laws of the Company (the
"By-Laws") providing for the indemnification of directors, officers, agents and
employees of the Company. The principal purposes of the
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Amendment were to conform Article IV of the By-Laws more closely to the current
language of Section 719 of Maine Law and to provide that advance payment of
litigation expenses to persons indemnified under Article IV of the By-Laws would
be mandatory (as permitted by Maine Law), rather than at the option of the
Company (as provided in the current By-Laws), subject to the agreement of the
indemnified person to repay any amounts so advanced under certain circumstances
as described in Article IV. A copy of Article IV of the By-Laws, as amended, is
filed as Exhibit 3 hereto and is incorporated herein by reference, and the
foregoing description of the amendments to Article IV is qualified in its
entirety by reference to such Exhibit.
(2) (i) The Company and American Home Products are parties to an agreement
(the "Verelan Agreement") pursuant to which the Company and American Home
Products co-market in the United States the Company's calcium channel blocker
antihypertensive, VERELAN (verapamil hydrochloride), through their respective
pharmaceutical divisions. Under the Verelan Agreement, American Home Products
and the Company each agreed to promote the product through detailing
presentations to physicians and medical residents in order to maximize sales of
VERELAN and to share in the income therefrom in specified percentages. In
addition, under the Verelan Agreement, American Home Products and the Company
agreed not to promote a specified type of antihypertensive product for a
three-year period and calcium channel blockers for the duration of the Verelan
Agreement. The Verelan Agreement has an initial term of 17 years from its date
and may be extended for additional five year terms. If American Home Products
desires to extend the Verelan Agreement and the Company does not, the Company is
required to make certain payments to American Home Products as liquidated
damages.
In addition, from time to time in the ordinary course of business,
executives of American Home Products and/or its subsidiaries and divisions
discuss and may enter into arrangements with executives of various companies in
the pharmaceutical industry, including the Company and/or its subsidiaries and
divisions, typically with respect to the possibility of cooperative ventures
relating to research, development and marketing of their respective products.
(ii) The following is a summary of the Merger Agreement. Defined terms used
below and not defined herein have the respective meanings assigned to those
terms in the Merger Agreement. Such summary is qualified in its entirety by
reference to the Merger Agreement, a copy of which is filed as Exhibit 4 hereto
and is incorporated herein by reference.
The Offer. In the Merger Agreement, the Purchaser has agreed, subject to
certain conditions, among other things, to amend the Offer (i) to extend the
Offer to September 14, 1994, (ii) to increase the purchase price offered from
$95 per Share to $101 per Share and (iii) to amend and restate the conditions to
the Offer, reduce the number of Shares required to be validly tendered and not
properly withdrawn to satisfy the Minimum Condition, eliminate the Financing
Condition, the Rights Condition and the Maine Takeover Statute Condition and
modify the other conditions to the Offer. The Purchaser has expressly reserved
the right, in its sole discretion, to waive the conditions to the Offer (other
than the Minimum Condition) and to increase the purchase price payable pursuant
to the Offer or make any other changes in the terms and conditions of the Offer,
provided that, unless previously approved by the Company in writing, no change
may be made which decreases the purchase price per Share payable in the Offer,
which changes the form of consideration payable in the Offer, which reduces the
maximum number of Shares to be purchased in the Offer or which imposes
additional conditions to the Offer. The Purchaser has further agreed that,
subject to the terms and conditions of the Merger Agreement, including the
conditions to the Offer, unless the Company otherwise consents in writing, the
Purchaser will accept for payment and pay for Shares as soon as it is permitted
to do so under applicable law, provided that the Purchaser may extend the Offer
up to the twenty-fifth business day after the latest of (i) September 14, 1994,
(ii) the tenth business day after the amendment of the Offer and (iii) the date
on which all such conditions shall first have been satisfied or waived.
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Pursuant to the Merger Agreement, the Company has approved of and consented
to the Offer and represented and warranted that (i) its Board of Directors, at a
meeting duly called and held on August 16 and August 17, 1994, has unanimously
(A) determined that the Merger Agreement and the transactions contemplated
thereby, including each of the Offer and the Merger, are fair to and in the best
interests of the holders of Shares, (B) approved the Merger Agreement and the
transactions contemplated thereby and (C) resolved to recommend that the
shareholders of the Company accept the Offer, tender their Shares to the
Purchaser and approve the Merger Agreement and the transactions contemplated
thereby and (ii) the Company's financial advisors have delivered to the Board of
Directors of the Company their respective written opinions (or oral opinions
confirmed in writing) that the consideration to be received by holders of
Shares, other than the Parent and the Purchaser, pursuant to the Merger
Agreement is fair to such holders from a financial point of view.
The Merger. The Merger Agreement provides that, upon the terms and subject
to the conditions thereof and in accordance with applicable laws, at the
Effective Time (as defined in the Merger Agreement) the Purchaser will be merged
with the Company. By virtue of the Merger, at the Effective Time, (i) each Share
issued and outstanding immediately prior to the Effective Time (other than any
Shares held in the treasury of the Company, Shares held by the Parent, the
Purchaser or any other direct or indirect subsidiary of the Parent or of the
Company (which will be cancelled without any payment therefor), and any
Dissenting Shares and Section 910 Shares (each as defined in the Merger
Agreement) held by shareholders of the Company who have properly exercised their
appraisal rights under the MBCA), will be converted into the right to receive
$101 per Share in cash, less any required withholding taxes. At the Effective
Time, each share of common, preferred or other capital stock of the Purchaser
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and nonassessable share
of identical common, preferred or other capital stock of the surviving
corporation in the Merger (the "Surviving Corporation").
For a description of certain rights available to shareholders upon
consummation of the Offer or the Merger, see Section 11 of the Offer to
Purchase.
Agreements of the Company, the Purchaser and the Parent. In the Merger
Agreement, the Company has covenanted and agreed that, during the period from
the date of the Merger Agreement to the Effective Time, except pursuant to the
terms of the Merger Agreement or as disclosed with reasonable specificity in the
documents and reports filed by the Company with the Commission prior to the date
of the Merger Agreement, or unless the Parent shall otherwise agree in writing,
the businesses of the Company and its subsidiaries (other than Immunex
Corporation ("Immunex")) will be conducted only in, and the Company shall not
take any action (including with respect to Immunex), and its subsidiaries (other
than Immunex) 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 the Company and its subsidiaries (other than Immunex) shall
each use its reasonable best efforts to preserve substantially intact the
business organization of the Company and its subsidiaries, to keep available the
services of the present officers, employees and consultants of the Company and
its subsidiaries and to preserve the present relationships of the Company and
its subsidiaries with customers, suppliers and other persons with which the
Company or any of its subsidiaries has significant business relations.
By way of amplification and not limitation of the provisions described in
the preceding paragraph, the Merger Agreement provides that neither the Company
(including with respect to Immunex) nor any of its subsidiaries (other than
Immunex) shall, between the date of the Merger Agreement and the Effective Time,
directly or indirectly do, or propose or commit to do, any of the following,
except pursuant to the terms of the Merger Agreement or as disclosed with
reasonable specificity in the documents and reports filed by the Company with
the Commission prior to the date of the Merger Agreement, or unless the Parent
shall otherwise agree in writing: (i) amend or otherwise change their respective
Articles of Incorporation or By-Laws or equivalent organizational documents;
(ii) 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,
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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 the Company or any of its
subsidiaries (except for the issuance of up to 5,451,876 shares of Company
Common Stock issuable in accordance with the terms of employee options
outstanding as of August 12, 1994) or (B) any assets of the Company or any of
its subsidiaries, except for sales of products in the ordinary course of
business and in a manner consistent with past practice; (iii) 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, except for the
regular quarterly dividend on the Shares in the amount of $.4625 per Share
declared on August 16, 1994 and the amounts to be paid upon the redemption of
the Rights pursuant to the Rights Agreement in accordance with the Merger
Agreement; (iv) reclassify, combine, split, subdivide or redeem, purchase or
otherwise acquire, directly or indirectly, any of its capital stock, except for
the redemption of the Rights at the redemption price of $.02 per Right in
accordance with the Merger Agreement; (v) (A) acquire (by merger, consolidation,
or acquisition of stock or assets) any corporation, partnership or other
business organization or division thereof, except for the completion of the
Company's previously announced acquisition of the Shell Company's crop
protection business, (B) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee 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, except for such of the foregoing incurred in the ordinary course of
business, consistent with past practice, having a maturity not exceeding 90
days, in an aggregate amount not in excess (including refinancing of already
outstanding amounts) of $900 million, (C) enter into any contract or agreement
other than in the ordinary course of business consistent with past practice, (D)
authorize any single capital expenditure which is in excess of $1 million or
capital expenditures which are, in the aggregate, in excess of $20 million or
(E) enter into or amend any contract, agreement, commitment or arrangement with
respect to any of the foregoing matters set forth in this clause (v); (vi)
except as described in the succeeding paragraph or otherwise in the Merger
Agreement, previously approved by the Parent or to the extent required under
existing employee and director benefit plans, agreements or arrangements as in
effect on the date of the Merger Agreement, increase the compensation or fringe
benefits of any of its directors, officers or employees, except for increases in
salary or wages of employees of the Company or its subsidiaries who are not
officers or directors of the Company in the ordinary course of business in
accordance with past practice, or grant any severance or termination pay not
currently required to be paid under existing severance plans to, or enter into
any employment, consulting or severance agreement with any present or former
director, officer or other employee of the Company or any of its subsidiaries
(other than an agreement entered into in exchange for a release by an employee
who is not an officer or director, of any and all claims against the Company
following such employee's termination of employment, but only if the aggregate
amount payable to any terminated employee under any such agreement does not
exceed $100,000 and the aggregate amount payable pursuant to all such agreements
does not exceed $1 million), 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, severance or other plan, agreement,
trust, fund, policy or arrangement for the benefit of any directors, officers or
employees; (vii) 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; (viii) make any tax election or settle or compromise
any material federal, state, local or foreign tax liability; (ix) settle or
compromise any pending or threatened suit, action or claim which is material or
which relates to the transactions contemplated by the Merger Agreement; (x) take
any action, including but not limited to introducing a new product, which, in
the good faith judgment of the Company, is reasonably likely to result in any
material claim that the Company has violated applicable laws, rules or
regulations or any rights of any other person; (xi) adopt a plan of complete or
partial liquidation, dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or any of its
subsidiaries not constituting an inactive subsidiary (other than the Merger);
(xii) pay, discharge or satisfy any claims, liabilities or obligations
(absolute, accrued, asserted or unasserted, contingent or otherwise), other than
the payment, discharge
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or satisfaction in the ordinary course of business and consistent with past
practice of liabilities reflected or reserved against in the financial
statements of the Company or incurred in the ordinary course of business and
consistent with past practice; or (xiii) take, or offer or propose to take, or
agree to take in writing or otherwise, any of the actions described in the
foregoing clauses or any action which would make any of the representations or
warranties of the Company contained in the Merger 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 to the Offer not being satisfied.
The Merger Agreement permits (i) an increase in the salaries of four
executives of the Company, (ii) the payment of lump sum special recognition
bonuses to employees who are not officers or directors of the Company, provided
that no special recognition bonus payable to any individual exceeds $10,000 and
the aggregate bonuses payable to all such employees between the date of the
Merger Agreement and the Effective Time does not exceed $500,000, (iii) the
Company to adopt a severance plan that is substantially similar in all material
respects to the Company's severance policy as disclosed to the Parent in writing
(except that the Company may provide that employees at certain salary levels
will have the right to receive benefits under the plan if they resign for "good
reason" (as defined in the Merger Agreement)), (iv) to permit the Company to
calculate and make a profit sharing contribution to the Company's Employees
Savings Plan and to amend the plan to vest employees if their employment is
terminated without cause or if an employee resigns following a reduction in base
salary prior to December 31, 1994; (v) to amend the Executive Income Continuity
Plan, the Key Manager Income Continuity Plan and the Non-Employee Directors
Retirement Plan, among other things, to provide for the payment of lump sum
benefits and to liberalize the eligibility requirements for individuals under
certain circumstances, (vi) to permit the Company to contribute to Rabbi trusts
the accrued benefits of employees under the Company's ERISA Excess Plan and
Supplemental Employees Retirement Plan, related gross up amounts under the
Company's Compensation Taxation Equalization Plan, and related fees and
expenses, and (vii) to accelerate the payment of incentive awards under the
Company's Cash Incentive Compensation Plan and the Company's Incentive
Compensation Plan (based on specific criteria).
See "Certain Employee Benefit Matters" below for a more complete discussion
of the foregoing matters.
The Merger Agreement provides that the Company, acting through its Board of
Directors, shall, if required in accordance with applicable law and its Articles
and By-Laws, (i) duly call, give notice of, convene and hold a special meeting
of its shareholders as soon as practicable following consummation of the Offer
for the purpose of considering and taking action on the Merger Agreement and the
transactions contemplated thereby and (ii) subject to its fiduciary duties under
applicable law, exercised after consultation with independent legal counsel, (A)
include in the proxy statement with respect to such meeting (the "Proxy
Statement") the unanimous recommendation of the Board of Directors that the
shareholders of the Company vote in favor of the approval of the Merger
Agreement and the transactions contemplated thereby and the written opinions of
the Company's financial advisors that the consideration to be received by the
shareholders of the Company pursuant to the Offer and the Merger is fair to such
shareholders and (B) use its reasonable best efforts to obtain the necessary
approval of the Merger Agreement and the transactions contemplated thereby by
its shareholders.
For a description of the short-form merger provisions of the MBCA, which,
under certain circumstances, could be applicable to the Merger, see Section 11
of the Offer to Purchase.
The Merger Agreement provides that, if required by applicable law, as soon
as practicable following the Parent's reasonable request, the Company shall file
with the Commission under the Exchange Act, and shall use its reasonable best
efforts to have cleared by the Commission, the Proxy Statement. The Parent, the
Purchaser and the Company have agreed to cooperate with each other in the
preparation of the Proxy Statement. The Company has agreed to use its reasonable
best efforts, after consultation with the other parties to the Merger Agreement,
to respond promptly to any comments
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made by the Commission with respect to the Proxy Statement and any preliminary
version thereof filed by it and cause such Proxy Statement to be mailed to the
Company's shareholders at the earliest practicable time.
Pursuant to the Merger Agreement, promptly upon the purchase by the
Purchaser of Shares pursuant to the Offer, and from time to time thereafter, the
Purchaser shall be entitled to designate up to such number of directors, rounded
up to the next whole number, on the Board of Directors of the Company as shall
give the Purchaser representation on the Board of Directors equal to the product
of the total number of directors on such Board (giving effect to the directors
elected pursuant to this sentence) multiplied by the percentage that the
aggregate number of Shares beneficially owned by the Purchaser or any affiliate
of the Purchaser bears to the total number of Shares then outstanding, and the
Company shall, at such time, promptly take all action necessary to cause the
Purchaser's designees to be so elected, including either increasing the size of
the Board of Directors or securing the resignations of incumbent directors or
both. At such times, the Company will use its reasonable best efforts to cause
persons designated by the Purchaser to constitute the same percentage as is on
the Board of Directors of (i) each committee of the Board, (ii) each board of
directors of each domestic subsidiary of the Company and (iii) each committee of
each such board, in each case only to the extent permitted by law. Until the
Purchaser acquires a majority of the outstanding Shares (on a fully diluted
basis), the Company shall use its reasonable best efforts to ensure that all the
members of the Board of Directors and such boards and committees as of the date
of the Merger Agreement who are not employees of the Company shall remain
members of the Board of Directors and such boards and committees. Annex I
attached to this Schedule 14D-9 sets forth information with respect to the
possible designation by the Parent, pursuant to the Merger Agreement, of persons
to be elected to the Board of Directors of the Company.
The Company has agreed to take all actions required pursuant to Section
14(f) and Rule 14f-1 in order to fulfill its obligations under the Merger
Agreement described in the preceding paragraph. Annex I to this Schedule 14D-9
fulfills the Company's obligations in this regard under the Merger Agreement.
Pursuant to the Merger Agreement, the Parent or the Purchaser will supply to the
Company and be solely responsible for any information with respect to either of
them and their nominees, officers, directors and affiliates required by Section
14(f) and Rule 14f-1.
Following the election or appointment of the Purchaser's designees as
described in the second preceding paragraph and prior to the Effective Time, any
amendment of the Merger Agreement or the Articles or By-Laws, any termination of
the Merger Agreement by the Company, any extension by the Company of the time
for the performance of any of the obligations or other acts of the Purchaser or
waiver of any of the Company's rights thereunder, and any other consent or
action by the Board of Directors thereunder, will require the concurrence of a
majority (which shall be at least two) of the directors of the Company then in
office who are neither designated by the Purchaser nor are employees of the
Company.
Under the Merger Agreement, the directors of the Purchaser immediately
prior to the Effective Time shall be the initial directors of the Surviving
Corporation and the officers of the Company immediately prior to the Effective
Time shall be the initial officers of the Surviving Corporation.
Pursuant to the Merger Agreement, from the date of the Merger Agreement to
the Effective Time, subject to appropriate provisions regarding confidentiality,
the Company shall, and shall cause its subsidiaries, officers, directors,
employees, auditors and other agents to, afford the officers, employees,
auditors and other agents of the Parent, and financing sources who shall agree
to be bound by the confidentiality provisions of the Merger Agreement as though
a party thereto, complete access at all reasonable times to its officers,
employees, agents, properties, offices, plants and other facilities and to all
books and records, and shall furnish the Parent and such financing sources with
all financial, operating and other data and information as the Parent, through
its officers, employees or agents, or such financing sources may from time to
time request.
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Under the Merger Agreement, the Company, its affiliates and their
respective officers, directors, employees, representatives and agents have
agreed that they shall immediately cease any existing discussions or
negotiations, if any, with any parties conducted theretofore with respect to any
acquisition or exchange of all or any material portion of the assets of, or any
equity interest in, the Company or any of its subsidiaries or any business
combination with the Company or any of its subsidiaries. The Company may,
directly or indirectly, furnish information and access, in each case only in
response to a request for such information or access to any person made after
the date of the Merger Agreement which was not encouraged, solicited or
initiated by the Company or any of its affiliates or any of its or their
respective officers, directors, employees, representatives or agents after the
date of the Merger Agreement, pursuant to appropriate confidentiality
agreements, and may participate in discussions and negotiate with such entity or
group concerning any merger, sale of assets, sale of shares of capital stock or
similar transaction (including an exchange of stock or assets) involving the
Company or any subsidiary or division of the Company, if such entity or group
has submitted a written proposal to the Board of Directors relating to any such
transaction and failing to take such action would constitute a breach of the
Board of Directors' fiduciary duty under applicable law. The Board of Directors
is required by the Merger Agreement to provide a copy of any such written
proposal to the Parent immediately after receipt thereof, unless independent
outside legal counsel to the Company has advised the Board of Directors that
providing such a copy would constitute a breach of the Board of Directors'
fiduciary duty under applicable law. Notwithstanding the foregoing, under the
Merger Agreement, the Company shall notify the Parent immediately if any such
proposal is made and shall keep the Parent promptly advised of all developments
which could reasonably be expected to culminate in the Board of Directors
withdrawing, modifying or amending its recommendation of the Offer, the Merger
and the other transactions contemplated by the Merger Agreement. Except as
described in this paragraph, neither the Company or any of its affiliates, nor
any of its or their respective officers, directors, employees, representatives
or agents, shall, directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than the Parent
and the Purchaser, any affiliate or associate of the Parent and the Purchaser or
any designees of the Parent or the Purchaser) concerning any merger, sale of
assets, sale of shares of capital stock or similar transactions (including an
exchange of stock or assets) involving the Company or any subsidiary or division
of the Company; provided, however, that the Board of Directors may take, and may
disclose to the Company's shareholders, a position contemplated by Rules 14d-9
and 14e-2 under the Exchange Act with regard to any tender offer; provided,
further, that the Board of Directors shall not recommend that the shareholders
of the Company tender their Shares in connection with any such tender offer
unless failing to take such action would constitute a breach of the Board of
Directors' fiduciary duty under applicable law. The Company agrees not to
release any third party from, or waive any provisions of, any confidentiality or
standstill agreement to which the Company is a party, unless failing to release
such third party or waive such provisions would constitute a breach of the Board
of Directors' fiduciary duty under applicable law.
In the Merger Agreement, the Company has covenanted and agreed that it will
not amend the Rights Agreement, except as expressly contemplated by the Merger
Agreement, and that the Company will redeem all outstanding Rights at a
redemption price of $.02 per Right immediately prior to the consummation of the
Offer.
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The Merger Agreement provides that, upon the terms and subject to the
conditions thereof, each of the parties shall use its reasonable best efforts to
take, or cause to be taken, all appropriate action, and to do or cause to be
done, all things necessary, proper or advisable under applicable laws and
regulations to consummate and make effective the transactions contemplated by
the Merger Agreement, including but not limited to (i) cooperation in the
preparation and filing of appropriate documents with governmental and other
authorities, any required filings under the HSR Act and certain other laws
described in Section 15 of the Offer to Purchase and any amendments to any
thereof and (ii) using its reasonable best efforts to make all required
regulatory filings and applications and to obtain all licenses, permits,
consents, approvals, authorizations, qualifications and orders of governmental
authorities and parties to contracts with the Company and its subsidiaries as
are necessary for the consummation of the transactions contemplated by the
Merger Agreement and to fulfill the conditions to the Offer and the Merger. The
Company will cooperate with the Parent and the Purchaser with respect to
consummating the financing for the Offer and the Merger. In case at any time
after the Effective Time any further action is necessary or desirable to carry
out the purposes of the Merger Agreement, the proper officers and directors of
each party to the Merger Agreement shall use their reasonable best efforts to
take all such necessary action.
Under the Merger Agreement, the Parent and the Company shall consult with
each other before issuing any press release or otherwise making any public
statements with respect to the Offer or the Merger and shall not issue any such
press release or make any such public statement prior to such consultation,
except as may be required by law or any listing agreement with its securities
exchange.
Pursuant to the Merger Agreement, to the extent required by the MBCA, the
Parent must cause the Purchaser to give the notice required by Section 910 not
later than fifteen days after the acceptance for payment of Shares pursuant to
the Offer. In order to provide such notice, the Company shall provide to the
Parent, not less than five days prior to the date on which such notice must be
made, an updated list of shareholders. If permitted by applicable law, such
notice may be contained in or provided in connection with the Offer documents or
the Proxy Statement.
Under the Merger Agreement, any liability with respect to the transfer of
the property of the Company arising out of the New York State Real Property
Gains Tax, the New York State Real Estate Transfer Tax and the New York City
Real Property Transaction Tax shall be borne by the Company and expressly shall
not be a liability of the shareholders of the Company.
Certain Employee Benefits Matters. Under the Merger Agreement, the Parent
shall cause the Company and the Surviving Corporation to pay promptly or provide
when due all compensation and benefits earned through or prior to the Effective
Time as provided pursuant to the terms of any compensation arrangements,
employment agreements and employee or director benefit plans, programs and
policies in existence as of the date of the Merger Agreement for all employees
(and former employees) and directors (and former directors) of the Company. The
Parent and the Company agree that the Company and the Surviving Corporation
shall pay promptly or provide when due all compensation and benefits required to
be paid pursuant to the terms of any individual agreement with any employee,
former employee, director or former director in effect and disclosed to the
Parent as of the date of the Merger Agreement. Nothing in the Merger Agreement
shall require the continued employment of any person or prevent the Company
and/or the Surviving Corporation from taking any action or refraining from
taking any action which the Company could take or refrain from taking prior to
the Effective Time.
Except as contemplated in the Merger Agreement, under the Merger Agreement,
the Parent shall cause the Surviving Corporation, for the period ending on
December 31, 1995, to provide employee benefits under plans, programs and
arrangements which, in the aggregate, will provide benefits to the employees and
former employees of the Surviving Corporation (other than employees and former
employees covered by a collective bargaining agreement) which are no less
favorable in the aggregate than those provided to such persons pursuant to the
plans, programs and arrangements of the Company
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in effect on the date of the Merger Agreement (other than all Performance
Allotments and Performance Share Allotments (as defined) under the Company's
Incentive Plan, which shall be disregarded for all purposes) and employees and
former employees covered by collective bargaining agreements shall be provided
with such benefits as shall be required under the terms of any applicable
collective bargaining agreement; provided, however, that nothing in the Merger
Agreement shall (i) prevent the amendment or termination of any such plan,
program or arrangement, (ii) require that the Surviving Corporation provide or
permit investment in the securities of the Parent, the Company or the Surviving
Corporation or (iii) interfere with the Surviving Corporation's right or
obligation to make such changes as are necessary to conform with applicable law.
On and after January 1, 1996, the Parent shall provide employees and former
employees of the Surviving Corporation (other than those covered by collective
bargaining agreements) with benefits, in the aggregate, that are no less
favorable than those provided to similarly situated employees and former
employees of other subsidiaries of the Parent.
The Merger Agreement provides that, with respect to the payment of the
Current Allotments (as defined) under the Company's Incentive Compensation Plan
and cash incentive compensation awards under the Company's Cash Incentive
Compensation Plan in respect of the year ending December 31, 1994, the Parent
shall cause the Company to pay such amounts, in accordance with the applicable
performance targets established at the beginning of such year, as soon as
practicable following the close of such year and the date the actual performance
of the Company and its subsidiaries for the year then ended is calculated. The
determination of the performance of the Company and its subsidiaries shall be
made in good faith by the certified public accountants of the Company who were
the Company's certified public accountants prior to the purchase of Shares
pursuant to the Offer, after disregarding the financial effects of the
transactions contemplated under the Merger Agreement and any other changes made
by the Parent after the purchase of Shares pursuant to the Offer to the
operations, finances or corporate structure of the Company and its subsidiaries.
Notwithstanding anything described in this paragraph to the contrary, if, prior
to the date such Current Allotments or cash incentive compensation awards are
paid, any employee is terminated by the Company without "cause" or voluntarily
terminates employment following a reduction in base salary, the Company or the
Surviving Corporation shall pay the employee his or her award under the
applicable plan as soon as practicable following the employee's termination of
employment.
Under the Merger Agreement, the Parent shall cause the Company to
contribute to the Company's Employees Savings Plan approximately $7 million as
the Company "performance contribution" for the year ended December 31, 1994,
provided the actual performance of the Company and its subsidiaries as of
December 31, 1994 satisfies the conditions provided under such Savings Plan for
such contribution. Such contribution shall be made as soon as practicable
following the close of such year and the date the actual performance of the
Company and its subsidiaries for the year then ended is calculated. The
determination of such performance shall be made in the same manner as described
with respect to the Company's Incentive Plan in the preceding paragraph.
Moreover, with respect to any participant in such Savings Plan whose employment
is terminated by the Company prior to December 31, 1994 without cause or
voluntarily by the employee following a reduction in base salary, such
participant shall be vested in that portion of the Company performance
contribution which such participant would have otherwise been entitled to
receive under the terms of the Savings Plan as in effect on the date of the
Merger Agreement had such participant's employment not been terminated prior to
December 31, 1994.
Pursuant to the Merger Agreement, as soon as practicable after the date the
Shares are purchased pursuant to the Offer, the Company shall pay its Incentive
Compensation Plan participants an amount ("Incentive Compensation Cashout")
equal to the value of the Performance Allotments (as defined) determined in
accordance with the rules of the Compensation Committee of the Company's Board
of Directors under such plan, as in effect on the date of the Merger Agreement.
As soon as practicable after December 31, 1994, the Parent shall cause the
Surviving Corporation to pay to each participant who is an employee as of
December 31, 1994 an amount (the "Additional Payment") equal to the
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excess of the amount such employee would have received under such rules had the
value of the Performance Allotments been calculated at 141.5% of the target
bonus over the Incentive Compensation Cashout received by such employee.
Notwithstanding the foregoing, if an employee's employment is terminated without
cause by the Company or voluntarily by the employee following the reduction of
such employee's base salary after the date the Shares are purchased pursuant to
the Offer but prior to the payment of the Additional Payment, the Company shall
pay such employee the Additional Payment as soon as practicable after the
employee's termination of employment.
Under the Merger Agreement, the Parent shall cause the Surviving
Corporation to include as a participant in the Company's Supplemental Employee
Retirement Plan ("SERP") any individual who is a Key Manager (as defined below)
as of the date of the Merger Agreement whose employment is terminated by the
Company without cause or who voluntarily terminates employment following a
reduction in base salary within the two year period following the date the
Shares are purchased pursuant to the Offer and such person shall be entitled to
benefits thereunder if, but only if, at the time of such termination, the Key
Manager has attained age 50 with 10 years of service with the Company and the
Surviving Corporation. Payment of retirement benefits under the SERP will
commence no earlier than the first day of the month following the Key Manager's
60th birthday. "Key Manager" is defined in the Merger Agreement as a participant
in the Company's Incentive Compensation Plan, as in effect on the date of the
Merger Agreement.
As discussed above under "Merger Agreement--Agreements of the Company, the
Purchaser and the Parent", under the Merger Agreement the Company is permitted,
and it intends, to take the following actions:
(i) adopt a severance plan which will provide severance benefits for all
employees (other than those employees covered by a collective
bargaining agreement) in the event of a termination of employment
(other than for cause) or, for employees of certain levels, a
resignation for good reason, within two years following the purchase of
Shares pursuant to the Offer;
(ii) amend the Company Employees Savings Plan to provide that participants
will become vested upon the purchase of Shares pursuant to the Offer;
(iii) amend the Executive Income Continuity Plan to provide that (a) Mrs.
A.C. Brennan will become a participant in such plan upon the purchase
of Shares pursuant to the Offer (but her benefit will be limited to
one times base pay and target bonus); and (b) the ten-year
eligibility requirement is waived for any person otherwise eligible
to participate in such plan who is terminated (other than for cause)
or who resigns because of a reduction in base salary (as it was in
effect prior to the purchase of Shares pursuant to the Offer) within
two years after the purchase of Shares pursuant to the Offer;
(iv) amend the Key Manager Income Continuity Plan to permit plan
participants to recover reasonable attorneys' fees and expenses in
connection with a dispute regarding the terms of such plan, provided
that the participant's claim is not frivolous;
(v) amend both the Executive Income Continuity Plan and the Key Manager
Income Continuity Plan (together, the "Income Continuity Plans") to (a)
remove the restriction on competitive employment, (b) provide for the
payment of benefits due under the Income Continuity Plans in a lump
sum, rather than in installments, (c) amend the definition of "Good
Reason" to include an action that reduces or eliminates a benefit under
a Company benefit or compensation plan, even if such reduction or
elimination is applied universally to all members of the Income
Continuity Plans, and (d) eliminate the restriction on payment of
income continuity benefits beyond age 60 if the participant is also a
participant is also a participant in the SERP;
(vi) amend the Non-Employee Directors Retirement Plan to (a) eliminate the
three-year eligibility requirement, and (b) accelerate the payment of
any unpaid benefits under such plan; and
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(vii) contribute to one or more Rabbi trusts the present value, as of the
date of the purchase of Shares pursuant to the Offer, of accrued
benefits under the Company ERISA Excess Benefit Plan and the SERP (as
defined above), as well as related "gross up" amounts, if any, under
the Company's Compensation Taxation Equalization Plan and a
reasonable reserve for the fees and expenses that may be incurred by
the trustee, its agents or designees. Approximately $51.2 million
will be contributed to the Rabbi trusts for the SERP, and
approximately $1.6 million will be contributed to the Rabbi trust for
the ERISA Excess Benefit Plan.
Directors' and Officers' Indemnification and Insurance. The Merger
Agreement provides that the By-Laws of the Surviving Corporation shall contain
provisions no less favorable with respect to indemnification than are set forth
in the By-laws of the Company, which provisions shall not be amended, repealed
or otherwise modified for a period of five years from the Effective Time in any
manner that would adversely affect the rights thereunder of individuals who at
the Effective Time were directors, officers, agents or employees of the Company
or otherwise entitled to indemnification under the Company's By-Laws.
Under the Merger Agreement, the Parent shall use its best efforts to cause
to be maintained in effect for three years from the Effective Time the current
policies of the directors' and officers' liability insurance maintained by the
Company (provided that the Parent may substitute therefor policies of at least
the same coverage containing terms and conditions which are not materially less
advantageous) with respect to matters occurring prior to the Effective Time to
the extent available; provided, however, that in no event shall the Parent or
the Company be required to expend more than an amount per year equal to 150% of
current annual premiums paid by the Company (which the Company represents and
warrants to be not more than $1,204,050) to maintain or procure insurance
coverage pursuant thereto.
Disposition of Litigation. In the Merger Agreement, each party has agreed
to use its best efforts to obtain a dismissal without prejudice of American Home
Products Corporation, et al. v. American Cyanamid Company, et al., Civil Action
Docket No. 94-230-P-H (D. Me. 1994), including any and all counterclaims
asserted against the Company, its directors, its officers, the Parent and the
Purchaser, with each party bearing its own costs and attorneys' fees therefor.
The Company agrees that it will not settle any litigation currently pending, or
commenced after the date of the Merger Agreement, against the Company or any of
its directors by any shareholder of the Company relating to the Offer or the
Merger Agreement, without the prior written consent of the Parent.
The Merger Agreement provides that the Company will not voluntarily
cooperate with any third party which has sought or may seek to restrain or
prohibit or otherwise oppose the Offer or the Merger and will cooperate with the
Parent and the Purchaser to resist any such effort to restrain or prohibit or
otherwise oppose the Offer or the Merger, unless failing so to cooperate with
such third party or cooperating with the Parent or the Purchaser, as the case
may be, would constitute a breach of the Board of Directors' fiduciary duty
under applicable law.
Representations and Warranties. The Merger Agreement contains customary
representations and warranties with respect to the Company, including without
limitation with regard to the Company's capitalization, that the Board of
Directors of the Company has approved the Merger Agreement and the transactions
contemplated thereby (including the Offer and the Merger) so as to render
inapplicable thereto both the limitation on business combinations contained in
Section 611-A of the MBCA (or any similar provision) and the supermajority
shareholder voting requirements of the Articles, that the affirmative vote of a
majority of the outstanding Shares is the sole vote required to approve the
Merger, that the Board of Directors of the Company has irrevocably waived the
requirement of ownership of Shares (and the related holding period) set forth in
the By-Laws with respect to the directors of the Purchaser immediately prior to
the Effective Time and any other director nominees or designees of the Parent or
the Purchaser for election to the Company's Board of Directors, the accuracy of
the Company's documents and reports filed with the Commission, the Company's
financial statements and financial condition, the absence of certain changes or
events which, individually or in the aggregate,
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have had or would reasonably be expected to have, a Material Adverse Effect (as
defined below), the absence of certain litigation, the Company's employee
benefit plans, tax matters, environmental matters, intellectual property
matters, that the Company has taken all necessary action so that none of the
execution of the Merger Agreement, the making of the Offer, the acquisition of
Shares pursuant to the Offer or the consummation of the Merger will cause the
Rights to become exercisable, cause any person to become an Acquiring Person or
give rise to a Distribution Date or a Triggering Event and that, since July 1,
1994, no event has occurred and no circumstance has arisen which would
reasonably be expected to result in a failure to satisfy any of the conditions
to the Offer.
Under the Merger Agreement, the term "Material Adverse Effect" means any
change or effect that is or is reasonably likely to be materially adverse to the
business, assets, financial condition or results of operations of the Company
and its subsidiaries taken as a whole.
In the Merger Agreement, the Parent and the Purchaser have made customary
representations and warranties, including without limitation that the Purchaser
is highly confident that it has or will have available to it all funds necessary
to satisfy the obligation to pay the purchase price of the Shares pursuant to
the Offer and the consideration to be paid pursuant to the Merger.
Conditions to Merger. The respective obligations of each party to the
Merger Agreement to effect the Merger are subject to the satisfaction at or
prior to the Effective Time of the following conditions: (i) if required by the
MBCA, the Merger Agreement shall have been approved by the affirmative vote of
the shareholders of the Company by the requisite vote in accordance with the
Articles and the MBCA; (ii) no statute, rule, regulation, executive order,
decree, ruling, injunction or other order (whether temporary, preliminary or
permanent) shall have been enacted, entered, promulgated or enforced by any
United States or state court or governmental authority which prohibits,
restrains, enjoins or restricts the consummation of the Merger; (iii) any
waiting period applicable to the Merger under the HSR Act shall have terminated
or expired; and (iv) the Purchaser shall have purchased Shares pursuant to the
Offer.
Termination. The Merger Agreement may be terminated and the Merger
contemplated thereby may be abandoned at any time prior to the Effective Time,
notwithstanding approval thereof by the shareholders of the Company: (i) by
mutual written consent of the Parent, the Purchaser and the Company; (ii) by the
Parent or the Company if any court of competent jurisdiction or other
governmental body located or having jurisdiction within the United States or any
country or economic region in which either the Company or the Parent, directly
or indirectly, has material assets or operations, shall have issued a final
order, decree or ruling or taken any other final action restraining, enjoining
or otherwise prohibiting the Offer or the Merger and such order, decree, ruling
or other action is or shall have become final and nonappealable; (iii) by the
Parent if due to an occurrence or circumstance which would result in a failure
to satisfy any of the conditions to the Offer, the Purchaser shall have (A)
failed to amend the Offer as provided in the Merger Agreement, (B) terminated
the Offer or (C) failed to pay for Shares pursuant to the Offer on or prior to
the Outside Date (as defined below); (iv) by the Company if (A) there shall not
have been a material breach of any representation, warranty, covenant or
agreement on the part of the Company, and the Purchaser shall have (x)
terminated the Offer or (y) failed to pay for Shares pursuant to the Offer on or
prior to the Outside Date or (B) prior to the purchase of Shares pursuant to the
Offer, any person shall have made a bona fide offer to acquire the Company (x)
that the Board of Directors has determined in its good faith judgment is more
favorable to the Company's shareholders than the Offer and the Merger and (y) as
a result of which the Board of Directors is obligated by its fiduciary duty
under applicable law to terminate the Merger Agreement, provided that such
termination shall not be effective until the Company has made payment of the
full fee required as described under "Fees and Expenses" below and has deposited
with a mutually acceptable escrow agent $50 million for reimbursement to the
Parent of expenses in accordance with such paragraph; or (v) by the Parent prior
to the purchase of Shares pursuant to the Offer, if (A) there shall have been a
breach of any representation or warranty on the part of the Company which would
reasonably be expected to either have a Material Adverse Effect (as defined in
the Merger Agreement)
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or prevent the consummation of the Offer, (B) there shall have been a breach of
any covenant or agreement on the part of the Company which would reasonably be
expected to either have a Material Adverse Effect or prevent the consummation of
the Offer, which shall not have been cured prior to the earlier of (x) 10 days
following notice of such breach and (y) two business days prior to the date on
which the Offer expires, (C) the Board of Directors shall have withdrawn or
modified (including by amendment of the Schedule 14D-9) in a manner adverse to
the Purchaser its approval or recommendation of the Offer, the Merger Agreement
or the Merger or shall have recommended another offer or transaction, or shall
have resolved to effect any of the foregoing or (D) the Minimum Condition shall
not have been satisfied by the Expiration Date and on or prior to the Expiration
Date (x) any person (other than the Parent or the Purchaser) shall have made a
proposal or public announcement or communication to the Company with respect to
a Third Party Acquisition (as defined below) or (y) any person (including the
Company or any of its subsidiaries or affiliates), other than the Parent or any
of its affiliates, shall have become the beneficial owner of 19.9% or more of
the Shares. "Outside Date" means the latest (not to exceed 120 days following
the date of the Merger Agreement) of (A) 60 days following the date of the
Merger Agreement, (B) if a Request for Additional Information is made by the
Federal Trade Commission pursuant to the HSR Act, 10 business days after
substantial compliance with any such request or (C) 10 business days following
the conclusion of any ongoing proceedings before the European Commission in
connection with its review of the transactions contemplated by the Merger
Agreement or any similar delay pursuant to any other material antitrust or
competition law or regulation.
In the event of the termination of the Merger Agreement, the Merger
Agreement shall forthwith become void and there shall be no liability on the
part of any party thereto except as described under "Fees and Expenses" below or
as otherwise expressly provided for in the Merger Agreement; provided, however,
that nothing in the Merger Agreement will relieve any party from liability for
any breach thereof.
Fees and Expenses. Under the Merger Agreement, if: (i) the Parent
terminates the Merger Agreement pursuant to clause (v)(A) or (B) under
"Termination" above, or if the Company terminates the Merger Agreement pursuant
to clause (iv)(A) under "Termination" above, and, within 12 months thereafter,
the Company enters into an agreement with respect to a Third Party Acquisition,
or a Third Party Acquisition occurs, involving any party (or any affiliate or
associate thereof) (x) with whom the Company (or its agents) had any discussions
with respect to a Third Party Acquisition, (y) to whom the Company (or its
agents) furnished information with respect to or with a view to a Third Party
Acquisition or (z) who had submitted a proposal or expressed any interest
publicly or to the Company in a Third Party Acquisition, in the case of each of
clauses (x), (y) and (z) prior to such termination; or (ii) the Parent
terminates the Merger Agreement pursuant to clause (v)(A) or (B) under
"Termination" above, or if the Company terminates the Merger Agreement pursuant
to clause (iv)(A) under "Termination" above, and within 12 months thereafter a
Third Party Acquisition occurs involving a direct or indirect consideration (or
implicit valuation) for Shares (including the value of any stub equity) in
excess of the amount payable per Share pursuant to the Offer; or (iii) the
Parent terminates the Merger Agreement pursuant to clause (v)(C) or (D) under
"Termination" above, or the Company terminates the Merger Agreement pursuant to
clause (iv)(B) under "Termination" above or otherwise under circumstances that
would have permitted the Parent to terminate the Merger Agreement under clause
(v)(D) under "Termination" above, then the Company shall pay to the Parent and
the Purchaser, within one business day following the execution and delivery of
such agreement or such occurrence, as the case may be, or simultaneously with
any termination contemplated by clause (iii) above, a fee, in cash, of $100
million, provided, however, that the Company in no event shall be obligated to
pay more than one such $100 million fee with respect to all such agreements and
occurrences and such termination. "Third Party Acquisition" means the occurrence
of any of the following events: (i) the acquisition of the Company by merger,
tender offer or otherwise by any person other than the Parent, the Purchaser or
any affiliate thereof (a "Third Party"); (ii) the acquisition by a Third Party
of 19.9% or more of the total assets of the Company and its subsidiaries, taken
as a whole; (iii) the acquisition by
13
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a Third Party of 19.9% or more of the outstanding Shares; (iv) the adoption by
the Company of a plan of liquidation or the declaration or payment of an
extraordinary dividend; or (v) the repurchase by the Company or any of its
subsidiaries of 19.9% or more of the outstanding Shares, other than a repurchase
which was not approved by the Company or publicly announced prior to the
termination of the Merger Agreement and which is not part of a series of
transactions resulting in a change of control.
In addition, the Merger Agreement provides that, upon the termination of
the Merger Agreement (i) under circumstances in which the Parent or the
Purchaser shall have been entitled to terminate the Merger Agreement pursuant to
clause (v)(A) or (B) under "Termination" above (whether or not expressly
terminated on such basis) or (ii) under circumstances in which the Company shall
be obligated to pay a fee as described in the preceding paragraph, the Company
shall reimburse the Parent, the Purchaser and their affiliates (not later than
one business day after submission of statements therefor) for all actual
documented out-of-pocket fees and expenses actually incurred by any of them or
on their behalf in connection with the Offer and the Merger and the consummation
of all transactions contemplated by the Merger Agreement (including, without
limitation, fees and disbursements payable to financing sources, investment
bankers, counsel to the Purchaser or the Parent or any of the foregoing, and
accountants).
Amendments. The Merger Agreement may be amended by the parties by action
taken by or on behalf of their respective Boards of Directors at any time prior
to the Effective Time; provided, however, that, after approval of the Merger by
the shareholders of the Company, no amendment may be made which would reduce the
amount or change the type of consideration into which each Share shall be
converted upon consummation of the Merger.
Certain Conditions of the Offer. Pursuant to the Merger Agreement, the
conditions of the Offer are amended and restated in their entirety as follows:
Notwithstanding any other provision of the Offer, the Purchaser shall not
be required to accept for payment or, subject to any applicable rules and
regulations of the Commission, including Rule 14e-1(c) under the Exchange Act
(relating to the Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for any Shares
tendered pursuant to the Offer, and may postpone the acceptance for payment or,
subject to the restriction referred to above, payment for any Shares tendered
pursuant to the Offer, and may amend or terminate the Offer (whether or not any
Shares have theretofore been purchased or paid for) if, prior to the expiration
of the Offer, (i) the Minimum Condition shall not have been satisfied or (ii) at
any time on or after August 16, 1994 and prior to the acceptance for payment of
Shares, any of the following conditions occurs or has occurred or the Purchaser
makes a good faith determination that any of the following conditions has
occurred:
(i) there shall have been any action or proceeding brought by any
governmental authority before any federal or state court, or any order or
preliminary or permanent injunction entered in any action or proceeding
before any federal or state court or governmental, administrative or
regulatory authority or agency, located or having jurisdiction within the
United States or any country or economic region in which either the Company
or the Parent, directly or indirectly, has material assets or operations,
or any other action taken, proposed or threatened, or statute, rule,
regulation, legislation, interpretation, judgment or order proposed,
sought, enacted, entered, enforced, promulgated, amended, issued or deemed
applicable to the Purchaser, the Company or any subsidiary or affiliate of
the Purchaser or the Company or the Offer or the Merger, by any legislative
body, court, government or governmental, administrative or regulatory
authority or agency located or having jurisdiction within the United States
or any country or economic region in which either the Company or the
Parent, directly or indirectly, has material assets or operations, which
could reasonably be expected to have the effect of: (i) making illegal, or
otherwise directly or indirectly restraining or prohibiting or making
materially more costly, the making of the Offer, the acceptance for payment
of, payment for, or ownership, directly or indirectly, of some of or all
the
14
<PAGE>
Shares by the Parent or the Purchaser, the consummation of any of the
transactions contemplated by the Merger Agreement or materially delaying
the Merger; (ii) prohibiting or materially limiting the ownership or
operation by the Company or any of its subsidiaries, or by the Parent, the
Purchaser or any of the Parent's subsidiaries of all or any material
portion of the business or assets of the Company or any of its material
subsidiaries or the Parent or any of its subsidiaries, or compelling the
Purchaser, the Parent or any of the Parent's subsidiaries to dispose of or
hold separate all or any material portion of the business or assets of the
Company or any of its material subsidiaries or the Parent or any of its
subsidiaries, as a result of the transactions contemplated by the Offer or
the Merger Agreement; (iii) imposing or confirming limitations on the
ability of the Purchaser, the Parent or any of the Parent's subsidiaries
effectively to acquire or hold or to exercise full rights of ownership of
Shares, including, without limitation, the right to vote any Shares
acquired or owned by the Parent or the Purchaser or any of the Parent's
subsidiaries on all matters properly presented to the shareholders of the
Company, including, without limitation, the adoption and approval of the
Merger Agreement and the Merger or the right to vote any shares of capital
stock of any subsidiary (other than immaterial subsidiaries) directly or
indirectly owned by the Company; (iv) requiring divestiture by the Parent
or the Purchaser, directly or indirectly, of any Shares; or (v) which would
reasonably be expected to materially adversely affect the business,
financial condition or results of operations of the Company and its
subsidiaries taken as a whole or the value of the Shares or of the Offer to
the Purchaser or the Parent;
(ii) there shall have occurred, or the Purchaser shall have become
aware of any fact that would reasonably be expected to have, a Material
Adverse Effect;
(iii) there shall have occurred (i) any general suspension of trading
in, or limitation on prices for, securities on any national securities
exchange or in the over-the-counter market in the United States, (ii) any
extraordinary or material adverse change in the market price of the Shares
or in the United States securities or financial markets generally,
including, without limitation, a decline of at least 25% in either the Dow
Jones Average of Industrial Stocks or the Standard & Poor's 500 index from
August 17, 1994, (iii) any material adverse change or any condition, event
or development involving a prospective material adverse change in United
States or other material international currency exchange rates or a
suspension of, or limitation on, the markets therefor, (iv) a declaration
of a banking moratorium or any suspension of payments in respect of banks
in the United States, (v) any limitation (whether or not mandatory) by any
government or governmental, administrative or regulatory authority or
agency, domestic or foreign, on, or any other event that could reasonably
be expected to materially adversely affect, the extension of credit by
banks or other lending institutions, (vi) a commencement of a war or armed
hostilities or other national or international calamity directly or
indirectly involving the United States which would reasonably be expected
to have a Material Adverse Effect or materially adversely affect (or
materially delay) the consummation of the Offer or (vii) in the case of any
of the foregoing existing at the time of commencement of the Offer, a
material acceleration or worsening thereof;
(iv) (i) it shall have been publicly disclosed or the Purchaser shall
have otherwise learned that beneficial ownership (determined for the
purposes of this paragraph as set forth in Rule 13d-3 promulgated under the
Exchange Act) of 19.9% or more of the outstanding Shares has been acquired
by any corporation (including the Company or any of its subsidiaries or
affiliates), partnership, person or other entity or group (as defined in
Section 13(d)(3) of the Exchange Act), other than the Parent or any of its
affiliates, or (ii) (A) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a manner adverse to
the Parent or the Purchaser the approval or recommendation of the Offer,
the Merger or the Merger Agreement, or approved or recommended any takeover
proposal or any other acquisition of Shares other than the Offer and the
Merger, (B) any such corporation, partnership, person or other entity or
group shall have entered into a definitive agreement or an agreement in
principle with the Company with respect to a tender offer or exchange offer
for any Shares or a merger, consolidation or other business combination
with or involving the Company or any of its subsidiaries or (C) the Board
of Directors of the Company or any committee thereof shall have resolved to
do any of the foregoing;
15
<PAGE>
(v) any of the representations and warranties of the Company set forth
in the Merger Agreement that are qualified as to materiality shall not be
true and correct or any such representations and warranties that are not so
qualified shall not be true and correct in any material respect, in each
case as if such representations and warranties were made at the time of
such determination;
(vi) the Company shall have failed to perform in any material respect
any obligation or to comply in any material respect with any agreement or
covenant of the Company to be performed or complied with by it under the
Merger Agreement;
(vii) the Merger Agreement shall have been terminated in accordance
with its terms or the Offer shall have been amended or terminated with the
consent of the Company; or
(viii) any waiting periods under the HSR Act applicable to the
purchase of Shares pursuant to the Offer shall not have expired or been
terminated, or any material approval, permit, authorization, consent or
waiting period of any domestic, foreign or supranational governmental,
administrative or regulatory agency (federal, state, local, provincial or
otherwise) located or having jurisdiction within the United States or any
country or economic region in which either the Company or the Parent,
directly or indirectly, has material assets or operations, shall not have
been obtained or satisfied on terms satisfactory to the Parent in its
reasonable discretion;
which, in the reasonable judgment of the Purchaser with respect to each and
every matter referred to above and regardless of the circumstances (including
any action or inaction by the Purchaser or any of its affiliates not
inconsistent with the terms hereof) giving rise to any such condition, makes it
inadvisable to proceed with the Offer or with such acceptance for payment of or
payment for Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of the Purchaser and may
be asserted by the Purchaser regardless of the circumstances giving rise to any
such condition or may be waived by the Purchaser in whole or in part at any time
and from time to time in its sole discretion (subject to the terms of the Merger
Agreement). The failure by the Purchaser at any time to exercise any of the
foregoing rights shall not be deemed a waiver of any such right, the waiver of
any such right with respect to particular facts and other circumstances shall
not be deemed a waiver with respect to any other facts and circumstances, and
each such right shall be deemed an ongoing right that may be asserted at any
time and from time to time.
Except as set forth in this Item 3, there are, to the knowledge of the
Company, no material contracts, agreements, arrangements or understandings and
no actual or potential conflicts of interest between the Company or its
affiliates and (i) its executive officers, directors or affiliates or (ii)
American Home Products, its executive officers, directors or affiliates.
ITEM 4. THE SOLICITATION OR RECOMMENDATION.
(a) The Board of Directors has unanimously approved the Merger Agreement
and the transactions contemplated thereby and determined that each of the Offer
and the Merger is fair to, and in the best interests of, the shareholders of the
Company. The Board of Directors unanimously recommends that all holders of
Shares accept the Offer and tender their Shares pursuant to the Offer.
(b) For some time prior to the August 2, 1994, letter from American Home
Products to the Company, the Company had been exploring possible restructuring
programs to strengthen its businesses. The Company's management ("Management"),
in consultation with one or both of the Company's financial advisors, Morgan
Stanley & Co., Incorporated ("Morgan Stanley") and CS First Boston Corporation
("First Boston"), evaluated various potential strategic transactions with a
variety of companies around the world. As a result of this process, the Company
determined to pursue a transaction in which the Company would transfer to a
third party certain assets used in the conduct of its human pharmaceutical and
consumer health businesses in exchange for certain assets to be used in its
human vaccine and animal health businesses (the "Asset Transaction").
16
<PAGE>
On July 25, 1994, John R. Stafford, Chairman, President and Chief Executive
Officer of American Home Products, contacted Albert J. Costello, Chairman and
Chief Executive Officer of the Company, by telephone, and suggested that he
would like to meet with Mr. Costello. Mr. Costello and Mr. Stafford tentatively
scheduled a meeting for August 15, 1994. On July 27, 1994, Mr. Costello received
a letter from Mr. Stafford. In the letter Mr. Stafford stated in relevant part:
I would like to suggest that you not take any definitive steps
involving your pharmaceutical business before we can have a meeting. We
have a keen interest in talking with you about the future of the
pharmaceutical industry and how both our companies might work together to
maximize shareholder value.
On August 2, 1994, American Cyanamid received the following letter in which
American Home Products made a proposal to acquire American Cyanamid for $95 a
Share in cash:
August 2, 1994
BY FACSIMILE
Mr. Albert J. Costello
Chairman and Chief Executive Officer
American Cyanamid Company
One Cyanamid Plaza
Wayne, New Jersey 07470
Dear Al:
We are writing to offer to acquire American Cyanamid Company (the
"Company") in a transaction in which your stockholders would receive $95 in
cash for each share of common stock. We believe our offer represents an
extremely attractive opportunity for your stockholders at a price which
represents a premium in excess of 50% over yesterday's closing market price
of the Company's common stock (which, as you know, is already up in excess
of 50% from its trading levels less than six months ago). We have been
advised by our financial advisors that the offer price is at a level which
both your financial advisors and stockholders should enthusiastically
support.
As I am sure you are aware, American Home Products Corporation is an
important participant in the pharmaceutical industry and other healthcare
and food products industries, with annual sales in excess of $8 billion. We
have, as you do, a well deserved reputation for quality products and
excellent customer service. We have been studying your company for quite a
while and are extremely impressed with the businesses you have so ably
built up. The combination of our companies would result in an enterprise
with the strength and breadth required to prosper in times of uncertainty
for the healthcare industry. As I have indicated to you in our earlier
communications, we have been keenly interested in discussing with you
opportunities for American Home Products to assist the Company in
maximizing value for its stockholders.
Given our financial strength and longstanding supportive banking
relationships, we are highly confident that financing will not represent
any impediment to the consummation of the transaction.
According to recent press reports, the Company may be considering
entering into a significant transaction involving its pharmaceutical
operations and possibly other assets. Since any such transaction would
affect our willingness to proceed with this proposed transaction, we urge
you not to enter into or to agree to any significant transactions, or to
take any additional defensive measures or other actions, that would
adversely affect the ability of your stockholders to receive the benefits
of our proposed transaction.
17
<PAGE>
Our offer is subject, among other things, to the receipt of any
required regulatory approvals and third-party consents and the taking of
all necessary actions to eliminate the applicability of, or to satisfy, any
anti-takeover or other defensive provisions contained in the applicable
corporate statutes or the Company's charter and by-laws (including the
Company's poison pill). I have discussed our offer at length with the
members of our senior management and with a majority of our Board members,
all of whom share my enthusiasm for the proposed transaction. However, our
offer remains subject to the formal approval of our Board of Directors at
its scheduled meeting on August 16.
We hope that you and your Board of Directors will view this offer as
we do--an excellent opportunity for the stockholders of the Company to
realize full value for their shares to an extent not likely to be available
to them in the marketplace or in the context of the rumored alternative
transactions. We are both prepared and desirous to enter into immediate
discussions with you and your directors, management and advisors to answer
any questions you have about our offer.
We hope that you and your Board of Directors will give our offer
prompt and serious consideration so that we may move forward, in our
preferred course, to a negotiated transaction which can be presented to
your stockholders as the joint effort of American Home Products and the
Company's Board of Directors and management.
Sincerely,
/s/ Jack Stafford
cc: Members of the Board of Directors of American Cyanamid Company
On August 3, 1994, Mr. Stafford sent a second letter to Mr. Costello, which
stated the following:
August 3, 1994
Mr. Albert J. Costello
Chairman and Chief Executive Officer
American Cyanamid Company
One Cyanamid Plaza
Wayne, NJ 07470
Dear Al:
Recognizing that my letter to you yesterday was formal in nature, I
wanted to write to you personally to indicate my desire to conclude a
friendly merger of AHP and American Cyanamid.
I regret that events overtook our plan to meet in person later this
month when I planned to discuss possible structures wherein our companies
could collaborate. However, I continue to hope that we can meet to talk
about how we might structure the merger of our companies on a negotiated
basis.
I am enthusiastic about the combined company our two businesses could
create. Our two companies have shared associations that are valuable to
both of us and, in this context, I hope that we will be able to meet as
soon as possible to discuss a broader combination.
I can be available whenever it is convenient for you, including, of
course, on August 15th as we originally scheduled.
Best regards,
Sincerely,
/s/ Jack
18
<PAGE>
On August 3, Management expanded the role of Morgan Stanley and First
Boston to include assisting the Company in connection with its evaluation of the
American Home Products proposal and to assist Management in evaluating such
proposal and any strategic alternatives to the proposal that might be available
to the Company.
On August 8, 1994, the Board of Directors of the Company (the "Board") met
for the purpose of receiving a report from Management and its financial and
legal advisors on the American Home Products proposal, the status of the Asset
Transaction and the other strategic alternatives to the American Home Products
proposal being considered by Management.
On August 10, American Home Products commenced the Offer by filing with the
Securities and Exchange Commission a Tender Offer Statement on Schedule 14D-1.
The same day, the Company issued a press release, which stated that the Board
would meet no later than ten business days thereafter to review the Offer and
urged all shareholders to take no action on the Offer until the Board had the
opportunity to review the Offer and to issue a recommendation with respect
thereto to the Company's shareholders.
On the afternoon of Friday, August 12, and in anticipation of the Board's
regularly scheduled August 16 meeting, Morgan Stanley contacted Gleacher & Co.
Inc. ("Gleacher"), financial advisor to American Home Products. Morgan Stanley
advised Gleacher that the Board would be meeting on August 16 and asked whether
there were any additional matters regarding the Offer that the Board should
consider at such meeting.
Following such initial call, there were numerous calls between Morgan
Stanley and Gleacher during Saturday, August 13, and between Morgan Stanley and
Gleacher and the legal advisors to the Company and American Home Products on
Sunday, August 14, principally in respect of the price to be paid for the Shares
pursuant to the Offer. These conversations culminated in a meeting on Sunday
evening, August 14, between Mr. Costello and Mr. Stafford. No agreement was
reached at such meeting.
The financial and legal advisors of the Company and American Home Products
continued to have telephone discussions during Monday, August 15, 1994. On
Monday afternoon, Mr. Stafford sent a letter to Mr. Costello, offering to pay
$100 per Share subject to certain conditions. The full text of such letter is
set forth below.
August 15, 1994
VIA TELECOPIER
Mr. Albert J. Costello
Chairman and Chief Executive Officer
American Cyanamid Plaza
Wayne, New Jersey 07470
Dear Al:
I appreciated the opportunity to meet with you yesterday to discuss
our proposal to acquire American Cyanamid. I regret the apparent
misunderstanding concerning the terms of an agreement which you would
recommend to your Board. While we have always believed that our $95 per
share offer represented a full and fair price, as I stated last night, we
were willing to propose an increase of that price to $100 on the basis of
our belief that such an increase would permit us to reach agreement and
proceed rapidly to conclude a transaction supported by both companies.
19
<PAGE>
So that there can be no further misunderstanding, I would like to
clarify our position to you and your Board. Our Board of Directors has
today authorized me to advise you that we will pay $100 per share, subject
to the following conditions:
(i) the American Cyanamid Board of Directors accepts this proposal
by the close of business on Tuesday, August 16; and
(ii) a definitive merger agreement containing customary provisions
for a transaction of this nature is executed by the close of business on
Friday, August 19.
If our proposal is not accepted by your Board of Directors, we will
proceed with our pending tender offer at $95 per share.
We continue to believe that our acquisition of American Cyanamid is in
the best interests of the stockholders of both companies, and we would look
forward to your cooperation in proceeding together to a speedy conclusion
of the transaction.
I look forward to your response.
Sincerely
Jack Stafford
Following receipt of such letter, discussions continued between the
financial and legal advisors to each of the Company and American Home Products.
Between Monday evening and Wednesday morning, the parties negotiated the terms
of the Merger Agreement, which, following its approval by the Board and the
board of directors of American Home Products, was executed on Wednesday, August
17.
At its meeting on August 16 and 17, the Board reviewed in detail the Asset
Transaction, the Offer and the various alternative transactions reviewed by
Management and its financial advisers, and deliberated extensively with its
legal and financial advisors regarding the foregoing. At the end of the meeting,
the Board determined by unanimous vote that the Offer, as revised, is fair to,
and in the best interests of, the Company, its shareholders and its other
constituencies and authorized the execution and delivery of the Merger
Agreement.
In making the determinations and recommendations set forth in Items 4(a)
above, the Board considered a number of factors, including the following:
(i) The terms and conditions of the Offer and the Merger Agreement.
(ii) Presentations by Management (at the August 8, 1994, meeting, the
August 16, 1994 meeting and at previous Board meetings) regarding the
financial condition, results of operations, business and prospects of the
Company including the prospects of the Company were it to remain
independent and consummate the Asset Transaction or other alternative
strategic transactions.
(iii) The Board's belief that the Asset Transaction or reasonably
likely alternative transactions were unlikely to provide values to the
shareholders of the Company superior to the Offer.
(iv) The fact that since August 2, 1994, the date American Home
Products first announced its proposal to acquire the Company, there have
been no indications that any other person would be willing to make a cash
offer for the whole Company on terms superior to those contained in the
Offer.
(v) The trading price of the Shares over the past three years and that
the $101 per Share Offer price represents a premium of approximately 60%
over the closing sales price for the Shares on the New York Stock Exchange
(the "NYSE") on August 1, 1994, the last trading day prior to the public
announcement by American Home Products of its interest in acquiring the
Company,
20
<PAGE>
and a premium of approximately 117% over the closing sales price for the
Shares on the NYSE on March 31, 1994.
(vi) The recommendation of Management that the Offer and Merger be
approved.
(vii) The presentations of Morgan Stanley and First Boston at the
August 16 and 17 meeting and the opinions of Morgan Stanley and First
Boston that, as of the date of such opinions, the consideration to be
received by the Company's shareholders pursuant to the Merger Agreement is
fair, from a financial point of view, to such holders. The full text of
such opinions, each dated August 17, 1994, which set forth the assumptions
made, the matters considered and the limitations on the review undertaken
by Morgan Stanley and First Boston are attached as Exhibits 5 and 6,
respectively, hereto and are incorporated herein by reference. Such
opinions should be read carefully in their entirety by shareholders in
conjunction with the foregoing matters.
(viii) That the Merger Agreement permits the Company to terminate the
Merger Agreement if any person shall have made a bona fide offer to acquire
the Company (A) that the Board determines in its good faith judgment is
more favorable to the Company's shareholders than the Offer and the Merger
and (B) as a result of which the Board is obligated by its fiduciary duty
under applicable law to terminate the Merger Agreement.
(ix) The termination provisions of the Merger Agreement providing that
Parent and Purchaser could be entitled to receive a fee of $100 million, as
well as reimbursement of all out-of-pocket fees and expenses actually
incurred by them or on their behalf in connection with the Offer, the
Merger and the transactions contemplated by the Merger Agreement under
certain circumstances, including the termination of the Merger Agreement by
American Home Products if the Board shall have withdrawn or modified
(including by amendment to this Schedule 14D-9) in a manner adverse to
Purchaser its approval or recommendation of the Offer, the Merger Agreement
or the Merger or shall have recommended another offer or transaction or
shall have resolved to effect any of the foregoing or the termination of
the Merger Agreement by the Company under the circumstances described in
clause (viii) above, and reimbursement of Parent's and Purchaser's out-
of-pocket fees and expenses actually incurred by them or on their behalf in
connection with the Offer, the Merger and the transactions contemplated by
the Merger Agreement upon the termination of the Merger Agreement by Parent
in the event of a breach by the Company of its representations, warranties
or covenants.
(x) The proposed revisions to the conditions contained in the Offer,
including the agreement of American Home Products to eliminate the
financing condition from the revised Offer.
The Board did not assign relative weights to the foregoing factors or
determine that any factor was of particular importance. Rather, the Board of
Directors viewed its position and recommendations as being based on the totality
of the information presented to and considered by it.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED.
The Company has retained Morgan Stanley to render financial advisory
services to the Company with respect to the Offer and such other matters as may
be agreed upon by the Company and Morgan Stanley. Pursuant to the terms of an
engagement letter dated August 3, 1994, the Company has agreed to pay Morgan
Stanley (a) an initial fee of $5.0 million, (b) a transaction fee of $13.0
million and (c) an incentive fee of approximately $5.8 million, based on the
price to be paid per Share in excess of $95.
The Company has also retained First Boston to render financial advisory
services to the Company with respect to the Offer and such other matters as may
be agreed upon by the Company and First Boston. Pursuant to the terms of an
engagement letter dated August 3, 1994, the Company has agreed to pay First
Boston (a) an initial fee of $3.5 million, (b) a transaction fee of $14.5
million and (c) an incentive fee of approximately $5.8 million, based on the
price to be paid per Share in excess of $95.
21
<PAGE>
In the past, each of Morgan Stanley and First Boston have provided
financial advisory and other services to both the Company and to American Home
Products and have received fees for the rendering of these services.
The Company has also agreed to reimburse Morgan Stanley and First Boston
for their out-of-pocket expenses, including all fees and disbursements of
counsel, and to indemnify Morgan Stanley and First Boston and certain related
persons against certain liabilities in connection with their engagement,
including certain liabilities under the federal securities laws.
The Company has retained Georgeson & Co., Inc. ("Georgeson") to assist the
Company in connection with the Offer and related matters. Such firm will receive
customary compensation for its services in an amount to be agreed upon between
Georgeson and the Company, will be reimbursed for certain out-of-pocket expenses
and will be indemnified against certain liabilities and expenses in connection
with their engagement, including certain liabilities under the federal
securities laws.
The Company has retained Kekst & Co. ("Kekst") as a public relations
advisor in connection with the Offer and the Merger. Such firm will receive
customary compensation for its services and reimbursement of out-of-pocket costs
in connection therewith. The Company has agreed to indemnify Kekst against
certain liabilities in connection with their engagement.
Except as set forth above, neither the Company nor any person acting on its
behalf has employed, retained or compensated any person to make solicitations or
recommendations to shareholders with respect to the Offer.
ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES.
(a) Except for transactions in the Shares described below, there have been
no transactions in Shares which where effected during the past 60 days by the
Company, or to the best knowledge of the Company, by any executive officer,
director, affiliate or subsidiary of the Company.
COMPANY EMPLOYEES SAVINGS PLAN.
The following table sets forth the number of Shares purchased for the
accounts of the following officers and directors participating in the Company's
Employees Savings Plan. All Shares were purchased on the open market on July 14,
1994 and August 12, 1994 at an average price per share of $58.75 and $92.875,
respectively.
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF
SHARES SHARES
OFFICER/DIRECTOR (7/14/94) (8/12/94)
- ----------------------------------------------------------------------------------------- --------------- -----------------
<S> <C> <C>
F.V. AtLee............................................................................... 0 0
D.R. Bethune............................................................................. 4 0
A.C. Brennan............................................................................. 5 3
A.J. Costello............................................................................ 0 0
L. Ellberger............................................................................. 8 5
D. Lilley................................................................................ 5 5
T.D. Martin.............................................................................. 11 3
J.S. McAuliffe........................................................................... 9 6
W.J. Murray.............................................................................. 12 3
R.T. Ritter.............................................................................. 7 4
G.J. Sella, Jr. ......................................................................... 0 0
W.A. Stiller............................................................................. 7 4
P. W. Wood............................................................................... 7 4
</TABLE>
(b) To the best knowledge of the Company, all of its executive officers,
directors, affiliates or subsidiaries presently intend to tender all Shares to
American Home Products pursuant to the Offer or
22
<PAGE>
to sell Shares in the open market, which are owned beneficially by such a
persons, in each case, subject to and consistent with any fiduciary obligations
in the case of Shares held by fiduciaries.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY.
(a) Except as set forth above in item 3 or in item 4(b) above, the Company
is not engaged in any negotiations in response to the Offer which relates to or
would result in (i) an extraordinary transaction, such as a merger or
reorganization, involving the Company or any subsidiary of the Company; (ii) a
purchase, sale or transfer of a material amount of assets by the Company or any
subsidiary of the Company; (iii) a tender offer for or other acquisition of
securities by or of the Company; or (iv) any material change in the present
capitalization or dividend policy of the Company.
(b) Except as described in item 3(b) there are no transactions, board of
directors resolutions, agreements in principle or signed contracts in response
to the Offer that relate to or would result in one or more of the events
referred to in Item 7(a) above.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED.
STOCKHOLDER LITIGATION
Commencing on August 3, 1994, and continuing thereafter, the following
twelve putative class action complaints (collectively, the "Complaints") were
filed by alleged Company stockholders in the Superior Court of New Jersey,
Chancery Division (Passaic Co.): (i) Levine v. American Cyanamid Co., No.
C-159-94 (N.J. Super. Ct. Ch. Div.); (ii) Fernandez v. American Cyanamid Co.,
No. C-160-94 (N.J. Super. Ct. Ch. Div.); (iii) Delio v. American Cyanamid Co.,
No. C-161-94 (N.J. Super. Ct. Ch. Div.); (iv) Miller v. American Cyanamid Co.,
No. C-162-94 (N.J. Super. Ct. Ch. Div.); (v) Katz v. American Cyanamid Co., No.
C-163-94 (N.J. Super. Ct. Ch. Div.); (vi) Spector v. American Cyanamid Co., No.
C-166-94 (N.J. Super. Ct. Ch. Div.); (vii) Seinfeld v. American Cyanamid Co.,
No. C-168-94 (N.J. Super. Ct. Ch. Div.); (viii) Kelly v. American Cyanamid Co.,
No. C-169-94 (N.J. Super. Ct. Ch. Div.); (ix) Broudy v. American Cyanamid Co.,
No. C-170-94 (N.J. Super. Ct. Ch. Div.); (x) Sumers v. American Cyanamid Co.,
No. C-171-94 (N.J. Super. Ct. Ch. Div.); (xi) Lifshitz v. American Cyanamid Co.,
transferred from Mercer County Docket No. C-115-94; and (xii) Gould v. American
Cyanamid Co., transferred from Mercer County Docket No. C-116-94. The Complaints
name the Company and several of the Company's directors (collectively, the
"Defendants") as defendants.
The Complaints generally allege that the Company's directors have violated
their fiduciary duties of loyalty and fair dealing by allegedly failing to
ensure the maximization of shareholder value in the sale of control of the
Company, including the Company's failure to redeem its preferred stock rights
plan (adopted on March 25, 1986), which purportedly makes it difficult for any
potential acquiror not approved by the Defendants to obtain control of the
Company. Among other things, plaintiffs seek preliminary and permanent
injunctive relief which would require the directors to: (i) conduct an active
auction of the company; (ii) take all appropriate steps to enhance the Company's
value as an acquisition candidate; and (iii) cooperate fully with any person or
entity having a "bona fide interest" in acquiring the Company. The Defendants
believe the plaintiffs' allegations are without merit and intend to defend the
cases vigorously.
On August 9, 1994, and August 11, 1994, various plaintiffs filed motions
with the New Jersey Superior Court, Chancery Division, seeking consolidation of
the various actions referenced in the Complaints, appointment of lead counsel
for plaintiffs, and expedited discovery. On August 11, 1994, the New Jersey
Supreme Court, Chancery Division scheduled a hearing on plaintiffs' motion for
consolidation and appointment of lead counsel for September 9, 1994.
On August 17, 1994, plaintiffs' motion for appointment of lead counsel was
granted and the Complaints were consolidated under the caption In Re American
Cyanamid Company Shareholders
23
<PAGE>
Litigation, Docket No. C-159-94. On August 18, 1994, the Chancery Court granted
plaintiffs permission to conduct limited discovery. On August 19, 1994,
plaintiffs filed a motion for leave to file an amended complaint and a motion
for additional discovery.
AMERICAN HOME PRODUCTS LITIGATION
On August 9, 1994, American Home Products and the Purchaser filed a
complaint (the "AHP Complaint"), American Home Products Corp. v. American
Cyanamid Company, et al., Civil Action Docket No. 94-230 P-H, in the United
States District Court for the Southern District of Maine against the Company and
various Directors (collectively, the "Defendants"). The AHP Complaint generally
alleged that the Company's directors had violated their fiduciary duties of
loyalty and fair dealing by allegedly failing to ensure the maximization of
shareholder value in the sale of control of the Company to American Home
Products. Among other things, the AHP Complaint sought declaratory and
injunctive relief concerning (i) the constitutionality of the Maine Business
Combination Act; (ii) the applicability of similar legislation adopted by states
other than Maine; and (iii) the legality of a number of measures in the
Company's Charter and By-Laws and of alleged conduct through which the Maine
Defendants purportedly seek to block the sale of the Company to American Home
Products or the Purchaser. Pursuant to the Merger Agreement, American Home
Products has agreed to use its best efforts to obtain a dismissal of this
action, and on August 17, 1994, American Home Products filed with the court a
notice of dismissal without prejudice of all claims against the Company without
costs to any party.
ITEM 9. MATERIAL TO BE FILED AS EXHIBITS.
The following exhibits are filed herewith:
Exhibit 1--Joint Press Release of the Company and Parent, dated August 17, 1994
(previously filed as Exhibit 20.1 to the Company's Report as Form 8-K
dated August 18, 1994).
Exhibit 2--Pages 7 through 11, 14 through 21 and 24 through 29 of the Company's
Proxy Statement dated March 8, 1994 for its 1994 Annual Meeting of
Shareholders.
Exhibit 3--Amendment, dated August 17, 1994, to the By-Laws of the Company.
Exhibit 4--Agreement and Plan of Merger, dated August 17, 1994, among the
Company, Parent and the Purchaser.
Exhibit 5--Opinion of Morgan Stanley & Co., Incorporated, dated August 17, 1994.
Exhibit 6--Opinion of CS First Boston Corporation, dated August 17, 1994.
Exhibit 7--Letter to Shareholders of the Company.
24
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this Statement is true, complete and
correct.
AMERICAN CYANAMID COMPANY
By: /s/ JOSEPH S. MCAULIFFE
..................................
Name: Joseph S. McAuliffe
Title: Vice President and General
Counsel
Dated: August 23, 1994
25
<PAGE>
ANNEX I
AMERICAN CYANAMID COMPANY
ONE CYANAMID PLAZA
WAYNE, NEW JERSEY 07470
INFORMATION STATEMENT PURSUANT TO SECTION 14(F)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14F-1 THEREUNDER
------------------------
This Information Statement is being mailed on or about August 23, 1994, as
part of American Cyanamid Company's (the "Company") Solicitation/Recommendation
Statement on Schedule 14D-9 with respect to the revised tender offer by AC
Acquisition Corp. (the "Schedule 14D-9") to the holders of record of the
Company's Common Stock, $5.00 par value ("Common Stock"). Capitalized terms used
and not otherwise defined herein shall have the meaning set forth in the
Schedule 14D-9. You are receiving this Information Statement in connection with
the possible election of persons designated by AC Acquisition Corp. to a
majority of the seats on the Board. The Merger Agreement provides that AC
Acquisition Corp., upon purchase of Shares pursuant to the Offer, shall be
entitled to designate up to such number of directors, rounded up to the next
whole number, on the Board as will give AC Acquisition Corp. representation on
the Board equal to the product of the total number of directors on the Board
(after giving effect to the directors to be elected pursuant to the Merger
Agreement) and the percentage that the aggregate number of shares of Common
Stock beneficially owned by AC Acquisition Corp. or any affiliate bears to
the total number of outstanding shares of Common Stock of the Company then
outstanding, and that the Company promptly take all action necessary to cause AC
Acquisition Corp. designees to be so elected including, either increasing the
size of the Board or securing the resignation of such number of directors, or
both. The Merger Agreement further provides that, at such times and subject to
the agreement set forth in the next sentence, the Company will use its best
efforts to cause persons designated by AC Acquisition Corp. to constitute the
same percentage as is on the Board of (i) each committee of the Board, (ii) each
board of directors of each domestic subsidiary of the company and (iii) each
committee of each such board, in each case only to the extent permitted by law.
The Merger Agreement further provides that, notwithstanding the foregoing, the
Company shall use its best efforts to ensure that all members of the Board and
such boards and committees as of the date of the Merger Agreement who are not
employees of the company shall remain members of the Board until AC Acquisition
Corp. acquires a majority of the outstanding shares. This Information Statement
is required by Section 14(f) of the Securities Exchange Act of 1934, as amended,
and Rule 14f-1 thereunder.
You are urged to read this Information Statement carefully. You are not,
however, required to take any action.
Pursuant to the Merger Agreement, on August 23, 1994, AC Acquisition Corp.
revised its Offer to Purchase dated August 10, 1994. The Offer is scheduled to
expire at 12:00 midnight, New York City time, on September 14, 1994, at which
time, if all conditions to the Offer have been satisfied or waived, AC
Acquisition Corp. has informed the Company that it intends to purchase all of
the Shares validly tendered pursuant to the Offer and not properly withdrawn.
The information contained in this Information Statement concerning AC
Acquisition Corp. and American Home Products has been furnished to the Company
by American Home Products and the Company assumes no responsibility for the
accuracy, completeness or fairness of any such information.
AC Acquisition Corp. has informed the Company that it currently intends to
choose the designees (the "Acquisition Designees") it has the right to designate
to the Board pursuant to the Merger
I-1
<PAGE>
Agreement from the officers of American Home Products listed in Schedule I of
the Offer to Purchase, a copy of which is being mailed to shareholders. The
information with respect to such officers in Schedule I is hereby incorporated
herein by reference in its entirety. As of August 23, 1994, the ages of each of
such officers are as follows: John R. Stafford--56, Robert G. Blount--55,
Stanley F. Barshay-- 54, Louis L. Hoynes, Jr.--58, Joseph J. Carr--51, Fred
Hassan--48, John R. Considine--44, Rene R. Lewin--48 and Thomas M. Nee--54.
It is expected that the Acquisition Designees may assume office at any time
following the purchase by AC Acquisition Corp. of a specified minimum number of
Shares pursuant to the Offer, which purchase cannot be earlier than September
14, 1994, and that, upon assuming office, the Acquisition Designees will
thereafter constitute at least a majority of the Board. This step will be
accomplished at a meeting or by written consent of the Board providing that the
size of the Board will be increased and/or sufficient numbers of current
directors will resign such that, immediately following such action, the number
of vacancies to be filled by the Acquisition Designees will constitute at least
a majority of the available positions on the Board. It is currently not known
which of the current directors of the Company will resign. AC Acquisition Corp.
has informed the Company that each of the officers listed in Schedule I of the
Offer to Purchase has consented to act as a director of the Company, if so
designated.
None of the executive officers and directors of American Home Products or
AC Acquisition Corp. currently is a director of, or holds any position with, the
Company. The Company has been advised that, to the best knowledge of American
Home Products and AC Acquisition Corp., none of American Home Products' or AC
Acquisition Corp.'s directors, executive officers, affiliates or associates
beneficially owns any equity securities, or rights to acquire any equity
securities, of the Company and none has been involved in any transactions with
the Company or any of its directors, executive officers, affiliates or
associates which are required to be disclosed pursuant to the rules and
regulations of the Securities and Exchange Commission (the "SEC").
INFORMATION WITH RESPECT TO THE COMPANY
As of August 12, 1994, there were issued and outstanding 90,832,206 shares
of Common Stock, each of which entitles the holder to one vote.
BOARD OF DIRECTORS AND EXECUTIVE OFFICERS
GENERAL
The Restated Articles of Incorporation of the Company provide that the
Board of Directors of the Company shall consist of nine to seventeen members,
with the exact number of directors within such minimum and maximum to be
determined by the Board of Directors. The Board of Directors currently consists
of 11 members.
ACQUISITION DESIGNEES
It is expected that the Acquisition Designees may assume office at any time
following the purchase by AC Acquisition Corp. of a specified minimum number of
shares pursuant to the Offer and that, upon assuming office, the Acquisition
Designees will thereafter constitute at least a majority of the Board.
CURRENT DIRECTORS
The persons named below are the current members of the Board. The following
sets forth as to each director, his or her age and principal occupation and
business experience, and the period during which each has served as a director
of the Company.
I-2
<PAGE>
Frank V. AtLee, age 54, is President of the Company and a member of the
Executive Committee. He was elected President in 1993. Mr. AtLee became a
director in 1990.
Albert J. Costello, age 58, is Chairman of the Board and Chief Executive
Officer of the Company, and is Chairman of the Executive Committee. He was
elected Chairman of the Board and Chief Executive Officer in 1993. Mr. Costello
served as President of the Company from 1990 through 1993. He became a director
in 1990. He is also a director of Cytec Industries Inc.
David M. Culver, age 69, is Chairman, CAI Capital Corporation in Montreal,
Quebec, Canada. He was a director and the Chairman and Chief Executive Officer
of Alcan Aluminum Limited until his retirement in June 1989. Mr. Culver became a
director of the Company in 1980, and is a member of the Compensation Committee
and Chairman of the Audit Committee. He is also a director of American Express
Company, Lehman Brothers Holdings, Inc., and The Seagram Company Ltd.
Allan R. Dragone, age 68, is Chairman, The New York Racing Association Inc.
He retired in 1990 as Chairman of Arcadian Corporation, a fertilizer consortium.
Prior to that Mr. Dragone served as president and chief executive officer of
Akzo America, Inc. He was reelected to the Board in 1991, having previously
served as a director of the Company from February 1984 to August 1986. He is a
member of the Audit, Compensation and Nominating Committees. He is also a
director of Arcadian Corporation, General Waterworks Corporation and Wellman,
Inc.
Ronald Halstead, age 67, was Chairman of the Beecham Group p.l.c., from
1984 to 1985. Prior to that he was employed by Beecham in a variety of
managerial and executive positions. He became a director of the Company in 1986
and is a member of the Audit, Nominating and Public Responsibility Committees.
He is also a director of British Steel p.l.c., Gestetner Holdings p.l.c., and
Laurentian Financial Group p.l.c.
Arnold J. Levine, age 55, is Chairman of the Department of Molecular
Biology and Harry C. Weiss Professor of Life Sciences in the Department of
Molecular Biology at Princeton University. From 1979 to 1984, he was Chairman
and Professor of the Department of Microbiology of the School of Medicine, State
University of New York at Stony Brook. Dr. Levine became a director in 1988, and
is a member of the Nominating, Pension and Public Responsibility Committees. He
is also a director of DNX Corporation.
Paul W. MacAvoy, age 60, has been the Williams Brothers Professor of
Management Studies at Yale University since 1992. He had been Dean of the School
of Organization and Management at Yale University, and Dean and John M. Olin
Professor of Public Policy and Business Administration at The William E. Simon
Graduate School of Business Administration at the University of Rochester, a
member of the President's Council of Economic Advisors during the Johnson
Administration, and a professor at the Sloan School of Management at the
Massachusetts Institute of Technology. He was reelected to the Board of
Directors in 1986, having previously served as a director of the Company from
August 1977 to July 1980. He is Chairman of the Nominating Committee and a
member of the Pension and Public Responsibility Committees. He is also a
director of Chase Manhattan Bank, Chase Manhattan Corporation, Alumax
Corporation and Lafarge Corporation.
Vincent T. Marchesi, age 58, is Director of the Yale Center for Molecular
Medicine and Professor of Pathology, Biology and Cell Biology at the Yale
University School of Medicine. From 1973 to 1989, he was the Anthony N. Brady
Professor of Pathology and Professor of Cell Biology and Chairman of the
Department of Pathology at Yale University School of Medicine. Dr. Marchesi
became a director in 1992, and is a member of the Audit and Nominating
Committees.
George J. Sella, Jr., age 65, retired as Chairman of the Board and Chief
Executive Officer of the Company in 1993. He became a director in 1977, and is
Chairman of the Pension Committee and a
I-3
<PAGE>
member of the Public Responsibility Committee. Mr. Sella is also a director of
Union Camp Corporation, The Equitable Companies Incorporated and The Equitable
Life Assurance Society of the United States.
Morris Tanenbaum, age 65, retired in 1991 as a Director and Vice Chairman
of the Board of Directors and Chief Financial Officer of American Telephone and
Telegraph Company, having previously served in various other executive
capacities with that company and its subsidiary companies. He became a director
of the Company in February 1982, and is Chairman of the Compensation Committee
and a member of the Audit Committee. He is also a director of American Electric
Power Company, Inc. and Cabot Corporation.
Anne Wexler, age 64, is Chairman of The Wexler Group, consultants in
Washington, D.C., specializing in government relations and public policy, and
Vice Chairman of its parent, Hill and Knowlton. Ms. Wexler served as Assistant
to President Carter for Public Liaison and, prior to that, as Deputy Under
Secretary of Commerce. She became a director in 1987, and is Chairman of the
Public Responsibility Committee and a member of the Audit Committee. She is also
a director of the Comcast Corporation, Continental Corporation, Dreyfus Index
Fund and New England Electric System.
BOARD MEETINGS AND COMMITTEES
The Board of Directors of American Cyanamid Company has held seven meetings
in 1994 and presently consists of 11 members, 2 of whom are officers of the
Corporation.
In 1994, the Board of Directors had five standing committees that dealt
with special responsibilities. No director attended less than 75 percent of both
Board and Committee meetings held during 1994. Following are brief descriptions
of each Committee, the frequency of its meetings and its composition in 1994.
The Audit Committee, which held two meetings during 1994, is comprised
entirely of outside directors. It considers the adequacy of the Company's
internal controls, the scope, approach, effectiveness and recommendations of the
audit performed by the independent accountants; determines and prescribes limits
upon the types of non-audit professional services that may be provided by the
independent accountants without adverse effect on the independence of such
accountants; recommends the appointment of independent accountants; considers
the scope, approach and effectiveness of the Company's Operations Audit
Department; and considers significant accounting methods adopted or proposed to
be adopted.
The Compensation Committee, which held five meetings in 1994, is comprised
entirely of outside directors. It determines the salaries of the Company's
officers, administers several compensation plans and makes recommendations
thereunder, and passes on all forms of remuneration affecting the Company's
senior management. See "Executive Compensation" for further details.
The Nominating Committee, which held one meeting in 1994, is comprised
entirely of outside directors. It considers and makes recommendations to the
Board of persons to be nominated for election as directors by the shareholders
and to be elected by the Board to fill vacancies that arise between annual
meetings of shareholders. In addition to its own efforts to locate outstanding
nominees for the Board, such committee considers nominees recommended by
shareholders.
The Pension Committee, which held one meeting in 1994, establishes
policies, standards, limitations and guidelines governing the Committee on
Investment of Pension Funds (which oversees investments of the Company's funded
benefit plans) and reviews the actions taken by such Committee.
The Public Responsibility Committee, which held no meetings in 1994,
reviews, monitors and, as it deems appropriate, advises the Board with respect
to those Company policies and practices which may affect the operation or
reputation of the Company in areas which include, but are not limited to,
I-4
<PAGE>
occupational safety and health, environmental affairs, equal employment
opportunity, philanthropy, consumer issues and governmental relations.
DIRECTORS' COMPENSATION
Directors who are employees are not entitled to extra compensation by
reason of their directorships or their attendance at meetings of the Board, any
committee thereof, or of the shareholders. Directors who are not employees of
the Company or of any of its subsidiaries are paid a retainer of $20,000 per
year. Such directors also receive annual retainers while chairmen ($4,000 each,
except Nominating, $2,000) or members ($2,000 each, except Nominating, $1,000)
of committees of the Board. Each director is also paid a fee of $1,000 for
attendance at a meeting of the Board and the committee meetings on the same day,
and $500 for attendance on any other day at committee meetings or at a meeting
of shareholders.
Pursuant to the Restricted and Deferred Stock Plan for Non-Employee
Directors, non-employee directors receive an annual grant of 200 shares of
Common Stock on the date of each annual meeting of shareholders, either in the
form of restricted stock (with restrictions lapsing after the next annual
meeting) or as deferred stock (with restrictions lapsing after the next annual
meeting, but which is distributed in the year following termination of Board
service). A person who becomes a non-employee director between annual meetings
will receive a pro-rated grant, but if a grant would be less than 40 shares no
grant will be made.
Under an arrangement available to all non-employee directors, compensation
for services as a director may be deferred until after retirement from the
Board, when it will be paid together with interest equivalents accrued at the
prime lending rate during the period of deferral. No director deferred his or
her director's fees in 1993 under such arrangement.
Under the Non-Employee Directors Retirement Plan, a person who has both
been a director and not been an employee for at least thirty-six months is
entitled, upon termination of membership on the Board of Directors at retirement
age (as determined under policies of the Board from time to time) or for other
reasons contemplated by the Plan (including circumstances related to a 'change
in control', as defined), to an annual benefit equal to the then current
retainer paid to non-employee directors (exclusive of retainers paid for
chairmanship of or membership on any committee of the Board) plus the value of
the most recent grant under the Restricted and Deferred Stock Plan for
Non-Employee Directors, in quarterly installments for a period of time equal to
the number of calendar quarters (not in excess of 40) during which such person
was a director and not an employee of the Company or any subsidiary. This
unfunded plan has a related "Rabbi" trust which is not funded. The Company has
no current plans for funding this trust.
Other personal benefit-type compensation for the entire group of directors
and officers is not individually significant or reportable.
BOARD COMPENSATION COMMITTEE REPORT
The Company's executive compensation policies for its officers are part of
its Salary Administration Program which is applicable to all salaried employees.
Under this Program, it is solely the responsibility of the Compensation
Committee of the Board of Directors, which is comprised entirely of outside
directors, to set an officer's annual compensation by determining his or her
base salary and short-term and long-term target incentive levels and actual
incentive payments. The Compensation Committee believes that the Company's
competition for executive talent is not limited to those companies identified in
the Performance Graph as the combined indices of Standard & Poor's Healthcare
Diversified Index and Chemicals Index. In order to ensure that the Company's
compensation levels are competitive, the Company uses both peer group surveys
and surveys provided by independent
I-5
<PAGE>
compensation consultants such as TPF&C, a Towers Perrin Company, to determine
the market criteria for its officers. The consultant surveys include executive
compensation surveys for companies with sales of $3 billion to $6 billion and
pharmaceutical/consumer goods surveys. The sixteen companies in the peer group
(other than the Company) that are surveyed individually were selected by the
Compensation Committee because they are major competitors in the pharmaceutical
and agricultural chemical industries: Abbott Laboratories, Bristol-Myers Squibb
Company, Ciba-Geigy Corporation, E. I. du Pont de Nemours and Company, Eli Lilly
and Company, Glaxo Inc., Johnson & Johnson, Merck and Co., Inc., Monsanto
Company, Pfizer Inc., Rhone-Poulenc Rorer Inc., Schering-Plough Corporation,
SmithKline Beecham Corporation, The Upjohn Company, Warner-Lambert Company, and
Wyeth-Ayerst Laboratories. Survey data is analyzed and the entire compensation
structure for each officer is measured to ensure peer competitiveness. Once
these market criteria have been determined, the objective of the Compensation
Committee is to ensure that executive compensation is closely tied to
shareholder value. To achieve that objective, the Committee sets base salary
somewhat below the average of its surveys and uses an incentive structure that
provides above average compensation for excellent growth in shareholder value
and below average compensation for less than average growth. The Committee takes
into consideration the recommendations of an outside expert on compensation
matters and the recommendations of management. This places more emphasis on the
incentive portion of the compensation plan.
BASE SALARY
In determining base salary under the Salary Administration Program, each
position in the Company is assigned a "job level" and each level is assigned a
range of base salaries, based on the average paid base salary rates in the
competitor comparison described above, with base salary midpoints being set
somewhat below the average of the competitor group. Individual salary within the
range is a function of experience and performance. The Compensation Committee
considers the competitiveness of the entire compensation package when
determining base salary ranges. A major element of this determination is the
base salary ranges of the competitor companies. Individual performance is not
weighed in setting base salary ranges. The determination of individual salaries
for the named executive officers within these ranges is based upon competitive
data and the individual executive's contributions.
ANNUAL INCENTIVE COMPENSATION
The Salary Administration program also provides short-term incentives in
the form of annual cash incentives. The target level for the annual incentives
is set as a percentage of individual salary for each eligible employee. This
percentage increases as the job level increases; thus, for higher level
employees, such as officers, annual incentives will constitute a greater portion
of total compensation. As in the case of base salary, the target levels for
named executive officers and other members of the executive group are set
somewhat below the average of the competitor group for average performance with
the opportunity to earn well above the average for above average performance.
This places emphasis on excellent performance. The actual amount of a named
executive officer's current annual incentive is determined by the Compensation
Committee based on an evaluation of individual performance, which would include
the achievement of established budget targets, the development of personnel, the
achievement of strategic management goals, new product introductions and the
extent to which earning objectives have been met. Once an individual's annual
incentive has been determined, it is subject to an overall company wide
adjustment directly relating to the extent to which the Company met, exceeded or
fell short of its overall earnings per share target for compensation purposes as
set each year by the Compensation Committee. Annual incentives may range from 0
to 200% of target based upon successfully achieving pre-determined goals and
individual performance. If a named executive officer's performance fails to meet
minimum requirements, he or she will receive no annual incentive. The
Compensation Committee has the power to adjust the earnings per share target
upward or downward. Its policy is to do so only in consideration of unusual
events not related solely to current year operations.
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<PAGE>
In 1993, earnings per share targets were adjusted for both the annual incentive
plan and the long-term incentive plan (as described below) to exclude the
financial impact of (i) the cumulative effect of accounting changes pertaining
to adoption by the Company of Statement of Financial Accounting Standards No.
106, "Employer's Accounting for Postretirement Benefits Other Than Pensions" and
Statement of Financial Accounting Standards No. 109, "Accounting for Income
Taxes"; (ii) the global, company-wide restructuring of the Company's businesses,
primarily the medical business; (iii) discontinued operations related to the
spin-off of the Company's chemicals and plant food businesses and (iv) the
one-time costs and charges associated with transactional matters such as the
write-off of acquired in-process research and development resulting from the
acquisition of 53.5% of Immunex Corporation.
LONG-TERM INCENTIVE COMPENSATION
The long-term portion of incentive compensation consists of performance
allotments denominated in dollars and stock option grants. Performance allotment
target levels for named executive officers and other members of the executive
group are set somewhat below the average of the competitor group, again to place
emphasis on excellent performance. The payout of performance allotments is
determined solely by the extent to which the Company's earnings growth over a
four-year performance period (currently as measured by earnings per share in the
fourth year) meets, exceeds or falls short of performance targets established by
the Compensation Committee at the beginning of the performance period. To
provide incentives for outstanding performance, awards of performance allotments
may range from 0 to 200% of target based solely upon earnings per share
achievement in the fourth year of the performance period. The payout of
performance allotments will only be made provided the named executive officer or
other member of the executive group remains an employee for the entire
performance period, unless the Compensation Committee determines otherwise.
The named executive officers and other key employees also receive annual
grants of stock options covering the Company's Common Stock. The number of
options granted is based upon a valuation of option grants by competitor
companies and is set somewhat below the average of the competitor group. The
price of the option is based on the market price at the date of grant and the
number of option s granted is determined by the individual's job level. The
extent to which the individual realizes any gain is, therefore, directly related
to increases in the price of the Company's Common Stock and hence, the increase
in shareholder value, during the period of the option.
The Company will present to the shareholders a proposal to amend the
Incentive Compensation Plan to grant performance shares instead of dollar
amounts. In the event the Amendment to the Incentive Compensation Plan is not
approved by the shareholders the Company will continue to use targets based on
dollar amounts to named executive officers and other members of the executive
group under the current plan.*
The Omnibus Budget Reconciliation Act of 1993 added Section 162(m) to the
Internal Revenue Code. Section 162(m) limits the deductibility of compensation
paid to top executives of public companies to $1,000,000, unless it is directly
tied to specific performance goals previously approved by shareholders. This cap
applies to all compensation paid in taxable years beginning on or after January
1, 1994. The transition rules applicable to Section 162(m) provide transition
relief to plans already approved by shareholders. This transition relief will
last until the date the plan is materially modified, the date it expires, the
date all the stock is issued under it or the first shareholder meeting after
December 31, 1996.
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* Subsequent to the issuance of this Compensation Committee Report, on April 18,
1994 the shareholders approved this proposal.
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<PAGE>
The Company has not determined whether to exempt either base salary or
annual cash incentive from Section 162(m) of the Internal Revenue Code. It is
not anticipated that base salary and annual cash incentive of any of the named
executive officers will exceed $1,000,000 in 1994. The Company believes that its
stock option and long-term incentive plans comply with the transition rules
applicable to Section 162(m).
In determining Mr. Costello's base salary for 1993, the Compensation
Committee set his salary in the lowest quartile of the peer group companies
previously specified because of his recent promotion and short tenure in the
position.
Each year, the Compensation Committee establishes a corporate earnings per
share objective for the purpose of determining annual current incentive
compensation for named executive officers and other key employees. (The
five-year history of the earnings per share actually achieved is detailed in the
Performance Graph section.) At year's end, performance against this and other
non-financial objectives such as progress in accomplishing strategic
restructuring plans is evaluated by the Compensation Committee for the Chief
Executive Officer and each of the named executive officers.
For 1993, the Compensation Committee determined that the major performance
objectives have been met or exceeded by the Chief Executive Officer and the
other named executive officers. These objectives included the spin-off of the
Company's chemicals and plant food business by distributing all the outstanding
shares of Common Stock of Cytec Industries Inc., the acquisition of 53.5% of
Immunex Corporation, the acquisition of Shell Petroleum Company Limited
international crop protection business, initiation of the strategic
restructuring of the Company's businesses, primarily the medical business, and
substantially meeting budgeted continuing operations objectives even in a
difficult economic environment. As a result annual incentive compensation was
awarded to the Chief Executive Officer in the amount of 103% of target and for
other named executive officers between 103% and 124% of target. All named
executive officers (and all other persons receiving performance allotment
payout) received a performance allotment payout at 75% of target as detailed in
the Summary Compensation Table. The below target payout was the result of lower
earnings than the objective that had been established at the time of grant
(1990). Options granted in early 1993 were based upon the competitor surveys and
are detailed in the Summary Compensation Table.
Compensation Committee
David M. Culver
Allan R. Dragone
Morris Tanenbaum, Chairman
March 8, 1994
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SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth data regarding two shareholders that,
according to information available to the Company, are each holders of more than
5% of the shares of Common Stock of the Company.*
<TABLE>
<CAPTION>
AMOUNT OF PERCENT OF
NAME AND ADDRESS OWNERSHIP CLASS
- ------------------------------------------------------------------------------------------ ----------- -----------
<S> <C> <C>
FMR Corp.................................................................................. 9,039,324 10.07%
82 Devonshire Street
Boston, MA 02109
Capital Group Inc......................................................................... 5,971,150 6.64%
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
The following table sets forth the shares of the Company's Common Stock
held beneficially, directly or indirectly, by each director or the named
executive officers, and by all directors and executive officers as a group.
<TABLE>
<CAPTION>
SHARES ACQUIRABLE
SHARES BENEFICIALLY OWNED WITHIN 60 DAYS OF
(EXCLUDING STOCK OPTIONS) JUNE 30, 1994, UPON
NAME AS OF JUNE 30, 1994 EXERCISE OF OPTIONS
- -------------------------------------------- ---------------------------------------- -------------------------
<S> <C> <C>
F. V. AtLee................................. 31,386(1)(3) 62,624(3)
D. R. Bethune............................... 7,714(1)(3) 26,188(3)
A. J. Costello.............................. 39,097(1)(3) 82,367(3)
D. M. Culver................................ 1,489(2) --
A. R. Dragone............................... 800(2) --
R. Halstead................................. 2,089(2) --
A. J. Levine................................ 1,209(2)(3) --
P. W. MacAvoy............................... 2,034(2)(3) --
V. T. Marchesi.............................. 593(2)(3) --
T. D. Martin................................ 4,045(1)(3) 26,420(3)
W. J. Murray................................ 10,755(1) 25,586(3)
G. J. Sella, Jr............................. 72,541(1)(2)(3) 166,663(3)
M. Tanenbaum................................ 1,989(2) --
A. Wexler................................... 1,695(2)(3) --
All directors and officers as a group (22
persons)(4)................................. 196,799(1)(2)(3) 478,851(3)
</TABLE>
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(1) Included as beneficially owned are shares held subject to restrictions to
assure compliance with certain conditions in the Incentive Compensation Plan
of the Company (G. J. Sella, Jr., 1,100; all directors and officers as a
group, 1,100); shares held in trust pursuant to the Company's Employees
Savings Plan, as to which shares the nominee possesses the right to vote (F.
V. AtLee, 2,723; D. R. Bethune, 589; A. J. Costello, 2,517; T. D. Martin,
507; W. J. Murray, 1,285; G. J. Sella, Jr., 5,569; all directors and
officers as a group, 18,582). Also included are rights to receive certain
shares in installments after retirement. The distribution of those shares
may be accelerated even during employment or in extraordinary circumstances
in the discretion of the Compensation Committee (F. V. AtLee, 28,663; D. R.
Bethune, 7,111; A. J. Costello, 23,535; T. D. Martin, 3,538; W. J. Murray,
8,582; G. J. Sella, Jr., 42,883; all directors and officers as a group,
123,308).
(2) Included as shares beneficially owned are an aggregate of 1,400 restricted
shares and 400 deferred shares granted to non-employee directors under the
Company's Restricted and Deferred Stock Plan for Non-Employee Directors.
(3) Including adjustments to the price and number of options covering shares as
of December 28, 1993 to reflect the Company's spin-off of Cytec Industries
Inc. as a dividend to Company Shareholders.
(4) The directors and officers as a group do not own more than 1% of the Shares.
- ---------------
(*) This information is based upon a Schedule 13G dated August 3, 1994, filed by
FMR Corp. and a Schedule 13G dated February 10, 1994, filed by Capital
Research and Management Company. FMR Corp. has sole voting power over
660,148 shares, shared voting power over 4,000 shares, sole dispositive
power over 9,039,324 shares, and shared dispositive power over 4,000 shares.
The Capital Group Inc. has sole voting power over 44,850 shares and sole
dispositive power 5,971,150 shares.
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PERFORMANCE GRAPH
The performance graph compares the yearly cumulative total shareholder
return on the Company's Common Stock with the yearly cumulative total
shareholder return for (a) the Standard & Poor's 500 Composite Index (S&P 500)
and (b) the combined indices of Standard & Poor's Healthcare Diversified Index
(consisting of Abbott Laboratories, American Cyanamid Company, American Home
Products Corporation, Bristol-Myers Squibb Company, Imcera Group Inc., Johnson &
Johnson and Warner-Lambert Company) and Chemicals Index (consisting of Air
Products and Chemicals, Inc., Dow Chemical Company, E.I. du Pont de Nemours and
Company, the B.F. Goodrich Company, Hercules Incorporated, Monsanto Company, NL
Industries, Praxair, Inc., Quantum Chemical Corporation, Rohm and Haas Company
and Union Carbide Corporation), weighted according to stock market
capitalization as of each measure point for the members of the combined group,
for the period beginning January 1, 1989 through December 31, 1993. The
companies in the combined indices reflect both the diversified health care and
chemical aspects of the Company's business during the period 1988-1993.
[PERFORMANCE GRAPH]
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
American Cyanamid.................. 100 118 118 149 136 123
S&P 500............................ 100 133 128 166 179 197
Combined S&P Healthcare Diversified
and Chemicals Indices............ 100 132 140 199 185 187
BASE 12/31/89 12/31/90 12/31/91 12/31/92 12/31/93
</TABLE>
I-10
<PAGE>
AMERICAN CYANAMID COMPANY CUMULATIVE GROWTH
IN EARNINGS PER SHARE FROM CONTINUING OPERATIONS
(1988 = 100 OR $2.30 EPS)
AVERAGE ANNUAL GROWTH RATE. 1988-93=11.0%. REFLECTS GROWTH IN EPS FROM
CONTINUING OPERATIONS USING 1988 AS THE BASE YEAR. SPECIAL COSTS OF M$512 NET
AFTER TAX, EQUIVALENT TO $5.69 EPS ASSOCIATED WITH THE WRITE-OFF OF ACQUIRED
IMMUNEX IN-PROCESS RESEARCH AND DEVELOPMENT AND THE GLOBAL COMPANY-WIDE
RESTRUCTURING PROGRAM HAVE BEEN ADDED BACK TO 1993 EPS FROM CONTINUING
OPERATIONS. SPECIAL COSTS OF M$67 NET AFTER TAX, EQUIVALENT TO $0.70 EPS,
ASSOCIATED WITH PLANS TO CURTAIL AND CONSOLIDATE CERTAIN PRODUCT LINES
AND FOR INCREASED ENVIRONMENTAL REMEDIATION, HAVE BEEN ADDED BACK TO
1990. EPS FROM CONTINUING OPERATIONS.
[GROWTH GRAPH--DESCRIBED IN
CAPTION BELOW]
The above graph compares the Company's growth in earnings per share from
continuing operations with the investment performance of the Company's Common
Stock versus the S&P 500 and the Standard & Poor's Healthcare Diversified Index
and Chemicals Index combined over the five-year period, 1989 to 1993. The
performance graph assumes that $100 was invested on January 1, 1989, at the
prior day's closing market price, in Company Common Stock and in each of the
Standard & Poor's indices. The graph shows that while the Company's earnings per
share from continuing operations have grown 68% during that period, the total
return which includes the change in stock price on the $100 investment has grown
only 23%. The comparison demonstrates that the Company's strong earnings
performance is not reflected in the market's valuation of its common stock.
I-11
<PAGE>
Through the end of 1993, the Company continued to emerge from a history of
operating businesses with lower rates of profitability than many companies
included in its comparative index.
During 1993, the Company announced several significant strategic decisions,
each designed to more firmly establish the Company in the life sciences
business. In June 1993, the Company acquired a 53.5% equity interest in Immunex
Corporation. In August, the Company announced its intention to acquire the
international agricultural business of Shell, and in December, finalized the
bulk of this transaction. In October, the Company announced a global
restructuring program, primarily in the medical business. Finally, in December,
the Company substantially completed the spin-off of its chemical business as
Cytec Industries Inc. to the Company's shareholders. The distribution of Cytec
shares to Company shareholders actually took place in January 1994, completing
the Company's transition to the life sciences.
EXECUTIVE COMPENSATION
The following tabulation summarizes compensation paid to the Chief
Executive Officer (CEO) and the four other most highly compensated executive
officers for services rendered in all capacities in 1991, 1992 and 1993 to the
Company and its subsidiaries:
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
----------------------------------------
AWARDS PAYOUTS
ANNUAL --------------------------- -----------
COMPENSATION(1)(2) RESTRICTED SECURITIES LONG-TERM
NAME AND ------------------------ STOCK UNDERLYING INCENTIVE ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(3) OPTIONS/SARS PAYOUTS COMPENSATION(4)
- ------------------------------ --------- ----------- ----------- ----------- -------------- ----------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
A.J. Costello
Chairman and CEO............ 1993 $ 525,000 $ 329,649 $ 0 43,500 $ 214,190 $ 7,075
President................... 1992 $ 450,000 $ 300,971 $ 0 18,278 $ 278,025 $ 6,866
President................... 1991 $ 410,000 $ 261,117 $ 0 18,500 $ 205,206
F.V. AtLee
President................... 1993 $ 443,750 $ 260,197 $ 0 20,900 $ 145,196 $ 7,075
Executive Vice President.... 1992 $ 408,333 $ 266,097 $ 0 11,206 $ 221,100 $ 6,866
Executive Vice President.... 1991 $ 383,333 $ 218,617 $ 0 11,400 $ 258,375
D.R. Bethune(5)
Group Vice President........ 1993 $ 325,000 $ 156,660 $ 0 7,600 $ 84,985 $ 7,075
Group Vice President........ 1992 $ 300,000 $ 146,558 $ 0 4,570 $ 143,963 $ 6,866
T.D. Martin
Vice President and CFO...... 1993 $ 255,750 $ 121,771 $ 0 7,600 $ 80,954 $ 7,075
Vice President and CFO...... 1992 $ 240,750 $ 127,531 $ 0 6,637 $ 121,688 $ 6,866
Vice President and CFO...... 1991 $ 255,917 $ 116,961 $ 0 6,700 $ 91,152
W.J. Murray(5)
Group Vice President........ 1993 $ 245,000 $ 139,572 $ 0 7,600 $ 80,860 $ 7,075
Group Vice President........ 1992 $ 206,250 $ 95,082 $ 0 4,134 $ 134,063 $ 6,187
G.J. Sella, Jr.(6)
Retired Chairman and CEO.... 1993 $ 225,000 $ 141,559 $ 0 0 $ 328,125 $ 6,746
Chairman and CEO............ 1992 $ 808,333 $ 625,771 $ 0 34,800 $ 544,500 $ 6,866
Chairman and CEO............ 1991 $ 781,250 $ 528,120 $ 0 28,700 $ 616,125
</TABLE>
(Footnotes on following page)
I-12
<PAGE>
(Footnotes for preceding page)
- ---------------
(1) Includes amounts earned in fiscal year, whether or not deferred.
(2) There was no disclosable "Other Annual Compensation" paid, payable or
accrued to any of the named executive officers during 1993, except for Mr.
Sella, who has imputed income of $80,043 attributable to off-site office
expenses incurred after his retirement.
(3) No restricted stock was granted in 1991, 1992 or 1993. None of the named
executive officers holds restricted stock, except for Mr. Sella who holds
1,140 shares, all of which were awarded in 1968, 1969 and 1970. The value of
the restricted stock as of the end of the last completed fiscal year is
$14,953. The restricted stock does not carry nor is it entitled to the
payment of any dividend (other than dividends in common stock of the
Company).
(4) The amount listed for each named executive officer consists entirely of
Company matching contributions to the Employees Savings Plan.
(5) Messrs. Bethune and Murray were elected executive officers of the Company in
1992.
(6) Mr. Sella retired as Chairman of the Board and Chief Executive Officer of
the Company on March 31, 1993.
The following tabulation shows, as to the named executive officers and as
to the shareholders, information with respect to stock options, all of which
were granted with stock appreciation rights in tandem therewith:
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<TABLE><CAPTION>
POTENTIAL REALIZATION VALUE
NUMBER OF % OF TOTAL AT ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS/SARs STOCK PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE OR FOR OPTION TERM
OPTIONS/SARs EMPLOYEES IN BASE PRICE EXPIRATION ---------------------------
NAME GRANTED(1) FISCAL YEAR(2) ($/SH) DATE 0% 5%
- ------------------------- ------------- ----------------- ----------- ------------ --------- ----------------
<S> <C> <C> <C> <C> <C> <C>
A.J. Costello............ 43,500 4.63% $ 52.00 4/19/2003 $ 0 $ 1,422,560
F.V. AtLee............... 20,900 2.23% $ 52.00 4/19/2003 $ 0 $ 683,483
D.R. Bethune............. 7,600 0.81% $ 52.00 4/19/2003 $ 0 $ 248,539
T.D. Martin.............. 7,600 0.81% $ 52.00 4/19/2003 $ 0 $ 248,539
W.J. Murray.............. 7,600 0.81% $ 52.00 4/19/2003 $ 0 $ 248,539
G.J. Sella, Jr.(3)....... 0 0 0 -- $ 0 $ 0
All Shareholders(4)...... -- -- -- -- $ 0 $ 2,944,160,220
Current CEO Gain As a %
of All Shareholders.... -- -- -- -- 0.0% 0.048%
Above Officers As a % of
All Shareholders......... -- -- -- -- 0.0% 0.097%
All Officers As a % of
All Shareholders......... -- -- -- -- 0.0% 0.132%
<CAPTION>
NAME 10%
- ------------------------- ----------------
A.J. Costello............ $ 3,605,045
F.V. AtLee............... $ 1,732,079
D.R. Bethune............. $ 629,847
T.D. Martin.............. $ 629,847
W.J. Murray.............. $ 629,847
G.J. Sella, Jr.(3)....... $ 0
All Shareholders(4)...... $ 7,461,079,961
Current CEO Gain As a %
of All Shareholders.... 0.048%
Above Officers As a % of
All Shareholders......... 0.097%
All Officers As a % of
All Shareholders......... 0.132%
</TABLE>
- ---------------
(1) Options covering 1,923 shares were granted as Incentive Stock Options to
each of the named executive officers and are exercisable after one year from
date of grant. The remaining options are Non-Qualified Options--one-third of
which are exercisable after one year from date of grant, another one-third
exercisable after two years from date of grant and the remaining one-third
exercisable after three years from date of grant. The term of the options is
ten years.
(2) Based on options covering 939,040 shares granted to a total of approximately
1,400 employees during 1993.
(3) Mr. Sella was not granted any securities, underlying options or SARs.
(4) Total dollar gains based on the assumed annual rates of appreciation shown
here and calculated on 90,028,540 outstanding shares as of December 31,
1993.
I-13
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED IN THE MONEY
OPTIONS/SARS HELD AT OPTIONS/SARS AT
SHARES FISCAL YEAR END FISCAL YEAR END
ACQUIRED ON VALUE -------------------------- ------------------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE(2)
- ------------------------- ------------ ----------- ----------- ------------- ------------- ---------------------
<S> <C> <C> <C> <C> <C> <C>
A.J. Costello............ 0 $ 0 53,790 60,188 $ 36,825 $ 0
F.V. AtLee............... 0 $ 0 46,700 30,506 $ 36,825 $ 0
D.R. Bethune............. 0 $ 0 18,456 12,514 $ 4,031 $ 0
T.D. Martin.............. 0 $ 0 18,743 12,594 $ 19,688 $ 0
W.J. Murray.............. 0 $ 0 19,348 11,756 $ 27,044 $ 0
G.J. Sella, Jr.(3)....... 17,192 $ 519,926 166,200 0 $ 381,713 $ 0
</TABLE>
- ---------------
(1) Total value of options based on fair market value of Company stock of
$50.1875 as of December 31, 1993. The exercise price cannot be lowered
during the term of the option.
(2) No unexercisable options/SARs were in the money at fiscal year end.
(3) All shares acquired on exercise by Mr. Sella were acquired subsequent to his
retirement on March 31, 1993.
LONG-TERM INCENTIVE PLANS--AWARDS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS UNDER
SHARES, UNITS OTHER PERIOD NON-STOCK PRICE-BASED PLANS
OR OTHER UNTIL MATURATION -------------------------------------
NAME RIGHTS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
- ------------------------------------------ ------------- ---------------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
A.J. Costello............................. $ 463,125 4 years $ 2,286 $ 463,125 $ 926,250
F.V. AtLee................................ $ 278,438 4 years $ 1,615 $ 278,438 $ 556,876
D.R. Bethune.............................. $ 125,000 4 years $ 725 $ 125,000 $ 250,000
T.D. Martin............................... $ 125,000 4 years $ 725 $ 125,000 $ 250,000
W.J. Murray............................... $ 125,000 4 years $ 725 $ 125,000 $ 250,000
G.J. Sella, Jr............................ $ 475,000 4 years $ 861 $ 148,438 $ 296,876
</TABLE>
- ---------------
(1) Performance Allotments are granted, the payment of which is predicated upon
the achievement of corporate performance goals, specifically, earnings per
share in the last year of the performance period. The achievement of
approximately 66% of this goal will result in payment of the threshold
amount. 100% of goal in payment of the target amount, while attaining
approximately 120% of the goal will result in payment of the maximum amount.
No payment will be made if less than 66% of the goal is achieved. The
Compensation Committee of the Board of Directors may adjust the goal, in its
discretion, at any time prior to the end of the first quarter of the final
year of the performance period.
I-14
<PAGE>
EMPLOYMENT AGREEMENTS
All salaried employees of the Company including the named executive
officers sign an employment agreement on the Company's standard form. Each
agreement provides for the initial salary the Company shall pay to the employee
for the services performed by the employee, the confidentiality and non-use of
information which is proprietary to the Company, assignment of inventions and
improvements which the employee may invent or produce and termination of
employment by both the employee and the Company. The notice of termination
period for salaried employees including the named executive officers ranges from
one month to six months (depending on the standard form in use at the time),
except in the case of termination for cause, when no prior notice is required.
The agreement provides that, for one year after termination of employment with
the Company, the employee shall not engage in work or other activity involving a
product or process similar to a product or process on which he or she worked for
the Company at any time during the period of two years immediately prior to
termination of employment, if such work or activity is then competitive with
that of the Company, unless otherwise given a release in writing by an officer
of the Company to engage in such work or activity. In certain circumstances, the
Company may be obligated to continue paying the former employee his or her base
salary in order to invoke the non-competition provisions.
COMPENSATION UNDER RETIREMENT PLAN
The following Pension Plan Table shows the estimated aggregate annual
benefits payable under the Company's retirement program consisting of the
Employees Retirement Plan, ERISA Excess Retirement Plan and Supplemental
Employees Retirement Plan, assuming retirement at or projected to age 65 (normal
retirement age) to persons in the earnings ranges recognized for pension
purposes, and with the number of years credited for purposes of pension benefits
shown, on a single life annuity basis:
PENSION PLAN TABLE
<TABLE>
<CAPTION>
EMPLOYEE'S
ANNUAL EARNINGS
USED FOR YEARS OF SERVICE
COMPUTATION -----------------------------------------------------------------------------------------
OF BENEFITS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS 45 YEARS
- ---------------------- ----------- ----------- ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
$200,000.............. $ 50,100 $ 66,800 $ 83,500 $ 100,200 $ 116,900 $ 133,600 $ 150,300
$250,000.............. $ 62,625 $ 83,500 $ 104,375 $ 125,250 $ 146,125 $ 167,000 $ 187,875
$350,000.............. $ 87,675 $ 116,900 $ 146,125 $ 175,350 $ 204,575 $ 233,800 $ 263,025
$450,000.............. $ 112,725 $ 150,300 $ 187,875 $ 225,450 $ 263,025 $ 300,600 $ 338,175
$550,000.............. $ 137,775 $ 183,700 $ 229,625 $ 275,550 $ 321,475 $ 367,400 $ 413,325
$650,000.............. $ 162,825 $ 217,100 $ 271,375 $ 325,650 $ 379,925 $ 434,200 $ 488,475
$750,000.............. $ 187,875 $ 250,500 $ 313,125 $ 375,750 $ 438,375 $ 501,000 $ 563,625
$850,000.............. $ 212,925 $ 283,900 $ 354,875 $ 425,850 $ 496,825 $ 567,800 $ 638,775
$950,000.............. $ 237,975 $ 317,300 $ 396,625 $ 475,950 $ 555,275 $ 634,600 $ 713,925
</TABLE>
Amounts shown in the above table would be reduced by a portion of primary
social security payments for which a person would be eligible at age 65. In
addition, the normal form of benefit payment under the program would require the
further reduction of amounts shown in the table pursuant to an actuarially based
formula to provide a benefit to a surviving spouse upon the employee's death
following retirement equal to 50% of the reduced benefit.
Compensation included in the Pension Plan Table consists of the base
salaries and target portion of the bonus (annual cash incentive) reported for
the named executive officers in the Summary Compensation Table. Mr. Martin
receives a pension differential, provided he is in the employ of the Company
when he reaches the age of 60, equal to the amount by which the pension Mr.
Martin is entitled to
I-15
<PAGE>
receive from the Company's Employees Retirement Plan and Supplemental Employees
Retirement Plan, if elected a member, is less than 40% of his average earnings
during the three years out of the final 10 years of his employment during which
such earnings are the highest, provided that he shall elect to have his pension
commence immediately upon retirement.
The Company's retirement program for employees consists of its Employee
Retirement Plan, an actuarially funded plan subject to the provisions of the
Employee Retirement Income Security Act of 1974, as amended (ERISA), and its
unfunded ERISA Excess Retirement Plan and Supplemental Employees Retirement
Plan, both of which are exempt from certain of the provisions of ERISA. All of
the plans are non-contributory defined benefit plans. The unfunded plans for
active employees have related "Rabbi" trusts (i.e., trusts the assets of which
remain available to satisfy claims of the Company's creditors) which have not
been funded.
The Board of Directors has authorized "Rabbi" trust agreements to fund
benefits payable to certain currently retired employees under the Supplemental
Employees Retirement Plan and the ERISA Excess Plan. One trust has been funded
through the purchase of annuities. The other has also been funded.
The Employees Retirement Plan covers all domestic employees of the Company
and the employees of many of its domestic subsidiaries. Retirement benefits are
determined by aggregating percentages of earnings (as defined) throughout an
individual's career, but retirement benefits so calculated are subject to a
minimum of 1.67% of average annual earnings (as defined) paid in cash for those
five calendar years of the employee's final ten calendar years of employment in
which the employee's earnings were the highest, multiplied by the employee's
number of years of service, reduced by a partial social security offset. Since
this plan is subject to ERISA, there are maximum limitations on pensions
payable. There is no actuarial reduction for early retirement at age 62 or older
after twenty years of service. Employees are 100% vested after five years of
service. If the plan is terminated, or merged with another plan, within three
years following a "change in control" (as defined in the plan), any remaining
funds, after providing for all fixed and contingent liabilities, must be applied
to provide proportionately increased benefits to participants.
The ERISA Excess Retirement Plan provides a supplemental pension for all
affected employees equal to the difference between the pension as calculated
under the Employees Retirement Plan (without reference to the ERISA maximum
limitation) and the lower maximum pension permitted under federal law to be paid
from the Employees Retirement Plan.
In addition, the Compensation Committee of the Board of Directors may elect
an employee a member of the Supplemental Employees Retirement Plan. A member of
the Supplemental Employees Retirement Plan is entitled upon retirement (but not
before the first day of the month following the member's 60th birthday or such
earlier date as may be determined by the Compensation Committee, in the case of
officers, or by the Executive Committee, in the case of other members) to a
supplemental pension equal to the difference between the aggregate pensions
payable under the Employees Retirement Plan and the ERISA Excess Retirement Plan
and an amount calculated in the same manner as is the pension under the
Employees Retirement Plan, but without regard to the limitations on maximum
pensions mandated by ERISA, and with the following modifications: (i) for
pension calculation purposes, such member is deemed to have continued employment
and earnings for five additional years, but not beyond age 65 unless a different
period is specified by the Compensation Committee (in the case of officers) or
the Executive Committee (in the case of other members), and (ii) average annual
earnings are those for the highest three of the last ten years (including years
in which such member is deemed to have continued earnings and employment under
clause (i), above).
These plans provide for normal post-retirement payment options and for
normal survivors' benefit options in the event of death prior to retirement,
including a Company-paid surviving spouse benefit.
I-16
<PAGE>
Survivors' benefits for members of the Supplemental Employees Retirement Plan
and for those included in groups specified by the Compensation Committee or the
Executive Committee and who meet specified age and service requirements, are
based on service determined as described in the preceding paragraph, with
additional service credited of five years but not beyond age 65.
Earnings, as utilized for the retirement program, consist of (i) regular
fixed compensation for the employee's normal work period in the form of salary
or wages (prior to reduction on account of any election specified in Sections
125, 127, 129 or 401(k) of the Internal Revenue Code); (ii) extra compensation
or cash awards customarily paid to full time salesmen or sales representatives
whether or not based on sales; and (iii) incentive compensation (other than
performance allotments) paid in cash under any incentive compensation plan
adopted by the Board during each calendar year up to a maximum amount of 33 1/3%
of such regular fixed compensation for each such calendar year. Under the
Supplemental Employees Retirement Plan, a member is credited, for the year of
retirement or death during employment and for subsequent years for which an
employee is deemed to have continued employment and earnings, with 100% of the
target incentive compensation (excluding performance allotments) applicable to
such member's salary level as of the date of such member's retirement or death,
in lieu of any credit under clause (iii) above for such years. Covered earnings
for 1993 (salary rate at September 1, 1993, plus covered incentive compensation
accrued in 1992 and paid in 1993, with years of service through 1993) for the
four persons named in the Summary Compensation Table who are not members of the
Supplemental Employees Retirement Plan were approximately: Mr. AtLee $600,000
(27 years); Mr. Bethune $426,667 (24 years); Mr. Martin $342,667 (5 years); and
Mr. Murray $340,000 (26 years). Covered earnings for the person named in the
Summary Compensation Table who is a member of the Supplemental Employees
Retirement Plan, which would have been utilized had he retired at December 31,
1993, assuming the Compensation Committee took no action to designate a period
ending prior to age 65 during which they would be deemed to have continued
employment with the same earnings (with years of service projected to age 65),
would have been Mr. Costello $880,000 (43 years).
CHANGE IN CONTROL ARRANGEMENTS
The Board of Directors has adopted an executive income continuity plan to
reinforce and encourage the continuing attention, dedication and loyalty of
executives in the senior management group without the distraction of concern
over the possibility of involuntary or constructive termination of employment
resulting from unforeseen developments, by providing income continuity for a
limited period. The plan provides for payments to members upon termination of
employment, unless such termination is (i) on account of death or retirement,
(ii) by the Company for disability or cause, or (iii) by the member without good
reason (as defined in the plan--generally, actions by the Company inconsistent
with the participant's status or with the Company's traditional compensation
policies). Members of the plan consist of the chairman, the president, the
corporate vice presidents, and such other employees as are designated by the
Executive Committee. In general, the plan provides for payments upon termination
of employment, in the case of the executive officers, and in the case of other
members meeting certain age and service requirements, of two times annual salary
plus two times target annual incentive (current allotment under the Incentive
Compensation Plan), in 24 monthly installments, and in the case of other members
annual salary plus target annual incentive, in 12 monthly installments. The plan
also provides for certain miscellaneous payments, including relocation payments,
legal fees, and expenses incurred in seeking new employment. The benefits of
this Plan are not available to any employee who is then currently eligible to
receive a benefit under the Supplemental Employees Retirement Plan or, in any
event, for any period beyond the employee's sixty-fifth birthday.
Under agreements approved by the Compensation Committee and the Board of
the Directors, if any one of a number of events potentially affecting the
control of the Company occurs, all deferred stock awards and deferred cash
awards held by certain members of key management (including all persons named in
the Summary Compensation Table) will be cancelled and the fair market value
thereof will be
I-17
<PAGE>
paid promptly in cash, and the Compensation Committee may authorize payment, to
the extent it deems equitable, of outstanding performance allotments held by
such persons.
The Board of Directors has adopted a Compensation Taxation Equalization
Plan providing for the payment to any employee, officer or director who becomes
subject to the tax imposed by Section 4999 of the Internal Revenue Code of
reimbursement for the tax, plus all taxes imposed upon the reimbursement. A 20%
excise tax applies to compensatory payments (i) the present value of which
equals or exceeds three times the 'base amount' of the recipient, and (ii) that
are contingent upon change 'in the ownership or effective control' of the
Company. The 'base amount' is the average annual compensation included in
taxable income over the five-year period ending before the year during which the
change in the ownership or effective control occurs.
I-18
<PAGE>
INDEX TO EXHIBITS
<TABLE><CAPTION>
SEQUENTIAL PAGE
EXHIBITS NUMBER
- --------------------------------------------------------------------------------------------------------------- -------------------
<S> <C>
Exhibit 1--Joint Press Release of the Company and Parent, dated August 17, 1994 (previously filed as Exhibit
20.1 to the Company's Report as Form 8-K dated August 18, 1994).....................................
Exhibit 2--Pages 7 through 11, 14 through 21 and 24 through 29 of the Company's Proxy Statement dated March 8,
1994 for its 1994 Annual Meeting of Shareholders....................................................
Exhibit 3--Amendment, dated August 17, 1994, to the By-Laws of the Company.....................................
Exhibit 4--Agreement and Plan of Merger, dated August 17, 1994, among the Company, Parent and the Purchaser....
Exhibit 5--Opinion of Morgan Stanley & Co., Incorporated, dated August 17, 1994................................
Exhibit 6--Opinion of CS First Boston Corporation, dated August 17, 1994.......................................
Exhibit 7--Letter to Shareholders of the Company...............................................................
</TABLE>
EXHIBIT 1
AMERICAN HOME PRODUCTS AND AMERICAN CYANAMID
--------------------------------------------
REACH MERGER AGREEMENT AT $101 PER SHARE
----------------------------------------
MADISON AND WAYNE, NJ August 17, 1994 - - American Home
Products Corporation (NYSE: AHP) and American Cyanamid Company (NYSE:
ACY) today announced that they have entered into a definitive merger
agreement which provides for American Cyanamid stockholders to receive
a price of $101 per share in cash for all outstanding shares of
American Cyanamid. The total value of the transaction, on a fully
diluted basis, is approximately $9.7 billion.
The agreement has been approved by the Boards of Directors
of both companies. The American Cyanamid Board has determined that
the terms of the offer and merger are fair to, and in the best
interests of, the Company and its stockholders and recommends that
stockholders tender their American Cyanamid shares in American Home
Products' tender offer.
American Home Products will amend its existing tender offer
to increase the price being offered to $101 per share. The amended
tender offer is scheduled to expire at midnight, New York City time,
on September 14, 1994 unless extended. Following completion of the
tender offer, American Cyanamid will be merged with a subsidiary of
American Home Products and each American Cyanamid share not previously
purchased will be converted into the right to received $101 net in
cash.
The American Home Products' amended tender offer will remain
subject to the valid tender of shares representing a majority of the
voting power of American Cyanamid, the expiration of waiting periods
<PAGE>
2
under applicable antitrust and competition laws, and other customary
closing conditions. Under the merger agreement, American Cyanamid's
preferred stock purchase rights will be redeemed at $.02 per right
immediately prior to consummation of the tender offer.
The merger price represents an increase of approximately
$600 million over American Home Products' initial offer made on August
2, 1994, and a premium of 60% over American Cyanamid's share price on
August 1, 1994.
Following the merger, the combined companies will have
annual revenues in excess of $12 billion, with a leading position in
the pharmaceutical industry including vaccines, as well as significant
franchises in consumer health care, medical supplies and diagnostic
products, agricultural chemicals and food products.
Albert J. Costello, Chairman and Chief Executive Officer of
American Cyanamid said: "For the past eighteen months, we have been
pursuing an aggressive strategic program to build value. The success
of this program can be measured by the significant increase in our
share price prior to the American Home Products offer. After a
thorough analysis of American Home Products' increased offer, our
Board concluded that a combination of the two companies would maximize
value for our stockholders and lead to the creation of a highly
competitive participant in our markets."
John R. Stafford, Chairman, President and Chief Executive
Officer of American Home Products, said: "We have been impressed with
American Cyanamid's progress in carrying out its strategic program.
The combination of our companies will result in a stronger company,
<PAGE>
3
better situated to compete in the rapidly evolving health care
marketplace.
"The combined new company will also benefit from a larger
chemical research library and the diversification contributed by
American Cyanamid's dynamic agricultural business. We are convinced
that this transaction is in the best interests of the stockholders of
American Home Products and American Cyanamid."
American Home Products, with annual revenues of
approximately $8.3 billion, is a world leader in the marketing and
manufacturing of prescription drugs, medical supplies, diagnostics,
over-the-counter medicines, and food products.
American Cyanamid, with annual revenues of approximately
$4.3 billion, is a research-based life sciences company which
discovers and develops medical and agricultural products and
manufactures and markets them in more than 135 countries.
EXHIBIT 2
PORTIONS OF 1994 PROXY STATEMENT
APPROVAL OF AMENDMENT TO THE INCENTIVE COMPENSATION PLAN (ITEM NO. 3)
The Company will present to the shareholders for approval a
proposal to amend the Incentive Compensation Plan.
PRINCIPAL FEATURES OF THE INCENTIVE COMPENSATION PLAN
1. The Incentive Compensation Plan provides for incentive
compensation for the executive group of the Company currently consisting of
12 officers and 36 other employees. Incentive compensation for these
individuals is determined by the Compensation Committee of the Board of
Directors and is payable solely from the Incentive Compensation Amount
which is also determined by the Compensation Committee. The Incentive
Compensation Amount cannot exceed 11% of reported Consolidated Net Income
of the Company and its subsidiaries, excluding any Incentive Compensation
Amount (on a net after-tax basis) included in Consolidated Net Income and
after deduction of dividends payable on any outstanding preferred stock (no
shares of preferred stock are outstanding) and an amount equal to 6% of
Average Common Stock Equity (an amount equal to the sum of (i) the
aggregate stated or par value of the average net number of shares of common
stock of the Company outstanding during such year and (ii) the average
capital surplus and the average earned surplus (earnings employed in the
business) of the Company and subsidiaries on a consolidated basis for such
year). In the discretion of the Compensation Committee, any unused portion
of the Incentive Compensation Amount may be carried forward and added to
the Incentive Compensation Amount for any of the five succeeding fiscal
years. The Compensation Committee may adjust the earnings per share target
upward or downward. Its policy is to do so only in consideration of
unusual events not related solely to current year operations. The
Compensation Committee may also change the Incentive Compensation Amount
for any year, by adjusting Consolidated Net Income upward or downward, to
eliminate in whole or in part the effects of any item deemed by the
Committee in its discretion to be extraordinary or unusual or not to be
reflective of the earnings on which incentive compensation should be based.
In the event that the Compensation Committee makes such adjustment, it may
also recalculate Average Common Stock Equity in such other years as it
deems appropriate consistent with such adjustment to Consolidated Net
Income.
2. The Plan is administered by the Compensation Committee,
which is comprised entirely of outside directors, appointed by the Board.
The Committee is authorized to construe and interpret the Plan.
<PAGE>
3. The Plan currently provides for two basic types of
incentives: (i) annual incentives (current allotments) which, unless
deferred, are payable in cash, generally shortly after the close of the
year to which the allotment relates to the extent that earnings per share
in the current year meet or exceed specified objectives set by the
Compensation Committee, and (ii) long-term incentives (performance
allotments) which are payable in cash (unless deferred) after the
applicable performance period (currently four years), to the extent that
earnings per share in the last year of such performance period meet or
exceed specified objectives set by the Compensation Committee. The
Compensation Committee requires that performance allotment payouts in
excess of 70% of the award be credited to the individual's common stock
account under the Plan (see paragraph 4). Allotments can be paid only to
the extent of the Incentive Compensation Amount for the then current year
plus any unused carry-forward.
4. The Committee may require that all or any portion of a
current allotment or performance allotment be deferred as a contingent
award. Amounts so deferred will be credited to a common stock account
maintained by the Company in the name of the participant. The number of
shares of Common Stock of the Company to be credited to a participant's
common stock account for a deferred current allotment will be determined by
dividing the dollar amount of the award by the average closing price of the
Common Stock as reported on the New York Stock Exchange Consolidated Tape
for a prescribed period shortly prior to the date on which the amount
deferred is determined. The number of shares credit to any common stock
account will be adjusted to reflect stock dividends, stock splits,
combinations or other changes.
5. A recipient may elect to have all or a portion of any award,
otherwise payable in cash, deferred and credited to a common stock account
or deferred cash account under the Plan.
6. Common stock accounts and deferred cash accounts are not
funded, but are maintained in book entry form.
7. Common stock accounts and deferred cash accounts are
credited, respectively, with dividend equivalents on full or partial shares
and interest equivalents at prime rate. Recipients may request current
payment of dividend equivalents.
8. Unless payment is accelerated by the Compensation Committee
in its discretion, common stock accounts and deferred cash accounts are
paid out over 60 quarters following termination of employment.
PROPOSED AMENDMENT
At its meeting held December 21, 1993, based upon the
recommendation of the Compensation Committee which is comprised entirely of
outside directors, the Board of Directors approved, subject to shareholder
approval, an amendment to the Incentive Compensation Plan. This amendment
provides prospectively, in lieu of performance allotments denominated in
dollars, for payment, in shares of the Company's Common Stock, of long-term
<PAGE>
incentive grants under the Plan to the extent that specified objectives set
by the Compensation Committee prior to the performance period were met or
exceeded. These shares will be valued at a price determined by applying a
compound increase to fair market value at the date of such performance
grants. The objectives include any one of, or any combination of, the
following: earnings per share, return on equity, return on assets,
economic value added, market value added and cash flow return on
investment. The effect of this amendment will be to encourage officers and
other members of the key management group to increase their equity
ownership of the Company. In addition, the value of the award of the
Company's Common Stock is tied directly not only to achievement of the
specified objectives but also to the amount of increase in the value of the
Company's Common Stock.
In addition, the Compensation Committee has set new stock
ownership guidelines for the key management group. The requirement
currently mandates that an executive must, within five years of becoming a
participant in the Plan (or by December 31, 1998, if later) acquire and
retain Company Common Stock as a multiple of base salary in the following
amounts: chief executive officer -- four times, president -- three times,
members of the Executive Committee -- two times, and all other key managers
eligible for performance shares -- one time. This requirement may be
satisfied by any combination of Company Common Stock held outright or held
as deferred compensation in a common stock account under the Incentive
Compensation Plan or held in another benefit plan. Shares subject to
currently exercisable employee options do not satisfy the requirement. In
the event that an executive to whom performance share awards are otherwise
payable, does not own common stock in the minimum amount required such
payment will be deferred, credited to a participant's common stock account
and paid out over 60 quarters following termination of employment.
The amended Plan is effective for performance share awards made
in 1994 and thereafter. Performance share awards payable in February 1998
based upon earnings per share in 1997 were granted in February 1994,
subject to shareholder approval of this Amendment. In the event the
amendment to the Incentive Compensation Plan is not approved by the
shareholders, the Company will continue to use targets based on dollar
amounts to named executive officers and other members of the executive
group under the current Plan.
If this Plan had been in effect for 1990 (the most recent year
which would have resulted in a payout for 1993), the following tabulation
summarizes the benefits or amounts which would have been received by or
allocated to each of the individuals serving as the Company's chief
executive officers and the four other most highly compensated executive
officers had those individuals been in those positions during the entire
performance period of this hypothetical illustration:
<PAGE>
NEW PLAN BENEFITS
INCENTIVE COMPENSATION PLAN HYPOTHETICAL ILLUSTRATION
NAME AND POSITION NO. OF VALUE OF
PERFORMANCE STOCK PRICE PERFORMANCE
SHARES AT PAYOUT SHARES
----------------- ----------- ----------- -----------
A.J. Costello 5,714 $51.868 $291,883
Chairman and CEO
F.V. AtLee 3,428 $51.868 $175,861
President
D.R. Bethune 1,584 $51.868 $76,886
Group Vice President
T.B. Martin 1,584 $51.868 $76,886
Vice President and CFO
W.J. Murray 1,584 $51.868 $76,886
Group Vice President
G.J. Sella, Jr. 0 ----- 0
Retired Chairman and CEO
Executive Officers 15,158 $51.868 $774,889
Non-Executive Director
Group 0 ----- 0
All Officers and Other
Members of Executive
Group 31,779 $51.868 $1,622,877
VOTE REQUIRED
The affirmative note of the holders of a majority of all
outstanding shares of common stock entitled to vote thereon is necessary
for approval of the amendment to the Incentive Compensation Plan. The
Board of Directors recommends that the shareholders vote FOR the approval
of the amendment to the Incentive Compensation Plan.
<PAGE>
EXECUTIVE COMPENSATION
The following tabulation summarizes compensation paid to the
Chief Executive Officers (CEO) and the four other most highly compensated
executive officers for services rendered in all capacities in 1991, 1992
and 1993 to the Company and its subsidiaries:
<TABLE>
SUMMARY COMPENSATION TABLE
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------
AWARDS PAYOUTS
ANNUAL --------------------- ---------
COMPENSATION SECURITIES LONG-
(1)(2) RESTRICTED UNDERLYING TERM
--------------- STOCK OPTIONS/ INCENTIVE ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS AWARDS(3) SARS PAYOUTS COMPENSATION(4)
- --------------------------- ---- ------ ----- --------- ---------- --------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
A.J. Costello
Chairman and CEO 1993 $525,000 $329,649 $0 43,500 $214,190 $7,075
President 1992 $450,000 $380,971 $0 18,278 $278,025 $6,866
President 1991 $410,000 $261,117 $0 18,500 $285,286
F.V. AtLee
President 1993 $443,750 $268,197 $0 20,900 $145,196 $7,075
Executive Vice President 1992 $488,333 $266,097 $0 11,286 $221,100 $6,866
Executive Vice President 1991 $383,333 $218,617 $0 11,400 $258,375
D.R. Bethune(5)
Group Vice President 1993 $325,000 $156,660 $0 7,600 $ 84,985 $7,075
Group Vice President 1992 $300,000 $146,558 $0 4,570 $143,963 $6,866
T.B. Martin
Vice President and CFO 1993 $255,750 $121,771 $0 7,600 $ 88,954 $7,075
Vice President and CFO 1992 $240,750 $126,531 $0 6,637 $121,688 $6,866
Vice President and CFO 1991 $225,917 $116,961 $0 6,700 $ 91,152
W.J. Murray(5)
Group Vice President 1993 $245,000 $139,572 $0 7,600 $ 88,868 $7,075
Group Vice President 1992 $206,250 $95,082 $0 4,134 $134,863 $6,187
G.J. Sella, Jr.(6)
Retired Chairman and CEO 1993 $225,000 $141,559 $0 0 $328,125 $6,746
Chairman and CEO 1992 $800,333 $625,771 $0 34,000 $544,500 $6,866
Chairman and CEO 1991 $781,250 $528,120 $0 28,700 $616,125
<FN>
____________
(1) Includes amounts earned in fiscal year, whether or not deferred.
(2) There was no disclosable "Other Annual Compensation" paid, payable or accrued to any of the named executive
officers during 1993, except for Mr. Sella who has imputed income of $88,043 attributable to off-site office
expenses incurred after his retirement.
(3) No restricted stock was granted in 1991, 1992 or 1993. None of the named executive officers holds restricted
stock, except for Mr. Sella who holds 1,148 shares, all of which are awarded in 1968, 1969 and 1970. The value
of the restricted stock as of the end of the last completed fiscal year is $14,953. The restricted stock does
not carry nor is it entitled to the payment of any dividend (other than dividends in common stock of the
Company).
(4) The amount listed for each named executive officer consists entirely of Company matching contributions to the
Employee Saving Plan.
(5) Messrs. Bethune and Murray were elected executive officers of the Company in 1992.
(6) Mr. Sella retired as Chairman of the Board and Chief Executive Officer of the Company on March 31, 1993.
</TABLE>
<PAGE>
The following tabulation shows, as to the named executive
officers and as to the shareholders, information with respect to stock
options, all of which were granted with stock appreciation rights in tandem
therewith:
<TABLE>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
<CAPTION>
% OF
TOTAL
OPTIONS/
NUMBER OF SARS POTENTIAL REALIZABLE VALUE AT
SECURITIES GRANTED ASSUMED ANNUAL RATES OF STOCK
UNDERLYING TO EXERCISE PRICE APPRECIATION FOR OPTION
OPTIONS/ EMPLOYEES OR BASE TERM
SARS IN FISCAL PRICE EXPIRATION -------------------------------------
NAME GRANTED(1) YEAR(2) ($/SH.) DATE 0% 5% 10%
- ---- ---------- --------- -------- ---------- ---- -------------- --------------
<S> <C> <C> <C> <C> <C> <C> <C>
A.J. Costello 43,500 4.63% $52.00 4/19/2003 $0 $1,422,560 $3,685,045
F.V. AtLee 28,900 2.23% $52.00 4/19/2003 $0 $683,483 $1,732,079
D.R. Bethune 7,600 0.81% $52.00 4/19/2003 $0 $248,539 $629,047
T.B. Martin 7,600 0.81% $52.00 4/19/2003 $0 $248,539 $629,047
W.J. Murray 7,600 0.81% $52.00 4/19/2003 $0 $248,539 $629,047
G.J. Sella, Jr. (3) 0 0 0 -- $0 $0 $0
All Shareholders(4) -- -- -- -- $0 $2,944,168,228 $7,461,079,961
Current CEO Gain As a %
of All Shareholders -- -- -- -- 0.0% 0.048% 0.048%
Above Officers As a % of
All Shareholders -- -- -- -- 0.0% 0.097% 0.097%
All Officers As a % of
All Shareholders -- -- -- -- 0.0% 0.132% 0.132%
<FN>
________________
(1) Options covering 1,923 shares were granted as Incentive Stock Options to each of the named executive officers
and are exercisable after one year from date of grant. The remaining options are Non-Qualified Options --
one-third of which are exercisable after one year from date of grant, another one-third exercisable after two
years from date of grant and the remaining one-third exercisable after three years from date of grant. The
term of the options is ten years.
(2) Based on options covering 939,840 shares granted to a total of approximately 1,400 employees during 1993.
(3) Mr. Sella was not granted any securities, underlying options or SARs.
(4) Total dollar gains based on the assumed annual rates of appreciation shown here and calculated on 90,028,540
outstanding shares as of December 31, 1993.
</TABLE>
<PAGE>
<TABLE>
AGGREGATED OPTIONS/SAR EXERCISES IN LAST FISCAL YEAR
AND FISCAL YEAR END OPTION SAR/VALUES
<CAPTION>
NUMBER OF UNEXERCISED VALUE OF UNEXERCISED
OPTIONS/SARS HELD AT IN-THE MONEY OPTIONS/SARS AT
FISCAL YEAR END FISCAL YEAR END
SHARES --------------------------- ------------------------------
ACQUIRED VALUE
NAME ON EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE(1) UNEXERCISABLE
---- ----------- -------- ----------- ------------- -------------- -------------
<S> <C> <C> <C> <C> <C> <C>
A.J. Costello 0 $0 53,790 68,108 $36,825 $0
F.V. AtLee 0 $0 46,700 38,506 $36,825 $0
D.R. Bethune 0 $0 18,456 12,514 $4,031 $0
T.B. Martin 0 $0 18,743 12,594 $19,688 $0
W.J. Murray 0 $0 19,348 11,756 $27,844 $0
G.J. Sella,
Jr.(3) 17,192 $519,926 166,200 0 $381,713 $0
<FN>
______________
(1) Total value of options based on fair market value of Company stock of $50.1875 as of December 31, 1993. The
exercise price cannot be lowered during the term of the option.
(2) No unexercisable options/SARs were in the money at fiscal year end.
(3) All shares acquired on exercise by Mr. Sella were acquired subsequent to his retirement on March 31, 1993.
</TABLE>
<TABLE>
LONG-TERM INCENTIVE PLANS - AWARDS IN LAST FISCAL YEAR
<CAPTION>
NUMBER OF PERFORMANCE OR ESTIMATED FUTURE PAYOUTS
SHARES, UNITS OTHER PERIOD UNDER NON-STOCK PRICE-BASED PLANS
OR OTHER UNTIL MATURATION -----------------------------------------------
NAME RIGHTS(1) OR PAYOUT THRESHOLD TARGET MAXIMUM
---- ------------- ---------------- --------- -------- --------
<S> <C>
A.J. Costello $463,125 4 years $2,286 $463,125 $926,250
F.V. AtLee $278,438 4 years $1,615 $278,438 $556,876
D.R. Bethune $125,000 4 years $725 $125,000 $250,000
T.B. Martin $125,000 4 years $725 $125,000 $250,000
W.J. Murray $125,000 4 years $725 $125,000 $250,000
G.J. Sella, Jr. $475,000 4 years $861 $148,438 $296,876
<FN>
_______________
(1) Performance Allotments are granted, the payment of which is predicated upon the achievement of corporate
performance goals, specifically earnings per share in the last year of the performance period. The
achievement of approximately 66% of this goal will result in payment of the threshold amount, 100% of goal
in payment of the target amount, while attaining approximately 120% of the goal will result in payment of
the maximum amount. No payment will be made if less than 66% of the goal is achieved. The Compensation
Committee of the Board of Directors may adjust the goal, in its discretion, at any time prior to the end
of the first quarter of the final year of the performance period.
</TABLE>
<PAGE>
BOARD COMPENSATION COMMITTEE REPORT
The Company's executive compensation policies for its officers
are part of its Salary Administration Program which is applicable to all
salaried employees. Under this Program, it is solely the responsibility of
the Compensation Committee of the Board of Directors, which is comprised
entirely of outside directors, to set an officer's annual compensation by
determining his or her base salary and short-term and long-term target
incentive levels and actual incentive payments. The Compensation Committee
believes that the Company's competition for executive talent is not limited
to those companies identified in the Performance Graph as the combined
indices of Standard & Poor's Healthcare Diversified Index and Chemicals
Index. In order to ensure that the Company's compensation levels are
competitive, the Company uses both peer group surveys and surveys provided
by independent compensation consultants such as TPF&C, a Towers Perrin
Company, to determine the market criteria for its officers. The consultant
surveys include executive compensation surveys for companies with sales of
$3 billion to $6 billion and pharmaceutical/consumer goods surveys. The
sixteen companies in the peer group (other than the Company) that are
surveyed individually were selected by the Compensation Committee because
they are major competitors in the pharmaceutical and agricultural chemical
industries: Abbott Laboratories, Bristol-Myers Squibb Company, Ciba-Geigy
Corporation, E. I du Pont de Nemours and Company, Eli Lilly and Company,
Glazo Inc., Johnson & Johnson, Merck and Co., Inc., Monsanto Company,
Pfizer Inc., Rhone-Poulenc Rorer Inc., Schering-Plough Corporation,
SmithKline Beecham Corporation, The Upjohn Company, Warner-Lambert Company,
and Wyeth-Ayerst Laboratories. Survey data is analyzed and the entire
compensation structure for each officer is measured to ensure peer
competitiveness. Once these market criteria have been determined, the
objective of the Compensation Committee is to ensure that executive
compensation is closely tied to shareholder value. To achieve that
objective, the Committee sets base salary somewhat below the average of its
surveys and uses an incentive structure that provides above average
compensation for excellent growth in shareholder value and below average
compensation for less than average growth. The Committee takes into
consideration the recommendations of management. This places more emphasis
on the incentive portion of the compensation plan.
BASE SALARY
In determining base salary under the Salary Administration
Program, each position in the Company is assigned a "job level" and each
level is assigned a range of base salaries, based on the average paid base
salary rates in the competitor comparison described above, with base salary
midpoints being set somewhat below the average of the competitor group.
Individual salary within the range is a function of experience and
performance. The Compensation Committee considers the competitiveness of
the entire compensation package when determining base salary ranges. A
major element of this determination is the base salary ranges of the
competitor companies. Individual performance is not weighed in setting
base salary ranges. The determination of individual salaries for the named
<PAGE>
executive officers within these ranges is based upon competitive data and
the individual executive's contributions.
ANNUAL INCENTIVE COMPENSATION
The Salary Administration Program also provides short-term
incentives in the form of annual cash incentives. The target level for the
annual incentives is set as a percentage of individual salary for each
eligible employee. This percentage increases as the job level increases;
thus, for higher level employees, such as officers, annual incentives will
constitute a greater portion of total compensation. As in the case of base
salary, the target levels for named executive officers and other members of
the executive group are set somewhat below the average of the competitor
group for average performance with the opportunity to earn well above the
average for above average performance. This places emphasis on excellent
performance. The actual amount of a named executive officer's current
annual incentive is determined by the Compensation Committee based on an
evaluation of individual performance, which would include the achievement
of established budget targets, the development of personnel, the
achievement of strategic management goals, new product introductions and
the extent to which earnings objectives have been met. Once an
individual's annual incentive has been determined, it is subject to an
overall companywide adjustment directly relating to the extent to which the
Company met, exceeded or fell short of its overall earnings per share
target for compensation purposes as set each year by the Compensation
Committee. Annual incentives may range from 0 to 200% of target based upon
successfully achieving pre-determined goals and individual performance. If
a named executive officer's performance fails to meet minimum requirements,
he or she will receive no annual incentive. The Compensation Committee has
the power to adjust the earnings per share target upward or downward. Its
policy is to do so only in consideration of unusual events not related
solely to current year operations. In 1993, earnings per share targets
were adjusted for both the annual incentive plan and the long-term
incentive plan (as described below) to exclude the financial impact of (i)
the cumulative effect of accounting changes pertaining to adoption by the
Company of Statement of Financial Accounting Standards No. 106,
'Employer's Accounting for Postretirement Benefits Other Than Pensions' and
Statement of Financial Accounting Standards No. 109, 'Accounting for Income
Taxes'; (ii) the global, companywide restructuring of the Company's
businesses, primarily the medical business; (iii) discontinued operations
related to the spin-off of the Company's chemicals and plant food
businesses; and (iv) the one-time costs and charges associated with
transactional matters such as the write-off of acquired in-process research
and development resulting from the acquisition of 53.5% of Immunex
Corporation.
LONG-TERM INCENTIVE COMPENSATION
The long-term portion of incentive compensation consists of
performance allotments denominated in dollars and stock option grants.
Performance allotment target levels for named executive officers and other
members of the executive group are set somewhat below the average of the
competitor group, again to place emphasis on excellent performance. The
<PAGE>
payout of performance allotments is determined solely by the extent to
which the Company's earnings growth over a four-year performance period
(currently as measured by earnings per share in the fourth year) meets,
exceeds or falls short of performance targets established by the
Compensation Committee at the beginning of the performance period. (See
Amendment to the Incentive Compensation Plan.) To provide incentives for
outstanding performance, awards of performance allotments may range from 0
to 200% of target based solely upon earnings per share achievement in the
fourth year of the performance period. The payout of performance
allotments will only be made provided the named executive officer or other
member of the executive group remains an employee for the entire
performance period, unless the Compensation Committee determines otherwise.
The named executive officers and other key employees also receive
annual grants of stock options covering the Company's Common Stock. The
number of options granted is based upon a valuation of option grants by
competitor companies and is set somewhat below the average of the
competitor group. The price of the option is based on the market price at
the date of grant and the number of options granted is determined by the
individual's job level. The extent to which the individual realizes any
gain is, therefore, directly related to increases in the price of the
Company's Common Stock and hence, the increase in shareholder value, during
the period of the option.
The Company will present to the shareholders a proposal to amend
the Incentive Compensation Plan to grant performance shares instead of
dollar amounts. In the event the Amendment to the Incentive Compensation
Plan is not approved by the shareholders, the Company will continue to use
targets based on dollar amounts to named executive officers and other
members of the executive group under the current Plan.
The Omnibus Budget Reconciliation Act of 1993 added Section
162(m) to the Internal Revenue Code. Section 162(m) limits the
deductibility of compensation paid to top executives of public companies to
$1,000,000, unless it is directly tied to specific performance goals
previously approved by shareholders. This cap applies to all compensation
paid in taxable years beginning on or after January 1, 1994. The
transition rules applicable to Section 162(m) provide transition relief to
plans already approved by shareholders. This transition relief will last
until the date the plan is materially modified, the date it expires, the
date all the stock is issued under it or the first shareholder meeting
after December 31, 1996.
The Company has not determined whether to exempt either base
salary or annual cash incentive from Section 162(m) of the Internal Revenue
Code. It is not anticipated that base salary and annual cash incentive of
any of the named executive officers will exceed $1,000,000 in 1994. The
Company believes that its stock option and long-term incentive plans comply
with the transition rules applicable to Section 162(m).
<PAGE>
In determining Mr. Costello's base salary for 1993, the
Compensation Committee set his salary in the lowest quartile of the peer
group companies previously specified because of his recent promotion and
short tenure in the position.
Each year, the Compensation Committee establishes a corporate
earnings per share objective for the purpose of determining annual current
incentive compensation for named executive officers and other key
employees. (The five-year history of the earnings per share actually
achieved is detailed in the Performance Graph section.) At year's end,
performance against this and other non-financial objectives such as
progress in accomplishing strategic restructuring plans is evaluated by the
Compensation Committee for the Chief Executive Officer and each of the
named executive officers.
For 1993, the Compensation Committee determined that the major
performance objectives have been met or exceeded by the Chief Executive
Officer and the other named executive officers. These objectives included
the spin-off of the Company's chemicals and plant food businesses by
distributing all the outstanding shares of Common Stock of Cytec Industries
Inc., the acquisition of 53.5% of Immunex Corporation, the acquisition of
Shell Petroleum Company Limited international crop protection business,
initiation of the strategic restructuring of the Company's businesses,
primarily the medical business, and substantially meeting budgeted
continuing operations objectives even in a difficult economic environment.
As a result annual incentive compensation was awarded to the Chief
Executive Officer in the amount of 103% of target and for other named
executive officers between 103% and 124% of target. All named executive
officers (and all other persons receiving performance allotment payouts)
received a performance allotment payout at 75% of target as detailed in the
Summary Compensation Table. The below target payout was the result of
lower earnings than the objective that had been established at the time of
grant (1990). Options granted in early 1993 were based upon the competitor
surveys and are detailed in the Summary Compensation Table.
Compensation Committee
David M. Culver
Allan B. Dragone
Morris Tanenbaum, Chairman
EMPLOYMENT AGREEMENTS
All salaried employees of the Company including the named
executive officers sign an employment agreement on the Company's standard
form. Each agreement provides for the initial salary the Company shall pay
to the employee for the services performed by the employee, the
confidentiality and non-use of information which is proprietary to the
Company, assignment of inventions and improvements which the employee may
invent or produce and termination of employment by both the employee and
the Company. The notice of termination period for salaried employees
including the named executive officers ranges from one month to six months
(depending on the standard form in use at the time), except in the case of
<PAGE>
termination for cause, when no prior notice is required. The agreement
provides that, for one year after termination of employment with the
Company, the employee shall not engage in work or other activity involving
a product or process similar to a product or process on which he or she
worked for the Company at any time during the period of two years
immediately prior to termination of employment, if such work or activity is
then competitive with that of the Company, unless otherwise given a release
in writing by an officer of the Company to engage in such work or activity.
In certain circumstances, the Company may be obligated to continue paying
the former employee his or her base salary in order to invoke the non-
competition provisions.
The Board of Directors has adopted an executive income continuity
plan to reinforce and encourage the continuing attention, dedication and
loyalty of executives in the senior management group without the
distraction of concern over the possibility of involuntary or constructive
termination of employment resulting from unforeseen developments, by
providing income continuity for a limited period. The plan provides for
payments to members upon termination of employment, unless such termination
is (i) on account of death or retirement, (ii) by the Company for
disability or cause, or (iii) by the member without good reason (as defined
in the plan -- generally, actions by the Company inconsistent with the
participant's status or with the Company's traditional compensation
policies). Members of the plan consist of the chairman, the president, the
corporate vice presidents, and such other employees as are designated by
the Executive Committee. In general, the plan provides for payments upon
termination of employment, in the case of the executive officers, and in
the case of other members meeting certain age and service requirements, of
two times annual salary plus two times target annual incentive (current
allotment under the Incentive Compensation Plan), in 24 monthly
installments, and in the case of other members annual salary plus target
annual incentive, in 12 monthly installments. The plan also provides for
certain miscellaneous payments, including relocation payments, legal fees,
and expenses incurred in seeking new employment. The benefits of this Plan
are not available to any employee who is then currently eligible to receive
a benefit under the Supplemental Employees Retirement Plan or, in any
event, for any period beyond the employee' sixty-fifth birthday.
Under agreements approved by the Compensation Committee and the
Board of the Directors, if any one of a number of events potentially
affecting the control of the Company occurs, all deferred stock awards and
deferred cash awards held by certain members of key management (including
all persons named in the Summary Compensation Table) will be cancelled and
the fair market value thereof will be paid promptly in cash, and the
Compensation Committee may authorize payment, to the extent it deems
equitable, of outstanding performance allotments held by such persons.
The Board of Directors has adopted a Compensation Taxation
Equalization Plan providing for the payment to any employee, officer or
director who becomes subject to the tax imposed by Section 4999 of the
Internal Revenue Code of reimbursement for the tax, plus all taxes imposed
upon the reimbursement. A 20% excise tax applies to compensatory payments
(i) the present value of which equals or exceeds three times the 'base
<PAGE>
amount' of the recipient, and (ii) that are contingent upon change 'in the
ownership or effective control' of the Company. The 'base amount' is the
average annual compensation included in taxable income over the five-year
period ending before the year during which the change in the ownership or
effective control occurs.
COMPENSATION UNDER RETIREMENT PLAN
The following Pension Plan Table shows the estimated aggregate
annual benefits payable under the Company's retirement program consisting
of the Employees Retirement Plan, ERISA Excess Retirement Plan and
Supplemental Employees Retirement Plan, assuming retirement at or projected
to age 65 (normal retirement age) to persons in the earnings ranges
recognized for pension purposes, and with the number of years credited for
purposes of pension benefits shown, on a single life annuity basis:
<TABLE>
PENSION PLAN TABLE
<CAPTION>
EMPLOYEE'S YEARS OF SERVICE
ANNUAL ----------------------------------------------------------------------------------------------
EARNINGS USED
FOR
COMPUTATION
OF BENEFITS 15 YEARS 20 YEARS 25 YEARS 30 YEARS 35 YEARS 40 YEARS 45 YEARS
- ----------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$200,000 $ 50,100 $ 66,000 $ 83,500 $100,280 $116,900 $133,600 $158,380
$250,000 $ 62,625 $ 83,500 $104,375 $125,250 $146,125 $167,800 $187,875
$350,000 $ 87,675 $116,900 $146,125 $175,350 $284,575 $233,880 $263,825
$450,000 $112,725 $158,300 $187,875 $225,450 $263,025 $308,680 $338,175
$550,000 $137,775 $183,700 $229,625 $275,550 $321,475 $367,480 $413,325
$650,000 $162,825 $217,100 $271,375 $325,650 $379,925 $434,200 $488,475
$750,000 $187,875 $250,500 $313,125 $375,750 $438,375 $501,800 $563,625
$850,000 $212,925 $283,900 $354,875 $625,850 $496,825 $567,800 $638,775
$950,000 $237,975 $317,300 $396,625 $475,950 $555,275 $634,600 $713,925
</TABLE>
Amounts shown in the above table would be reduced by a portion of
primary social security payments for which a person would be eligible at
age 65. In addition, the normal form of benefit payment under the program
would require the further reduction of amounts above in the table pursuant
to an actuarially based formula to provide a benefit to a surviving spouse
upon the employee's death following retirement equal to 50% of the reduced
benefit.
<PAGE>
Compensation included in the Pension Plan Table consists of the
base salaries and target portion of the bonus (annual cash incentive)
reported for the named executive officers in the Summary Compensation
Table. Mr. Martin receives a pension differential, provided he is in the
employ of the company when he reaches the age of 68, equal to the amount by
which the pension Mr. Martin is entitled to receive from the Company's
Employee Retirement Plan and Supplemental Employees Retirement Plan, if
elected a member, is less than 40% of his average earnings during the three
years out of the final 18 years of his employment during which such
earnings are the highest, provided that he shall elect to have his pension
commence immediately upon retirement.
The Company's retirement program for employees consists of its
Employee Retirement Plan, an actuarially funded plan subject to the
provisions of the Employees Retirement Income Security Act of 1974, as
amended (ERISA), and its unfunded ERISA Excess Retirement Plan and
Supplemental Employees Retirement Plan, both of which are exempt from
certain of the provisions of ERISA. All of the plans are non-contributory
defined benefit plans. The unfunded plans for active employees have
related 'Rabbi' trusts (i.e.; trusts the assets of which remain available
to satisfy claim of the Company's creditors) which have not been funded.
The Company has no current plans for funding these trusts.
The Board of Directors has authorized 'Rabbi' trust agreements to
fund benefits payable to certain currently retired employees under the
Supplemental Employees Retirement Plan and the ERISA Excess Plan. One
trust has been funded through the purchase of annuities. the other has not
yet been established.
The Employees Retirement Plan covers all domestic employees of
the Company and the employees of many of its domestic subsidiaries.
Retirement benefits are determined by aggregating percentages of earnings
(as defined) throughout an individual's career, but retirement benefits so
calculated are subject to a minimum of 1.57% of average annual earnings (as
defined) paid in cash for those five calendar years of the employee's final
ten calendar years of employment in which the employee's earnings were the
highest, multiplied by the employee's number of years of service, reduced
by a partial social security offset. Since this plan is subject to ERISA,
there are maximum limitations on pensions payable. There is no actuarial
reduction for early retirement at age 62 or older after twenty years of
service. Employees are 100% vested after five years of service. If the
plan is terminated, or merged with another plan, within three years
following a 'change in control' (as defined in the plan), any remaining
funds, after providing for all fixed and contingent liabilities, must be
applied to provide proportionately increased benefits to participants.
The ERISA Excess Retirement Plan provides a supplemental pension
for all affected employees equal to the difference between the pension as
calculated under the Employees Retirement Plan (without reference to the
ERISA maximum limitation) and the lower maximum pension permitted under
federal law to be paid from the Employees Retirement Plan.
<PAGE>
In addition, the Compensation Committee of the Board of Directors
may elect an employee a member of the Supplemental Employees Retirement
Plan. A member of the Supplemental Employees Retirement Plan is entitled
upon retirement (but not before the first day of the month following the
member's 60th birthday or such earlier date as may be determined by the
Compensation Committee, in the case of officers, or by the Executive
Committee, in the case of other members) to a supplemental pension equal to
the difference between the aggregate pensions payable under the Employees
Retirement Plan and the ERISA Excess Retirement Plan and an amount
calculated in the same manner as is the pension under the Employees
Retirement Plan, but without regard to the limitations on maximum pensions
mandated by ERISA, and with the following modifications: (i) for pension
calculation purposes, such member is deemed to have continued employment
and earnings for five additional years, but not beyond age 65 unless a
different period is specified by the Compensation Committee (in the case of
officers) or the Executive Committee (in the case of other members), and
(ii) average annual earnings are those for the highest three of the last
ten years (including years in which such member is deemed to have continued
earnings and employment under clause (i), above).
These plans provide for normal post-retirement payment options
and for normal survivors' benefit options in the event of death prior to
retirement, including a Company-paid surviving spouse benefit. Survivors'
benefits for members of the Supplemental Employees Retirement Plan and for
those included in groups specified by the Compensation Committee or the
Executive Committee and who meet specified age and service requirements,
are based on service determined as described in the preceding paragraph,
with additional service credited of five years but not beyond age 65.
Earnings, as utilized for the retirement program, consist of (i)
regular fixed compensation for the employee's normal work period in the
form of salary or wages (prior to reduction on account of any election
specified in Sections 125, 127, 129 or 401(k) of the Internal Revenue
Code); (ii) extra compensation or cash awards customarily paid to full time
salesmen or sales representatives whether or not based on sales; and (iii)
incentive compensation (other than performance allotments) paid in cash
under any incentive compensation plan adopted by the Board during each
calendar year up to a maximum amount of 33-1/3% of such regular fixed
compensation for each such calendar year. Under the Supplemental Employees
Retirement Plan, a member is credited, for the year of retirement or death
during employment and for subsequent years for which an employee is deemed
to have continued employment and earnings, with 100% of the target
incentive compensation (excluding performance allotments) applicable to
such member's salary level as of the date of such member's retirement or
death, in lieu of any credit under clause (iii) above for such years.
Covered earnings for 1993 (salary rate at September 1, 1993, plus covered
incentive compensation accrued in 1992 and paid in 1993, with years of
service through 1993) for the four persons named in the Summary
Compensation Table who are not members of the Supplemental Employees
Retirement Plan were approximately: Mr. AtLee $600,000 (27 years); Mr.
Bethune $426,667 (24 years); Mr. Martin $342,667 (5 years); and Mr. Murray
$340,000 (25 years). Covered earnings for the person named in the Summary
Compensation Table who is a member of the Supplemental Employees Retirement
<PAGE>
Plan, which would have been utilized had be retired at December 31, 1993,
assuming the Compensation Committee took no action to designate a period
ending prior to age 65 during which they would be deemed to have continued
employment with the same earnings (with years of service projected to age
65), would have been Mr. Costello $880,000 (43 years).
DIRECTORS' COMPENSATION
Directors who are employees are not entitled to extra
compensation by reason of their directorships or their attendance at
meetings of the Board, any committee thereof, or of the shareholders.
Directors who are not employees of the Company or of any of its
subsidiaries are paid a retainer of $20,000 per year. Such directors also
receive annual retainers while chairmen ($4,000 each, except Nominating,
$2,000) or members ($2,000 each, except Nominating, $1,000) of committees
of the Board. Each such director is also paid a fee of $1,000 for
attendance at a meeting of the Board and the committee meetings on the same
day, and $500 for attendance on any other day at committee meetings or at a
meeting of shareholders.
Pursuant to the Restricted and Deferred Stock Plan for Non-
Employee Directors, non-employee directors receive an annual grant of 200
shares of Common Stock on the date of each annual meeting of shareholders,
either in the form of restricted stock (with restrictions lapsing after the
next annual meeting) or as deferred stock (with restrictions lapsing after
the next annual meeting, but which is distributed in the year following
termination of Board service). A person who becomes a non-employee
director between annual meetings will receive a pro-rated grant, but if a
grant would be less than 40 shares no grant will be made.
Under an arrangement available to all non-employee directors,
compensation for services as a director may be deferred until after
retirement from the Board, when it will be paid together with interest
equivalents accrued at the prime lending rate during the period of
deferral. No director deferred his or her director's fees in 1993 under
such arrangement.
Under the Non-Employee Directors Retirement Plan, a person who
has both been a director and not been an employee for at least thirty-six
months is entitled, upon termination of membership on the Board of
Directors at retirement age (as determined under policies of the Board from
time to time) or for other reasons contemplated by the Plan (including
circumstances related to a 'change in control', as defined), to an annual
benefit equal to the then current retained paid to non-employee directors
(exclusive of retainers paid for chairmanship of or membership on any
committee of the Board) plus the value of the most recent grant under the
Restricted and Deferred Stock Plan for Non-Employee Directors, in quarterly
installments for a period of time equal to the number of calendar quarters
(not in excess of 40) during which such person was a director and not an
employee of the Company or any subsidiary. This unfunded plan has a
related 'Rabbi' trust which is not funded. The Company has no current
plans for funding this trust.
<PAGE>
Other personal benefit-type compensation for the entire group of
directors and officers is not individually significant or reportable.
EXHIBIT 3
Article IV
Indemnification.
SECTION 4.01. Indemnification.
---------------
(1) The Company shall in all cases indemnify any person who was
or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative, by reason of the fact that that person is
or was a director, officer, employee or agent of the Company, or is or was
serving at the request of the Company as a director, officer, trustee,
partner, fiduciary, employee or agent of another corporation, partnership,
joint venture, trust, pension or other employee benefit plan or other
enterprise, against expenses, including attorneys' fees, judgments, fines
and amounts paid in settlement actually and reasonably incurred by that
person in connection with such action, suit or proceeding; provided that no
indemnification may be provided for any person with respect to any matter
as to which that person shall have been finally adjudicated:
(A) Not to have acted honestly or in the reasonable belief that
that person's action was in or not opposed to the best interests of
the Company or its shareholders or, in the case of a person serving as
a fiduciary of an employee benefit plan or trust, in or not opposed to
the best interests of that plan or trust, or its participants or
beneficiaries; or
(B) With respect to any criminal action or proceeding, to have
had reasonable cause to believe that that person's conduct was
unlawful.
The termination of any action, suit or proceeding by judgment,
order or conviction adverse to that person, or by settlement or plea of
nolo contendere or its equivalent, shall not of itself create a presumption
that that person did not act honestly or in the reasonable belief that that
person's action was in or not opposed to the best interests of the Company
or its shareholders or, in the case of a person serving as a fiduciary of
an employee benefit plan or trust, in or not opposed to the best interests
of that plan or trust or its participants or beneficiaries and, with
respect to any criminal action or proceeding, had reasonable cause to
believe that that person's conduct was unlawful.
(2) Any provision of subsection (1) to the contrary
notwithstanding, to the extent that a director, officer, employee or agent
of the Company has been successful on the merits or otherwise in defense of
any action, suit or proceeding referred to in subsection (1), or in defense
of any claim, issue or matter therein, that director, officer, employee or
agent shall be indemnified against expenses, including attorneys' fees,
actually and reasonably incurred by that director, officer, employee or
agent in connection therewith.
<PAGE>
(3) In the case of a person entitled to indemnification under
subsection 1, expenses incurred in defending a civil, criminal,
administrative or investigative action, suit or proceeding shall in all
cases be authorized and promptly paid by the Company, even in advance of
the final disposition of that action, suit or proceeding upon receipt by
the Company of:
(A) A written undertaking by or on behalf that person to repay
that amount if that person is finally adjudicated:
(i) Not to have acted honestly or in the reasonable belief that
that person's action was in or not opposed to the best
interests of the Company or its shareholders or, in the case
of a person serving as a fiduciary of an employee benefit
plan or trust, in or not opposed to the best interests of
such plan or trust or its participants or beneficiaries;
(ii) With respect to any criminal action or proceeding, to have
had reasonable cause to believe that the person's conduct
was unlawful; or
(iii) With respect to any claim, issue or matter asserted in
any action, suit or proceeding brought by or in the
right of the Company, to be liable to the Company,
unless the court in which that action, suit or
proceeding was brought permits indemnification in
accordance with subsection 2; and
(B) A written affirmation by that person that the person has met
the standard of conduct necessary for indemnification by the Company
as authorized in this Article IV.
The undertaking required by paragraph A shall be an unlimited
general obligation of the person seeking the advance, but need not be
secured and may be accepted without reference to financial ability to make
the repayment.
(4) The indemnification and entitlement to advances of expenses
provided by this Article IV shall not be deemed exclusive of any other
rights to which those indemnified may be entitled under any agreement, vote
of stockholders or disinterested directors or otherwise, both as to action
in that person's official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has ceased
to be a director, officer, employee, agent, trustee, partner or fiduciary
and shall inure to the benefit of the heirs, executors and administrators
of such a person.
(5) The Company shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of
the Company as a director, officer, trustee, partner, fiduciary, employee
or agent of another corporation, partnership, joint venture, trust, pension
or other employee benefit plan or other enterprise against any liability
<PAGE>
asserted against that person and incurred by that person in any such
capacity, or arising out of that person's status as such, whether or not
the Company would have the power to indemnify that person against such
liability under this Article IV.
(6) Amendment, alteration or repeal of this Article IV shall not
have the effect of reducing or disallowing indemnification or entitlement
to advances with respect to any occurrence, transaction, other course of
conduct or failure to act which shall have occurred prior to the date of
such amendment, alteration or repeal.
(7) For purposes of this Article IV, references to "the Company"
shall include, in addition to the surviving corporation or new corporation,
any participating corporation in a consolidation or merger.
EXHIBIT 4
CONFORMED COPY
__________________________________________________________
AGREEMENT AND PLAN OF MERGER
Among
AMERICAN HOME PRODUCTS CORPORATION,
AC ACQUISITION CORP.
and
AMERICAN CYANAMID COMPANY
Dated August 17, 1994
__________________________________________________________
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE I
THE OFFER
SECTION 1.1 The Offer . . . . . . . . . . . . . . . . . 2
SECTION 1.2 Company Action . . . . . . . . . . . . . . 3
ARTICLE II
THE MERGER
SECTION 2.1 The Merger . . . . . . . . . . . . . . . . 4
SECTION 2.2 Effective Time . . . . . . . . . . . . . . 4
SECTION 2.3 Effects of the Merger . . . . . . . . . . . 5
SECTION 2.4 Articles of Incorporation; By-Laws . . . . 5
SECTION 2.5 Directors and Officers . . . . . . . . . . 5
SECTION 2.6 Conversion of Securities . . . . . . . . . 6
SECTION 2.7 Treatment of Employee Options . . . . . . . 6
SECTION 2.8 Dissenting Shares and Section 910
Shares . . . . . . . . . . . . . . . . . 6
SECTION 2.9 Surrender of Shares; Stock Transfer
Books . . . . . . . . . . . . . . . . . . 7
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
SECTION 3.1 Organization and Qualification;
Subsidiaries . . . . . . . . . . . . . . 9
SECTION 3.2 Articles of Incorporation and By-Laws . . 10
SECTION 3.3 Capitalization . . . . . . . . . . . . . 10
SECTION 3.4 Authority Relative to This Agreement . . 11
SECTION 3.5 No Conflict; Required Filings and
Consents . . . . . . . . . . . . . . . 12
SECTION 3.6 Compliance . . . . . . . . . . . . . . . 13
SECTION 3.7 SEC Filings; Financial Statements . . . . 13
SECTION 3.8 Absence of Certain Changes or Events . . 15
SECTION 3.9 Absence of Litigation . . . . . . . . . . 15
SECTION 3.10 Employee Benefit Plans . . . . . . . . . 16
SECTION 3.11 Tax Matters . . . . . . . . . . . . . . . 16
SECTION 3.12 Environmental Matters . . . . . . . . . . 17
SECTION 3.13 Intellectual Property . . . . . . . . . . 19
SECTION 3.14 Offer Documents; Proxy Statement . . . . 19
SECTION 3.15 Rights Agreement . . . . . . . . . . . . 20
SECTION 3.16 Brokers . . . . . . . . . . . . . . . . . 20
SECTION 3.17 Offer Conditions. . . . . . . . . . . . . 21
-i-
<PAGE>
Page
----
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
SECTION 4.1 Corporate Organization . . . . . . . . . 21
SECTION 4.2 Authority Relative to This Agreement . . 21
SECTION 4.3 No Conflict; Required Filings and
Consents . . . . . . . . . . . . . . . 21
SECTION 4.4 Offer Documents; Proxy Statement . . . . 22
SECTION 4.5 Financing. . . . . . . . . . . . . . . . 23
SECTION 4.6 Brokers . . . . . . . . . . . . . . . . . 23
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company
Pending the Merger . . . . . . . . . . 23
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Shareholders Meeting . . . . . . . . . . 26
SECTION 6.2 Proxy Statement . . . . . . . . . . . . . 27
SECTION 6.3 Company Board Representation; Section
14(f) . . . . . . . . . . . . . . . . . 27
SECTION 6.4 Access to Information; Confidentiality . 28
SECTION 6.5 No Solicitation of Transactions . . . . . 29
SECTION 6.6 Employee Benefits Matters . . . . . . . . 30
SECTION 6.7 Directors' and Officers' Indemnification
and Insurance . . . . . . . . . . . . . 33
SECTION 6.8 No Amendment to the Rights Agreement;
Redemption . . . . . . . . . . . . . . 33
SECTION 6.9 Further Action; Reasonable Best Efforts . 33
SECTION 6.10 Public Announcements . . . . . . . . . . 34
SECTION 6.11 Notice Pursuant to Section 910 . . . . . 34
SECTION 6.12 Taxes . . . . . . . . . . . . . . . . . . 34
SECTION 6.13 Disposition of Litigation. . . . . . . . 34
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party
to Effect the Merger . . . . . . . . . 35
ARTICLE
VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination . . . . . . . . . . . . . . . 35
SECTION 8.2 Effect of Termination . . . . . . . . . . 37
-ii-
<PAGE>
SECTION 8.3 Fees and Expenses . . . . . . . . . . . . 37
SECTION 8.4 Amendment . . . . . . . . . . . . . . . . 39
SECTION 8.5 Waiver . . . . . . . . . . . . . . . . . 39
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations,
Warranties and Agreements . . . . . . . 39
SECTION 9.2 Notices . . . . . . . . . . . . . . . . . 39
SECTION 9.3 Certain Definitions . . . . . . . . . . . 40
SECTION 9.4 Severability . . . . . . . . . . . . . . 41
SECTION 9.5 Entire Agreement; Assignment . . . . . . 42
SECTION 9.6 Parties in Interest . . . . . . . . . . . 42
SECTION 9.7 Governing Law . . . . . . . . . . . . . . 42
SECTION 9.8 Headings . . . . . . . . . . . . . . . . 42
SECTION 9.9 Counterparts . . . . . . . . . . . . . . 42
Annex A - Offer Conditions
Schedule 5.1(f) - Certain Permitted Payments
-iii-
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated August 17, 1994
(the "Agreement"), among AMERICAN HOME PRODUCTS CORPORATION, a
---------
Delaware corporation ("Parent"), AC ACQUISITION CORP., a Delaware
------
corporation and a wholly owned subsidiary of Parent
("Purchaser"), and AMERICAN CYANAMID COMPANY, a Maine corporation
---------
(the "Company").
-------
WHEREAS, Purchaser has outstanding an offer (such offer
as amended pursuant to this Agreement is hereinafter referred to
as the "Offer") to purchase all of the outstanding shares of
-----
Common Stock, $5.00 par value per share, of the Company (the
"Company Common Stock"; all of the outstanding shares of Company
--------------------
Common Stock being hereinafter collectively referred to as the
"Shares") and the associated Preferred Stock Purchase Rights (the
------
"Rights") issued pursuant to the Rights Agreement dated as of
------
March 10, 1986, as amended as of April 29, 1986, as of April 21,
1987 and as of the date hereof, between the Company and Mellon
Bank, N.A., as successor Rights Agent (the "Rights Agreement"),
----------------
at a purchase price of $95 per Share (and associated Right) net
to the seller in cash, without interest thereon, upon the terms
and subject to the conditions set forth in the Offer to Purchase
dated August 10, 1994, and in the related letter of transmittal;
WHEREAS, in consideration of the Company's entering
into this Agreement, Parent is willing to cause Purchaser to
increase the price to be paid pursuant to the Offer to $101 per
Share (such amount being hereinafter referred to as the ("Per
---
Share Amount");
- ------------
WHEREAS, the Board of Directors of the Company has (i)
determined that the consideration to be paid for each Share in
the Offer and in the Merger (as defined below) is fair to and in
the best interests of the shareholders of the Company, (ii)
approved this Agreement and the transactions contemplated hereby
and (iii) resolved to recommend acceptance of the Offer and the
Merger and approval of this Agreement by such shareholders; and
WHEREAS, the Board of Directors of Parent and Purchaser
have each approved the merger (the "Merger") of Purchaser with
------
the Company in accordance with the Business Corporation Act of
the State of Maine ("Maine Law") and the General Corporation Law
---------
of the State of Delaware ("Delaware Law") upon the terms and
------------
subject to the conditions set forth herein.
NOW, THEREFORE, in consideration of the foregoing and
the mutual covenants and agreements herein contained, and
intending to be legally bound hereby, Parent, Purchaser and the
Company hereby agree as follows:
<PAGE>
2
ARTICLE I
THE OFFER
SECTION 1.1 The Offer. (a) Provided that this
---------
Agreement shall not have been terminated in accordance with
Section 8.1 and no event shall have occurred and no circumstance
shall exist which would result in a failure to satisfy any of the
conditions or events set forth in Annex A hereto (the "Offer
-----
Conditions"), Purchaser shall amend the Offer as soon as
- ----------
practicable after the date hereof, and in any event within five
business days from the date hereof, (i) to extend the Offer to
September 14, 1994, (ii) to increase the purchase price offered
to $101 per Share, (iii) to modify the conditions of the Offer to
conform to the Offer Conditions, including by reducing the
percentage of Shares required to be validly tendered and not
properly withdrawn prior to the expiration of the Offer from 80%
to the minimum number of Shares which, together with any Shares
owned by Parent and Purchaser, constitutes not less than a
majority of the Company's voting power (determined on a fully
diluted basis), on the date of purchase, of all securities of the
Company entitled to vote generally in the election of directors
or in a merger (the "Minimum Condition")and (iv) to make such
-----------------
other amendments as are required to conform the Offer to this
Agreement. The obligation of Purchaser to accept for payment
Shares tendered shall be subject to the satisfaction of the Offer
Conditions. Purchaser expressly reserves the right, in its sole
discretion, to waive any such condition (other than the Minimum
Condition) and to increase the Per Share Amount payable pursuant
to the Offer or make any other changes in the terms and
conditions of the Offer (provided that, unless previously
--------
approved by the Company in writing, no change may be made which
decreases the Per Share Amount payable in the Offer, which
changes the form of consideration payable in the Offer, which
reduces the maximum number of Shares to be purchased in the Offer
or which imposes conditions to the Offer in addition to the Offer
Conditions). Purchaser covenants and agrees that, subject to the
terms and conditions of this Agreement, including but not limited
to the Offer Conditions, unless the Company otherwise consents in
writing, Purchaser will accept for payment and pay for Shares as
soon as it is permitted to do so under applicable law, provided
--------
that Purchaser may extend the Offer up to the twenty-fifth
business day after the latest of (i) September 14, 1994, (ii) the
tenth business day after the amendment of the Offer pursuant to
this Section 1.1 and (iii) the date on which all such conditions
shall first have been satisfied or waived. It is agreed that the
Offer Conditions are for the benefit of Purchaser and may be
asserted by Purchaser regardless of the circumstances giving rise
to any such condition (including any action or inaction by
Purchaser or Parent not inconsistent with the terms hereof) or,
except with respect to the Minimum Condition as set forth above,
may be waived by Purchaser, in whole or in part at any time and
from time to time, in its sole discretion.
<PAGE>
3
(b) As soon as reasonably practicable after the date
hereof, and in any event within five business days from the date
hereof, Purchaser and Parent shall amend their Tender Offer
Statement on Schedule 14D-1 (the "Schedule 14D-1") with respect
--------------
to the Offer which was originally filed with the Securities and
Exchange Commission (the "SEC") on August 10, 1994, and shall
---
file such amendment with the SEC. The Schedule 14D-1 will
contain a supplement to the Offer to Purchase dated August 10,
1994 and a revised form of the related letter of transmittal
(which Schedule 14D-1, Offer to Purchase and other documents,
together with any further supplements or amendments thereto, are
referred to herein collectively as the "Offer Documents").
---------------
Parent, Purchaser and the Company each agrees promptly to correct
any information provided by it for use in the Offer Documents
that shall have become false or misleading in any material
respect, and Parent and Purchaser further agree to take all steps
necessary to cause the Schedule 14D-1 as so corrected to be filed
with the SEC and the other Offer Documents as so corrected to be
disseminated to holders of Shares, in each case as and to the
extent required by applicable federal securities laws.
SECTION 1.2 Company Action. (a) The Company hereby
--------------
approves of and consents to the Offer and represents and warrants
that: (i) its Board of Directors, at a meeting duly called and
held on August 16 and August 17, 1994, has unanimously (A)
determined that this Agreement and the transactions contemplated
hereby, including each of the Offer and the Merger, are fair to
and in the best interests of the holders of Shares, (B) approved
this Agreement and the transactions contemplated hereby and (C)
resolved to recommend that the shareholders of the Company accept
the Offer, tender their Shares to Purchaser thereunder and
approve this Agreement and the transactions contemplated hereby;
and (ii) Morgan Stanley & Co. Incorporated and CS First Boston
Corporation (the "Financial Advisers") have delivered to the
------------------
Board of Directors of the Company their respective written
opinions (or oral opinions confirmed in writing) that the
consideration to be received by holders of Shares, other than
Parent and Purchaser, pursuant to each of the Offer and the
Merger is fair to such holders from a financial point of view.
The Company has been authorized by each of the Financial Advisers
to permit, subject to prior review and consent by such Financial
Adviser (such consent not to be unreasonably withheld), the
inclusion of such fairness opinion (or a reference thereto) in
the Offer Documents and in the Schedule 14D-9 referred to below
and the Proxy Statement referred to in Section 3.14. The Company
hereby consents to the inclusion in the Offer Documents of the
recommendations of the Company's Board of Directors described in
this Section 1.2(a).
(b) The Company shall file with the SEC,
contemporaneously with the amendment to the Offer pursuant to
Section 1.1, a Solicitation/Recommendation Statement on Schedule
14D-9 (together with all amendments and supplements thereto, the
"Schedule 14D-9"), containing the recommendations of the
--------------
<PAGE>
4
Company's Board of Directors described in Section 1.2(a)(i) and
shall promptly mail the Schedule 14D-9 to the shareholders of the
Company. The Company, Parent and Purchaser each agrees promptly
to correct any information provided by it for use in the Schedule
14D-9 that shall have become false or misleading in any material
respect, and the Company further agrees to take all steps
necessary to cause the Schedule 14D-9 as so corrected to be filed
with the SEC and disseminated to holders of Shares, in each case
as and to the extent required by applicable federal securities
laws.
(c) In connection with the Offer, if requested by
Purchaser, the Company shall promptly furnish Purchaser with
mailing labels, security position listings, any non-objecting
beneficial owner lists and any available listings or computer
files containing the names and addresses of the record holders of
Shares, each as of a recent date, and shall promptly furnish
Purchaser with such additional information (including but not
limited to updated lists of shareholders, mailing labels,
security position listings and non-objecting beneficial owner
lists) and such other assistance as Parent, Purchaser or their
agents may reasonably require in communicating the Offer to the
record and beneficial holders of Shares. The Company will not
object if Purchaser disseminates amendments disclosing material
changes to the Offer Documents in any manner that would be
permitted by applicable law if Purchaser had not, by its letter
to the Company of August 10, 1994, made the election to require
the Company to disseminate such amendments pursuant to Rule 14d-
5(f) promulgated under the Securities Exchange Act of 1934, as
amended (the "Exchange Act").
------------
ARTICLE II
THE MERGER
SECTION 2.1 The Merger. Upon the terms and subject to
----------
the conditions of this Agreement, and in accordance with Maine
Law and Delaware Law, at the Effective Time (as defined in
Section 2.2), Purchaser shall be merged with and into the
Company. As a result of the Merger, the separate corporate
existence of Purchaser shall cease and the Company shall continue
as the surviving corporation of the Merger (the "Surviving
---------
Corporation"). At Parent's election, the Merger may
- -----------
alternatively be structured so that (i) the Company is merged
with and into Parent, Purchaser or any other direct or indirect
subsidiary of Parent or (ii) any direct or indirect subsidiary of
Parent other than Purchaser is merged with and into the Company.
In the event of such an election, the parties agree to execute an
appropriate amendment to this Agreement in order to reflect such
election.
SECTION 2.2 Effective Time. As soon as practicable
--------------
after the satisfaction or, if permissible, waiver of the
<PAGE>
5
conditions set forth in Article VII, the parties hereto shall
cause the Merger to be consummated by delivering articles of
merger (the "Articles of Merger") to the Secretary of State of
------------------
the State of Maine and by filing this Agreement or a certificate
of merger or a certificate of ownership and merger (the
"Certificate of Merger") with the Secretary of State of the State
---------------------
of Delaware, in such form as required by, and executed in
accordance with the relevant provisions of, Maine Law and
Delaware Law (the date and time of the later to occur of the
filing of the Articles of Merger by the Secretary of State of the
State of Maine and the filing of the Certificate of Merger with
the Secretary of State of the State of Delaware (or such later
time as is specified in the Articles of Merger and Certificate of
Merger) being the "Effective Time").
--------------
SECTION 2.3 Effects of the Merger. The Merger shall
---------------------
have the effects set forth in the applicable provisions of Maine
Law and Delaware Law. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time all the
property, rights, privileges, immunities, powers and franchises
of the Company and Purchaser shall vest in the Surviving
Corporation, and all debts, liabilities and duties of the Company
and Purchaser shall become the debts, liabilities and duties of
the Surviving Corporation.
SECTION 2.4 Articles of Incorporation; By-Laws. (a)
----------------------------------
Unless otherwise determined by Parent prior to the Effective
Time, the Articles of Incorporation of the Surviving Corporation
shall, as a result of the Merger, be changed so as to read in
their entirety as closely as possible to the Certificate of
Incorporation of Purchaser immediately prior to the Effective
Time, except to the extent necessary (in the case of a merger
where the Company is the Surviving Corporation) to comply with or
conform to Maine Law until thereafter amended as provided by law
and such Articles of Incorporation.
(b) Unless otherwise determined by Parent prior to the
Effective Time, the By-Laws of the Surviving Corporation shall,
as a result of the Merger, be changed so as to read in their
entirety as closely as possible to the By-Laws of Purchaser
immediately prior to the Effective Time, except to the extent
necessary to comply with Section 6.7 or (in the case of a merger
where the Company is the Surviving Corporation) to comply with or
conform to Maine Law until thereafter amended as provided by law,
the Articles of Incorporation of the Surviving Corporation and
such By-Laws.
SECTION 2.5 Directors and Officers. The directors of
----------------------
Purchaser immediately prior to the Effective Time shall be the
initial directors of the Surviving Corporation, each to hold
office in accordance with the Articles of Incorporation and By-
Laws of the Surviving Corporation, and the officers of the
Company immediately prior to the Effective Time shall be the
initial officers of the Surviving Corporation, in each case until
<PAGE>
6
their respective successors are duly elected or appointed (as the
case may be) and qualified.
SECTION 2.6 Conversion of Securities. At the
------------------------
Effective Time, by virtue of the Merger and without any action on
the part of Purchaser, the Company or the holders of any of the
following securities:
(a) Each Share issued and outstanding immediately
prior to the Effective Time (other than any Shares to be
cancelled pursuant to Section 2.6(b), any Dissenting Shares
(as defined in Section 2.8(a)) and any Section 910 Shares
(as defined in Section 2.8(b))) shall be cancelled,
extinguished and converted into the right to receive an
amount equal to the Per Share Amount in cash (the "Merger
------
Consideration") payable to the holder thereof, without
-------------
interest, upon surrender of the certificate formerly
representing such Share in the manner provided in Section
2.9, less any required withholding taxes.
(b) Each share of Company Common Stock held in the
treasury of the Company and each Share owned by Parent,
Purchaser or any other direct or indirect subsidiary of
Parent or of the Company, in each case immediately prior to
the Effective Time, shall be cancelled and retired without
any conversion thereof and no payment or distribution shall
be made with respect thereto.
(c) Each share of common, preferred or other capital
stock of Purchaser issued and outstanding immediately prior
to the Effective Time shall be converted into and become one
validly issued, fully paid and nonassessable share of
identical common, preferred or other capital stock of the
Surviving Corporation.
SECTION 2.7 Treatment of Employee Options.
-----------------------------
Immediately prior to the Effective Time, each outstanding
employee stock option and any related stock appreciation right
(together, an "Employee Option") whether or not then exercisable
---------------
shall be cancelled by the Company, and each holder of a cancelled
Employee Option shall be entitled to receive at the Effective
Time or as soon as practicable thereafter (or, if later, the date
six months and one day following the grant of such Employee
Option) from the Company in consideration for the cancellation of
such Employee Option an amount in cash equal to the product of
(i) the number of Shares previously subject to such Employee
Option and (ii) the excess, if any, of the Merger Consideration
over the exercise price per Share previously subject to such
Employee Option.
SECTION 2.8 Dissenting Shares and Section 910 Shares.
----------------------------------------
(a) Notwithstanding any provision of this Agreement to the
contrary, Shares which are outstanding immediately prior to the
Effective Time and which are held by holders of Shares who have
<PAGE>
7
filed with the Company a written objection to the Merger and have
not voted in favor of the Merger, and who shall have properly
demanded in writing appraisal for such Shares in accordance with
Section 909 ("Section 909") of Maine Law (collectively, the
-----------
"Dissenting Shares"), shall not be converted into or represent
-----------------
the right to receive the Merger Consideration, but such holders
of Shares shall be entitled to receive payment of the appraised
value of such Shares in accordance with the provisions of Section
909, except that any Dissenting Shares held by holders of Shares
who shall have failed to perfect or shall have effectively
withdrawn or lost their rights to appraisal of such Shares under
Section 909 shall thereupon be deemed to have been converted into
and to have become exchangeable for, as of the Effective Time,
the right to receive the Merger Consideration without any
interest thereon, upon surrender of the certificate or
certificates formerly representing such Shares in the manner
provided in Section 2.9, less any required withholding taxes.
(b) Notwithstanding any provisions of this Agreement
to the contrary, Shares which are outstanding immediately prior
to the Effective Time and which are held by holders of Shares who
have prior to the Effective Time demanded in writing appraisal
for their Shares pursuant to Section 910 ("Section 910") of Maine
-----------
Law (other than holders of Shares who shall have failed to
perfect their rights pursuant to Section 910 or shall have
effectively withdrawn or lost their rights to such fair value
under Section 910; collectively, the "Section 910 Shares") shall
------------------
not be converted into or represent the right to receive the
Merger Consideration, but such holders of Shares shall be
entitled to receive payment of the fair value of such Shares in
accordance with the provisions of Section 910, except that any
Section 910 Shares held by holders of Shares who shall have
failed to perfect or shall have effectively withdrawn or lost
their rights to appraisal of such Shares under Section 910 shall
thereupon be deemed to have been converted into and to have
become exchangeable for, as of the Effective Time, the right to
receive the Merger Consideration without any interest thereon,
upon surrender of the certificate or certificates formerly
representing such Shares in the manner provided in Section 2.9,
less any required withholding taxes.
(c) The Company shall give Parent (i) prompt notice of
any demands for appraisal pursuant to Section 909 received by the
Company, withdrawals of such demands, and any other instruments
served pursuant to Maine Law and received by the Company and (ii)
the opportunity to direct all negotiations and proceedings with
respect to demands for appraisal under Maine Law. The Company
shall not, except with the prior written consent of Parent, make
any payment with respect to any such demands for appraisal or
offer to settle or settle any such demands.
SECTION 2.9 Surrender of Shares; Stock Transfer Books.
-----------------------------------------
(a) Prior to the Effective Time, Purchaser shall designate a
bank or trust company to act as agent for the holders of Shares
<PAGE>
8
in connection with the Merger (the "Paying Agent") to receive the
------------
Merger Consideration to which holders of Shares shall become
entitled pursuant to Section 2.6(a). When and as needed, Parent
or Purchaser will make available to the Paying Agent sufficient
funds to make all payments pursuant to Section 2.9(b). Such
funds shall be invested by the Paying Agent as directed by
Purchaser or, after the Effective Time, the Surviving
Corporation, provided that such investments shall be in
--------
obligations of or guaranteed by the United States of America, in
commercial paper obligations rated A-1 or P-1 or better by
Moody's Investors Service, Inc. or Standard & Poor's Corporation,
respectively, or in certificates of deposit, bank repurchase
agreements or banker's acceptances of commercial banks with
capital exceeding $50 million. Any net profit resulting from, or
interest or income produced by, such investments will be payable
to the Surviving Corporation or Parent, as Parent directs.
(b) Promptly after the Effective Time, the Surviving
Corporation shall cause to be mailed to each record holder, as of
the Effective Time, of an outstanding certificate or certificates
which immediately prior to the Effective Time represented Shares
(the "Certificates"), a form of letter of transmittal (which
------------
shall specify that delivery shall be effected, and risk of loss
and title to the Certificates shall pass, only upon proper
delivery of the Certificates to the Paying Agent) and
instructions for use in effecting the surrender of the
Certificates for payment of the Merger Consideration therefor.
Upon surrender to the Paying Agent of a Certificate, together
with such letter of transmittal, duly completed and validly
executed in accordance with the instructions thereto, and such
other documents as may be required pursuant to such instructions,
the holder of such Certificate shall be entitled to receive in
exchange therefor the Merger Consideration for each Share
formerly represented by such Certificate, and such Certificate
shall then be cancelled. No interest shall be paid or accrued
for the benefit of holders of the Certificates on the Merger
Consideration payable upon the surrender of the Certificates. If
payment of the Merger Consideration is to be made to a person
other than the person in whose name the surrendered Certificate
is registered, it shall be a condition of payment that the
Certificate so surrendered shall be properly endorsed or shall be
otherwise in proper form for transfer and that the person
requesting such payment shall have paid any transfer and other
taxes required by reason of the payment of the Merger
Consideration to a person other than the registered holder of the
Certificate surrendered or shall have established to the
satisfaction of the Surviving Corporation that such tax either
has been paid or is not applicable.
(c) At any time following six months after the
Effective Time, the Surviving Corporation shall be entitled to
require the Paying Agent to deliver to it any funds (including
any interest received with respect thereto) which had been made
available to the Paying Agent and which have not been disbursed
<PAGE>
9
to holders of Certificates, and thereafter such holders shall be
entitled to look to the Surviving Corporation (subject to
abandoned property, escheat or other similar laws) only as
general creditors thereof with respect to the Merger
Consideration payable upon due surrender of their Certificates.
Notwithstanding the foregoing, neither the Surviving Corporation
nor the Paying Agent shall be liable to any holder of a
Certificate for Merger Consideration delivered to a public
official pursuant to any applicable abandoned property, escheat
or similar law.
(d) At the Effective Time, the stock transfer books of
the Company shall be closed and thereafter there shall be no
further registration of transfers of shares of Company Common
Stock on the records of the Company. From and after the
Effective Time, the holders of Certificates evidencing ownership
of Shares outstanding immediately prior to the Effective Time
shall cease to have any rights with respect to such Shares except
as otherwise provided for herein or by applicable law.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to Parent
and Purchaser that:
SECTION 3.1 Organization and Qualification;
-------------------------------
Subsidiaries. Each of the Company and each of its subsidiaries
- ------------
is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation
and has the requisite corporate power and authority and any
necessary governmental approvals to own, lease and operate its
properties and to carry on its business as it is now being
conducted, except where the failure to be so organized, existing
and in good standing or to have such power, authority and
governmental approvals would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect (as defined below). Each of the Company and each of its
subsidiaries is duly qualified or licensed as a foreign
corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned, leased
or operated by it or the nature of its activities makes such
qualification or licensing necessary, except for such failures to
be so duly qualified or licensed and in good standing which would
not, individually or in the aggregate, reasonably be expected to
either have a Material Adverse Effect or prevent the consummation
of the transactions contemplated hereby. When used in connection
with the Company or any of its subsidiaries, the term "Material
--------
Adverse Effect" means any change or effect that is or is
- --------------
reasonably likely to be materially adverse to the business,
assets, financial condition or results of operations of the
Company and its subsidiaries taken as a whole.
<PAGE>
10
SECTION 3.2 Articles of Incorporation and By-Laws.
-------------------------------------
The Company has heretofore furnished to Parent a complete and
correct copy of the Restated Articles of Incorporation and the
By-Laws of the Company as currently in effect. Such Restated
Articles of Incorporation and By-Laws are in full force and
effect and no other organizational documents are applicable to or
binding upon the Company. The Company is not in violation of any
of the provisions of its Restated Articles of Incorporation or
By-Laws.
SECTION 3.3 Capitalization. The authorized capital
--------------
stock of the Company consists of 200,000,000 shares of Company
Common Stock and 10,000,000 shares of Preferred Stock, $1.00 par
value per share (collectively, "Company Preferred Stock"). As of
-----------------------
August 12, 1994, (i) 90,832,206 shares of Company Common Stock
were issued and outstanding, all of which were validly issued,
fully paid and nonassessable and were issued free of preemptive
(or similar) rights, (ii) 11,893,400 shares of Company Common
Stock were held in the treasury of the Company and (iii) an
aggregate of 5,451,876 shares of Company Common Stock were
reserved for issuance and issuable upon or otherwise deliverable
in connection with the exercise of outstanding Employee Options
issued pursuant to the Plans (as defined in Section 3.10). Since
August 12, 1994, no options to purchase shares of Company Common
Stock have been granted and no shares of Company Common Stock
have been issued except for shares issued pursuant to the
exercise of Employee Options outstanding as of August 12, 1994.
As of the date hereof, no shares of Company Preferred Stock are
issued and outstanding and 300,000 shares of Series A Junior
Participating Preferred Stock are reserved for issuance upon
exercise of the Rights. Except as set forth above, except for
the Rights, and except as a result of the exercise of Employee
Options outstanding as of August 12, 1994, there are outstanding
(i) no shares of capital stock or other voting securities of the
Company, (ii) no securities of the Company convertible into or
exchangeable for shares of capital stock or voting securities of
the Company, (iii) no options or other rights to acquire from the
Company, and no obligation of the Company to issue, any capital
stock, voting securities or securities convertible into or
exchangeable for capital stock or voting securities of the
Company and (iv) no equity equivalents, interests in the
ownership or earnings of the Company or other similar rights
(collectively, "Company Securities"). There are no outstanding
------------------
obligations of the Company or any of its subsidiaries to
repurchase, redeem or otherwise acquire any Company Securities.
There are no other options, calls, warrants or other rights,
agreements, arrangements or commitments of any character relating
to the issued or unissued capital stock of the Company or any of
its subsidiaries to which the Company or any of its subsidiaries
is a party except, with respect to Immunex Corporation
("Immunex"), as contemplated by the Immunex Governance Agreement
(as defined below) or the Amended and Restated Merger Agreement,
dated as of December 15, 1992, among Immunex, the Company and the
other parties thereto. All shares of Company Common Stock
<PAGE>
11
subject to issuance as aforesaid, upon issuance on the terms and
conditions specified in the instruments pursuant to which they
are issuable, shall be duly authorized, validly issued, fully
paid and nonassessable and free of preemptive (or similar)
rights. There are no outstanding contractual obligations of the
Company or any of its subsidiaries to repurchase, redeem or
otherwise acquire any shares of Company Common Stock or the
capital stock of any subsidiary or, except as described below, to
provide funds to or make any investment (in the form of a loan,
capital contribution or otherwise) in any such subsidiary or any
other entity. Each of the outstanding shares of capital stock of
each of the Company's subsidiaries is duly authorized, validly
issued, fully paid and nonassessable and is owned free and clear
of all security interests, liens, claims, pledges, agreements,
limitations in voting rights, charges or other encumbrances of
any nature whatsoever, except where the failure to own such
shares free and clear would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect. The Company has delivered to Parent prior to the date
hereof is a list of the subsidiaries and associated entities of
the Company which evidences, among other things, the amount of
capital stock or other equity interests owned by the Company,
directly or indirectly, in such subsidiaries or associated
entities. No entity in which the Company owns, directly or
indirectly, less than a 50% equity interest is, individually or
when taken together with all such other entities, material to the
business of the Company and its subsidiaries taken as a whole.
Pursuant to an Amended and Restated Governance Agreement with
Immunex, dated as of December 15, 1992 (the "Immunex Governance
Agreement"), the Company is obligated to make payments to Immunex
covering certain revenue shortfalls through 1997. The aggregate
amount of such payments pursuant to such agreement will not
exceed $44.7 million in 1994, $56.6 million in 1995, $70 million
in 1996 and $75 million in 1997.
SECTION 3.4 Authority Relative to This Agreement. The
------------------------------------
Company has all necessary corporate power and authority to
execute and deliver this Agreement, to perform its obligations
hereunder and to consummate the transactions contemplated hereby.
The execution, delivery and performance of this Agreement by the
Company and the consummation by the Company of the transactions
contemplated hereby have been duly and validly authorized by all
necessary corporate action and no other corporate proceedings on
the part of the Company are necessary to authorize this Agreement
or to consummate the transactions so contemplated (other than,
with respect to the Merger, the approval of this Agreement by the
holders of a majority of the outstanding shares of Company Common
Stock if and to the extent required by applicable law, and the
filing of appropriate merger documents as required by Maine Law
and Delaware Law). This Agreement has been duly and validly
executed and delivered by the Company and, assuming the due
authorization, execution and delivery hereof by Parent and
Purchaser, constitutes a legal, valid and binding obligation of
the Company enforceable against the Company in accordance with
<PAGE>
12
its terms. The Board of Directors of the Company has approved
this Agreement and the transactions contemplated hereby
(including but not limited to the Offer and the Merger) so as to
render inapplicable hereto and thereto (a) the limitation on
business combinations contained in Section 1 of Section 611-A of
Maine Law (or any similar provision), and (b) the supermajority
shareholder voting requirements of Article SIXTH of the Company's
Restated Articles of Incorporation. The Board of Directors of
the Company has irrevocably waived the requirement of ownership
of Shares (and the related holding period) set forth in Section
2.01 of the Company's By-Laws with respect to the directors of
Purchaser immediately prior to the Effective Time and any other
director nominees or designees of Parent or Purchaser for
election to the Company's Board of Directors. As a result of the
foregoing actions, the only vote required to authorize the Merger
is the affirmative vote of a majority of the outstanding Shares.
SECTION 3.5 No Conflict; Required Filings and
---------------------------------
Consents. (a) The execution, delivery and performance of this
- --------
Agreement by the Company do not and will not: (i) conflict with
or violate the Restated Articles of Incorporation or By-Laws of
the Company or the equivalent organizational documents of any of
its subsidiaries; (ii) assuming that all consents, approvals and
authorizations contemplated by clauses (i), (ii) and (iii) of
subsection (b) below have been obtained and all filings described
in such clauses have been made, conflict with or violate any law,
rule, regulation, order, judgment or decree applicable to the
Company or any of its subsidiaries or by which its or any of
their respective properties are bound or affected; or (iii)
result in any breach or violation of or constitute a default (or
an event which with notice or lapse of time or both could become
a default) or result in the loss of a material benefit under, or
give rise to any right of termination, amendment, acceleration or
cancellation of, or result in the creation of a lien or
encumbrance on any of the properties or assets of the Company or
any of its subsidiaries pursuant to, any note, bond, mortgage,
indenture, contract, agreement, lease, license, permit, franchise
or other instrument or obligation to which the Company or any of
its subsidiaries is a party or by which the Company or any of its
subsidiaries or its or any of their respective properties are
bound or affected, except, in the case of clauses (ii) and (iii),
for any such conflicts, violations, breaches, defaults or other
occurrences which would not, individually or in the aggregate,
reasonably be expected to either have a Material Adverse Effect
or prevent the consummation of the Offer or the Merger.
(b) The execution, delivery and performance of this
Agreement by the Company and the consummation of the Merger by
the Company do not and will not require any consent, approval,
authorization or permit of, action by, filing with or
notification to, any governmental or regulatory authority,
domestic or foreign, except for (i) applicable requirements, if
any, of the Exchange Act, the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended (the "HSR Act"), Regulation
-------
<PAGE>
13
(EEC) No. 4064/89 of the European Community, the New Jersey
Industrial Site Recovery Act, Canada's Competition Act, the
Investment Canada Act, the Connecticut Transfer Act, state
securities, takeover and Blue Sky laws, (ii) the filing and
recordation of appropriate merger or other documents as required
by Maine Law and Delaware Law, (iii) compliance with the
statutory provisions and regulations relating to the New York
State Tax on Gains Derived from Certain Real Property Transfers
and the New York City Real Property Transfer Tax and (iv) such
consents, approvals, authorizations, permits, actions, filings or
notifications the failure of which to make or obtain would not
reasonably be expected to (x) prevent consummation of the Offer
or the Merger or materially delay the Merger, (y) otherwise
prevent or delay the Company from performing its obligations
under this Agreement or (z) individually or in the aggregate,
have a Material Adverse Effect.
SECTION 3.6 Compliance. Neither the Company nor any
----------
of its subsidiaries is in conflict with, or in default or
violation of, (i) any law, rule, regulation, order, judgment or
decree applicable to the Company or any of its subsidiaries or by
which its or any of their respective properties are bound or
affected, or (ii) any note, bond, mortgage, indenture, contract,
agreement, lease, license, permit, franchise or other instrument
or obligation to which the Company or any of its subsidiaries is
a party or by which the Company or any of its subsidiaries or its
or any of their respective properties are bound or affected,
except for any such conflicts, defaults or violations which would
not, individually or in the aggregate, reasonably be expected to
either have a Material Adverse Effect or prevent the consummation
of the Offer or the Merger.
SECTION 3.7 SEC Filings; Financial Statements. (a)
---------------------------------
The Company and, to the extent applicable (and, in the case of
Immunex, to the Company's knowledge), each of its then or current
subsidiaries, has filed all forms, reports, statements and
documents required to be filed with the SEC since January 1, 1990
(collectively, the "SEC Reports"), each of which has complied in
-----------
all material respects with the applicable requirements of the
Securities Act of 1933, as amended (the "Securities Act"), or the
--------------
Exchange Act, each as in effect on the date so filed. The
Company has heretofore delivered or promptly will deliver to
Parent, in the form filed with the SEC (including any amendments
thereto), (i) its (and, to the extent applicable, its
subsidiaries') Annual Reports on Form 10-K for each of the four
fiscal years ended December 31, 1990, 1991, 1992 and 1993 and its
Quarterly Reports on Form 10-Q for each of the quarterly periods
ended March 31, 1994 and June 30, 1994, (ii) all definitive proxy
statements relating to the Company's (and such subsidiaries')
meetings of shareholders (whether annual or special) held since
January 1, 1990 and (iii) all other reports or registration
statements filed by the Company (and such subsidiaries) with the
SEC since January 1, 1990. None of such forms, reports or
documents (including but not limited to any financial statements
<PAGE>
14
or schedules included or incorporated by reference therein) filed
by the Company and its then or current subsidiaries (including,
to the Company's knowledge, Immunex) contained, when filed, any
untrue statement of a material fact or omitted to state a
material fact required to be stated or incorporated by reference
therein or necessary in order to make the statements therein, in
the light of the circumstances under which they were made, not
misleading. Except to the extent revised or superseded by a
subsequent filing with the SEC (a copy of which has been provided
to Parent prior to the date hereof), none of the SEC Reports
filed by the Company since December 31, 1993 and prior to the
date hereof contains any untrue statement of a material fact or
omits to state a material fact required to be stated or
incorporated by reference therein or necessary in order to make
the statements therein, in the light of the circumstances under
which they were made, not misleading.
(b) Each of the audited and unaudited consolidated
interim financial statements of the Company (including, in each
case, any related notes thereto) included in its Annual Reports
on Form 10-K for each of the two fiscal years ended December 31,
1992 and 1993 and in its Quarterly Reports on Form 10-Q for its
fiscal quarters ended March 31, 1994 and June 30, 1994, which
have previously been furnished to Parent, has been prepared in
accordance with generally accepted accounting principles applied
on a consistent basis throughout the periods involved (except as
may be indicated in the notes thereto) and each fairly presents
the consolidated financial position of the Company and its
subsidiaries at the respective dates thereof and the consolidated
results of its operations and changes in cash flows for the
periods indicated, except that the unaudited interim financial
statements are subject to normal and recurring year-end
adjustments which are not expected to be material in amount.
(c) Except as and to the extent set forth on the
consolidated balance sheet of the Company and its subsidiaries at
December 31, 1993, including the notes thereto, neither the
Company nor any of its subsidiaries has any liabilities or
obligations of any nature (whether accrued, absolute, contingent
or otherwise) which would be required to be reflected on a
balance sheet or in the notes thereto prepared in accordance with
generally accepted accounting principles, except for liabilities
or obligations incurred in the ordinary course of business since
December 31, 1993 which would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect.
(d) The Company has heretofore furnished to Parent a
complete and correct copy of any amendments or modifications,
which have not yet been filed with the SEC, to agreements
(including the Rights Agreement), documents or other instruments
which previously had been filed by the Company with the SEC
pursuant to the Securities Act or the Exchange Act.
<PAGE>
15
SECTION 3.8 Absence of Certain Changes or Events.
------------------------------------
Since December 31, 1993, except as contemplated by this Agreement
or disclosed in the SEC Reports filed since that date and up to
the date of this Agreement, the Company and its subsidiaries have
conducted their businesses only in the ordinary course and in a
manner consistent with past practice and, since such date, there
has not been (i) any condition, event or occurrence which,
individually or in the aggregate, has had, or would reasonably be
expected to have, a Material Adverse Effect (without regard,
however, to changes in conditions generally applicable to the
industries in which the Company and its subsidiaries are involved
or general economic conditions), (ii) any change by the Company
in its accounting methods, principles or practices, (iii) any
revaluation by the Company of any of its material assets,
including but not limited to writing down the value of inventory
or writing off notes or accounts receivable other than in the
ordinary course of business, (iv) other than in respect of the
previously announced sale of Davis & Geck, any entry by the
Company or any of its subsidiaries into any commitment or
transactions material to the Company and its subsidiaries taken
as a whole, (v) except for (A) each of the regular quarterly
Share dividends declared on or prior to the date hereof in
amounts not exceeding $.4625 per Share and (B) the amounts to be
paid upon redemption of the Rights pursuant to the Rights
Agreement in accordance with Section 6.8, any declaration,
setting aside or payment of any dividends or distributions in
respect of the Shares or any redemption, purchase or other
acquisition of any of its securities, or (vi) except with respect
to the adoption or amendment of certain plans or arrangements or
the taking of certain actions with respect to certain of such
plans or arrangements, in each case, effective as of the date
hereof, as described in Schedule 5.1(f), any increase in or
establishment of any bonus, insurance, severance, deferred
compensation, pension, retirement, profit sharing, stock option
(including, without limitation, the granting of stock options,
stock appreciation rights, performance awards, or restricted
stock awards), stock purchase or other employee benefit plan or
agreement or arrangement, or any other increase in the
compensation payable or to become payable to any officers or key
employees of the Company or any of its subsidiaries, except in
the ordinary course of business consistent with past practice.
SECTION 3.9 Absence of Litigation. Except as
---------------------
disclosed with reasonable specificity in the SEC Reports filed
prior to the date of this Agreement, there are no suits, claims,
actions, proceedings or investigations pending or, to the
knowledge of the Company, threatened against the Company or any
of its subsidiaries, or any properties or rights of the Company
or any of its subsidiaries, before any court, arbitrator or
administrative, governmental or regulatory authority or body,
domestic or foreign, that (i) individually or in the aggregate,
would reasonably be expected to have a Material Adverse Effect or
(ii) seek to materially delay or prevent the consummation of the
transactions contemplated hereby. As of the date hereof, neither
<PAGE>
16
the Company nor any of its subsidiaries nor any of their
respective properties is or are subject to any order, writ,
judgment, injunction, decree, determination or award having, or
which would reasonably be expected to have, a Material Adverse
Effect or which would prevent or delay the consummation of the
transactions contemplated hereby.
SECTION 3.10 Employee Benefit Plans. With respect to
----------------------
all the employee benefit plans, programs and arrangements
maintained for the benefit of any current or former employee,
officer or director of the Company or any subsidiary of the
Company (collectively, the "Plans"), except as set forth in the
-----
SEC Reports and except as would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse
Effect: (i) none of the Plans is a multiemployer plan within the
meaning of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"); (ii) none of the Plans promises or provides
-----
retiree medical or life insurance benefits to any person, except
as otherwise required by law in the applicable jurisdiction and,
outside of the United States, in accordance with local custom and
practice; (iii) each Plan intended to be qualified under Section
401(a) of the Internal Revenue Code of 1986, as amended, has
received a favorable determination letter from the Internal
Revenue Service that it is so qualified and nothing has occurred
since the date of such letter that could reasonably be expected
to affect the qualified status of such Plan; (iv) each Plan has
been operated in all respects in accordance with its terms and
the requirements of applicable law; (v) neither the Company nor
any subsidiary of the Company has incurred any direct or indirect
liability under, arising out of or by operation of Title IV of
ERISA in connection with the termination of, or withdrawal from,
any Plan or other retirement plan or arrangement, and no fact or
event exists that could reasonably be expected to give rise to
any such liability; and (vi) the Company and its subsidiaries
have not incurred any liability under, and have complied in all
respects with, the Worker Adjustment Retraining Notification Act,
and no fact or event exists that could give rise to liability
under such Act. Except as set forth in the SEC Reports, the
aggregate accumulated benefit obligations of each Plan subject to
Title IV of ERISA (as of the date of the most recent actuarial
valuation prepared for such Plan) do not exceed the fair market
value of the assets of such Plan (as of the date of such
valuation). The "Compensation Letter" (as defined in Schedule
5.1(f) and attached hereto) constitutes a reasonable estimate,
prepared in good faith by the Company, of the amounts and
benefits payable, as of the date of such letter, and the amounts
and benefits proposed to be paid, as of the date of such letter,
pursuant to the plans and programs of the Company enumerated
therein for the benefit of its employees.
SECTION 3.11 Tax Matters. The Company and each of its
-----------
subsidiaries, and any consolidated, combined, unitary or
aggregate group for Tax purposes of which the Company or any of
its subsidiaries is or has been a member has timely filed all Tax
<PAGE>
17
Returns required to be filed by it, has paid all Taxes shown
thereon to be due and has provided adequate reserves in its
financial statements for any Taxes that have not been paid,
whether or not shown as being due on any returns, except where
the failure to make such filings, pay such taxes or provide for
such reserves has not had, and would not reasonably be expected
to have, a Material Adverse Effect. As used herein, "Taxes"
-----
shall mean any taxes of any kind, including but not limited to
those on or measured by or referred to as income, gross receipts,
sales, use, ad valorem, franchise, profits, license, withholding,
payroll, employment, excise, severance, stamp, occupation,
premium, value added, property or windfall profits taxes,
customs, duties or similar fees, assessments or charges of any
kind whatsoever, together with any interest and any penalties,
additions to tax or additional amounts imposed by any
governmental authority, domestic or foreign. As used herein,
"Tax Return" shall mean any return, report or statement required
----------
to be filed with any governmental authority with respect to
Taxes.
SECTION 3.12 Environmental Matters. Except to the
---------------------
extent that the inaccuracy of any of the following (or the
circumstances giving rise to such inaccuracy), individually or in
the aggregate, would not reasonably be expected to have a
Material Adverse Effect (after taking into account any reserves
therefor reflected in the most recent financial statements
included in the SEC Reports filed prior to the date hereof):
(a) The Company and its subsidiaries hold, and are in
compliance with, all Environmental Permits, and the Company
and its subsidiaries are in compliance with all applicable
Environmental Laws;
(b) There are no circumstances which would reasonably
be expected to prevent or interfere with such compliance in
the future;
(c) None of the Company or its subsidiaries has
received, nor to the knowledge of the Company is there
threatened, any Environmental Claim, nor are there any
circumstances, conditions or events that would reasonably be
expected to give rise to any Environmental Claim against the
Company or any of its subsidiaries;
(d) None of the Company or its subsidiaries has
entered into or agreed to any consent decree or order under
any Environmental Law, and none of the Company or its
subsidiaries is the subject of any pending or, to the
knowledge of the Company, threatened judgment, decree, order
or other requirement of any governmental authority or
private party relating to compliance with any Environmental
Law or to investigation, cleanup, remediation or removal of
regulated substances under any Environmental Law;
<PAGE>
18
(e) There are no (i) underground storage tanks, (ii)
polychlorinated biphenyls, (iii) asbestos or asbestos-
containing materials or (iv) Hazardous Materials present at
any facility currently or formerly owned, leased or operated
by the Company or any of its subsidiaries that could
reasonably be expected to give rise to liability of the
Company or any of its subsidiaries under any Environmental
Laws or otherwise result in any cost or expense to the
Company or any of its subsidiaries; and
(f) There are no past (including, without limitation,
with respect to assets or businesses formerly owned, leased
or operated by the Company or any of its subsidiaries) or
present actions, activities, events, conditions or
circumstances, including without limitation the release,
threatened release, emission, discharge, generation,
treatment, storage or disposal of Hazardous Materials, that
would reasonably be expected to give rise to liability of
the Company or any of its subsidiaries under any
Environmental Laws or any contract or agreement relating to
Environmental Claims.
For purposes of this Agreement, the following terms
shall have the following meanings:
"Environmental Claim" means any written or oral notice,
-------------------
claim, demand, action, suit, complaint, proceeding or other
communication by any person alleging liability or potential
liability (including without limitation liability or
potential liability for emergency actions, investigatory
costs, cleanup costs, governmental response costs, natural
resource damages, property damage, personal injury, fines or
penalties) arising out of, relating to, based on or
resulting from (i) the presence, discharge, emission,
release or threatened release of any Hazardous Materials at
any location, whether or not owned, leased or operated by
the Company or any of its subsidiaries, or (ii)
circumstances forming the basis of any violation or alleged
violation of any Environmental Law or Environmental Permit.
"Environmental Permits" means all permits, licenses,
---------------------
registrations and other governmental authorizations required
for the Company and the operations of the Company's and its
subsidiaries' facilities, and otherwise to conduct their
respective businesses under Environmental Laws.
"Environmental Laws" means all applicable federal,
------------------
state and local statutes, rules, regulations, ordinances,
orders, decrees and common law relating in any manner to
contamination, pollution or protection of human health or
the environment, including without limitation the
Comprehensive Environmental Response, Compensation and
Liability Act, the Solid Waste Disposal Act, the Resource
Conservation and Recovery Act, the Clean Air Act, the Clean
<PAGE>
19
Water Act, the Toxic Substances Control Act, the
Occupational Safety and Health Act, the Emergency Planning
and Community-Right-to-Know Act, the Safe Drinking Water
Act, all as amended, and similar state laws.
"Hazardous Materials" means all hazardous or toxic
-------------------
substances, wastes, materials or chemicals, petroleum
(including crude oil or any fraction thereof) and petroleum
products, asbestos and asbestos-containing materials,
pollutants, contaminants and all other materials and
substances regulated pursuant to any Environmental Law.
SECTION 3.13 Intellectual Property. Except to the
---------------------
extent that the inaccuracy of any of the following (or the
circumstances giving rise to such inaccuracy), individually or in
the aggregate, would not reasonably be expected to have a
Material Adverse Effect: (1) the Company and each of its
subsidiaries owns, or is licensed to use (in each case, clear of
any liens or encumbrances of any kind), all Intellectual Property
used in or necessary for the conduct of its business as currently
conducted; (2) the use of any Intellectual Property by the
Company and its subsidiaries does not infringe on or otherwise
violate the rights of any person; (3) to the knowledge of the
Company, no product (or component thereof or process) used, sold
or manufactured by and/or for, or supplied to, the Company and
each of its subsidiaries infringes or otherwise violates the
Intellectual Property of any other person; and (4) to the
knowledge of the Company, no person is challenging, infringing on
or otherwise violating any right of the Company or any of its
subsidiaries with respect to any Intellectual Property owned by
and/or licensed to the Company and its subsidiaries. For
purposes of this Agreement "Intellectual Property" shall mean
---------------------
trademarks, service marks, brand names, certification marks,
trade dress, assumed names, trade names 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, continuations in
part and renewal applications), and any renewals, extensions or
reissues thereof, in any jurisdiction; nonpublic information,
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; any similar intellectual property or proprietary rights;
and any claims or causes of action arising out of or related to
any infringement or misappropriation of any of the foregoing.
SECTION 3.14 Offer Documents; Proxy Statement.
--------------------------------
Neither the Schedule 14D-9, nor any of the information supplied
<PAGE>
20
by the Company for inclusion in the Offer Documents, shall, at
the respective times such Schedule 14D-9, the Offer Documents or
any amendments or supplements thereto are filed with the SEC or
are first published, sent or given to shareholders, as the case
may be, 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 the light
of the circumstances under which they were made, not misleading.
Neither the proxy statement to be sent to the shareholders of the
Company in connection with the Shareholders Meeting (as defined
in Section 6.1) or the information statement to be sent to such
shareholders, as appropriate (such proxy statement or information
statement, as amended or supplemented, is herein referred to as
the "Proxy Statement"), shall, at the date the Proxy Statement
---------------
(or any amendment thereof or supplement thereto) is first mailed
to shareholders and at the time of the Shareholders Meeting and
at the Effective Time, be false or misleading with respect to any
material fact, or omit to state any material fact required to be
stated therein or necessary in order to make the statements made
therein, in the light of the circumstances under which they are
made, not misleading or necessary to correct any statement in any
earlier communication with respect to the solicitation of proxies
for the Shareholders Meeting which has become false or
misleading. Notwithstanding the foregoing, the Company makes no
representation or warranty with respect to any information
supplied by Parent or Purchaser or any of their respective
representatives which is contained in the Schedule 14D-9 or the
Proxy Statement. The Schedule 14D-9 and the Proxy Statement will
comply in all material respects as to form with the requirements
of the Exchange Act and the rules and regulations thereunder.
SECTION 3.15 Rights Agreement. The Company has
----------------
heretofore provided Parent with a complete and correct copy of
the Rights Agreement, including all amendments and exhibits
thereto. The Company has taken all necessary action so that none
of the execution of this Agreement, the making of the Offer, the
acquisition of Shares pursuant to the Offer or the consummation
of the Merger will (a) cause the Rights issued pursuant to the
Rights Agreement to become exercisable, (b) cause any person to
become an Acquiring Person (as such term is defined in the Rights
Agreement) or (c) give rise to a Distribution Date or a
Triggering Event (as each such term is defined in the Rights
Agreement).
SECTION 3.16 Brokers. No broker, finder or investment
-------
banker (other than the Financial Advisers) is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of the Company. The Company
has heretofore furnished to Parent a complete and correct copy of
all agreements between the Company and each of the Financial
Advisers pursuant to which such firm would be entitled to any
payment relating to the transactions contemplated hereby.
<PAGE>
21
SECTION 3.17 Offer Conditions. Since July 1, 1994, no
----------------
event shall have occurred and no circumstance shall have arisen
which would reasonably be expected to result in a failure to
satisfy any of the Offer Conditions.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF
PARENT AND PURCHASER
Parent and Purchaser hereby, jointly and severally,
represent and warrant to the Company that:
SECTION 4.1 Corporate Organization. Each of Parent
----------------------
and Purchaser is a corporation duly organized, validly existing
and in good standing under the laws of the State of Delaware and
has the requisite corporate power and authority and any necessary
governmental authority to own, operate or lease its properties
and to carry on its business as it is now being conducted, except
where the failure to be so organized, existing and in good
standing or to have such power, authority and governmental
approvals would not, individually or in the aggregate, reasonably
be expected to prevent the consummation of the Offer or the
Merger.
SECTION 4.2 Authority Relative to This Agreement.
------------------------------------
Each of Parent and Purchaser has all necessary corporate power
and authority to enter into this Agreement, to perform its
obligations hereunder and to consummate the transactions
contemplated hereby. The execution, delivery and performance of
this Agreement by each of Parent and Purchaser and the
consummation by each of Parent and Purchaser of the transactions
contemplated hereby have been duly authorized by all necessary
corporate action on the part of Parent and Purchaser other than
filing and recordation of appropriate merger documents as
required by Maine Law and Delaware Law. This Agreement has been
duly executed and delivered by Parent and Purchaser and, assuming
due authorization, execution and delivery by the Company,
constitutes a legal, valid and binding obligation of each such
corporation enforceable against such corporation in accordance
with its terms.
SECTION 4.3 No Conflict; Required Filings and
---------------------------------
Consents. (a) The execution, delivery and performance of this
- --------
Agreement by Parent and Purchaser do not and will not: (i)
conflict with or violate the respective certificates of
incorporation or by-laws of Parent or Purchaser; (ii) assuming
that all consents, approvals and authorizations contemplated by
clauses (i), (ii) and (iii) of subsection (b) below have been
obtained and all filings described in such clauses have been
made, conflict with or violate any law, rule, regulation, order,
judgment or decree applicable to Parent or Purchaser or by which
either of them or their respective properties are bound or
<PAGE>
22
affected; or (iii) result in any breach or violation of or
constitute a default (or an event which with notice or lapse of
time or both could become a default) or result in the loss of a
material benefit under, or give rise to any right of termination,
amendment, acceleration or cancellation of, or result in the
creation of a lien or encumbrance on any of the property or
assets of Parent or Purchaser pursuant to, any note, bond,
mortgage, indenture, contract, agreement, lease, license, permit,
franchise or other instrument or obligation to which Parent or
Purchaser is a party or by which Parent or Purchaser or any of
their respective properties are bound or affected, except, in the
case of clauses (ii) and (iii), for any such conflicts,
violations, breaches, defaults or other occurrences which would
not, individually or in the aggregate, reasonably be expected to
prevent the consummation of the Offer or the Merger.
(b) The execution, delivery and performance of this
Agreement by Parent and Purchaser do not and will not require any
consent, approval, authorization or permit of, action by, filing
with or notification to, any governmental or regulatory
authority, domestic or foreign, except for (i) applicable
requirements, if any, of the laws referred to in clause (i) of
the exception to Section 3.5(b), (ii) the filing and recordation
of appropriate merger or other documents as required by Maine Law
and Delaware Law, (iii) compliance with the statutory provisions
and regulations relating to the New York State Tax on Gains
Derived from Certain Real Property Transfers and the New York
City Real Property Transfer Tax and (iv) such consents,
approvals, authorizations, permits, actions, filings or
notifications the failure of which to make or obtain would not,
individually or in the aggregate, reasonably be expected to
prevent the consummation of the Offer or the Merger.
SECTION 4.4 Offer Documents; Proxy Statement. The
--------------------------------
Offer Documents, as amended pursuant to Section 1.1, will not, at
the time such Offer Documents as so amended are filed with the
SEC or are first published, sent or given to shareholders, as the
case may be, contain any untrue statement of a material fact or
omit to state any material fact required to be stated or
incorporated by reference therein or necessary in order to make
the statements therein, in light of the circumstances under which
they were made, not misleading. The information supplied by
Parent for inclusion in the Proxy Statement shall not, on the
date the Proxy Statement is first mailed to shareholders, at the
time of the Shareholders Meeting (as defined in Section 6.1) or
at the Effective Time, contain any statement which, at such time
and in light of the circumstances under which it shall be made,
is false or misleading with respect to any material fact, or
shall omit to state a material fact required to be stated therein
or necessary in order to make the statements therein not false or
misleading or necessary to correct any statement in any earlier
communication with respect to the solicitation of proxies for the
Shareholders Meeting which has become false or misleading.
Notwithstanding the foregoing, Parent and Purchaser make no
<PAGE>
23
representation or warranty with respect to any information
supplied by the Company or any of its representatives which is
contained in any of the foregoing documents or the Offer
Documents. The Offer Documents, as amended and supplemented by
the Supplement, will comply in all material respects as to form
with the requirements of the Exchange Act and the rules and
regulations thereunder.
SECTION 4.5 Financing. Upon the terms and subject to
---------
the conditions of this Agreement and the amended Offer, Purchaser
is highly confident that it has or will have available to it all
funds necessary to satisfy the obligation to pay the Per Share
Amount pursuant to the Offer and the Merger Consideration
pursuant to the Merger.
SECTION 4.6 Brokers. No broker, finder or investment
-------
banker (other than Gleacher & Co. Inc.) is entitled to any
brokerage, finder's or other fee or commission in connection with
the transactions contemplated by this Agreement based upon
arrangements made by and on behalf of Parent or Purchaser.
ARTICLE V
CONDUCT OF BUSINESS PENDING THE MERGER
SECTION 5.1 Conduct of Business of the Company Pending
------------------------------------------
the Merger. The Company covenants and agrees that, during the
- ----------
period from the date hereof to the Effective Time, except
pursuant to the terms hereof or as disclosed with reasonable
specificity in the SEC Reports filed prior to the date hereof, or
unless Parent shall otherwise agree in writing, the businesses of
the Company and its subsidiaries (other than Immunex) shall be
conducted only in, and the Company shall not take any action
(including with respect to Immunex) and its subsidiaries (other
than Immunex) 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 the Company and its
subsidiaries (other than Immunex) shall each use its reasonable
best efforts to preserve substantially intact the business
organization of the Company and its subsidiaries, to keep
available the services of the present officers, employees and
consultants of the Company and its subsidiaries and to preserve
the present relationships of the Company and its subsidiaries
with customers, suppliers and other persons with which the
Company or any of its subsidiaries has significant business
relations. By way of amplification and not limitation, neither
the Company (including with respect to Immunex) nor any of its
subsidiaries (other than Immunex) shall, between the date of this
Agreement and the Effective Time, directly or indirectly do, or
propose or commit to do, any of the following, except as
contemplated by this Agreement or as previously disclosed with
reasonable specificity in the SEC Reports filed prior to the date
hereof, without the prior written consent of Parent:
<PAGE>
24
(a) Amend or otherwise change its Restated Articles 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 the Company or any of its
subsidiaries (except for the issuance of up to 5,451,876
shares of Company Common Stock issuable in accordance with
the terms of Employee Options outstanding as of August 12,
1994 or (B) any assets of the Company or any of its
subsidiaries, except for sales of products 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, except
for the regular quarterly dividend on the Shares in the
amount of $.4625 per Share declared on August 16, 1994 and
the amounts to be paid upon the redemption of the Rights
pursuant to the Rights Agreement in accordance with Section
6.8;
(d) Reclassify, combine, split, subdivide or redeem,
purchase or otherwise acquire, directly or indirectly, any
of its capital stock, except for the redemption of the
Rights at the redemption price of $.02 per Right in
accordance with Section 6.8;
(e) (i) Acquire (by merger, consolidation, or
acquisition of stock or assets) any corporation, partnership
or other business organization or division thereof, except
for the completion of the Company's previously announced
acquisition of the Shell Company's crop protection business,
(ii) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee 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, except for such of the foregoing incurred in the
ordinary course of business, consistent with past practice,
having a maturity not exceeding 90 days, in an aggregate
amount not in excess (including refinancing of already
outstanding amounts) of $900 million; (iii) enter into any
contract or agreement other than in the ordinary course of
business consistent with past practice; (iv) authorize any
single capital expenditure which is in excess of $1 million
or capital expenditures which are, in the aggregate, in
<PAGE>
25
excess of $20 million for the Company and its subsidiaries
taken as a whole; or (v) enter into or amend any contract,
agreement, commitment or arrangement with respect to any of
the matters set forth in this Section 5.1(e);
(f) Except as set forth on Schedule 5.1(f), as
previously approved by Parent or to the extent required
under existing employee and director benefit plans,
agreements or arrangements as in effect on the date of this
Agreement, increase the compensation or fringe benefits of
any of its directors, officers or employees, except for
increases in salary or wages of employees of the Company or
its subsidiaries who are not officers or directors of the
Company in the ordinary course of business in accordance
with past practice, or grant any severance or termination
pay not currently required to be paid under existing
severance plans to, or enter into any employment, consulting
or severance agreement with any present or former director,
officer or other employee of the Company or any of its
subsidiaries (other than an agreement entered into in
exchange for a release by an employee who is not an officer
or director, of any and all claims against the Company
following such employee's termination of employment, but
only if the aggregate amount payable to any terminated
employee under any such agreement does not exceed $100,000
and the aggregate amount payable pursuant to all such
agreements does not exceed $1,000,000), 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, 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) Make any tax election or settle or compromise any
material federal, state, local or foreign tax liability;
(i) Settle or compromise any pending or threatened
suit, action or claim which is material or which relates to
the transactions contemplated hereby;
(j) Take any action, including but not limited to
introducing a new product, which, in the good faith judgment
of the Company, is reasonably likely to result in any
material claim that the Company has violated applicable
laws, rules or regulations or any rights of any other
person;
<PAGE>
26
(k) Adopt a plan of complete or partial liquidation,
dissolution, merger, consolidation, restructuring,
recapitalization or other reorganization of the Company or
any of its subsidiaries not constituting an inactive
subsidiary (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 the Company
or incurred in the ordinary course of business and
consistent with past practice; or
(m) Take, or offer or propose to take, or agree to
take in writing or otherwise, any of the actions described
in Sections 5.1(a) through 5.1(l) or any action which would
make any of the representations or warranties of the Company
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 Offer Conditions not being satisfied.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Shareholders Meeting. (a) The Company,
--------------------
acting through its Board of Directors, shall, if required in
accordance with applicable law and the Company's Restated
Articles of Incorporation and By-Laws, (i) duly call, give notice
of, convene and hold a special meeting of its shareholders as
soon as practicable following consummation of the Offer for the
purpose of considering and taking action on this Agreement and
the transactions contemplated hereby (the "Shareholders Meeting")
--------------------
and (ii) subject to its fiduciary duties under applicable law,
exercised after consultation with independent legal counsel, (A)
include in the Proxy Statement the unanimous recommendation of
the Board of Directors that the shareholders of the Company vote
in favor of the approval of this Agreement and the transactions
contemplated hereby and the written opinions of the Financial
Advisers that the consideration to be received by the
shareholders of the Company pursuant to the Offer and the Merger
is fair to such shareholders and (B) use its reasonable best
efforts to obtain the necessary approval of this Agreement and
the transactions contemplated hereby by its shareholders. At the
Shareholders Meeting, Parent and Purchaser shall cause all Shares
then owned by them and their subsidiaries to be voted in favor of
approval of this Agreement and the transactions contemplated
hereby.
(b) Notwithstanding the foregoing, in the event that
Purchaser shall acquire at least 90% of the outstanding Shares,
<PAGE>
27
the Company agrees, at the request of Purchaser, subject to
Article VII, to take all necessary and appropriate action to
cause the Merger to become effective as soon as reasonably
practicable after such acquisition, without a meeting of the
Company's shareholders, in accordance with Section 904 of Maine
Law.
SECTION 6.2 Proxy Statement. If required by
---------------
applicable law, as soon as practicable following Parent's
reasonable request, the Company shall file with the SEC under the
Exchange Act, and shall use its reasonable best efforts to have
cleared by the SEC, the Proxy Statement with respect to the
Shareholders Meeting. Parent, Purchaser and the Company will
cooperate with each other in the preparation of the Proxy
Statement; without limiting the generality of the foregoing, each
of Parent and Purchaser will furnish to the Company the
information relating to it required by the Exchange Act to be set
forth in the Proxy Statement. The Company agrees to use its
reasonable best efforts, after consultation with the other
parties hereto, to respond promptly to any comments made by the
SEC with respect to the Proxy Statement and any preliminary
version thereof filed by it and cause such Proxy Statement to be
mailed to the Company's shareholders at the earliest practicable
time.
SECTION 6.3 Company Board Representation; Section
-------------------------------------
14(f). (a) Promptly upon the purchase by Purchaser of Shares
- -----
pursuant to the Offer, and from time to time thereafter,
Purchaser shall be entitled to designate up to such number of
directors, rounded up to the next whole number, on the Board of
Directors of the Company as shall give Purchaser representation
on the Board of Directors equal to the product of the total
number of directors on such Board (giving effect to the directors
elected pursuant to this sentence) multiplied by the percentage
that the aggregate number of Shares beneficially owned by
Purchaser or any affiliate of Purchaser bears to the total number
of Shares then outstanding, and the Company shall, at such time,
promptly take all action necessary to cause Purchaser's designees
to be so elected, including either increasing the size of the
Board of Directors or securing the resignations of incumbent
directors or both. At such times, the Company will use its
reasonable best efforts to cause persons designated by the
Purchaser to constitute the same percentage as is on the Board of
(i) each committee of the Board, (ii) each board of directors of
each domestic subsidiary of the Company and (iii) each committee
of each such board, in each case only to the extent permitted by
law. Until Purchaser acquires a majority of the outstanding
Shares on a fully diluted basis, the Company shall use its
reasonable best efforts to ensure that all the members of the
Board and such boards and committees as of the date hereof who
are not employees of the Company shall remain members of the
Board and such boards and committees.
<PAGE>
28
(b) The Company's obligations to appoint designees to
its Board of Directors shall be subject to Section 14(f) of the
Exchange Act and Rule 14f-1 promulgated thereunder. The Company
shall promptly take all actions required pursuant to Section
14(f) and Rule 14f-1 in order to fulfill its obligations under
this Section 6.3 and shall, if requested by Parent, include in
the Schedule 14D-9 or a separate Rule 14f-1 Statement provided to
shareholders such information with respect to the Company and its
officers and directors as is required under Section 14(f) and
Rule 14f-1 to fulfill its obligations under this Section 6.3.
Parent or Purchaser will supply to the Company and be solely
responsible for any information with respect to either of them
and their nominees, officers, directors and affiliates required
by Section 14(f) and Rule 14f-1.
(c) Following the election or appointment of
Purchaser's designees pursuant to this Section 6.3 and prior to
the Effective Time, any amendment of this Agreement or the
Restated Articles of Incorporation or By-Laws of the Company, any
termination of this Agreement by the Company, any extension by
the Company of the time for the performance of any of the
obligations or other acts of Purchaser or waiver of any of the
Company's rights hereunder, and any other consent or action by
the Board of Directors hereunder, will require the concurrence of
a majority (which shall be at least two) of the directors of the
Company then in office who are neither designated by Purchaser
nor are employees of the Company (the "Disinterested Directors").
-----------------------
SECTION 6.4 Access to Information; Confidentiality.
--------------------------------------
(a) From the date hereof to the Effective Time, the Company
shall, and shall cause its subsidiaries, officers, directors,
employees, auditors and other agents to, afford the officers,
employees, auditors and other agents of Parent, and financing
sources who shall agree to be bound by the provisions of this
Section 6.4 as though a party hereto, complete access at all
reasonable times to its officers, employees, agents, properties,
offices, plants and other facilities and to all books and
records, and shall furnish Parent and such financing sources with
all financial, operating and other data and information as
Parent, through its officers, employees or agents, or such
financing sources may from time to time request.
(b) Each of Parent and Purchaser will hold and will
cause its officers, employees, auditors and other agents to hold
in confidence, unless compelled to disclose by judicial or
administrative process or by other requirements of law, all
documents and information concerning the Company and its
subsidiaries furnished to Parent or Purchaser in connection with
the transactions contemplated in this Agreement (except to the
extent that such information can be shown to have been (i)
previously known by Parent or Purchaser from sources other than
the Company, or its directors, officers, auditors or other
agents, (ii) in the public domain through no fault of Parent or
Purchaser or (iii) later lawfully acquired by Parent or Purchaser
<PAGE>
29
on a non-confidential basis from other sources who are not known
by Parent or Purchaser to be bound by a confidentiality agreement
(after inquiry of such sources) or otherwise prohibited from
transmitting the information to Parent or Purchaser by a
contractual, legal or fiduciary obligation) and will not release
or disclose such information to any other person, except its
auditors and other advisors in connection with this Agreement who
need to know such information. If the transactions contemplated
by this Agreement are not consummated, such confidence shall be
maintained for a period of three years from the date hereof and,
if requested by or on behalf of the Company, Parent and Purchaser
will, and will use all reasonable efforts to cause their auditors
and other agents to, return to the Company or destroy all copies
of written information furnished by the Company to Parent and
Purchaser or their agents, representatives or advisors. It is
understood that Parent and Purchaser shall be deemed to have
satisfied their obligation to hold such information confidential
if they exercise the same care as they take to preserve
confidentiality for their own similar information.
(c) No investigation pursuant to this Section 6.4
shall affect any representations or warranties of the parties
herein or the conditions to the obligations of the parties
hereto.
SECTION 6.5 No Solicitation of Transactions. The
-------------------------------
Company, its affiliates and their respective officers, directors,
employees, representatives and agents shall immediately cease any
existing discussions or negotiations, if any, with any parties
conducted heretofore with respect to any acquisition or exchange
of all or any material portion of the assets of, or any equity
interest in, the Company or any of its subsidiaries or any
business combination with the Company or any of its subsidiaries.
The Company may, directly or indirectly, furnish information and
access, in each case only in response to a request for such
information or access to any person made after the date hereof
which was not encouraged, solicited or initiated by the Company
or any of its affiliates or any of its or their respective
officers, directors, employees, representatives or agents after
the date hereof, pursuant to appropriate confidentiality
agreements, and may participate in discussions and negotiate with
such entity or group concerning any merger, sale of assets, sale
of shares of capital stock or similar transaction (including an
exchange of stock or assets) involving the Company or any
subsidiary or division of the Company, if such entity or group
has submitted a written proposal to the Board relating to any
such transaction and failing to take such action would constitute
a breach of the Board's fiduciary duty under applicable law. The
Board shall provide a copy of any such written proposal to Parent
immediately after receipt thereof, unless independent outside
legal counsel to the Company has advised the Board of Directors
that providing such a copy would constitute a breach of the
Board's fiduciary duty under applicable law. Notwithstanding the
foregoing, the Company shall notify Parent immediately if any
<PAGE>
30
such proposal is made and shall keep Parent promptly advised of
all developments which could reasonably be expected to culminate
in the Board of Directors withdrawing, modifying or amending its
recommendation of the Offer, the Merger and the other
transactions contemplated by this Agreement. Except as set forth
in this Section 6.5, neither the Company or any of its
affiliates, nor any of its or their respective officers,
directors, employees, representatives or agents, shall, directly
or indirectly, encourage, solicit, participate in or initiate
discussions or negotiations with, or provide any information to,
any corporation, partnership, person or other entity or group
(other than Parent and Purchaser, any affiliate or associate of
Parent and Purchaser or any designees of Parent or Purchaser)
concerning any merger, sale of assets, sale of shares of capital
stock or similar transactions (including an exchange of stock or
assets) involving the Company or any subsidiary or division of
the Company; provided, however, that nothing in this Section 6.5
-------- -------
shall prevent the Board from taking, and disclosing to the
Company's shareholders, a position contemplated by Rules 14d-9
and 14e-2 promulgated under the Exchange Act with regard to any
tender offer; provided, further, that the Board shall not
-------- -------
recommend that the shareholders of the Company tender their
Shares in connection with any such tender offer unless failing to
take such action would constitute a breach of the Board's
fiduciary duty under applicable law. The Company agrees not to
release any third party from, or waive any provisions of, any
confidentiality or standstill agreement to which the Company is a
party, unless failing to release such third party or waive such
provisions would constitute a breach of the Board's fiduciary
duty under applicable law.
SECTION 6.6 Employee Benefits Matters. (a) Parent
-------------------------
shall cause the Company and the Surviving Corporation to promptly
pay or provide when due all compensation and benefits earned
through or prior to the Effective Time as provided pursuant to
the terms of any compensation arrangements, employment agreements
and employee or director benefit plans, programs and policies in
existence as of the date hereof for all employees (and former
employees) and directors (and former directors) of the Company.
Parent and the Company agree that the Company and the Surviving
Corporation shall pay promptly or provide when due all
compensation and benefits required to be paid pursuant to the
terms of any individual agreement with any employee, former
employee, director or former director in effect and disclosed to
Parent as of the date hereof. Nothing in this Agreement shall
require the continued employment of any person or prevent the
Company and/or the Surviving Corporation from taking any action
or refraining from taking any action which the Company could take
or refrain from taking prior to the Effective Time.
(b) Except as contemplated herein, Parent shall cause
the Surviving Corporation, for the period ending on December 31,
1995, to provide employee benefits under plans, programs and
arrangements which, in the aggregate, will provide benefits to
<PAGE>
31
the employees and former employees of the Surviving Corporation
(other than employees and former employees covered by a
collective bargaining agreement) which are no less favorable in
the aggregate than those provided to such persons pursuant to the
plans, programs and arrangements of the Company in effect on the
date hereof (other than all Performance Allotments and
Performance Share Allotments under the Company's Incentive Plan,
which shall be disregarded for all purposes under this Section
6.6(b)) and employees and former employees covered by collective
bargaining agreements shall be provided with such benefits as
shall be required under the terms of any applicable collective
bargaining agreement; provided, however, that nothing herein (i)
-------- -------
shall prevent the amendment or termination of any such plan,
program or arrangement, (ii) require that the Surviving
Corporation provide or permit investment in the securities of
Parent, the Company or the Surviving Corporation or (iii)
interfere with the Surviving Corporation's right or obligation to
make such changes as are necessary to conform with applicable
law. On and after January 1, 1996, Parent shall provide
employees and former employees of the Surviving Corporation
(other than those covered by collective bargaining agreements)
with benefits, in the aggregate, that are no less favorable than
those provided to similarly situated employees and former
employees of other subsidiaries of Parent.
(c) With respect to the payment of the Current
Allotments under the Company Incentive Plan and cash incentive
compensation awards under the Cash Incentive Compensation Plan of
the Company in respect of the year ending December 31, 1994,
Parent shall cause the Company to pay such amounts, in accordance
with the applicable performance targets established at the
beginning of such year, as soon as practicable following the
close of such year and the date the actual performance of the
Company and its subsidiaries for the year then ended is
calculated. The determination of the performance of the Company
and its subsidiaries shall be made in good faith by the certified
public accountants of the Company who were the Company's
certified public accountants prior to the purchase of Shares
pursuant to the Offer, after disregarding the financial effects
of the transactions contemplated hereunder and any other changes
made by Parent after the purchase of Shares pursuant to the Offer
to the operations, finances or corporate structure of the Company
and its subsidiaries. Notwithstanding anything in this Section
6.06(c) to the contrary, if, prior to the date the Current
Allotments or cash incentive compensation awards are paid
pursuant to this section (c), any employee is terminated by the
Company without "cause" or voluntarily terminates employment
following a reduction in base salary, the Company or the
Surviving Corporation shall pay the employee his or her award
under the applicable plan as soon as practicable following the
employee's termination of employment.
(d) Parent shall cause the Company to contribute to
the Company Savings Plan approximately $7 million as the Company
<PAGE>
32
"performance contribution" for the year ended December 31, 1994,
provided the actual performance of the Company and its
subsidiaries as of December 31, 1994 satisfies the conditions
provided under the Savings Plan for such contribution. Such
contribution shall be made as soon as practicable following the
close of such year and the date the actual performance of the
Company and its subsidiaries for the year then ended is
calculated. The determination of such performance shall be made
in the same manner as provided in Section 6.6(c) above.
Moreover, with respect to any participant in the Savings Plan
whose employment is terminated by the Company prior to December
31, 1994 without cause or voluntarily by the employee following a
reduction in base salary, such participant shall be vested in
that portion of the Company performance contribution which such
participant would have otherwise been entitled to receive under
the terms of the Savings Plan as in effect on the date hereof had
such participant's employment not been terminated prior to
December 31, 1994.
(e) As soon as practicable after the date the Shares
are purchased pursuant to the Offer, the Company shall pay
Incentive Compensation Plan participants an amount ("Incentive
Compensation Cashout") equal to the value of the Performance
Allotments determined in accordance with Rule 8(g) of the Rules
and Regulations of the Compensation Committee under such plan, as
in effect on the date hereof. As soon as practicable after
December 31, 1994, Parent shall cause the Surviving Corporation
to pay to each participant who is an employee as of December 31,
1994 an amount (the "Additional Payment") equal to the excess of
the amount such employee would have received under such Rule 8(g)
had the value of the Performance Allotments been calculated at
141.5% of the target bonus over the Incentive Compensation
Cashout received by such employee. Notwithstanding the
foregoing, if an employee's employment is terminated without
cause by the Company or voluntarily by the employee following
the reduction of such employee's base salary after the date the
Shares are purchased pursuant to the Offer but prior to the payment
of the Additional Payment, the Company shall pay such employee the
Additional Payment as soon as practicable after the employee's
termination of employment.
(f) Parent shall cause the Surviving Corporation to
include as a participant in the Company's Supplemental Employees
Retirement Plan ("SERP") any individual who is a Key Manager (as
defined below) as of the date hereof whose employment is
terminated by the Company without cause or who voluntarily
terminates employment following a reduction in base salary within
the two year period following the date the Shares are purchased
pursuant to the Offer and such person shall be entitled to
benefits hereunder if, but only if, at the time of such
termination, the Key Manager has attained age 50 with 10 years of
service with the Company and the Surviving Corporation. Payment
of retirement benefits under the SERP will commence no earlier
than the first day of the month following the Key Manager's 60th
birthday. As used herein, "Key Manager" means a participant in
<PAGE>
33
the Company's Incentive Compensation Plan, as in effect on the
date hereof.
SECTION 6.7 Directors' and Officers' Indemnification
----------------------------------------
and Insurance. (a) The By-Laws of the Surviving Corporation
- -------------
shall contain provisions no less favorable with respect to
indemnification than are set forth in Article IV of the By-laws
of the Company, which provisions shall not be amended, repealed
or otherwise modified for a period of five years from the
Effective Time in any manner that would adversely affect the
rights thereunder of individuals who at the Effective Time were
directors, officers, agents or employees of the Company or
otherwise entitled to indemnification pursuant to Article IV of
the Company's By-Laws.
(b) Parent shall use its best efforts to cause to be
maintained in effect for three years from the Effective Time the
current policies of the directors' and officers' liability
insurance maintained by the Company (provided that Parent may
--------
substitute therefor policies of at least the same coverage
containing terms and conditions which are not materially less
advantageous) with respect to matters occurring prior to the
Effective Time to the extent available; provided, however, that
-------- -------
in no event shall Parent or the Company be required to expend
more than an amount per year equal to 150% of current annual
premiums paid by the Company (which the Company represents and
warrants to be not more than $1,204,050) to maintain or procure
insurance coverage pursuant hereto.
SECTION 6.8 No Amendment to the Rights Agreement;
-------------------------------------
Redemption. The Company covenants and agrees that it will not
- ----------
amend the Rights Agreement, except as expressly contemplated by
this Agreement. The Company will redeem all outstanding Rights
at a redemption price of $.02 per Right immediately prior to the
consummation of the Offer; the Rights Agreement permits and will
permit such redemption.
SECTION 6.9 Further Action; Reasonable Best Efforts.
---------------------------------------
Upon the terms and subject to the conditions hereof, each of the
parties hereto shall use its reasonable best efforts to take, or
cause to be taken, all appropriate action, and to do or cause to
be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective
the transactions contemplated by this Agreement, including but
not limited to (i) cooperation in the preparation and filing of
the Offer Documents, the Schedule 14D-9, the Proxy Statement, any
required filings under the HSR Act and other laws described in
clause (i) of the exception in Section 3.5(b), and any amendments
to any thereof and (ii) using its reasonable best efforts to make
all required regulatory filings and applications and to obtain
all licenses, permits, consents, approvals, authorizations,
qualifications and orders of governmental authorities and parties
to contracts with the Company and its subsidiaries as are
necessary for the consummation of the transactions contemplated
<PAGE>
34
by this Agreement and to fulfill the conditions to the Offer and
the Merger. The Company will cooperate with Parent and Purchaser
with respect to consummating the financing for the Offer and the
Merger. In case at any time after the Effective Time any further
action is necessary or desirable to carry out the purposes of
this Agreement, the proper officers and directors of each party
to this Agreement shall use their reasonable best efforts to take
all such necessary action.
SECTION 6.10 Public Announcements. Parent and the
--------------------
Company shall consult with each other before issuing any press
release or otherwise making any public statements with respect to
the Offer or the Merger and shall not issue any such press
release or make any such public statement prior to such
consultation, except as may be required by law or any listing
agreement with its securities exchange.
SECTION 6.11 Notice Pursuant to Section 910. To the
------------------------------
extent required by Maine Law, Parent shall cause the Purchaser to
give the notice required by subsection 3 of Section 910 not later
than fifteen days after the acceptance for payment of Shares
pursuant to the Offer. In order to provide such notice, the
Company shall provide to Parent, not less than five days prior to
the date on which such notice must be made pursuant to this
Section, an updated list of shareholders, which list shall be
subject to the provisions of Section 1.2(c) of this Agreement.
If permitted by applicable law, such notice may be contained in
or provided in connection with the Offer Documents or the Proxy
Statement.
SECTION 6.12 Taxes. Any liability with respect to the
-----
transfer of the property of the Company arising out of the New
York State Real Property Gains Tax, the New York State Real
Estate Transfer Tax and the New York City Real Property
Transaction Tax shall be borne by the Company and expressly shall
not be a liability of the shareholders of the Company.
SECTION 6.13 Disposition of Litigation. (a) Each
-------------------------
party agrees to use its best efforts to obtain a dismissal
without prejudice of American Home Products Corporation, et al.
------------------------------------------
v. American Cyanamid Company, et al., Civil Action Docket
- ------------------------------------
No. 94-230-P-H (D. Me. 1994), including any and all counterclaims
asserted against the Company, its directors, its officers, Parent
and Purchaser, with each party bearing its own costs and
attorneys' fees therefor. The Company agrees that it will not
settle any litigation currently pending, or commenced after the
date hereof, against the Company or any of its directors by any
shareholder of the Company relating to the Offer or this
Agreement, without the prior written consent of Parent.
(b) The Company will not voluntarily cooperate with
any third party which has sought or may hereafter seek to
restrain or prohibit or otherwise oppose the Offer or the Merger
and will cooperate with Parent and Purchaser to resist any such
<PAGE>
35
effort to restrain or prohibit or otherwise oppose the Offer or
the Merger, unless failing so to cooperate with such third party
or cooperating with Parent or Purchaser, as the case may be,
would constitute a breach of the Board's fiduciary duty under
applicable law.
ARTICLE VII
CONDITIONS OF MERGER
SECTION 7.1 Conditions to Obligation of Each Party to
-----------------------------------------
Effect the Merger. The respective obligations of each party to
- -----------------
effect the Merger shall be subject to the satisfaction at or
prior to the Effective Time of the following conditions:
(a) If required by Maine Law, this Agreement shall
have been approved by the affirmative vote of the
shareholders of the Company by the requisite vote in
accordance with the Company's Restated Articles of
Incorporation and Maine Law (which the Company has
represented shall be solely the affirmative vote of a
majority of the outstanding Shares).
(b) No statute, rule, regulation, executive order,
decree, ruling, injunction or other order (whether
temporary, preliminary or permanent) shall have been
enacted, entered, promulgated or enforced by any United
States or state court or governmental authority which
prohibits, restrains, enjoins or restricts the consummation
of the Merger.
(c) Any waiting period applicable to the Merger under
the HSR Act shall have terminated or expired.
(d) Purchaser shall have purchased Shares pursuant to
the Offer.
ARTICLE VIII
TERMINATION, AMENDMENT AND WAIVER
SECTION 8.1 Termination. This Agreement may be
-----------
terminated and the Merger contemplated hereby may be abandoned at
any time prior to the Effective Time, notwithstanding approval
thereof by the shareholders of the Company:
(a) By mutual written consent of Parent, Purchaser and
the Company; or
(b) By Parent or the Company if any court of competent
jurisdiction or other governmental body located or having
jurisdiction within the United States or any country or
economic region in which either the Company or Parent,
<PAGE>
36
directly or indirectly, has material assets or operations,
shall have issued a final order, decree or ruling or taken
any other final action restraining, enjoining or otherwise
prohibiting the Offer or the Merger and such order, decree,
ruling or other action is or shall have become final and
nonappealable;
(c) By Parent if due to an occurrence or circumstance
which would result in a failure to satisfy any of the Offer
Conditions, Purchaser shall have (i) failed to amend the
Offer as provided in Section 1.1, (ii) terminated the Offer
or (iii) failed to pay for Shares pursuant to the Offer on
or prior to the Outside Date (as defined below);
(d) By the Company if (i) there shall not have been a
material breach of any representation, warranty, covenant or
agreement on the part of the Company, and Purchaser shall
have (A) terminated the Offer or (B) failed to pay for
Shares pursuant to the Offer on or prior to the Outside Date
or (ii) prior to the purchase of Shares pursuant to the
Offer, any person shall have made a bona fide offer to
acquire the Company (A) that the Board has determined in its
good faith judgment is more favorable to the Company's
shareholders than the Offer and the Merger and (B) as a
result of which the Board is obligated by its fiduciary duty
under applicable law to terminate this Agreement, provided
--------
that such termination under this clause (ii) shall not be
effective until the Company has made payment of the full fee
required by Section 8.3(b) hereof and has deposited with a
mutually acceptable escrow agent $50 million for
reimbursement to Parent of expenses in accordance with
Section 8.3(b) hereof; or
(e) By Parent prior to the purchase of Shares pursuant
to the Offer, if (i) there shall have been a breach of any
representation or warranty on the part of the Company which
would reasonably be expected to either have a Material
Adverse Effect on the Company or prevent the consummation of
the Offer, (ii) there shall have been a breach of any
covenant or agreement on the part of the Company which would
reasonably be expected to either have a Material Adverse
Effect or prevent the consummation of the Offer, which shall
not have been cured prior to the earlier of (A) 10 days
following notice of such breach and (B) two business days
prior to the date on which the Offer expires, (iii) the
Board shall have withdrawn or modified (including by
amendment of the Schedule 14D-9) in a manner adverse to
Purchaser its approval or recommendation of the Offer, this
Agreement or the Merger or shall have recommended another
offer or transaction, or shall have resolved to effect any
of the foregoing or (iv) the Minimum Condition shall not
have been satisfied by the expiration date of the Offer and
on or prior to such date (A) any person (other than Parent
or Purchaser) shall have made a proposal or public
<PAGE>
37
announcement or communication to the Company with respect to
a Third Party Acquisition or (B) any person (including the
Company or any of its subsidiaries or affiliates), other
than Parent or any of its affiliates, shall have become the
beneficial owner of 19.9% or more of the Shares. As used
herein, the "Outside Date" shall mean the latest (not to
exceed 120 days following the date hereof) of (A) 60 days
following the date hereof, (B) if a Request for Additional
Information is made by the Federal Trade Commission pursuant
to the HSR Act, 10 business days after substantial
compliance with any such request, or (C) 10 business days
following the conclusion of any ongoing proceedings before
the European Commission in connection with its review of the
transactions contemplated hereby or any similar delay
pursuant to any other material antitrust or competition law
or regulation.
SECTION 8.2 Effect of Termination. In the event of
---------------------
the termination of this Agreement pursuant to Section 8.1, this
Agreement shall forthwith become void and there shall be no
liability on the part of any party hereto except as set forth in
Section 8.3 and Section 9.1; provided, however, that nothing
-------- -------
herein shall relieve any party from liability for any breach
hereof.
SECTION 8.3 Fees and Expenses.
-----------------
(a) If:
(i) Parent terminates this Agreement pursuant to
Section 8.1(e)(i) or (ii) hereof, or if the Company
terminates this Agreement pursuant to Section 8.1(d)(i)
hereof, and, within 12 months thereafter, the Company enters
into an agreement with respect to a Third Party Acquisition,
or a Third Party Acquisition occurs, involving any party (or
any affiliate or associate thereof) (x) with whom the
Company (or its agents) had any discussions with respect to
a Third Party Acquisition, (y) to whom the Company (or its
agents) furnished information with respect to or with a view
to a Third Party Acquisition or (z) who had submitted a
proposal or expressed any interest publicly or to the
Company in a Third Party Acquisition, in the case of each of
clauses (x), (y) and (z) prior to such termination; or
(ii) Parent terminates this Agreement pursuant to
Section 8.1(e)(i) or (ii) hereof, or if the Company
terminates this Agreement pursuant to Section 8.1(d)(i)
hereof, and within 12 months thereafter a Third Party
Acquisition shall occur involving a direct or indirect
consideration (or implicit valuation) for Shares (including
the value of any stub equity) in excess of the Per Share
Amount; or
<PAGE>
38
(iii) Parent terminates this Agreement pursuant to
Section 8.1(e)(iii) or (iv) hereof or the Company terminates
this Agreement pursuant to Section 8.1(d)(ii) hereof or
otherwise under circumstances that would have permitted
Parent to terminate this Agreement under Section 8.1(e)(iv)
hereof;
then the Company shall pay to Parent and Purchaser, within one
business day following the execution and delivery of such
agreement or such occurrence, as the case may be, or
simultaneously with any termination contemplated by Section
8.3(a)(iii) above, a fee, in cash, of $100 million, provided,
--------
however, that the Company in no event shall be obligated to pay
- -------
more than one such $100 million fee with respect to all such
agreements and occurrences and such termination.
"Third Party Acquisition" means the occurrence of any
-----------------------
of the following events: (i) the acquisition of the Company by
merger, tender offer or otherwise by any person other than
Parent, Purchaser or any affiliate thereof (a "Third Party");
-----------
(ii) the acquisition by a Third Party of 19.9% or more of the
total assets of the Company and its subsidiaries, taken as a
whole; (iii) the acquisition by a Third Party of 19.9% or more of
the outstanding Shares; (iv) the adoption by the Company of a
plan of liquidation or the declaration or payment of an
extraordinary dividend; or (v) the repurchase by the Company or
any of its subsidiaries of 19.9% or more of the outstanding
Shares, other than a repurchase which was not approved by the
Company or publicly announced prior to the termination of this
Agreement and which is not part of a series of transactions
resulting in a change of control.
(b) Upon the termination of this Agreement (i) under
circumstances in which Parent or Purchaser shall have been
entitled to terminate this Agreement pursuant to Section
8.1(e)(i) or (ii) hereof (whether or not expressly terminated on
such basis) or (ii) under circumstances in which the Company
shall be obligated to pay a fee pursuant to Section 8.3(a), the
Company shall reimburse Parent, Purchaser and their affiliates
(not later than one business day after submission of statements
therefor) for all actual documented out-of-pocket fees and
expenses actually incurred by any of them or on their behalf in
connection with the Offer and the Merger and the consummation of
all transactions contemplated by this Agreement (including,
without limitation, fees and disbursements payable to financing
sources, investment bankers, counsel to Purchaser or Parent or
any of the foregoing, and accountants). Unless required to be
paid earlier pursuant to Section 8.1(d), the Company shall in any
event pay the amount requested within one business day of such
request, subject to the Company's right to demand a return of any
portion as to which invoices are not received in due course after
request by the Company. The escrow agent referred to in Section
8.1(d) shall promptly and in any event within one business day of
receipt of request therefor by Purchaser or Parent disburse to
<PAGE>
39
Purchaser or Parent the fees and expenses payable by the Company
pursuant to this Section 8.3(b). To the extent that funds
deposited with such escrow agent are insufficient to reimburse
Purchaser and Parent for all fees and expenses pursuant to this
Section 8.3(b), the Company shall, upon submission of invoices,
directly reimburse Purchaser and Parent.
(c) Except as specifically provided in this Section
8.3, each party shall bear its own expenses in connection with
this Agreement and the transactions contemplated hereby.
SECTION 8.4 Amendment. Subject to Section 6.3, this
---------
Agreement may be amended by the parties hereto by action taken by
or on behalf of their respective Boards of Directors at any time
prior to the Effective Time; provided, however, that, after
-------- -------
approval of the Merger by the shareholders of the Company, no
amendment may be made which would reduce the amount or change the
type of consideration into which each Share shall be converted
upon consummation of the Merger. This Agreement may not be
amended except by an instrument in writing signed by the parties
hereto.
SECTION 8.5 Waiver. Subject to Section 6.3, at any
------
time prior to the Effective Time, any party hereto may (a) extend
the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in
the representations and warranties contained herein or in any
document delivered pursuant hereto and (c) waive compliance with
any of the agreements or conditions contained herein. Any such
extension or waiver shall be valid if set forth in an instrument
in writing signed by the party or parties to be bound thereby.
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.1 Non-Survival of Representations,
--------------------------------
Warranties and Agreements. The representations, warranties and
- -------------------------
agreements in this Agreement shall terminate at the Effective
Time or upon the termination of this Agreement pursuant to
Section 8.1, as the case may be, except that the agreements set
forth in Article II, Section 6.6, Section 6.7, Section 6.9 and
Article IX shall survive the Effective Time indefinitely and
those set forth in Section 6.4, Section 8.3 and Article IX shall
survive termination indefinitely.
SECTION 9.2 Notices. All notices, requests, claims,
-------
demands and other communications hereunder shall be in writing
and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by cable, telecopy, telegram
or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
<PAGE>
40
if to Parent or Purchaser:
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: Louis L. Hoynes, Jr., Esq.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Robert E. Spatt, Esq.
if to the Company:
American Cyanamid Company
One Cyanamid Plaza
Wayne, New Jersey 07470
Attention: Secretary
with a copy to:
Shearman & Sterling
599 Lexington Avenue
New York, New York 10022
Attention: Peter D. Lyons, Esq.
SECTION 9.3 Certain Definitions. For purposes of this
-------------------
Agreement, the term:
(a) "affiliate" of a person means a person that
---------
directly or indirectly, through one or more intermediaries,
controls, is controlled by, or is under common control with,
the first mentioned person;
(b) "beneficial owner" with respect to any Shares
----------------
means a person who shall be deemed to be the beneficial
owner of such Shares (i) which such person or any of its
affiliates or associates beneficially owns, directly or
indirectly, (ii) which such person or any of its affiliates
or associates (as such term is defined in Rule 12b-2 of the
Exchange Act) has, directly or indirectly, (A) the right to
acquire (whether such right is exercisable immediately or
subject only to the passage of time), pursuant to any
agreement, arrangement or understanding or upon the exercise
of consideration rights, exchange rights, warrants or
options, or otherwise, or (B) the right to vote pursuant to
any agreement, arrangement or understanding or (iii) which
are beneficially owned, directly or indirectly, by any other
persons with whom such person or any of its affiliates or
person with whom such person or any of its affiliates or
associates has any agreement, arrangement or understanding
<PAGE>
41
for the purpose of acquiring, holding, voting or disposing
of any shares;
(c) "control" (including the terms "controlled by" and
------- -------------
"under common control with") means the possession, directly
-------------------------
or indirectly or as trustee or executor, of the power to
direct or cause the direction of the management policies of
a person, whether through the ownership of stock, as trustee
or executor, by contract or credit arrangement or otherwise;
(d) "generally accepted accounting principles" shall
----------------------------------------
mean the generally accepted accounting principles set forth
in the opinions and pronouncements of the Accounting
Principles Board of the American Institute of Certified
Public Accountants and statements and pronouncements of the
Financial Accounting Standards Board or in such other
statements by such other entity as may be approved by a
significant segment of the accounting profession in the
United States, in each case applied on a basis consistent
with the manner in which the audited financial statements
for the fiscal year of the Company ended December 31, 1993
were prepared;
(e) "knowledge" means knowledge after reasonable
---------
inquiry;
(f) "person" means an individual, corporation,
------
partnership, association, trust, unincorporated
organization, other entity or group (as defined in Section
13(d)(3) of the Exchange Act); and
(g) "subsidiary" or "subsidiaries" of the Company, the
---------- ------------
Surviving Corporation, Parent or any other person means any
corporation, partnership, joint venture or other legal
entity of which the Company, the Surviving Corporation,
Parent or such other person, as the case may be (either
alone or through or together with any other subsidiary),
owns, directly or indirectly, 50% or more of the stock or
other equity interests the holder of which is generally
entitled to vote for the election of the board of directors
or other governing body of such corporation or other legal
entity.
SECTION 9.4 Severability. If any term or other
------------
provision of this Agreement is invalid, illegal or incapable of
being enforced by any rule of law, or public policy, all other
conditions 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 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 to the
<PAGE>
42
end that the transactions contemplated hereby are fulfilled to
the fullest extent possible.
SECTION 9.5 Entire Agreement; Assignment. This
----------------------------
Agreement constitutes the entire agreement among the parties with
respect to the subject matter hereof and supersedes all prior
agreements and undertakings, both written and oral, among the
parties, or any of them, with respect to the subject matter
hereof. This Agreement shall not be assigned by operation of law
or otherwise, except that Parent and Purchaser may assign all or
any of their respective rights and obligations hereunder to any
direct or indirect wholly owned subsidiary or subsidiaries of
Parent, provided that no such assignment shall relieve the
--------
assigning party of its obligations hereunder if such assignee
does not perform such obligations.
SECTION 9.6 Parties in Interest. 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 rights,
benefits or remedies of any nature whatsoever under or by reason
of this Agreement.
SECTION 9.7 Governing Law. This Agreement shall be
-------------
governed by, 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 thereof,
except to the extent that the consummation of the Merger is
governed by Maine Law.
SECTION 9.8 Headings. The descriptive headings
--------
contained in this Agreement are included for convenience of
reference only and shall not affect in any way the meaning or
interpretation of this Agreement.
SECTION 9.9 Counterparts. This Agreement may be
------------
executed in one or more counterparts, and by the different
parties hereto in separate counterparts, each of which when
executed shall be deemed to be an original but all of which taken
together shall constitute one and the same agreement.
<PAGE>
IN WITNESS WHEREOF, Parent, Purchaser and the Company
have caused this Agreement to be executed as of the date first
written above by their respective officers thereunto duly
authorized.
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ Robert G. Blount
---------------------------
Name: Robert G. Blount
Title: Executive Vice President
AC ACQUISITION CORP.
By: /s/ Robert G. Blount
---------------------------
Name: Robert G. Blount
Title: Vice President
AMERICAN CYANAMID COMPANY
By: /s/ J. S. McAuliffe
----------------------------
Name: J.S. McAuliffe
Title: Vice President
<PAGE>
ANNEX A
Offer Conditions
----------------
The capitalized terms used in this Annex A have the
meanings set forth in the attached Agreement, except that the
term "Merger Agreement" shall be deemed to refer to the attached
Agreement and the term "Commission" shall be deemed to refer to
the SEC.
Notwithstanding any other provision of the Offer,
Purchaser shall not be required to accept for payment or, subject
to any applicable rules and regulations of the Commission,
including Rule 14e-1(c) under the Exchange Act (relating to
Purchaser's obligation to pay for or return tendered Shares
promptly after termination or withdrawal of the Offer), pay for
any Shares tendered pursuant to the Offer, and may postpone the
acceptance for payment or, subject to the restriction referred to
above, payment for any Shares tendered pursuant to the Offer, and
may amend or terminate the Offer (whether or not any Shares have
theretofore been purchased or paid for) if, prior to the
expiration of the Offer, (i) the Minimum Condition shall not have
been satisfied or (ii) at any time on or after
August 16, 1994 and prior to the acceptance for payment of
Shares, any of the following conditions occurs or has occurred or
Purchaser makes a good faith determination that any of the
following conditions has occurred:
(a) there shall have been any action or proceeding
brought by any governmental authority before any federal or
state court, or any order or preliminary or permanent
injunction entered in any action or proceeding before any
federal or state court or governmental, administrative or
regulatory authority or agency, located or having
jurisdiction within the United States or any country or
economic region in which either the Company or Parent,
directly or indirectly, has material assets or operations,
or any other action taken, proposed or threatened, or
statute, rule, regulation, legislation, interpretation,
judgment or order proposed, sought, enacted, entered,
enforced, promulgated, amended, issued or deemed applicable
to Purchaser, the Company or any subsidiary or affiliate of
Purchaser or the Company or the Offer or the Merger, by any
legislative body, court, government or governmental,
administrative or regulatory authority or agency located or
having jurisdiction within the United States or any country
or economic region in which either the Company or Parent,
directly or indirectly, has material assets or operations,
which could reasonably be expected to have the effect of:
(i) making illegal, or otherwise directly or indirectly
restraining or prohibiting or making materially more costly,
the making of the Offer, the acceptance for payment of,
payment for, or ownership, directly or indirectly, of some
of or all the Shares by Parent or Purchaser, the
consummation of any of the transactions contemplated by the
<PAGE>
Merger Agreement or materially delaying the Merger; (ii)
prohibiting or materially limiting the ownership or
operation by the Company or any of its subsidiaries, or by
Parent, Purchaser or any of Parent's subsidiaries of all or
any material portion of the business or assets of the
Company or any of its material subsidiaries or Parent or any
of its subsidiaries, or compelling Purchaser, Parent or any
of Parent's subsidiaries to dispose of or hold separate all
or any material portion of the business or assets of the
Company or any of its material subsidiaries or Parent or any
of its subsidiaries, as a result of the transactions
contemplated by the Offer or the Merger Agreement; (iii)
imposing or confirming limitations on the ability of
Purchaser, Parent or any of Parent's subsidiaries
effectively to acquire or hold or to exercise full rights of
ownership of Shares, including, without limitation, the
right to vote any Shares acquired or owned by Parent or
Purchaser or any of Parent's subsidiaries on all matters
properly presented to the shareholders of the Company,
including, without limitation, the adoption and approval of
the Merger Agreement and the Merger or the right to vote any
shares of capital stock of any subsidiary (other than
immaterial subsidiaries) directly or indirectly owned by the
Company; (iv) requiring divestiture by Parent or Purchaser,
directly or indirectly, of any Shares; or (v) which would
reasonably be expected to materially adversely affect the
business, financial condition or results of operations of
the Company and its subsidiaries taken as a whole or the
value of the Shares or of the Offer to Purchaser or Parent;
(b) there shall have occurred, or Purchaser shall have
become aware of any fact that would reasonably be expected
to have, a Material Adverse Effect;
(c) there shall have occurred (i) any general
suspension of trading in, or limitation on prices for,
securities on any national securities exchange or in the
over-the-counter market in the United States, (ii) any
extraordinary or material adverse change in the market price
of the Shares or in the United States securities or
financial markets generally, including, without limitation,
a decline of at least 25% in either the Dow Jones Average of
Industrial Stocks or the Standard & Poor's 500 index from
the date hereof, (iii) any material adverse change or any
condition, event or development involving a prospective
material adverse change in United States or other material
international currency exchange rates or a suspension of, or
limitation on, the markets therefor, (iv) a declaration of a
banking moratorium or any suspension of payments in respect
of banks in the United States, (v) any limitation (whether
or not mandatory) by any government or governmental,
administrative or regulatory authority or agency, domestic
or foreign, on, or any other event that could reasonably be
expected to materially adversely affect, the extension of
A-2
<PAGE>
credit by banks or other lending institutions, (vi) a
commencement of a war or armed hostilities or other national
or international calamity directly or indirectly involving
the United States which would reasonably be expected to have
a Material Adverse Effect or materially adversely affect (or
materially delay) the consummation of the Offer or (vii) in
the case of any of the foregoing existing at the time of
commencement of the Offer, a material acceleration or
worsening thereof;
(d) (i) it shall have been publicly disclosed or
Purchaser shall have otherwise learned that beneficial
ownership (determined for the purposes of this paragraph as
set forth in Rule 13d-3 promulgated under the Exchange Act)
of 19.9% or more of the outstanding Shares has been acquired
by any corporation (including the Company or any of its
subsidiaries or affiliates), partnership, person or other
entity or group (as defined in Section 13(d)(3) of the
Exchange Act), other than Parent or any of its affiliates,
or (ii) (A) the Board of Directors of the Company or any
committee thereof shall have withdrawn or modified in a
manner adverse to Parent or Purchaser the approval or
recommendation of the Offer, the Merger or the Merger
Agreement, or approved or recommended any takeover proposal
or any other acquisition of Shares other than the Offer and
the Merger, (B) any such corporation, partnership, person or
other entity or group shall have entered into a definitive
agreement or an agreement in principle with the Company with
respect to a tender offer or exchange offer for any Shares
or a merger, consolidation or other business combination
with or involving the Company or any of its subsidiaries or
(C) the Board of Directors of the Company or any committee
thereof shall have resolved to do any of the foregoing;
(e) any of the representations and warranties of the
Company set forth in the Merger Agreement that are qualified
as to materiality shall not be true and correct or any such
representations and warranties that are not so qualified
shall not be true and correct in any material respect, in
each case as if such representations and warranties were
made at the time of such determination;
(f) the Company shall have failed to perform in any
material respect any obligation or to comply in any material
respect with any agreement or covenant of the Company to be
performed or complied with by it under the Merger Agreement;
(g) the Merger Agreement shall have been terminated in
accordance with its terms or the Offer shall have been
amended or terminated with the consent of the Company; or
(h) any waiting periods under the HSR Act applicable
to the purchase of Shares pursuant to the Offer shall not
have expired or been terminated, or any material approval,
A-3
<PAGE>
permit, authorization, consent or waiting period of any
domestic, foreign or supranational governmental,
administrative or regulatory agency (federal, state, local,
provincial or otherwise) located or having jurisdiction
within the United States or any country or economic region
in which either the Company or Parent, directly or
indirectly, has material assets or operations, shall not
have been obtained or satisfied on terms satisfactory to the
Parent in its reasonable discretion;
which, in the reasonable judgment of Purchaser with respect to
each and every matter referred to above and regardless of the
circumstances (including any action or inaction by Purchaser or
any of its affiliates not inconsistent with the terms hereof)
giving rise to any such condition, makes it inadvisable to
proceed with the Offer or with such acceptance for payment of or
payment for Shares or to proceed with the Merger.
The foregoing conditions are for the sole benefit of
Purchaser and may be asserted by Purchaser regardless of the
circumstances giving rise to any such condition or may be waived
by Purchaser in whole or in part at any time and from time to
time in its sole discretion (subject to the terms of the Merger
Agreement). The failure by Purchaser at any time to exercise any
of the foregoing rights shall not be deemed a waiver of any such
right, the waiver of any such right with respect to particular
facts and other circumstances shall not be deemed a waiver with
respect to any other facts and circumstances, and each such right
shall be deemed an ongoing right that may be asserted at any time
and from time to time.
A-4
<PAGE>
Schedule 5.1(f)
Certain Permitted Payments
1. The Company shall be permitted to increase the salaries of:
Effective Date Base Salary Employee Name
- -------------- ----------- -------------
Increase
--------
September 1, 1994 $11,000 P.W. Wood
(from $182,000 to
$193,000)
October 1, 1994 $20,000 D.R. Bethune
(from $340,000 to
$360,000)
October 1, 1994 $20,000 L. Elberger
(from $188,000 to
$$208,000)
October 1, 1994 $27,000 D. Lilley
(from $250,000 to
$277,000)
2. In accordance with past practice, the Company shall be
permitted to pay lump sum special recognition bonuses to
employees who are not officers or directors of the Company,
provided that no special recognition bonus payable to any
individual exceeds $10,000 and the aggregate bonuses payable
to all such employees between the date of this Agreement and
the Effective Time does not exceed $500,000.
3. The Company may adopt a severance plan that is substantially
similar in all material respects to the Company's existing
severance policy as described in that certain letter dated
August 16, 1994 (the "Compensation Letter") except that the
Company may provide that employees in salary grade 10 to 17
shall have the right to receive benefits under this plan if
they resign for "good reason". For this purpose, "good
reason" shall be defined as either (i) a reduction in an
employee's base salary; (ii) a material adverse change in an
employee's job responsibilities, without an employee's
consent; or (iii) a relocation of the employee's principal
work location, unless such employee is entitled to the
relocation benefits provided under Parent's relocation
policy (as previously disclosed to the Company).
4. The Company may amend the Company Employees Savings Plan to
provide for the vesting of participants as of the date the
Shares are purchased pursuant to the Offer and to permit the
calculation, making and vesting of the Company
PerformanceContribution for 1994 in accordance with Section
6.06(d) of the Agreement.
<PAGE>
2
5. The Company may amend the Company Executive Income
Continuity Plan to permit A.C. Brennan to participate in the
plan (but such benefit to be limited to one times base pay
and target bonus) and to provide for a waiver of the ten-
year eligibility requirement thereunder for any person
otherwise eligible therefor whose employment is terminated
without cause (as defined therein) or who voluntarily
terminates his employment following a reduction of his base
salary as in effect prior to the purchase of Shares pursuant
to the Offer within two years after such purchase by the
Company.
6. The Company may amend the Company Key Manager Income
Continuity Plan to permit plan participants to recover
reasonable attorneys' fees and expenses in connection with a
dispute regarding the plan's terms; provided, however, such
amendment shall not permit a participant to recover such
fees if it is determined that a participant's claim was
frivolous.
7. The Company may amend both the Company Executive Income
Continuity Plan and the Company Key Manager Income
Continuity Plan in a manner reasonably consistent with the
descriptions set forth below, as consented to by Parent
(which consent shall not be unreasonably withheld):
(a) to remove the restriction on competitive employment
contained therein;
(b) to provide that benefits due thereunder shall be paid
in a lump sum rather than in installments;
(c) to modify the definition of "good reason" by deleting
paragraph (C) and adopting in lieu thereof a paragraph
substantially identical to the following:
a failure to continue a member as a participant in
the Incentive Compensation Plan of the Company as
in effect on the date the Shares are purchased
pursuant to the Offer in accordance with the terms
of the Agreement and Plan of Merger among AC
Acquisition Corp., American Home Products
Corporation and the Company (the "Merger
Agreement") (or a plan providing benefits that are
not substantially less favorable than the benefits
provided under such plan (the "IC Plan")
(disregarding for this purpose any enhanced or
accelerated benefits paid or payable in connection
with the Merger Agreement and the transactions
contemplated thereby) or a failure to pay a member
any installment of a previous allotment made to
such member under the IC Plan.
(d) to further modify the definition of "good reason" by
deleting the words "unless such action is applied uniformly
<PAGE>
3
to all members" at the end of paragraph (E) of such
definition; and
(e) to eliminate the restriction on payment of income
continuity benefits beyond age 60 where the participant is
also a participant in the Supplemental Employees Retirement
Plan.
8. The Company may contribute to one or more rabbi trusts (a)
the present value, as of the date the Shares are purchased
pursuant to the Offer, of accrued benefits under the Company
ERISA Excess Retirement Plan and the Company and
Subsidiaries Supplemental Employees Retirement Plan (the
"SERP"), (b) related "gross up" amounts, if any, under the
Company's Compensation Taxation Equalization Plan and (c) a
reasonable reserve for the fees and expenses that may be
incurred by the trustee or its agents or designees, which
amounts shall be substantially the same as or less than the
amounts set forth below.
RABBI TRUST FUNDING ANALYSIS
----------------------------
Anticipated
Rabbi Estimated Term of
----- Employees Amount ---
Trust Description Covered (M$)(1) Rabbi Trust
----- ----------- ------- -------- ------------
SERP
1 Retired 101 32.1 (2) L/T
Executives
since Oct.
1990 &
Superannuati
on
2 Currently 9 10.1 L/T
Elected
Personnel
3 New Members up to 35 9.0 L/T
added
pursuant to
Sec.6.6(f) of
the Merger
Agreement
ERISA Excess
4 ERISA Excess 200 1.6(2) L/T
------
Total 52.8
(1) Amounts include estimate for fees and expenses.
(2) Trust accounts in place at Morgan Guaranty.
9. The Company may amend the Non-Employee Directors Retirement
Plan to eliminate the three-year eligibility requirement.
<PAGE>
4
10. In accordance with the terms of the Non-Employee Directors
Retirement Plan, the Company may accelerate the payment of
the unpaid benefits due to the one former director and one
surviving spouse currently receiving benefits under the Non-
Employee Directors Retirement Plan.
11. The Company may amend the SERP to permit the actions
contemplated in Section 6.6(f) of the Merger Agreement.
12. The Company may amend the Incentive Compensation Plan to
permit the actions contemplated in Section 6.6(e) of the
Merger Agreement.
13. As provided by the terms of the Company's Incentive
Compensation Plan and the Company's Cash Incentive
Compensation Plan, all Deferred Cash Awards, Deferred Cash
Accounts and Deferred Stock Accounts may be made payable as
of the date the Shares are purchased pursuant to the Offer.
EXHIBIT 5
[MORGAN STANLEY & CO. INCORPORATED LETTERHEAD]
August 17, 1994
Board of Directors
American Cyanamid Company
One Cyanamid Plaza
Wayne, NJ 07470-8426
Members of the Board:
We understand that American Cyanamid Company (the "Company"),
American Home Products Corporation ("Buyer") and AC Acquisition Corp., a
wholly owned subsidiary of Buyer ("Acquisition Sub") have entered into an
Agreement and Plan of Merger dated August 17, 1994 (the "Merger Agreement")
which provides, among other things, for (i) the tender offer by Acquisition
Sub (the "Tender Offer") for all the issued and outstanding shares of
common stock, par value $5 per share (the "Common Stock") of the Company
for $101 per share net to the seller in cash, and (ii) the subsequent
merger (the "Merger") of Acquisition Sub with and into the Company.
Pursuant to the Merger, the Company will become a wholly owned subsidiary
of Buyer and each outstanding share of Common Stock, other than shares held
in treasury or held by Buyer or any affiliate of Buyer or as to which
dissenters' rights have been perfected, will be converted into the right to
receive $101 per share in cash. The terms and conditions of the Tender
Offer and the Merger are more fully set forth in the Merger Agreement.
You have asked for our opinion as to whether the consideration to
be received by the holders of shares of Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and
other information of the Company;
(ii) analyzed certain internal financial statements and other
financial and operating data concerning the Company prepared by
the management of the Company;
(iii) analyzed certain financial projections prepared by the
management of the Company;
(iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the
Company;
<PAGE>
2
(v) reviewed the reported prices and trading activity for the Common
Stock;
(vi) compared the financial performance of the Company and the prices
and trading activity of the Common Stock with that of certain
other comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly
available, of certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among
representatives of the Company and Buyer and their financial
and legal advisors;
(ix) reviewed the Merger Agreement and certain related documents; and
(x) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon without independent verification
the accuracy and completeness of the information reviewed by us for the
purposes of this opinion. With respect to the financial projections, we
have assumed that they have been reasonably prepared on bases reflecting
management's best currently available estimates and judgments of the future
financial performance of the Company. We have not made any independent
valuation or appraisal of the assets or liabilities of the Company, nor
have we been furnished with any such appraisals. Our opinion is
necessarily based on economic, market and other conditions as in effect on,
and the information made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit,
and did not solicit, interest from any party with respect to the
acquisition of the Company, nor did we negotiate or have discussions with
any of the parties which expressed interest to us in the possible
acquisition of the Company or any of its constituent businesses, except in
each case as known to you.
We have acted as financial advisor to the Board of Directors of
the Company in connection with this transaction and will receive a fee for
our services. In the past, Morgan Stanley & Co., Incorporated and its
affiliates have provided financial advisory and other services for the
Company and Buyer and have received fees for the rendering of these
services.
It is understood that this letter is for the information of the
Board of Directors of the Company only and may not be used for any other
purpose without our prior written consent.
<PAGE>
3
Based on the foregoing, we are of the opinion on the date hereof
that the consideration to be received by the holders of shares of Common
Stock pursuant to the Merger Agreement is fair from a financial point of
view to such holders.
Very truly yours,
MORGAN STANLEY & CO. INCORPORATED
By: /s/ Joseph R. Perella
----------------------------------------
Joseph R. Perella
Managing Director
EXHIBIT 6
[CS FIRST BOSTON CORPORATION LETTERHEAD]
August 17, 1994
Board of Directors
American Cyanamid Company
One Cyanamid Plaza
Wayne, NJ 07470-8426
Members of the Board:
We understand that American Cyanamid Company (the "Company"), American
Home Products Corporation ("Buyer") and AC Acquisition Corp., a wholly
owned subsidiary of Buyer ("Acquisition Sub") have entered into an
Agreement and Plan of Merger, dated August 17, 1994 (the "Merger
Agreement") which provides, among other things, for (i) the tender offer by
Acquisition Sub (the "Tender Offer") for all the issued and outstanding
shares of common stock, par value $5 per share (the "Common Stock") of the
Company for $101 per share net to the seller in cash, and (ii) the
subsequent merger (the "Merger") of Acquisition Sub with and into the
Company. Pursuant to the Merger, the Company will become a wholly owned
subsidiary of Buyer and each outstanding share of Common Stock, other than
shares held in treasury or held by Buyer or any affiliate of Buyer or as to
which dissenters' rights have been perfected, will be converted into the
right to receive $101 per share in cash. The terms and conditions of the
Tender Offer and the Merger are more fully set forth in the Merger
Agreement.
You have asked for our opinion as to whether the consideration to be
received by the holders of shares of Common Stock pursuant to the Merger
Agreement is fair from a financial point of view to such holders.
For purposes of the opinion set forth herein, we have:
(i) analyzed certain publicly available financial statements and other
information of the Company;
(ii) analyzed certain internal financial statements and other financial
and operating data concerning the Company prepared by the management
of the Company;
(iii) analyzed certain financial projections prepared by the management of
the Company;
<PAGE>
(iv) discussed the past and current operations and financial condition
and the prospects of the Company with senior executives of the
Company;
(v) reviewed the reported prices and trading activity for the Common
Stock;
(vi) compared the financial performance of the Company and the prices and
trading activity of the Common Stock with that of certain other
comparable publicly-traded companies and their securities;
(vii) reviewed the financial terms, to the extent publicly available, of
certain comparable acquisition transactions;
(viii) participated in discussions and negotiations among representatives
of the Company and Buyer and their financial and legal advisors;
(ix) reviewed the Merger Agreement and certain related documents; and
(x) performed such other analyses as we have deemed appropriate.
We have assumed and relied upon without independent verification the
accuracy and completeness of the information reviewed by us for the
purposes of this opinion. With respect to the financial projections, we
have assumed that they have been reasonably prepared on bases reflecting
management's best currently available estimates and judgments of the future
financial performance of the Company. We have not made any independent
valuation or appraisal of the assets or liabilities of the Company, nor
have we been furnished with any such appraisals. Our opinion is
necessarily based on economic, market and other conditions as in effect on,
and the information made available to us as of, the date hereof.
In arriving at our opinion, we were not authorized to solicit, and
did not solicit, interest from any party with respect to the acquisition of
the Company, nor did we negotiate or have discussions with any of the
parties which expressed interest to us in the possible acquisition of the
Company or any of its constituent businesses, except in each case as known
as you.
We have acted as financial advisor to the Board of Directors of the
Company in connection with this transaction and will receive a fee for our
services. In the past, CS First Boston Corporation and its affiliates have
provided financial advisory and other services for the Company and Buyer
and have received fees for the rendering of these services.
It is understood that this letter is for the information of the
Board of Directors of the Company only and may not be used for any other
purpose without our prior written consent.
<PAGE>
Based on the foregoing, we are of the opinion on the date hereof
that the consideration to be received by the holders of shares of Common
Stock pursuant to the Merger Agreement is fair from a financial point of
view to such holders.
Very truly yours,
CS FIRST BOSTON CORPORATION
By: /S/ Donald Meltzer
------------------------------
Name: Donald Meltzer
Title: Managing Director
EXHIBIT 7
August 23, 1994
Dear Fellow Cyanamid Shareholder:
Eighteen months ago, the new leadership at American
Cyanamid Company launched an aggressive strategic action program
designed to enhance your Company's ability to compete and win in a
rapidly changing business environment and, by so doing, build the value of
your investment in Cyanamid.
During that period, we acquired complementary, high-growth
businesses, spun off non-core operations, and reduced costs, with the
overriding goal of creating shareholder value by properly positioning your
Company for the future.
For example, we:
. spun off our Cytec chemical operations, eliminating
exposure to a highly cyclical business and helping
Cyanamid focus on higher-growth, higher-margin
activities;
. announced the sale of Davis & Geck, our wound-
management unit;
. became the world's sixth-largest agrochemical company by
acquiring the overseas crop protection business of Royal
Dutch Shell;
. purchased 53.5 per cent of Immunex, making your
Company the second-largest anti-cancer drug company in
the United States; and
. initiated the first stage of a restructuring program to
increase earnings and cash flow by streamlining our
operations.
<PAGE>
-2-
The success of these efforts is manifest. It is reflected, in
part, by the 50 per cent increase in your Company's stock price, which
moved from a low of $42.25 on March 14 to $63 on August 1. And it is
further reflected by the fact that on August 2, recognizing the values we
have, and have been building, at American Cyanamid -- our products, our
market position, our research, our people, and our significant earnings and
growth potential -- American Home Products Corporation, a leading
pharmaceutical and consumer products company, announced its desire to
effect a strategic business combination with American Cyanamid.
Before American Home Products approached us, we had been
fully and actively engaged in contining to implement the various elements
of our strategic action program. We had not been looking for a merger
partner; but, for a number of reasons, the business combination proposed
by American Home Products demanded serious consideration.
Clearly, the price initially proposed by American Home
Products -- $95 per share in cash for all outstanding shares of American
Cyanamid -- represented a sizeable premium over the $63 per share at
which American Cyanamid closed on August 1, the day before American
Home's merger proposal was announced. On August 15-16, American
Home modified this initial proposal, increasing the proposed consideration
first to $100 and then to $101 per share in cash -- an amount representing
an increase of approximately $600 million over American Home's initial
offer made on August 2 and a premium of 60 per cent over the price at
which American Cyanarmid's shares were trading on the day prior to the
announcement of the American Home proposal.
After a thorough review, the Board of Directors of American
Cyanamid, in consultation with our independent financial advisors, Morgan
Stanley & Co. Incorporated and CS First Boston Corporation, determined
that the terms of the American Home offer and merger are fair to, and
in the best interest of, our shareholders.
According, the Board recommends that the shareholders of
American Cyanamid tender their Cyanamid shares in the American Home
offer.
The definitive merger agreement American Cyanamid and
American Home have signed, which has been approved by the boards of
directors of both companies, provides for American Cyanamid shareholders
to receive $101 per share in cash for each American Cyanamid share they
hold. The total value of the transaction, on a fully diluted basis, is
approximately $9.7 billion.
<PAGE>
-3-
The amended American Home Products tender offer will
expire at midnight, New York City time, on September 14, 1994, unless
further extended. Following completion of the tender offer, American
Cyanamid will be merged with an American Home Products subsidiary; and
each American Cyanamid share not previously purchased will be converted
into the right to receive $101 net in cash.
Under the agreement, American Cyanamid's common stock
purchase rights will be redeemed at $0.02 per right immediately prior to
consummation of the offer and no further dividends will be paid by
American Cyanamid, other than the regular quarterly divided of $0.4625
per share payable to holders of record on August 30, 1994.
Following the merger, the combined entity will have annual
revenues in excess of $12 billion, with a leading position in the
pharmaceutical industry, as well as significant franchises in consumer
health care, medical supplies and diagnostic products, agricultural
chemicals, and food products. The combined entity will, in short, be a truly
formidable global competitor.
American Cyanamid is a great company that, since its
founding in 1907, has developed and brought to market many hundreds of
pharmaceutical, agricultural, and other products that have saved millions Of
lives and otherwise benefitted countless people, in countless ways, all over
the world.
As we proceed toward the completion of this very important
strategic business combination, and on behalf of the entire Board of
Directors of American Cyanamid Company, I want to thank you for your
long-standing and continuing interest and support. We at Cyanamid are
proud of what we have accomplished on your behalf over the past eighteen
months and of American Cyanamid's heritage over the past eight decades.
Very truly yours
/s/ A.J. Costello
A.J. Costello
AJC/ns
Enclosure
P.S. Enclosed is a Form 14D-9, which contains detailed information and
instructions for tending your American Cyanamid shares in the American
Home offer. Please read this material carefully.
