SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended Commission file number
December 31, 1993 1-1225
AMERICAN HOME PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2526821
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Five Giralda Farms, Madison, NJ 07940-0874
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 660-5000
Securities registered pursuant to Section 12(b) of the Act:
Name of Each Exchange On
Title of Each Class Which Registered
$2 Convertible Preferred
Stock, $2.50 par value New York Stock Exchange
Common Stock, $.33 - 1/3 par value New York Stock Exchange
6 - 7/8% Notes due April 15, 1997 New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part
III of this Form 10-K or any amendment to this Form 10-K.
State the aggregate market value of the voting stock held by
nonaffiliates of the registrant. (The aggregate market value
shall be computed by reference to the price at which the stock
was sold, or the average bid and asked prices of such stock,
as of a specified date within 60 days prior to the date of
filing).
Aggregate market value at March 1, 1994 - $18,564,584,755
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest
practicable date (applicable only to corporate registrants).
Outstanding at
March 1, 1994
Common Stock, $.33 - 1/3 par value 310,035,743
Documents incorporated by reference: list hereunder the following
documents if incorporated by reference and the part of the
Form 10-K into which the document is incorporated: (1) any annual
report to security holders; (2) any proxy or information
statements; and (3) any prospectus filed pursuant to Rule 424(b) or
(c) under the Securities Act of 1933 (the listed documents
should be clearly described for identification purposes).
(1) 1993 Annual Report to Shareholders - In Parts I, II and IV
(2) Proxy Statement filed March 17, 1994 - In Parts III and IV
(3) 1993 Genetics Institute, Inc. Annual Report to Shareholders -
In Part I
PART I
ITEM 1. DESCRIPTION OF BUSINESS
General
American Home Products Corporation (the "Company"), a
Delaware corporation organized in 1926, is a leading
manufacturer and marketer of health care products (in-
cluding pharmaceuticals, consumer health care products,
medical supplies and diagnostic products) and food
products. Unless stated to the contrary, or unless the
context otherwise requires, references to the Company
in this report include American Home Products Corporation,
its divisions and subsidiaries.
Information relating to acquisitions and certain
other transactions is set forth in Note 2 of the Notes
to Consolidated Financial Statements in the Company's
1993 Annual Report to Shareholders, and is incorporated
herein by reference.
Industry Segments
Financial information, by geographic location and by the
industry segments of the Company, for the three years ended
December 31, 1993 is set forth on page 38 of the Company's
1993 Annual Report to Shareholders and is incorporated herein
by reference.
The Company is not dependent on any single or major group of
customers for its sales. The Company currently manufactures,
distributes and sells a diversified line of products in two
business segments(*):
1. HEALTH CARE PRODUCTS -
Pharmaceuticals - This sector includes a wide variety of
ethical pharmaceuticals and biological products for human
and veterinary use which are promoted and sold worldwide
primarily to wholesalers, pharmacies, hospitals and doctors.
Some of these sales are made through large buying groups
representing certain of these customers. Principal product
categories for human use include female health care products,
infant nutritionals, cardiovascular and metabolic disease
therapies, mental health products, anti-inflammatory
products, anti-infectives and vaccines. Principal veterinary
product categories include vaccine products, antibiotics and
analgesics. The Company manufactures these products in the
United States and Puerto Rico, and in eighteen foreign
countries.
*The product designations appearing in differentiated type
herein are trademarks.
Except for the female health care category, no single
category of products accounted for more than 10% of Health
Care Products segment sales in 1993. Within the female
health care category, no single product or line of products
accounted for more than 10% of Health Care Products segment
sales in 1993. The operating income from the female health
care category in the aggregate, and PREMARIN, individually,
accounted for more than 10% of the Company's consolidated
operating income before and after taxes.
Consumer health care - The Company's over-the-counter
health care products include analgesics, cough/cold/allergy
remedies, hemorrhoidal and asthma relief items, oral health
care and in-home diagnostic test products. These products
are generally sold to wholesalers and retailers, and are
primarily promoted to consumers through advertising. These
products are manufactured in the United States and Puerto
Rico, and in seven foreign countries.
No single consumer health care product or line of products
accounted for more than 10% of Health Care Products segment
sales in 1993.
Medical supplies and diagnostic products - Principal
products in this segment include medical supplies, medical
and diagnostic instrumentation, disposable laparoscopic and
endoscopic surgical instruments and other hospital products
which are promoted and sold principally to doctors, hospi-
tals, other health care institutions and wholesalers. Buying
groups also represent certain of these customers. In addi-
tion to the United States, these products are manufactured
in five foreign countries.
No single product or line of products in this sector
accounted for more than 10% of Health Care Products
segment sales in 1993.
Further information regarding the principal products in
the Health Care Products segment and the principal markets
served therein is included in the text on pages 13 through
23 of the Company's 1993 Annual Report to Shareholders,
which is incorporated herein by reference.
2. FOOD PRODUCTS -
Products in this segment include prepared pastas and
specialty food, condiments, snack products, and jams, which
are promoted to consumers through advertising and generally
sold directly to wholesalers and retailers.
Product line sales in 1993 under the CHEF BOYARDEE trademark
exceeded 10% of Food Products segment sales but did not
exceed 10% of total consolidated sales.
Further information regarding the principal products in
the Food Products segment and the principal markets served
therein is included on page 24 of the Company's 1993 Annual
Report to Shareholders, which is incorporated herein by
reference.
Sources and Availability of Raw Materials
Generally, raw materials and packaging supplies are purchased
in the open market from various outside vendors. The loss of
any one source of supply would not have a material adverse
effect on the Company's financial position or results of
operations.
Patents and Trademarks
The Company owns, has applications pending for, and is
licensed under many patents relating to a wide variety of
products. The Company believes that its patents and licenses
are important to its business, but no one patent or license
(or group of related patents or licenses) currently is of
material importance in relation to its business as a whole.
In the pharmaceuticals area, substantially all of the
Company's major products are no longer patent protected. The
oral contraceptive brand TRIPHASIL lost its patent protection
in the United States in May 1993 as did SECTRAL and
CORDARONE. The non-steroidal anti-inflammatory ("NSAID")
LODINE remains under patent protection in the United States
until early 1997. Other prescription products, such as the
cardiovasculars INDERAL LA and INDERIDE LA remain patent
protected until early 1996. EFFEXOR, a recently approved
antidepressant, will have patent protection into 2007.
Sales in the consumer health care and medical supplies and
diagnostic products businesses are largely supported by the
Company's trademarks and brand names, as are food product
sales. These trademarks and brand names are a significant
part of the Company's business and have a perpetual life as
long as they remain in use. See the Competition section of
this Annual Report regarding generic and store brands
competition in the consumer health care business.
Seasonality
Sales of consumer health care products are affected by
seasonal demand for cold/flu season products. On a
comparable basis, second quarter results have historically
been lower than results in other quarters due primarily to
the lower demand for cold/flu season products.
Competition
Each of the industry segments in which the Company is
engaged is highly competitive. The Health Care Products
segment faces competitive pressures in the United States
from branded and generic forms of both prescription
and non-prescription products, as well as new product
introductions. For prescription products, the growth of
generic substitutes is further promoted by legislation,
regulation and various incentives enacted and promulgated
in both the public and private sectors. The growth of
managed care organizations, such as health maintenance
organizations ("HMOs") and pharmaceutical benefit management
companies, has resulted in further competitive pressures on
health care products.
While naturally sourced PREMARIN no longer has patent pro-
tection, it is not presently subject to generic competition
in the United States. The Company cannot presently predict
the timing of regulatory approval of generic conjugated
estrogens products and their potential impact on the market.
However, the FDA has issued a bioequivalence guidance to
facilitate the development of such generic products. While
it is very likely that some generic companies are attempting
to develop and obtain approval of such products, information
on the status of drugs (including generic drugs) under FDA's
approval processes is not publicly available prior to
approval being obtained. In addition, PREMARIN has been
subject to increased competition from certain synthetic
estrogen products (though not conjugated estrogens products)
that have been approved for many of the same uses as
PREMARIN.
The growth of consumer health care generic and store brands
continued to impact some of the Company's branded product
line categories in 1993.
The debate regarding U.S. health care reform and its
uncertainty continued during 1993. The proposals by the
Clinton Administration have been formalized and were
presented to Congress in October 1993. Other health care
reform proposals from members of Congress are being
introduced with varied agendas on issues such as Medicaid and
Medicare rebates, price controls, governmental alliances and
other matters. Similarly, in international markets, health
care spending is subject to increasing governmental scrutiny,
much of which is focused on pharmaceutical prices. While we
cannot predict the impact proposed health care legislation
will have on the Company's worldwide results of operations,
we believe the pharmaceutical industry will continue to play
a very positive role in helping to contain global health care
costs through the development of innovative products.
However, it is expected that global market forces will
continue to constrain price growth regardless of the outcome
of health care reform.
A federal law that became effective in January 1991 requires
drug manufacturers to pay rebates to state Medicaid programs,
in order for their products to be eligible for federal
matching funds under the Social Security Act. Additionally,
a number of states are, or may be, pursuing similar
initiatives for rebates to Pharmaceutical Assistance to the
Elderly programs and other strategies, to contain the cost of
pharmaceutical products. Federal and state rebate programs
as well as infant nutritional products rebates under the
federally sponsored Women, Infants and Children program are
expected to continue.
Other significant competitive factors in the Health Care
Products segment are scientific and technological advances,
product quality, price and effective communication of product
information to physicians, pharmacists, hospitals and trade
customers. Competition is particularly severe in the
hospital supply industry, principally in the needle and
syringe business and in the generic hospital injectable
products business.
In the Food Products segment, product quality, price and
relevance to contemporary family needs are important
competitive factors.
Advertising and promotional expenditures are significant
costs to the Company, and are necessary to effectively
communicate information concerning the Company's products to
health professionals, to the trade and to consumers.
Research and Development
Worldwide research and development activities are focused on
developing and bringing to market new drugs to treat and/or
prevent some of the most serious health care problems. The
Company employs over 5,600 professionals worldwide who are
committed to this effort. Research and development expend-
itures totaled $662,689,000 in 1993, $552,450,000 in 1992
and $430,519,000 in 1991, with approximately 85% of these
expenditures in the ethical pharmaceutical area. The Company
received FDA approval in 1993 for EFFEXOR, ORUVAIL and LODINE
400 mg tablets.
The Company's Wyeth-Ayerst Laboratories Division currently
has three New Drug Applications ("NDA") filed with the FDA
for review and 23 active Investigational New Drug
applications pending. In addition, in 1993 a NDA to switch a
lower dose of ORUDIS to a non-prescription status was filed.
During 1993, several major collaborative research and
development arrangements continued with other pharmaceutical
and biotechnology companies. Research and development
projects continued at Genetics Institute, Inc. and at the
Company's other health care operations. It is not
anticipated, however, that the products from these
activities will contribute significantly to revenues and
operating profit in the near future. The extent, if any, of
subsequent contributions cannot presently be predicted.
Regulation
The Company's various health care and food products are
subject to regulation by government agencies throughout the
world. The primary emphasis of these requirements is to
assure the safety and effectiveness of the Company's
products. In the United States, the FDA, under the federal
Food, Drug and Cosmetic Act (the "Act"), including several
recent amendments to the Act, regulates the Company's human
and animal pharmaceuticals, consumer health care, medical
supplies and diagnostic products and food products
businesses. FDA's powers include the imposition of criminal
and civil sanctions against companies, including seizures of
regulated products and criminal sanctions against
individuals. To facilitate compliance, the Company from time
to time may institute voluntary compliance actions such as
product recalls when it believes it advisable to do so. In
addition, many states have similar regulatory requirements.
Most of the Company's pharmaceutical products, and an
increasing number of its consumer health care products, are
regulated under the FDA's new drug approval processes, which
mandate pre-market approval of all new drugs. Such require-
ments continue to increase the amount of time, testing and
documentation needed for approval, resulting in a corres-
ponding increase in the cost of new product introductions.
FDA has exercised its enforcement powers more aggressively in
recent years, increasing both the number and intensity of its
factory inspections. The Company's pharmaceutical business
is also affected by the Controlled Substances Act,
administered by the Drug Enforcement Administration, which
regulates strictly all narcotic and habit-forming drug
substances. The Company devotes significant resources to
dealing with the extensive federal and state regulatory
requirements applicable to its products.
With respect to the Company's food products, the Nutrition
Labeling and Education Act of 1990 and FDA regulations issued
thereunder will, in the future, affect the consumer
nutritional information and any health claims appearing on
the labels of the Company's food products.
Environmental
Certain of the Company's operations are affected by a variety
of federal, state and local environmental protection laws and
regulations and the Company has, in a number of instances,
been notified of its potential responsibility relating to the
generation, storage, treatment and disposal of hazardous
waste. In addition, the Company has been advised that it
may be a responsible party in several sites on the National
Priority List created by the Comprehensive Environmental
Response, Compensation, and Liability Act ("CERCLA").
(See Item 3. Legal Proceedings.) The Company provides for
the estimated costs of remediation for all known environ-
mental liabilities.
Employees
At the end of 1993, the Company had 51,399 employees world-
wide, with 29,028 employed in the United States including
Puerto Rico.
Financial Information about the Company's Foreign and
Domestic Operations
Financial information about foreign and domestic operations
for the three years ended December 31, 1993, as set forth on
page 38 of the Company's 1993 Annual Report to Shareholders,
is incorporated herein by reference.
ITEM 2. PROPERTIES
In the fourth quarter of 1993, the Company relocated its
executive offices and the headquarters for its domestic
consumer health care and food products businesses to a new
facility in Giralda Farms, Madison, New Jersey. The former
headquarters facility, a 31-story office building located at
685 Third Avenue, New York, New York, is being marketed for
sale or lease.
The Company's domestic and international pharmaceutical
operations and its international consumer health care
business are headquartered in three executive/administrative
buildings in Radnor and St. Davids, Pennsylvania. Sherwood,
the Company's principal medical supplies and diagnostic
operation, maintains its headquarters in St. Louis, Missouri.
The following are the principal domestic manufacturing plants
(M) and research laboratories (R) of the Company's operating
units:
Floor Area
INDUSTRY SEGMENT (Sq. Ft.)
Health Care Products:
Deland, Florida (M) 342,000
Fort Dodge, Iowa (M,R) 498,000
Andover, Massachusetts (M,R) 270,000
Cambridge, Massachusetts (M,R) 220,000
Mason, Michigan (M) 299,000
Norfolk, Nebraska (M) 204,000
Hammonton, New Jersey (M,R) 467,000
Monmouth Junction, New Jersey (R) 285,000
Rouses Point, New York (M,R) 833,000
Malvern, Pennsylvania (M) 816,000
Marietta, Pennsylvania (M,R) 225,000
Radnor, Pennsylvania (R) 418,000
West Chester, Pennsylvania (M) 421,000
Guayama, Puerto Rico (M) 1,079,000
Georgia, Vermont (M) 288,000
Richmond, Virginia (M) 273,000
Richmond, Virginia (M) 321,000
Food Products:
Vacaville, California (M,R) 527,000
Milton, Pennsylvania (M,R) 1,020,000
Fort Worth, Texas (M) 205,000
All of the above properties are owned except the land
and a 757,000 sq. ft. facility in Guayama, Puerto Rico, which
are under lease expiring in 2007 with options for renewal and
purchase, 105,000 sq. ft. facility in Georgia, Vermont which
is under lease expiring in 2006, and 177,000 sq. ft.
in Cambridge, Massachusetts, which is under leases expiring
in 1999 and 2009. The Company also owns or leases a number
of other smaller properties in the United States which are
used for manufacturing, warehousing and office space.
During 1993, the Company's St. Joseph, Missouri manufacturing
facility (224,000 sq. ft.) was severely damaged by floods.
Production from this facility was shifted to other plants and
this facility was closed.
In addition to the domestic properties, foreign subsidiaries
and affiliates of the Company, which generally own their
properties, have manufacturing facilities in nineteen
countries outside the United States, the principal facilities
of which are located in Ireland, Italy, Germany, Brazil,
Mexico and the United Kingdom.
ITEM 3. LEGAL PROCEEDINGS
The Company is involved in various legal proceedings,
including product liability suits of a nature considered
normal to its business.
There are approximately 1,700 cases pending, predominantly in
the United Kingdom, based primarily on alleged dependence on
the tranquilizer ATIVAN. Substantially all of the cases in
the United Kingdom have been supported by governmental legal
aid funding. The Legal Aid Board in England, where more than
1,100 cases are pending, has determined to discontinue
funding of these cases. If this decision is upheld on
appeal, these cases will be dismissed and the other legally-
aided cases in Scotland and Northern Ireland (approximately
340 cases) may be discontinued as well.
The Company is self-insured against ordinary product
liability risks and, other than for the years 1986 to 1988,
has liability coverage in excess of certain limits from
various insurance carriers.
As discussed in Item 1, the Company is a party to a number of
proceedings brought under CERCLA and similar state laws.
These proceedings seek to require the owners or operators of
facilities at which hazardous wastes are alleged to have been
disposed, transporters of waste to the sites and generators
of hazardous waste disposed of at the sites, to clean up the
sites or to reimburse the government for cleanup costs.
Although joint and several liability is alleged in these
cases where multiple entities have been named as responsible
parties, these proceedings are frequently resolved on the
basis of the quantity of hazardous waste disposed of at the
site by the generator. The Company's potential liability
varies greatly from site to site. For some sites, the
potential liability is de minimis and, for others, the final
costs of cleanup have not yet been determined.
In 1992, the New York Department of Environmental
Conservation imposed a $750,000 penalty on the Company
relating to air emissions at a New York State facility.
The Company appealed the amount of the penalty to the
Supreme Court of New York, claiming that the maximum
penalty permitted under New York law is $97,000. The
Supreme Court affirmed the penalty and an appeal to the
Appellate Division of the New York Supreme Court, Third
Department, is pending.
The United States Environmental Protection Agency ("USEPA")
filed an action against Ekco Housewares ("Ekco"), a former
subsidiary of the Company, in the U.S. District Court for the
Northern District of Ohio alleging violation of federal and
state financial assurance regulations in connection with the
required closure of a lagoon at Ekco's Massillon, Ohio
facility. AHPC assumed the defense of the action pursuant to
an indemnification agreement. On January 28, 1994, the court
entered judgment against Ekco in the amount of $4,606,000,
concluding that Ekco had violated regulations governing the
posting of financial assurance for closure, post-closure and
liability coverage. An appeal will be filed and pursued
vigorously, with judgment stayed during the pendency of the
appeal.
The Company has been involved in various antitrust suits and
government investigations relating to its marketing and sale
of infant formula. The antitrust lawsuits, which were
commenced in various federal and state courts, allege in
general that the Company conspired with one or more of its
competitors to fix prices of infant formula and to monopolize
the market for infant formula products. The Company has
settled most of the cases as well as a Federal Trade
Commission proceeding. Each of these settlements was entered
into by the Company in order to avoid the burden and expense
of protracted litigation and did not involve any admission of
wrongdoing by the Company. The Company is currently a
defendant in litigation brought in federal court by the
State of Louisiana and in purported class actions in Alabama
and Texas (under the Texas Deceptive Trade Practices Act)
state courts on behalf of indirect purchasers of infant
formula in those states. In addition to the Federal Trade
Commission, the government agencies that have been conducting
investigations of pricing and marketing practices in the
infant formula industry include three state attorneys
general. The Company has been advised that two other state
attorneys general have terminated their investigations of
the Company without any action. In addition, the Bureau of
Competition Policy in Canada is conducting an investigation
of infant formula pricing and marketing practices in Canada.
On October 14, 1993, Rite Aid Corporation, Revco D.S. Inc.
and other retail drug chains and retail pharmacies filed an
action in the U.S. District Court for the Middle District of
Pennsylvania against the Company, other pharmaceutical
manufacturers and a pharmacy benefit management company.
The complaint alleges that the Company and other defendants
provided discriminatory price and promotional allowances to
managed care organizations and others in violation of the
Robinson-Patman Act. The complaint further alleges collusive
conduct among the defendants related to the alleged
discriminatory pricing in violation of the Sherman Antitrust
Act as well as certain other violations of common law
principles of unfair competition. Subsequently, numerous
other cases, many of which are purported class actions
brought on behalf of retail pharmacies and retail drug and
grocery chains, were filed in various federal courts and in
various California state courts against the Company as well
as other pharmaceutical manufacturers and wholesalers. These
cases make one or more similar allegations of violations of
federal or state antitrust or unfair competition laws. All
of the federal actions have been consolidated for pretrial
purposes in the U.S. District Court for the Northern District
of Illinois. The above actions seek treble damages,
injunctive and other relief.
For information concerning certain litigation involving
Genetics Institute, Inc., see Part I, Item 3 of Genetics
Institute, Inc's. Annual Report on Form 10-K for the fiscal
year ended November 30, 1993, which Item is incorporated
herein by reference.
In the opinion of the Company, although the outcome of any
litigation cannot be predicted with certainty, the ultimate
liability of the Company in connection with pending
litigation and other matters described above will not have a
material adverse effect on the Company's financial position
or results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF MARCH 24, 1994
Each officer is elected to hold office until his successor is chosen
or until his earlier removal or resignation. None of the executive
officers is related to another:
Elected to
Name Age Offices and Positions Office
John R. Stafford 56 Chairman of the Board, December 1986
President and Chief Executive
Officer, Chairman of Executive,
Finance and Operations
Committees
Business Experience: 1989 to date, Chairman
of the Board, President
and Chief Executive
Officer (President to May
1990 and from February 1994)
Robert G. Blount 55 Executive Vice President, August 1987
Director, Member of Finance
and Operations Committees
Business Experience: 1989 to date, Executive Vice
President
Stanley F. Barshay 54 Senior Vice President August 1987
Member of Finance and Oper-
ations Committees
Business Experience: 1989 to date, Senior
Vice President
Joseph R. Bock 64 Senior Vice President February 1990
Member of Finance and
Operations Committees
Business Experience: 1989 to February 1990, Vice
President - Industrial Relations
February 1990 to date, Senior
Vice President
Elected to
Name Age Offices and Positions Office
Louis L. Hoynes, Jr. 58 Senior Vice President and November 1990
General Counsel
Member of Finance and
Operations Committees
Business Experience: 1989 to 1990, Partner,
Willkie Farr & Gallagher
November 1990 to date, Senior
Vice President and General
Counsel
Joseph J. Carr 51 Senior Vice President May 1993
Member of Finance and Oper-
ations Committees
Business Experience: To November 1989, Executive
Vice President - Operations,
Wyeth-Ayerst Laboratories
Division
November 1989 to April 1991,
Vice President
April 1991 to May 1993, Group
Vice President
May 1993 to date, Senior Vice
President
Fred Hassan 48 Senior Vice President May 1993
Member of Finance and Oper-
ations Committees
Business Experience: February 1989 to March 1993,
President of Wyeth-Ayerst
Laboratories Division
March 1993 to May 1993,
Group Vice President,
May 1993 to date, Senior Vice
President
John R. Considine 43 Vice President - Finance February 1992
Member of Finance and Oper-
ations Committees
Business Experience: To February 1989, Vice President
and Comptroller
February 1989 to February 1992,
Vice President and Treasurer
February 1992 to date, Vice
President - Finance
Elected to
Name Age Offices and Positions Office
Thomas M. Nee 54 Vice President - Taxes May 1986
Member of Finance Committee
Business Experience: 1989 to date, Vice President -
Taxes
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON STOCK AND RELATED
SHAREHOLDER MATTERS
The New York Stock Exchange is the principal market on which
the Company's common stock is traded. Tables showing the
high and low sales price for the stock, as reported in the
consolidated transaction reporting system, and the dividends
paid per common share for each quarterly period during the
past two years, as shown on page 40 of the Company's 1993
Annual Report to Shareholders, are incorporated herein by
reference.
There were 72,422 holders of record of the Company's common
stock as of March 1, 1994.
ITEM 6. SELECTED FINANCIAL DATA
The data with respect to the last five fiscal years,
appearing in the Ten-Year Selected Financial Data presented
on pages 26 and 27 of the Company's 1993 Annual Report to
Shareholders, are incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Management's Discussion and Analysis of Financial Condition
and Results of Operations, appearing on pages 41 through 43
of the Company's 1993 Annual Report to Shareholders, is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The Consolidated Financial Statements and Notes on pages 28
through 38 of the Company's 1993 Annual Report to Share-
holders, the Report of Independent Public Accountants and the
Management Report on Financial Statements on page 39, and
Quarterly Financial Data on page 40, are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
(a) Information relating to the Company's directors is
incorporated herein by reference to pages 3 through 7
and page 24 of a definitive proxy statement filed with the
Securities and Exchange Commission on March 17, 1994
("the 1994 Proxy Statement").
(b) Information relating to the Company's executive officers
as of March 24, 1994 is furnished in Part I hereof under a
separate unnumbered caption ("Executive Officers of the
Registrant").
ITEM 11. EXECUTIVE COMPENSATION
Information relating to executive compensation is in-
corporated herein by reference to pages 11 through 16
of the 1994 Proxy Statement. Information with respect
to compensation of directors is incorporated herein by
reference to pages 8 and 9 of that proxy statement.
Information relating to the Compensation Committee Interlocks
and Insider Participation is incorporated by reference to
pages 23 and 24 of the 1994 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Information relating to security ownership is incorporated by
reference to pages 9 and 10 of the 1994 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS
ON FORM 8-K
(a) 1. Financial Statements
The following Consolidated Financial Statements, related
Notes and Report of Independent Public Accountants, included
on pages 28 through 39 of the Company's 1993 Annual Report to
Shareholders, are incorporated herein by reference.
Pages
Consolidated Balance Sheets as of
December 31, 1993 and 1992 28
Consolidated Statements of Income
for the years ended December 31,
1993, 1992 and 1991 29
Consolidated Statements of Retained
Earnings and Additional Paid-in
Capital for the years ended
December 31, 1993, 1992 and 1991 30
Consolidated Statements of Cash Flows
for the years ended December 31, 1993,
1992 and 1991 31
Notes to Consolidated Financial Statements 32-38
Report of Independent Public Accountants 39
(a) 2. Financial Statement Schedules
The following consolidated financial information is included
in Part IV of this report:
Pages
Report of Independent Public Accountants
on Supplemental Schedules IV-6
For the years ended December 31, 1993,
1992 and 1991:
Schedule V - Property, Plant and
Equipment IV-7
Schedule VI - Accumulated Depreciation of
Property, Plant and Equipment IV-8
Schedule VIII - Valuation and Qualifying
Accounts IV-9
ITEM 14. (Continued) Pages
Schedule IX - Short-term Borrowings IV-10
Schedule X - Supplementary Income Statement
Information IV-11
Schedules other than those listed above are omitted because they are
either not applicable or the required information is included through
incorporation by reference to pages 28 through 38 of the Company's 1993
Annual Report to Shareholders.
(a) 3. Exhibits
Exhibit No. Description
(3.1) Restated Certificate of Incorporation, as amended to
date, is incorporated herein by reference to Exhibit
(3.1) of the Registrant's Form 10-K for the year ended
December 31, 1990.
(3.2) By-Laws, as amended to date is incorporated herein by
reference to Exhibit (3.2) of the Registrant's Form
10-K for the year ended December 31, 1992.
(4.1) Indenture, dated as of April 10, 1992, between AHPC and
Chemical Bank (as successor by merger to Manufacturers
Hanover Trust Company), as Trustee, is incorporated by
reference to Registrant's Form 8-A dated August 25,
1992.
(4.2) Supplemental Indenture, dated October 13, 1992, between
AHPC and Chemical Bank (as successor by merger to
Manufacturers Hanover Trust Company) as Trustee,
incorporated by reference to Registrant's Form 10-Q for
the quarter ended September 30, 1992.
(10.1) Credit Agreement dated as of April 29, 1993 among
Registrant, the Lenders Parties thereto and Chemical
Bank.
(10.2) * 1978 Stock Option Plan, as amended to date, is
incorporated herein by reference to Exhibit (10.2) of
the Registrant's Form 10-K for the year ended December
31, 1990.
(10.3) * 1980 Stock Option Plan, as amended to date is
incorporated by reference to Exhibit (10.3) of the
Registrant's Form 10-K for the year ended December 31,
1991.
*Denotes management contract or compensatory plan or
arrangement required to be filed as an exhibit hereto.
ITEM 14. (Continued)
(a) 3. Exhibits
Exhibit No. Description
(10.4) * 1985 Stock Option Plan, as amended to date is
incorporated by reference to Exhibit (10.4) of the
Registrant's Form 10-K for the year ended December 31,
1991.
(10.5) * Management Incentive Plan, as amended to date, is
incorporated herein by reference to Exhibit (10.5) of
the Registrant's Form 10-K for the year ended December
31, 1990.
(10.6) * Supplemental Executive Retirement Plan is incorporated
herein by reference to Exhibit (10.6) of the
Registrant's Form 10-K for the year ended December 31,
1990.
(10.7) * 1990 Stock Incentive Plan is incorporated herein by
reference to Exhibit (28) of the Registrant's Form S-8
Registration Statement File No. 33-41434 under the
Securities and Exchange Act of 1933, filed June 28,
1991.
(10.8) * 1993 Stock Incentive Plan is incorporated herein by
reference to Exhibit I of the Registrant's Proxy
Statement filed March 17, 1994.
(10.9) * 1994 Restricted Stock Plan for Non-Employee Directors
is incorporated herein by reference to Exhibit II of
the Registrant's Proxy Statement filed March 17, 1994.
(10.10)* Form of Deferred Compensation Agreement.
(10.11)* American Home Products Savings Plan, as amended, is
incorporated herein by reference to Exhibit 99 of the
Registrant's Form S-8 Registration Statement File No.
33-50149 under the Securities and Exchange Act of 1933,
filed September 1, 1993.
(10.12)* American Home Products Corporation Retirement Plan for
Outside Directors, as amended on January 27, 1994.
(10.13) Sixth Amended and Restated Disclosure Statement
Pursuant to Section 1125 of the Bankruptcy Code, dated
March 28, 1988, among A.H. Robins Company,
Incorporated, Registrant and AHP Subsidiary (9)
Corporation is incorporated herein by reference to
Exhibit (2) of Registrant's Form 8-K dated December 15,
1989, filed December 30, 1989.
ITEM 14. (Continued)
(a) 3. Exhibits
Exhibit No. Description
(10.14) Purchase Agreement, dated as of April 6, 1990, between
Reckitt & Colman plc and Registrant is incorporated
herein by reference to Exhibit (2.1) of Registrant's
Form 8-K dated June 29, 1990, filed July 12, 1990.
(10.15) First Amendment, dated as of June 28, 1990, to the
Purchase Agreement is incorporated herein by reference
to Exhibit (2.2) of Registrant's Form 8-K dated June
29, 1990, filed July 12, 1990.
(10.16) Second Amendment, dated as of July 3, 1990, to the
Purchase Agreement is incorporated herein by reference
to Exhibit (2.3) of Registrant's Form 8-K dated June
29, 1990, filed July 12, 1990.
(10.17) Agreement and Plan of Merger dated as of September
19, 1991 among Genetics Institute, Inc. ("G.I."),
Registrant, AHP Biotech Holdings, Inc. and AHP Merger
Subsidiary Corporation, is incorporated herein by
reference to Exhibit (I) of Registrant's Schedule 13D
dated January 24, 1992 filed with respect to the common
stock of G.I. ("Schedule 13D").
(10.18) Depositary Agreement dated as of January 16, 1992 among
Registrant, AHP Biotech Holdings, Inc., G.I. and The
First National Bank of Boston, as Depositary, is
incorporated herein by reference to Exhibit (II) of the
Registrant's Schedule 13D.
(10.19) Governance Agreement dated as of January 16, 1992 among
Registrant, AHP Biotech Holdings, Inc. and G.I., is
incorporated herein by reference to Exhibit (III) of
the Registrant's Schedule 13D.
(11) Calculation of per share earnings as reported in
Note 10 to Consolidated Financial Statements on page 37
of the Company's 1993 Annual Report to Shareholders is
incorporated herein by reference.
(13) 1993 Annual Report to Shareholders. Such report,
except for those portions thereof which are expressly
incorporated by reference herein, is furnished solely
for the information of the Commission and is not to be
deemed "filed" as part of this filing.
(21) Subsidiaries of the Registrant.
ITEM 14. (Continued)
(a) 3. Exhibits
Exhibit No. Description
(23) Consent of Independent Public Accountants relating to
their report dated January 18, 1994, consenting to the
incorporation thereof in Registration Statements on
Form S-3 (File No. 33-45324) and on Form S-8 (File No.,
33-24068, 33-41434, 33-50149 and 33-55456) by reference
to the Form 10-K of the Registrant filed for the year
ended December 31, 1993.
(99) Part I Item 3 of Genetics Institute, Inc.'s Annual
Report on Form 10-K (SEC File No. 0-14587) for the year
ended November 30, 1993 is incorporated herein by
reference.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of
the year ended December 31, 1993.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To American Home Products Corporation:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in American
Home Products Corporation's Annual Report to Shareholders incorporated
by reference in this Form 10-K, and have issued our report thereon dated
January 18, 1994. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedules listed in
the accompanying index are the responsibility of the Company's
management and are presented for purposes of complying with the
Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the
auditing procedures applied in the audit of the basic financial
statements and, in our opinion, fairly state in all material respects
the financial data required to be set forth therein in relation to the
basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO.
New York, New York
January 18, 1994
SCHEDULE V
American Home Products Corporation and Subsidiaries
Schedule V -- Property, Plant and Equipment
For the Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
Currency
Balance Translation Balance
at Adjustment at
Beginning Additions Retire- Add End of
Classification of Period at Cost ments (Deduct) Period
Year Ended
12/31/93:
Land $79,881 $17,463 $8,186 $217 $89,375
Buildings 1,292,741 218,779 20,310 (17,797) 1,473,413
Machinery and
Equipment 1,460,538 212,716 32,846 (20,872) 1,619,536
Furniture and
Fixtures 223,733 68,954 12,542 (2,104) 278,041
---------- -------- -------- -------- ----------
$3,056,893 $517,912 $73,884 ($40,556) $3,460,365
========== ======== ======== ======== ==========
Year Ended
12/31/92:
Land $61,433 $20,338 $683 ($1,207) $79,881
Buildings 1,076,708 276,776 36,606 (24,137) 1,292,741
Machinery and
Equipment 1,327,571 218,666 63,652 (22,047) 1,460,538
Furniture and
Fixtures 193,520 39,508 6,566 (2,729) 223,733
---------- -------- -------- -------- ----------
$2,659,232 $555,288 $107,507 ($50,120) $3,056,893
========== ======== ======== ======== ==========
Year Ended
12/31/91:
Land $51,787 $11,388 $1,030 ($712) $61,433
Buildings 1,046,677 69,130 26,631 (12,468) 1,076,708
Machinery and
Equipment 1,264,319 123,284 47,231 (12,801) 1,327,571
Furniture and
Fixtures 170,039 34,336 8,734 (2,121) 193,520
---------- -------- ------- -------- ----------
$2,532,822 $238,138 $83,626 ($28,102) $2,659,232
========== ======== ======= ======== ==========
SCHEDULE VI
American Home Products Corporation and Subsidiaries
Schedule VI -- Accumulated Depreciation of
Property, Plant and Equipment
For the Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
Additions Currency
Balance Charged Translation Balance
at to Costs Adjustment at
Beginning and Retire- Add End of
Description of Period Expenses ments (Deduct) Period
Year Ended
12/31/93:
Buildings $378,776 $50,091 $14,499 ($3,085) $411,283
Machinery and
Equipment 774,893 108,103 29,745 (9,466) 843,785
Furniture and
Fixtures 125,433 32,722 11,457 (1,186) 145,512
---------- -------- ------- -------- ----------
$1,279,102 $190,916 $55,701 ($13,737) $1,400,580
========== ======== ======= ======== ==========
Year Ended
12/31/92:
Buildings $354,574 $49,805 $20,325 ($5,278) $378,776
Machinery and
Equipment 723,762 105,485 43,048 (11,306) 774,893
Furniture and
Fixtures 104,055 28,291 5,424 (1,489) 125,433
---------- -------- ------- -------- ----------
$1,182,391 $183,581 $68,797 ($18,073) $1,279,102
========== ======== ======= ======== ==========
Year Ended
12/31/91:
Buildings $332,841 $34,730 $8,652 ($4,345) $354,574
Machinery and
Equipment 671,207 95,968 36,022 (7,391) 723,762
Furniture and
Fixtures 91,384 22,248 8,293 (1,284) 104,055
---------- -------- ------- -------- ----------
$1,095,432 $152,946 $52,967 ($13,020) $1,182,391
========== ======== ======= ======== ==========
Rates of depreciation range from 2 to 20 percent for buildings, 6 2/3 to
33 1/3 percent for machinery and equipment and 5 to 33 1/3 percent for
furniture and fixtures.
SCHEDULE VIII
American Home Products Corporation and Subsidiaries
Schedule VIII -- Valuation and Qualifying Accounts
For the Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Column A Column B Column C Column D Column E
Additions
Balance Charged Balance
at to Costs at
Beginning and Deductions End of
Description of Period Expenses (A) Period
Year ended 12/31/93:
Valuation and qualifying accounts -
Allowance for doubtful
accounts $23,702 $7,101 $5,172 $25,631
Allowance for cash discounts 15,203 148,013 142,898 20,318
Allowance for deferred tax
assets 101,324 -- 9,961 91,363
---------- -------- -------- ----------
$140,229 $155,114 $158,031 $137,312
========== ======== ======== ==========
Liability for loss contin-
gencies and additional taxes $511,679 $41,899 $138,050 $415,528
Liability for self-insurance
claims 269,413 38,284 38,302 269,395
Accrued postretirement
benefit obligation 250,355 37,754 23,556 264,553
---------- -------- -------- ----------
$1,031,447 $117,937 $199,908 $949,476
========== ======== ======== ==========
Year ended 12/31/92:
Valuation and qualifying accounts -
Allowance for doubtful
accounts $25,865 $5,147 $7,310 $23,702
Allowance for cash discounts 11,554 132,227 128,578 15,203
Allowance for deferred tax
assets -- 101,324(B) -- 101,324
---------- -------- -------- ----------
$37,419 $238,698 $135,888 $140,229
========== ======== ======== ==========
Liability for loss contin-
gencies and additional taxes $550,734 $90,295 $129,350 $511,679
Liability for self-insurance
claims 258,436 32,129 21,152 269,413
Accrued postretirement
benefit obligation 129,084 121,271(C) -- 250,355
---------- -------- -------- ----------
$938,254 $243,695 $150,502 $1,031,447
========== ======== ======== ==========
cont'd
Column A Column B Column C Column D Column E
Additions
Balance Charged Balance
at to Costs at
Beginning and Deductions End of
Description of Period Expenses (A) Period
Year ended 12/31/91:
Valuation and qualifying accounts -
Allowance for doubtful
accounts $26,591 $7,066 $7,792 $25,865
Allowance for cash discounts 7,657 119,839 115,942 11,554
---------- -------- -------- ----------
$34,248 $126,905 $123,734 $37,419
========== ======== ======== ==========
Liability for loss contin-
gencies and additional taxes $458,628 $157,304 $65,198 $550,734
Liability for self-insurance
claims 268,449 21,984 31,997 258,436
Accrued postretirement
benefit obligation 103,500 25,584 -- 129,084
---------- -------- -------- ----------
$830,577 $204,872 $97,195 $938,254
========== ======== ======== ==========
(A) Represents amounts used for the purposes for which the accounts
were created and reversal of amounts no longer required.
(B) Established upon the adoption of Statement of Financial Accounting
Standards ("SFAS") No. 109, "Accounting for Income Taxes" as
disclosed in Note 9 on pages 36 and 37 of the Company's 1993 Annual
Report to Shareholders.
(C) Includes the cumulative effect of adopting SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" as disclosed in Note 4 on pages 33, 34 and 35 of the
Company's 1993 Annual Report to Shareholders.
SCHEDULE IX
American Home Products Corporation and Subsidiaries
Schedule IX -- Short-term Borrowings
For the Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Column A Column B Column C Column D Column E Column F
Average Weighted
Maximum Amount Average
Amount Out- Interest
Category Out- standing Rate
of Weighted standing During During
Aggregate Balance Average During the the
Short-term at End Interest the Period Period
Borrowings Of Period Rate Period (A) (B)
Commercial Paper
1993 $0 -- -- -- --
1992 0 -- $159,500 $17,361 3.2%
1991 0 -- 665,157 214,695 5.9%
(A) Average daily amount outstanding.
(B) Weighted as to principal amount and days outstanding.
SCHEDULE X
American Home Products Corporation and Subsidiaries
Schedule X -- Supplementary Income Statement Information
For the Years Ended December 31, 1993, 1992 and 1991
(Dollars in thousands)
Item Charged to Costs and Expenses
1993 1992 1991
Maintenance and repairs $159,630 $153,001 $142,939
======== ======== ========
Amortization of intangible
assets, pre-operating costs
and similar deferrals (A) * $246,632 *
======== ======== ========
Taxes, other than payroll
and income taxes * * *
======== ======== ========
Royalties $94,475 $97,499 $84,708
======== ======== ========
Advertising costs $613,576 $601,798 $553,641
======== ======== ========
*Less than 1% of sales
(A) Amortization of intangible assets in 1992 reflects the special
charge of $220,000 discussed in Note 2 on page 32 of the Company's
1993 Annual Report to Shareholders.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Annual Report
to be signed on its behalf by the undersigned, thereunto duly
authorized.
AMERICAN HOME PRODUCTS CORPORATION
(Registrant)
March 24, 1994 By /S/ Robert G. Blount
Robert G. Blount
Executive Vice President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the Registrant and in the capacities and on the dates indicated.
Signatures Title Date
Principal Executive Officer:
/S/ John R. Stafford Chairman, President March 24, 1994
John R. Stafford and Chief Executive
Officer
Principal Financial Officer:
/S/ Robert G. Blount Executive Vice President March 24, 1994
Robert G. Blount and Director
Principal Accounting Officer:
/S/ John R. Considine Vice President - Finance March 24, 1994
John R. Considine
A Majority of Directors:
/S/ Clifford L. Alexander, Jr. Director March 24, 1994
Clifford L. Alexander, Jr.
/S/ Frank A. Bennack, Jr. Director March 24, 1994
Frank A. Bennack, Jr.
/S/ K. Roald Bergethon Director March 24, 1994
K. Roald Bergethon
SIGNATURES (continued)
Signatures Title Date
/S/ John W. Culligan Director March 24, 1994
John W. Culligan
/S/ Robin Chandler Duke Director March 24, 1994
Robin Chandler Duke
/S/ John D. Feerick Director March 24, 1994
John D. Feerick
/S/ Edwin A. Gee Director March 24, 1994
Edwin A. Gee
/S/ William F. Laporte Director March 24, 1994
William F. Laporte
/S/ Robert W. Sarnoff Director March 24, 1994
Robert W. Sarnoff
/S/ John R. Torell III Director March 24, 1994
John R. Torell III
/S/ William Wrigley Director March 24, 1994
William Wrigley
<PAGE>
EXHIBIT (21)
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1993
State or Country of
Name Incorporation
Domestic
AH Investments Ltd. Delaware
A.H. Robins Company, Inc. Virginia
A.H. Robins International Company Nevada
AHP Subsidiary Holding Corporation Delaware
AHP Subsidiary (10) Corporation Delaware
American Home Food Products, Inc. Delaware
Ayerst Laboratories Incorporated New York
Ayerst-Wyeth Pharmaceuticals Inc. Delaware
Corometrics Medical Systems, Inc. Delaware
Genetics Institute, Inc. Delaware
Quinton Instrument Company Washington
Route 24 Holdings, Inc. Delaware
Sherwood Medical Company Delaware
Symbiosis Corp. Florida
Vermont Whey Company Vermont
Viobin Corporation Illinois
Whitehall Laboratories Inc. Delaware
Wyeth-Ayerst International Inc. New York
Wyeth Laboratories Inc. New York
Wyeth Nutritionals Inc. Delaware
Wyeth-Ayerst (Asia) Limited Delaware
Foreign
AHP Holdings B.V. Netherlands
American Drug Corporation Panama
American Home Investments (Hong Kong) Limited Hong Kong
Ayerst International S.A. France
Brenner-EFEKA Pharma G.m.b.H. Germany
Whitehall Italia SpA Italy
Laboratorios Wyeth Whitehall Ltda. Brazil
Much Pharma A.G. Germany
Sherwood Medical Industries Limited England
Sherwood Medical Industries of Ireland Ltd. Ireland
Whitehall Laboratories Limited England
Whitehall-Robins Canada, Inc. Canada
Wyeth (Japan) Corporation Japan
John Wyeth & Brother Limited England
Wyeth-Ayerst Canada, Inc. Canada
Wyeth Hong Kong, Ltd. Hong Kong
Wyeth-Pharma G.m.b.H. Germany
Wyeth Pharmaceuticals Pty. Limited Australia
Wyeth S.A. de C.V. Mexico
Wyeth S.p.A. Italy
Wyeth-Philippines Inc. Philippines
There have been omitted from the above list the names of subsidiaries
which, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
$1,000,000,000
CREDIT AGREEMENT
among
AMERICAN HOME PRODUCTS CORPORATION,
THE LENDERS PARTIES HERETO
and
CHEMICAL BANK,
as Agent
Dated as of April 29, 1993
<PAGE>
<PAGE> TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS. ............................. 1
1.1 Defined Terms.............................. 1
1.2 Other Definitional Provisions.............. 14
SECTION 2. THE COMMITTED RATE LOANS; THE BID LOANS;
AMOUNT AND TERMS......................... 14
2.1 The Committed Rate Loans................... 14
2.2 The Bid Loans.............................. 15
2.3 Denomination of Committed Rate Loans....... 19
2.4 Fees....................................... 19
2.5 Changes of Commitments..................... 20
2.6 Optional Prepayments....................... 20
2.7 Minimum Principal Amount of Tranches and
Maximum Number of Tranches................ 20
2.8 Committed Rate Loan Interest Rates and
Payment Dates............................. 20
2.9 Conversion Options..........................21
2.10 Computation of Interest and Fees........... 22
2.11 Pro Rata Treatment and Payments............ 23
2.12 Non-Receipt of Funds by the Agent.......... 24
2.13 Inability to Determine Interest Rate....... 25
2.14 Illegality................................. 26
2.15 Requirements of Law........................ 26
2.16 Indemnity.................................. 29
2.17 Taxes.......................................29
2.18 Extension of Termination Date, Replacement
of Exiting Lender......................... 31
SECTION 3. REPRESENTATIONS AND WARRANTIES............. 32
3.1 Financial Condition........................ 32
3.2 No Change.................................. 32
3.3 Corporate Existence; Compliance with Law... 32
3.4 Corporate Power; Authorization; Enforceable
Obligations............................... 33
3.5 No Legal Bar; No Default................... 33
3.6 No Material Litigation..................... 33
3.7 Investment Company Act..................... 34
3.8 Federal Regulations ....................... 34
3.9 ERISA...................................... 34
3.10 Environmental Matters...................... 34
3.11 Purpose of Loans........................... 35
SECTION 4. CONDITIONS PRECEDENT........................36
4.1 Conditions to Initial Loans................ 36
4.2 Conditions to All Loans.................... 36
4.3 Conditions to All Committed Rate Loans..... 38
<PAGE>
SECTION 5. AFFIRMATIVE COVENANTS...................... 38
5.1 Financial Statements....................... 38
5.2 Certificates; Other Information............ 39
5.3 Payment of Obligations..................... 39
5.4 Conduct of Business and Maintenance of
Existence................................. 39
5.5 Maintenance of Property; Insurance......... 40
5.6 Inspection of Property; Books and Records;
Discussions............................... 40
5.7 Notices.................................... 40
5.8 Environmental Laws......................... 41
SECTION 6. EVENTS OF DEFAULT.......................... 42
SECTION 7. THE AGENT.................................. 45
7.1 Appointment................................ 45
7.2 Delegation of Duties....................... 45
7.3 Exculpatory Provisions..................... 45
7.4 Reliance by Agent.......................... 46
7.5 Notice of Default.......................... 46
7.6 Non-Reliance on Agent, Other Lenders and
CBASC..................................... 47
7.7 Indemnification............................ 47
7.8 Agent in Its Individual Capacity........... 48
7.9 Successor Agent............................ 48
SECTION 8. MISCELLANEOUS.............................. 48
8.1 Amendments and Waivers..................... 48
8.2 Removal of a Lender by the Borrower........ 49
8.3 Notices.................................... 49
8.4 No Waiver; Cumulative Remedies............. 50
8.5 Survival of Representations and Warranties. 50
8.6 Payment of Expenses and Taxes.............. 50
8.7 Successors and Assigns; Participations;
Purchasing Lenders.........................51
8.8 Adjustments; Set-off....................... 55
8.9 Table of Contents and Section Headings..... 56
8.10 Counterparts............................... 56
8.11 Severability............................... 57
8.12 Integration.................................57
8.13 Governing Law...............................57
8.14 Consent to Jurisdiction and Service of
Process; Waivers.......................... 57
8.15 Confidentiality............................ 58
8.16 Acknowledgements........................... 58
8.17 Waivers of Jury Trial...................... 59
PAGE
<PAGE>
EXHIBITS
Exhibit A Form of Committed Rate Note
Exhibit B Form of Grid Bid Loan Note
Exhibit C Form of Individual Bid Loan Note
Exhibit D Form of Borrowing Notice
Exhibit E Form of Bid Loan Request
Exhibit F-1 Form of Bid Loan Offer - Absolute Bid Loans
Exhibit F-2 Form of Bid Loan Offer - Index Rate Bid Loans
Exhibit G Form of Bid Loan Confirmation
Exhibit H Form of Bid Loan Assignment
Exhibit I Form of Commitment Transfer Supplement
Exhibit J Form of Certificate of Secretary of the Borrower
Exhibit K Form of Opinion of Counsel to the Borrower
Exhibit L Form of Acknowledgment and Release (subsection
2.15(d))
Exhibit M Form of Acknowledgment and Release (subsection
2.18)
Exhibit N Form of Acknowledgment and Release (subsection 8.2)
SCHEDULES
Schedule 3.6 Material Litigation
PAGE
<PAGE>
CREDIT AGREEMENT, dated as of April 29, 1993, among AMERICAN
HOME PRODUCTS CORPORATION, a Delaware corporation
(the "Borrower"), the several banks and other financial
institutions from time to time parties to this Agreement
(collectively, the "Lenders"; individually, a "Lender") and
CHEMICAL BANK, a New York banking corporation, as agent for the
Lenders hereunder (in such capacity, the "Agent").
W I T N E S S E T H :
WHEREAS, the Borrower has requested the Lenders to make
loans to it in an amount up to $1,000,000,000 as more
particularly described herein;
WHEREAS, the Lenders are willing to make such loans on the
terms and conditions contained herein;
NOW, THEREFORE, in consideration of the premises and the
mutual covenants contained herein, the parties hereto hereby
agree as follows:
SECTION 1: DEFINITIONS
1.1 Defined Terms. As used in this Agreement, terms
defined in the preamble to this Agreement have the meanings
therein indicated, and the following terms have the following
meanings:
"Absolute Rate Bid Loan Request": any Bid Loan Request
requesting the Bid Loan Lenders to offer to make Bid Loans at an
absolute rate (as opposed to a rate composed of the Applicable
Index Rate plus (or minus) a margin).
"Affiliate": as to any Person, any other Person (other than
a Subsidiary) which, directly or indirectly, is in control of, is
controlled by, or is under common control with, such Person. For
purposes of this definition, a Person shall be deemed to be
"controlled by" a Person if such Person possesses, directly or
indirectly, power either (a) to vote 10% or more of the
securities having ordinary voting power for the election of
directors of such Person or (b) to direct or cause the direction
of the management and policies of such Person whether by contract
or otherwise.
"Aggregate Loans": at a particular time, the sum of the
then aggregate outstanding principal amount of Committed Rate
Loans and Bid Loans.
"Agreement": this Credit Agreement, as amended,
supplemented or modified from time to time in accordance with its
terms.
<PAGE>
"Alternate Base Rate": for any day, a rate per annum
(rounded upwards, if necessary, to the next 1/16 of 1%) equal to
the greatest of (a) the Prime Rate in effect on such day, (b) the
Base CD Rate in effect on such day plus 1% and (c) the Federal
Funds Effective Rate in effect on such day plus 1/2 of 1%. For
purposes hereof: "Prime Rate" shall mean the rate of interest
per annum publicly announced from time to time by Chemical as its
prime rate in effect at its principal office in New York City
(each change in the Prime Rate to be effective on the date such
change is publicly announced); "Base CD Rate" shall mean the sum
of (a) the product of (i) the Three-Month Secondary CD Rate and
(ii) a fraction, the numerator of which is one and the
denominator of which is one minus the C/D Reserve Percentage and
(b) the C/D Assessment Rate; "Three-Month Secondary CD Rate"
shall mean, for any day, the secondary market rate for three-
month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the immediately
preceding Business Day) by the Board of Governors of the Federal
Reserve System (the "Board") through the public information
telephone line of the Federal Reserve Bank of New York (which
rate will, under the current practices of the Board, be published
in Federal Reserve Statistical Release H.15(519) during the week
following such day), or, if such rate shall not be so reported on
such day or such immediately preceding Business Day, the average
of the secondary market quotations for three-month certificates
of deposit of major money center banks in New York City received
at approximately 10:00 A.M., New York City time, on such day,
(or, if such day shall not be a Business Day, on the immediately
preceding Business Day) by the Agent from three New York City
negotiable certificate of deposit dealers of recognized standing
selected by it; and "Federal Funds Effective Rate" shall mean,
for any day, the weighted average of the rates on overnight
federal funds transactions with members of the Federal Reserve
System arranged by federal funds brokers, as published on the
next succeeding Business Day by the Federal Reserve Bank of New
York, or, if such rate is not so published on the next succeeding
Business Day, the average of the quotations for the day of such
transactions received by the Agent from three federal funds
brokers of recognized standing selected by it. If for any reason
the Agent shall have determined (which determination shall be
conclusive in the absence of manifest error) that it is unable to
ascertain the Base CD Rate or the Federal Funds Effective Rate,
or both, for any reason, including the inability or failure of
the Agent to obtain sufficient quotations in accordance with the
terms thereof, the Alternate Base Rate shall be determined
without regard to clause (b) or (c), or both, of the first
sentence of this definition, as appropriate, until the
circumstances giving rise to such inability no longer exist. Any
change in the Alternate Base Rate due to a change in the Prime
Rate, the Three-Month Secondary CD Rate or the Federal Funds
Effective
<PAGE>
Rate shall be effective on the opening of business on the date of
such change.
"Alternate Base Rate Loans": Committed Rate Loans that bear
interest at an interest rate based on the Alternate Base Rate.
"Applicable Index Rate": in respect of any Bid Loan
requested pursuant to an Index Rate Bid Loan Request, the
Eurodollar Rate applicable to the Interest Period for such Bid
Loan.
"Applicable Margin": the Applicable Margin shall be the
rate per annum set forth below for each Type of Loan:
Alternate
Eurodollar C/D Base Rate
Loans Rate Loans Loans
.125% .250% 0%
"Bid Loan": each Bid Loan made pursuant to subsection 2.2;
the aggregate amount advanced by a Bid Loan Lender pursuant to
subsection 2.2 on each Bid Loan Date shall constitute one or more
Bid Loans, as specified by such Bid Loan Lender pursuant to
subsection 2.2(b)(viii).
"Bid Loan Assignees": as defined in subsection 8.7(c).
"Bid Loan Assignment": a Bid Loan Assignment, substantially
in the form of Exhibit H.
"Bid Loan Confirmation": each confirmation by the Borrower
of its acceptance of Bid Loan Offers, which Bid Loan Confirmation
shall be substantially in the form of Exhibit G and shall be
delivered to the Agent by facsimile transmission.
"Bid Loan Date": in respect of a Bid Loan, the day on which
a Bid Loan Lender makes such Bid Loan pursuant to subsection 2.2.
"Bid Loan Lenders": Lenders from time to time designated as
Bid Loan Lenders by the Borrower by written notice to the Agent
(which notice the Agent shall transmit to each such Bid Loan
Lender).
"Bid Loan Offer": each offer by a Bid Loan Lender to make
Bid Loans pursuant to a Bid Loan Request, which Bid Loan Offer
shall contain the information specified in Exhibit F-1, in the
case of an Absolute Rate Bid Loan Request, or F-2, in the case of
an Index Rate Bid Loan Request, and shall be delivered to the
Agent by facsimile transmission or by telephone immediately
confirmed by facsimile transmission.
<PAGE>
"Bid Loan Request": each request by the Borrower for Bid
Loan Lenders to submit bids to make Bid Loans, which shall
contain the information in respect of such requested Bid Loans
specified in Exhibit E and shall be delivered to the Agent by
facsimile transmission or by telephone immediately confirmed by
facsimile transmission.
"Bid Notes": the collective reference to the Grid Bid Loan
Notes and the Individual Bid Loan Notes; individually, a "Bid
Note".
"Borrowing Date": in respect of any Committed Rate Loan,
the date such Committed Rate Loan is made.
"Business": as defined in subsection 3.10.
"Business Day": a day other than a Saturday, Sunday or
other day on which commercial banks in New York, New York are
authorized or required by law to close; provided, however, that
when used in connection with a rate determination, borrowing or
payment in respect of a Eurodollar Loan or an Index Rate Bid
Loan, the term "Business Day" shall also exclude any day on which
commercial banks are not open for dealings in Dollar deposits in
the London interbank market.
"CBASC": Chemical Bank Agency Services Corporation.
"C/D Assessment Rate": for any day, the net annual
assessment rate (rounded upward to the nearest 1/100th of 1%)
determined by Chemical to be payable on such day to the Federal
Deposit Insurance Corporation or any successor ("FDIC") for
FDIC's insuring time deposits made in Dollars at offices of
Chemical in the United States.
"C/D Base Rate": with respect to each day during each
Interest Period pertaining to a C/D Rate Loan, the rate of
interest per annum determined by the Agent to be the arithmetic
average (rounded upward to the nearest 1/16th of 1%) of the
respective rates notified to the Agent by each of the Reference
Lenders as the average rate bid at 9:00 A.M., New York City time,
or as soon thereafter as practicable, on the first day of such
Interest Period by a total of three certificate of deposit
dealers of recognized standing selected by such Reference Lender
for the purchase at face value from such Reference Lender of its
certificates of deposit in an amount comparable to the C/D Rate
Loan of such Reference Lender to which such Interest Period
applies and having a maturity comparable to such Interest Period.
"C/D Rate": with respect to each day during each Interest
Period pertaining to a C/D Rate Loan, a rate per annum determined
for such day in accordance with the following formula (rounded
upward to the nearest 1/100th of 1%):
<PAGE>
C/D Base Rate + C/D Assessment Rate
1.00 - C/D Reserve Percentage
"C/D Rate Loans": Committed Rate Loans that bear interest
at an interest rate based on the C/D Rate.
"C/D Reserve Percentage": for any day as applied to any C/D
Rate Loan, that percentage (expressed as a decimal) which is in
effect on such day, as prescribed by the Board of Governors of
the Federal Reserve System (or any successor), for determining
the maximum reserve requirement for a member bank of the Federal
Reserve System in New York City with deposits exceeding one
billion Dollars in respect of new non-personal time deposits in
Dollars in New York City having a maturity comparable to the
Interest Period for such C/D Rate Loan and in an amount of
$100,000 or more.
"Chemical": Chemical Bank.
"Closing Date": the date on which each of the conditions
specified in subsection 4.1 are satisfied in full or waived in
accordance with this Agreement.
"Code": the Internal Revenue Code of 1986, as amended from
time to time.
"Commitment": as to any Lender, the obligation of such
Lender to make Committed Rate Loans to the Borrower hereunder in
an aggregate principal amount at any one time outstanding not to
exceed the amount set forth opposite such Lender's name on the
signature pages hereof, as such amount may from time to time be
reduced in accordance with this Agreement; collectively, as to
all the Lenders, the "Commitments".
"Commitment Percentage": as to any Lender at any time, the
percentage which such Lender's Commitment then constitutes of the
aggregate Commitments (or, at any time after the Commitments
shall have expired or terminated, the percentage which the
aggregate principal amount of such Lender's Loans then
outstanding constitutes of the aggregate principal amount of the
Loans then outstanding).
"Commitment Period": the period from and including the
Closing Date to but not including the Termination Date or such
earlier date on which the Commitments shall terminate as provided
herein.
"Commitment Transfer Supplement": a Commitment Transfer
Supplement, substantially in the form of Exhibit I.
"Committed Rate Loans": Loans made pursuant to subsection
2.1.
<PAGE>
"Committed Rate Note": as defined in subsection 2.1(c);
collectively, the "Committed Rate Notes".
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Borrower
within the meaning of Section 4001 of ERISA or is part of a group
which includes the Borrower and which is treated as a single
employer under Section 414 of the Code.
"Contractual Obligation": as to any Person, any provision
of any security issued by such Person or of any agreement,
instrument or undertaking to which such Person is a party or by
which it or any of its property is bound.
"Default": any of the events specified in Section 6,
whether or not any requirement for the giving of notice or the
lapse of time, or both, or any other condition, has been
satisfied.
"Dollars" and "$": dollars in lawful currency of the United
States of America.
"Domestic Lending Office": initially, the office of each
Lender designated as such Lender's Domestic Lending Office under
such Lender's name on the signature pages hereof; thereafter,
such other office of such Lender as such Lender may from time to
time specify to the Agent and the Borrower as the office of such
Lender at which the C/D Rate Loans and Alternate Base Rate Loans
of such Lender are to be made.
"Environmental Laws": any and all foreign, Federal, state,
local or municipal laws, rules, orders, regulations, statutes,
ordinances, codes, decrees, requirements of any Governmental
Authority or other Requirements of Law (including common law)
regulating, relating to or imposing liability or standards of
conduct concerning protection of human health or the environment,
as now or may at any time be in effect during the term of this
Agreement.
"ERISA": the Employee Retirement Income Security Act of
1974, as amended from time to time.
"Eurodollar Lending Office": initially, the office of each
Lender designated as such Lender's Eurodollar Lending Office
under such Lender's name on the signature pages hereof;
thereafter, such other office of such Lender as such Lender may
from time to time specify to the Agent and the Borrower as the
office of such Lender at which the Eurodollar Loans of such
Lender are to be made.
"Eurodollar Loans": Committed Rate Loans the rate of
interest applicable to which is based upon the Eurodollar Rate.
<PAGE>
"Eurodollar Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan or an Index Rate
Bid Loan, the rate per annum equal to the average (rounded upward
to the nearest 1/16th of 1%) of the respective rates notified to
the Agent by each of the Reference Lenders as the rate at which
such Reference Lender is offered Dollar deposits at or about
10:00 A.M., New York City time, two Business Days prior to the
beginning of such Interest Period in the interbank eurodollar
market where the eurodollar and foreign currency and exchange
operations of such Reference Lender are customarily conducted for
delivery on the first day of such Interest Period for the number
of days comprised therein and in an amount (i) in the case of
Eurodollar Loans, comparable to the amount of the Eurodollar Loan
of such Reference Lender to be outstanding during such Interest
Period and (ii) in the case of an Index Rate Bid Loan by a Bid
Loan Lender, equal to the amount of the Index Rate Bid Loan or
Loans of such Bid Loan Lender to which such Interest Period
applies.
"Event of Default": any of the events specified in Section
6; provided, however, that any requirement for the giving of
notice or the lapse of time, or both, or any other condition, has
been satisfied.
"Existing Facility": the Credit Agreement, dated as of
April 29, 1988, as amended, among the Borrower, the Banks party
thereto and Chemical (as successor by merger to Manufacturers
Hanover Trust Company) as agent.
"Facility Fee": as defined in subsection 2.4.
"Federal Funds Effective Rate": as defined in the
definition of "Alternate Base Rate".
"Financing Lease": any lease of property, real or personal,
the obligations of the lessee in respect of which are required in
accordance with GAAP to be capitalized on a balance sheet of the
lessee.
"GAAP": generally accepted accounting principles in effect
in the United States of America from time to time.
"Governmental Authority": any nation or government, any
state or other political subdivision thereof and any entity
exercising executive, legislative, judicial, regulatory or
administrative functions of or pertaining to government.
"Grid Bid Loan Note": as defined in subsection 2.2(b)(vii);
collectively, the "Grid Bid Loan Notes".
"Guarantee Obligation": as to any Person (the "guaranteeing
person"), any obligation of (a) the guaranteeing person or (b)
another Person (including,
<PAGE>
without limitation, any bank under any letter of credit) to
induce the creation of which the guaranteeing person has issued a
reimbursement, counterindemnity or similar obligation, in either
case guaranteeing or in effect guaranteeing any Indebtedness,
leases, dividends or other obligations (the "primary
obligations") of any other third Person (the "primary obligor")
in any manner, whether directly or indirectly, including, without
limitation, any obligation of the guaranteeing person, whether or
not contingent, (i) to purchase any such primary obligation or
any property constituting direct or indirect security therefor,
(ii) to advance or supply funds (1) for the purchase or payment
of any such primary obligation or (2) to maintain working capital
or equity capital of the primary obligor or otherwise to maintain
the net worth or solvency of the primary obligor, (iii) to
purchase property, securities or services primarily for the
purpose of assuring the owner of any such primary obligation of
the ability of the primary obligor to make payment of such
primary obligation or (iv) otherwise to assure or hold harmless
the owner of any such primary obligation against loss in respect
thereof; provided, however, that the term Guarantee Obligation
shall not include endorsements of instruments for deposit or
collection in the ordinary course of business. The amount of any
Guarantee Obligation of any guaranteeing person shall be deemed
to be the lower of (a) an amount equal to the stated or
determinable amount of the primary obligation in respect of which
such Guarantee Obligation is made and (b) the maximum amount for
which such guaranteeing person may be liable pursuant to the
terms of the instrument embodying such Guarantee Obligation,
unless such primary obligation and the maximum amount for which
such guaranteeing person may be liable are not stated or
determinable, in which case the amount of such Guarantee
Obligation shall be such guaranteeing person's maximum reasonably
anticipated liability in respect thereof as determined by the
Borrower in good faith.
"Indebtedness": of any Person at any date, (a) all
indebtedness of such Person for borrowed money or for the
deferred purchase price of property or services (other than
current trade liabilities incurred in the ordinary course of
business and payable in accordance with customary practices), (b)
any other indebtedness of such Person which is evidenced by a
note, bond, debenture or similar instrument, (c) all obligations
of such Person under Financing Leases, (d) all obligations of
such Person in respect of acceptances issued or created for the
account of such Person and (e) all liabilities secured by any
Lien on any property owned by such Person even though such Person
has not assumed or otherwise become liable for the payment
thereof.
<PAGE>
"Index Rate Bid Loan": any Bid Loan made at an interest
rate based upon the Applicable Index Rate (as opposed to an
absolute rate).
"Index Rate Bid Loan Request": any Bid Loan Request
requesting the Bid Loan Lenders to offer to make Index Rate Bid
Loans at an interest rate equal to the Applicable Index Rate plus
(or minus) a margin.
"Individual Bid Loan Note": as defined in subsection
2.2(b)(vii); collectively, the "Individual Bid Loan Notes".
"Insolvency": with respect to any Multiemployer Plan, the
condition that such Plan is insolvent within the meaning of such
term as used in Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Interest Payment Date": (a) as to any Alternate Base Rate
Loan, the last day of each March, June, September and December to
occur while such Loan is outstanding, (b) as to any Eurodollar
Loan having an Interest Period of three months or less and any
C/D Rate Loan having an Interest Period of 90 days or less, the
last day of such Interest Period, and (c) as to any Eurodollar
Loan or C/D Rate Loan having an Interest Period longer than three
months or 90 days, respectively, each day which is three months
or 90 days, respectively, after the first day of such Interest
Period and the last day of such Interest Period.
"Interest Period": (a) with respect to any Eurodollar
Loan,
(i) initially, the period commencing on the Borrowing
Date or conversion date, as the case may be, with respect to such
Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower in its notice of
borrowing or notice of conversion given with respect thereto; and
(ii) thereafter, each period commencing on the last
day of the immediately preceding Interest Period applicable to
such Eurodollar Loan and ending one, two, three or six months
thereafter, as selected by the Borrower by irrevocable notice to
the Agent not less than three Business Days prior to the last day
of the then current Interest Period with respect thereto;
(b) with respect to any C/D Rate Loan,
(i) initially, the period commencing on the
Borrowing Date or conversion date, as the case may be, with
respect to such C/D Rate Loan and ending 30, 60, 90 or 180 days
thereafter, as selected by the Borrower
<PAGE>
in its notice of borrowing or notice of conversion given with
respect thereto; and
(ii) thereafter, each period commencing on the
last day of the immediately preceding Interest Period applicable
to such C/D Rate Loan and ending 30, 60, 90 or 180 days
thereafter, as selected by the Borrower by irrevocable notice to
the Agent not less than two Business Days prior to the last day
of the then current Interest Period with respect thereto; and
(c) with respect to any Bid Loan, the period
commencing on the Bid Loan Date with respect to such Bid Loan and
ending on the date not less than 7 nor more than 180 days
thereafter, as specified by the Borrower in such Bid Loan
Request;
provided that the foregoing provisions are subject to the
following:
(A) if any Interest Period pertaining to a
Eurodollar Loan or an Index Rate Bid Loan would otherwise end on
a day that is not a Business Day, such Interest Period shall be
extended to the next succeeding Business Day unless the result of
such extension would be to carry such Interest Period into
another calendar month in which event such Interest Period shall
end on the immediately preceding Business Day;
(B) any Interest Period pertaining to a
Eurodollar Loan or an Index Rate Bid Loan that begins on the last
Business Day of a calendar month (or on a day for which there is
no numerically corresponding day in the calendar month at the end
of such Interest Period) shall end on the last Business Day of
the relevant calendar month;
(C) if any Interest Period pertaining to a
C/D Rate Loan or a Bid Loan made pursuant to an Absolute Rate Bid
Loan Request would otherwise end on a day which is not a Business
Day, such Interest Period shall be extended to the next
succeeding Business Day;
(D) if the Borrower shall fail to give
notice as provided above, the Borrower shall be deemed to have
selected an Alternate Base Rate Loan to replace the affected
Eurodollar Loan or the affected C/D Rate Loan, as the case may
be;
(E) any Interest Period in respect of a Bid
Loan that would otherwise extend beyond the Termination Date
shall end on the Termination Date; and
<PAGE>
(F) any Interest Period in respect of a
Committed Rate Loan that would otherwise extend beyond the
Maturity Date for such Committed Rate Loan shall end on such
Maturity Date.
"Lien": any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other),
charge or other security interest or any preference, priority or
other security agreement or preferential arrangement of any kind
or nature whatsoever (including, without limitation, any
conditional sale or other title retention agreement and any
Financing Lease having substantially the same economic effect as
any of the foregoing).
"Loans": the collective reference to the Committed Rate
Loans and the Bid Loans.
"Majority Lenders": at any time, Lenders whose Commitment
Percentages aggregate at least 50.1%.
"Material Adverse Effect": a material adverse effect on (a)
the business, operations, property or condition (financial or
otherwise) of the Borrower and its Subsidiaries taken as a
whole, (b) the ability of the Borrower to perform its obligations
under this Agreement or any of the Notes or (c) the validity or
enforceability of this Agreement or any of the Notes or the
rights or remedies of the Agent or the Lenders hereunder or
thereunder.
"Materials of Environmental Concern": any gasoline or
petroleum (including crude oil or any fraction thereof) or
petroleum products or any hazardous or toxic substances,
materials or wastes, defined or regulated as such in or under any
Environmental Law, including, without limitation, asbestos,
polychlorinated biphenyls and urea-formaldehyde insulation.
"Maturity Date": as to any Eurodollar Loan or C/D Rate Loan
which shall be outstanding on the Termination Date, the first
anniversary of the date immediately preceding the first day of
the then current Interest Period with respect thereto; as to any
Alternate Base Rate Loan which shall be outstanding on the
Termination Date, the first anniversary of the date immediately
preceding the Termination Date.
"Multiemployer Plan": a Plan which is a multiemployer plan
as defined in Section 4001(a)(3) of ERISA.
"Notes": the collective reference to the Committed Rate
Notes and the Bid Notes.
"Participant": as defined in subsection 8.7(b).
<PAGE>
"PBGC": the Pension Benefit Guaranty Corporation
established pursuant to Subtitle A of Title IV of ERISA.
"Person": an individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association,
joint venture, Governmental Authority or other entity of whatever
nature.
"Plan": at any particular time, any employee benefit plan
which is covered by ERISA and in respect of which the Borrower or
a Commonly Controlled Entity is (or, if such plan were terminated
at such time, would under Section 4069 of ERISA be deemed to be)
an "employer" as defined in Section 3(5) of ERISA.
"Prime Rate": as defined in the definition of Alternate
Base Rate.
"Properties": as defined in subsection 3.10(a).
"Purchasing Lenders": as defined in subsection 8.7(d).
"Reference Lenders": initially, Chemical Bank, J.P. Morgan
Delaware and Commerzbank A.G., Grand Cayman Branch.
"Register": as defined in subsection 8.7(e).
"Release": an Acknowledgment and Release (i) substantially
in the form of Exhibit L if delivered pursuant to subsection
2.15(d), (ii) substantially in the form of Exhibit M if delivered
pursuant to subsection 2.18 and (iii) substantially in the form
of Exhibit N if delivered pursuant to subsection 8.2.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization within the meaning
of such term as used in Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section
4043(b) of ERISA, other than those events as to which the
thirty-day notice period is waived under subsections .13, .14,
.16, .18, .19 or .20 of PBGC Reg. Section 2615.
"Required Lenders": at any time, Lenders whose Commitment
Percentages aggregate at least 66-2/3%.
"Requirement of Law": as to any Person, the Certificate of
Incorporation and By-laws or other organizational or governing
documents of such Person, and each law, treaty, rule or
regulation or determination of an arbitrator or a court or other
Governmental Authority, in each case applicable to or binding
upon such Person or any <PAGE>
of its property or to which such Person or any of its property is
subject.
"Responsible Officer": as to the Borrower, the Executive
Vice President, the Vice President - Finance, the Treasurer, the
Comptroller, the Assistant Comptroller, the Deputy Treasurer or
any Assistant Treasurer of the Borrower.
"Significant Subsidiary": any Subsidiary other than
Genetics Institute, Inc. that satisfies the requirements of Rule
1-02(v) of Regulation S-X as adopted by the Securities and
Exchange Commission under the provisions of the Securities Act of
1933 and the Securities Exchange Act of 1934 as in force on the
date of this Agreement.
"Single Employer Plan": any Plan which is covered by Title
IV of ERISA, but which is not a Multiemployer Plan.
"Subsidiary": as to any Person, a corporation, partnership
or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such
other ownership interests having such power only by reason of the
happening of a contingency) to elect a majority of the board of
directors or other managers of such corporation, partnership or
other entity are at the time owned, or the management of which is
otherwise controlled, directly or indirectly through one or more
intermediaries, or both, by such Person. Unless otherwise
qualified, all references to a "Subsidiary" or to "Subsidiaries"
in this Agreement shall refer to a Subsidiary or Subsidiaries of
the Borrower.
"Termination Date": the earlier of (a) the date 364 days
after the date hereof, as such date may be extended in accordance
with the terms of subsection 2.18 and (b) the date on which the
Commitments shall terminate in accordance with the provisions of
this Agreement.
"Tranche": the collective reference to Eurodollar Loans,
C/D Rate Loans or Alternate Base Rate Loans whose Interest
Periods begin and end on the same day. A Tranche may be a "C/D
Rate Tranche", a "Eurodollar Tranche" or an "Alternate Base Rate
Tranche".
"Transferees": as defined in subsection 8.7(g).
"Transfer Effective Date": as defined in each Commitment
Transfer Supplement and each Bid Loan Assignment.
"Type": as to any Loan, its nature as a Alternate Base Rate
Loan, Eurodollar Loan or C/D Rate Loan, as the case may be.
<PAGE>
1.2 Other Definitional Provisions. (a) Unless otherwise
specified therein, all terms defined in this Agreement shall have
the defined meanings when used in the Notes or any certificate or
other document made or delivered pursuant hereto.
(b) As used herein and in the Notes and any
certificate or other document made or delivered pursuant hereto,
accounting terms relating to the Borrower and its Subsidiaries
not defined in subsection 1.1 and accounting terms partly defined
in subsection 1.1, to the extent not defined, shall have the
respective meanings given to them under GAAP.
(c) The words "hereof", "herein" and "hereunder" and
words of similar import when used in this Agreement shall refer
to this Agreement as a whole and not to any particular provision
of this Agreement, and Section, subsection, Schedule and Exhibit
references are to this Agreement unless otherwise specified.
(d) The meanings given to terms defined herein shall
be equally applicable to both the singular and plural forms of
such terms.
SECTION 2. THE COMMITTED RATE LOANS; THE BID LOANS;
AMOUNT AND TERMS
2.1 The Committed Rate Loans. (a) During the Commitment
Period, subject to the terms and conditions hereof, each Lender
severally agrees to make loans (individually, a "Committed Rate
Loan") to the Borrower from time to time in an aggregate
principal amount at any one time outstanding not to exceed such
Lender's Commitment, provided that no Committed Rate Loan shall
be made hereunder which would result in the Aggregate Loans being
in excess of the aggregate amount of the Commitments then in
effect. During the Commitment Period, the Borrower may use the
Commitments by borrowing, repaying and reborrowing, all in
accordance with the terms and conditions hereof.
(b) The Committed Rate Loans may be (i) Eurodollar Loans,
(ii) Alternate Base Rate Loans, (iii) C/D Rate Loans or (iv) a
combination thereof. Eurodollar Loans shall be made by each
Lender at its Eurodollar Lending Office, and Alternate Base Rate
and C/D Rate Loans shall be made by each Lender at its Domestic
Lending Office.
(c) Committed Rate Loans made by each Lender shall be
evidenced by a promissory note of the Borrower, substantially in
the form of Exhibit A with appropriate insertions (a "Committed
Rate Note"), payable to the order of such Lender and representing
the obligation of the Borrower to pay the lesser of (a) the
amount of the initial Commitment of such Lender and (b) the
aggregate unpaid principal amount of all Committed Rate Loans
made by such Lender. Each Lender is hereby authorized to record
the date, Type and amount of each Committed Rate Loan made by
such Lender, the maturity date thereof, the date and amount of
<PAGE>
each payment or prepayment of principal thereof and the interest
rate with respect thereto on the schedule annexed to and
constituting a part of its Committed Rate Note, and any such
recordation shall constitute prima facie evidence of the accuracy
of the information so recorded; provided, however, that the
failure to make any such recordation shall not affect the
obligations of the Borrower hereunder or under such Committed
Rate Note. Each Committed Rate Note shall (i) be dated the
Closing Date, (ii) be stated to mature on the Maturity Date with
respect to each Committed Rate Loan evidenced thereby, and (iii)
bear interest on the unpaid principal amount thereof from time to
time outstanding at the applicable interest rate per annum
determined as provided in subsections 2.8 and 2.10. Interest on
each Committed Rate Note shall be payable as specified in
subsections 2.8 and 2.10.
(d) The Borrower may borrow Committed Rate Loans on any
Business Day; provided, however, that the Borrower shall give the
Agent irrevocable notice thereof (which notice must be received
by the Agent (i) prior to 12:00 Noon, New York City time, three
Business Days prior to the requested Borrowing Date, in the case
of Eurodollar Loans, (ii) prior to 12:00 Noon, New York City
time, two Business Days prior to the requested Borrowing Date in
the case of C/D Rate Loans and (iii) prior to 11:00 A.M., New
York City time, on the requested Borrowing Date, in the case of
Alternate Base Rate Loans). Each such notice shall be given by
facsimile transmission substantially in the form of Exhibit D
(with appropriate insertions) or shall be given by telephone
(specifying the information set forth in Exhibit D) promptly
confirmed by notice given by facsimile transmission substantially
in the form of Exhibit D (with appropriate insertions). On the
day of receipt of any such notice from the Borrower, the Agent
shall promptly notify each Lender thereof. Each Lender will make
the amount of its share of each borrowing available to the Agent
for the account of the Borrower at the office of the Agent set
forth in subsection 8.3 at 11:00 A.M. (or 3:00 P.M., in the case
of Alternate Base Rate Loans), New York City time, on the
Borrowing Date requested by the Borrower in funds immediately
available to the Agent as the Agent may direct. The proceeds of
all such Committed Rate Loans will then be made available to the
Borrower by the Agent at the office of the Agent specified in
subsection 8.3 by crediting the account of the Borrower on the
books of such office of the Agent with the aggregate of the
amount made available to the Agent by the Lenders and in like
funds as received by the Agent.
2.2 The Bid Loans. (a) The Borrower may borrow Bid Loans
from time to time on any Business Day during the period from the
Closing Date until the date occurring 7 days prior to the
Termination Date in the manner set forth in this subsection and
in amounts such that the Aggregate Loans at any time outstanding
shall not exceed the aggregate amount of the Commitments at such
time, provided, however, that the aggregate principal amount of
the outstanding Bid Loans of a Bid Loan Lender may (but shall not
be required to) exceed its Commitment.
<PAGE>
(b) (i) The Borrower shall request Bid Loans by
delivering a Bid Loan Request to the Agent, not later than 12:00
Noon (New York City time) four Business Days prior to the
proposed Bid Loan Date (in the case of an Index Rate Bid Loan
Request), and not later than 10:00 A.M. (New York City time) one
Business Day prior to the proposed Bid Loan Date (in the case of
an Absolute Rate Bid Loan Request). Each Bid Loan Request may
solicit bids for Bid Loans in an aggregate principal amount of
$50,000,000 or an integral multiple of $10,000,000 in excess
thereof and for not more than three alternative Interest Periods
for such Bid Loans. The Interest Period for each Bid Loan shall
end not less than 7 days (one month in the case of Index Rate Bid
Loans) nor more than 180 days (six months in the case of Index
Rate Bid Loans) after the Bid Loan Date therefor (and in any
event subject to the proviso to the definition of "Interest
Period" in subsection 1.1). The Agent shall promptly notify each
Bid Loan Lender by facsimile transmission of the contents of each
Bid Loan Request received by it.
(ii) In the case of an Index Rate Bid Loan Request,
upon receipt of notice from the Agent of the contents of such Bid
Loan Request, any Bid Loan Lender that elects, in its sole
discretion, to do so, shall irrevocably offer to make one or more
Bid Loans at the Applicable Index Rate plus or minus a margin for
each such Bid Loan determined by such Bid Loan Lender, in its
sole discretion. Any such irrevocable offer shall be made by
delivering a Bid Loan Offer to the Agent before 10:30 A.M. (New
York City time) three Business Days before the proposed Bid Loan
Date, setting forth the maximum amount of Bid Loans for each
Interest Period, and the aggregate maximum amount for all
Interest Periods, which such Lender would be willing to make
(which amount may, subject to subsection 2.2(a), exceed such
Lender's Commitment) and the margin above or below the Applicable
Index Rate at which such Bid Loan Lender is willing to make each
such Bid Loan; the Agent shall advise the Borrower before 11:15
A.M. (New York City time) three Business Days before the proposed
Bid Loan Date of the contents of each such Bid Loan Offer
received by it. If the Agent in its capacity as a Bid Loan
Lender shall, in its sole discretion, elect to make any such
offer, it shall advise the Borrower of the contents of its Bid
Loan Offer before 10:15 A.M. (New York City time) three Business
Days before the proposed Bid Loan Date.
(iii) In the case of an Absolute Rate Bid Loan
Request, upon receipt of notice from the Agent of the contents of
such Bid Loan Request, any Bid Loan Lender that elects, in its
sole discretion, to do so, shall irrevocably offer to make one or
more Bid Loans at a rate or rates of interest for each such Bid
Loan determined by such Bid Loan Lender in its sole discretion.
Any such irrevocable offer shall be made by delivering a Bid Loan
Offer to the Agent before 9:30 A.M. (New York City time) on the
proposed Bid Loan Date, setting forth the maximum amount of Bid
Loans for each Interest Period, and the aggregate maximum amount
for all Interest Periods, which such Bid Loan Lender would be
willing to make (which amount may, subject to subsection 2.2(a),
<PAGE>
exceed such Bid Loan Lender's Commitment) and the rate or rates
of interest at which such Bid Loan Lender is willing to make each
such Bid Loan; the Agent shall advise the Borrower before 10:15
A.M. (New York City time) on the proposed Bid Loan Date of the
contents of each such Bid Loan Offer received by it. If the
Agent in its capacity as a Bid Loan Lender shall, in its sole
discretion, elect to make any such offer, it shall advise the
Borrower of the contents of its Bid Loan Offer before 9:15 A.M.
(New York City time) on the proposed Bid Loan Date.
(iv) The Borrower shall before 11:30 A.M. (New York
City time) three Business Days before the proposed Bid Loan Date
(in the case of Bid Loans requested by an Index Rate Bid Loan
Request) and before 10:30 A.M. (New York City time) on the
proposed Bid Loan Date (in the case of Bid Loans requested by an
Absolute Rate Bid Loan Request) either, in its absolute
discretion:
(A) cancel such Bid Loan Request by giving the Agent
telephone notice to that effect, or
(B) accept one or more of the offers made by any Bid
Loan Lender or Bid Loan Lenders pursuant to clause (ii) or clause
(iii) above, as the case may be, by giving telephone notice to
the Agent (immediately confirmed by delivery to the Agent of a
Bid Loan Confirmation) of the amount of Bid Loans for each
relevant Interest Period to be made by each Bid Loan Lender
(which amount shall be equal to or less than the maximum amount
for such Interest Period specified in the Bid Loan Offer of such
Bid Loan Lender, and for all Interest Periods included in such
Bid Loan Offer shall be less than the aggregate maximum amount
specified in such Bid Loan Offer for all such Interest Periods)
and reject any remaining offers made by Bid Loan Lenders pursuant
to clause (ii) or clause (iii) above, as the case may be;
provided, however, that (x) the Borrower may not accept offers
for Bid Loans for any Interest Period in an aggregate principal
amount in excess of the maximum principal amount requested for
such Interest Period in the related Bid Loan Request, (y) if the
Borrower accepts any of such offers, it must accept offers
strictly based upon pricing for such relevant Interest Period and
no other criteria whatsoever and (z) if two or more Bid Loan
Lenders submit offers for any Interest Period at identical
pricing and the Borrower accepts any of such offers but does not
wish to borrow the total amount offered by such Bid Loan Lenders
with such identical pricing, the Borrower shall accept offers
from all of such Bid Loan Lenders in amounts allocated among them
pro rata according to the amounts offered by such Bid Loan
Lenders (or as nearly pro rata as shall be practicable, after
giving effect to the requirement that Bid Loans made by a Bid
Loan Lender on a Bid Loan Date for each relevant Interest Period
shall be in a principal amount of $10,000,000 or an integral
multiple of $1,000,000 in excess thereof).
<PAGE>
(v) If the Borrower notifies the Agent that a Bid
Loan Request is cancelled pursuant to clause (iv)(A) above, the
Agent shall give prompt telephone notice thereof to the Bid Loan
Lenders, and the Bid Loans requested thereby shall not be made.
(vi) If the Borrower accepts pursuant to clause
(iv)(B) above one or more of the offers made by any Bid Loan
Lender or Bid Loan Lenders, the Agent shall promptly notify by
telephone each Bid Loan Lender which has made such an offer of
the aggregate amount of such Bid Loans to be made on such Bid
Loan Date for each Interest Period and of the acceptance or
rejection of any offers to make such Bid Loans made by such Bid
Loan Lender. Each Bid Loan Lender which is to make a Bid Loan
shall, before 12:00 Noon (New York City time) on the Bid Loan
Date specified in the Bid Loan Request applicable thereto, make
available to the Agent at its office set forth in subsection 8.3
the amount of Bid Loans to be made by such Bid Loan Lender, in
immediately available funds. The Agent will make such funds
available to the Borrower as soon as practicable on such date at
the Agent's aforesaid address. As soon as practicable after each
Bid Loan Date, the Agent shall notify each Lender of the
aggregate amount of Bid Loans advanced on such Bid Loan Date and
the respective Interest Periods therefor.
(viii) Bid Loans made by each Bid Loan Lender
shall be evidenced by a promissory note of the Borrower
substantially in the form of Exhibit B with appropriate
insertions (a "Grid Bid Loan Note") or (pursuant to the terms of
subsection 2.2(b)(viii) below), by a promissory note of the
Borrower in the form of Exhibit C with appropriate insertions (an
"Individual Bid Loan Note"). Each Grid Bid Loan Note shall
represent the obligation of the Borrower to pay the lesser of (i)
the aggregate Commitments and (ii) the aggregate unpaid principal
amount of all Bid Loans made by such Bid Loan Lender (other than
those evidenced by an Individual Bid Loan Note). Each Bid Loan
Lender is hereby authorized to record the date and amount of each
Bid Loan made by such Bid Loan Lender, the maturity date thereof,
the date of payment thereof and the interest rate with respect
thereto on the schedule annexed to and constituting a part of its
Grid Bid Loan Note, and any such recordation shall constitute
prima facie evidence of the accuracy of the information so
recorded; provided, however, that the failure to make any such
recordation shall not affect the obligations of the Borrower
hereunder or under such Grid Bid Loan Note. Each Grid Bid Loan
Note shall be dated the Closing Date.
(viii) Amounts advanced by a Bid Loan Lender on a
Bid Loan Date which have the same Interest Period and interest
rate shall be deemed to constitute one Bid Loan so long as such
amounts remain evidenced by the Grid Bid Loan Note of such Bid
Loan Lender. Any such Bid Loan Lender that wishes such amounts
to constitute more than one Bid Loan and to have each such Bid
Loan evidenced by an Individual Bid Loan Note shall notify the
Agent and the Borrower by facsimile transmission of the
respective principal amounts of the Bid Loans (which principal
<PAGE>
amounts shall not be less than $10,000,000 for any of such Bid
Loans) to be evidenced by each such Individual Bid Loan Note.
Not later than three Business Days after receipt of such notice,
the Borrower shall deliver to such Bid Loan Lender an Individual
Bid Loan Note payable to the order of such Bid Loan Lender in the
principal amount of each such Bid Loan and otherwise conforming
to the requirements of this Agreement. Upon receipt of such Bid
Loan Note, such Bid Loan Lender shall endorse on the schedule
attached to its Grid Bid Loan Note the transfer of such Bid Loan
from such Grid Bid Loan Note to such Individual Bid Loan Note.
Within the limits and on the conditions set forth in this
subsection, the Borrower may from time to time borrow under this
subsection, repay pursuant to paragraph (d) below, and reborrow
under this subsection.
(d) The Borrower shall repay to the Agent for the
account of each Bid Loan Lender which has made a Bid Loan (or the
Bid Loan Assignee in respect thereof, as the case may be) on the
last day of the Interest Period for each Bid Loan (such Interest
Period being that specified by the Borrower for repayment of such
Bid Loan in the related Bid Loan Request) the then unpaid
principal amount of such Bid Loan. The Borrower shall not have
the right to prepay any principal amount of any Bid Loan.
(e) The Borrower shall pay interest on the unpaid
principal amount of each Bid Loan from the applicable Bid Loan
Date to the stated maturity date thereof, at the rate of interest
determined pursuant to paragraph (b) above (calculated on the
basis of a 360 day year for actual days elapsed), payable on the
Interest Payment Date or dates specified by the Borrower for such
Bid Loan in the related Bid Loan Request as provided in the Bid
Note evidencing such Bid Loan. If all or a portion of the
principal amount of any Bid Loan or any interest payable thereon
shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue amount shall, without
limiting any rights of any Lender under this Agreement, bear
interest at a rate per annum which is (x) in the case of overdue
principal, 2% above the rate which would otherwise be applicable
pursuant to the Bid Note evidencing such Bid Loan until the
scheduled maturity date with respect thereto as set forth in the
Bid Note evidencing such Bid Loan, and for each day thereafter at
a rate per annum which is 2% above the Alternate Base Rate or (y)
in the case of overdue interest, 2% above the Alternate Base Rate
plus the Applicable Margin, in each case from the date of such
non-payment until such amount is paid in full (as well after as
before judgment).
2.3 Denomination of Committed Rate Loans. Each borrowing
of Committed Rate Loans shall be in an aggregate principal amount
of $50,000,000 or a whole multiple of $10,000,000 in excess
thereof.
2.4 Fees. The Borrower agrees to pay to the Agent, for the
ratable benefit of the Lenders, a facility fee (the
<PAGE>
"Facility Fee") of .05% per annum of the aggregate Commitments
from and including the date of this Agreement to but excluding
the Termination Date and .05% per annum of the average principal
amount of Committed Rate Loans outstanding from and after the
Termination Date, payable quarterly in arrears on the last day of
each March, June, September and December and, as the case may be,
(a) on the Termination Date (in respect of the fee relating to
the aggregate Commitments) and (b) on the date on which the
Committed Rate Loans are fully repaid (in respect of the fee
relating to outstanding Committed Rate Loans). Such quarterly
payment made hereunder shall be a payment in consideration for
holding open the availability of the Commitments for the
quarterly period completed on the date payment is due.
2.5 Changes of Commitments. (a) The Borrower shall have
the right to terminate or reduce the unused portion of the
Commitments at any time or from time to time upon not less than
five Business Days' prior notice to the Agent (which shall notify
the Lenders thereof as soon as practicable) of each such
termination or reduction, which notice shall specify the
effective date thereof and the amount of any such reduction
(which shall be in a minimum amount of $50,000,000 or a whole
multiple of $5,000,000 in excess thereof) and shall be
irrevocable and effective only upon receipt by the Agent,
provided that no such reduction or termination shall be permitted
if after giving effect thereto, and to any prepayments of the
Committed Rate Loans made on the effective date thereof, the then
outstanding principal amount of the Aggregate Loans would exceed
the amount of the Commitments then in effect.
(b) The Commitments once terminated or reduced pursuant
to this subsection may not be reinstated.
2.6 Optional Prepayments. The Borrower may, upon five
Business Days' irrevocable notice to the Agent (which shall
notify the Lenders thereof as soon as practicable), prepay
Committed Rate Loans. If any Committed Rate Loan shall be
prepaid on any day other than the last day of the Interest Period
applicable thereto, the Borrower shall, on the date of such
payment, also pay all interest accrued on such Loan to the date
of such payment and all amounts payable pursuant to subsection
2.16 in connection therewith.
2.7 Minimum Principal Amount of Tranches and Maximum Number
of Tranches. All borrowings, payments and prepayments in respect
of Committed Rate Loans shall be in such amounts and be made
pursuant to such elections so that after giving effect thereto
the aggregate principal amount of the Committed Rate Loans
comprising any Tranche shall not be less than $50,000,000 or a
whole multiple of $10,000,000 in excess thereof, and there shall
be no more than ten Tranches outstanding at any one time.
2.8 Committed Rate Loan Interest Rates and Payment Dates.
(a) Each Committed Rate Loan comprising each Eurodollar Tranche
shall bear interest for each day during each Interest
<page
Period with respect thereto at a rate per annum equal to the
Eurodollar Rate determined for such day plus the Applicable
Margin.
(b) Each Committed Rate Loan comprising each C/D Rate
Tranche shall bear interest for each day during each Interest
Period with respect thereto at a rate per annum equal to the C/D
Rate determined for such day plus the Applicable Margin.
(c) The Committed Rate Loans comprising each Alternate
Base Rate Tranche shall bear interest at a rate per annum equal
to the Alternate Base Rate plus the Applicable Margin.
(d) If all or a portion of the principal amount of any
Committed Rate Loan which is a Eurodollar Loan or C/D Rate Loan
shall not be paid when due (whether at the stated maturity, by
acceleration or otherwise), such overdue principal amount of such
Committed Rate Loan shall be converted to an Alternate Base Rate
Loan at the end of the Interest Period applicable thereto.
(e) If all or a portion of (i) the principal amount of
any Committed Rate Loan, (ii) any interest payable thereon or
(iii) any fee or other amount payable hereunder shall not be paid
when due (whether at the stated maturity, by acceleration or
otherwise), such overdue amount shall bear interest at a rate per
annum which is (x) in the case of overdue principal, the rate
that would otherwise be applicable thereto pursuant to the
foregoing provisions of this subsection plus 2% or (y) in the
case of overdue interest, fees or other amounts, the rate
described in paragraph (c) of this subsection plus 2%, in each
case from the date of such non-payment until such amount is paid
in full (as well after as before judgment).
(f) Interest on each Committed Rate Loan shall be
payable in arrears on each Interest Payment Date, provided that
interest accruing pursuant to paragraph (e) of this subsection
shall be payable from time to time on demand.
2.9 Conversion Options. (a) The Borrower may elect from
time to time to convert Eurodollar Loans or C/D Rate Loans to
Alternate Base Rate Loans, and to convert Eurodollar Loans or
Alternate Base Rate Loans to C/D Rate Loans, by giving the Agent
at least three Business Days' prior irrevocable written notice of
such election, provided that any such conversion of Eurodollar
Loans or C/D Rate Loans shall, subject to the second following
sentence, only be made on the last day of an Interest Period with
respect thereto. The Borrower may elect from time to time to
convert Alternate Base Rate Loans or C/D Rate Loans to Eurodollar
Loans by giving the Agent at least three Business Days' prior
irrevocable notice of such election, provided that any such
conversion of C/D Rate Loans shall, subject to the following
sentence, only be made on the last day of an Interest Period with
respect thereto. If the last day of an Interest Period with
respect to a C/D Rate Loan that is to be converted to a
Eurodollar Loan is not a Business Day in London, then such
<PAGE>
conversion shall be made on the next succeeding Business Day in
London and during the period from such last day of an Interest
Period to such succeeding Business Day such Loan shall bear
interest as if it were an Alternate Base Rate Loan. All or any
part of outstanding Eurodollar Loans, Alternate Base Rate Loans
and C/D Rate Loans may be converted as provided herein, provided
that (i) no Loan may be converted into a Eurodollar Loan or a C/D
Rate Loan when any Default or Event of Default has occurred and
is continuing and the Agent or the Required Lenders have
determined that such conversion is not appropriate and (ii)
partial conversions shall be in an aggregate principal amount of
$50,000,000 or a whole multiple of $10,000,000 in excess thereof.
(b) Any Eurodollar Loans or C/D Rate Loans may be
continued as such upon the expiration of an Interest Period with
respect thereto by compliance by the Borrower with the notice
provisions contained in subsection 2.9(a); provided, that no
Eurodollar Loan or C/D Rate Loan may be continued as such when
any Default or Event of Default has occurred and is continuing,
and the Agent or the Required Lenders have determined that such a
continuation is not appropriate, in which case such Loan shall be
automatically converted to an Alternate Base Rate Loan on the
last day of the then current Interest Period with respect
thereto.
2.10 Computation of Interest and Fees. (a) Interest payable
hereunder with respect to Alternate Base Rate Loans shall be
calculated on the basis of a year of 365/6 days for the actual
days elapsed. All other fees, interest and all other amounts
payable hereunder shall be calculated on the basis of a 360 day
year for the actual days elapsed. The Agent shall as soon as
practicable notify the Borrower and the Lenders of each
determination of a Eurodollar Rate and of a C/D Rate on the
Business Day of the determination thereof. Any change in the
interest rate on a Committed Rate Loan resulting from a change in
the Alternate Base Rate, the C/D Assessment Rate or the C/D
Reserve Percentage shall become effective as of the opening of
business on the day on which such change in the Alternate Base
Rate, the C/D Assessment Rate or the C/D Reserve Percentage shall
become effective. The Agent shall as soon as practicable notify
the Borrower and the Lenders of the effective date and the amount
of each such change.
(b) Each determination of an interest rate by the Agent
pursuant to any provision of this Agreement shall be conclusive
and binding on the Borrower and the Lenders in the absence of
manifest error. The Agent shall, at the request of the Borrower,
deliver to the Borrower a statement showing the quotations given
by the Reference Lenders and the computations used by the Agent
in determining any interest rate.
(c) If any Reference Lender's Commitment shall
terminate, for any reason whatsoever (otherwise than with
termination of all the Commitments), such Reference Lender shall
thereupon cease to be a Reference Lender, and if for any reason
<PAGE>
there shall cease to be at least three Reference Lenders, then
the Agent (after consultation with the Borrower and the Lenders)
shall, by notice to the Borrower and the Lenders, designate
another Lender as a Reference Lender so that there shall at all
times be at least three Reference Lenders.
(d) Each Reference Lender shall use its best efforts to
furnish quotations of rates to the Agent as contemplated hereby.
If any of the Reference Lenders shall be unable or otherwise
fails to supply such rates to the Agent upon its request, the
rate of interest shall, subject to the provisions of subsection
2.13, be determined on the basis of the quotations of the
remaining Reference Lenders or Reference Lender.
2.11 Pro Rata Treatment and Payments. Except as expressly
provided in subsections 2.15(d), 2.18 or 8.2, as the case may be,
each borrowing by the Borrower of Committed Rate Loans and any
reduction of the Commitments shall be made pro rata according to
the respective Commitment Percentages of the Lenders. Each
payment by the Borrower under this Agreement or any Note shall be
applied, first, to any fees then due and owing pursuant to
subsection 2.4, second, to interest then due and owing in respect
of the Notes and, third, to principal then due and owing
hereunder and under the Notes. Each payment by the Borrower on
account of any fees pursuant to subsection 2.4 shall be made pro
rata in accordance with the respective amounts due and owing.
Except as expressly provided in subsections 2.15(d), 2.18 or 8.2,
as the case may be, each payment (other than prepayments) by the
Borrower on account of principal of and interest on the Loans
shall be made pro rata according to the respective amounts due
and owing. Each prepayment on account of principal of the Loans
shall be applied, first, to such of the Committed Rate Loans as
the Borrower may designate (to be applied pro rata among the
Lenders), and, second, after all Committed Rate Loans shall have
been paid in full, to Bid Loans, pro rata according to the
respective amounts outstanding; provided, that prepayments made
pursuant to subsection 2.14 shall be applied in accordance with
such subsection; and provided, further that nothing herein shall
be deemed to permit optional prepayments on account of Bid Loans.
All payments (including prepayments) to be made by the Borrower
on account of principal, interest and fees shall be made without
defense, set-off or counterclaim and shall be made to the Agent
for the account of the Lenders at the Agent's office specified in
subsection 8.3 in Dollars and in immediately available funds.
The Agent shall distribute such payments to the Lenders entitled
thereto promptly upon receipt in like funds as received. If any
payment hereunder (other than payments on the Eurodollar Loans)
becomes due and payable on a day other than a Business Day, such
payment shall be extended to the next succeeding Business Day,
and, with respect to payments of principal, interest thereon
shall be payable at the then applicable rate during such
extension. If any payment on a Eurodollar Loan or Bid Loan made
pursuant to an Index Rate Bid Loan Request becomes due and
payable on a day other than a Business Day, the maturity thereof
shall be extended to the next
<PAGE>
succeeding Business Day unless the result of such extension would
be to extend such payment into another calendar month, in which
event such payment shall be made on the immediately preceding
Business Day.
2.12 Non-Receipt of Funds by the Agent. (a) Unless the
Agent shall have been notified by a Lender prior to the date a
Committed Rate Loan is to be made by such Lender (which notice
shall be effective upon receipt) that such Lender does not intend
to make the proceeds of such Committed Rate Loan available to the
Agent, the Agent may assume that such Lender has made such
proceeds available to the Agent on such date, and the Agent may
in reliance upon such assumption (but shall not be required to)
make available to the Borrower a corresponding amount. If such
amount is made available to the Agent on a date after such
Borrowing Date, such Lender shall pay to the Agent on demand an
amount equal to the product of (i) the daily average Federal
Funds Effective Rate during such period, times (ii) the amount of
such Lender's Commitment Percentage of such borrowing, times
(iii) a fraction, the numerator of which is the number of days
that elapse from and including such Borrowing Date to the date on
which such Lender's Commitment Percentage of such borrowing shall
have become immediately available to the Agent and the
denominator of which is 360. A certificate of the Agent
submitted to any Lender with respect to any amounts owing under
this subsection shall be conclusive in the absence of manifest
error. If such Lender's Commitment Percentage is not in fact
made available to the Agent by such Lender within three Business
Days of such Borrowing Date, the Agent shall be entitled to
recover such amount with interest thereon at the rate per annum
applicable to Alternate Base Rate Loans hereunder, on demand,
from the Borrower.
(b) Unless the Agent shall have been notified by the
Borrower prior to the date on which any payment is due from it
hereunder (which notice shall be effective upon receipt) that the
Borrower does not intend to make such payment, the Agent may
assume that the Borrower has made such payment when due, and the
Agent may in reliance upon such assumption (but shall not be
required to) make available to each Lender on such payment date
an amount equal to the portion of such assumed payment to which
such Lender is entitled hereunder, and if the Borrower has not in
fact made such payment to the Agent, such Lender shall, on
demand, repay to the Agent the amount made available to such
Lender. If such amount is repaid to the Agent on a date after
the date such amount was made available to such Lender, such
Lender shall pay to the Agent on demand an amount equal to the
product of (i) the daily average Federal Funds Effective Rate
during such period, times (ii) the amount made available to such
Lender by the Agent pursuant to this paragraph (b), times (iii) a
fraction, the numerator of which is the number of days that
elapse from and including the date on which such amount was made
available to such Lender to the date on which such amount shall
have been repaid to the Agent by such Lender and become
<PAGE>
immediately available to the Agent and the denominator of which
is 360.
(c) A certificate of the Agent submitted to the
Borrower or any Lender with respect to any amount owing under
this subsection shall be conclusive in the absence of manifest
error.
2.13 Inability to Determine Interest Rate. (a)
Notwithstanding any other provision of this Agreement, if (i) the
Agent determines that no Reference Lender is, for any reason
whatsoever, quoting a rate referred to in the definition of
Eurodollar Rate for any Interest Period or (ii) the Majority
Lenders shall determine (which determination shall be conclusive)
that the rates quoted by the Reference Lenders for the purpose of
computing the Eurodollar Rate do not adequately and fairly
reflect the cost to such Lenders of funding Eurodollar Loans that
the Borrower has requested be outstanding as a Eurodollar Tranche
during such Interest Period, the Agent shall forthwith give
telephone notice of such determination, confirmed in writing, to
the Borrower and the Lenders at least two Business Days prior to
the first day of such Interest Period. Unless the Borrower shall
have notified the Agent upon receipt of such telephone notice
that it wishes to rescind or modify its request regarding such
Eurodollar Loans, any Loans that were requested to be made as
Eurodollar Loans shall be made as Alternate Base Rate Loans and
any Loans that were requested to be converted into or continued
as Eurodollar Loans shall be converted into Alternate Base Rate
Loans. Until any such notice has been withdrawn by the Agent, no
further Loans shall be made as, continued as, or converted into,
Eurodollar Loans.
(b) Notwithstanding any other provision of this
Agreement, if (i) the Agent determines that no Reference Lender
is, for any reason whatsoever, quoting a rate referred to in the
definition of C/D Base Rate for any Interest Period or (ii) the
Majority Lenders shall determine (which determination shall be
conclusive) that the rates quoted by the Reference Lenders for
the purpose of computing the C/D Rate do not adequately and
fairly reflect the cost to such Lenders of funding C/D Rate Loans
that the Borrower has requested be outstanding as a C/D Rate
Tranche during such Interest Period, the Agent shall forthwith
give telephone notice of such determination to the Borrower and
the Lenders on or before the first day of such Interest Period.
Unless the Borrower shall have notified the Agent after receipt
of such telephone notice that it wishes to rescind or modify its
request regarding such C/D Rate Loans, any Loans that were
requested to be made as C/D Rate Loans shall be made as Alternate
Base Rate Loans and any Loans that were requested to be converted
into or continued as C/D Rate Loans shall be converted into
Alternate Base Rate Loans. Until such notice has been withdrawn
by the Agent, no further Loans shall be made as, continued as, or
converted into, C/D Rate Loans.
<PAGE>
(c) In the event that the Agent shall have determined
(which determination shall be conclusive and binding upon the
Borrower) that by reason of circumstances affecting the interbank
eurodollar market, adequate and reasonable means do not exist for
ascertaining the Eurodollar Rate for any Interest Period with
respect to a proposed Bid Rate Loan to be made pursuant to an
Index Rate Bid Loan Request, the Agent shall forthwith give
telephone notice of such determination, confirmed in writing, to
the Borrower and the Bid Loan Lenders at least two Business Days
prior to the proposed Bid Loan Date, and such Bid Loans shall not
be made on such Bid Loan Date. Until any such notice has been
withdrawn by the Agent, no further Index Rate Bid Loan Requests
shall be submitted by the Borrower.
2.14 Illegality. Notwithstanding any other provision of
this Agreement, if the adoption of or any change in any
Requirement of Law or in the interpretation or application
thereof by the relevant Governmental Authority to any Lender
shall make it unlawful for such Lender or its Eurodollar Lending
Office to make or maintain Eurodollar Loans as contemplated by
this Agreement or to obtain in the interbank eurodollar market
through its Eurodollar Lending Office the funds with which to
make such Loans, (a) such Lender shall promptly notify the Agent
and the Borrower thereof, (b) the commitment of such Lender
hereunder to make Eurodollar Loans or continue Eurodollar Loans
as such shall forthwith be cancelled and (c) such Lender's
Committed Rate Loans then outstanding as Eurodollar Loans, if
any, shall be repaid and reborrowed on the Interest Payment Date
for such Loans or within such earlier period as required by law
as Alternate Base Rate Loans. The Borrower hereby agrees
promptly to pay any Lender, upon its demand, any additional
amounts necessary to compensate such Lender for actual and direct
costs reasonably incurred by such Lender in making any repayment
in accordance with this subsection including, but not limited to,
any interest or fees payable by such Lender to lenders of funds
obtained by it in order to make or maintain its Eurodollar Loans
hereunder. A certificate as to any additional amounts payable
pursuant to this subsection submitted by such Lender, through the
Agent, to the Borrower shall be conclusive in the absence of
manifest error. Each Lender agrees to use reasonable efforts
(including reasonable efforts to change its Eurodollar Lending
Office) to avoid or to minimize any amounts which may otherwise
be payable pursuant to this subsection; provided, however, that
such efforts shall not cause the imposition on such Lender of any
additional costs or legal or regulatory burdens deemed by such
Lender to be material.
2.15 Requirements of Law. (a) If the adoption of or any
change in any Requirement of Law or in the interpretation or
application thereof or compliance by any Lender with any request
or directive (whether or not having the force of law) from any
central bank or other Governmental Authority made subsequent to
the date hereof:
<PAGE>
(i) does or shall subject such Lender to any tax of
any kind whatsoever with respect to this Agreement, any Note or
any Eurodollar Loan or C/D Rate Loan made by it, or change the
basis of taxation of payments to such Lender of principal,
facility fee, interest or any other amount payable hereunder
(except for changes in the rate of tax on the overall net income
of such Lender);
(ii) does or shall impose, modify or hold applicable
any reserve, special deposit, compulsory loan or similar
requirement against assets held by, or deposits or other
liabilities in or for the account of, advances or loans by, or
other credit extended by, or any other acquisition of funds by,
any office of such Lender which are not otherwise included in the
determination of the C/D Rate hereunder or covered by subsection
2.15(b);
(iii) does or shall impose on such Lender any other
condition;
and the result of any of the foregoing is to increase the cost to
such Lender of making or maintaining Loans or to reduce any
amount receivable hereunder or under any Note, then, in any such
case, the Borrower shall promptly pay such Lender, upon its
demand, any additional amounts necessary to compensate such
Lender for such additional cost or reduced amount receivable
which such Lender reasonably deems to be material as determined
by such Lender with respect to its Eurodollar Loans and C/D Rate
Loans. A certificate as to any additional amounts payable
pursuant to this subsection submitted by such Lender, through the
Agent, to the Borrower shall be conclusive in the absence of
manifest error. Each Lender agrees to use reasonable efforts
(including reasonable efforts to change its Domestic Lending
Office or Eurodollar Lending Office, as the case may be) to avoid
or to minimize any amounts which might otherwise be payable
pursuant to this paragraph of this subsection; provided, however,
that such efforts shall not cause the imposition on such Lender
of any additional costs or legal or regulatory burdens deemed by
such Lender to be material.
(b) In addition to amounts which may become payable
from time to time pursuant to paragraph (a) of this subsection,
the Borrower agrees to pay to each Lender which requests
compensation under this paragraph (b) (by notice to the
Borrower), on the last day of each Interest Period with respect
to any Eurodollar Loan made by such Lender, so long as such
Lender shall be required to maintain reserves against
"Eurocurrency liabilities" under Regulation D of the Board of
Governors of the Federal Reserve System (or, so long as such
Lender may be required by such Board of Governors or by any other
Governmental Authority to maintain reserves against any other
category of liabilities which includes deposits by reference to
which the interest rate on Eurodollar Loans is determined as
provided in this Agreement or against any category of extensions
of credit or other assets of such Lender which includes any
<PAGE>
Eurodollar Loans), an additional amount (determined by such
Lender and notified to the Borrower) representing such Lender's
calculation or, if an accurate calculation is impracticable,
reasonable estimate (using such reasonable means of allocation as
such Lender shall determine) of the actual costs, if any,
incurred by such Lender during such Interest Period as a result
of the applicability of the foregoing reserves to such Eurodollar
Loans, which amount in any event shall not exceed the product of
the following for each day of such Interest Period:
(i) the principal amount of the Eurodollar Loans
made by such Lender to which such Interest Period relates
outstanding on such day; and
(ii) the difference between (x) a fraction the
numerator of which is the Eurodollar Rate (expressed as a
decimal) applicable to such Eurodollar Loan and the denominator
of which is one minus the maximum rate (expressed as a decimal)
at which such reserve requirements are imposed by such Board of
Governors or other Governmental Authority on such date minus (y)
such numerator; and
(iii) a fraction the numerator of which is one
and the denominator of which is 360.
(c) If any Lender shall have determined that the
adoption of or any change in any Requirement of Law regarding
capital adequacy or in the interpretation or application thereof
or compliance by such Lender or any corporation controlling such
Lender with any request or directive regarding capital adequacy
(whether or not having the force of law) from any central bank or
Governmental Authority made subsequent to the date hereof does or
shall have the effect of reducing the rate of return on such
Lender's or such corporation's capital as a consequence of its
obligations hereunder to a level below that which such Lender or
such corporation could have achieved but for such adoption,
change or compliance (taking into consideration such Lender's or
such corporation's policies with respect to capital adequacy) by
an amount deemed by such Lender to be material, then from time to
time, within 15 days after demand by such Lender, the Borrower
shall pay to such Lender such additional amount as shall be
certified by such Lender as being required to compensate it for
such reduction.
(d) In the event that any Lender shall submit a
request for reimbursement of additional amounts pursuant to
subsection 2.15(a), (b) or (c), the Borrower may (i) provide,
with the consent of the Agent (which consent shall not be
unreasonably withheld), another financial institution to acquire,
pursuant to subsection 8.7(d), the Commitment of such Lender and
all amounts owing to such Lender in respect of Committed Rate
Loans under this Agreement or (ii) prepay, in accordance with the
terms and provisions of the Release to which such Lender shall be
party, the outstanding Committed Rate Loans of such Lender in
full, (together with all other amounts owing to such Lender
<PAGE>
hereunder (other than Bid Loans of such Lender), including,
without limitation, amounts payable pursuant to subsection 2.16),
and upon such prepayment, terminate the Commitment of such
Lender. In addition, the Borrower will reimburse any Lender
submitting such request for all such additional amounts incurred
by such Lender, provided that no such reimbursement shall be
required in respect of periods commencing (x) prior to the
commencement of the Interest Period in respect of which such
reimbursement is sought, in the case of any reimbursement
pursuant to subsection 2.15(b), or (y) prior to the date which is
60 days prior to the date of such request, in all other cases.
The Borrower will also be required to provide additional
reimbursement to such Lender for periods subsequent to such
request through the date of such replacement pursuant to clause
(i) above or through the date of such prepayment and cancellation
pursuant to clause (ii) above, as the case may be.
(e) The agreements in this subsection shall survive the
termination of this Agreement and payment of the Notes and all
other amounts payable hereunder.
2.16 Indemnity. The Borrower hereby agrees to indemnify
each Lender and to hold such Lender harmless from any loss or
expense which such Lender may sustain or incur as a consequence
of (a) default by the Borrower in payment of the principal amount
of or interest on any Loan by such Lender in accordance with the
terms of subsections 2.2(e) and 2.8(e), as the case may be, (b)
default by the Borrower in making a borrowing after the Borrower
has given a notice in accordance with subsection 2.1 or 2.2, (c)
default by the Borrower in making any prepayment after the
Borrower has given a notice in accordance with subsection 2.6
and/or (d) the making by the Borrower of a prepayment of a
Committed Rate Loan on a day which is not the last day of the
Interest Period with respect thereto, in each case including, but
not limited to, any such loss or expense arising from interest or
fees payable by such Lender to lenders of funds obtained by it in
order to maintain its Loans hereunder. A certificate as to any
additional amounts payable pursuant to this subsection submitted
by any Lender, through the Agent, to the Borrower shall be
conclusive in the absence of manifest error. The agreements in
this subsection shall survive termination of this Agreement and
payment of the Notes and all other amounts payable hereunder.
2.17 Taxes. (a) All payments made by the Borrower under
this Agreement and the Notes shall be made free and clear of, and
without deduction or withholding for or on account of, any
present or future income, stamp or other taxes, levies, imposts,
duties, charges, fees, deductions or withholdings, now or
hereafter imposed, levied, collected, withheld or assessed by any
Governmental Authority, excluding, in the case of the Agent and
each Lender, net income and franchise taxes (imposed in lieu of
net income taxes) imposed on the Agent or such Lender, as the
case may be, as a result of a present or former connection
between the jurisdiction of the government or taxing authority
<PAGE>
imposing such tax on the Agent or such Lender (excluding a
connection arising solely from the Agent or such Lender having
executed, delivered or performed its obligations or received a
payment under, or enforced this Agreement or the Notes), or any
political subdivision or taxing authority thereof or therein, or
by any jurisdiction in which such Lender's Domestic Lending
Office or Eurodollar Lending Office, as the case may be, is
located or any political subdivision or taxing authority thereof
or therein (all such non-excluded taxes, levies, imposts, duties,
fees, deductions, charges or withholdings being hereinafter
called "Taxes"). If any Taxes are required to be withheld from
any amounts payable to the Agent or any Lender hereunder or under
the Notes, the amounts so payable to the Agent or such Lender
shall be increased to the extent necessary to yield to the Agent
or such Lender (after payment of all Taxes) interest or any such
other amounts payable hereunder at the rates or in the amounts
specified in this Agreement and the Notes. Whenever any Taxes
are payable by the Borrower, as promptly as practicable
thereafter, the Borrower shall send to the Agent, for its own
account or for the account of such Lender, as the case may be, a
certified copy of an original official receipt received by the
Borrower showing payment thereof. If the Borrower fails to pay
any Taxes when due to the appropriate taxing authority or fails
to remit to the Agent the required receipts or other required
documentary evidence, the Borrower shall indemnify the Agent and
the Lenders for any incremental taxes, interest or penalties that
may become payable by the Agent or any Lender as a result of any
such failure.
(b) Prior to the first Interest Payment Date each
Lender that is not incorporated under the laws of the United
States of America or a state thereof agrees that it will deliver
to the Borrower and the Agent (i) two duly completed copies of
United States Internal Revenue Service Form 1001 or 4224 or
successor applicable form, as the case may be, certifying in each
case that such Lender is entitled to receive payments under this
Agreement and the Notes payable to it, without deduction or
withholding of any United States federal income taxes, and (ii)
an Internal Revenue Service Form W-8 or W-9 or successor
applicable form, as the case may be, to establish an exemption
from United States backup withholding tax. Each Lender which
delivers to the Borrower and the Agent a Form 1001 or 4224 and
Form W-8 or W-9 pursuant to the immediately preceding sentence
further undertakes to deliver to the Borrower and the Agent two
further copies of the said letter and Form 1001 or 4224 and Form
W-8 or X-9, or successor applicable forms, or other manner of
certification, as the case may be, on or before the date that any
such letter or form expires or becomes obsolete or after the
occurrence of any event requiring a change in the most recent
letter and form previously delivered by it to the Borrower, and
such extensions or renewals thereof as may reasonably be
requested by the Borrower, certifying in the case of a Form 1001
or 4224 that such Lender is entitled to receive payments under
this Agreement without deduction or withholding of any United
States federal income taxes, unless in any such cases an event
<PAGE>
(including, without limitation, any change in treaty, law or
regulation) has occurred prior to the date on which any such
delivery would otherwise be required which renders all such forms
inapplicable or which would prevent such Lender from duly
completing and delivering any such letter or form with respect to
it and such Lender advises the Borrower that it is not capable of
receiving payments without any deduction or withholding of United
States federal income tax, and in the case of a Form W-8 or W-9,
establishing an exemption from United States backup withholding
tax.
(c) Each Lender agrees to use reasonable efforts
(including reasonable efforts to change its Domestic Lending
Office or Eurodollar Lending Office, as the case may be) to avoid
or to minimize any amounts which might otherwise be payable
pursuant to this subsection; provided, however, that such efforts
shall not cause the imposition on such Lender of any additional
costs or legal or regulatory burdens deemed by such Lender to be
material.
(d) The agreements in this subsection shall survive
the termination of this Agreement and the payment of the Notes
and all other amounts payable hereunder.
2.18 Extension of Termination Date, Replacement of Exiting
Lender. The Borrower may, at any time prior to the date which is
thirty days prior to the then Termination Date, by written notice
to the Agent (which notice the Agent shall promptly transmit to
each Lender), request that the Termination Date be extended.
Each Lender shall respond to such request not earlier than the
fifteenth day after the date of the Borrower's notice to the
Agent (such fifteenth day, the "First Response Date") and not
later than the twenty-ninth day after the date of such notice
(the "Last Response Date"), with the failure of any Lender to
respond being deemed to be a negative response. If and only if
the Majority Lenders respond affirmatively to such request on or
before the Last Response Date, the Agent shall so advise the
Borrower, whereupon the Borrower shall immediately determine, and
so advise the Agent, either (a) not to have the Termination Date
extended or (b) to have the Termination Date extended, in which
case the Termination Date shall be extended as to those Lenders
that have agreed to such extension until the date which is 364
days after the First Response Date. In the event that the
Majority Lenders agree to extend the Termination Date, but one or
more Lenders (each an "Exiting Lender") do not agree to such
extension, the Borrower shall, on or before the original
Termination Date, either (i) provide, with the consent of the
Agent (which consent shall not be unreasonably withheld), another
financial institution to acquire, pursuant to subsection 8.7(d),
the Commitment of such Exiting Lender and all amounts owing to
such Exiting Lender in respect of Committed Rate Loans under this
Agreement or (ii) prepay, in accordance with the terms and
provisions of the Release to which such Lender shall be party,
the outstanding Committed Rate Loans of such Exiting Lender in
full, (together with all other amounts owing to such
<PAGE>
Exiting Lender hereunder (other than Bid Loans of such Exiting
Lender), including, without limitation, amounts payable pursuant
to subsection 2.16), and upon such prepayment, terminate the
Commitment of such Exiting Lender. The Termination Date may be
extended for up to four successive periods pursuant to this
subsection 2.18.
SECTION 3. REPRESENTATIONS AND WARRANTIES
To induce the Lenders to enter into this Agreement and to
make the Loans herein provided for, the Borrower hereby
represents and warrants to the Agent and to each Lender that:
3.1 Financial Condition. The consolidated balance sheet of
the Borrower and its consolidated Subsidiaries as at December 31,
1992 and the related consolidated statements of income and of
cash flows for the fiscal year ended on such date, reported on by
Arthur Andersen & Co., copies of which have heretofore been
furnished to each Lender, are complete and correct and present
fairly the consolidated financial condition of the Borrower and
its consolidated Subsidiaries as at such date, and the
consolidated results of their operations and their consolidated
cash flows for the fiscal year then ended. All such financial
statements, including the related schedules and notes thereto,
have been prepared in accordance with GAAP applied consistently
throughout the periods involved (except as disclosed therein).
Neither the Borrower nor any of its consolidated Subsidiaries
had, at the date of the balance sheet referred to above, any
material Guarantee Obligation, contingent liabilities or
liability for taxes, long-term lease or unusual forward or
long-term commitment, including, without limitation, any interest
rate or foreign currency swap or exchange transaction, which is
not reflected in the foregoing statements or in the notes
thereto.
3.2 No Change. Since December 31, 1992 there has been no
development or event which has had a Material Adverse Effect.
3.3 Corporate Existence; Compliance with Law. Each of the
Borrower and its Significant Subsidiaries (a) is duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its organization, (b) has the corporate or
partnership power and authority and the legal right to own and
operate all its material property, to lease the material property
it operates as lessee and to conduct the business in which it is
currently engaged, (c) is duly qualified as a foreign corporation
or partnership and in good standing under the laws of each
jurisdiction where its ownership, lease or operation of property
or the conduct of its business requires such qualification except
to the extent that the failure to so qualify or be in good
standing would not, in the aggregate, have a Material Adverse
Effect and (d) is in compliance with all Requirements of Law
except to the extent that the failure to comply therewith would
<PAGE>
not, in the aggregate, reasonably be expected to have a Material
Adverse Effect.
3.4 Corporate Power; Authorization; Enforceable
Obligations. The Borrower has full power and authority and the
legal right to make, deliver and perform this Agreement and has
taken all necessary action to authorize the execution, delivery
and performance of this Agreement by the Borrower. No consent or
authorization of, filing with, notice to or other act by or in
respect of, any Governmental Authority or any other Person is
required in connection with the borrowings hereunder or with the
execution, delivery or performance of this Agreement or the Notes
by the Borrower or with the validity or enforceability of this
Agreement or the Notes against the Borrower. This Agreement has
been duly executed and delivered on behalf of the Borrower. This
Agreement constitutes a legal, valid and binding obligation of
the Borrower enforceable against the Borrower in accordance with
its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and
by general equitable principles (whether enforcement is sought by
proceedings in equity or at law). The Borrower has full power
and authority and the legal right to make, deliver and perform
the Notes and to borrow hereunder and has taken all necessary
action to authorize the borrowings contemplated by this Agreement
on the terms and conditions of this Agreement and the Notes and
to authorize the execution, delivery and performance of the
Notes. On the Closing Date, each Committed Rate Note and Grid
Bid Loan Note, and on the date of delivery thereof, each
Individual Bid Loan Note, will have been duly executed and
delivered on behalf of the Borrower and will constitute a legal,
valid and binding obligation of the Borrower enforceable against
the Borrower in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting
the enforcement of creditors' rights generally and by general
equitable principles (whether enforcement is sought by
proceedings in equity or at law).
3.5 No Legal Bar; No Default. The execution, delivery and
performance of this Agreement and the Notes, the borrowings
hereunder and the use of the proceeds thereof will not violate
any Requirement of Law or any Contractual Obligation of the
Borrower or of any of its Subsidiaries, and will not result in,
or require, the creation or imposition of any Lien on any of its
or their respective properties or revenues pursuant to any
Requirement of Law or Contractual Obligation. Neither the
Borrower nor any of its Subsidiaries is in default under or with
respect to any of its Contractual Obligations in any respect
which would reasonably be expected to have a Material Adverse
Effect. No Default or Event of Default has occurred and is
continuing.
3.6 No Material Litigation. Except as set forth on
Schedule 3.6, no litigation, investigation or proceeding of or
<PAGE>
before any arbitrator or Governmental Authority is pending or, to
the best knowledge of the Borrower, threatened by or against the
Borrower or any of its Subsidiaries or against any of its or
their respective properties or revenues (a) with respect to this
Agreement or the Notes or any Loan or any of the transactions
contemplated hereby, or (b) which would reasonably be expected to
have a Material Adverse Effect.
3.7 Investment Company Act. The Borrower is not an
"investment company", or a company "controlled" by an "investment
company", within the meaning of the Investment Company Act of
1940, as amended.
3.8 Federal Regulations. No part of the proceeds of any
Loan hereunder will be used directly or indirectly for any
purpose which violates, or which would be inconsistent with, the
provisions of Regulation G, T, U or X of the Board of Governors
of the Federal Reserve System as now and from time to time
hereafter in effect.
3.9 ERISA. Neither a Reportable Event nor an "accumulated
funding deficiency" (within the meaning of Section 412 of the
Code or Section 302 of ERISA) has occurred during the five-year
period prior to the date on which this representation is made or
deemed made with respect to any Plan, and each Plan has complied
in all material respects with the applicable provisions of ERISA
and the Code. No termination of a Single Employer Plan has
occurred resulting in any liability that has remained
underfunded, and no Lien in favor of the PBGC or a Plan has
arisen, during such five-year period. Except for the
Supplemental Executive Retirement Plan, the present value of all
accrued benefits under each Single Employer Plan (based on those
assumptions used to fund such Plans) did not, as of the last
annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the
assets of such Plan allocable to such accrued benefits by an
amount which would reasonably be expected to have a Material
Adverse Effect. Neither the Borrower nor any Commonly Controlled
Entity is currently subject to any liability for a complete or
partial withdrawal from a Multiemployer Retirement Plan.
3.10 Environmental Matters. Except to the extent that all
of the following, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect:
(a) To the best knowledge of the Borrower, the
facilities and properties owned, leased or operated by the
Borrower or any of its Subsidiaries (the "Properties") do not
contain, and have not previously contained, any Materials of
Environmental Concern in amounts or concentrations which (i)
constitute or constituted a violation of, or (ii) could give rise
to liability under, any Environmental Law.
<PAGE>
(b) To the best knowledge of the Borrower, the
Properties and all operations at the Properties are in
compliance, and have in the last five years been in compliance,
in all material respects with all applicable Environmental Laws,
and there is no contamination at, under or about the Properties
or violation of any Environmental Law with respect to the
Properties or the business operated by the Borrower or any of its
Subsidiaries (the "Business").
(c) Neither the Borrower nor any of its Subsidiaries
has received any notice of violation, alleged violation, non-
compliance, liability or potential liability regarding
environmental matters or compliance with Environmental Laws with
regard to any of the Properties or the Business, nor does the
Borrower have knowledge or reason to believe that any such notice
will be received or is being threatened.
(d) To the best knowledge of the Borrower, Materials
of Environmental Concern have not been transported or disposed of
from the Properties in violation of, or in a manner or to a
location which could give rise to liability under, any
Environmental Law, nor have any Materials of Environmental
Concern been generated, treated, stored or disposed of at, on or
under any of the Properties in violation of, or in a manner that
could give rise to liability under, any applicable Environmental
Law.
(e) No judicial proceeding or governmental or
administrative action is pending or, to the knowledge of the
Borrower, threatened, under any Environmental Law to which the
Borrower or any Subsidiary is or will be named as a party with
respect to the Properties or the Business, nor are there any
consent decrees or other decrees, consent orders, administrative
orders or other orders, or other administrative or judicial
requirements outstanding under any Environmental Law with respect
to the Properties or the Business.
(f) To the best knowledge of the Borrower, there has
been no release or threat of release of Materials of
Environmental Concern at or from the Properties, or arising from
or related to the operations of the Borrower or any Subsidiary in
connection with the Properties or otherwise in connection with
the Business, in violation of or in amounts or in a manner that
could give rise to liability under Environmental Laws.
3.11 Purpose of Loans. The proceeds of the Loans will be
used by the Borrower for its general corporate and working
capital purposes, including, without limitation, additions to
working capital, capital expenditures, acquisitions, stock
repurchases and commercial paper back-up. This Agreement will
replace the Existing Facility.
<PAGE>
SECTION 4. CONDITIONS PRECEDENT
4.1 Conditions to Initial Loans. The obligation of each
Lender to make its initial Loan hereunder is subject to the
satisfaction of the following conditions precedent:
(a) Execution of Agreement. The Agent shall have
received one or more counterparts of this Agreement, executed by
a duly authorized officer of each party hereto.
(b) Secretary's Certificate of the Borrower. The
Agent shall have received, with a counterpart for each Lender, a
certificate of the Secretary or Assistant Secretary of the
Borrower dated the Closing Date, substantially in the form of
Exhibit J with appropriate insertions and attachments.
(c) Legal Opinion of Counsel to the Borrower. The
Agent shall have received, with a copy for each Lender, an
opinion of Louis L. Hoynes, Jr., Senior Vice President and
General Counsel of the Borrower, dated the Closing Date and
addressed to the Agent and the Lenders, substantially in the form
of Exhibit K. Such opinion shall also cover such other matters
incident to the transactions contemplated by this Agreement as
the Agent shall reasonably require.
(d) Fees. The Agent shall have received all fees, if
any, owing pursuant to subsection 2.4.
(e) Termination of Existing Facility. The Agent shall
have received evidence satisfactory to it that all commitments
under the Existing Facility have been terminated and all amounts
owing thereunder, if any, have been paid in full.
(f) Additional Matters. All other documents and legal
matters in connection with the transactions contemplated by this
Agreement shall be satisfactory in form and substance to the
Agent and its counsel.
4.2 Conditions to All Loans. The obligation of each Lender
to make any Loan to be made by it hereunder (including the
initial Loan to be made by it hereunder) is subject to the
satisfaction of the following conditions precedent on the date of
making such Loan:
(a) Representations and Warranties. The
representations and warranties made by the Borrower herein or
which are contained in any certificate furnished at any time
under or in connection herewith shall be true and correct in all
material respects on and as of the date of such Loan as if made
on and as of such date.
(b) No Default or Event of Default. No Default or
Event of Default shall have occurred and be continuing on
<PAGE>
such date or after giving effect to the Loan to be made on such
date unless such Default or Event of Default shall have been
waived in accordance with this Agreement.
(c) Additional Conditions to Bid Loans. If such Loan
is made pursuant to subsection 2.2:
(i) all conditions set forth in such subsection
shall have been satisfied;
(ii) the Agent shall have received for the
account of each Lender a Grid Bid Loan Note conforming to the
requirements hereof and executed by a duly authorized officer of
the Borrower, and the Agent shall promptly forward such Notes to
the appropriate Lenders; and
(iii) the Agent shall have received, with a copy
for each Lender, an opinion of the General Counsel of the
Borrower, dated the date of making such Loan and addressed to the
Agent and the Lenders, which shall cover matters in respect of
the execution of the Grid Bid Loan Notes and Individual Bid Loan
Notes in accordance with paragraph 3 of Exhibit K hereto and
otherwise confirm the opinions rendered in the legal opinion
delivered pursuant to subsection 4.1(c) on the Closing Date.
(d) Additional Conditions to Committed Rate Loans. If
such Loan is made pursuant to subsection 2.1:
(i) all conditions set forth in such subsection
shall have been satisfied;
(ii) the Agent shall have received for the
account of each Lender a Committed Rate Note conforming to the
requirements hereof and executed by a duly authorized officer of
the Borrower, and the Agent shall promptly forward such Notes to
the appropriate Lenders; and
(iii) the Agent shall have received, with a copy
for each Lender, an opinion of the General Counsel of the
Borrower, dated the date of making such Loan and addressed to the
Agent and the Lenders, which shall cover matters in respect of
the execution of the Committed Rate Notes in accordance with
paragraph 3 of Exhibit K hereto and otherwise confirm the
opinions rendered in the legal opinion
<PAGE>
delivered pursuant to subsection 4.1(c) on the Closing Date.
Each acceptance by the Borrower of a Loan shall be deemed to
constitute a representation and warranty by the Borrower as of
the date of such Loan that the applicable conditions in
paragraphs (a), (b) and (c) of this subsection have been
satisfied.
4.3 Conditions to All Committed Rate Loans. The obligation
of each Lender to make any Committed Rate Loan to be made by it
hereunder (including the initial Committed Rate Loan to be made
by it hereunder) is subject to receipt by the Agent of a notice
of borrowing from the Borrower in accordance with subsection 2.1.
SECTION 5. AFFIRMATIVE COVENANTS
The Borrower hereby agrees that, so long as the Commitments
remain in effect, any Note remains outstanding and unpaid or any
other amount is owing to the Agent or any Lender hereunder, the
Borrower shall and, in the case of subsections 5.3, 5.4, 5.5 and
5.6, shall cause each of its Significant Subsidiaries to, and in
the case of subsections 5.7 and 5.8 shall cause each of its
Subsidiaries to:
5.1 Financial Statements. Furnish to the Agent (with a
sufficient number of copies for each Lender, which the Agent
shall promptly furnish to each Lender):
(a) as soon as available, but in any event within 120
days after the end of each fiscal year of the Borrower, a copy of
the consolidated balance sheet of the Borrower and its
consolidated Subsidiaries as at the end of such year and the
related consolidated statements of income and retained earnings
and of cash flows of the Borrower and its consolidated
Subsidiaries for such year, setting forth in each case in
comparative form the figures for the previous year, reported on
without a "going concern" or like qualification or exception, or
qualification indicating that the scope of the audit was
inadequate to permit such independent certified public
accountants to certify such financial statements without such
qualification, by Arthur Andersen & Co. or other firm of
independent certified public accountants of nationally recognized
standing; and
(b) as soon as available, but in any event not later
than 60 days after the end of each of the first three quarterly
periods of each fiscal year of the Borrower, a copy of the
Borrower's Report on Form 10-Q for such quarter, as filed with
the Securities Exchange Commission; all such financial statements
to be complete and correct in all material respects and to be
prepared in reasonable detail and in
<PAGE>
accordance with GAAP applied consistently throughout the periods
reflected therein (except as approved by such accountants or
Responsible Officer, as the case may be, and disclosed therein).
5.2 Certificates; Other Information. Furnish to the Agent
(with a sufficient number of copies for each Lender, which the
Agent shall promptly furnish to each Lender):
(a) concurrently with the delivery of the financial
statements referred to in subsection 5.1(a) above, a certificate
of the independent certified public accountants reporting on such
financial statements stating that in making the examination
necessary therefor no knowledge was obtained of any Default or
Event of Default, except as specified in such certificate;
(b) concurrently with the delivery of the financial
statements referred to in subsection 5.1(a) above and the Report
on Form 10-Q for the Borrower's second fiscal quarter referred to
in subsection 5.1(b) above, a certificate of a Responsible
Officer stating that, to the best of such Responsible Officer's
knowledge, the Borrower during such period observed or performed
all of its covenants and other agreements, and satisfied every
material condition, contained in this Agreement and in the Notes
to be observed, performed or satisfied by it, and that such
Responsible Officer has obtained no knowledge of any Default or
Event of Default except as specified in such certificate;
(c) within thirty days after the same are sent, copies
of all reports (not otherwise provided pursuant to subsection
5.1) and other financial information which the Borrower sends to
its stockholders, and within thirty days after the same are
filed, copies of all financial statements and reports which the
Borrower may make to, or file with, the Securities and Exchange
Commission or any successor or analogous Governmental Authority;
(d) promptly, such additional financial and other
information as the Agent, on behalf of any Lender, may from time
to time reasonably request.
5.3 Payment of Obligations. Pay, discharge or otherwise
satisfy at or before maturity or before they become delinquent,
as the case may be, all its material obligations of whatever
nature and any additional costs that are imposed as a result of
any failure to so pay, discharge or otherwise satisfy such
obligations, except when the amount or validity of such
obligations and costs is currently being contested in good faith
by appropriate proceedings and reserves in conformity with GAAP
with respect thereto have been provided on the books of the
Borrower or its Subsidiaries, as the case may be.
5.4 Conduct of Business and Maintenance of Existence.
Continue to engage in business of the same general type as now
<PAGE>
conducted by it and preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to
maintain all rights, privileges and franchises necessary or
desirable in the normal conduct of its businesses; comply with
all Contractual Obligations and Requirements of Law applicable to
it except to the extent that failure to comply therewith would
not, in the aggregate, have a Material Adverse Effect.
5.5 Maintenance of Property; Insurance. Keep all property
useful and necessary in its business in good working order and
condition; maintain with financially sound and reputable
insurance companies insurance on all its property in at least
such amounts and against at least such risks as are usually
insured against in the same general area by companies engaged in
the same or a similar business; and furnish to each Lender, upon
written request, full information as to the insurance carried;
provided, however, that the Borrower may maintain self insurance
plans to the extent companies of similar size and in similar
businesses do so.
5.6. Inspection of Property; Books and Records;
Discussions. Keep proper books of records and account in which
full, true and correct entries in conformity with GAAP and all
Requirements of Law shall be made of all dealings and
transactions in relation to its businesses and activities; and
permit, during regular business hours and upon reasonable notice
by the Agent, the Agent or any Lender to visit and inspect any of
its properties and examine and make abstracts from any of its
books and records (other than materials protected by the
attorney-client privilege and materials which the Borrower may
not disclose without violation of a confidentiality obligation
binding upon it) at any reasonable time and as often as may
reasonably be desired, and to discuss the business, operations,
properties and financial and other condition of the Borrower and
its Significant Subsidiaries with officers and employees of the
Borrower and its Significant Subsidiaries and with its
independent certified public accountants.
5.7. Notices. Promptly give notice to the Agent (which
shall promptly transmit such notice to each Lender) of:
(a) the occurrence of any material Default or Event of
Default;
(b) any default or event of default under any
Contractual Obligation of the Borrower or any of its Significant
Subsidiaries which would reasonably be expected to have a
Material Adverse Effect;
(c) any litigation, or any investigation or proceeding
known to the Borrower, affecting the Borrower or any of its
Significant Subsidiaries which would reasonably be expected to
have a Material Adverse Effect;
<PAGE>
(d) the following events, as soon as possible and in
any event within 30 days after the Borrower knows or has reason
to know thereof: (i) the occurrence or expected occurrence of
any Reportable Event with respect to any Plan, a failure to make
any required contribution to a Plan, the creation of any Lien in
favor of the PBGC or a Plan or any withdrawal from, or the
termination, Reorganization or Insolvency of, any Multiemployer
Plan or (ii) the institution of proceedings or the taking of any
other action by the PBGC or the Borrower or any Commonly
Controlled Entity or any Multiemployer Plan with respect to the
withdrawal from, or the terminating, Reorganization or Insolvency
of, any Plan; and
(e) any other development or event which would
reasonably be expected to have a Material Adverse Effect.
Each notice pursuant to this subsection shall be accompanied
by a statement of a Responsible Officer setting forth details of
the occurrence referred to therein and stating what action the
Borrower proposes to take with respect thereto.
5.8 Environmental Laws.
(a) Comply with, and ensure compliance by all tenants
and subtenants, if any, with, all applicable Environmental Laws
and obtain and comply in all material respects with and maintain,
and ensure that all tenants and subtenants obtain and comply in
all material respects with and maintain, any and all licenses,
approvals, notifications, registrations or permits required by
applicable Environmental Laws except to the extent that failure
to do so would not reasonably be expected to have a Material
Adverse Effect;
(b) Conduct and complete all investigations, studies,
sampling and testing, and all remedial, removal and other actions
required under Environmental Laws and promptly comply in all
material respects with all lawful orders and directives of all
Governmental Authorities regarding Environmental Laws except to
the extent that the same are being contested in good faith by
appropriate proceedings and the pendency of such proceedings
would not reasonably be expected to have a Material Adverse
Effect; and
(c) Defend, indemnify and hold harmless the Agent and
the Lenders, and their respective employees, agents, officers and
directors, from and against any and all claims, demands,
penalties, fines, liabilities, settlements, damages, costs and
expenses of whatever kind or nature known or unknown, contingent
or otherwise, arising out of, or in any way relating to the
violation of, noncompliance with or liability under, any
Environmental Law applicable to the operations of the Borrower,
any of its Significant Subsidiaries or the Properties, or any
orders, requirements or demands of Governmental Authorities
related thereto,
<PAGE>
including, without limitation, attorney's and consultant's fees,
investigation and laboratory fees, response costs, court costs
and litigation expenses, except to the extent that any of the
foregoing arise out of the gross negligence or willful misconduct
of the party seeking indemnification therefor. The agreements in
this paragraph shall survive repayment of the Notes and all other
amounts payable hereunder.
SECTION 6 EVENTS OF DEFAULT
Upon the occurrence of any of the following events:
(a) The Borrower shall fail to pay any principal on
any Note when due in accordance with the terms thereof or hereof
on the maturity date thereof; or the Borrower shall fail to pay
any interest on any Note or any fee or other amount payable
hereunder when due in accordance with the terms thereof or hereof
and such failure shall continue unremedied for five Business
Days; or
(b) Any representation or warranty made or deemed made
by the Borrower herein or which is contained in any certificate,
document or financial or other statement furnished at any time
under or in connection with this Agreement shall prove to have
been incorrect, false or misleading in any material respect on or
as of the date made or deemed made; or
(c) The Borrower shall default in any material respect
in the observance or performance of any agreement contained in
this Agreement (other than as described in paragraph (a) above),
and such default shall continue unremedied for a period of 30
days; or
(d) The Borrower or any of its Significant
Subsidiaries shall (i) default in any payment of principal of or
interest on any Indebtedness (other than the Notes) in a
principal amount outstanding of at least $100,000,000 in the
aggregate for the Borrower and its Significant Subsidiaries or in
the payment of any matured Guarantee Obligation in a principal
amount outstanding of at least $100,000,000 in the aggregate for
the Borrower and its Significant Subsidiaries beyond the period
of grace (not to exceed 30 days), if any, provided in the
instrument or agreement under which such Indebtedness or
Guarantee Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition
relating to any such Indebtedness in a principal amount
outstanding of at least $100,000,000 in the aggregate for the
Borrower and its Significant Subsidiaries or Guarantee Obligation
in a principal amount outstanding of at least $100,000,000 in the
aggregate for the Borrower and its Significant Subsidiaries or
contained in any instrument or agreement evidencing,
<PAGE>
securing or relating thereto, or any other event shall occur or
condition exist, the effect of which default or other event or
condition is to cause, or to permit the holder or holders of such
Indebtedness or beneficiary or beneficiaries of such Guarantee
Obligation (or a trustee or agent on behalf of such holder or
holders or beneficiary or beneficiaries) to cause, with the
giving of notice if required, such Indebtedness to become due
prior to its stated maturity or such Guarantee Obligation to
become payable; or
(e) (i) The Borrower or any of its Significant
Subsidiaries shall commence any case, proceeding or other action
(A) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it a
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian, conservator or
other similar official for it or for all or any substantial part
of its assets, or the Borrower or any such Significant Subsidiary
shall make a general assignment for the benefit of its creditors;
or (ii) there shall be commenced against the Borrower or any such
Significant Subsidiary any case, proceeding or other action of a
nature referred to in clause (i) above which (A) results in the
entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded
for a period of 60 days; or (iii) there shall be commenced
against the Borrower or any such Significant Subsidiary any case,
proceeding or other action seeking issuance of a warrant of
attachment, execution, distraint or similar process against all
or any substantial part of its assets which results in the entry
of an order for any such relief which shall not have been
vacated, discharged, or stayed or bonded pending appeal within 60
days from the entry thereof; or (iv) the Borrower or any such
Significant Subsidiary shall take any action in furtherance of,
or indicating its consent to, approval of, or acquiescence in,
any of the acts set forth in clause (i), (ii), or (iii) above;
or (v) the Borrower or any such Significant Subsidiary shall
generally not, or shall be unable to, or shall admit in writing
its inability to, pay its debts as they become due; or
(f) One or more judgments or decrees shall be entered
against the Borrower or any of its Significant Subsidiaries
involving in the aggregate a liability (not paid when due or
covered by insurance) of $100,000,000 or more and all such
judgments or decrees shall not have been vacated, discharged,
stayed or bonded pending appeal within 30 days from the entry
thereof; or
<PAGE>
(g) (i) Any Person shall engage in any "prohibited
transaction" (as defined in Section 406 of ERISA or Section 4975
of the Code) involving any Plan, (ii) any "accumulated funding
deficiency" (as defined in Section 302 of ERISA), whether or not
waived, shall exist with respect to any Plan or any Lien in favor
of the PBGC or a Plan shall arise on the assets of the Borrower
or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a
trustee appointed, or a trustee shall be appointed, to administer
or to terminate, any Single Employer Plan, which Reportable Event
or commencement of proceedings or appointment of a Trustee is, in
the reasonable opinion of the Required Lenders, likely to result
in the termination of such Plan for purposes of Title IV of
ERISA, (iv) any Single Employer Plan shall terminate for purposes
of Title IV of ERISA, (v) the Borrower, any of its Significant
Subsidiaries or any Commonly Controlled Entity shall, or in the
reasonable opinion of the Required Lenders is likely to, incur
any liability in connection with a withdrawal from, or the
Insolvency or Reorganization of, any Multiemployer Plan or (vi)
any other event or condition shall occur or exist; and in each
case in clauses (i) through (vi) above, such event or condition,
together with all other such events or conditions, if any, could
have a material Adverse Effect; or
(h) Either (i) a "person" or a "group" (within the
meaning of Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934) becomes the "beneficial owner" (as defined in Rule
13d-3 under the Securities Exchange Act of 1934) of more than 25%
of the then outstanding voting stock of the Borrower or (ii) a
majority of the Board of Directors of the Borrower shall consist
of individuals who are not Continuing Directors; "Continuing
Director" means, as of any date of determination, (i) an
individual who on the date two years prior to such determination
date was a member of the Borrower's Board of Directors and (ii)
any new Director whose nomination for election by the Borrower's
shareholders was approved by a vote of at least 75% of the
Directors then still in office who either were Directors on the
date two years prior to such determination date or whose
nomination for election was previously so approved;
then, and in any such event, (A) if such event is an Event of
Default specified in clause (i) or (ii) of paragraph (e) above,
automatically the Commitments shall immediately terminate and the
Loans (with accrued interest thereon), and all other amounts
owing under this Agreement and the Notes shall immediately become
due and payable, and (B) if such event is any other Event of
Default, either or both of the following actions may be taken:
(i) with the consent of the Required Lenders, the Agent may,
<PAGE>
or upon the request of the Required Lenders, the Agent shall, by
notice to the Borrower declare the Commitments to be terminated
forthwith, whereupon the Commitments shall immediately terminate;
and (ii) with the consent of the Required Lenders, the Agent may,
or upon the request of the Required Lenders, the Agent shall, by
notice of default to the Borrower, declare the Loans (with
accrued interest thereon) and all other amounts owing under this
Agreement and the Notes to be due and payable forthwith,
whereupon the same shall immediately become due and payable.
Except as expressly provided above in this Section 6,
presentment, demand, protest and all other notices of any kind
are hereby expressly waived.
SECTION 7 THE AGENT
7.1 Appointment. Each Lender hereby irrevocably designates
and appoints Chemical Bank as the Agent of such Lender under this
Agreement, and each such Lender irrevocably authorizes Chemical
Bank, as the Agent for such Lender, to take such action on its
behalf under the provisions of this Agreement and to exercise
such powers and perform such duties as are expressly delegated to
the Agent by the terms of this Agreement, together with such
other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in
this Agreement, the Agent shall not have any duties or
responsibilities, except those expressly set forth herein, or any
fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities
shall be read into this Agreement or otherwise exist against the
Agent.
7.2 Delegation of Duties. The Agent may execute any of its
duties under this Agreement by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Agent shall
not be responsible for the negligence or misconduct of any agents
or attorneys-in-fact selected by it with reasonable care.
Without limiting the foregoing, the Agent may appoint CBASC as
its agent to perform the functions of the Agent hereunder
relating to the advancing of funds to the Borrower and
distribution of funds to the Lenders and to perform such other
related functions of the Agent hereunder as are reasonably
incidental to such functions.
7.3 Exculpatory Provisions. Neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or
Affiliates (including, without limitation, CBASC) shall be (i)
liable for any action lawfully taken or omitted to be taken by it
or such Person under or in connection with this Agreement (except
for its or such Person's own gross negligence or willful
misconduct) or (ii) responsible in any manner to any of the
Lenders for any recitals, statements, representations or
warranties made by the Borrower or any officer thereof contained
in this Agreement or in any certificate, report, statement or
other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or for the
value, validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or the Notes or for any failure of
<PAGE>
the Borrower to perform its obligations hereunder or thereunder.
Neither the Agent nor CBASC shall be under any obligation to any
Lender to ascertain or to inquire as to the observance or
performance by the Borrower of any of the agreements contained
in, or conditions of, this Agreement (other than the receipt by
the Agent of the documents specified in subsection 4.1), or to
inspect the properties, books or records of the Borrower.
7.4 Reliance by Agent. Each of the Agent and CBASC shall
be entitled to rely, and shall be fully protected in relying,
upon any Note, writing, resolution, notice, consent, certificate,
affidavit, letter, cablegram, telegram, telecopy, telex or
teletype message, statement, order or other document or
conversation reasonably believed by it to be genuine and correct
and to have been signed, sent or made by the proper Person or
Persons and upon advice and statements of legal counsel
(including, without limitation, counsel to the Borrower),
independent accountants and other experts selected by the Agent.
The Agent may deem and treat the payee of any Note as the owner
thereof for all purposes unless (a) a written notice of
assignment, negotiation or transfer thereof shall have been filed
with the Agent and (b) the Agent shall have received the written
agreement of such assignee to be bound hereby as fully and to the
same extent as if such assignee were an original Lender party
hereto, in each case in form satisfactory to the Agent. The
Agent shall be fully justified in failing or refusing to take any
action under this Agreement unless it shall first receive such
advice or concurrence of the Required Lenders as it deems
appropriate or it shall first be indemnified to its satisfaction
by the Lenders against any and all liability and expense which
may be incurred by it by reason of taking or continuing to take
any such action. The Agent shall in all cases be fully protected
in acting, or in refraining from acting, under this Agreement and
the Notes in accordance with a request of the Required Lenders,
and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future
holders of the Notes.
7.5 Notice of Default. The Agent shall not be deemed to
have knowledge or notice of the occurrence of any Default or
Event of Default hereunder unless the Agent has received notice
from a Lender or the Borrower referring to this Agreement,
describing such Default or Event of Default and stating that such
notice is a "notice of default". In the event that the Agent
receives such a notice, the Agent shall give notice thereof to
the Lenders. The Agent shall take such action with respect to
such Default or Event of Default as shall be reasonably directed
by the Required Lenders; provided, however, that unless and until
the Agent shall have received such directions, the Agent may (but
shall not be obligated to) take such action, or refrain from
taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interests of the
Lenders.
<PAGE>
7.6 Non-Reliance on Agent, Other Lenders and CBASC. Each
Lender expressly acknowledges that neither the Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or
Affiliates has made any representation or warranty to it and that
no act by the Agent hereinafter taken, including any review of
the affairs of the Borrower, shall be deemed to constitute any
representation or warranty by the Agent to any Lender. Each
Lender represents to the Agent and CBASC that it has,
independently and without reliance upon the Agent or any other
Lender or CBASC, and based on such documents and information as
it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial
and other condition and creditworthiness of the Borrower and made
its own decision to make its Loans hereunder and enter into this
Agreement. Each Lender also represents that it will,
independently and without reliance upon the Agent, CBASC or any
other Lender, and based on such documents and information as it
shall deem appropriate at the time, continue to make its own
credit analysis, appraisals and decisions in taking or not taking
action under this Agreement, and to make such investigation as it
deems necessary to inform itself as to the business, operations,
property, financial and other condition and creditworthiness of
the Borrower. Except for notices, reports and other documents
expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to
provide any Lender with any credit or other information
concerning the business, operations, property, condition
(financial or otherwise), prospects or creditworthiness of the
Borrower which may come into the possession of the Agent or any
of its officers, directors, employees, agents, attorneys-in-fact
or Affiliates.
7.7 Indemnification. The Lenders agree to indemnify each
of the Agent and CBASC in their respective capacities hereunder
(to the extent not reimbursed by the Borrower and without
limiting the obligation of the Borrower to do so), ratably
according to their respective Commitment Percentages in effect on
the date on which indemnification is sought under this
subsection, from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements of any kind whatsoever
which may at any time (including, without limitation, at any time
following the payment of the Notes) be imposed on, incurred by or
asserted against the Agent or CBASC in any way relating to or
arising out of this Agreement, the Notes or any documents
contemplated by or referred to herein or therein or the
transactions contemplated hereby or thereby or any action taken
or omitted by the Agent or CBASC under or in connection with any
of the foregoing; provided, however, that no Lender shall be
liable for the payment of any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments,
suits, costs, expenses or disbursements resulting solely from the
Agent's or CBASC's gross negligence or willful misconduct. The
agreements in this subsection shall survive the termination of
<PAGE>
this Agreement and payment of the Notes and all other amounts
payable hereunder.
7.8 Agent in Its Individual Capacity. The Agent and its
Affiliates may make loans to, accept deposits from and generally
engage in any kind of business with the Borrower as though the
Agent were not the Agent hereunder. With respect to its Loans
made or renewed by it and any Note issued to it, the Agent shall
have the same rights and powers under this Agreement as any
Lender and may exercise the same as though it were not the Agent,
and the terms "Lender" and "Lenders" shall include the Agent in
its individual capacity.
7.9 Successor Agent. The Agent may resign as Agent upon 15
days' notice to the Borrower and the Lenders. If the Agent shall
resign as Agent under this Agreement and the Notes, then the
Required Lenders shall appoint from among the Lenders a successor
agent for the Lenders, which successor agent shall be approved by
the Borrower, whereupon such successor agent shall succeed to the
rights, powers and duties of the Agent, and the term "Agent"
shall mean such successor agent effective upon such appointment
and approval, and the former Agent's rights, powers and duties as
Agent shall be terminated, without any other or further act or
deed on the part of such former Agent or any of the parties to
this Agreement or any holders of the Notes. After any retiring
Agent's resignation as Agent, the provisions of this subsection
shall inure to its benefit as to any actions taken or omitted to
be taken by it while it was Agent under this Agreement.
SECTION 8 MISCELLANEOUS
8.1 Amendments and Waivers. Neither this Agreement, any
Note, nor any terms hereof or thereof may be amended,
supplemented or modified except in accordance with the provisions
of this subsection. The Required Lenders may, or, with the
written consent of the Required Lenders, the Agent may, from time
to time, (a) enter into with the Borrower written amendments,
supplements or modifications hereto and to the Notes for the
purpose of adding any provisions to this Agreement or the Notes
or changing in any manner the rights of the Lenders or of the
Borrower hereunder or thereunder or (b) waive, on such terms and
conditions as the Required Lenders or the Agent, as the case may
be, may specify in such instrument, any of the requirements of
this Agreement or the Notes or any Default or Event of Default
and its consequences; provided, however, that no such waiver and
no such amendment, supplement or modification shall (i) reduce
the amount or extend the scheduled date of maturity of any Note
or of any installment thereof, or reduce the
<PAGE>
stated rate of any interest or fee payable hereunder or extend
the scheduled date of any payment thereof or increase the amount
or extend the expiration date of any Lender's Commitment, in each
case without the consent of each Lender affected thereby, or (ii)
amend, modify or waive any provision of this subsection or reduce
the percentage specified in the definition of Required Lenders or
Majority Lenders, or consent to the assignment or transfer by the
Borrower of any of its rights and obligations under this
Agreement, in each case without the written consent of all the
Lenders, or (iii) amend, modify or waive any provision of Section
7 without the written consent of the then Agent. Any such waiver
and any such amendment, supplement or modification shall apply
equally to each of the Lenders and shall be binding upon the
Borrower, the Lenders, the Agent and all future holders of the
Notes. In the case of any waiver, the Borrower, the Lenders and
the Agent shall be restored to their former position and rights
hereunder and under the outstanding Notes, and any Default or
Event of Default waived shall be deemed to be cured and not
continuing; but no such waiver shall extend to any subsequent or
other Default or Event of Default, or impair any right consequent
thereon.
8.2 Removal of a Lender by the Borrower. The Borrower may
at any time, in its sole discretion, elect to remove any Lender
(a "Removed Lender") from the syndicate of Lenders under this
Agreement by delivering notice thereof to such Lender and the
Agent. Any such removal by the Borrower of a Lender shall be
effective on the date set forth in such notice, provided that the
Borrower shall have either (i) provided, with the consent of the
Agent (which consent shall not be unreasonably withheld), another
financial institution to acquire, pursuant to subsection 8.7(d),
the Commitment of such Removed Lender and all amounts owing to
such Removed Lender in respect of Committed Rate Loans under this
Agreement or (ii) prepaid, in accordance with the terms and
provisions of the Release to which such Lender shall be party,
the outstanding Committed Rate Loans of such Removed Lender in
full, (together with all other amounts owing to such Removed
Lender hereunder (other than Bid Loans of such Removed Lender),
including, without limitation, amounts payable pursuant to
subsection 2.16), and upon such prepayment, terminated the
Commitment of such Removed Lender.
8.3 Notices. Except as otherwise provided in Section 2,
all notices, requests and demands to or upon the respective
parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly provided herein, shall
be deemed to have been duly given or made when delivered by hand,
or 3 Business Days after being deposited in the mail, postage
prepaid, or, in the case of telecopy notice, when received,
addressed as follows in the case of the Borrower and the Agent,
and as set forth on the signature pages hereof in the case of the
Lenders, or to such other address as may be hereafter notified by
the respective parties hereto and any future holders of the
Notes:
<PAGE>
The Borrower:
American Home Products Corporation
685 Third Avenue
New York, New York 10017-9085
Attention: Treasurer
Telecopier: (212) 875-5771
Telephone: (212) 878-8649
The Agent:
Chemical Bank
270 Park Avenue
New York, New York 10017
Attention: Robert Kellas
Telecopier: (212) 270-2112
Telephone: (212) 270-3560
CBASC:
Chemical Bank Agency Services
Corporation
140 East 45th Street
New York, New York 10017-3162
Attention: Janet Belden
Telecopier: (212) 622-0001
Telephone: (212) 622-0011;
provided, however, that any notice, request or demand to or upon
the Agent or the Lenders pursuant to subsections 2.1, 2.2, 2.3,
2.5, 2.6 and 2.12 shall not be effective until received.
8.4 No Waiver; Cumulative Remedies. No failure to exercise
and no delay in exercising, on the part of the Agent or any
Lender, any right, remedy, power or privilege hereunder shall
operate as a waiver thereof; nor shall any single or partial
exercise of any right, remedy, power or privilege hereunder
preclude any other or further exercise thereof or the exercise of
any other right, remedy, power or privilege. The rights,
remedies, powers and privileges herein provided are cumulative
and not exclusive of any rights, remedies, powers and privileges
provided by law.
8.5 Survival of Representations and Warranties. All
representations and warranties made hereunder and in any
document, certificate or statement delivered pursuant hereto or
in connection herewith shall survive the execution and delivery
of this Agreement and the Notes and the making of the Loans.
8.6 Payment of Expenses and Taxes. The Borrower agrees (a)
to pay or reimburse the Agent for all its reasonable
out-of-pocket costs and expenses incurred in connection with the
development, preparation, printing and execution of, and any
amendment, supplement or modification to, this Agreement
<PAGE>
and the Notes and any other documents prepared in connection
herewith or therewith, and the consummation and administration of
the transactions contemplated hereby and thereby, including,
without limitation, the reasonable fees and disbursements of
counsel to the Agent, (b) to pay or reimburse each Lender and the
Agent for all its costs and expenses incurred in connection with
the enforcement or preservation of any rights under this
Agreement, the Notes and any such other documents, including,
without limitation, the fees and disbursements of counsel to the
Agent and to the several Lenders, and (c) on demand, to pay,
indemnify, and hold each Lender and the Agent harmless from, any
and all recording and filing fees and any and all liabilities
with respect to, or resulting from any delay in paying, stamp,
excise and other taxes, if any, which may be payable or
determined to be payable in connection with the execution and
delivery of, or consummation or administration of any of the
transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of,
this Agreement, the Notes and any such other documents, and (d)
to pay, indemnify, and hold each Lender and the Agent harmless
from and against, any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever with
respect to the execution, delivery, enforcement, performance and
administration of this Agreement, the Notes and any such other
documents (all the foregoing, collectively, the "indemnified
liabilities"); provided, however, that the Borrower shall have no
obligation hereunder to the Agent or any Lender with respect to
indemnified liabilities arising from (i) the gross negligence or
willful misconduct of the Agent or any such Lender, (ii) legal
proceedings commenced against the Agent or any such Lender by any
security holder or creditor thereof arising out of and based upon
rights afforded such security holder or creditor solely in its
capacity as such or (iii) legal proceedings commenced against any
Lender by any other Lender or the Agent. The agreements in this
subsection shall survive repayment of the Notes and all other
amounts payable hereunder.
8.7 Successors and Assigns; Participations; Purchasing
Lenders. 1. This Agreement shall be binding upon and inure to
the benefit of the Borrower, the Lenders, the Agent, all future
holders of the Notes and their respective successors and assigns,
except that the Borrower may not assign or transfer any of its
rights or obligations under this Agreement without the prior
written consent of each Lender.
(a) Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable
law, at any time sell to one or more banks or other entities
("Participants") participating interests in any Loan owing to
such Lender, any Note held by such Lender, any Commitment of such
Lender, or any other interest of such Lender hereunder. In the
event of any such sale by a Lender of participating interests to
a Participant, such Lender's obligations under this Agreement to
the other parties to this Agreement shall remain unchanged, such
Lender shall remain solely responsible for the performance
thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement, and the Borrower and the Agent
shall continue to deal solely and directly with such Lender in
connection with such Lender's rights and obligations under this
Agreement. The Borrower agrees that if amounts outstanding under
this Agreement and the Notes are due and unpaid, or shall have
<PAGE>
been declared or shall have become due and payable upon the
occurrence of an Event of Default, each Participant shall be
deemed to have, to the extent permitted by applicable law, the
right of setoff in respect of its participating interest in
amounts owing under this Agreement and any Note to the same
extent as if the amount of its participating interest were owing
directly to it as a Lender under this Agreement or any Note;
provided that, in purchasing such participating interest, such
Participant shall be deemed to have agreed to share with the
Lenders the proceeds thereof as provided in subsection 8.7(a) as
fully as if it were a Lender hereunder. The Borrower also agrees
that each Participant shall be entitled to the benefits of
subsections 2.15, 2.16, 2.17 and 8.6 with respect to its
participation in the Commitments and the Loans outstanding from
time to time; provided, that no Participant shall be entitled to
receive any greater amount pursuant to such subsections than the
transferor Lender would have been entitled to receive in respect
of the amount of the participation transferred by such transferor
Lender to such Participant had no such transfer occurred. Each
Lender agrees that the participation agreement (or any other
document) pursuant to which any Participant acquires its
participating interest may afford voting rights to such
Participant only with respect to matters requiring the consent of
all of the Lenders hereunder.
(b) Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable
law, at any time assign to one or more banks or other entities
("Bid Loan Assignees") any Bid Loan owing to such Lender and any
Individual Bid Loan Note held by such Lender evidencing such Bid
Loan, pursuant to a Bid Loan Assignment executed by the assignor
Lender and the Assignee. Upon such execution, from and after the
Transfer Effective Date specified in such Bid Loan Assignment,
the Bid Loan Assignee shall, to the extent of the assignment
provided for in such Bid Loan Assignment and to the extent
permitted by applicable law, be deemed to have the same rights
and benefits with respect to such Bid Loans and Individual Bid
Loan Note and the same rights of setoff and obligation to share
pursuant to subsection 8.8 as it would have had if it were a
Lender hereunder; provided, that unless such Bid Loan Assignment
shall otherwise specify and a copy of such Bid Loan Assignment
shall have been delivered to the Agent for its acceptance and
recording in the Register in accordance with subsection 8.7(f),
the assignor Lender shall act as collection agent for the Bid
Loan Assignee, and the Agent shall pay all amounts received from
the Borrower which are allocable to the assigned Bid Loan or Bid
Note directly to the assignor Lender without any further
liability to the Bid Loan Assignee. The Bid Loan Assignee shall
not, by virtue of such Bid Loan Assignment, become a party to
this Agreement or have any rights to consent to or refrain from
consenting to any amendment, waiver or other modification of any
provision of this Agreement or any related document; provided,
that (x) the assignor Lender and the Bid Loan Assignee may, in
their discretion, agree between themselves upon the manner in
which the assignor Lender will exercise its rights under this
<PAGE>
Agreement and any related document, and (y) if a copy of such Bid
Loan Assignment shall have been delivered to the Agent for its
acceptance and recording in the Register in accordance with
subsection 8.7(f), neither the principal amount of, the interest
rate on, nor the maturity date of any Bid Loan or Bid Note
assigned to a Bid Loan Assignee will be modified without the
written consent of such Bid Loan Assignee.
(c) Any Lender may, in the ordinary course of its
commercial banking business and in accordance with applicable
law, at any time sell to any Lender or any affiliate thereof and,
with the consent of the Borrower, in its absolute discretion, and
the Agent (which consent shall not be unreasonably withheld), to
one or more additional banks or financial institutions
("Purchasing Lenders"), all or any part of its rights and
obligations under this Agreement and the Notes in minimum amounts
of $25,000,000 (or, if less, the entire amount of such Lender's
obligations) pursuant to a Commitment Transfer Supplement,
executed by such Purchasing Lender, such transferor Lender (and,
in the case of a Purchasing Lender that is not then a Lender or
an affiliate thereof, by the Borrower and the Agent), and
delivered to the Agent for its acceptance and recording in the
Register. Upon such execution, delivery, acceptance and
recording, from and after the Transfer Effective Date specified
in such Commitment Transfer Supplement, (x) the Purchasing Lender
thereunder shall be a party hereto and, to the extent provided in
such Commitment Transfer Supplement, have the rights and
obligations of a Lender hereunder with a Commitment as set forth
therein, and (y) the transferor Lender thereunder shall, to the
extent provided in such Commitment Transfer Supplement, be
released from its obligations under this Agreement (and, in the
case of a Commitment Transfer Supplement covering all or the
remaining portion of a transferor Lender's rights and obligations
under this Agreement, such transferor Lender shall cease to be a
party hereto). Such Commitment Transfer Supplement shall be
deemed to amend this Agreement to the extent, and only to the
extent, necessary to reflect the addition of such Purchasing
Lender and the resulting adjustment of Commitment Percentages
arising from the purchase by such Purchasing Lender of all or a
portion of the rights and obligations of such transferor Lender
under this Agreement and the Notes. On or prior to the Transfer
Effective Date specified in such Commitment Transfer Supplement,
the Borrower, at its own expense, shall execute and deliver to
the Agent in exchange for the Committed Rate Note delivered to
the Agent pursuant to such Commitment Transfer Supplement a new
Committed Rate Note to the order of such Purchasing Lender in an
amount equal to the Commitment assumed by it pursuant to such
Commitment Transfer Supplement and a new Grid Bid Loan Note to
the order of such Purchasing Lender in an amount equal to the
aggregate Commitments and, unless the transferor Lender has not
retained a Commitment hereunder, a new Committed Rate Note to the
order of the transferor Lender in an amount equal to the
Commitment retained by it hereunder. Such new Committed Rate
Note
<PAGE>
and Grid Bid Loan Note shall be dated the Closing Date and shall
otherwise be in the form of the Committed Rate Note and Grid Bid
Loan Note replaced thereby. The Committed Rate Note and Grid Bid
Loan Note, if any, surrendered by the transferor Lender shall be
returned by the Agent to the Borrower marked "cancelled".
(d) The Agent shall maintain at its address referred
to in subsection 8.3 a copy of each Bid Loan Assignment and each
Commitment Transfer Supplement delivered to it and a register
(the "Register") for the recordation of (i) the names and
addresses of the Lenders and the Commitment of, and principal
amount of the Loans owing to, each Lender from time to time, and
(ii) with respect to each Bid Loan Assignment delivered to the
Agent, the name and address of the Bid Loan Assignee and the
principal amount of each Bid Loan owing to such Bid Loan
Assignee. The entries in the Register shall be conclusive, in
the absence of manifest error, and the Borrower, the Agent and
the Lenders may treat each Person whose name is recorded in the
Register as the owner of the Loan recorded therein for all
purposes of this Agreement. The Register shall be available for
inspection by the Borrower or any Lender or Bid Loan Assignee at
any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of a Bid Loan Assignment executed
by an assignor Lender and a Bid Loan Assignee, together with
payment to the Agent (by the assignor Lender or the Bid Loan
Assignee, as agreed between them) of a registration and
processing fee of $1,000, the Agent shall (i) accept such Bid
Loan Assignment, (ii) record the information contained therein in
the Register and (iii) give prompt notice of such acceptance and
recordation to the assignor Lender, the Bid Loan Assignee and the
Borrower. Upon its receipt of a Commitment Transfer Supplement
executed by a transferor Lender and a Purchasing Lender (and, in
the case of a Purchasing Lender that is not then a Lender or an
affiliate thereof, by the Borrower and the Agent) together with
payment to the Agent (by the transferor Lender or the Purchasing
Lender, as agreed between them) of a registration and processing
fee of $3,000 for each Purchasing Lender listed in such
Commitment Transfer Supplement, and the Notes subject to such
Commitment Transfer Supplement, the Agent shall (i) accept such
Commitment Transfer Supplement, (ii) record the information
contained therein in the Register and (iii) give prompt notice of
such acceptance and recordation to the Lenders and the Borrower.
(f) The Borrower authorizes each Lender to disclose to
any Participant, Bid Loan Assignee or Purchasing Lender (each, a
"Transferee") and any prospective Transferee any and all
financial information in such Lender's possession concerning the
Borrower and its Affiliates which has been delivered to such
Lender by or on behalf of the Borrower pursuant to this Agreement
or which has been delivered to such Lender by or on behalf of the
Borrower in connection with such Lender's credit evaluation of
the Borrower and its Affiliates prior to becoming a party to this
Agreement.
(g) If, pursuant to this subsection, any interest in
this Agreement or any Note is transferred to any Transferee which
is organized under the laws of any jurisdiction other than the
United States or any State thereof, the transferor Lender shall
cause such Transferee, concurrently with the effectiveness of
such transfer, (i) to represent to the transferor Lender (for the
benefit of the transferor Lender, the Agent and the Borrower)
that under applicable law and treaties no taxes will be required
to be withheld by the Agent, the Borrower or the transferor
Lender with respect to any payments to be made to such Transferee
in respect of the Loans, (ii) to furnish to the transferor
Lender, the Agent and the Borrower either U.S. Internal Revenue
Service Form 4224 or U.S. Internal Revenue Service Form 1001
(wherein such Transferee claims entitlement to complete exemption
from U.S. federal withholding tax on all interest payments
hereunder), (iii) to furnish to the transferor Lender, the Agent
and the Borrower either U.S. Internal Revenue Service Form W-8 or
U.S. Internal Revenue Service Form W-9 (wherein such Transferee
claims entitlement to complete exemption from U.S. federal backup
withholding tax on all interest payments hereunder) and (iv) to
agree (for the benefit of the transferor Lender, the Agent and
the Borrower) to provide the transferor Lender, the Agent and the
Borrower a new Form 4224 or Form 1001 and Form W-8 or Form W-9
upon the expiration or obsolescence of any previously delivered
form and comparable statements in accordance with applicable U.S.
laws and regulations and amendments duly executed and completed
by such Transferee, and to comply from time to time with all
applicable U.S. laws and regulations with regard to such
withholding tax exemption and such backup withholding tax
exemption.
<PAGE>
(h) Nothing herein shall prohibit any Lender from
pledging or assigning any of its rights under this Agreement
(including, without limitation, any right to payment of principal
and interest under any Note) to any Federal Reserve Bank in
accordance with applicable laws.
8.8 Adjustments; Set-off. (a) Each Lender agrees that if
any Lender (a "benefitted Lender") shall at any time receive any
payment of all or part of its Committed Rate Loans, or interest
thereon, or receive any collateral in respect thereof (whether
voluntarily or involuntarily, by set-off, pursuant to events or
proceedings of the nature referred to in clause (e) of Section 6,
or otherwise) in a greater proportion than any such payment to or
collateral received by any other Lender, if any, in respect of
such other Lender's Committed Rate Loans, or interest thereon
(except as expressly provided in subsections 2.15(d), 2.18 or
8.2, as the case may be), such benefitted Lender shall purchase
for cash from the other Lenders a participating interest in such
portion of each such other Lender's Committed Rate Loan, or shall
provide such other Lenders with the benefits of any such
collateral, or the proceeds thereof, as shall be necessary to
cause such benefitted Lender to share the excess payment or
benefits of such collateral or proceeds ratably with each of the
Lenders; provided, however, that if all or any portion of such
<PAGE>
excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be rescinded, and the
purchase price and benefits returned, to the extent of such
recovery, but without interest. The Borrower agrees that each
Lender so purchasing a portion of another Lender's Committed Rate
Loan may exercise all rights of payment (including, without
limitation, rights of set-off) with respect to such portion as
fully as if such Lender were the direct holder of such portion.
(b) In addition to any rights and remedies of the
Lenders provided by law (including, without limitation, other
rights of set-off), each Lender shall have the right, without
prior notice to the Borrower, any such notice being expressly
waived by the Borrower to the extent permitted by applicable law,
upon the occurrence of any Event of Default, to setoff and
appropriate and apply any and all deposits (general or special,
time or demand, provisional or final), in any currency, and any
other credits, indebtedness or claims, in any currency, in each
case whether direct or indirect, absolute or contingent, matured
or unmatured, at any time held or owing by such Lender or any
branch or agency thereof to or for the credit or the account of
the Borrower, or any part thereof in such amounts as such Lender
may elect, against and on account of the obligations and
liabilities of the Borrower to such Lender hereunder and claims
of every nature and description of such Lender against the
Borrower, in any currency, whether arising hereunder, under the
Notes or under any documents contemplated by or referred to
herein or therein, as such Lender may elect, whether or not such
Lender has made any demand for payment and although such
obligations, liabilities and claims may be contingent or
unmatured. The aforesaid right of set-off may be exercised by
such Lender against the Borrower or against any trustee in
bankruptcy, debtor in possession, assignee for the benefit of
creditors, receiver or execution, judgment or attachment creditor
of the Borrower, or against anyone else claiming through or
against the Borrower or any such trustee in bankruptcy, debtor in
possession, assignee for the benefit of creditors, receiver, or
execution, judgment or attachment creditor, notwithstanding the
fact that such right of set-off shall not have been exercised by
such Lender prior to the occurrence of any Event of Default.
Each Lender agrees promptly to notify the Borrower and the Agent
after any such set-off and application made by such Lender;
provided, however, that the failure to give such notice shall not
affect the validity of such set-off and application.
8.9 Table of Contents and Section Headings. The table of
contents and the Section and subsection headings herein are
intended for convenience only and shall be ignored in construing
this Agreement.
8.10 Counterparts. This Agreement may be executed by one
or more of the parties to this Agreement on any number of
separate counterparts, and all of said counterparts taken
together shall be deemed to constitute one and the same
<PAGE>
instrument. A set of the copies of this Agreement signed by all
the parties shall be lodged with the Borrower and the Agent.
8.11 Severability. Any provision of this Agreement which
is prohibited or unenforceable in any jurisdiction shall, as to
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
8.12 Integration. This Agreement and the Notes represent
the agreement of the Borrower, the Agent and the Lenders with
respect to the subject matter hereof, and there are no promises,
undertakings, representations or warranties by the Agent, the
Borrower or any Lender relative to the subject matter hereof not
expressly set forth or referred to herein or in the Notes.
8.13 GOVERNING LAW. THIS AGREEMENT AND THE NOTES AND THE
RIGHTS AND OBLIGATIONS OF THE PARTIES UNDER THIS AGREEMENT AND
THE NOTES SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAW OF THE STATE OF NEW YORK.
8.14 Consent to Jurisdiction and Service of Process;
Waivers. (a) All judicial proceedings brought against the
Borrower with respect to this Agreement or any Note may be
brought in any state or federal court of competent jurisdiction
in the State of New York, and, by execution and delivery of this
Agreement, the Borrower accepts, for itself and in connection
with its properties, generally and unconditionally, the
non-exclusive jurisdiction of the aforesaid courts and
irrevocably agrees to be bound by any final judgment rendered
thereby in connection with this Agreement from which no appeal
has been taken or is available. The Borrower irrevocably agrees
that all process in any such proceedings in any such court may be
effected by mailing a copy thereof by registered or certified
mail (or any substantially similar form of mail), postage
prepaid, to it at its address set forth in subsection 8.3 or at
such other address of which the Agent shall have been notified
pursuant thereto, such service being hereby acknowledged by the
Borrower to be effective and binding service in every respect.
Each of the Borrower, the Agent and the Lenders irrevocably
waives any objection, including, without limitation, any
objection to the laying of venue or based on the grounds of forum
non conveniens which it may now or hereafter have to the bringing
of any such action or proceeding in any such jurisdiction.
Nothing herein shall affect the right to serve process in any
other manner permitted by law or shall limit the right of any
Lender to bring proceedings against the Borrower in the court of
any other jurisdiction.
(b) Each of the Borrower, the Agent and the Lenders
hereby irrevocably and unconditionally waives, to the maximum
extent not prohibited by law, any right it may have to claim or
<PAGE>
recover in any legal action or proceeding referred to in this
subsection any special, exemplary, punitive or consequential
damages.
8.15 Confidentiality. Each of the Lenders agrees that it
will use its best efforts not to disclose without the prior
consent of the Borrower (other than to its employees, auditors or
counsel or to another Lender) any information with respect to the
Borrower which is furnished pursuant to this Agreement, the Notes
or any documents contemplated by or referred to herein or therein
and which is designated by the Borrower to the Lenders in writing
as confidential, except that any Lender may disclose any such
information (a) as has become generally available to the public
other than by a breach of this Section 8.15, (b) as may be
required or appropriate in any report, statement or testimony
submitted to any municipal, state or federal regulatory body
having or claiming to have jurisdiction over such Lender or to
the Federal Reserve Board or the Federal Deposit Insurance
Corporation or similar organizations (whether in the United
States or elsewhere) or their successors, (c) as may be required
or appropriate in response to any summons or subpoena or any law,
order, regulation or ruling applicable to such Lender, or (d) to
any prospective participant or assignee in connection with any
contemplated transfer pursuant to Section 8.7, provided that such
prospective transferee shall have been made aware of this Section
8.15 and shall have agreed to be bound by its provisions as if it
were a party to this Agreement.
8.16 Acknowledgements. The Borrower hereby acknowledges
that:
(a) it has been advised by counsel in the negotiation,
execution and delivery of this Agreement and the Notes;
(b) neither the Agent nor any Lender has any fiduciary
relationship with or duty to the Borrower arising out of or in
connection with this Agreement and the relationship between Agent
and Lenders, on one hand, and the Borrower, on the other hand, in
connection herewith is solely that of debtor and creditor; and
(c) no joint venture exists among the Lenders or among
the Borrower and the Lenders.
<PAGE>
8.17 WAIVERS OF JURY TRIAL. THE BORROWER, THE AGENT AND
THE LENDERS HEREBY IRREVOCABLY AND UNCONDITIONALLY WAIVE TRIAL BY
JURY IN ANY LEGAL ACTION OR PROCEEDING RELATING TO THIS AGREEMENT
OR THE NOTES AND FOR ANY COUNTERCLAIM THEREIN.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed and delivered in New York, New York
by its proper and duly authorized officers as of the day and year
first above written.
AMERICAN HOME PRODUCTS CORPORATION
By:/s/John R. Considine
Title:
CHEMICAL BANK,
as Agent and as a Lender
By:/s/ Nancy Mistretta
Title:Managing Director
$75,000,000 7.5% CHEMICAL BANK
Domestic Lending Office:
CHEMICAL BANK
270 Park Avenue
New York, New York 10017
Attn: Ms. Elizabeth Chow
<PAGE>
Eurodollar Lending Office:
CHEMICAL BANK
270 Park Avenue
New York, New York 10017
Attn: Ms. Elizabeth Chow
$75,000,000 7.5% CIBC, INC.
By:/s/ Illegible
Title: Vice President
Domestic Lending Office:
CIBC, Inc.
Two Paces West,
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attn: Ms. Kim Swink
Eurodollar Lending Office:
CIBC, Inc.
Two Paces West,
2727 Paces Ferry Road, Suite 1200
Atlanta, Georgia 30339
Attn: Ms. Kim Swink
Any notice, request or demand in
respect of the Bid Loans shall be
delivered to:
CIBC, Inc.
425 Lexington Avenue
New York, New York 10017
Attn: Ms. Carol Kizzia
$75,000,000 7.5% COMMERZBANK AG, GRAND CAYMAN
BRANCH
By:/s/ Illegible
Title: Vice President
Domestic Lending Office:
Commerzbank AG, New York Branch
2 World Financial Center
New York, New York 10281-1050
Attn: Mr. Andreas Bremer
Eurodollar Lending Office:
Commerzbank AG, Grand Cayman Branch
2 World Financial Center
New York, New York 10281-1050
Attn: Mr. Andreas Bremer
<PAGE>
$75,000,000 7.5% J.P. MORGAN DELAWARE
By: /s/ David Morris
Title: Vice President
Domestic Lending Office:
J.P. Morgan Delaware
902 Market Street
Wilmington, Delaware 19801
Attn: Mr. David J. Morris
Eurodollar Lending Office:
J.P. Morgan Delaware
902 Market Street
Wilmington, Delaware 19801
Attn: Mr. David J. Morris
$75,000,000 7.5% WACHOVIA BANK OF GEORGIA, N.A.
By:/s/ Illegible
Title: Vice President
Domestic Lending Office:
Wachovia Corporate Services, Inc.
Carnegie Hall Tower, 37th Floor
152 W. 57th Street
New York, New York 10019
Attn: Ms. Pendleton Gray Whisnant
Eurodollar Lending Office:
Wachovia Corporate Services, Inc.
Carnegie Hall Tower, 37th Floor
152 W. 57th Street
New York, New York 10019
Attn: Ms. Pendleton Gray Whisnant
<PAGE>
$50,000,000 5.0% ABN AMRO BANK N.V.
By:/s/ Denise A. Gallegher
/s/ Nancy F. Watkins
Title: Vice President
Group Vice President
Domestic Lending Office:
ABN AMRO Bank N.V.
500 Park Avenue
New York, New York 10022
Attn: Ms. Denise Gallagher
Eurodollar Lending Office:
ABN AMRO Bank N.V.
500 Park Avenue
New York, New York 10022
Attn: Ms. Denise Gallagher
$50,000,000 5.0% BANK OF MONTREAL
By:/s/ Sharron P. Walsh
Title: Director
Domestic Lending Office:
Bank of Montreal/Harris Bank
115 South LaSalle Street
Chicago, Illinois 60603
Attn: Ms. Sharron P. Walsh
Eurodollar Lending Office:
Bank of Montreal/Harris Bank
115 South LaSalle Street
Chicago, Illinois 60603
Attn: Ms. Sharron P. Walsh
<PAGE>
$50,000,000 5.0% CITIBANK, N.A.
By:/s/ Hans F. Horn
Title:Vice President
Domestic Lending Office:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attn: Mr. Hans Horn
Eurodollar Lending Office:
Citibank, N.A.
399 Park Avenue
New York, New York 10043
Attn: Mr. Hans Horn
$50,000,000 5.0% ISTITUTO BANCARIO SAN PAOLO DI
TORINO S.P.A.
By:/s/ Illegible
Title: Vice President
Domestic Lending Office:
San Paolo Bank
245 Park Avenue
New York, New York 10167
Attn: Mr. Wendell Jones
Eurodollar Lending Office:
San Paolo Bank
245 Park Avenue
New York, New York 10167
Attn: Mr. Wendell Jones
<PAGE>
$50,000,000 5.0% NATIONAL WESTMINSTER BANK PLC
By:/s/ Illegible
Title: Vice President
Domestic Lending Office:
National Westminster Bank PLC -
New York Branch
175 Water Street, 21st Floor
New York, New York 10038-4924
Attn: Mr. Robert Passarello
Eurodollar Lending Office:
National Westminster Bank PLC -
Nassau Branch
175 Water Street, 21st Floor
New York, New York 10038-4924
Attn: Mr. Robert Passarello
$50,000,000 5.0% THE SUMITOMO BANK, LIMITED
By:/s/ Illegible
Title:Joint General Manager
Domestic Lending Office:
The Sumitomo Bank, Limited
One World Trade Center
Suite 9651
New York, New York 10048
Attn: U.S. Corporate Department
Eurodollar Lending Office:
The Sumitomo Bank, Limited
One World Trade Center
Suite 9651
New York, New York 10048
Attn: U.S. Corporate Department
<PAGE>
$50,000,000 5.0% SWISS BANK CORPORATION, NEW YORK
BRANCH
By:/s/ Colin T. Taylor
Title: Director
By:/s/ Illegible
Title: Associate Director
Domestic Lending Office:
Swiss Bank Corporation, New York
Branch
10 East 50th Street
New York, New York 10022
Attn: Mr. Colin T. Taylor
Eurodollar Lending Office:
Swiss Bank Corporation, Cayman
Islands Branch
c/o Swiss Bank Corporation,
New York Branch
10 East 50th Street
New York, New York 10022
Attn: Mr. Colin T. Taylor
$25,000,000 2.5% BANCA DI ROMA - NEW YORK BRANCH
By:/s/ Illegible
/s/Ralph L. Riehle
Title: Vice President
F.V.P.
Domestic Lending Office:
Banca di Roma - New York Branch
100 Wall Street
New York, New York 10005
Attn: Mr. Ralph L. Riehle
Eurodollar Lending Office:
Banca di Roma - New York Branch
100 Wall Street
New York, New York 10005
Attn: Mr. Ralph L. Riehle
<PAGE>
$25,000,000 2.5% THE BOATMAN'S NATIONAL BANK OF
ST. LOUIS
By:/s/ J. David Kennenbeck
Title: Corporate Banking Officer
Domestic Lending Office:
The Boatman's National Bank of
St. Louis
800 Market Street
P.O. Box #236
St. Louis, Missouri 63166-0236
Attn: Mr. J. David Kennebeck
Eurodollar Lending Office:
The Boatman's National Bank of
St. Louis
800 Market Street
P.O. Box #236
St. Louis, Missouri 63166-0236
Attn: Mr. J. David Kennebeck
$25,000,000 2.5% THE CHASE MANHATTAN BANK, N.A.
By:/s/ Robert W. Cook
Title: Managing Director
Domestic Lending Office:
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081
Attn: Mr. Robert W. Cook
Eurodollar Lending Office:
The Chase Manhattan Bank, N.A.
One Chase Manhattan Plaza
New York, New York 10081
Attn: Mr. Robert W. Cook
<PAGE>
$25,000,000 2.5% CORESTATES BANK, N.A.
By:/s/ James A. Bennett
Title: Senior Vice President
Domestic Lending Office:
CoreStates Bank, N.A.
P.O. Box 7618
1345 Chestnut Street
Philadelphia, Pennsylvania 19101
Attn: Mr. James A. Bennett
Eurodollar Lending Office:
CoreStates Bank, N.A.
P.O. Box 7618
1345 Chestnut Street
Philadelphia, Pennsylvania 19101
Attn: Mr. James A. Bennett
$25,000,000 2.5% CREDIT LYONNAIS NEW YORK BRANCH
By:/s/ Sebastion Rocco
Title: First Vice President
Domestic Lending Office:
Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Attn: Mr. Michael Moretti
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:/s/ Illegible
Title:
Eurodollar Lending Office:
Credit Lyonnais Cayman Island
Branch
c/o Credit Lyonnais New York Branch
1301 Avenue of the Americas
New York, New York 10019
Attn: Mr. Michael Moretti
<PAGE>
$25,000,000 2.5% CRESTAR BANK
By:/s/ Keith A. Hubbard
Title:Senior Vice President
Domestic Lending Office:
Crestar Bank
919 East Main Street
Richmond, Virginia 23219
Attn: Mr. Keith A. Hubbard
Eurodollar Lending Office:
Crestar Bank
919 East Main Street
Richmond, Virginia 23219
Attn: Mr. Keith A. Hubbard
$25,000,000 2.5% THE DAI-ICHI KANGYO BANK, LTD.
By:/s/ Andreas Panteli
Title: Vice President
Domestic Lending Office:
The Dai-ichi Kangyo Bank, Ltd.
One World Trade Center, 48th Floor
New York, New York 10048
Attn: Mr. Andreas Panteli
Eurodollar Lending Office:
The Dai-ichi Kangyo Bank, Ltd.
One World Trade Center, 48th Floor
New York, New York 10048
Attn: Mr. Andreas Panteli
<PAGE>
$25,000,000 2.5% THE FIRST NATIONAL BANK OF BOSTON
By:/s/ William F. Hamilton
Title: Vice President
Domestic Lending Office:
The First National Bank of Boston
100 Federal Street, 1-6-12
Boston, Massachusetts 02110
Attn: Mr. William F. Hamilton
Eurodollar Lending Office:
The First National Bank of Boston
100 Federal Street, 1-6-12
Boston, Massachusetts 02110
Attn: Mr. William F. Hamilton
$25,000,000 2.5% THE FUJI BANK, LIMITED
NEW YORK BRANCH
By:/s/ Illegible
Title:Vice President and Manager
Domestic Lending Office:
The Fuji Bank, Limited
New York Branch
Two World Trade Center, 79th Floor
New York, New York 10048
Attn: Ms. Chigusa Tada
Eurodollar Lending Office:
The Fuji Bank, Limited
New York Branch
Two World Trade Center, 79th Floor
New York, New York 10048
Attn: Ms. Chigusa Tada
<PAGE>
$25,000,000 2.5% THE SANWA BANK LIMITED, NEW YORK
BRANCH
By:/s/ Joseph E. Leo
Title: Vice President
Domestic Lending Office:
The Sanwa Bank Limited, New York
Branch
55 E. 52nd Street
New York, New York 10055
Attn: Mr. Joseph Leo
Eurodollar Lending Office:
The Sanwa Bank Limited, New York
Branch
55 E. 52nd Street
New York, New York 10055
Attn: Mr. Joseph Leo
$25,000,000 2.5% WESTPAC BANKING CORPORATION
By:/s/ Pamela L. Atkins
Title: Assistant Vice President
Domestic Lending Office:
Westpac Banking Corporation
335 Madison Avenue (27th Floor)
New York, New York 10017
Attn: Ms. Pamela L. Atkins
Eurodollar Lending Office:
Westpac Banking Corporation
335 Madison Avenue (27th Floor)
New York, New York 10017
Attn: Ms. Pamela L. Atkins
<PAGE>
<PAGE>
Schedule 3.6
Material Litigation
NONE
DEFERRED COMPENSATION AGREEMENT
between
American Home Products Corporation
and
_______________________________________
AGREEMENT made this ____ day of _____________ (Title) by and
between American Home Products Corporation and its subsidiaries
(hereinafter referred to as "EMPLOYER") and
____________________________ (hereinafter referred to as
"EMPLOYEE").
W I T N E S S E T H:
WHEREAS, EMPLOYEE has been _____________________ of EMPLOYER
since _____________________________ [and theretofore was
employed by EMPLOYER or its subsidiaries in other executive or
managerial capacities]; and
WHEREAS, it is the wish of EMPLOYER that EMPLOYEE continue in
its employ (and in furtherance of such wish the Board of Directors
of the EMPLOYER has authorized the EMPLOYER to enter into this
Agreement with EMPLOYEE);
NOW, THEREFORE, in consideration of the above and in order to
induce EMPLOYEE to continue in the employ of EMPLOYER, it is agreed
between the parties as follows:
<PAGE> PART A - DEFERRAL OF CASH AWARD UNDER
THE MANAGEMENT INCENTIVE PLAN ("MIP")
1. The percentage designated on the Attachment Schedule is
a percentage of the cash portion of EMPLOYEE'S MIP compensation
from EMPLOYER for 1993 and payable in 1994, if any, which shall be
deferred and distributed as hereinafter provided (the "Deferred MIP
Compensation").
2. The Deferred MIP Compensation will accrued deemed
interest from the date of the award at a deemed rate of interest
designated on the Attachment Schedule. Deemed interest payable
hereunder will be calculated, accrued and compounded quarterly.
Such deemed interest shall accrue up to date of distribution.
3. EMPLOYER shall distribute to EMPLOYEE the total
Deferred MIP Compensation, together with deemed interest accrued
thereon in accordance with the deferral period and distribution
period designated on the Attachment Schedule.
PART B - DEFERRAL OF SALARY
1. The percentage designated on the Attachment Schedule is
a percentage of the EMPLOYEE'S total 1994 authorized base salary
which shall be deferred and distributed as hereinafter provided
("Deferred Salary Compensation"). It is understood that six
percent (6%) of such Deferred Salary Compensation will be deferred
<PAGE>
and be subject to the terms of the American Home Products
Corporation Supplemental Employee Savings Plan ("SESP").
2. The Deferred Salary Compensation not deferred under the
SESP will accrue deemed interest from the date such Deferred Salary
Compensation would have otherwise been paid at a deemed interest
rate designated on the Attachment Schedule. Deemed interest
payable hereunder will be calculated, accrued and compounded
quarterly. Such deemed interest shall accrue up to date of
distribution.
The deferral under the provisions of the SESP shall accrue
interest/earnings pursuant to the provisions of the SESP.
3. Except for the portion deferred under the SESP, the
EMPLOYER shall distribute to the EMPLOYEE the total Deferred Salary
Compensation together with deemed interest accrued thereon in
accordance with the deferral period and distribution period
designated on the Attachment Schedule.
The portion deferred under the SESP will be distributed in
accordance with the provisions of the SESP.
4. Upon thirty (30) days' written notice to the Vice
President - Finance of American Home Products Corporation, EMPLOYEE
may prospectively terminate this Agreement as to all future
deferrals of authorized base salary pursuant to Section 1 above, it
<PAGE>
being understood that such termination shall not affect the
treatment hereunder of amounts deferred prior to the giving of such
written notice.
GENERAL PROVISIONS APPLICABLE TO PART A AND PART B
1. In the event EMPLOYEE shall separate from service with
the EMPLOYER for reasons other than death, prior to receipt of any
or all of the Deferred MIP Compensation and/or Deferred Salary
Compensation, such amount shall be distributed to EMPLOYEE together
with deemed interest accrued hereunder on such amount through the
date of such distribution as designated on the Attachment Schedule.
In the event EMPLOYEE shall die prior to the receipt of any or all
of the Deferred MIP Compensation and/or Deferred Salary
Compensation, such amount shall be distributed to his estate or
beneficiary(ies) as designated on the Attachment Schedule within
ninety (90) days of death together with deemed interest accrued
hereunder on such amount through the date of such distribution.
2. EMPLOYER has no obligation to set aside, earmark or
entrust any funds with which to pay its obligation under this
Agreement. EMPLOYER'S obligation shall not be secured in any way
and EMPLOYEE'S rights are in no way preferred over the general
creditors of the EMPLOYER.
3. In the event another company or group of related
companies obtains a 50% or more interest in EMPLOYER'S common stock
<PAGE>
or otherwise obtains effective control of EMPLOYER, all Deferred
MIP Compensation and/or Deferred Salary Compensation shall be paid
to EMPLOYEE within thirty (30) days together with deemed interest
accrued through the date of such payment.
4. Except as concerns matters of compensation expressly
dealt with herein, this Agreement will have no effect on the
employee-employer relationship between EMPLOYEE and EMPLOYER or
EMPLOYEE'S duties to EMPLOYER or any other compensation
arrangements between EMPLOYEE and EMPLOYER. The EMPLOYEE'S
employment with the EMPLOYER shall remain at will, and the EMPLOYEE
is free to resign at any time, and the EMPLOYER may terminate the
EMPLOYEE'S employment at any time.
5. At the election of the EMPLOYER, to be ratified by a
majority of all non-officer members of the Board of Directors of
EMPLOYER, this Agreement may be terminated upon thirty (30) days'
notice to EMPLOYEE. If so terminated, such majority will also, as
soon as practicable, decide whether the EMPLOYER will distribute
all the Deferred MIP Compensation and/or Deferred Salary
Compensation and deemed interest accrued through the deferred
payment arrangements provided for hereinabove.
6. This Agreement shall be governed by and construed under
the law of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement on the day and year first above written.
______________________
(Employee)
American Home Products Corporation
By:______________________
Title:______________________
<PAGE> ATTACHMENT SCHEDULE (REGARDING PART A)
_______________________________ (Print Name), hereby elects to
defer _____ percent of the portion of any Management Incentive Plan
Award eligible to be taken in cash which may be awarded in January
1994 for 1993 performance. This election under Part A of the
Deferred Compensation Agreement shall be irrevocable upon execution
of the Agreement.
I. (a) Check a period of deferral:
_______ 10 years or __________Until retirement
(b) Check a period of distribution:
_________ Lump sum (payable within 90 days of termination
of the period designated in I(a) above) or
_________ 5 annual installments (first installment
payment within 90 days of termination
of the period designated in I(a) above and
remaining installments payable within 90 days
of the anniversaries of that termination date)
II. Check one of the following deemed investments which will be
used to calculate deemed interest which shall be credited on
the amounts deferred:
_________ The three month Treasury Bill
_________ The three year Treasury Note
_________ The five year Treasury Note
_________ Any Treasury Bill/Note of a duration which
corresponds to the remaining period of
deferral. For example, if two years and three
months remain in a deferred period, a yield
available for a U.S. Treasury security with a
corresponding maturity will be credited.
The election of rates under this Section II may only be changed
upon maturity of term selected. In no event may an option be
selected whereby its term extends beyond the participant's normal
retirement date or the deferral period, whichever is earlier. If
notification is not received upon maturity of the term selected,
the term selected will be renewed for the same term at the then
current rate.
<PAGE>
III. I designate the following beneficiary(ies) to receive any
undistributed amount deferred under this Agreement together with
any deemed interest accrued in the event of my death:
_____________________________________
Beneficiary(ies)
_____________________________________
Contingent Beneficiary(ies)
<PAGE>
ATTACHMENT SCHEDULE (REGARDING PART A)
___________________________ (Print Name), hereby elects to defer
_____ percent of my eligible 1994 base salary with the
understanding that 6 percent of such deferred base salary will be
deferred under the Supplemental Employee Savings Plan for the year
1994. This election under Part B of the Deferred Compensation
Agreement shall be irrevocable upon execution of the Agreement.
IV. (a) Check a period of deferral:
_______ 10 years or __________Until retirement
(b) Check a period of distribution:
_________ Lump sum (payable within 90 days of termination
of the period designated in IV(a) above) or
_________ 5 annual installments (first installment
payment within 90 days of termination
of the period designated in IV(a) above and
remaining installments payable within 90 days
of the anniversaries of that termination date)
V. Check one of the following deemed investments which will be
used to calculate deemed interest which shall be credited on
the amounts deferred:
_________ The three month Treasury Bill
_________ The three year Treasury Note
_________ The five year Treasury Note
_________ Any Treasury Bill/Note of a duration which
corresponds to the remaining period of
deferral. For example, if two years and three
months remain in a deferred period, a yield
available for a U.S. Treasury security with a
corresponding maturity will be credited.
The election of rates under this Section V may only be changed upon
maturity of term selected. In no event may an option be elected
whereby its term extends beyond the participant's normal retirement
date or the deferral period, whichever is earlier. If notification
is not received upon maturity of the term selected, the term
selected will be renewed for the same term at the then current
rate.
<PAGE>
VI. I designate the following beneficiary(ies) to receive any
undistributed amount deferred under this Agreement together with
any deemed interest accrued in the event of my death:
Beneficiary(ies)
Contingent Beneficiary(ies)
__________________________________ ________________________
Signature Date
AMERICAN HOME PRODUCTS CORPORATION
RETIREMENT PLAN FOR OUTSIDE DIRECTORS (the "Plan")
(Amended as of February 24, 1994)
1. PURPOSE
The purpose of the Plan is to enable American Home Products
Corporation (the "Company"), by offering retirement and disability
benefits to its Outside Directors, to attract and retain
outstanding individuals to serve as Outside Directors of the
Company. The Plan is effective July 1, 1987.
2. DEFINITIONS
2.01 Annual Retainer: An amount equal to the annual retainer
payable to an Outside Director for serving on the Board of
Directors of the Company.
2.02 Beneficiary: The person or persons designated by an
Outside Director pursuant to Section 7.
2.03 Board: The Board of Directors of the Company.
2.04 Committee: The AHPC Corporate Retirement Committee.
2.05 Disability: Complete and permanent inability, by reason
of illness or accident, to perform the individual's duties as an
Outside Director. The determination whether an Outside Director
has suffered a Disability shall be made by the Committee based upon
such evidence as it deems appropriate.
<PAGE>
2.06 Outside Director: A director of the Company who is not
presently an employee of the Company or any subsidiary.
2.07 Year of Service: An individual shall be credited with
a Year of Service for each full year and any partial year served as
an Outside Director. An Outside Director who has served as a
director of the Company while employed by the Company shall be
credited with a Year of Service for each full year and any partial
year served as a director and employee of the Company, provided,
however, such Director must have at least 5 years of Service as an
Outside Director to be eligible for benefits under the Plan. For
the purpose a "year" is the twelve month period commencing with the
first day of the individual's service as a director of the Company,
or any anniversary thereof. Service shall be credited for service
as a director of the Company both before and after July 1, 1987,
the effective date of the Plan.
3. ADMINISTRATION
The Plan shall be administered by the Committee, which shall
have the exclusive authority to take any action necessary or
appropriate for the proper administration of the Plan. The
Committee's interpretation of the Plan, and all actions taken
within the scope of its authority, shall be final and binding on
the Company, and its Outside Directors.
<PAGE>
4. PARTICIPATION
An individual who is an Outside Director as of July 1, 1987
shall participate in the Plan as of that date. Each individual who
subsequently becomes an Outside Director shall commence
participation in the Plan on the first day of service as an Outside
Director.
5. OUTSIDE DIRECTORS RETIREMENTS BENEFITS
5.01(a) Eligibility For Retirement Benefits. Upon any
termination of service as an Outside Director due to retirement
after the Outside Director has attained age 65 and has ten or more
Years of Service, such Outside Director shall be entitled to
receive from the Company an annual retirement benefit commencing in
the quarter of the calendar year next following the quarter of the
calendar year in which the Outside Director's service terminates as
set forth below. In the case of an Outside Director who has ten or
more Years of Service who has a termination of service for any
reason as an Outside Director before age 65, such Outside Director
shall be entitled to receive a retirement benefit upon attaining
age 65.
Upon any termination of service as an Outside Director due to
Disability at any time after the Outside Director has completed ten
or more Years of Service, an Outside Director shall be entitled to
receive from the Company an annual retirement benefit commencing in
the next quarter of the calendar year following the quarter of the
calendar year in which the Outside Director's service terminates
<PAGE>
due to Disability as set forth below. Such annual retirement
benefit shall continue even through an Outside Director has
recovered from a Disability at a future date.
If an Outside Director who has completed ten or more Years of
Service dies before receiving any retirement benefit under the
Plan, his Beneficiary or his estate or his Beneficiary's estate,
determined in accordance with Section 7 of the Plan, shall be paid
in a lump sum an amount equal to five times the Annual Retainer in
the calendar quarter following his date of death.
(b) Amount of Retirement Benefit. The annual retirement
benefit shall equal the Annual Retainer, and shall be payable to
the Outside Director for his life. Each annual retirement benefit
shall be payable quarterly by dividing the Annual Retainer into
four equal installments. The retirement benefit paid to Outside
Directors before January 27, 1994 will be based on the Annual
Retainer in effect on the date on which the Outside Director's
service as a Director of the Company ceases due to retirement,
disability or death. The retirement benefit paid to Outside
Directors on or after January 27, 1994 will be based on the then
current Annual Retainer in effect for the year for which the
payment is made.
If the Outside Director dies after becoming eligible for
benefits under Section 5.01(a) but prior to receiving five annual
retirement benefit payments under the Plan, an amount equal to five
times the Annual Retainer, less any annual retirement benefit
payments received by the Outside Director, shall be paid in a lump
<PAGE>
sum to the Outside Director's Beneficiary (or other recipient as
provided in Section 7 of the Plan) and no further benefit shall be
payable. If the Outside Director dies after receiving five annual
retirement benefit payments under the Plan, no further benefit
shall be payable, except that if the Outside Director dies between
quarterly payments the quarterly annual retirement benefit shall be
prorated up to the date of his death and such amount shall be paid
to his Beneficiary or to his estate or the Beneficiary's estate in
accordance with Section 7.
6. LIMITATION ON RIGHT TO RECEIVE BENEFITS
An Outside Director, a Beneficiary and their respective
estates shall have no right to receive benefits under the Plan (or
to receive additional benefits if benefits have already commenced)
if, in the opinion of the Board, the Outside Director has engaged
in an act of misconduct or otherwise engaged in conduct contrary to
the best interest of the Company.
7. DESIGNATION OF BENEFICIARY
An Outside Director may designate a person or persons (the
"Beneficiary") to receive, after the Outside Director's death, any
remaining benefits payable under the Plan. Such designation shall
be made by the Outside Director on a form prescribed by the
Committee. The Outside Director may at any time change or revise
such designation by filing a new form with the Committee. If the
Outside Director does not designate a Beneficiary or the
<PAGE>
Beneficiary predeceases the Outside Director, any remaining
benefits payable under the Plan after the Outside Director's death
shall be paid to the Outside Director's estate. If the Beneficiary
survives the Outside Director but dies prior to receiving the
benefits payable under the Plan, the benefits shall be paid to the
Beneficiary's estate.
8. AMENDMENT AND TERMINATION
The Board may at any time amend or terminate the Plan. No
such amendment or termination shall reduce the amount of an Outside
Director's Plan benefits which have accrued prior to the amendment
or termination without the consent of the Outside Director (or, in
the event of death, the Outside Director's Beneficiary or estate).
9. MISCELLANEOUS PROVISIONS
9.01 Neither the establishment of the Plan, nor any action
taken thereunder, shall in any way obligate the Company to nominate
an Outside Director for reelection or continue to retain an Outside
Director on the Board.
9.02 Except as provided in Section 7, an Outside
Director's or Beneficiary's rights under the Plan, including the
right of receive moneys due thereunder, may not be assigned or
transferred, and any attempted assignment or transfer shall be null
and void.
<PAGE>
9.03 The Plan shall be unfunded. All benefits payable
under the Plan shall be paid from the general assets of the
Company, which are subject to the claims of the Company's general
creditors.
9.04 The Plan shall be binding upon any successors to the
Company by merger, acquisition, consolidation or otherwise.
9.05 The masculine gender shall be deemed to refer to the
feminine wherever appropriate.
9.06 The provisions of the Plan shall be governed by the
laws of the State of New York.
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
RETIREMENT PLAN FOR OUTSIDE DIRECTORS (the "Plan")
BENEFICIARY DESIGNATION FORM
In accordance with Section 7 of the Plan, I hereby designate
the following persons as my primary and secondary beneficiaries.
Primary Beneficiary Secondary Beneficiary
Name __________________________ ________________________
Address _________________________ ________________________
Relationship______________________ _________________________
Soc. Sec. No._____________________ _________________________
The primary beneficiary shall receive after my death any remaining
benefits payable under the Plan. If the primary beneficiary does
not survive me but the secondary beneficiary does survive me, such
benefits shall be paid to the secondary beneficiary.
I understand that if neither of the above designated beneficiaries
survives me, or if I have not designated a beneficiary as of the
date of my death, any remaining benefits payable under the Plan
after my death shall be paid to my estate.
________________________________ ________________________________
Date Outside Director
1993 Annual Report
American Home Products
Corporation
Special Report:
----------------------
A Global Commitment
to Advancing
Medical Therapy
<PAGE>
American Home Products Corporation
American Home Products Corporation is an innovation-driven
company focused on discovering and commercializing new, cost-effective
products that represent significant therapeutic advances. Our global
scientific discovery and clinical program is at the leading edge of medical
science in areas of critical need where the quality of life can be
improved for millions of people.
Our Company's broad lines of prescription drugs, nutritionals,
over-the-counter medications, and medical devices, supplies and instru-
mentation make an important contribution to health care worldwide.
We also are known for quality food brands that are highly regarded by
consumers in the United States and Canada.
In 1993, American Home Products Corporation achieved record
sales and earnings, and the Company increased its dividend for the 42nd
consecutive year.
On the cover: Lorayne Jenkins, Associate Pharmacologist at Wyeth-Ayerst
Research in Princeton, New Jersey, is one of the many dedicated scientists
and technicians who contribute to our Company's research and development
efforts.
Contents
2 Chairman's Report to Shareholders
5 Special Report:
A Global Commitment to
Advancing Medical Therapy
13 Review of Operations
25 Financial Section
44 Directors and Officers
45 Corporate Data
<PAGE>
Financial Highlights
Net Sales by Segment
Pharmaceuticals 57.5%
- ---------------------------
Consumer
Health Care 21.0%
- ---------------------------
Medical Supplies
and Diagnostic
Products 10.2%
- ---------------------------
Food Products 11.3%
- ---------------------------
[Graph representing earnings per share]
[Graph representing dividends per share]
[Graph representing net sales]
[Graph representing net income]
Years Ended December 31, 1993 1992*
- --------------------------------------------------------------------------------
(In thousands except per share amounts)
Net sales .............................. $8,304,851 $7,873,687
Net income ............................. 1,469,300 1,460,842
Net income per common share ............ 4.73 4.65
Dividends per common share ............. 2.86 2.66
Working capital ........................ 3,223,273 3,059,360
Shareholders' equity ................... 3,876,488 3,562,589
* 1992 net income and net income per common share include $90 million
of net income ($.29 per share) related to accounting changes and
the charge for acquired research associated with the
acquisition of a majority stake in Genetics Institute, Inc.
<PAGE>
Chairman's Report to Shareholders
I am pleased to report that in 1993 American Home Products Corporation achieved
another year of record sales and earnings, and the dividend was increased for
the 42nd consecutive year. 1993 also was a year in which we added to our broad
portfolio of products in the United States and throughout the world while
enhancing our focus on the discovery, development and commercialization of new,
innovative products.
This year's performance was achieved in spite of a very challenging
environment for all in the health care industry in the United States and,
indeed, throughout the world. The political and economic debate about domestic
health care reform has intensified in the past year, leaving the industry
subject to unprecedented scrutiny and criticism. Therefore, I will begin this
letter by making several points about these reform initiatives and their
potential impact upon our Company.
There is a clear need for significant health care reform in the United
States. We support the availability of affordable health care coverage for all
U.S. citizens. We also believe that this country has a social obligation and
strong economic interest in preserving the best health care system in the world.
The United States has a long-standing history of supporting innovation and
rewarding innovators; but that tradition would be jeopardized by reforms which
include government price controls.
Price controls in this industry are not the solution. We believe that
constraining free market forces through government regulation would not only
fail to resolve the problem but would significantly impact the funds available
for research and development. If innovation is impeded by artificial economic
restraints, important and cost-effective therapeutic advances would be
undermined. The U.S. pharmaceutical industry would lose its global leadership
position at the expense of its citizens and their good health.
Our industry is an important part of the solution, not the problem. We
believe that the orientation toward government regulation could lead to changes
that would impair our ability to conquer disease and lower costs.
We strongly urge legislators to consider the following:
o Pharmaceuticals prevent, control and cure some of the most devastating and
expensive health problems. Within recent memory, polio, smallpox, influenza,
diphtheria, whooping cough and measles claimed many millions of lives each year.
Pharmaceuticals have all but eradicated these diseases or reduced their death
rate to nearly zero. Further, many millions of people suffering from depression,
cancer, heart disease, arthritis and other chronic illnesses now can lead
productive lives because of effective drug therapy.
o Our industry is poised to make an even bigger difference. It invested about
$12.6 billion, or 15 cents of each sales dollar, in R&D during 1993. This level
of spending, per dollar of sales, is approximately four times higher than the
average investment of other research-intensive industries based in the United
States.
o Our industry is a highly cost-effective component of the health care system.
In spite of our industry's enormous investment in R&D, prescription drug costs
as a percentage of total U.S. health care costs have fallen from 15% to less
than 8% during the past three decades and continue to decline. Drug spending has
remained at less than 1% of gross domestic product (GDP) while overall health
care spending has risen from 5% to 14% of GDP in the same period.
The marketplace already is working to hold down the cost of prescription
drugs. Weighted average price increases for our Wyeth-Ayerst U.S.
pharmaceuticals have been held at a level approximately equal to the Consumer
Price Index in 1992 and 1993, even in light of our additional investments in
R&D. The highly competitive U.S. pharmaceutical industry has, in fact, helped
keep overall health care cost increases down. Private sector initiatives to
control total health care cost are having a substantial impact and should be
permitted to continue.
We expect to continue to play a positive role in building on the
accomplishments of the pharmaceutical industry as an integral part of the health
care system. We are committed to solving its problems within the context of real
competition and clear and productive incentives for substantial innovation.
We now turn to a discussion of financial results and other major
operational developments in our Company.
Financial Highlights of 1993
- --------------------------------------------------------------------------------
o Net sales increased 5% from last year to $8,304,851,000.
o Net income, exclusive of the 1992 accounting changes and the charge for
acquired research related to the acquisition of a majority stake in Genetics
Institute, Inc., increased 7% to $1,469,300,000 in 1993.
o Earnings per share, excluding the effect of the accounting changes and the
charge for acquired research, increased 8% to $4.73 per share.
2
<PAGE>
o In October 1993, the Board of Directors approved management's recommendation
to increase the quarterly dividend to $.73 per share. With this increase, the
1993 dividend was $2.86, an 8% increase over the 1992 dividend of $2.66.
[Photograph of John R. Stafford, Chairman, President and Chief Executive
Officer]
Research and Development
- --------------------------------------------------------------------------------
Underscoring the priority we attach to product innovation as the key to our
Company's future growth, our R&D expenditures, including those of Genetics
Institute, increased to $663 million in 1993. This represents a 20% increase
over the prior year.
We are focused on areas of critical need where we have significant
knowledge based on established products and intensive R&D programs. We also are
"fast tracking" product candidates that have the greatest potential. A special
report highlighting several of our R&D programs follows this letter.
Ethical Pharmaceuticals
- --------------------------------------------------------------------------------
A number of positive steps, including important new drug introductions, were
taken to strengthen our broad-based pharmaceutical business. We established the
Wyeth-Ayerst Women's Health Research Institute in 1993 to build upon our global
leadership position in women's health care. Premarin, the most widely prescribed
drug in the United States, continued to expand in worldwide markets. A major
addition to our U.S. pharmaceutical product line is the structurally novel
antidepressant, Effexor, which will be available in the spring of 1994. The
approval and introduction of Oruvail and Lodine 400 mg. strengthen
Wyeth-Ayerst's position in the important anti-inflammatory market. 1993 also saw
the marketing launch of Genetics Institute's Recombinate, the first genetically
engineered form of recombinant antihemophilic factor (rAHF), a blood-clotting
protein used to treat hemophilia.
We continued to enter into collaborative scientific ventures that are using
biotechnology and other important emerging technologies to develop new therapies
in many areas. Wyeth-Ayerst, in 1993, signed a collaborative agreement with
Cygnus Therapeutic Systems, Inc. to develop and market transdermal hormone
replacement products on a global basis.
Consumer Health Care
- --------------------------------------------------------------------------------
The performance of major brands such as Advil, Robitussin and Dimetapp
strengthened Whitehall-Robins as a leader in the increasingly competitive
nonprescription analgesic and cough/cold/allergy categories in the United
States.
Our excellent, growing core franchises in the United States place us in a
strong position to capture a larger share of the self-medication market
worldwide. This market is expected to expand significantly as governments seek
to control health care costs and as consumer interest in self-diagnosis and
self-treatment increases. We are moving vigorously to capitalize on these trends
by extending our core franchises internationally and by building a pipeline of
prescription products that are candidates for "switching" to the OTC market.
Animal Health Care
- --------------------------------------------------------------------------------
Strong growth for Fort Dodge Laboratories in the United States augmented our
leadership in key areas of veterinary pharmaceuticals and biologicals. LymeVax,
our Lyme disease vaccine, became the single largest dollar volume canine vaccine
in the United States. Fort Dodge also began to introduce a wide range of
products in Europe.
3
<PAGE>
Medical Supplies and Hospital Products
- --------------------------------------------------------------------------------
Sherwood Medical Company continued to benefit from manufacturing efficiencies
and marketing programs designed to improve competitiveness in an increasingly
price-sensitive market. A growing number of value-added products are being
developed and marketed that improve therapy and enhance patient and health care
worker safety while reducing costs.
A contribution to sales growth was made by Symbiosis Corp., a leading
developer and manufacturer of disposable instruments for laparoscopic and
endoscopic surgery acquired in September 1992. Sales for Symbiosis as well as
for our U.S. perinatal monitoring and medical diagnostic businesses continue to
be affected by the uncertainty about health care reform. We believe these
businesses will regain momentum as the health care system places greater
emphasis on early diagnosis and screening of patients to help contain costs.
Food Products
- --------------------------------------------------------------------------------
The brands of American Home Food Products hold leading positions in several key
food categories, including prepared pastas, glazed popcorn and cooking sprays.
In 1993, American Home Foods added to its quality line by acquiring M. Polaner,
Inc., a leading manufacturer of all-natural spreadable fruit products and wet
spices.
Changes in Management and Headquarters Relocation
- --------------------------------------------------------------------------------
Dr. Bernard Canavan, President of American Home Products, retired early in 1994
after 25 years of exemplary service to our Company. Dr. Canavan's medical
background combined with his strong managerial skills and vision were extremely
valuable to our Company as we increased our commitment to health care markets
and to global R&D programs. We thank Dr. Canavan for his many contributions.
In January 1994, William F. Laporte announced that he would not stand for
re-election to the Board of Directors. In recognition of his outstanding
contributions to our Company, including 37 years of service as a Director, the
Board named Mr. Laporte Director Emeritus, effective immediately following the
Company's Annual Meeting on April 20, 1994.
Joining the Board in 1993 was Clifford L. Alexander, Jr. The Company will
benefit greatly from Mr. Alexander's knowledge and experience, which includes
serving as Chairman of the Equal Employment Opportunity Commission and Secretary
of the Army.
In May 1993, Joseph J. Carr and Fred Hassan were elected Senior Vice
Presidents of the Company. Also elected to corporate positions in 1993 were John
B. Adams, Vice President-Corporate Development; Thomas G. Cavanagh, Vice
President-Investor Relations; E. Thomas Corcoran, Vice President; and Roxanne E.
Parker, Treasurer.
In January 1994, Terrence L. Stecz was named President of Whitehall-Robins.
Headquarters personnel of the Corporation as well as Whitehall-Robins and
American Home Foods relocated from New York City and Richmond, Virginia, to
Madison, New Jersey, in November 1993.
Outlook for 1994 and Beyond
- --------------------------------------------------------------------------------
The challenges of change continue in our industry. We are committed to seeking
solutions to our nation's health care problems that reflect the important
contributions the pharmaceutical industry makes to the well-being of all
citizens.
At the same time, we are determined that our Company will be properly
positioned for the new era that is unfolding. We have much to be confident
about. Our growing R&D effort holds the promise of innovative therapeutic
breakthroughs that can alleviate suffering, prevent illness and help to reduce
the burden of health care costs. Our product franchise is among the broadest,
most competitively priced and strongest in the industry. With our financial
strength, we can continue to make major investments to enhance our growth.
The success of our Company ultimately depends on the skill, dedication and
hard work of our employees. On behalf of the Board of Directors, I thank them
for their outstanding efforts in 1993. I also want to thank the Board for its
continued counsel and support.
Times of change present unique challenges and opportunities. Working
together, we can meet these challenges and make the years ahead the best for
American Home Products.
John R. Stafford
Chairman, President and Chief Executive Officer
February 24, 1994
4
<PAGE>
Special Report
A Global Commitment to Advancing
Medical Therapy
Research and development are at the center of efforts by the people of American
Home Products Corporation to contribute to the quality of life worldwide.
Our programs, which represented an investment of more than $650 million in
1993, are focused on areas of critical need, including women's health care,
inflammatory disease, central nervous system disorders, cardiovascular and
metabolic disease, oncology and infectious disease.
This major commitment enabled us to make significant progress during 1993
in bringing important therapeutic advances to the health care community.
Approvals to market three new prescription drug products were received in the
United States. Wyeth-Ayerst Laboratories entered 1994 with 26 new molecular
entities, vaccines or major line extensions in various stages of clinical
development. An additional six Investigational New Drug applications are
expected to be filed during the year. Genetics Institute, Inc., a major
biotechnology company in which we are a majority shareholder, increased its
development portfolio from three to five promising product candidates in 1993.
Further, we shared expertise and proprietary knowledge in a broad range of
therapeutic areas with an expanding number of premier biotechnology companies
with which we have collaborative arrangements seeking to develop new therapies.
In this special report, we highlight several initiatives within key areas
of therapeutic focus that could represent breakthroughs in treating serious
health problems. The individuals pictured are members of the team dedicated
to each research initiative and are representative of the many
talented people throughout our Company and at Genetics Institute.
Central Nervous
System
Disorders
Immune
System Modulation
Oncology
Cardiovascular
Disease
Women's Health Care
Infectious
Disease
Metabolic Disease
5
<PAGE>
Central Nervous System Disorders
Providing an Important Option for
Treating Depression
[graph representing total patients treated for depression in the United States]
G. Morris Husbands, Ph.D.
Research Fellow, Wyeth-Ayerst Research, Princeton, N.J.
Depression is a serious and expensive illness that afflicts many millions of
people worldwide. If left untreated, it results in prolonged suffering,
deterioration of family and work relationships, and a heightened risk of
suicide and physical illness.
Effexor
Effexor (venlafaxine HCl), a product of Wyeth-Ayerst's discovery research
program, is expected to be an important option in treating depression.
This structurally novel antidepressant received market clearance in the
United States in 1993 and is being reviewed by health regulators
worldwide. Effexor specifically inhibits both serotonin and
norepinephrine reuptake, which play pivotal roles in the cause of
depression. In clinical studies, Effexor has demonstrated efficacy and
safety, and its side effects are comparable to the leading
antidepressants on the market.
The annual cost of depression
in the United States is
estimated to be $43.7 billion.
6
<PAGE>
Immune System Modulation
Preventing and Treating Organ
Transplant Rejection
Joseph S. Camardo, M.D.
Rapamune Task Force Chairman, Wyeth-Ayerst Research, Radnor, Pa.
Kidney and heart transplants enable many thousands of people to live productive,
fulfilling lives. However, immunosuppressants are needed to ensure that
the transplanted organs are not rejected by the body's immune system.
Side effects and transplant rejection occur with all current therapies.
Rapamune
Rapamune (rapamycin), in contrast to currently marketed immunosuppressant
products, has been shown to exert a unique pharmacologic effect on the
immune system. In animal models predictive of organ rejection, these
properties translated into a superior efficacy and safety profile in the
treatment of acute and chronic organ rejection. Studies now are being
conducted in humans to determine the utility of Rapamune as first-line
chronic therapy for the prevention and treatment of organ rejection.
Rapamune reaches a milestone in 1994 when Wyeth-Ayerst reviews plans with
the U.S. Food and Drug Administration (FDA) for Phase II/III clinical
studies.
In 1992, close to 20,000
kidney transplant procedures
were performed worldwide
[Graph representing organ transplants in the United States]
7
<PAGE>
Oncology
Enhancing the Safety of
Chemotherapy
Paul F. Schendel, Ph.D.
Project Director, rhIL-11, Genetics Institute, Cambridge, Mass.
One of the most common side effects of chemotherapy is the
lowering of platelet counts, a condition known as thrombocytopenia.
Platelets are the blood cells that help to control bleeding. Platelet
transfusion from another individual to the patient can be used when
severe platelet reduction occurs so that chemotherapy may continue.
However, platelet transfusion is expensive and is associated with risks
of transmission of infectious diseases as well as allergic reactions.
Neumega Recombinant-Human Interleukin Eleven (rh IL-11)
Genetics Institute is developing this novel human regulatory protein using
genetic engineering. A Phase I study, completed in 1993, shows that
Neumega rhIL-11 can increase platelet production and is well tolerated by
patients even through multiple cycles of chemotherapy treatment. A
multi-center Phase II study of Neumega rhIL-11 was initiated late in 1993
and is ongoing. In addition, a Phase I/II study of Neumega rhIL-11 in
patients undergoing extremely high-dose chemotherapy with bone marrow
transplantation was started in 1993.
The use of platelet transfusions
presents a number of significant
medical risks and is costly.
[Graph representing Cancer - New Cases and Mortality - 1993, United States]
8
<PAGE>
Cardiovascular Disease
Leading in Research on Coronary
Heart Disease in Women
[Graph representing Estimated Cost of Heart Disease by Type of Expenditure]
# Hospital/nursing home services
$37.2 billion
# Physician/nurse services
$8.7 billion
# Lost output $8.0 billion
# Drugs $2.4 billion
Betty S. Riggs, M.D.
Director of Clinical Research, Wyeth-Ayerst Research, Radnor, Pa.
Cardiovascular research has historically focused on men.
However, coronary heart disease (CHD) is the most common cause of death
among women over 50 years of age. Further, women are more likely than men
to suffer pain and disability from angina and to die from myocardial
infarction during angioplasty and heart bypass procedures.
Heart and Estrogen-Progestin Replacement Study (HERS)
HERS is the largest clinical trial ever undertaken to examine the role of
hormone replacement therapy (Premarin MPA) as protection against CHD
events in postmenopausal women with existing coronary heart disease. This
landmark $40 million, multi-center study is being conducted and funded by
Wyeth-Ayerst in the United States. HERS ultimately will enroll more than
2,300 women and is scheduled for completion within five years. The study
is expected to complement the growing worldwide recognition of Premarin
(conjugated estrogens) as a cardioprotection therapy.
At older ages, women who have
heart attacks are twice as
likely as men to die from them
within a few weeks.
9
<PAGE>
Women's Health Care
Focusing on Critical Health Care
Needs for Women
[Graph representing Annual Diagnosis of Osteoporosis Among Women -
United States 1991-93]
Andres Negro-Vilar, M.D., Ph.D.
Vice-President, Women's Health Research Institute, Wyeth-Ayerst
Research, Radnor, Pa.
Disorders associated with menopause, such as osteoporosis and cardiovascular
disease as well as cancer, reproductive diseases, contraception,
infertility and sexually transmitted diseases, are among the most serious
health concerns for women worldwide. The at-risk group for disorders
related to menopause alone will number more than 500 million by the year
2000.
[picture of Women's Health Research Institute]
In 1993, Wyeth-Ayerst established the Women's Health Research Institute
(WHRI) in Radnor, Pennsylvania, to expand its leadership position in
women's health care. The WHRI will foster the discovery of new drugs
using basic and clinical research as well as the development of products
through external alliances. The Institute's first initiatives are
directed at finding new therapies for osteoporosis, endometriosis and
contraception and will be expanded to uncover new therapies for
menopausal symptoms, reproductive diseases and dysfunctions, and
infertility. These efforts build on Wyeth-Ayerst's extensive knowledge as
the premier supplier of hormone replacement therapy and oral
contraceptives worldwide.
In osteoporosis, the density
of bone tissues decreases,
increasing the brittleness
of the bones and the probability
of fractures.
10
<PAGE>
Infectious Disease
Finding a Breakthrough
Rotavirus Vaccine
William H. Wainwright, Ph.D.
Associate Director, Biological Development, Wyeth-Ayerst
Research, Marietta, Pa.
Nearly 1 million lives are claimed by acute infantile gastroenteritis each year.
This disease is the leading cause of death among young children in
developing nations. The primary symptom is diarrhea, and the severest
cases are caused by the rotavirus. Finding a vaccine is one of the
world's top health priorities.
Rotavirus Vaccine
A Wyeth-Ayerst rotavirus vaccine that could represent a dramatic advance in
the prevention of severe childhood diarrhea began final clinical studies
in 1994. The vaccine is being tested in concert with the World Health
Organization, European government health agencies and the FDA. To date,
more than 9,000 subjects worldwide have been studied. The vaccine is
administered orally, which facilitates distribution and immunization in
geographically remote areas. It is expected to be the first product
manufactured in Wyeth-Ayerst's new Biological Development Center, a
state-of-the-art facility in Marietta, Pennsylvania, that is dedicated to
the development, production and testing of new live virus vaccines.
Rotaviruses are the major
cause of viral diarrhea in
human infants.
[Graph representig Cases of Infant Death from Diarrheal Illness in Less-
Developed Countries]
# Rotavirus 1.0 million
# Other causes 3.0 million
11
<PAGE>
Metabolic Disease
Developing an Innovative
Diabetic Therapy
[Graph representing Total Economic Cost of Diabetes, 1992 - United States]
$91.9 Billion
- --------------------------
# Institutional/outpatient
care 49.2%
# Mortality 29.4%
# Long-term morbidity 12.2%
# Short-term morbidity 9.2%
Thomas Hohman, Ph.D.
Research Fellow, Wyeth-Ayerst Research, Princeton, N.J.
The complications of diabetes can seriously diminish the quality of life for
more than 120 million diabetics worldwide. More than 50% of diabetics
eventually will suffer from neuropathy, a degeneration of the nervous
system, and retinopathy, a major cause of blindness. Nephropathy, a
kidney ailment, also afflicts more than half of all diabetics and is one
of the leading causes of death in juvenile diabetics.
Alredase
Wyeth-Ayerst's Alredase (tolrestat) is the first of a class of drugs known as
aldose reductase inhibitors to be commercially available for the
management of diabetic complications. It has been approved as a therapy
for diabetic neuropathy in 19 countries and is marketed in nine of them.
Alredase is in advanced Phase III studies in the United States for the
treatment of the diabetic complications of neuropathy, retinopathy and
nephropathy. Filing of a New Drug Application for the neuropathy
indication is planned in 1994 upon successful completion of multi-center
studies in the United States and Canada. Data from these studies, the
most expansive of their kind, are expected to have a significant impact
on the management of diabetic neuropathy.
Each year in the United States,
nearly 50,000 people with
diabetes have lower limbs
amputated because of the
complications of neuropathy.
12
<PAGE>
Review of Operations
Ethical Pharmaceuticals, Vaccines and Nutritionals
- --------------------------------------------------------------------------------
The broad product lines of ethical pharmaceuticals, vaccines and nutritionals of
Wyeth-Ayerst Laboratories are widely recognized by the medical community and
people worldwide. In the United States, Wyeth-Ayerst prescription products are
dispensed more often than those of any other research-based pharmaceutical
company. Wyeth-Ayerst also has leading products in major therapeutic areas
internationally. Global basic and clinical research is concentrated on
discovering and developing innovative products where important therapeutic gaps
exist. Genetics Institute, Inc., of which the Corporation is a majority
shareholder, is in the forefront of the biopharmaceutical industry, focusing on
the discovery of protein-based therapies.
Women's Health Care - Wyeth-Ayerst, the leader in women's health care,
furthered its commitment to remain at the forefront in research and education in
women's health care by establishing the Wyeth-Ayerst Women's Health Research
Institute in 1993. It is devoted to basic and clinical research in areas of
significant need, including hormone replacement therapy, contraception and
reproductive diseases and dysfunctions. Work proceeded on the landmark $40
million Heart and Estrogen-Progestin Replacement Study (HERS), which
investigates Premarin MPA's use for women with pre-existing coronary artery
disease. In addition, Wyeth-Ayerst signed an agreement with the National
Institutes of Health (NIH) to provide hormone replacement therapy (both Premarin
and Premarin MPA) and placebo for the NIH's "Women's Health Initiative" trial
that will examine the causes and prevention of heart disease, cancer and
osteoporosis in some 160,000 women aged 50 and over.
Wyeth-Ayerst maintained its worldwide position as the largest provider of
hormone replacement therapy and hormonal contraceptive products.
Premarin (conjugated estrogens), the number-one estrogen replacement
therapy, continued to be the most widely prescribed drug in the United States,
sustaining several years of growth. Premarin is used to prevent and treat
osteoporosis, a debilitating disease that afflicts more than 25 million
Americans and has related annual health care costs of approximately $10 billion.
Premarin also is a therapy for short-term symptoms of menopause such as hot
flashes and vaginal atrophy.
Premarin sustained impressive growth in international markets, gaining
rapidly in recognition as a treatment for the short-term symptoms of menopause
as well as protection from the long-term effects of estrogen deficiency,
including osteoporosis and cardiovascular disease. It now is registered in 86
countries and has approvals pending in 18 others.
Global registration filings for Premarin MPA were completed in 21
countries, and registration is planned to be completed in the United States in
1994. This combination estrogen and progestin product is indicated for the
treatment and prevention of menopausal symptoms and osteoporosis. The database
for Premarin MPA contains information on the protective effects of the progestin
MPA (medroxyprogesterone acetate) on the endometrium and the positive effects of
conjugated estrogens - Premarin - on lipoproteins.
Combination products grew in physician and consumer support
internationally, including Prempak C (conjugated estrogens and norgestrel),
which continued to enjoy strong support in the United Kingdom for treatment of
postmenopausal disorders and osteoporosis.
In keeping with plans to make available a variety of treatment options for
estrogen deficiency, Wyeth-Ayerst entered into a collaborative arrangement with
Cygnus Therapeutic Systems, Inc. to develop and market transdermal hormone
replacement products worldwide. Cygnus, located in California, is a leader in
transdermal patch technology.
While oral contraceptive demand has been relatively flat,
Wyeth-Ayerst's oral contraceptives were the products of choice in many
countries due to their reliability and excellent side-effect profile.
Wyeth-Ayerst continues to research and develop promising low-dose
contraceptives that are
long-acting and have fewer side effects than currently available products.
Triphasil (levonorgestrel), marketed internationally under the trademark
Trinordiol, remained the second-largest selling oral contraceptive in the United
States and was the leading oral contraceptive in Canada. Lo/Ovral (norgestrel)
maintained its
13
<PAGE>
Review of Operations
position as the number-one selling monophasic contraceptive in the United
States, and Nordette (levonorgestrel) was widely used in the United States and
throughout the world.
Patient usage expanded significantly in international markets for
gestodene-based oral contraceptive formulations, which have pharmacologic and
biochemical profiles similar to natural progesterone. Tri-Minulet (triphasic
gestodene) now is approved in 19 countries. Registration is pending in four
additional countries. Steady growth continued for Minulet (monophasic
gestodene), which is available in 53 countries. European registrations are
expected to begin in 1994 for one of two lower-dose monophasic gestodene
products currently in Phase III clinical studies.
Wyeth-Ayerst continued its U.S. information and instruction programs for
the Norplant System (levonorgestrel implants). Since its launch in the United
States three years ago, this reversible, five-year progestin-only contraceptive
has been used by approximately 900,000 women. The Norplant System was approved
in Canada and will be introduced in early 1994. A New Drug Application (NDA)
filing is anticipated in 1994 for Norplant II, a three-year implant system. In
1993, sales of Norplant declined after the initial pent up demand for this
innovative product had been met. Norplant sales are expected to reflect more
normalized levels during 1994.
Mental Health Products - Approval was received in the United States for
Effexor (venlafaxine HCl), a novel antidepressant characterized by serotonin and
norepinephrine reuptake inhibition. Effexor, which is expected to be launched in
the United States in the spring of 1994, provides physicians with a significant
new option to treat depression. Registrations currently are pending in 23 other
countries, and significant approvals are anticipated during 1994.
Worldwide leadership, in a declining category, was retained by Ativan
(lorazepam) for short-term treatment of anxiety. Loramet (lormetazepam),
indicated for anxiety and sleep disorders, continued to grow in many markets.
The anti-anxiety agent Serax (oxazepam) and Normison (temazepam), for treatment
of sleep disorders, were other key products internationally.
Early clinical development continued on a novel anti-anxiety/
antidepressant compound as well as a new anti-anxiety compound.
Cardiovascular and Metabolic Disease Therapies - Wyeth-Ayerst ranks number one
in sales and prescriptions in the United States for cardiac arrhythmia
therapies. The family of agents in this therapeutic area - Cordarone (amiodarone
HCl), Sectral (acebutolol HCl) and Quinidex Extentabs (long-acting quinidine
sulfate) - can treat arrhythmias ranging from the mildest to the most
life-threatening.
Cordarone oral continued to register strong sales gains. The recent study
"Cardiac Arrest in Seattle: Conventional versus Amiodarone Drug Evaluation,"
funded by the NIH, shows that Cordarone was more effective than conventional
agents in preventing recurrence of fatal or near-fatal arrhythmias in high-risk
ventricular fibrillation survivors. In 1994, an NDA is expected to be filed for
Cordarone Intravenous, which will be indicated for treatment of life-threatening
ventricular tachycardia or ventricular fibrillation. When this dosage form is
available, Cordarone is expected to be the only Class III agent with oral and
intravenous formulations, providing physicians with the option to continue
patients on the same agent when they leave the hospital.
14
<PAGE>
Sectral, the only cardioselective beta-blocker to have an indication for
premature ventricular contractions, was the subject of a favorable study
published in the Journal of the American Medical Association. The study shows
that therapy using Sectral and a diuretic together provided a significantly
greater improvement in quality of life over newer classes of anti-hypertensive
agents.
In addition, Wyeth-Ayerst continues to be a leader in a broad range of
cardiovascular therapy. Inderal (propranolol) and Inderal LA combined remain as
leading beta-blocker agents in the treatment of cardiovascular disease,
including hypertension.
Verelan (verapamil HCl), a co-promotion venture with Lederle Laboratories,
Inc., has successfully penetrated the calcium channel-blocker market by becoming
the fastest growing branded verapamil.
The emergence of ISMO (isosorbide mononitrate) as a leading branded oral
nitrate has further established Wyeth-Ayerst as a leader in nitrate therapy.
Approval is anticipated in the United States in 1994 for Normiflo, a low
molecular-weight heparin for prevention of venous thromboembolic disease in
orthopedic surgery patients. This agent has shown advantages over currently
available heparin products, including a longer duration of action with increased
absorption.
Alredase (tolrestat), the first commercially available aldose reductase
inhibitor for management of diabetic complications, gained increasing physician
support internationally as a therapy for diabetic neuropathy. Alredase is
registered in 19 countries and currently is marketed in nine countries. An NDA
for neuropathy is expected to be filed in the United States in 1994 upon
successful completion of multi-center studies.
Anti-Inflammatory Drugs - In a unique move in the U.S. pharmaceutical industry,
Wyeth-Ayerst launched two products concurrently in the same therapeutic area.
These are Lodine (etodolac) 400 mg. and Oruvail (ketoprofen), which are expected
to strengthen Wyeth-Ayerst as a leader in the $2 billion non-steroidal
anti-inflammatory drug (NSAID) field.
The 400 mg. tablet of Lodine adds a higher strength of the NSAID indicated
for treatment of osteoarthritis and relief of pain. Lodine, one of the most
frequently prescribed NSAIDs in the United States, also continued to grow
internationally as therapy for osteoarthritis, rheumatoid arthritis and pain. It
is registered in 48 countries and is available in 35. A once-a-day dosage form,
Lodine SR, was introduced successfully in France, Mexico, Switzerland and the
United Kingdom. It is registered in five other countries, has approvals pending
in eight countries and continues in Phase III trials in the United States.
Oruvail extended release capsules are a once-a-day dosage form that offers
a valuable treatment option for the 18 million people in the United States who
suffer from osteoarthritis and rheumatoid arthritis. Sales of Oruvail, launched
in October 1993, are expected to offset, in part, sales declines in Orudis
(ketoprofen) due to patent expiration in 1991. Orudis continued to be an
important NSAID in the United States for moderate pain, arthritis and
dysmenorrhea.
Advanced Phase III trials continued for bromfenac sodium, a potent,
long-acting analgesic with fewer side effects than narcotic analgesics.
15
<PAGE>
Review of Operations
Anti-Infectives, Vaccines and Immunomodulators - Wyeth-Ayerst is the leader in
small volume parenterals in the United States. It supplies a wide range of
products, including: Ativan Injection, a premedication used in surgical,
oncologic and critical care procedures; Infumorph (preservative-free morphine
sulfate sterile solution) for the management of chronic pain; FluShield
(influenza vaccine); and the Tubex Closed Injection System, which is the most
comprehensive line of pre-filled syringe delivery systems.
Sales of anti-infectives were strong internationally. Key products were
Bicillin (sterile penicillin G benzathine and penicillin G procaine) and Pen-Vee
K (penicillin V potassium). Both are valuable products for treating a range of
upper respiratory infections, including strep throat as well as the treatment of
rheumatic fever.
Wyeth-Ayerst also is one of the largest suppliers of influenza, cholera,
typhoid and adenovirus vaccine in the United States. Progress was made toward
developing a new generation of more effective flu vaccines.
Children's Health Care - Wyeth-Ayerst continued to build recognition for
products that improve health care for infants and children.
The scientifically formulated nutritional products of Wyeth-Ayerst are
widely recommended by the medical community and are leaders worldwide.
Increased sales in many international markets reflected growth in established
products and new product introductions. A significant expansion to our
state-of-the-art nutritional manufacturing facility in Ireland began operations.
Unit sales of SMA infant formula increased in the United States as well as
internationally where it is sold as S-26. The brand held the number- one
position in the first-age formula segment in key international markets such as
Australia and the United Kingdom. The brand is growing throughout Latin America,
where a whey-based SMA with nucleotides was introduced in Mexico. The addition
of this formulation, which may help to bridge the immunological gap between
breast milk and commercial formulas, aligns Mexico with Wyeth-Ayerst's product
line in North America. Nursoy, a soy-based formula for infants and children
allergic to cow's milk, sustained sales gains in the United States. Bonamil, an
economical alternative to existing casein-based formulas, was launched
successfully in Canada.
Increased recognition among medical professionals of the need to improve
the diet of babies aged six months or older led to excellent sales growth for
Promil and other follow-on formulas.
Sales growth was recorded for Croissance, a liquid third-age product that
is marketed jointly with Cedilac, the largest French milk producer.
Pediatric pharmaceutical specialties complement the nutritional franchise
in the United States. Children's Advil (ibuprofen) Suspension, indicated for the
reduction of fever and relief of the symptoms of juvenile arthritis, was up in
sales. Donnagel is recommended as an anti-diarrheal product.
16
<PAGE>
Cough/Cold/Allergy Products - Wyeth-Ayerst is a leader in total prescriptions
for cough/cold/allergy products in the United States. Major products include the
codeine formulas of the Phenergan (promethazine) and Robitussin lines of cough
control products and the combination antihistamine/decongestant formulas of
Dimetane, which are used in the treatment of serious colds and allergies.
Generic Products - ESI-Pharma, Inc. was formed by Wyeth-Ayerst in 1993 to
compete in the U.S. generic drug marketplace with a broad line of oral products.
ESI's initial product introductions were two drugs indicated for secondary
amenorrhea and abnormal uterine bleeding. Cycrin (medroxyprogesterone acetate)
is bioequivalent and interchangeable with Provera. Aygestin (norethindrone
acetate) is bioequivalent to Norlutate. These drugs compete in the progestin
market, which has been growing in recent years.
The Wyeth Group Germany, consisting of Wyeth-Pharma, Brenner-Efeka, Kytta
and Leipziger Arzneimittelwerk, holds a substantial stake in the expanding
generic market. Further growth potential was added by the acquisition of
Siegfried Pharma GmbH in early 1994. Siegfried has a strong generic line of
cardiovascular and other ethical pharmaceuticals.
Managed Care - In response to rapidly changing industry conditions,
Wyeth-Ayerst intensified efforts to work with hospital purchasing groups,
entering into agreements with two of the largest such organizations, which
represent nearly 25% of the hospitals in the United States.
Similarly, Wyeth-Ayerst significantly expanded the size of its Managed
Care sales and marketing organization in 1993. This staff expansion is
reflective of a commitment to maintain our prescription drug leadership position
in a health care delivery system that will be increasingly influenced by
managed care plans. Wyeth-Ayerst will respond to competition in this new
environment and will maintain its position in providing quality, cost-effective
products and services.
Biopharmaceuticals - Genetics Institute, Inc. is developing a portfolio of
genetically engineered human proteins and small molecules for use in treating a
range of health problems. A Phase I study was completed in 1993 for Neumega
rhIL-11, an agent for enhancing blood platelet production that often is lowered
by the toxic side effects of chemotherapy in cancer patients. rhBMP-2, a protein
that has shown encouraging preclinical activity as a treatment for multiple
orthopedic indications where bone growth or repair is desired, is being
evaluated in pilot studies. Phase II studies continue for rhM-CSF as a potential
agent for the treatment of cancer, and a Phase I/II clinical study began for the
reduction of significantly elevated cholesterol levels. Two new products,
rhIL-12 for treating cancer and infectious disease and rhFactor IX for treating
hemophilia B, progressed from discovery research to product development during
the year.
Construction was begun on the Bioscience Center, which will augment
pharmacology research and add transgenic capabilities at Wyeth-Ayerst's
Princeton, New Jersey, research complex. This will enhance our ability to
develop and utilize animal models of human diseases in the search for new
medicines.
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<PAGE>
Review of Operations
Research Partnerships - Several collaborative research ventures proceeded during
the year. Clinical trials continued for three products using new drug delivery
system technology developed by ALZA Corporation.
A research partnership with Athena Neurosciences, Inc. and Genetics
Institute, Inc. in the areas of "cell trafficking" and cell adhesion technology
is aimed at developing products to treat inflammation.
A discovery research program is using the proprietary technologies of
Panlabs, Inc. to screen natural products for new drugs for stroke, asthma and
osteoporosis.
Research with Oncogene Science, Inc. is directed at finding genetically
engineered therapies for asthma, osteoporosis, immune system modulation and
diabetes.
International Initiatives - Substantial progress was made in establishing
state-of-the-art pan-European manufacturing and distribution facilities. A new
manufacturing center began operations in Ireland, producing prescription and
over-the-counter (OTC) products. Distribution centers are being established in
Belgium, France, Germany and the United Kingdom.
Production facilities were augmented in Mexico and in Canada, where the
Company's Wyeth and Ayerst subsidiaries were merged to form Wyeth-Ayerst Canada,
Inc.
Consumer Health Care
- --------------------------------------------------------------------------------
Whitehall-Robins is a premier consumer health care business with leading
products in key market segments in many countries and major initiatives to meet
the growing emphasis on self-medication. A focused research and development
effort in the United States and the United Kingdom is directed at converting
prescription products to OTC status. Whitehall-Robins has one of the largest OTC
medical detailing efforts in the United States. In addition, Whitehall-Robins
has established a core unit of specialists to capitalize on the growing
opportunities within managed health care in the United States. It also is
rapidly extending its core product franchise to international markets through
targeted research and development and expanded access to the services and
facilities of Wyeth-Ayerst.
Late in 1993, an application was submitted by Whitehall- Robins to the
U.S. Food and Drug Administration (FDA) for an OTC version of Wyeth-Ayerst's
prescription analgesic Orudis. Efforts continued under an agreement
with Eli Lilly and Company to develop and market an OTC version of Axid
(nizatidine), an H2 antagonist.
Analgesics - Sales growth continued for Advil (ibuprofen), one of the most
successful prescription-to-OTC product conversions in history. Advil is the
largest-selling OTC ibuprofen product in the United States and Canada and the
second-largest selling non-prescription U.S. analgesic. The brand benefited from
expanded advertising, promotion, physician detailing and education programs of
the Advil Forum on Health Education. These efforts raised awareness of the
effectiveness of ibuprofen for relief of pain due to many types of ailments.
18
<PAGE>
Growth of the ibuprofen sector of the analgesic market is coming somewhat
at the expense of the older aspirin-based analgesic products. Among
aspirin-based products, Anacin remained an important analgesic in North America.
Anadin, the leading analgesic in the United Kingdom, was strengthened through an
extension of its top-selling Anadin Extra product and was launched in Portugal.
The Spalt/Doppel-Spalt line continued as a leader in Germany, and the Company
introduced Spalt fur die Nacht, the first nighttime analgesic in Europe.
Cough/Cold/Allergy Remedies - Strong sales increases continued for leading
products in the U.S. OTC cough/cold/ allergy category, one of the fastest
growing in the field of self-medication.
Robitussin built on its leadership in the U.S. cough syrup category,
continuing as the brand most frequently recommended by physicians and
pharmacists. New products included Robitussin Pediatric Night Relief and two
cold formulations - Robitussin Cold & Cough Liqui-Gels and Robitussin Severe
Congestion Liqui-Gels.
Robitussin Cough Drops strengthened its position as the second-largest
selling brand of U.S. cough drops with the introduction of Robitussin Liquid
Center Cough Drops, and the brand was launched in Mexico.
Sales for Dimetapp increased in the highly competitive cold segment. The
brand remained the OTC antihistamine/ decongestant most widely recommended by
physicians for colds and allergies. The launch of Dimetapp Allergy in tablet and
Liquigel forms expanded the brand in one of the fastest-growing segments of the
category. An initial entry was made into the fast-growing non-drowsy segment
with Dimetapp Decongestant Liquigels. Sales climbed for Dimetapp in Canada,
where national advertising was begun, and in Brazil and Australia. The brand was
approved for OTC marketing in Mexico.
Advil Cold and Sinus (ibuprofen and pseudoephedrine) was one of the
fastest growing brands in the U.S. cough/cold/allergy category and was
introduced in Canada. FDA now has approved expansion of the franchise to include
sales of tablets as well as caplets for Advil Cold and Sinus. This product also
was introduced in France under the name RhinAdvil. The Dristan line declined in
the United States but expanded internationally. Dristan solidified its strong
leadership in Colombia. In Argentina, Dristan's leading position in cold symptom
relief was strengthened with the introduction of Dristancito for children.
Oral Health - Whitehall's Kolynos oral health care franchise, which includes
dental creams, toothbrushes, dental floss and mouthwash, boosted its leading
market share position in many Latin American markets. In Brazil, Kolynos dental
creams continue to dominate the market through increased consumer advertising
investments and line extensions, such as Kolynos Total Action, which was
introduced in late 1993. The Kolynos brand of toothbrushes achieved market
leadership for the first time in Brazil. This leadership position was fueled by
the introduction of Kolynos Master toothbrushes and an extended line of Kolynos
Doctor toothbrushes.
In Argentina, the Kolynos brand maintained its leading position in the
oral health care market through the introduction of dental cream line
extensions, Kolynos Star Gel and Kolynos Ninos, and innovative product
presentations such as pump dispensers.
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Review of Operations
During 1993, Whitehall Colombia maintained a leading position in the oral
health care market. New advertising campaigns and product reformulations enabled
Kolynos to achieve consistent share gains.
Hemorrhoidal and Asthma Relief - Preparation H remained the number-one selling
product in the hemorrhoidal relief category in the United States, Canada and
many European countries and was launched in Spain. Primatene, the
largest-selling non-prescription brand in the United States for relief of
asthma, was strengthened by the introduction of new Primatene Dual Action
Formula Tablets. This is the first line extension for the franchise in more than
10 years.
Family Planning and In-Home Diagnostics - Clearblue Easy was number one in
recommendations by chain drugstore pharmacists and a leader in drugstore and
food store sales in the fast-growing U.S. pregnancy test kit category. The brand
continued to be expanded internationally, where it was introduced in Argentina.
Sales were up for Clearplan Easy, which gained as the leader in the U.S.
ovulation predictor category.
Leadership in the U.S. family planning category was maintained with the
Today Contraceptive Sponge, the largest-selling feminine OTC contraceptive.
Lip Care, Medicated Shampoo and Topical Analgesics - Sales growth for Chap Stick
Lip Balm, a category leader in the United States, was fueled by the expansion of
a medicated line and new marketing programs.
Denorex remained a leading medicated shampoo in the United States. The
franchise benefited from the addition of Denorex for Dry Scalp and Denorex
Shampoo and Conditioner for Dry Scalp - the first products for relief of dry,
itchy scalp that are enriched with Panthenol (provitamin B5), a conditioning
agent.
The Anbesol line of leading topical analgesics in the United States
demonstrated expanding sales in both the adult and baby categories of the
market.
International Research and Development facilities - A state-of-the-art
central development center was completed in the United Kingdom, and an
additional center is scheduled for completion during the first quarter of 1994
in Brazil. The U.K. facility focuses on incorporating new technology into OTC
products and on supporting introductions in new categories. The Brazilian center
will focus on the development of oral health products and new OTC products that
meet the unique needs of Latin American consumers.
Medical Supplies and Instrumentation
- --------------------------------------------------------------------------------
The innovative medical devices, supplies and diagnostic instrumentation of
American Home Products Corporation meet specialized needs of health care
providers in the United States and internationally. Sherwood Medical Company,
Corometrics Medical Systems, Quinton Instrument Company and Symbiosis Corp. are
known for quality, cost-effective products that are safe and easy to use.
Disposable Syringes and Needles - Sherwood's sales of safety syringes continued
to grow dramatically in the United States. Sherwood now offers a complete range
of needle and syringe
20
<PAGE>
combinations to protect health care workers from accidental needlesticks and
exposure to blood-borne pathogens.
Tubes, Catheters and Chest Drainage Products - The Argyle line gives Sherwood a
leading U.S. position in the key areas of umbilical vessel catheters, connecting
tubes, naso-gastric tubes and chest drainage products. A substantial sales
increase was registered in the United States for the Argyle Salem Sump
Anti-Reflux Valve. This product protects patients and clinical staff from
contact with potentially hazardous bodily fluids during prolonged stomach
drainage. In 1994, Sherwood will introduce the Argyle Turkel Safety
Thoracentesis System. This new product, used to drain fluid from the pleural
space, incorporates many safety features and benefits that minimize potential
complications associated with traditional thoracentesis procedures, such as
inadvertent lung puncture and potential pneumothorax. Initial clinical feedback
has been favorable.
Sherwood maintained its leadership position in tubes and catheters in
Germany and recorded sales growth in France. Nippon Sherwood strengthened its
leading share in Japan for stomach drainage products and continued as a leader
in suction, intravenous hemodialysis and enteral feeding tube products.
An innovative hemostatic puncture closure device licensed from Kensey Nash
Corporation and developed in cooperation with Quinton will be marketed by
Sherwood internationally and by Quinton in the United States under the trade
name Angio-Seal. Clinical trials continue in Europe and in the United States for
this product, which is expected to significantly increase patient comfort while
reducing costs related to arterial punctures during the termination of cardiac
catheterization procedures.
Disposable and Consumable Obstetrical Products - Sales of disposable and
consumable products contributed to the positioning of Corometrics as a leader in
the obstetrical market. Ongoing development of disposable and sensor products is
focusing on increased vital signs detection with non-invasive technology.
Perinatal Monitoring Systems - Corometrics sustained a leading position in the
perinatal medical area in the United States through technological improvements
to its obstetrical and neonatal equipment and systems. New software updates and
monitoring features strengthened the Model 116 Intrapartum Fetal Monitor as the
standard product for labor-to-birth care of mother and fetus in the obstetrical
market. New software enhancements improved the display, operation and ease of
use of the Model 556 Patient Monitor, which is particularly suited for neonatal
intensive care.
Major obstetrical, neonatal and pediatric monitoring systems were
introduced internationally and are awaiting approval in the United States. These
systems include the first and only fetal and maternal monitoring system combined
into a single package; a compact, lower-cost intrapartum fetal monitor; and
advanced infant monitors for hospital and homecare uses.
Cardiopulmonary Instrumentation and Devices - Quinton maintained a leadership
position in the stress-testing field in the United States and expanded
internationally where software for the Q4500 Stress Test System, was made
available
21
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Review of Operations
in French, German, Italian and Spanish language versions.
Sales increased for the EPLab automated electrophysiology management
system, which provides data analysis, reporting and optical disk storage. The
system was enhanced by the introduction of EPAmp, a new electrophysiology/
catheter lead switching system that significantly increases speed and efficiency
in data analysis. Electrophysiology is a rapidly growing area that has shown
great success in treating potentially fatal heart rhythm disturbances.
Quinton also held a leading share of cardiac catheterization laboratory
monitors. New angiography and ventriculography digital imaging now is available
for the Q-Cath Cardiac Catheterization Laboratory System. These programs make
Q-Cath the first system of its type to provide real-time hemodynamic analysis,
online cardiac image analysis and combined image and analysis reporting.
Laparoscopic and Endoscopic Instruments - Symbiosis Corp., an original equipment
manufacturer acquired in 1992, holds a leading position in disposable
laparoscopic and endoscopic surgical products and provides innovative products
to major surgical instrumentation companies for sales to customers. Laparoscopy,
a method of performing surgery through very small incisions, offers significant
benefits to patients and substantial savings to the health care system.
In 1993, a new laparoscopic suction irrigation system that integrates
electrosurgical cutting and coagulation capabilities was introduced. This
product is among the first of a new generation of laparoscopic instruments
designed specifically to incorporate multiple technologies in a single device.
It also represents the initial less-invasive product to be marketed in the
United States by Sherwood Intrascopic. This is a new division established by
Sherwood to strengthen the Company's presence in key segments of the
less-invasive surgical product market.
In addition, Symbiosis entered the arthroscopic field, introducing a new
line of disposable instruments. Arthroscopy involves the interior examination
and treatment of a joint.
Enteral Feeding Systems - A strong performance by the Kangaroo Pet Enteral
Feeding Pump strengthened Sherwood as a leader in enteral feeding devices in the
United States. This ambulatory system, introduced last year, has exclusive
safety features and is the most compact product of its type. Sales for the
Kangaroo device product line benefited from gains for adult formula supplements,
particularly the KDS ready-to-use system.
Wound Care Dressings - Specialty wound care brands such as Viasorb, Blisterfilm
and Ultec recorded significant sales increases for Sherwood in the wound care
dressings field in the United States. These products offer a cost-effective
alternative to conventional methods for treating chronic wounds.
Thermometry - Sherwood is a thermometry leader in the United States with Filac
electronic predictive thermometers and innovative FirstTemp infrared tympanic
thermometers, which enable temperatures to be taken accurately and quickly.
Excellent sales gains were recorded in Europe, Canada and Australia for tympanic
thermometers.
22
<PAGE>
Facilities Development - Sherwood continued to consolidate European
manufacturing of tube, catheter and chest drainage products in Ireland.
Construction was begun by Quinton on a new administrative, manufacturing and
warehouse facility in Bothell, Washington.
Animal Health Care
- --------------------------------------------------------------------------------
Fort Dodge Laboratories experienced strong sales growth in 1993 and is making a
dedicated commitment to increase its leadership in key segments of veterinary
biological and pharmaceutical markets in the United States. The division also is
expanding its presence in Europe, Asia and Latin America.
Small Animal Products - LymeVax (borrelia burgdorferi bacterin) continued to
gain acceptance as the only U.S. Department of Agriculture (USDA) licensed
canine Lyme disease vaccine, achieving another year of strong sales growth and
becoming the single largest-dollar-volume canine vaccine in the United States.
Fort Dodge strengthened its position as a leader in the growing feline
biological field fueled by sales increases for Fel-O-Vax Lv-K IV. Duramune
(coronavirus) combination vaccines and Ketaset (ketamine hydrochloride) and
Telazol (tiletamine HCl/zolazepam HCl) anesthetics also recorded substantial
sales growth in the small animal line.
In 1994, the division expects to introduce the first fungal vaccine
licensed by the USDA for prevention and treatment of feline ringworm. Under
development are new canine antibiotic and inflammation control products and
feline analgesics.
A complete range of equine, bovine and small animal vaccines was
successfully introduced in Ireland. Through collaboration with the GHEN
Corporation, Fort Dodge expects to receive licenses for canine and feline
vaccines in Japan.
Dairy and Cattle Products - Leadership in antibiotic products for mastitis
prevention and treatment in the dairy industry was maintained for Fort Dodge and
Franklin Laboratories, its OTC entity, with Today, Tomorrow, Cefa-Lak and
Cefa-Dri. Advances in production technology led to sales increases for Triangle
and Discovery, the leading lines of inactivated bovine biologicals. TrichGuard
and Reprotec gained in recognition for protection against bovine infertility.
Internationally, a full range of bovine biologicals was introduced in
Ireland, Italy and Spain. Licenses for small animal and equine vaccines were
received in many European countries. Production of the full line of Fort Dodge
vaccines for Europe was begun in a new facility in Ireland, and efforts were
initiated to establish a European sales and marketing network.
Marketing and Production Improvements - A unique toll-free order system was
installed that ensures next-day product delivery in the United States, and the
sales force was expanded significantly to provide greater customer access to
technical resources and product information. The addition of new high-speed and
automated production capabilities and the consolidation of distribution
operations resulted in increased capacity, lower operating costs, and improved
productivity and customer service in the United States.
23
<PAGE>
Review of Operations
Food Products
- --------------------------------------------------------------------------------
American Home Food Products, Inc. and Canadian Home Products Limited are known
for quality, nutritious, ready-to-eat convenience foods that represent some of
the most popular brands in key food categories in North America.
Prepared Meals and Side Dishes - American Home Foods strengthened its leading
share of the prepared pasta category in the United States through new products
and line extensions. The appeal of the Chef Boyardee brand to older children and
adults was increased with the introduction of a meat and cheese tortellini
variety. Chef Boyardee Sir Chomps-a-Lot, a bite-sized, canned pasta successfully
introduced in 1992, was expanded with two new varieties: lasagna and O' Rings
with mini-meatballs. The franchise also was bolstered by the restage of Chef
Boyardee Teenage Mutant Ninja Turtles and Chef Boyardee Dinosaurs in new pasta
shapes to coincide with the release of popular movies.
The company expanded its leadership in the microwave segment with Chef
Boyardee Microwave Meals, a leading line of microwavable prepared pastas, and
Chef Boyardee Main Meals, a line of microwave products in family portions.
Record sales were achieved in Canada for the canned pasta line, which
added Chef Boyardee Sir Chomps-a-Lot and fettuccine products.
Dennison's, the top-selling line of chili products on the West Coast,
introduced Hot & Chunky Chili. Ranch Style continued to be a leading line of
bean products in key geographic areas. Luck's, a leading brand of beans and peas
in the Southeast, achieved a sizable sales increase for Chili Hot Beans in a
redesigned package.
Condiments and Snacks - Pam No Stick Cooking Spray maintained its leadership in
a highly competitive category in the United States and Canada. Gulden's
continued as the largest-selling spicy brown mustard in the United States.
Another year of excellent sales growth was recorded for Crunch 'n Munch,
the leading brand of glazed popcorn in the United States and Canada.
Early in 1993, American Home Foods became one of the top fruit spread
marketers in the United States with the acquisition of M. Polaner, Inc. Polaner
All Fruit has recently become the number-one fruit juice sweetened spreadable
fruit. The company expects to further strengthen the brand through national
expansion and increased marketing support. Polaner also is a leader in the
rapidly growing ready-to-use garlic and wet spices category.
The Ro*Tel brand of canned tomatoes and green chilies introduced a
bottled, pourable version for convenient use on sandwiches and other foods.
Ro*Tel was acquired in 1992 and is the leading brand in its segment.
24
<PAGE>
Financial Section
Contents
26 Ten-Year Selected Financial Data
28 Consolidated Balance Sheets
29 Consolidated Statements of Income
30 Consolidated Statements of Retained Earnings
and Additional Paid-in Capital
31 Consolidated Statements of Cash Flows
32 Notes to Consolidated Financial Statements
39 Report of Independent Public Accountants
39 Management Report on Financial Statements
40 Quarterly Financial Data
40 Market Prices of Common Stock and Dividends
41 Management's Discussion and Analysis of
Financial Condition and Results of Operations
25
<PAGE>
Ten-Year Selected Financial Data
<TABLE>
<CAPTION>
American Home Products Corporation and Subsidiaries
- ------------------------------------------------------------------------------------------------------------------------------------
Years Ended December 31, 1993 1992 1991 1990 1989 1988 1987 1986 1985 1984
(Dollar amounts in thousands except per share amounts)
Summary of Sales and Earnings
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales ............ $8,304,851 $7,873,687 $7,079,443 $6,775,182 $6,747,016 $6,401,454 $5,850,383 $5,683,507 $5,358,376 $5,088,798
Net income (1) ....... 1,469,300 1,460,842 1,375,273 1,230,597 1,102,158 995,461 928,232 865,922 818,459 695,478
Net income per
common share ...... 4.73 4.65 4.36 3.92 3.54 3.22 2.98 2.73 2.54 2.14
Dividends per
common share ...... 2.86 2.66 2.375 2.15 1.95 1.80 1.67 1.55 1.45 1.32
Year-End Financial Position
- ------------------------------------------------------------------------------------------------------------------------------------
Current assets ....... $4,807,684 $4,552,077 $4,119,057 $3,826,075 $3,532,786 $3,256,494 $3,310,467 $3,249,404 $2,634,616 $2,328,294
Current liabilities .. 1,584,411 1,492,717 1,270,135 1,693,852 1,108,895 1,067,599 1,392,800 1,103,109 754,216 775,031
Ratio of current
assets to current
liabilities ....... 3.03 3.05 3.24 2.26 3.19 3.05 2.38 2.95 3.49 3.00
Total assets ......... 7,687,353 7,141,405 5,938,797 5,637,107 5,681,487 5,492,424 5,411,150 4,928,476 3,972,634 3,577,565
Long-term debt ....... 859,278 601,934 104,710 111,430 1,895,796 100,057 90,076 70,815 63,017 63,249
Average
shareholders'
equity ............ 3,719,539 3,431,568 2,987,885 2,322,623 1,651,050 1,077,462 1,572,972 2,227,801 1,977,817 2,115,118
Shareholders -- Outstanding Shares
- ------------------------------------------------------------------------------------------------------------------------------------
Number of common
shareholders ...... 72,664 73,064 71,209 69,907 70,904 70,021 73,353 75,405 77,797 79,541
Number of preferred
shareholders ...... 726 780 870 931 1,021 1,110 1,187 1,314 1,417 1,975
Average number of
common shares
outstanding used
for earnings per
share calculation
(in thousands...... 310,668 314,201 315,726 314,066 311,644 309,396 311,975 317,678 322,259 325,151
Preferred shares
outstanding at
year-end (in
thousands) ........ 40 43 51 57 64 71 77 87 98 112
Employment Data
- ------------------------------------------------------------------------------------------------------------------------------------
Number of employees
at year-end ....... 51,399 50,653 47,938 48,700 50,816 51,464 50,623 49,896 53,337 53,298
Wages and salaries ... $1,654,984 $1,575,615 $1,388,397 $1,398,721 $1,391,233 $1,284,208 $1,171,788 $1,045,691 $1,052,264 $ 967,651
Benefits (including
social security
taxes) ............ 396,045 367,899 300,810 312,750 256,458 245,834 215,109 164,306 188,946 176,165
- ------------------------------------------------------------------------------------------------------------------------------------
<FN>
(1) Net income in 1992 includes the impact of accounting changes and the charge
for acquired research discussed in Notes 2, 4 and 9 and in Management's
Discussion and Analysis of Financial Condition and Results of Operations.
Excluding these items, 1992 net income was $1,370,738 and net income per
common share was $4.36. Net income in 1987 and 1984 excludes provisions
related to Dalkon Shield claims of $1.75 billion and $615 million,
respectively, recorded by A.H. Robins Company, Incorporated prior to its
acquisition by the Company in 1989.
</TABLE>
26
<PAGE>
Consolidated Balance Sheets
American Home Products Corporation and Subsidiaries
- ------------------------------------------------------------------------------
December 31, 1993 1992
(In thousands except share amounts)
Assets
- ------------------------------------------------------------------------------
Cash and cash equivalents ...................... $1,936,834 $1,692,761
Marketable securities .......................... 283,449 289,603
Accounts receivable less allowances
(1993 - $45,949 and 1992 - $38,905) ......... 1,389,555 1,250,541
Inventories .................................... 958,896 944,568
Other current assets ........................... 238,950 374,604
---------- ----------
Total Current Assets ...................... 4,807,684 4,552,077
Property, plant and equipment:
Land ...................................... 89,375 79,881
Buildings ................................. 1,473,413 1,292,741
Machinery and equipment ................... 1,897,577 1,684,271
---------- ----------
3,460,365 3,056,893
Less accumulated depreciation .................. 1,400,580 1,279,102
---------- ----------
2,059,785 1,777,791
Goodwill ....................................... 716,395 708,832
Other assets ................................... 103,489 102,705
---------- ----------
$7,687,353 $7,141,405
========== ==========
Liabilities
- ------------------------------------------------------------------------------
Loans payable to banks ......................... $ 4,280 $ 11,162
Trade accounts payable ......................... 388,804 366,986
Accrued expenses ............................... 1,019,923 970,498
Accrued federal and foreign taxes on income .... 171,404 144,071
---------- ----------
Total Current Liabilities ................. 1,584,411 1,492,717
Long-term debt ................................. 859,278 601,934
Accrued postretirement benefit obligation ...... 264,553 250,355
Other noncurrent liabilities ................... 903,993 1,008,708
Minority interests ............................. 198,630 225,102
Shareholders' Equity
- ------------------------------------------------------------------------------
$2 convertible preferred stock,
par value $2.50 per share;
5,000,000 shares authorized ................. $ 100 $ 108
Common stock, par value $.33 1/3
per share; 600,000,000 shares authorized .... 103,442 104,349
Additional paid-in capital ..................... 1,014,911 953,155
Retained earnings .............................. 2,884,244 2,547,719
Currency translation adjustments ............... (126,209) (42,742)
---------- ----------
Total Shareholders' Equity ................ 3,876,488 3,562,589
---------- ----------
$7,687,353 $7,141,405
========== ==========
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated balance
sheets.
28
<PAGE>
Consolidated Statements of Income
American Home Products Corporation and Subsidiaries
- ------------------------------------------------------------------------------
Years Ended December 31, 1993 1992 1991
(In thousands except per share amounts)
Net Sales ................................ $8,304,851 $7,873,687 $7,079,443
---------- ---------- ----------
Cost of goods sold ....................... 2,723,902 2,568,690 2,390,463
Selling, administrative
and general expenses .................. 2,922,579 2,846,365 2,541,422
Research and development expenses ........ 662,689 552,450 430,519
Other expense (income), net .............. 3,016 (37,888) (42,771)
Special charge ........................... -- 220,000 --
---------- ---------- ----------
6,312,186 6,149,617 5,319,633
---------- ---------- ----------
Income before federal and foreign
taxes on income ....................... 1,992,665 1,724,070 1,759,810
Provision for taxes on income:
Federal ............................. 287,846 351,193 163,217
Foreign ............................. 235,519 222,139 221,320
---------- ---------- ----------
523,365 573,332 384,537
---------- ---------- ----------
Income before accounting changes ......... 1,469,300 1,150,738 1,375,273
Cumulative effect of accounting
changes:
Income taxes ........................ -- 383,295 --
Postretirement benefits other
than pensions
(net of taxes of $37,704) ........ -- (73,191) --
---------- ---------- ----------
Net Income ............................... $1,469,300 $1,460,842 $1,375,273
========== ========== ==========
Income per share of common stock
before accounting changes ............. $ 4.73 $ 3.66 $ 4.36
Cumulative effect of accounting changes:
Income taxes ........................ -- 1.22 --
Postretirement benefits other
than pensions .................... -- (.23) --
---------- ---------- ----------
Net Income per Share of Common Stock ..... $ 4.73 $ 4.65 $ 4.36
========== ========== ==========
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
29
<PAGE>
Consolidated Statements of Retained Earnings and Additional Paid-in Capital
American Home Products Corporation and Subsidiaries
- ------------------------------------------------------------------------------
Years Ended December 31, 1993 1992 1991
(In thousands except per share amounts)
Retained Earnings
- ------------------------------------------------------------------------------
Balance, beginning of year ............ $2,547,719 $2,316,555 $1,802,658
Net income ............................ 1,469,300 1,460,842 1,375,273
---------- ---------- ----------
4,017,019 3,777,397 3,177,931
---------- ---------- ----------
Cash dividends declared:
Preferred stock (per share:
1993 - 1991, $2.00) ............. 82 92 108
Common stock (per share: 1993-
1991, $2.86, $2.66, $2.375) ..... 888,100 833,758 749,030
---------- ---------- ----------
888,182 833,850 749,138
Cost of treasury stock acquired,
less amount charged to capital ..... 244,593 395,828 112,238
---------- ---------- ----------
1,132,775 1,229,678 861,376
---------- ---------- ----------
Balance, end of year .................. $2,884,244 $2,547,719 $2,316,555
========== ========== ==========
Additional Paid-in Capital
- ------------------------------------------------------------------------------
Balance, beginning of year ............ $ 953,155 $ 838,099 $ 683,504
Excess over par value of common
stock issued ....................... 84,013 125,513 145,583
Miscellaneous, net .................... (22,257) (10,457) 9,012
---------- ---------- ----------
Balance, end of year .................. $1,014,911 $ 953,155 $ 838,099
========== ========== ==========
- ------------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
30
<PAGE>
Consolidated Statements of Cash Flows
American Home Products Corporation and Subsidiaries
- -----------------------------------------------------------------------------
Years Ended December 31, 1993 1992 1991
(In thousands)
Operating Activities
- -----------------------------------------------------------------------------
Net income ........................... $ 1,469,300 $ 1,460,842 $ 1,375,273
Adjustments to reconcile to net cash
provided from operating activities:
Depreciation and amortization ... 241,068 210,213 167,166
Deferred income taxes ........... 153,314 (223,484) (15,459)
Special charge .................. -- 220,000 --
Changes in working capital, net
of businesses acquired or sold:
Accounts receivable ............ (135,038) (192,150) (2,997)
Inventories .................... (8,341) (72,057) (51,554)
Trade accounts payable and
accrued expenses ............ 62,758 104,217 270,865
Accrued taxes .................. 27,333 31,457 (23,251)
Other current assets ........... (13,101) 138 34,728
Other items, net ................ (115,905) (26,031) 143,288
----------- ----------- -----------
Net cash provided from operating
activities ........................ $ 1,681,388 $ 1,513,145 $ 1,898,059
=========== =========== ===========
Investing Activities
- -----------------------------------------------------------------------------
Purchases of property, plant and
equipment ......................... $ (517,912) $ (428,109) $ (227,911)
Purchases of businesses for cash,
net of cash acquired .............. (67,500) (565,952) --
Proceeds/(purchases) of marketable
securities, net ................... 6,154 (238,589) --
Proceeds from sales of
businesses/assets ................. 13,614 60,341 44,947
Purchases of other assets ............ (16,038) (10,165) (8,470)
----------- ----------- -----------
Net cash used for investing
activities ........................ $ (581,682) $(1,182,474) $ (191,434)
=========== =========== ===========
Financing Activities
- -----------------------------------------------------------------------------
Dividends paid ....................... $ (888,182) $ (833,850) $ (749,138)
Net proceeds/(repayments) of
commercial paper and notes ........ 251,646 503,759 (665,039)
Purchases of treasury stock .......... (277,495) (434,947) (123,898)
Exercise of stock options ............ 69,255 95,431 127,873
----------- ----------- -----------
Net cash used for financing
activities ........................ (844,776) (669,607) (1,410,202)
----------- ----------- -----------
Effects of exchange rates on
cash balances ..................... (10,857) (32,906) (20,354)
----------- ----------- -----------
Increase/(decrease) in cash
and cash equivalents .............. 244,073 (371,842) 276,069
Cash and cash equivalents,
beginning of year ................. 1,692,761 2,064,603 1,788,534
----------- ----------- -----------
Cash and cash equivalents,
end of year ....................... $ 1,936,834 $ 1,692,761 $ 2,064,603
=========== =========== ===========
- -----------------------------------------------------------------------------
The accompanying notes are an integral part of these consolidated statements.
31
<PAGE>
Notes to Consolidated Financial Statements
1 Summary of Significant Accounting Policies
- --------------------------------------------------------------------------------
Principles of Consolidation: The accompanying consolidated financial statements
include the accounts of American Home Products Corporation and its subsidiaries
(the Company).
Cash and Cash Equivalents, for purposes of reporting cash flows, consists
primarily of certificates of deposit, time deposits and other short-term, highly
liquid securities and is stated at cost, which approximates fair value.
Marketable Securities consists of U.S. government or agency issues and corporate
bonds and are stated at cost, which approximates fair value. The fair values are
estimated based on quoted market prices. In May 1993, the Financial Accounting
Standards Board issued Statement of Financial Accounting Standards (SFAS) No.
115 - Accounting for Certain Investments in Debt and Equity Securities. This
Statement will be adopted in the first quarter of 1994, and the effect will be
immaterial to the Company.
Inventories are valued at the lower of cost or market. Inventories valued under
the last-in, first-out (LIFO) method amounted to $148,700,000 at December 31,
1993 and $265,816,000 at December 31, 1992. Current value exceeded LIFO value by
$65,607,000 and $52,894,000 at December 31, 1993 and 1992, respectively. The
remaining inventories are valued under the first-in, first-out (FIFO) or the
average cost method.
Inventories at December 31 consisted of:
(In thousands) 1993 1992
- --------------------------------------------------------------
Finished goods......................... $435,902 $477,226
Work in progress....................... 219,701 197,368
Materials and supplies................. 303,293 269,974
-------- --------
$958,896 $944,568
======== ========
- --------------------------------------------------------------
Property, Plant and Equipment is carried at cost. Depreciation is provided over
the estimated useful lives of the related assets, principally on the
straight-line method.
Goodwill is being amortized on the straight-line method over periods not
exceeding 40 years. Accumulated amortization was $636,385,000 and $604,484,000
at December 31, 1993 and 1992, respectively.
Long-Term Debt is stated at face value, which approximates fair value (see Note
3). The fair value of the Company's long-term debt is estimated based on quoted
market prices.
2 Acquisitions
- --------------------------------------------------------------------------------
On March 19, 1993, the Company acquired M. Polaner, Inc. (Polaner), a
manufacturer of jams, for $67,500,000 in a purchase transaction. The excess of
the purchase price over the net assets acquired was approximately $65,600,000.
In January 1992, the Company acquired a majority interest in Genetics
Institute, Inc. (G.I.), a biopharmaceutical company. The Company acquired
approximately 40% of G.I.'s outstanding common stock for $50 per share in cash
and purchased approximately 9,500,000 newly issued shares of G.I. common stock
for $300,000,000. The total consideration paid by the Company for the
approximate 60% interest in G.I. was $666,000,000. The purchase price exceeded
the net tangible assets acquired by approximately $365,000,000 of which
$220,000,000 was attributable to acquired research and was expensed as a special
charge in 1992. The unamortized goodwill at December 31, 1993 was $164,000,000
inclusive of additional share purchases of 40,000 and 907,000 shares in 1993 and
1992, respectively, bringing the Company's total ownership at December 31, 1993
to approximately 64%. The Company holds an option to acquire the remaining
shares of G.I. from the public shareholders over a five-year period ending
December 31, 1996 at prices escalating by approximately $1.84 per quarter, to
$85 per share through December 31, 1996. At January 1, 1994, the option price
per share was $64.74. The Company has the right to acquire additional shares
through open market or privately negotiated purchases, provided that its
aggregate holdings do not exceed 75% of G.I.'s outstanding equity. G.I.
continues as a publicly traded company.
On September 24, 1992, pursuant to a Stock Purchase Agreement, the Company
acquired Symbiosis Corp. (Symbiosis), a manufacturer of disposable surgical
instruments. Under the terms of the agreement, the Company paid
32
<PAGE>
$175,000,000 for 100% of Symbiosis' stock. The purchase price exceeded the net
assets acquired by approximately $173,000,000.
The results of operations of G.I., Symbiosis and Polaner have been included
in the consolidated statements of income since their acquisition dates.
The Company also acquired all the outstanding stock of Intelligent Medical
Systems, Inc. (IMS) in exchange for 498,242 shares of the Company's common
stock. This acquisition was accounted for as a pooling-of-interests, effective
January 1, 1992. The 1991 financial statements were not restated for this
transaction as the effects were immaterial.
The Company had other acquisitions during the 1991-1993 period, the effect
of which, individually and in the aggregate, was not material to the
consolidated financial position or results of operations.
Unaudited pro forma results of operations to reflect the 1993 and 1992
acquisitions as if they had taken place on January 1 of those years are not
presented as the effects are immaterial.
3 Long-Term Debt and Financing Arrangements
- --------------------------------------------------------------------------------
On April 10, 1992, the Company issued $250,000,000 principal amount of five-year
Notes due April 15, 1997. The five-year Notes bear interest at the rate of
6.875% payable semiannually on April 15 and October 15.
On October 2, 1992, the Company issued an additional $250,000,000 principal
amount of 10-year Notes due October 15, 2002. The 10-year Notes bear interest of
6.5% payable semiannually on April 15 and October 15.
On February 19, 1993, the Company issued $250,000,000 principal amount of
30-year Notes due March 1, 2023. The 30-year Notes bear interest of 7.25%
payable semiannually on March 1 and September 1.
All the Notes were issued under a $1,000,000,000 shelf registration
statement filed with the Securities and Exchange Commission in February 1992.
These Notes are unsecured and unsubordinated and may not be redeemed prior to
maturity. The proceeds from the sale of the Notes were used for acquisitions and
general corporate purposes, including common share repurchases and repayments of
commercial paper.
In April 1993, the Company entered into a Revolving Credit Facility
Agreement, for a 364-day term, with a syndicate of international lending
institutions. The facility allows the Company to borrow a maximum of
$1,000,000,000 on an unsecured basis at variable interest rates and may be used
to satisfy general corporate cash requirements, including acquisitions, common
share repurchases and commercial paper backup. Fees under the agreement are not
significant. The Company intends to renew the facility upon the expiration of
the 364-day term. To date, there have been no borrowings under this agreement.
The Notes and the Revolving Credit Facility Agreement contain customary
covenants, representations, warranties, conditions and default provisions which,
given the Company's current financial position, provide substantial flexibility.
The Company participates in certain off-balance sheet arrangements,
including interest rate swap agreements and foreign exchange forward contracts,
as part of its management of interest rate and foreign currency exposures,
which, in the aggregate, are not significant. The Company believes that the
risks of accounting loss associated with these arrangements, principally from
non-performance by the counterparties or due to fluctuations in interest and/or
exchange rates, would not have a material adverse effect on the Company's
results of operations or financial position.
Interest payments in connection with the Company's debt obligations for the
years ended December 31, 1993, 1992 and 1991 amounted to $55,215,000,
$26,151,000 and $37,159,000, respectively.
4 Employee Benefit Plans
- --------------------------------------------------------------------------------
Pension Plans: The Company sponsors various retirement plans for most full-time
employees. Total pension expense for 1993, 1992 and 1991 was $50,660,000,
$46,003,000 and $43,412,000, respectively. Pension plan benefits are based
primarily on participants' compensation and years of credited service. It has
been the Company's policy to fund all current and prior service costs under
retirement plans, and all liabilities for accrued vested and nonvested benefits
have been fully funded.
33
<PAGE>
Notes to Consolidated Financial Statements
Net periodic pension cost of domestic pension plans was as
follows:
(In thousands) 1993 1992 1991
- --------------------------------------------------------------
Service cost on benefits earned
during the year........... $ 31,520 $ 28,237 $ 25,277
Interest cost on projected
benefit obligation........ 59,485 54,226 49,513
Actual return on plan assets... (113,393) (53,600) (105,376)
Net amortization and
deferral.................. 57,642 2,502 59,009
--------- -------- --------
Net periodic pension cost...... $ 35,254 $ 31,365 $ 28,423
========= ======== ========
- --------------------------------------------------------------
The actuarial present value of benefit obligations and funded
status for the Company's domestic plans were as follows:
(In thousands) 1993 1992 1991
- --------------------------------------------------------------
Benefit obligations:
Vested benefits........ $620,872 $510,892 $486,306
Nonvested benefits..... 45,702 36,461 34,021
-------- -------- --------
Accumulated benefit
obligation............. 666,574 547,353 520,327
Projected compensation
increases.............. 160,079 153,495 116,568
-------- -------- --------
Projected benefit
obligation............. 826,653 700,848 636,895
Plan assets at fair value... 743,292 668,005 608,245
-------- -------- --------
Projected benefit obligation
in excess of plan assets (83,361) (32,843) (28,650)
Unrecognized net
loss (gain)............ 16,457 (18,080) (30,800)
Unrecognized net transition
obligation............. 2,891 1,968 1,045
Unrecognized prior
service cost........... 26,177 29,482 22,761
-------- -------- --------
Net pension liability....... $(37,836) $(19,473) $(35,644)
======== ======== ========
- --------------------------------------------------------------
Assumptions used in developing the projected benefit obligation
as of December 31 were as follows:
1993 1992 1991
- --------------------------------------------------------------
Discount rate......................... 7.5% 8.5% 8.5%
Rate of increase in
compensation..................... 4.5% 6.0% 6.0%
Rate of return on plan assets......... 8.5% 9.0% 9.0%
- --------------------------------------------------------------
Postretirement Benefits: The Company provides postretirement health care
and life insurance benefits for retired employees. Most full-time employees
become eligible for these benefits after attaining specified age and service
requirements.
Effective January 1, 1992, the Company adopted SFAS No. 106 - Employers'
Accounting for Postretirement Benefits Other Than Pensions. SFAS No. 106
requires the Company to accrue the estimated cost of retiree benefit payments,
other than pensions, during the employee's active service period. The Company
had established reserves in prior years for the postretirement health care
benefits of existing retirees totaling $129,084,000 as of December 31, 1991.
Prior to adoption of SFAS No. 106, the Company expensed the cost of these
benefits, principally health care and related benefits, as claims were paid.
The Company recognized this change as a cumulative effect of a change in
accounting principle as of January 1, 1992, resulting in a non-recurring
after-tax charge of $73,191,000. The Company's unfunded accumulated
postretirement benefit obligation (APBO) increased to $355,864,000 as of
December 31, 1993, due principally to claims experience in 1993 and the
reduction of the discount rate. The Company recorded an accrued postretirement
benefit obligation of $264,553,000 as of December 31, 1993.
Net periodic postretirement health care cost at December 31 included the
following components:
(In thousands) 1993 1992
- --------------------------------------------------------------
Service cost on benefits earned
during the year................... $ 9,759 $ 8,439
Interest cost on APBO.................. 26,765 21,456
Amortization of loss................... 1,230 --
------- -------
Net periodic postretirement
health care cost.................. $37,754 $29,895
======= =======
- --------------------------------------------------------------
The cost of these programs in 1991 was $15,218,000.
The APBO at December 31 was as follows:
(In thousands) 1993 1992
- --------------------------------------------------------------
Retirees............................... $165,797 $118,920
Fully eligible active participants..... 151,753 103,090
Other active participants.............. 38,314 28,345
-------- --------
APBO .................................. 355,864 250,355
Unrecognized net loss.................. (91,311) --
-------- --------
Accrued postretirement
benefit obligation................ $264,553 $250,355
======== ========
- --------------------------------------------------------------
34
<PAGE>
Assumptions used in developing the APBO were as follows:
1993 1992
- --------------------------------------------------------------
Discount rate........................... 7.5% 9.0%
Increase in per capita cost
of health care benefits
that gradually was decreased
over 10 years and
held constant thereafter........... 11%-6% 12%-6%
- --------------------------------------------------------------
A one percentage point increase in the assumed health care cost trend rates
would increase the APBO as of December 31, 1993 by approximately $36,382,000,
and the total of the service and interest cost components of the net periodic
postretirement health care cost would increase by approximately $5,017,000.
In November 1992, the Financial Accounting Standards Board issued SFAS No.
112 - Employers' Accounting for Postemployment Benefits. This Statement will be
adopted in the first quarter of 1994, and the effect will be immaterial to the
Company.
5 Other Noncurrent Liabilities
- --------------------------------------------------------------------------------
Other noncurrent liabilities include reserves for contingencies relating to
income taxes and environmental and product liabilities. Deferred income taxes
payable, liabilities for the Company's Management Incentive Plan and reserves
for plant reorganizations, including severance payments, also are included.
The Company has responsibilities for environmental safety and cleanup under
various state, local and federal laws, including the Comprehensive Environmental
Response, Compensation and Liability Act, commonly known as Superfund. The
Company also is involved in various other environmental claims and legal
proceedings of a nature considered normal to its business. The Company provides
for the estimated costs of remediation for all known environmental liabilities.
The Company's Management Incentive Plan provides for cash and deferred
contingent common stock awards to key employees. The maximum shares issuable
under the plan are 12,000,000 common shares, of which 8,702,162 have been
awarded through December 31, 1993. Deferred contingent common stock awards plus
accrued dividends totaling 316,648 shares were outstanding at December 31, 1993.
Awards for 1993 amounted to $31,266,000, which included deferred contingent
common stock of $7,120,000 (101,348 shares). Awards for 1992 were $30,337,000,
which included deferred contingent common stock of $7,201,000 (104,098 shares).
Awards for 1991 amounted to $25,871,000, which included deferred contingent
common stock of $14,324,000 (168,911 shares).
6 Capital Stock
- --------------------------------------------------------------------------------
There were 600,000,000 shares of common stock and 5,000,000 shares of preferred
stock authorized at December 31, 1993. Of the authorized preferred shares, there
is a series of shares (40,137 outstanding), which is designated as $2
convertible preferred stock. Each share of the $2 series is convertible at the
option of the holder into nine shares of common stock. This series may be called
for redemption at $60 per share plus accrued dividends if the market price of
the common stock is at least $6.67 per share.
Changes in outstanding common shares during 1993, 1992 and 1991 are
summarized as follows:
(In thousands) 1993 1992 1991
- --------------------------------------------------------------
Balance, beginning of year..... 313,048 315,623 314,028
Issued for stock options and
Management Incentive
Plan...................... 1,754 2,681 3,470
Conversions of preferred stock
(3,011 shares in 1993,
7,900 shares in 1992 and
5,900 shares in 1991)..... 27 72 53
Purchase of shares for treasury (4,503) (5,826) (1,928)
Issued for acquisition of IMS -- 498 --
------- ------- -------
Balance, end of year........... 310,326 313,048 315,623
======= ======= =======
- --------------------------------------------------------------
7 Stock Options
- --------------------------------------------------------------------------------
The Company has three Stock Option Plans - 1985, 1980 and 1978 - and a 1990
Stock Incentive Plan. In addition, in June 1993, the Board of Directors of the
Company approved the 1993 Stock Incentive Plan to be presented to shareholders
for approval in April 1994. Under the 1993 and 1990 plans, a maximum of
14,000,000 and 12,000,000 option shares, respectively, may be granted at prices
not less than 100% of the fair market value at the date of option grant. No
further grants will be made under the 1985, 1980 and 1978 plans.
35
<PAGE>
Notes to Consolidated Financial Statements
The plans provide for the granting of incentive stock options as defined
under the Internal Revenue Code. Under the plans, grants may be made to selected
officers and employees of non-qualified stock options with a 10-year term or
incentive stock options with a term not exceeding 10 years. The plans provide
for the granting of Stock Appreciation Rights (SAR) which permit the optionee to
surrender an exercisable option for an amount equal to the excess of the market
price of the common stock over the option price when the right is exercised. In
May 1991, all SARs issued to U.S. employees were canceled. Foreign employee SARs
for 112,800 shares remain outstanding and exercisable at December 31, 1993. The
1993 and 1990 plans, in addition and among other things, provide for the
issuance of up to 2,000,000 of the available options as restricted stock
performance awards under each plan. No restricted stock performance awards have
been granted under these plans.
Transactions involving the plans are summarized as follows:
Option Shares 1993 1992
- --------------------------------------------------------------
Outstanding January 1.............. 12,465,013 12,671,683
Granted............................ 10,710,210 1,899,100
Canceled........................... (322,450) (70,600)
Exercised (1993 - $23.03 to
$60.88 per share)............. (1,511,849) (2,035,170)
---------- ----------
Outstanding December 31............ 21,340,924 12,465,013
========== ==========
Exercisable December 31
(1993 - $27.06 to
$79.31 per share)............. 10,805,634 10,562,913
========== ==========
- --------------------------------------------------------------
At December 31, 1993, 12,713,740 shares were available for future grants under
the 1993 and 1990 plans.
8 Other Expense (Income), Net
- --------------------------------------------------------------------------------
This caption in the Consolidated Statements of Income is summarized as follows:
(In thousands) 1993 1992 1991
- --------------------------------------------------------------
Interest income............. $(89,677) $(108,720) $(137,203)
Interest expense............ 47,174 35,503 31,431
Foreign exchange
loss and other......... 45,519 35,329 63,001
--------- ---------- ----------
Total....................... $ 3,016 $ (37,888) $ (42,771)
========= ========== ==========
- --------------------------------------------------------------
9 Income Taxes
- --------------------------------------------------------------------------------
The provision for income taxes consisted of:
(In thousands) 1993 1992 1991
- --------------------------------------------------------------
Current:
Domestic............... $150,916 $154,572 $173,555
Foreign................ 219,135 221,245 226,441
370,051 375,817 399,996
Deferred:
Domestic............... 136,930 196,621 (10,338)
Foreign................ 16,384 894 (5,121)
-------- -------- --------
153,314 197,515 (15,459)
-------- -------- --------
$523,365 $573,332 $384,537
======== ======== ========
- --------------------------------------------------------------
Deferred tax (liabilities) assets, inclusive of a valuation allowance for
deferred tax assets, were reflected in the consolidated balance sheets at
December 31 as follows:
(In thousands) 1993 1992
- --------------------------------------------------------------
Net current assets....................... $ 140,902 $289,744
Net noncurrent liabilities............... (148,558) (144,086)
--------- --------
$ (7,656) $145,658
========= ========
- --------------------------------------------------------------
Deferred income taxes are provided for the temporary differences between the
financial reporting basis and the tax basis of the Company's assets and
liabilities. Deferred tax benefits result principally from the recording of
certain reserves which currently are not deductible for tax purposes. Deferred
tax credits result principally from temporary differences in the recognition of
gains and losses from certain investments and from the use, for tax purposes, of
accelerated depreciation.
36
<PAGE>
In 1992, the Company adopted SFAS No. 109 - Accounting for Income Taxes.
The impact of SFAS No. 109 resulted in the accelerated recognition of
$301,706,000 of tax benefits related to the remaining net operating loss (NOL)
carryforward as of January 1, 1992 of its subsidiary, A.H. Robins Company,
Incorporated (Robins), and additional tax benefits of $81,589,000 not previously
recognized. Prior to the adoption of SFAS No. 109, the Company had recognized
the Robins' NOL benefit, for financial reporting purposes, as this benefit was
realized for tax purposes in accordance with SFAS No. 96 - Accounting for Income
Taxes, which is superseded by SFAS No. 109. The aggregate amount of the tax
benefits was $383,295,000.
Included in the 1991 current domestic provision for income taxes is the
benefit of the Robins' NOL of $132,371,000. The Robins' NOL for tax purposes was
fully utilized during 1993.
The Company has recorded deferred tax assets as of December 31, 1993 under
SFAS No. 109 of $507,937,000 related principally to reserves for product and
environmental liabilities, postretirement benefit obligations and other employee
benefits and reorganizations. A valuation allowance was established on January
1, 1992 for certain deferred tax assets related to reorganizations, product
liability and other matters, as the Company determined that it was more likely
than not that these benefits will not be realized. During 1993, the valuation
allowance was reduced by $9,961,000 to $91,363,000. There was no change to this
allowance in 1992. Deferred tax liabilities of $424,230,000 as of December 31,
1993 related principally to accelerated depreciation, losses on securities and
employee compensation.
A reconciliation between the Company's effective tax rate and the U.S.
statutory rate is as follows:
Tax Rate 1993 1992 1991
- ---------------------------------------------------------------
U.S. statutory rate................... 35.0% 34.0% 34.0%
Effect of Puerto Rico and Ireland
manufacturing operations......... (6.1) (6.1) (6.0)
Effect of Robins' net
operating loss................... -- -- (7.5)
Expenses for which no tax
benefits were recorded........... -- 4.5 --
Research credits...................... (1.3) (0.4) (0.9)
Other................................. (1.3) 1.3 2.3
----- ---- ----
Effective tax rate.................... 26.3% 33.3% 21.9%
===== ==== ====
- ---------------------------------------------------------------
Total income tax payments for the years ended December 31, 1993, 1992 and 1991
amounted to $335,102,000, $292,170,000 and $349,333,000, respectively.
10 Net Income per Share
- --------------------------------------------------------------------------------
Net income per share of common stock was based on the average of common shares
and common share equivalents outstanding during the year: 310,668,000 shares in
1993, 314,201,000 shares in 1992 and 315,726,000 shares in 1991.
11 Contingencies
- --------------------------------------------------------------------------------
The Company is involved in various legal proceedings, including product
liability suits of a nature considered normal to its business.
The Company is self-insured against ordinary product liability risks and
has liability coverage in excess of certain limits from various insurance
carriers.
In the opinion of the Company, although the outcome of any litigation
cannot be predicted with certainty, the ultimate liability of the Company in
connection with pending litigation will not have a material adverse effect on
the Company's results of operations or financial position.
37
<PAGE>
Notes to Consolidated Financial Statements
12 Company Data by Industry Segment
- --------------------------------------------------------------
Years Ended December 31,
-------------------------------
(In millions) 1993 1992 1991
- --------------------------------------------------------------
Net Sales to Customers
Health Care Products:
Pharmaceuticals.......... $4,774.6 $4,589.3 $4,018.0
Consumer Health
Care.................... 1,743.0 1,611.0 1,435.7
Medical Supplies and
Diagnostic Products..... 851.5 807.6 766.6
-------- -------- --------
7,369.1 7,007.9 6,220.3
Food Products................. 935.8 865.8 859.1
-------- -------- --------
Consolidated Total............ $8,304.9 $7,873.7 $7,079.4
======== ======== ========
- --------------------------------------------------------------
Income before Taxes
- --------------------------------------------------------------
Health Care Products.......... $1,836.7 $1,755.7 $1,561.3
Food Products................. 152.4 146.1 129.4
-------- -------- --------
Total Health Care and
Food Products............ 1,989.1 1,901.8 1,690.7
Corporate (1)................. 3.6 (177.7) 69.1
-------- -------- --------
Consolidated Total............ $1,992.7 $1,724.1 $1,759.8
======== ======== ========
- --------------------------------------------------------------
Total Assets at December 31
- --------------------------------------------------------------
Health Care Products.......... $5,165.3 $4,944.4 $3,601.9
Food Products................. 504.4 384.0 317.4
Corporate..................... 2,017.7 1,813.0 2,019.5
-------- -------- --------
Consolidated Total............ $7,687.4 $7,141.4 $5,938.8
======== ======== ========
- --------------------------------------------------------------
Depreciation Expense
- --------------------------------------------------------------
Health Care Products.......... $172.3 $169.3 $138.8
Food Products................. 11.8 10.6 10.5
Corporate..................... 6.8 3.7 3.5
------ ------ ------
Consolidated Total............ $190.9 $183.6 $152.8
====== ====== ======
- --------------------------------------------------------------
Capital Expenditures (2)
- --------------------------------------------------------------
Health Care Products.......... $416.3 $474.4 $209.1
Food Products................. 24.9 20.0 16.1
Corporate..................... 76.7 60.9 12.9
------ ------ ------
Consolidated Total............ $517.9 $555.3 $238.1
====== ====== ======
- --------------------------------------------------------------
Company Data by Geographic Segment
- --------------------------------------------------------------
Years Ended December 31,
-------------------------------
(In millions) 1993 1992 1991
- --------------------------------------------------------------
Net Sales to Customers
- --------------------------------------------------------------
United States................. $5,695.8 $5,387.1 $4,877.7
Canada and Latin
America.................. 897.7 758.9 707.5
Europe and Africa............. 1,196.6 1,244.1 1,108.8
Asia and Australia............ 514.8 483.6 385.4
-------- -------- --------
Consolidated Total............ $8,304.9 $7,873.7 $7,079.4
======== ======== ========
- --------------------------------------------------------------
Income before Taxes
- --------------------------------------------------------------
United States (1)............. $1,465.7 $1,245.9 $1,334.8
Canada and Latin
America.................. 214.9 158.9 148.7
Europe and Africa............. 224.0 233.6 211.0
Asia and Australia............ 88.1 85.7 65.3
-------- -------- --------
Consolidated Total............ $1,992.7 $1,724.1 $1,759.8
======== ======== ========
- --------------------------------------------------------------
Total Assets at December 31
- --------------------------------------------------------------
United States................. $5,736.6 $5,249.6 $4,385.5
Canada and Latin
America.................. 467.5 436.6 356.9
Europe and Africa............. 1,075.7 1,065.3 867.2
Asia and Australia............ 407.6 389.9 329.2
-------- -------- --------
Consolidated Total............ $7,687.4 $7,141.4 $5,938.8
======== ======== ========
- --------------------------------------------------------------
(1) These segments include the special charge of $220,000,000 in 1992 (see
Note 2).
(2) Capital expenditures for 1992 include additions from businesses acquired.
Transactions between industry and geographic segments are not material.
Foreign exchange adjustments, which were included in operating income before
taxes in this note and in other expense (income), net in the Consolidated
Statements of Income on page 29, resulted in net charges to income of
$55,475,000 in 1993, $23,662,000 in 1992 and $66,610,000 in 1991, principally in
the Canada and Latin America segment (see Note 8).
38
<PAGE>
Report of Independent
Public Accountants
To the Board of Directors and Shareholders of
American Home Products Corporation:
We have audited the accompanying consolidated balance sheets of American Home
Products Corporation (a Delaware corporation) and subsidiaries as of December
31, 1993 and 1992, and the related consolidated statements of income, retained
earnings, additional paid-in capital and cash flows for each of the three years
in the period ended December 31, 1993. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of American Home Products
Corporation and subsidiaries as of December 31, 1993 and 1992, and the results
of their operations and cash flows for each of the three years in the period
ended December 31, 1993 in conformity with generally accepted accounting
principles.
As discussed in Notes 4 and 9 to the consolidated financial statements,
effective January 1, 1992, the Company changed its methods of accounting for
postretirement benefits other than pensions and income taxes.
Arthur Andersen & Co.
New York, N.Y.
January 18, 1994
Management Report on Financial Statements
Management has prepared and is responsible for the Company's consolidated
financial statements and related notes. They have been prepared in accordance
with generally accepted accounting principles and necessarily include amounts
based on judgments and estimates made by management. All financial information
in this Annual Report is consistent with the financial statements.
The Company maintains internal accounting control systems and related
policies and procedures designed to provide reasonable assurance that assets are
safeguarded, that transactions are executed in accordance with management's
authorization and are properly recorded, and that accounting records may be
relied upon for the preparation of financial statements and other financial
information. The design, monitoring and revision of internal accounting control
systems involve, among other things, management's judgment with respect to the
relative cost and expected benefits of specific control measures. The Company
also maintains an internal auditing function which evaluates and formally
reports on the adequacy and effectiveness of internal accounting controls,
policies and procedures.
The Company's financial statements have been audited by independent
auditors who have expressed their opinion with respect to the fairness of these
statements.
The Audit Committee of the Board of Directors, com-posed of non-employee
directors, meets periodically with the external and internal auditors to
evaluate the effectiveness of the work performed by them in discharging their
respective responsibilities and to assure their independent and free access to
the Committee.
John R. Stafford Robert G. Blount
Chairman, President and Executive Vice President and
Chief Executive Officer Chief Financial Officer
39
<PAGE>
Quarterly Financial Data
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
(In thousands except
per share amounts) 1993 1993 1993 1993
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales ................. $2,111,015 $1,909,416 $2,168,116 $2,116,304
Gross Profit .............. 1,450,423 1,258,745 1,455,053 1,416,728
Net Income ................ 401,509 287,490 397,553 382,748
Net Income per Common Share $ 1.29 $ 0.93 $ 1.28 $ 1.23
- ---------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
1992 1992 1992 1992
- ---------------------------------------------------------------------------------------
Net Sales ................. $2,002,039 $1,759,867 $2,109,318 $2,002,463
Gross Profit .............. 1,346,276 1,181,303 1,404,109 1,373,309
Net Income ................ 453,368 263,493 382,428 361,553
Net Income per Common Share $ 1.43 $ 0.84 $ 1.22 $ 1.16
- ---------------------------------------------------------------------------------------
</TABLE>
Market Prices of Common Stock and Dividends
1993 Range of Prices* 1992 Range of Prices*
- ------------------------------------------------ ---------------------------
Dividends Dividends
High Low per Share High Low per Share
- --------------------------------------------------------------------------------
First Quarter .. $68.00 $55.50 $0.71 $84.25 $72.75 $0.65
Second Quarter . 69.00 62.38 0.71 82.00 66.75 0.65
Third Quarter .. 65.75 58.38 0.71 77.13 66.88 0.65
Fourth Quarter . 65.38 58.88 0.73 73.25 63.25 0.71
- --------------------------------------------------------------------------------
* Prices are those of the New York Stock Exchange - Composite Transactions.
40
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
The following commentary should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements (Notes) on
pages 28 to 38.
Results of Operations
- --------------------------------------------------------------------------------
Net sales increased 5% to $8.3 billion in 1993, while net sales for 1992
increased 11% from 1991 levels. Worldwide health care products segment sales of
$7.4 billion in 1993 were 5% higher than in 1992, and 1992 sales of $7.0 billion
were 13% above 1991 levels. Food products sales increased 8% to $936 million in
1993 and 1% in 1992.
Net sales of health care and food products in the United States in 1993
were $5.7 billion, an increase of 6% from 1992; 1992 net sales increased 10%
from 1991. Foreign sales increased 5% in 1993 to $2.6 billion and increased 13%
in 1992 to $2.5 billion. Net sales of health care products in the United States
of $4.8 billion in 1993 increased 5%, and 1992 net sales of $4.6 billion
increased 12%. U.S. pharmaceutical sales increased 5% in 1993, due primarily to
unit volume growth of 3%. U.S. pharmaceutical sales growth of 14% in 1992 was
due primarily to unit volume increases of 11%.
The Company voluntarily established a policy to limit the weighted average
U.S. prescription pharmaceutical price increase to not more than the increase in
the Consumer Price Index, which in 1993 was 2.7%. The Company's U.S.
prescription pharmaceutical price increase in 1993 was 2.6%. In 1992, the
Company's weighted average U.S. prescription pharmaceutical price increase was
3.7%, which approximated the 1992 increase in the Consumer Price Index.
Unit volume growth in the U.S. pharmaceutical segment was led by Premarin
and increases in the anti-inflammatory and veterinary product line categories.
Genetics Institute, Inc.'s (G.I.) recombinant antihemophilic factor (rAHF) bulk
product sales also contributed to this volume growth. U.S. pharmaceutical sales
growth was impacted by increased competitive pressures on pricing in both the
public and private sectors, increases in Medicaid rebates, and additional
rebates under the Women, Infants and Children Program. It is anticipated that
these trends will continue in this market in 1994, regardless of the outcome of
proposed health care reform legislation. U.S. pharmaceutical sales increases in
1992 were due principally to unit volume increases in female health care
products, the anti-inflammatory product, Lodine, and infant nutritional
products.
Consumer health care sales in the United States increased 5% to $1.2
billion in 1993 as price increases were partly offset by unit volume declines of
3%. Unit volume growth in the cough/cold/allergy product line was more than
offset by unit sales declines in some of the Company's analgesic products,
particularly Anacin. However, Advil unit volume grew 8% in the United States in
1993. U.S. consumer health care sales were unfavorably impacted by the continued
growth of private label brands and new competitive products. U.S. consumer
health care sales in 1992 were 12% higher than 1991 levels, due principally to
unit volume growth in the analgesic and cough/cold/allergy product categories.
Medical supplies and diagnostic products sales in the United States
increased 6% in 1993, due principally to increased unit volume as competitive
conditions in the hospital supply market held prices in many product categories
at 1992 levels. The acquisition of Symbiosis Corp. (Symbiosis) in late 1992 and
sales growth in Sherwood's disposable needle and syringe products contributed to
the sales increase. U.S. medical supplies and diagnostic products sales in 1992
increased 4% as a result of the acquisition of Symbiosis and Intelligent Medical
Systems, Inc. (see Note 2) and increased unit sales of cardiovascular monitoring
systems.
Foreign sales of health care products in 1993 increased 5% to $2.5 billion.
Unit volume grew 5%, while price increases of 6% were offset by unfavorable
foreign exchange rates. Foreign sales of health care products in 1992 of $2.4
billion increased 13%, due to 6% unit volume growth, price increases averaging
5% and favorable foreign exchange rates.
Foreign pharmaceutical sales increased 2% in 1993, led by unit volume gains
for female health care and infant nutritional products. Excluding the effects of
exchange rates, foreign pharmaceutical sales would have increased 9% in 1993.
The Company operates under governmental price controls in many of its more
significant international markets and, during 1993, experienced price rollbacks
in several countries, including Germany and Italy. Pricing pressures are
expected to continue in 1994, particularly in Europe. The Company was able to
increase prices in line with inflation and related currency devaluations in
several Latin American markets in 1993, particularly Brazil, which contributed
to the foreign pharmaceuticals sales gain.
41
<PAGE>
Management's Discussion and Analysis
of Financial Condition and Results of Operations
However, changes in governmental health care policies and, to a lesser extent,
competitive conditions may constrain prices in 1994. Foreign sales of
pharmaceuticals increased 14% in 1992, led by unit volume gains for infant
nutritional and female health care products.
Foreign consumer health care sales in 1993 increased 16% to $586 million,
due primarily to unit volume growth in the oral health care product line,
particularly in Argentina, and inflation-related price increases in Brazil. In
1992, foreign consumer health care sales increased 12%, primarily due to unit
volume growth in the oral health care product line.
Food products sales in the United States in 1993 were $879 million, 9%
above year-ago levels. This increase was led by unit volume growth of 8%,
principally as a result of the M. Polaner, Inc. (Polaner) acquisition (see Note
2), with additional volume contributions from Crunch 'n Munch. Competitive
conditions, primarily in certain regional and specialty product markets,
continue to constrain sales growth. U.S. sales of food products in 1992 of $808
million were 1% above 1991 levels.
Cost of goods sold in 1993, as a percentage of net sales, was consistent
with 1992 levels. Cost of goods sold in 1992 was one percentage point below 1991
levels, due principally to operating efficiencies in the consumer health care
and food products businesses.
Selling, administrative and general expense, as a percentage of net sales,
decreased by approximately one percentage point from 1992, due primarily to
decreases in media spending, particularly in the U.S. consumer health care
segment. Selling, general and administrative expense in 1992, as a percentage of
net sales, was consistent with 1991 levels.
Research and development expense increased 20% to $663 million in 1993 and
28% to $552 million in 1992. The increased expenditures in 1993 and 1992 were
due, in part, to G.I.'s research spending (see Note 2), net of its collaborative
revenues. Excluding G.I.'s expenditures, research and development expenses
increased 11% in 1993 and 19% in 1992. Pharmaceutical research and development
expense, as a percentage of worldwide pharmaceutical sales, exclusive of
nutritional sales, was 14% and 12% in 1993 and 1992, respectively.
As discussed in Note 8, other expense (income), net in 1993 reflects
reduced net interest income, due primarily to the use of cash balances and
proceeds from debt issuances for acquisitions and common share repurchases in
1993 and 1992 and, to a lesser extent, lower interest rates on invested funds.
Foreign exchange rates, principally in Brazil, also had an unfavorable impact on
earnings in 1993. Other (income) expense, net in 1992 reflected lower interest
rates compared to 1991 and reduced foreign exchange losses.
The growth in sales outpaced the growth in income before taxes in 1993,
exclusive of the 1992 special charge, due primarily to the impact of recent
acquisitions from which the incremental sales contribution exceeded the income
contribution and also due to lower net interest income previously mentioned.
In August 1993, Congress passed the Omnibus Budget Reconciliation Act of
1993. The Company's effective tax rate of 26.3% in 1993 was not significantly
impacted by this legislation as the 1% increase in the corporate tax rate to
35%, effective January 1, 1993, was more than offset by the retroactive
reinstatement of the research tax credit. The Company's effective tax rate of
33.3% in 1992 reflected the non tax-deductible $220 million write-off of the
acquired research related to the G.I. acquisition. The Company's effective tax
rate in 1994 is expected to increase to approximately 28% - 29%, due primarily
to a reduction in Section 936 tax benefits derived from its manufacturing
operations in Puerto Rico, offset, in part, by incremental tax benefits from its
manufacturing operations in Ireland (see Note 9).
As discussed above and in Notes 2, 4 and 9, reported results in 1992 were
impacted by the $220 million special charge and the adoption of Statement of
Financial Accounting Standards Nos. 109 and 106. Excluding the impact of these
non-recurring items from 1992 results, net income and earnings per share
increased 7% and 8%, respectively, in 1993 as these items, in the aggregate,
contributed $90 million ($.29 per share) to 1992 net income.
42
<PAGE>
As previously mentioned, intense competition and pricing pressures in the
U.S. pharmaceutical and other health care markets are expected to continue in
the near term, particularly from managed care organizations, hospital
associations/alliances, governmental agencies and other large buying groups. In
addition, health care reform legislation in the United States has been proposed
to the Congress by President Clinton. Other health care reform proposals from
members of Congress are being introduced with varied agendas on issues such as
Medicaid and Medicare rebates, price controls, governmental alliances and other
matters. Similarly, in international markets, particularly in Europe and Brazil,
health care spending is subject to increasing governmental scrutiny, much of
which is focused on pharmaceutical prices. While we cannot predict the impact
this proposed health care legislation will have on the Company's worldwide
results of operations, we believe the pharmaceutical industry will continue to
play a very positive role in helping to contain global health care costs through
the development of innovative products. However, it is expected that global
market forces will continue to constrain price growth regardless of the outcome
of health care reform.
The Company is not dependent on any one patent-protected product or line of
products for a substantial portion of its revenues or profits. However,
Premarin, the Company's conjugated estrogens product, which no longer is patent-
protected, does contribute significantly to sales and profits. While Premarin
presently is subject to competition from other hormone replacement products, it
currently is not subject to competition from generic conjugated estrogens
products. The Company cannot presently predict the timing of regulatory approval
of such generic products and their potential impact on the market.
Financial Condition and Liquidity
- --------------------------------------------------------------------------------
Cash, cash equivalents and marketable securities as of December 31, 1993 totaled
$2.2 billion. Principal sources of cash in 1993 were operating activities, which
generated $1.7 billion, and the proceeds from the issuance of $250 million of
30-year debentures (see Note 3). These funds were used principally for dividend
payments of $888 million, common share repurchases of $277 million, and
additions to property, plant and equipment of $518 million. In 1992, the Company
issued $500 million of medium-term notes. These funds, in addition to operating
funds of $1.5 billion, were used for dividend payments, share repurchases,
capital additions and the acquisitions noted in the following paragraphs.
On March 19, 1993, the Company acquired all the outstanding common stock of
Polaner for $67.5 million (see Note 2).
Effective January 16, 1992, the Company acquired a majority interest in
G.I. (see Note 2). The cost to the Company to acquire the outstanding G.I.
shares, which the Company does not own, ranges from approximately $1.0 billion
to $1.3 billion under the option discussed in Note 2.
As also discussed in Note 2, in September 1992, the Company acquired 100%
of the common stock of Symbiosis, a developer and manufacturer of disposable
instruments for endoscopic and laparoscopic surgery, for $175 million.
The Company continued to expand and upgrade its operating plants, research
facilities and office facilities during the year. Significant capital projects
included the completion of pharmaceutical manufacturing facilities in Ireland
and the expansion of Premarin manufacturing facilities in Canada. The expansion
of research and development facilities in Radnor, Pennsylvania, and Andover,
Massachusetts, also continued in 1993. In October 1993, the construction of the
new corporate headquarters in Madison, New Jersey, was completed. The Company
also continued to invest capital in its manufacturing facilities to comply with
environmental regulations.
The Company has significant cash balances, a consistent ability to generate
cash flow from operations and available funds under its Revolving Credit
Facility Agreement (see Note 3). The Company foresees no difficulty in
maintaining its present financial condition and liquidity and the ability to
finance its global research and development, capital programs and other
foreseeable future needs.
43
<PAGE>
Directors and Officers
Board of Directors
John R. Stafford(1)
Chairman, President and
Chief Executive Officer
Clifford L. Alexander, Jr.
President, Alexander & Associates, Inc.
Frank A. Bennack, Jr.
President and Chief
Executive Officer,
The Hearst Corporation
K. Roald Bergethon
Educational Consultant
Robert G. Blount
Executive Vice President
John W. Culligan(1)
Retired-Former Chairman
of the Board
Robin Chandler Duke
National Chair, Population
Action International
John D. Feerick
Dean, Fordham University
School of Law
Edwin A. Gee
Retired-Former Chairman,
International Paper Company
William F. Laporte(1)
Retired-Former Chairman
of the Board
Robert W. Sarnoff
Director/Consultant
John R. Torell III
Chairman,
Torell Management Inc.
William Wrigley
President and Chief
Executive Officer,
Wm. Wrigley Jr. Company
Principal Corporate Officers
John R. Stafford(2,3)
Chairman, President and
Chief Executive Officer
Robert G. Blount(2,3)
Executive Vice President
Stanley F. Barshay(2,3)
Senior Vice President
Joseph R. Bock(2,3)
Senior Vice President
Joseph J. Carr(2,3)
Senior Vice President
Fred Hassan(2,3)
Senior Vice President
Louis L. Hoynes, Jr.(2,3)
Senior Vice President and
General Counsel
John B. Adams
Vice President-Corporate Development
Thomas G. Cavanagh
Vice President-Investor Relations
John R. Considine(2,3)
Vice President-Finance
E. Thomas Corcoran(3)
Vice President
Paul M. Heinrich
Vice President-Engineering
Gerald A. Jibilian
Vice President and Associate
General Counsel
Thomas M. Nee(2)
Vice President-Taxes
Edward A. Schefer
Vice President-Management
Information Systems
Steven A. Tasher
Vice President-Environmental Affairs
and Associate General Counsel-
Environment
Carol G. Emerling
Secretary
Robert J. Haller
Comptroller
Roxanne E. Parker
Treasurer
Principal Division and
Subsidiary Officers
American Home
Food Products, Inc.
Charles E. LaRosa,(3) President
Corometrics Medical Systems
Craig A. Castle, President
Fort Dodge Laboratories
E. Thomas Corcoran,(3)
Vice President, AHPC
Genetics Institute, Inc.
Gabriel Schmergel, President
Quinton Instrument Company
Anthony G. Perri, President
Sherwood Medical Company
David A. Low,(3) President
Specialty Pharmaceuticals Division
David Strunce, President
Symbiosis Corp.
Kevin W. Smith, President
Whitehall International, Inc.
Jean-Claude Leroux,(3) President
Whitehall-Robins
Terrence L. Stecz,(3) President
Wyeth-Ayerst Laboratories
Robert Essner,(3) President
Wyeth-Ayerst International, Inc.
David M. Olivier,(3) President
Wyeth-Ayerst Research
Robert I. Levy, M.D.,
President
(1)Executive Committee
(2)Finance Committee
(3)Operations Committee
44
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Corporate Data
Corporate Employee Relations
Relations with organized labor remain harmonious and responsible. Our labor
agreements offer competitive wages and benefits, giving us the ability to
compete and provide our employees with a broad base of benefit programs.
Our established affirmative action and equal employment programs
demonstrate our long-standing commitment to provide job and promotional
opportunities for all qualified persons regardless of age, color, national
origin, physical or mental disability, race, religion, sex or status as a
Vietnam-era veteran or a qualified disabled veteran.
Our continued progress is the result of our ability to attract and retain
highly qualified employees who, through their superior performance, contribute
significantly to our success. We sincerely appreciate the dedication, commitment
and support all of our employees gave us throughout 1993.
Independent Auditors
Arthur Andersen & Co.
Transfer Agent and Registrar
Chemical Bank
450 West 33rd Street
New York, NY 10001
Executive Offices
American Home Products
Corporation
Five Giralda Farms
Madison, NJ 07940
Annual Meeting
The Annual Meeting of Shareholders will be held on April 20, 1994, in Short
Hills, New Jersey.
Form 10-K
A copy of the Company's Form 10-K Annual Report to the Securities and
Exchange Commission may be obtained by any shareholder without charge upon
written request to:
American Home Products
Corporation
Treasurer's Department
Five Giralda Farms
Madison, NJ 07940
(201) 660-6936
Master Investment Plan
The plan provides shareholders with the opportunity to automatically reinvest
dividends or to make cash purchases of additional shares of the Company's common
stock. Inquiries should be directed to:
Chemical Bank
Dividend Reinvestment
Department
J.A.F. Building
P.O. Box 3069
New York, NY 10116-3069
Shareholder Relations
(800) 851-9677
Policy on Health, Safety and
Environmental Protection
A copy of the Company's "Policy on Health, Safety and Environmental Protection"
may be obtained upon written request to:
American Home Products Corporation
Office of Environment and Safety
Five Giralda Farms
Madison, NJ 07940
Product designations appearing
in differentiated type are trademarks.
Pages 25-44 are printed on
recycled paper.
<PAGE>
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
<PAGE>
EXHIBIT (23)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference in this Form 10-K of our report dated
January 18, 1994 included in American Home Products Corporation's (the
Company) Annual Report to Shareholders for the year ended December 31,
1993. Furthermore, we consent to the incorporation of our reports
dated January 18, 1994 included in or made part of this Form 10-K,
into the Company's previously filed Registration Statements on Form
S-3 (File No. 33-45324) and on Form S-8 (File Nos. 33-24068, 33-41434,
33-50149 and 33-55456).
ARTHUR ANDERSEN & CO.
New York, New York
March 23, 1994
