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, 1995 1-1225
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AMERICAN HOME PRODUCTS CORPORATION
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(Exact name of registrant as specified in its charter)
Delaware 13-2526821
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
Five Giralda Farms, Madison, NJ 07940-0874
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (201) 660-5000
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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
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Common Stock, $.33 - 1/3 par value New York Stock Exchange
- ---------------------------------- -----------------------
6 - 7/8% Notes due April 15, 1997 New York Stock Exchange
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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
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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.
X
--------
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, 1996 - $31,551,007,000
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, 1996
-------------
Common Stock, $.33 - 1/3 par value 315,188,641
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) 1995 Annual Report to Shareholders - In Parts I, II and IV
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(2) Proxy Statement filed March 21, 1996 - In Parts III and IV
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<PAGE>
PART I
------
ITEM 1. BUSINESS
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General
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American Home Products Corporation (the "Company"), a
Delaware corporation organized in 1926, is engaged in the
discovery, development, manufacture, distribution and sale of
a diversified line of products in three business segments:
health care products, agricultural products and food
products. Health care products include branded and generic
ethical pharmaceuticals, biologicals, nutritionals, consumer
health care products, medical devices and animal biologicals
and pharmaceuticals. The Company holds majority interests in
Genetics Institute, Inc. and Immunex Corporation, each a
biopharmaceutical company whose stock is publicly traded.
Agricultural products include crop protection and pest
control products such as herbicides, insecticides, fungicides
and plant growth regulators. Food products include entrees,
side dishes, spreadable fruit products, snacks and other food
products.
In late 1994, the Company acquired all of the outstanding
common stock of American Cyanamid Company ("Cyanamid"). The
aggregate purchase price to acquire all of Cyanamid including
related fees and expenses was approximately $9.6 billion.
Additional information relating to the Cyanamid acquisition
and certain other acquisitions and divestitures is set forth
in Note 2 of the Notes to Consolidated Financial Statements
and in the Management's Discussion and Analysis of Financial
Condition and Results of Operations in the Company's 1995
Annual Report to Shareholders and is incorporated herein by
reference.
Unless stated to the contrary, or unless the context
otherwise requires, references to the Company in this report
include American Home Products Corporation and its
subsidiaries.
Industry Segments
-----------------
Financial information, by industry segment, for the three
years ended December 31, 1995 is set forth on page 42 of the
Company's 1995 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 three
industry segments. The product designations appearing in
differentiated type herein are trademarks.
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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, managed care
organizations and physicians. Some of these sales are made
through large buying groups representing certain of these
customers. Principal product categories for human use
include women's health care, infant nutritional,
cardiovascular, mental health, anti-inflammatory, anti-
infective, anti-cancer, analgesic and vaccine products, as
well as generics. Principal veterinary product categories
include vaccines, anthelmintics and growth implants. The
Company manufactures these products in the United States and
Puerto Rico, and in 21 foreign countries.
Sales of the women's health care products category in the
aggregate accounted for more than 10% of consolidated net
sales in 1995, 1994 and 1993. Except for sales of the
women's health care products category, no single
pharmaceutical product or other category of products
accounted for more than 10% of consolidated net sales in
1995, 1994 or 1993. The operating income before taxes from
the women's health care products category in the aggregate,
and the PREMARIN line of products individually, accounted for
more than 10% of consolidated operating income before taxes
in 1995, 1994 and 1993.
Consumer health care - The Company's over-the-counter health
--------------------
care products include analgesics, cough/cold/allergy
remedies, vitamins and mineral supplements, hemorrhoidal and
asthma relief items, and in-home diagnostic test products.
These products are generally sold to wholesalers, retailers
and managed care organizations, and are primarily promoted to
consumers through advertising. These products are
manufactured in the United States and Puerto Rico and in 17
foreign countries.
No single consumer health care product or category of
products accounted for more than 10% of consolidated net
sales or operating income before taxes in 1995, 1994 or 1993.
Medical Devices - Principal products in this segment include
---------------
needles and syringes, tubes and catheters, tympanic and
predictive thermometers, wound closure products, ophthalmic
surgical equipment and pharmaceuticals, exercise equipment,
arthroscopic instruments, diagnostic instrumentation, enteral
feeding systems and access devices, and other hospital
products which are promoted and sold principally to
physicians, hospitals, other health care institutions and
wholesalers. Buying groups also represent certain of these
customers. In addition to the United States and Puerto Rico,
these products are manufactured in 11 foreign countries.
No single medical device product or category of products
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accounted for more than 10% of consolidated net sales or
operating income before taxes in 1995, 1994 or 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 14 through 23 and
pages 25 through 27 of the Company's 1995 Annual Report to
Shareholders, which information is incorporated herein by
reference.
2. AGRICULTURAL PRODUCTS -
Principal products in this segment include herbicides,
primarily the imidazolinone herbicides, insecticides and
fungicides which are promoted to consumers worldwide through
advertising and generally sold directly to wholesalers and
retailers. In addition to the United States and Puerto Rico,
these products are manufactured in nine foreign countries.
No single agricultural product or category of products
exceeded 10% of consolidated net sales or operating income
before taxes in 1995 or 1994.
Further information regarding the principal products in the
Agricultural Products segment and the principal markets
served therein is included on pages 23, 24 and 27 of the
Company's 1995 Annual Report to Shareholders, which
information is incorporated herein by reference.
3. FOOD PRODUCTS -
Products in this segment include prepared pastas and other
entrees, side dishes, regional specialty foods, condiments,
snack products, spreadable fruit products and other food
products which are promoted to consumers through advertising
and generally sold directly to wholesalers and retailers.
No single food product or category of products exceeded 10%
of consolidated net sales or operating income before taxes in
1995, 1994 or 1993.
Further information regarding the principal products in the
Food Products segment and the principal markets served
therein is included on pages 26 and 27 of the Company's 1995
Annual Report to Shareholders, which information 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 consolidated financial position or
results of operations.
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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 business, most of the Company's major
products are no longer patent protected. 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 late 1997. The
anti-depressant EFFEXOR will have patent protection into
2007. TETRAMUNE, a combination vaccine, will have patent
protection until 2007. SUPRAX, a third-generation
cephalosporin antibiotic, remains under patent protection
until 2002. VERELAN, a calcium channel blocker, will have
patent protection until 2006. PREMPRO, a combination
estrogen and progestin product, will have patent protection
until 2006.
Sales in the consumer health care and medical devices
businesses and food products segment are largely supported by
the Company's trademarks and brand names. 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 "Competition" below, for a discussion of generic
and store brands competition.
In the Agricultural Products segment, the imidazolinone
herbicide products SCEPTER and PURSUIT will have patent
protection until at least 2006.
Seasonality
-----------
Sales and results of operations of the U.S. Agricultural
Products business are seasonal and tend to be heavily
concentrated in the first six months of each year. Sales of
consumer health care products are affected by seasonal demand
for cold/flu products and, as a result, second quarter
results for consumer health care products tend to be lower
than results in other quarters.
Competition
-----------
HEALTH CARE PRODUCTS -
The Company operates in the highly competitive health care
industry which includes the ethical pharmaceutical, consumer
health care and medical devices businesses. Within the
ethical pharmaceutical business, the Company has many major
multi-national competitors and numerous other smaller
domestic and foreign competitors. Based on net sales, the
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Company believes it ranks within the top five of major
competitors within this business category. The consumer
health care business also has many competitors. Based on net
sales, the Company believes it ranks within the top 10 of
major competitors within this business category.
The Company's competitive position in the Health Care
Products segment is affected by several factors including
resources available to develop, enhance and promote products,
customer acceptance, product quality, patent protection,
development of alternative therapies by competitors,
scientific and technological advances, governmental reforms
on pricing and generic substitutes. 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 continued growth of managed care organizations,
such as health maintenance organizations ("HMOs") and
pharmaceutical benefit management companies, has resulted in
increased competitive pressures on health care products.
PREMARIN, the Company's conjugated estrogens product, which
has not had patent protection for many years, contributes
significantly to sales and results of operations. PREMARIN
is not currently subject to generic competition in the United
States. A U.S. Food and Drug Administration (FDA) advisory
committee meeting was held in July 1995 to discuss relative
differences in safety and efficacy among estrogen products
and to advise the FDA on the activity of various estrogenic
components in PREMARIN relative to the FDA's review of
applications for generic conjugated estrogens. The FDA
advisory committee concluded that there is insufficient data
to assess whether or not any individual component or
combination of components of PREMARIN, other than estrone and
equilin, must be present to achieve clinical efficacy and
safety. The Company cannot predict the timing or outcome of
the FDA's action on currently pending applications for
generic conjugated estrogen products. While the introduction
of generic competition ordinarily is expected to
significantly impact the market for a brand name product, the
extent of such impact on PREMARIN and related products cannot
be predicted with certainty due to a number of factors,
including the nature of the product and the introduction of
the combination estrogen and progestin products PREMPRO and
PREMPHASE.
U.S. health care costs will continue to be debated during
1996. Similarly, in international markets, health care
spending is subject to increasing governmental review, much
of which is focused on pharmaceutical prices. While the
Company cannot predict the impact proposed health care
legislation may have on the Company's worldwide results of
operations, the Company believes that 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.
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The growth of generic and store brands continued to impact
some of the Company's consumer health care branded product
line categories in 1995 and is expected to continue during
1996. The medical devices business, particularly in the
needle and syringe, and suture product lines, is also
impacted by competitive market conditions which continue to
place significant pressure on prices.
AGRICULTURAL PRODUCTS -
The Agricultural Products segment has over 40 competitors
worldwide and ranks in the top 10 based on net sales. Among
these companies, the top 10 competitors are multi-national,
representing over 70% of the sales in the agrochemical
market. Competitive factors include product efficacy,
distribution channels and resource availability for
development of new products and improvement of existing ones.
There can also be generic competition when products are no
longer patent protected.
FOOD PRODUCTS -
In the Food Products segment, product quality, price and
relevance to changing family needs and tastes are important
competitive factors. Additionally, the growth of store
brands is a factor affecting competition in the food
industry.
GENERAL -
In all business segments, 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.
Research and development expenditures totaled $1,354,963,000
in 1995, $817,090,000 in 1994 and $662,689,000 in 1993, with
approximately 78% of these expenditures in the ethical
pharmaceutical area in 1995.
The Company currently has 10 New Drug Applications and nine
Supplemental Drug Applications filed with the FDA for review
and 79 active Investigational New Drug Applications pending.
During 1995, several major collaborative research and
development arrangements continued with other pharmaceutical
and biotechnology companies. Research and development
projects continued at Genetics Institute, Inc., Immunex
Corporation and at the Company's other health care
operations. It is not anticipated, however, that the
products developed as a result of these activities will
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contribute significantly to consolidated revenues or
operating profits in the near future. The extent of
subsequent contributions, if any, cannot presently be
predicted. Additionally, the Agricultural Products segment
has three products awaiting approval by the United States
Environmental Protection Agency ("EPA").
During 1995, the Company received FDA approval for the
cardiovascular product CORDARONE I.V., PREMPRO and PREMPHASE
single combination tablets and the OTC product ORUDIS KT
(ketoprofen).
Regulation
----------
The Company's various health care, agricultural 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 many of the
Company's health care and food products, including human and
animal pharmaceuticals, vaccines, consumer health care
products, medical devices and food products. The 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 is appropriate 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 processes require extensive
time, testing and documentation for approval, resulting in
significant costs for new product introductions. The 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.
Federal law also 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 and other strategies
to contain the cost of pharmaceutical products. The federal
Vaccines for Children entitlement program enables states to
purchase vaccines at federal vaccine prices and limits
federal vaccine price increases to the increase in the
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consumer price index. Federal and state rebate programs are
expected to continue.
The manufacture and sale of pesticides are regulated by the
EPA. No new pesticide and no existing pesticide for a new
use may be manufactured, processed or used without prior
notice to the EPA. Outside the United States, agricultural
chemicals are regulated by various agencies, often by
standards which differ from those in the United States.
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"),
commonly known as Superfund. (See Item 3. Legal
Proceedings.) In connection with the spin-off in 1993 by
Cyanamid of Cytec Industries Inc. ("Cytec"), Cyanamid's
former chemicals business, Cytec assumed the environmental
liabilities relating to the chemicals businesses, except for
the former chemical business site at Bound Brook, New Jersey.
This assumption is not binding on third parties, and if Cytec
were unable to satisfy these liabilities, they would, in the
absence of other circumstances, be enforceable against
Cyanamid.
It is the Company's policy to accrue environmental cleanup
costs if it is probable that a liability has been incurred
and an amount is reasonably estimated. For further
information on environmental matters, see Notes 3, 6 and 11
of the Notes to Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition
and Results of Operations in the Company's 1995 Annual Report
to Shareholders, which are incorporated herein by reference.
Employees
---------
At the end of 1995, the Company had 64,712 employees world-
wide, with 36,734 employed in the United States including
Puerto Rico. Approximately 22% of worldwide employees are
represented by various collective bargaining groups.
Relations with most organized labor groups remain relatively
stable.
Financial Information about the Company's Foreign and
-----------------------------------------------------
Domestic Operations
-------------------
Financial information about foreign and domestic operations
for the three years ended December 31, 1995, as set forth on
page 43 of the Company's 1995 Annual Report to Shareholders,
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is incorporated herein by reference.
Certain Factors Affecting Future Performance
--------------------------------------------
Various factors could affect the future performance of the
Company. These factors include, among others, the ability of
the Company to develop and obtain regulatory approval for new
products, the introduction of new products by competitors and
other factors discussed or incorporated by reference in this
report on Form 10-K, including factors described under the
caption "Competition". The Company's future business could
also be affected by developments relating to legislation, FDA
and other governmental regulation, taxes, litigation, foreign
currency exchange restrictions, foreign exchange rates and
labor conditions.
ITEM 2. PROPERTIES
----------
The Company's executive offices and the headquarters for its
domestic consumer health care and food products businesses
are located in Madison, New Jersey. 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. The Company's principal medical
devices business maintains its headquarters in St. Louis,
Missouri. The Agricultural Products segment currently
maintains its headquarters in Wayne, New Jersey. The
Agricultural Products segment will be relocating its
headquarters to Parsippany, New Jersey in late 1996. The
Company's foreign subsidiaries and affiliates, which
generally own their properties, have manufacturing facilities
in 24 countries outside the United States. The following are
the principal manufacturing plants (M) and research
laboratories (R) of the Company:
INDUSTRY SEGMENT
Health Care Products:
Andover, Massachusetts (M,R)
Askeaton, Ireland (M)
Canlubang, Philippines (M)
Carolina, Puerto Rico (M)
Catania, Italy (M)
Chazy, New York (R)
Deland, Florida (M)
Fort Dodge, Iowa (M,R)
Georgia, Vermont (M)
Gosport, United Kingdom (M,R)
Guayama, Puerto Rico (M)
Havant, United Kingdom (M,R)
Malvern, Pennsylvania (M)
Marietta, Pennsylvania (M)
Mexico City, Mexico (M)
Montreal, Canada (M,R)
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Muenster, Germany (M)
Newbridge, Ireland (M)
Parramatta, Australia (M)
Pearl River, New York (M,R)
Princeton, New Jersey (R)
Radnor, Pennsylvania (R)
Richmond, Virginia (M,R)
Rouses Point, New York (M,R)
Smithfield, Australia (M)
West Chester, Pennsylvania (M)
Agricultural Products:
Catania, Italy (M)
Genay, France (M)
Gravelines, France (M)
Hannibal, Missouri (M)
Paulina, Brazil (M)
Princeton, New Jersey (R)
Resende, Brazil (M)
Schwabenheim, Germany (R)
Food Products:
Milton, Pennsylvania (M,R)
Vacaville, California (M,R)
All of the above properties are owned except the land
and a 757,000 sq. ft. facility in Guayama, Puerto Rico, which
is under a lease expiring in 2007 with options for renewal
and purchase. 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.
ITEM 3. LEGAL PROCEEDINGS
-----------------
The Company and its subsidiaries are parties to numerous
lawsuits and claims arising out of the conduct of its
business, including product liability and other tort claims.
Included among these cases are lawsuits arising out of the
use of the Company's DTP and polio vaccines and its
agricultural products.
There are approximately 472 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. During 1994, the Legal Aid Board in England,
where more than 1,100 cases had been pending, discontinued
funding for the litigation and, as a result, only 34 cases
remain pending in that jurisdiction. The Northern Ireland
Legal Aid Board has also discontinued the funding of the
litigation in that jurisdiction. In Scotland, where 266
cases remain, the Scottish Legal Aid Board has indicated that
it will continue to fund the Scottish cases, although there
has been no subsequent activity in the Scottish cases.
The Company has been served with more than 600 lawsuits in
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federal and state courts alleging injuries as a result of use
of the NORPLANT SYSTEM, the Company's implantable
contraceptive containing levonorgestrel. Approximately 70 of
the cases have been filed as class actions and the remainder
are proceeding as individual suits. In June 1994, a class of
women who have had removal difficulties, scarring and related
injuries allegedly as a result of the NORPLANT SYSTEM was
certified. Doe v. Wyeth-Ayerst Laboratories (Cir. Ct. Ill.,
--------------------------------
Cook Cty. 1993). On March 5, 1996, the Doe court denied the
plaintiffs' request to expand the scope of the class to
include all women allegedly injured by the NORPLANT SYSTEM,
on the grounds that such claims raise predominantly
individual, rather than common, issues. The Company is
seeking reconsideration of the original class certification
which was limited to removal difficulties. On December 6,
1994, the Judicial Panel on Multi-District Litigation ("MDL")
ordered that all NORPLANT SYSTEM lawsuits filed in federal
court be consolidated in the U.S. District Court (E.D.Tex.)
in Beaumont. The MDL plaintiffs have also requested class
certification and the court has tentatively concluded,
subject to further briefing and consideration, that certain
specified issues satisfy the prerequisites for class action
treatment. The Company will continue to contest class
certification in this matter.
On June 29, 1995, an action was brought in the U.S. District
Court (S.D.N.Y.) on behalf of plaintiffs and all similarly
situated individuals who allegedly contracted paralytic
poliomyelitis as a direct result of the administration of the
Company's oral polio vaccine, ORIMUNE, or through contact
with an immunized person. Plaintiffs seek compensatory and
punitive damages on behalf of the putative class. Stuart, et
----------
al. v. American Cyanamid, et al.
--------------------------------
On March 7, 1994, an action was brought against the Company
by Johnson & Johnson ("J&J") and Ortho Pharmaceutical
Corporation ("Ortho") currently seeking $217 million in
damages alleged to have arisen from a preliminary injunction
which was granted in a patent infringement lawsuit brought by
the Company and which had prevented J&J and Ortho from
marketing an oral contraceptive containing norgestimate for
approximately 10 months until it was overturned by the Court
of Appeals for the Federal Circuit in a two-to-one decision.
Thereafter, in the underlying action in the district court,
the jury found against the Company on its claim of
infringement. This verdict was affirmed by the Court of
Appeals for the Federal Circuit and certiorari was recently
denied by the Supreme Court.
On October 14, 1993, Rite Aid Corporation, Revco D.S. Inc.
and other retail drug chains and retail pharmacies filed an
action in U.S. District Court (M.D.Pa.) against the Company,
other pharmaceutical manufacturers and a pharmacy benefit
management company alleging that the Company and other
defendants provided discriminatory price and promotional
allowances to managed care organizations and others in
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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 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. In addition, a mail order pharmacy
plaintiff alleges that it was forced out of business and
certain plaintiffs also allege that the defendants' patents
covering brand name prescription drugs give the defendants
power to enter into exclusionary arrangements with certain
managed care customers and seek compulsory patent licenses.
The various class actions were consolidated as a single class
action (the "Consolidated Class Action") which alleges
violations of Section 1 of the Sherman Act. All of the
federal actions have been coordinated and consolidated for
pretrial purposes under the caption In re Brand Name
----------------
Prescription Drug Antitrust Litigation (MDL 997 N.D. Ill.).
--------------------------------------
These federal actions seek treble damages in unspecified
amounts and injunctive and other relief. The court in the
federal actions preliminarily approved a settlement among
certain defendants, including the Company, and the
Consolidated Class Action plaintiffs. The settlement is
subject to final approval by the court, which must determine
that the settlement is fair to the members of the plaintiff
class of retail pharmacies. The settlement provides, among
other things, for certain payments to be made by the settling
defendants, over a period of three years, to the Consolidated
Class Action plaintiffs. The Company's settlement payments
(including payments to be made on behalf of Cyanamid) would
total $42.5 million. The settlement also provides that it
shall not be deemed or construed to be an admission or
evidence of any violation of any statute or law or of any
liability or wrongdoing by the Company or of the truth of any
of the claims or allegations alleged in the Consolidated
Class Action. The individual federal actions, including
those brought by Rite Aid Corporation, Revco D.S. Inc. and
other retail drug chains, remain pending against the Company.
In addition to the federal actions, similar litigation on
behalf of consumers or retail pharmacies has been brought in
various state courts, including purported class actions in
Alabama, Arizona, California, Colorado, District of Columbia,
Maine, Michigan, Minnesota, New York, Washington and
Wisconsin. These actions are all in various pre-trial
stages. The actions in Colorado and Washington have been
dismissed on pre-trial motions. Plaintiffs have appealed the
dismissal of the Washington action.
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
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commenced in various federal and state courts, alleged 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. As previously
disclosed, the Company has settled most of the cases as well
as a Federal Trade Commission ("FTC") proceeding. The
Company is currently a defendant in litigation brought in
federal court by the State of Louisiana. In Texas, a
purported class action under the Texas Deceptive Trade
Practices Act was dismissed. In Alabama, class certification
was denied in a state court action on behalf of indirect
purchasers. The Company is also a defendant in a purported
class action brought in federal court under Massachusetts
state law on behalf of indirect purchasers of infant formula
in Massachusetts. 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 Canadian Bureau
of Competition Policy has closed inquiries into infant
formula pricing and marketing practices in Canada.
The FTC and state attorneys general have sought information
concerning pricing practices relating to a marketing program
for certain crop protection products. The FTC is also
investigating allegations of concerted action in the pricing
of pharmaceutical products. The FTC has closed an inquiry
concerning Cyanamid's opposition to a petition by another
company to the FDA to reclassify sutures and a patent
infringement lawsuit against that company.
In response to a subpoena from the New York State Attorney
General, the Company has provided information relating to the
Company's copromotion of Merck's osteoporosis drug FOSAMAX
and disease management activities.
Pursuant to an FTC consent order entered into by the Company
in connection with the acquisition of Cyanamid, the Company
divested the Wyeth-Ayerst tetanus and diphtheria vaccines
businesses and has applied for FTC approval to license
Cyanamid's rotavirus research. The FTC has modified the
order, which also imposes certain reporting obligations, to
require prior notice rather than prior FTC approval of
certain acquisitions involving tetanus, diphtheria and
rotavirus vaccines.
As discussed in Item I, the Company is a party to, or
otherwise involved in, legal proceedings under CERCLA
directed at the cleanup of 70 Superfund sites, including the
Cyanamid-owned Bound Brook, N.J. site. 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. As assessments and cleanups proceed, these
liabilities are reviewed periodically and are adjusted as
I-13
<PAGE>
additional information becomes available. Environmental
liabilities are inherently unpredictable. The liabilities
can change substantially due to such factors as additional
information on the nature or extent of contamination, methods
of remediation required, and other actions by governmental
agencies or private parties. The 70 Superfund sites exclude
sites for which Cytec assumed full liability and agreed to
indemnify Cyanamid but include certain sites for which there
is shared responsibility between Cyanamid and Cytec. The
Company has no reason to believe that it has any practical
exposure to any of the liabilities against which Cytec has
agreed to assume and indemnify Cyanamid.
During 1992, the U.S. Environmental Protection Agency filed
an action against Ekco Housewares ("Ekco"), a former
subsidiary of the Company, in U.S. District Court (N.D. 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. The Company
assumed the defense of the action pursuant to an
indemnification agreement. In January 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. On appeal, the U.S. Court of Appeals for
the Sixth Circuit affirmed $2.8 million of the judgment and
reversed and remanded the remainder.
For information concerning certain litigation involving
Genetics Institute, Inc., see Part I, Item 3 of the Genetics
Institute, Inc. Annual Report on Form 10-K for the fiscal
year ended December 31, 1995, which Item is incorporated
herein by reference.
For information concerning certain litigation involving
Immunex Corporation, see Part I, Item 3 of the Immunex
Corporation Annual Report on Form 10-K for the fiscal year
ended December 31, 1995, 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 consolidated
financial position but could be material to the results of
operation in any one accounting period.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
---------------------------------------------------
None.
I-14
<PAGE>
EXECUTIVE OFFICERS OF THE REGISTRANT AS OF MARCH 27, 1996
- ---------------------------------------------------------
Each officer is elected to hold office until a successor is chosen or
until earlier removal or resignation. None of the executive officers
is related to another:
Elected to
Name Age Offices and Positions Office
---- --- --------------------- ----------
John R. Stafford 58 Chairman of the Board, December 1986
President and Chief Executive
Officer, Chairman of Executive,
Finance, Operations and
Nominating Committees
Business Experience: 1991 to date, Chairman
of the Board, President
and Chief Executive
Officer (President to May
1990 and from February 1994)
Robert G. Blount 57 Senior Executive Vice President, October 1995
Director, Member of Executive,
Finance and Operations
Committees
Business Experience: 1991 to October 1995, Executive
Vice President
October 1995 to date, Senior
Executive Vice President
Fred Hassan 50 Executive Vice President, October 1995
Director, Member of Finance
and Operations Committees
Business Experience: To March 1993,
President, Wyeth-Ayerst
Laboratories Division
March 1993 to May 1993,
Group Vice President,
May 1993 to October 1995, Senior
Vice President
October 1995 to date, Executive
Vice President
Stanley F. Barshay 56 Senior Vice President August 1987
Member of Finance and Oper-
ations Committees
Business Experience: 1991 to date, Senior
Vice President
I-15
<PAGE>
Elected to
Name Age Offices and Positions Office
---- --- --------------------- ----------
Joseph J. Carr 53 Senior Vice President May 1993
Member of Finance and Oper-
ations Committees
Business Experience: To April 1991, Vice President
April 1991 to May 1993, Group
Vice President
May 1993 to date, Senior Vice
President
Louis L. Hoynes, Jr. 60 Senior Vice President and November 1990
General Counsel
Member of Finance and
Operations Committees
Business Experience: 1991 to date, Senior
Vice President and General
Counsel
William J. Murray 50 Senior Vice President October 1995
Member of Finance and
Operations Committees
Business Experience: To September 1992, President,
Agricultural Division,
American Cyanamid Company
September 1992 to January 1995,
Group Vice President,
American Cyanamid Company
January 1995 to October 1995,
Vice President
October 1995 to date, Senior
Vice President
David M. Olivier 52 Senior Vice President January 1996
Member of Finance and
Operations Committees
Business Experience: To January 1996, President,
Wyeth-Ayerst International,
Inc.
January 1996 to date, Senior
Vice President
John R. Considine 45 Vice President - Finance February 1992
Member of Finance and
Operations Committees
Business Experience: To February 1992,
Vice President and Treasurer
February 1992 to date, Vice
President - Finance
I-16
<PAGE>
Elected to
Name Age Offices and Positions Office
---- --- --------------------- ----------
Paul J. Jones 50 Vice President and Comptroller May 1995
Member of Finance Committee
Business Experience: To April 1995, Senior Vice
President - Finance and
Administration, Wyeth-Ayerst
Laboratories Division
May 1995 to date, Vice Presi-
dent and Comptroller
Rene R. Lewin 49 Vice President - Human May 1994
Resources, Member of Finance
Committee
Business Experience: To May 1994, Executive Director
Human Resources - Worldwide
Pharmaceutical Division,
Eli Lilly and Company
May 1994 to date, Vice
President - Human Resources
David Lilley 49 Vice President January 1995
Member of Finance and
Operations Committees
Business Experience: To November 1991, Vice
President, Cyanamid Interna-
tional Lederle Division
November 1991 to March 1992,
President, Cyanamid Interna-
tional Chemicals Division
March 1992 to January 1995,
Group Vice President,
American Cyanamid Company
January 1995 to date, Vice
President
Thomas M. Nee 56 Vice President - Taxes May 1986
Member of Finance Committee
Business Experience: 1991 to date, Vice President -
Taxes
I-17
<PAGE>
PART II
-------
ITEM 5. MARKET FOR REGISTRANT'S COMMON STOCK AND RELATED
STOCKHOLDER 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 45 of the Company's 1995
Annual Report to Shareholders, are incorporated herein by
reference.
There were 68,045 holders of record of the Company's common
stock as of March 1, 1996.
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 28 and 29 of the Company's 1995 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 46 through 49
of the Company's 1995 Annual Report to Shareholders, is
incorporated herein by reference.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
-------------------------------------------
The Consolidated Financial Statements and Notes on pages 30
through 43 of the Company's 1995 Annual Report to Share-
holders, the Report of Independent Public Accountants and the
Management Report on Financial Statements on page 44, and
Quarterly Financial Data on page 45, are incorporated herein
by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
-----------------------------------------------------------
None.
II-1
<PAGE>
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 2 through 4 of a
definitive proxy statement filed with the Securities and
Exchange Commission on March 21, 1996 ("the 1996 Proxy
Statement").
(b) Information relating to the Company's executive officers
as of March 27, 1996 is furnished in Part I hereof under a
separate unnumbered caption ("Executive Officers of the
Registrant as of March 27, 1996").
ITEM 11. EXECUTIVE COMPENSATION
----------------------
Information relating to executive compensation is in-
corporated herein by reference to pages 7 through 12
of the 1996 Proxy Statement. Information with respect
to compensation of directors is incorporated herein by
reference to page 5 of the 1996 Proxy Statement.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
---------------------------------------------------
Information relating to security ownership is incorporated by
reference to page 6 of the 1996 Proxy Statement.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
----------------------------------------------
None.
III-1
<PAGE>
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 30 through 44 of the Company's 1995 Annual Report to
Shareholders, are incorporated herein by reference.
Pages
-----
Consolidated Balance Sheets as of
December 31, 1995 and 1994 30
Consolidated Statements of Income
for the years ended December 31,
1995, 1994 and 1993 31
Consolidated Statements of Retained
Earnings and Additional Paid-in
Capital for the years ended
December 31, 1995, 1994 and 1993 32
Consolidated Statements of Cash Flows
for the years ended December 31, 1995,
1994 and 1993 33
Notes to Consolidated Financial Statements 34-43
Report of Independent Public Accountants 44
(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 Schedule IV-7
Schedule II - Valuation and Qualifying
Accounts for the years
ended December 31, 1995,
1994 and 1993 IV-8
Schedules other than those listed above are omitted because
they are not applicable.
IV-1
<PAGE>
ITEM 14. (Continued)
(a) 3. Exhibits
--------
Exhibit No. Description
----------- -----------
(2.1) The Registrant's Statement on Schedule 14D-1 relating to
the Registrant's tender offer for all issued and
outstanding shares of American Cyanamid Company, filed on
August 10, 1994 (the "Schedule 14D-1"), and all exhibits
and amendments thereto are hereby incorporated herein by
reference.
(2.2) Agreement and Plan of Merger, dated August 17, 1994, as
amended, among American Home Products Corporation, AC
Acquisition Corp. and American Cyanamid Company, filed as
Exhibit (I) to the Report on Schedule 13D for Immunex
Corporation filed by the Registrant, dated December 1,
1994 for the event which occurred on November 21, 1994 is
hereby incorporated herein by reference.
(3.1) The Registrant's Restated Certificate of Incorporation as
amended to date.
(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 American
Home Products Corporation 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
American Home Products Corporation 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) A Credit Agreement, dated as of September 9, 1994, among
American Home Products Corporation, American Home Food
Products, Inc., Sherwood Medical Company, A.H. Robins
Company, Incorporated, the several banks and other
financial institutions from time to time parties thereto
and Chemical Bank, as agent for the lenders thereunder,
filed as Exhibit (11(b)(2)) in Amendment No. 7 to the
Schedule 14D-1 is hereby incorporated herein by
reference.
IV-2
<PAGE>
ITEM 14. (Continued)
(a) 3. Exhibits
--------
Exhibit No. Description
----------- -----------
(10.2) B Credit Agreement, dated as of September 9, 1994, among
American Home Products Corporation, American Home Food
Products, Inc., Sherwood Medical Company, A.H. Robins
Company, Incorporated, the several banks and other
financial institutions from time to time parties thereto
and Chemical Bank, as agent for the lenders thereunder,
filed as Exhibit (11(b)(3)) in Amendment No. 7 to the
Schedule 14D-1 is hereby incorporated herein by
reference.
(10.3) First Amendment to A Credit Agreement, dated as of August
4, 1995, among American Home Products Corporation,
American Home Food Products, Inc., Sherwood Medical
Company, A.H. Robins Company, Incorporated, the several
banks and other financial institutions from time to time
parties thereto and Chemical Bank, as agent for the
lenders thereunder.
(10.4) First Amendment to B Credit Agreement, dated as of August
4, 1995, among American Home Products Corporation,
American Home Food Products, Inc., Sherwood Medical
Company, A.H. Robins Company, Incorporated, the several
banks and other financial institutions from time to time
parties thereto and Chemical Bank, as agent for the
lenders thereunder.
(10.5) * 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.
(10.6) * 1980 Stock Option Plan, as amended is incorporated by
reference to Exhibit (10.3) of the Registrant's Form 10-K
for the year ended December 31, 1991.
(10.7) * Amendment to the 1980 Stock Option Plan.
(10.8) * 1985 Stock Option Plan, as amended is incorporated by
reference to Exhibit (10.4) of the Registrant's Form 10-K
for the year ended December 31, 1991.
(10.9) * Amendment to the 1985 Stock Option Plan.
*Denotes management contract or compensatory plan or arrangement
required to be filed as an exhibit hereto.
IV-3
<PAGE>
ITEM 14. (Continued)
(a) 3. Exhibits
--------
Exhibit No. Description
----------- -----------
(10.10)* 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.
(10.11)* 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.
(10.12)* 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.
(10.13)* Amendment to the 1990 Stock Incentive Plan.
(10.14)* 1993 Stock Incentive Plan is incorporated herein by
reference to Exhibit (I) of the Registrant's Proxy
Statement filed March 17, 1994.
(10.15)* Amendment to the 1993 Stock Incentive Plan.
(10.16)* 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.
(10.17)* Form of Deferred Compensation Agreement.
(10.18)* Form of American Home Products Corporation Restricted
Stock Performance Award Agreement under the 1993 Stock
Incentive Plan for awards granted in 1994 is incorporated
herein by reference to Exhibit (10.12) of the
Registrant's Form 10-K for the year ended December 31,
1994.
(10.19)* Form of Amendment to the American Home Products
Corporation Restricted Stock Performance Award Agreement
under the 1993 Stock Incentive Plan relating to the 1994
awards is incorporated herein by reference to Exhibit
(10.13) of the Registrant's Form 10-K for the year ended
December 31, 1994.
*Denotes management contract or compensatory plan or arrangement
required to be filed as an exhibit hereto.
IV-4
<PAGE>
ITEM 14. (Continued)
(a) 3. Exhibits
--------
Exhibit No. Description
----------- -----------
(10.20)* Form of American Home Products Corporation Restricted
Stock Performance Award Agreement under the 1993 Stock
Incentive Plan for award grants in 1995-1997.
(10.21)* American Home Products Corporation 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.
(10.22)* American Home Products Corporation Retirement Plan for
Outside Directors, as amended on January 27, 1994 is
herein incorporated by reference to Exhibit (10.12) of
the Registrant's Form 10-K for the year ended December
31, 1993.
(10.23)* Restricted Stock Trust Agreement under the 1993 Stock
Incentive Plan.
(10.24)* 1996 Stock Incentive Plan, as approved by the Board of
Directors on January 25, 1996 subject to the approval of
stockholders at the April 1996 Annual Meeting.
(10.25)* Nonfunded Deferred Compensation Plan for Directors, as
amended as of January 25, 1996.
(10.26)* Form of American Home Products Corporation Stock Option
Agreement.
(10.27)* Form of American Home Products Corporation Special Stock
Option Agreement (phased vesting).
(10.28)* Form of American Home Products Corporation Special Stock
Option Agreement (three-year vesting).
(10.29) 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").
*Denotes management contract or compensatory plan or arrangement
required to be filed as an exhibit hereto.
IV-5
<PAGE>
ITEM 14. (Continued)
(a) 3. Exhibits
--------
Exhibit No. Description
----------- -----------
(10.30) 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.
(10.31) 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) Computation of Per Share Earnings.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) 1995 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.
(23) Consent of Independent Public Accountants relating to
their report dated January 24, 1996, consenting to the
incorporation thereof in Registration Statements on Form
S-3 (File Nos. 33-45324 and 33-57339) and on Form S-8
(File Nos. 2-96127, 33-24068, 33-41434, 33-53733, 33-
55449, 33-45970, 33-14458, 33-50149 and 33-55456) by
reference to the Form 10-K of the Registrant filed for
the year ended December 31, 1995.
(27) Financial Data Schedule.
(99.1) The Part I, Item 3 Legal Proceedings (pages 27-28)
section of Genetics Institute Inc.'s Report on Form 10-K
for the fiscal year ended December 31, 1995, filed on
March 1, 1996, is incorporated herein by reference.
(99.2) The Part I, Item 3 Legal Proceedings (pages 16 and 17)
section of Immunex Corporation's Report on Form 10-K for
the fiscal year ended December 31, 1995, filed on March
18, 1996, is incorporated herein by reference.
(b) Reports on Form 8-K
-------------------
None
IV-6
<PAGE>
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 24, 1996. Our audit was made for the purpose of forming an
opinion on those statements taken as a whole. The schedule listed in
the accompanying index is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial
statements. The schedule has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our
opinion, fairly states 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 LLP
New York, N.Y.
January 24, 1996
IV-7
<PAGE>
SCHEDULE II
American Home Products Corporation and Subsidiaries
Schedule II -- Valuation and Qualifying Accounts
For the Years Ended December 31, 1995, 1994 and 1993
(Dollars in thousands)
Column A Column B Column C Column D Column E
Balance Balance
at at
Beginning Additions Deductions End of
Description of Period (B) (A) Period
----------- --------- --------- ---------- --------
Year ended 12/31/95:
Allowance for doubtful
accounts $ 77,985 $ 32,186 $ 2,007 $108,164
Allowance for cash discounts 21,483 240,871 234,909 27,445
Allowance for deferred tax
assets 250,976 45,604 89,936 206,644
-------- -------- -------- --------
$350,444 $318,661 $326,852 $342,253
======== ======== ======== ========
Year ended 12/31/94:
Allowance for doubtful
accounts $ 25,631 $ 58,752 $ 6,398 $ 77,985
Allowance for cash discounts 20,318 151,783 150,618 21,483
Allowance for deferred tax
assets 91,363 228,542 68,929 250,976
-------- -------- -------- --------
$137,312 $439,077 $225,945 $350,444
======== ======== ======== ========
Year ended 12/31/93:
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
======== ======== ======== ========
(A) Represents amounts used for the purposes for which the accounts
were created and reversal of amounts no longer required.
(B) Balances for 1994 reflect the acquisition of Cyanamid effective
December 1, 1994.
IV-8
<PAGE>
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 27, 1996 By /S/ Robert G. Blount
---------------------------------
Robert G. Blount
Senior 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 27, 1996
- -------------------------------
John R. Stafford and Chief Executive
Officer
Principal Financial Officer:
/S/ Robert G. Blount Senior Executive Vice March 27, 1996
- --------------------------------
Robert G. Blount President and Director
Principal Accounting Officer:
/S/ Paul J. Jones Vice President and March 27, 1996
- -------------------------------
Paul J. Jones Comptroller
Directors:
/S/ Clifford L. Alexander, Jr. Director March 27, 1996
- -------------------------------
Clifford L. Alexander, Jr.
/S/ Frank A. Bennack, Jr. Director March 27, 1996
- -------------------------------
Frank A. Bennack, Jr.
/S/ Robin Chandler Duke Director March 27, 1996
- -------------------------------
Robin Chandler Duke
<PAGE>
SIGNATURES (continued)
----------------------
Signatures Title Date
---------- ----- ----
/S/ John D. Feerick Director March 27, 1996
- -------------------------------
John D. Feerick
/S/ Fred Hassan Director March 27, 1996
- -------------------------------
Fred Hassan
/S/ John P. Mascotte Director March 27, 1996
- -------------------------------
John P. Mascotte
/S/ Mary Lake Polan M.D., Ph.D. Director March 27, 1996
- --------------------------------
Mary Lake Polan M.D., Ph.D.
/S/ John R. Torell III Director March 27, 1996
- -------------------------------
John R. Torell III
/S/ William Wrigley Director March 27, 1996
- -------------------------------
William Wrigley
<PAGE>
INDEX TO EXHIBITS
Exhibit No. Description
- ----------- -----------
(3.1) The Registrant's Restated Certificate of Incorporation as
amended to date.
(10.3) First Amendment to A Credit Agreement, dated as of August 4,
1995, among American Home Products Corporation, American Home
Food Products, Inc., Sherwood Medical Company, A.H. Robins
Company, Incorporated, the several banks and other financial
institutions from time to time parties thereto and Chemical
Bank, as agent for the lenders thereunder.
(10.4) First Amendment to B Credit Agreement, dated as of August 4,
1995, among American Home Products Corporation, American Home
Food Products, Inc., Sherwood Medical Company, A.H. Robins
Company, Incorporated, the several banks and other financial
institutions from time to time parties thereto and Chemical
Bank, as agent for the lenders thereunder.
(10.7) * Amendment to the 1980 Stock Option Plan.
(10.9) * Amendment to the 1985 Stock Option Plan.
(10.13)* Amendment to the 1990 Stock Incentive Plan.
(10.15)* Amendment to the 1993 Stock Incentive Plan.
(10.17)* Form of Deferred Compensation Agreement.
(10.20)* Form of American Home Products Corporation Restricted Stock
Performance Award Agreement under the 1993 Stock Incentive
Plan for award grants in 1995-1997.
(10.23)* Restricted Stock Trust Agreement under the 1993 Stock
Incentive Plan.
(10.24)* 1996 Stock Incentive Plan, as approved by the Board of
Directors on January 25, 1996 subject to the approval of
stockholders at the April 1996 Annual Meeting.
(10.25)* Nonfunded Deferred Compensation Plan for Directors, as
amended as of January 25, 1996.
(10.26)* Form of American Home Products Corporation Stock Option
Agreement.
*Denotes management contract or compensatory plan or arrangement required
to be filed as an exhibit hereto.
<PAGE>
Exhibit No. Description
- ----------- -----------
(10.27)* Form of American Home Products Corporation Special Stock
Option Agreement (phased vesting).
(10.28)* Form of American Home Products Corporation Special Stock
Option Agreement (three-year vesting).
(11) Computation of Per Share Earnings.
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) 1995 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.
(23) Consent of Independent Public Accountants relating to their
report dated January 24, 1996, consenting to the
incorporation thereof in Registration Statements on Form S-3
(File Nos. 33-45324 and 33-57339) and on Form S-8 (File Nos.
2-96127, 33-24068, 33-41434, 33-53733, 33-55449, 33-45970,
33-14458, 33-50149 and 33-55456) by reference to the Form 10-
K of the Registrant filed for the year ended December 31,
1995.
(27) Financial Data Schedule.
*Denotes management contract or compensatory plan or arrangement required
to be filed as an exhibit hereto.
Exhibit 3.1
RESTATED
CERTIFICATE OF INCORPORATION
OF
AMERICAN HOME PRODUCTS CORPORATION
Amended through April 18, 1990
<PAGE>
RESTATED
CERTIFICATE OF INCORPORATION
OF
AMERICAN HOME PRODUCTS CORPORATION
FIRST: The name of the corporation is AMERICAN HOME PRODUCTS
CORPORATION.
SECOND: The principal office of the corporation in the State of
Delaware is located at 32 Loockerman Square, Suite L-100, in the
City of Dover, County of Kent. The name address of the agent of
the corporation resident therein and in charge thereof is The
Prentice-Hall Corporation System, Inc., 32 Loockerman Square,
Suite L-100, Dover, Delaware 19901.
THIRD: The nature of the business or objects or purposes to be
transacted, promoted or carried on by the corporation are as
follows:
(a) To manufacture, produce, purchase or otherwise acquire and
to hold, own, use, lease, distribute or otherwise dispose of and
generally to trade and deal in and with, at wholesale, retail or
otherwise, any and all kinds of medicines, medicinal and
pharmaceutical preparations, compounds and mixtures, food,
beverage and confectionery products, toilet articles, drugs,
chemicals, dyes, dye-stuffs and combinations, and mixtures and
preparations thereof, and all kinds of tools, machinery,
equipment, utensils, builders' hardware, housewares and household
items of every type and description (including, without
limitation on, cutlery, kitchen tools, flatware, cookware,
household bakeware, egg beaters, can openers, cooking utensils,
bathroom and closet fittings and accessories), commercial
bakeware, industrial food handling equipment and aluminum foil
and other containers, and materials and supplies for any of the
foregoing or for use in connection with the business of the
corporation.
(b) To apply for, obtain, register, purchase, lease or otherwise
acquire, hold, own, use, operate, introduce, develop or control,
sell, assign or otherwise dispose of, take or grant licenses or
other rights with respect to and in any and all ways to exploit
or turn to account inventions, improvements, processes,
copyrights, patents, trademarks, formulae, trade names and
distinctive marks and similar rights of any and all kinds and
whether granted, registered or established by or under the laws
of the United States or of any state or country.
(c) To acquire, buy, purchase, lease, own, hold, sell, mortgage
and encumber improved and unimproved real estate wherever
situated and to construct and erect thereon factories, works,
plants, stores, mills, hotels, houses and building.
(d) To purchase or otherwise acquire and to hold, sell, pledge
or otherwise dispose of all forms of securities, including
stocks, bonds, debentures, notes, certificates of indebtedness,
certificates of interest, mortgages and other similar instruments
and rights however issued or created, and to deal in and with the
same and to issue in exchange therefor or in payment therefor its
own stock, bonds or other obligations or securities and to
exercise in respect thereof any and all rights, powers and
privileges of individual ownership or interest therein, including
the right to vote thereof and to consent or otherwise act with
respect thereto; to do any and all acts and things for the
preservation, protection, improvement and enhancement in value
thereof, or designed to accomplish any such purpose and to aid by
loan, subsidy, guaranty or in any other manner, those issuing,
creating or responsible for any of such securities; to acquire or
become interested in any such securities as aforesaid by original
subscription, underwriting, participation in syndicates or
otherwise and to make payments thereon as called for and to
underwrite or subscribe for the same conditionally or otherwise
and either with a view to investment or for resale or for any
other lawful purpose.
(e) To purchase or otherwise acquire, sell or otherwise dispose
of, realize upon or otherwise turn to account, manage, liquidate
or reorganize the properties, assets, business undertakings,
enterprises or ventures or any part thereof of corporations,
associations, firms, individuals, syndicates and others; to act
as financial, commercial or general agent or representative of
any corporation, association, firm, syndicate or individual and
as such to develop, improve and extend the property, trade and
business interests thereof and to aid any lawful enterprise in
connection therewith and in connection with acting as agent or
broker for any principal to give any other aid or assistance.
(f) To borrow money and for moneys borrowed or in payment for
property acquired or for any other objects and purposes of the
corporation or otherwise in connection with the transaction of
any part of its business to issue bonds, debentures, notes and
other obligations secured or unsecured and to mortgage, pledge or
hypothecate any or all of its properties or assets as security
therefor; to make, accept, endorse, guarantee, execute and issue
notes, bills of exchange and other obligations; to mortgage,
pledge or hypothecate any stocks, bonds, other evidences of
indebtedness or securities and any other property held by it or
in which it may be interested and to loan money with or without
collateral or other security; to guarantee the payment of
dividends upon stocks or the principal of and/or interest upon
bonds, notes or other evidences of indebtedness or obligations or
the performance of the contracts or other undertakings of any
corporation, copartnership, syndicate or individual; to enter
into, make and perform contracts of every kind and for any lawful
purpose with any person, firm, corporation or syndicate.
(g) To purchase or otherwise acquire all or any part of the
business, good will, rights, property and assets and to assume or
otherwise provide for all or any part of the liabilities of any
corporation, association, partnership or individual; to take over
as a going concern and continue any business so acquire and to
pay for any such business or properties, in cash, stock, bonds,
debentures or obligations of this corporation or otherwise.
(h) To manufacture, buy or otherwise acquire and to sell or
otherwise dispose of, distribute, deal in and deal with, either
as principal, agent, dealer or broker, goods, wares and
merchandise of every kind and description, including all
materials or substances now known or hereafter to be discovered
or invented; to purchase or otherwise acquire and to sell or
otherwise dispose of, distribute, deal in and deal with, either
as principal, agent, dealer or broker, all kinds of personal
property of every sort and description wheresoever situated and
all interests therein which this corporation may deem necessary
or convenient in connection with any part of its business.
(i) To conduct any and all of its business in the State of
Delaware and any other states, the District of Columbia, the
territories, colonies and dependencies of the United States and
in foreign countries and places and to have one or more offices
outside of the State of Delaware, and to purchase or otherwise
acquire, hold, mortgage, convey, transfer, or otherwise dispose
of, outside of the State of Delaware, real and personal property.
(j) To do all and everything necessary, suitable, convenient or
proper for the accomplishment of any of the purposes or the
attainment of any or all of the objects hereinbefore enumerated
or incidental to the powers herein named, or which shall at any
time appear conducive to or expedient for the protection or
benefit of the corporation, either as holder of or as interested
in any property or otherwise; and to have all the rights, powers
and privileges named or hereafter conferred by the General
Corporation Laws of the State of Delaware.
The foregoing clauses shall be construed both as objects and
powers and it is hereby expressly provided that the enumeration
herein of specific objects and powers shall not be held to limit
or restrict in any manner the general powers of this corporation
and all the powers of this corporation and all the powers and
purposes hereinbefore enumerated shall be exercised, carried on
and enjoyed by this corporation within the State of Delaware and
outside of the State of Delaware to such extent and in such
manner as corporations organized under the General Corporation
Laws of the State of Delaware may properly and legally exercise,
carry on and enjoy.
FOURTH: The total number of shares of Capital Stock which may
be issued by the corporation is Six hundred five million
(605,000,000) of which Six hundred million (600,000,000) shares
shall be Common Stock of the par value of Thirty-three and one-
third cents ($.33 1/3) per share and Five million (5,000,000)
shares shall be Preferred Stock (hereinafter referred to as the
"Preferred Stock") of the par value of Two Dollars fifty cents
($2.50) per share.
The designations and the powers, preferences and rights, and
the qualifications, limitations or restrictions of the shares of
each class of stock are as follows:
PREFERRED STOCK
I The Preferred Stock may be issued from time to time in one
or more series, each of such series to have such voting powers
full or limited, or without voting powers, such designation,
preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions
thereof as are stated and expressed herein, or in a resolution or
resolutions providing for the issue of such series adopted by the
Board of Directors as hereinafter provided.
II. Authority is hereby expressly granted to the Board of
Directors, subject to the provisions of this Article Fourth, to
authorize one or more series of Preferred Stock and, with respect
to each series (except the series hereinafter designated as $2
Convertible Preferred Stock), to fix by resolution or resolutions
providing for the issue of such series:
(a) the number of shares to constitute such series and the
distinctive designation thereof;
(b) the dividend rate on the shares of such series,
dividend payment dates, whether such dividends shall be
cumulative, and, if cumulative, the date or dates from which
dividends shall accumulate;
(c) whether or not the shares of such series shall be
redeemable, and, if redeemable, the redemption prices which the
shares of such series shall be entitled to receive upon the
redemption thereof;
(d) whether or not the shares of such series shall be
subject to the operation of retirement or sinking funds to be
applied to the purchase or redemption of such shares for
retirement and, if such retirement or sinking fund or funds be
established, the annual amount thereof and the terms and
provisions relative to the operation thereof;
(e) whether or not the shares of such series shall be
convertible into, or exchangeable for, shares of any other class
or classes or of any other series of the same or any other class
or classes of stock of the corporation and the conversion price
or prices or ratio or ratios or the rate or rates at which such
exchange may be made, with such adjustments, if any, as shall be
stated and expressed or provided in such resolution or
resolutions;
(f) the preferences, if any, and the amounts thereof, which
the shares of such series shall be entitled to receive upon the
voluntary and involuntary dissolution of, or upon any
distribution of the assets of, the corporation;
(g) the voting power, if any, of the shares of such series;
and
(h) such other special rights and protective provisions as
to the Board of Directors may seem advisable.
Notwithstanding the fixing of the number of shares
constituting a particular series (including the $2 Convertible
Preferred Stock) upon the issuance thereof, the Board of
Directors may at any time thereafter authorize the issuance of
additional shares of the same series.
III. Holders of Preferred Stock shall be entitled to receive,
when and as declared by the Board of Directors, out of funds
legally available for the payment of dividends, dividends at the
annual rates fixed by the Board of Directors for the respective
series and no more, payable on such dates in each year as the
Board of Directors shall fix for the respective series as
provided in subdivision (b) of Section II of this Article Fourth
(hereinafter referred to as "dividend dates"), in preference to
dividends on any other class of stock of the corporation, so
that unless all accrued dividends on all series of Preferred
Stock entitled to cumulative dividends shall have been declared
and set apart for payment through the last preceding dividend
date set for all such series and dividends on all other series of
Preferred Stock shall have been declared and set apart for
payment at the rate to which such other series of Preferred Stock
are entitled for the period commencing the second preceding
dividend date and ending on the last preceding dividend date set
for such series, no cash payment or distribution shall be made to
holders of the Common Stock of the corporation. No dividend
shall be declared and set apart for payment on any series of
Preferred Stock in respect of any dividend period unless there
shall likewise be or have been declared and set apart for payment
on all shares of Preferred Stock of each series entitled to
cumulative dividends at the time outstanding dividends ratably in
accordance with the sums which would be payable on the said
shares through the last preceding dividend date if all dividends
were declared and paid in full. Nothing herein contained shall
be deemed to limit the right of the corporation to purchase or
otherwise acquire at any time any shares of its capital stock;
provided that no shares of capital stock shall be repurchased at
any time when accrued dividends on any series of Preferred Stock
entitled to cumulative dividends remain unpaid for any period to
and including the last preceding dividend date.
For the purposes of this Article Fourth, and of any
certificate fixing the terms of any series of Preferred Stock,
the amount of dividends "accrued" on any share of Preferred Stock
of any series entitled to cumulative dividends as at any dividend
date shall be deemed to be the amount of any unpaid dividends
accumulated thereon to and including such dividend date, whether
or not earned or declared, and the amount of dividends "accrued"
on any share of Preferred Stock of any series entitled to
cumulative dividends as at any date other than an dividend date
shall be calculated as the amount of any unpaid dividends
accumulated thereon to and including the last preceding dividend
date, whether or not earned or declared, plus an amount computed,
on the basis of 360 days per annum, for the period after such
last preceding dividend date to and including the date as of
which the calculation is made at the annual dividend rate fixed
for the shares of such series or class.
IV. In the event that the Preferred Stock of any series shall be
entitled to a preference upon the dissolution of, or upon any
distribution of the assets of, the corporation, then upon any
such dissolution of, or distribution of the assets of, the
corporation, before any payment or distribution of the assets of
the corporation (whether capital or surplus) shall be made to or
set apart for any other series or class or classes of stock, the
holders of such series of Preferred Stock shall be entitled to
payment of the amount of the preference, if any, payable upon
such dissolution of, or distribution of the assets of the
corporation as may be fixed by the Board of Directors for the
shares of the respective series as provided in subdivision (f) of
Section II of this Article Fourth before any further payment or
distribution shall be made on any other class or series of
capital stock. If, upon any such dissolution, or distribution,
the assets of the corporation distributable among the holders of
any such series of the Preferred Stock entitled to a preference
shall be insufficient to pay in full the preferential amount
aforesaid, then such assets, or the proceeds thereof, shall be
distributed among the holders of each such series of the
Preferred Stock ratably in accordance with the sums which would
be payable on such distribution if all sums payable were
discharged in full. The voluntary sale, conveyance, exchange or
transfer (for cash, shares of stock, securities or other
consideration) of all or substantially all of the property and
assets of the corporation, the merger or consolidation of the
corporation into or with any other corporation, or the merger of
any other corporation into it, shall not be deemed to be a
dissolution of, or a distribution of the assets of, the
corporation, for the purpose of this Section IV.
V. In the event that the Preferred Stock of any series shall be
redeemable, then, at the option of the Board of Directors, the
corporation at any time or from time to time may redeem all, or
any number less than all, of the outstanding shares of such
series at the redemption price thereof fixed by the board of
Directors as provided in subdivision (c) of Section II of this
Article Fourth (the sum so payable upon any redemption of
Preferred Stock being herein referred to as the "redemption
price"); provided, that not less than 30 days previous to the
date fixed for redemption a notice of the time and place thereof
shall be mailed to each holder of record of the redemption a
notice of the time and place thereof shall be mailed to each
holder of record of the shares so to be redeemed at his address
as shown by the records of the corporation; and provided further,
that in case of redemption of less than all of the outstanding
shares of any series of Preferred Stock the shares to be redeemed
shall be chosen by lot in such equitable manner as may be
prescribed in the Board of Directors. At any time after notice
of redemption shall have been mailed as above provided to the
holders of the stock so to be redeemed, the corporation may
deposit the aggregate redemption price, in trust, with a bank or
trust company in the Borough of Manhattan, The City of New York,
having capital, surplus and undivided profits of at least
$5,000,000, named in such notice, for payment, on or before the
date fixed for redemption, of the redemption price for the shares
called for redemption. Upon the making of such deposit, or if no
such deposit is made then upon such redemption date (unless the
corporation shall default in making payment of the redemption
price), holders of the shares of Preferred Stock called for
redemption shall cease to be stockholders with respect to such
shares notwithstanding that any certificate for such shares shall
not have been surrendered, and thereafter such shares shall no
longer be transferable on the books of the corporation and such
holders shall have no interest in or claim against the
corporation with respect to said shares, except the right (a) to
receive payment of the redemption price upon surrender of their
certificates, or (b) to exercise on or before the date fixed for
redemption the rights, if any, not theretofore expiring, to
convert the shares so called for redemption into, or to exchange
such shares for, shares of stock of any other class or classes or
of any other series of the same class or any other class or
classes of stock of the corporation. Any funds deposited in trust
as aforesaid which shall not be required for such redemption,
because of the exercise of any right of conversion or otherwise
subsequent to the date of such deposit, shall be returned to the
corporation forthwith. The corporation shall be entitled to
receive from any such bank or trust company the interest, if any,
allowed on any moneys deposited as in this Section provided, and
the holders of any shares so redeemed shall have no claim to any
such interest. Any funds so deposited by the corporation and
unclaimed at the end of five years from the date fixed for such
redemption shall be repaid to the corporation upon its request,
after which repayment the holders of such shares who shall not
have made claim against such moneys prior to such repayment shall
be deemed to unsecured creditors of the corporation, but only for
a period of two years from the date of such repayment (after
which all rights to holders of such shares as unsecured creditors
or otherwise shall cease), for an amount equivalent to the amount
deposited as above stated for the redemption of such shares and
so repaid to the corporation, but shall in no event be entitled
to any interest.
In order to facilitate the redemption of any shares of
Preferred Stock, the Board of Directors is authorized to cause
the transfer books of the corporation to be closed as to the
shares to be redeemed.
VI. Any shares of Preferred Stock which shall at any time have
been redeemed, or which shall at any time have been surrendered
for conversion or exchange or for cancellation pursuant to any
retirement or sinking fund provisions with respect to any series
of Preferred Stock, shall be retired and shall thereafter have
the status of authorized and unissued shares of Preferred Stock
undesignated as to series.
VII. There is hereby authorized an initial series of the
Preferred Stock having the following voting powers, designation,
preferences and relative, participating, optional or other
special rights and qualifications, limitations or restrictions:
(a) The number of shares to constituted such series shall
be Two million eight hundred thirty thousand (2,830,000) and the
distinctive designation thereof shall be "$2 Convertible
Preferred Stock".
(b) The dividend rate on the shares of such series shall be
$2.00 per annum, payable in cash quarterly on January 1, April 1,
July 1 and October 1 in each year. Dividends shall accumulate on
any shares of such series issued upon conversion of outstanding
shares of Ekco Products Company upon the Merger Date of the
Agreement of Merger (herein called the "Agreement of Merger")
dated July 29, 1965 of American Home Products Corporation and
Ekco Products Company from and after January 1, 1966 and upon any
other shares of such series from and after the dividend date next
following the issuance of such shares.
(c) The shares of such series shall be redeemable on and
after the fifth anniversary of the Merger Date of the Agreement
of Merger if at the time of mailing of the notice of redemption
the average market price per share (as hereafter defined) of the
Common Stock is at least $80.00 per share, or in the event that
an adjustment in the number of shares issuable upon conversion of
shares of such series under Section (e) of this Article Fourth
shall have occurred, then a market price per share equal to the
product of multiplying $60.00 per share by the reciprocal of the
then current conversion rate and the redemption price which the
shares of such series shall be entitled to receive upon the
redemption thereof shall be the amount of $60.00 per share in
cash plus a sum equal to the accrued but unpaid dividends thereon
to the redemption date.
(d) The shares of such series shall not be subject to the
operation of any sinking fund to be applied to the purchase or
redemption of such shares for retirement.
(e) Subject to the provisions for adjustment hereinafter
set forth, the shares of such series shall be convertible at the
option of the holder thereof, at any time, upon surrender for
conversion to any Transfer Agent for such shares of the
certificate representing the shares so to be converted, into full
paid and non-assessable shares of Common Stock of the corporation
at the rate of .75 shares of Common Stock for each such share of
such series so surrendered for conversion. The right, if any, to
convert shares of such series called for redemption shall
terminate at the time specified in the notice of redemption given
pursuant to the provisions of Section VII of this Article Fourth.
Upon conversion, no payment or adjustment shall be made for
dividends on any class of shares.
The number of shares of Common Stock and the number of
shares of stock of other classes of the corporation, if any, into
which each share of such series is convertible shall be subject
to adjustment from time to time as follows:
(i) In case the corporation shall (a) take a record of the
holders of its Common Stock for the purpose of entitling them to
receive a dividend declared payable in shares of the corporation,
(b) subdivide its outstanding Common Stock, (c) combine the
outstanding Common Stock into a smaller number of shares, or (d)
issue by reclassification of shares of Common Stock any shares of
the Corporation, the holder of each share of such series shall
thereafter be entitled to receive upon the conversion of such
share, the number of shares of the corporation which he would
have owned or have been entitled to receive after the happening
of any of the events described above had such share been
converted immediately prior to the happening of such event.
Further such adjustment shall be made whenever any of the events
listed above shall occur.
(ii) In case the corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to
subscribe for or purchase shares of Common Stock at a price per
share less than the average market price (as hereinafter defined)
for the time at which such record is taken, in each such case,
the number of shares of Common Stock into which each such share
of such series shall thereafter be convertible shall be
determined by multiplying the number of shares of Common Stock
into which such share of such series was theretofore convertible
by a fraction of which the numerator shall be the sum of the
number of shares of Common Stock outstanding at the time of the
taking of such record and the number of additional shares of
Common Stock so offered for subscription or purchase, and of
which the denominator shall be the sum of the number of shares of
Common Stock outstanding at the time of the taking of such record
and the number of shares of Common Stock which the aggregate
public offering price (without deduction of expenses of the
issue, including underwriting commissions) of the total number of
shares so offered would purchase at the average market price per
share for such time.
(iii) In case the corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to
receive any distribution of evidence of its indebtedness or
assets (excluding cash distributions on Common Stock after
December 31, 1964 not exceeding the amount of consolidated net
earnings after December 31, 1964 of the corporation and its
subsidiaries, less cash distributions after December 31, 1964 on
stock other than Common Stock, all determined in accordance with
good accounting practice) or rights to subscribe, excluding those
referred to in paragraph (ii) above, in each such case the number
of shares of Common Stock into which each such share of such
series shall thereafter be convertible shall be determined by
multiplying the number of shares of Common Stock into which such
share of such series was theretofore convertible by a fraction of
which the numerator shall be the average market price per share
of Common Stock for the time at which such record is taken and of
which the denominator shall be the average market price per share
of Common Stock for such time less the fair value (as determined
by the Board of Directors of the corporation, whose determination
shall be conclusive and described in a statement filed with the
Transfer Agent or Agents for such shares of such series and for
the Common Stock) of the portion of the assets or evidences of
indebtedness so distributed or of such subscription rights
applicable to one of the outstanding shares of Common Stock.
(iv) For the purpose of any computation under this Article
Fourth, the "average market price per share" of any shares of
capital stock for any time shall be the average of the daily mean
of the high and low sales prices, or bid prices, as the case may
be, for five consecutive business days commencing ten business
days before the time in question on which transactions have been
reported by any accepted financial publication of general
circulation in the Borough of Manhattan, The City of New York, on
the New York Stock Exchange, if such shares are regularly traded
on such Exchange, or on any other national securities exchange if
such shares be not regularly traded on the New York Stock
Exchange, or if such shares be not regularly traded on any
national securities exchange the bid prices as reported by the
National Quotation Bureau, Inc. or by any successor organization.
(v) No adjustment in the number of shares of Common Stock
into which any share of such series is convertible shall be
required unless such adjustment would require an increase or
decrease of at least 1% in the total number of shares of Common
Stock into which all shares of such series are then convertible;
provided, however, that any adjustments which by reason of this
paragraph (v) are not required to be made shall be carried
forward and taken into account in any subsequent adjustment.
(vi) If the corporation shall take a record of the holders
of its Common Stock for the purpose of entitling them to receive
any dividend, distribution or subscription rights and shall,
thereafter and before delivery to shareholders of any such
dividend, distribution or subscription rights, legally abandon
its plan to pay or deliver such dividend, distribution or
subscription rights, then no adjustment in the number of shares
of Common Stock or of other shares of the corporation into which
any share of such Stock is convertible, nor the giving of any
notice to the holders of shares of such series, shall be required
by reason of the taking of such record.
(vii) Whenever any adjustment is required in the shares
into which any share of such series is convertible, the
corporation shall forthwith (a) file with the Transfer Agent or
Transfer Agents for shares of such series and for the Common
Stock a statement describing in reasonable detail the adjustment
and the method of calculation used, and (b) cause a notice
stating the nature and amount of such adjustment to be published
at least once in a newspaper printed in the English language and
customarily published on five days each calendar week and of
general circulation in the Borough of Manhattan, The City of New
York and in the City of Chicago, Illinois.
(viii) No fractional shares shall be issued upon
conversion of shares of such series, but in lieu thereof the
corporation shall pay to the holder thereof an amount in cash
equal to the value of such fractional interest in a share
determined upon the basis of the closing price per share on the
New York Stock Exchange as reported in an accepted financial
publication of general circulation in the Borough of Manhattan,
The City of New York if such shares are regularly traded upon
such exchange or on any other national securities exchange if
such shares be not regularly traded on the New York Stock
Exchange, or if such shares be not regularly traded on any
national securities exchange upon the basis of the closing bid
price reported by the National Quotation Bureau, Inc. or by any
successor organization, on the date upon which the certificate
representing the shares of such series shall be surrendered for
conversion.
(ix) Shares of such series shall be deemed to be converted
and the holder thereof shall be deemed to have become a holder of
record of the shares of the corporation into which the shares of
such series are convertible at the close of business on the date
upon which the certificate representing shares of such series has
been surrendered to any Transfer Agent for conversion, or if such
date shall be a legal holiday in the jurisdiction in which such
Transfer Agent is located or a date fixed by the Board of
Directors for the closing of the transfer books or the taking of
a record of the holders of the shares of the corporation into
which the shares of such series are convertible, then on the next
succeeding business day when such transfer books are open.
(x) The corporation shall at all times reserve and keep
available out of its authorized but unissued shares the full
number of shares into which all shares of such series from time
to time outstanding are convertible.
(f) The shares of such series shall be entitled to receive
in preference to shares of the Common Stock of the corporation
upon any dissolution of, or distribution of assets of, the
corporation (i) the amount of $60.00 per share in the event of
any voluntary liquidation, dissolution or winding-up of the
corporation and (ii) the amount of $52.50 in the event of any
involuntary liquidation, dissolution or winding-up of the
corporation, plus, in either case, an amount equal to all accrued
but unpaid dividends to the date of such liquidation, dissolution
or winding-up.
(g) The shares of such series shall be entitled to Nine (9)
votes per share voting with the shares of the Common Stock at any
annual or special meeting of stockholders for the election of
directors and upon any other matter coming before such meeting.
In addition, the shares of such series shall have the following
special voting powers and rights:
(i) So long as any shares of such series are outstanding,
the corporation shall not, without the consent (given by vote at
a meeting called for that purpose) of the holders of at least
two-thirds of the total number of shares of such series and any
other series of the Preferred Stock then outstanding having
voting rights in the premises, voting as a class:
(a) create or authorize any class of stock ranking prior to
or on a parity with the Preferred Stock, or create or authorize
any obligation or security convertible into shares of stock of
any such class; or
(b) amend, alter, change or repeal any of the express terms
of such series or of the Preferred Stock then outstanding in a
manner prejudicial to the holders thereof;
provided, however, if any such change shall effect only a single
series of the Preferred Stock, then only the holders of such
series shall have any special voting right hereunder.
(ii) If and when dividends payable on such series shall be
in default in an amount equivalent to six (6) full quarter-yearly
dividends on all shares of such series at the time outstanding,
the number of directors of the corporation shall thereupon, and
until all dividends in default on such series shall have been
paid or declared and set apart for payment, be two more than the
full number constituting the Board of Directors immediately prior
to such default. The holders of all shares of such series,
voting separately as one class with any other series of the
Preferred Stock having voting powers in the premises, shall be
entitled to elect directors to fill the vacancies resulting from
such increase in the number of directors of the corporation.
Such holders shall, at a meeting called and held as provided in
subparagraph (v) hereof elect such two directors to hold office
until the next annual meeting of stockholders; provided, however,
that the terms of office of such directors shall terminate upon
the curing of all defaults in dividends on such series as
provided in subparagraph (iii) hereof, unless dividend defaults
shall still exist on other series of the Preferred Stock.
(iii) If and when all dividends then in default on such
series at the time outstanding shall be paid, the holders of
shares of such series shall thereupon be divested of any special
right with respect to the election of directors provided in
subparagraph (ii) hereof and the number of directors of the
corporation shall be reduced by two (except as provided in
paragraph (ii) hereof); but always subject to the same provisions
for vesting such special rights in such series in case of further
like default or defaults in dividends thereon.
(iv) In case of any vacancy in the Board of Directors
occurring among the directors elected by the holders of such
series, as a class, pursuant to subparagraph (ii) hereof, the
holders of such series and of any other series of Preferred Stock
then outstanding and entitled to vote may elect a successor to
hold office for the unexpired term of the directors whose place
shall be vacant. In all other cases, any vacancy occurring among
the directors shall be filled by the vote of a majority of the
remaining directors.
(v) Whenever the holders of such series, as a class, become
entitled to elect directors of the corporation pursuant to
subparagraph (ii) or (iv) hereof, a meeting of the holders of
such series shall be held at any time thereafter upon call by the
holders of not less than 1,000 shares of such series or upon call
by the Secretary of the corporation at the request in writing of
any stockholder addressed to him at the principal office of the
corporation. At all meetings of stockholders held for the
purpose of electing directors during such times as the holders of
shares of such series shall have the special right, voting
separately as one class, to elect directors pursuant to
subparagraph (ii) hereof, the presence in person or by proxy of
the holders of a majority of the outstanding shares of the series
of Preferred Stock entitled to vote separately as a class shall
be required to constitute a quorum of such class for the election
of directors for such class; provided, however, that the absence
of a quorum of the holders of stock of such class shall not
prevent the election at any such meeting or adjournment thereof
of any other directors by the necessary quorum of the holders of
all classes of stock having voting rights for the election of
directors (other than as a separate class) if such quorum is
present in person or by proxy at such meeting; and provided
further that in the absence of a quorum of the holders of stock
having the right to vote separately as a class, a majority of
those holders of the stock of such class who are present in
person or by proxy shall have power to adjourn the election of
the directors to be elected by such class from time to time
without notice other than announcement at the meeting until the
holders of the requisite number of shares of such class shall be
present in person or by proxy.
(h) The shares of such series shall not have any other
special rights or provisions.
COMMON STOCK
Each share of Common Stock shall be equal in all respects to
every other share of the Common Stock of the Corporation.
FIFTH: The corporation is to have perpetual existence.
SIXTH: The private property of the stockholders shall not
be subject to the payment of corporate debts to any extent
whatever.
SEVENTH: The Board of Directors of the corporation shall
have power to issue the authorized shares of stock of the
corporation from time to time for such consideration as they may
fix and determine.
EIGHTH: In furtherance and not in limitation of powers
conferred by Statute the following provisions are inserted for
the regulation of the business and to define and regulate the
powers of the corporation and of its directors and stockholders:
(a) The number of directors of the corporation shall be
fixed and may be altered from time to time as may be provided in
by-laws. Any vacancies in the Board of Directors, by reason of
an increase in the number of directors or otherwise, shall be
filled solely by the Board of Directors, by a majority vote of
the directors then in office, though less than a quorum, but any
such director so elected shall hold office only until the next
succeeding annual meeting of stockholders. Advance notice of
nominations for the election of directors, other than by the
Board of Directors or a committee thereof, shall be given in the
manner provided in the by-laws.
(b) The Board of Directors may, by majority vote of the
whole Board designate three or more directors to constitute an
Executive Committee which, to the extent provided by the
directors or in the by-laws, shall have and may exercise the
powers of the Board of Directors in the management of the
business and affairs of the corporation and shall have power to
authorize the seal of the corporation to be affixed to all papers
which may require it.
(c) The Board of Directors shall have power to make, alter,
amend or repeal the by-laws of the corporation, but any by-laws
so made, altered or amended by the directors may be altered or
repealed by the stockholders. Notwithstanding the foregoing and
anything contained in this Certificate of Incorporation to the
contrary, sections two and seven of the by-laws shall not be
altered, amended or repealed and no provision inconsistent
therewith shall be adopted without the affirmative vote of the
holders of at least 80% of the voting power of all the shares of
the corporation entitled to vote generally in the election of
directors, voting together as a single class.
(d) No holder of stock shall be entitled as of right to
subscribe for, purchase or receive any part of any authorized but
unissued stock or of any new or additional issue of stock,
preferred or common, or of bonds, notes, debentures or other
securities convertible into stock, but all such unissued, new or
additional shares of stock or bonds, notes, debentures or other
securities convertible into stock may be issued and disposed of
by the Board of Directors to such person or persons and on such
terms and for such lawful consideration as the Board of Directors
in their absolute discretion may deem advisable.
(e) The corporation reserves the right to amend, alter or
repeal any provision herein contained in the manner now or
hereafter prescribed by law and all rights conferred on
stockholders hereunder are granted subject to this provision.
Notwithstanding the foregoing and anything contained in this
Certificate of Incorporation to the contrary, the affirmative
vote of the holders of at least 80% of the voting power of all
shares of the corporation entitled to vote generally in the
election of directors, voting together a single class, shall be
required to alter, amend, adopt any provision inconsistent with,
or repeal, this Article EIGHTH or any provision hereof.
(f) A director may (except directors elected by shares of
Preferred Stock voting separately as a class), by vote of a
majority of the entire Board of Directors for any cause deemed by
them sufficient, be removed as such director. Any director may
also be removed from office, for any cause deemed by them
sufficient, by the affirmative vote of the holders of 80% of the
combined voting power of the then outstanding shares of stock
entitled to vote generally in the election of directors, voting
together as a single class, except that directors elected by
shares of Preferred Stock voting separately may only be removed
by such stockholders at any special meeting for any cause deemed
sufficient by such meeting. Directors of the corporation need
not be stockholders therein.
(g) A director of the corporation shall not, in the absence
of fraud, be disqualified by his office from dealing or
contracting with the corporation either as a vendor, purchaser or
otherwise, nor in the absence of fraud shall any transaction or
contract of the corporation be void or voidable by reason of the
fact that any director or any firm of which any director is a
member, or any corporation of which any director is a shareholder
or director is in any way interested in such transaction or
contract, provided that such transaction or contract is or shall
be authorized, ratified or approved either:
(1) by vote of a majority of a quorum of the Board of
Directors or of the Executive Committee without counting in such
majority or quorum any director so interested or a member of a
firm so interested or a shareholder or a director of a
corporation so interested, or
(2) by vote at a stockholders' meeting of the holders of
record of a majority of all the outstanding shares of stock of
the corporation, or by writing or writings signed by a majority
of such holders; nor shall any director be liable to account to
the corporation for any profit realized by him from or through
any such transaction or contract of the corporation ratified or
approved as aforesaid by reason of the fact that he or any firm
of which he is a member or any corporation of which he is a
shareholder or director was interested in such transaction or
contract. Nothing herein contained shall create any liability in
the events above described or prevent the authorization,
ratification or approval of such contracts or transactions in any
other manner permitted by law.
(h) Any action required or permitted to be taken by the
stockholders of the corporation must be effected at a duly called
annual or special meeting of such holders and may not be effected
by any consent in writing by such holders. Except as provided in
paragraph VII(g)(v) of Article FOURTH respecting rights of
holders of Preferred Stock to call meetings of such holders in
certain dividend default situations, special meetings of
stockholders, unless otherwise provided in law, may be called
only by the Chairman or Vice-Chairman of the Board of Directors
or the President, or by the Secretary on the written request of a
majority of all the directors, such request to state the purpose
of the proposed meeting.
NINTH: No director shall be personally liable to the
corporation or its stockholders for monetary damages for any
breach of fiduciary duty by such director as a director, except
(i) for breach of the director's duty of loyalty to the
corporation or its stockholders, (ii) for acts or omissions not
in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) pursuant to section 174 of the
Delaware General Corporation Law, or (iv) for any transaction
from which the director derived an improper personal benefit.
Exhibit 10.3
FIRST AMENDMENT TO A CREDIT AGREEMENT
First Amendment (this "Amendment"), dated as of August
4, 1995, among American Home Food Products, Inc., Sherwood
Medical Company, A.H. Robins Company, Incorporated (each, a
"Subsidiary Borrower"), American Home Products Corporation
(the "Company", and together with the Subsidiary Borrowers,
the "Borrowers"), the lending institutions party to the A
Credit Agreement referred to below (the "Banks") and
Chemical Bank, as Agent (in such capacity, the "Agent").
All capitalized terms used herein and not otherwise defined
shall have the respective meanings provided such terms in
the A Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the Borrowers, the Banks and the Agent are
parties to a Credit Agreement, dated as of September 9,
1994, (the "A Credit Agreement");
WHEREAS, the parties hereto wish to amend the A Credit
Agreement as herein provided;
NOW THEREFORE, it is agreed:
1. The first recital of the A Credit Agreement is
hereby amended by deleting the amount "$7,000,000,000" in
its entirety and inserting in lieu thereof the amount
"$4,000,000,000".
2. Section 1.1 of the A Credit Agreement is hereby
amended by deleting the definition of "Applicable Margin"
in its entirety and inserting in lieu thereof the following
new definition:
"Applicable Margin": a percentage equal to,
(x) for Alternate Base Rate Loans, 0%, (y) for C/D
Rate Loans, .320% and (z) for Eurodollar Rate Loans,
.195%.
3. Section 1.1 of the A Credit Agreement is hereby
amended by deleting the definition of "Facility Fee
Percentage" in its entirety and inserting in lieu thereof
the following definition:
""Facility Fee Percentage": a percentage
equal to .055%."
4. Section 1.1 of the A Credit Agreement is hereby
amended by deleting the definition of "Significant Usage
Period" in its entirety.
5. Section 1.1 of the A Credit Agreement is hereby
amended by deleting clause (a) of the definition of
"Termination Date" in its entirety and inserting in lieu
thereof "(a) August 3, 1996 (as such date may be extended
in accordance with the provisions of subsection 2.19)and ".
6. In order to induce the Agent and the Banks to
enter into this Amendment, the Borrowers hereby represent
and warrant that (x) no Default or Event of Default exists
on the First Amendment Effective Date (as defined herein)
both before and after giving effect to this Amendment and
(y) all of the representations and warranties contained in
the Credit Documents shall be true and correct in all
material respects on the First Amendment Effective Date
both before and after giving effect to this Amendment with
the same effect as though such representations and
warranties had been made on and as of the First Amendment
Effective Date (it being understood that any representation
or warranty made as of a specific date shall be true and
correct in all material respects as of such specific date).
7. This Amendment is limited as specified and shall
not constitute a modification, acceptance or waiver of any
other provision of the A Credit Agreement or any other
Credit Document.
8. This Amendment may be executed in any number of
counterparts and by the different parties hereto on
separate counterparts, each of which counterparts when
executed and delivered shall be an original, but all of
which shall together constitute one and the same
instrument. A complete set of counterparts shall be lodged
with the Company and the Agent.
9. This Amendment and the rights and obligations of
the parties hereunder shall be construed in accordance with
and governed by the law of the State of New York.
10. Notwithstanding anything to the contrary
contained in the Credit Agreement or this Amendment, for
purposes of this Amendment "Banks" shall mean each of the
lending institutions who shall have delivered (including by
way of telecopier) by August 3, 1995 (or such later date as
the Agent and the Company shall agree) a signed copy hereof
to the Agent as provided in Section 8.2 of the Credit
Agreement.
11. On or prior to August 3, 1995 (or such later date
as the Agent and the Company shall agree) assuming that the
Banks who have signed and delivered a copy hereof pursuant
to paragraph 10 of this Amendment hold Commitments in the
aggregate of at least $4,000,000,000, (x) the Company and
the Agent shall reduce or reallocate the Commitments of
such Banks in their sole discretion for purposes of
establishing an aggregate total commitment of
$4,000,000,000 and (y) the Agent shall distribute revised
Schedules I and II to the Credit Agreement to reflect such
reductions and reallocations; provided that, after giving
effect to such reallocation, no Bank shall have a
Commitment in excess of its Commitment on the date hereof
unless such Bank has so agreed.
12. This Amendment shall become effective as of the
date hereof (the "First Amendment Effective Date") on the
date upon which (i) each of the Borrowers, the Agent and
Banks (after giving effect to paragraph 10 hereto), after
giving effect to the reallocation of Commitments pursuant
to paragraph 11 of this Amendment, shall have signed a copy
hereof (whether the same or different copies) and shall
have delivered (including by way of telecopier) the same to
the Agent as provided in Section 8.2 of the A Credit
Agreement and (ii) the First Amendment to the B Credit
Agreement, dated as of the date hereof, has become
effective.
13. From and after the First Amendment Effective
Date, all references in the A Credit Agreement and each of
the other A Credit Documents to the A Credit Agreement
shall be deemed to be references to the A Credit Agreement
after giving effect to this Amendment.
IN WITNESS WHEREOF, each of the parties hereto
has caused a counterpart of this Amendment to be duly
executed and delivered as of the date first above written.
AMERICAN HOME PRODUCTS CORPORATION
By:_____________________________
Title:
AMERICAN HOME FOOD PRODUCTS, INC.
By:_____________________________
Title:
SHERWOOD MEDICAL COMPANY
By:____________________________
Title:
A. H. ROBINS COMPANY, INCORPORATED
By:________________________________
Title:
CHEMICAL BANK,
as Agent and as a Lender
By:_____________________________
Title:
ABN AMRO BANK N.V.,
NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BANCA NAZIONALE DEL LAVORO S.p.A.
NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BANK OF AMERICA NT & SA
By:_____________________________
Title:
BANK OF AMERICA ILLINOIS
By:_____________________________
Title:
BANK BRUSSELS LAMBERT -
NEW YORK BRANCH
By:_____________________________
Title:
BANK OF MONTREAL
By:_____________________________
Title:
THE BANK OF NEW YORK
By:_____________________________
Title:
THE BANK OF NOVA SCOTIA
By:_____________________________
Title:
THE BANK OF TOKYO TRUST COMPANY
By:_____________________________
Title:
BANQUE NATIONALE DE PARIS -
NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BANQUE NATIONALE DE PARIS -
GEORGETOWN BRANCH, CAYMAN ISLANDS
By:_____________________________
Title:
By:_____________________________
Title:
BANQUE PARIBAS
By:_____________________________
Title:
By:_____________________________
Title:
BAYERISCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BAYERISCHE VEREINSBANK AG,
NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BANCA COMMERCIALE ITALIANA
NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BHF - BANK
By:_____________________________
Title:
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:_____________________________
Title:
CARIPLO - CASSA DI RISPARMIO
DELLE PROVINCIE LOMBARDE SPA
By:_____________________________
Title:
By:_____________________________
Title:
THE CHASE MANHATTAN BANK, N.A.
By:_____________________________
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By:_____________________________
Title:
CITIBANK, N.A.
By:_____________________________
Title:
COMMERZBANK AKTIENGESELLSCHAFT
By:_____________________________
Title:
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A.,
"RABOBANK NEDERLAND"
By:_____________________________
Title:
CORESTATES BANK, N.A.
By:_____________________________
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:_____________________________
Title:
CREDIT LYONNAIS CAYMAN ISLAND
BRANCH
By:_____________________________
Title:
CREDIT SUISSE
By:_____________________________
Title:
CRESTAR BANK
By:_____________________________
Title:
THE DAI-ICHI KANGYO BANK LTD.
By:_____________________________
Title:
THE DAIWA BANK LTD. - NEW YORK
BRANCH
By:_____________________________
Title:
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By:_____________________________
Title:
By:_____________________________
Title:
DRESDNER BANK AG, NEW YORK BRANCH
By:_____________________________
Title:
DRESDNER BANK AG, GRAND CAYMAN
BRANCH
By:_____________________________
Title:
FIRST FIDELITY BANK, NATIONAL ASSOCIATION
By:_____________________________
Title:
FIRST INTERSTATE BANK OF CALIFORNIA
By:_____________________________
Title:
By:_____________________________
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:_____________________________
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By:_____________________________
Title:
FIRST UNION NATIONAL BANK OF NC
By:_____________________________
Title:
THE FUJI BANK, LIMITED
By:_____________________________
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:_____________________________
Title:
ISTITUTO BANCARIO SAN PAOLO DI TORINA SPA - NEW YORK
LIMITED BRANCH
By:_____________________________
Title:
LLOYDS BANK PLC
By:_____________________________
Title:
LTCB TRUST COMPANY
By:_____________________________
Title:
MELLON BANK, N.A.
By:_____________________________
Title:
THE MITSUBISHI BANK, LIMITED -
NEW YORK BRANCH
By:_____________________________
Title:
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED - NEW YORK BRANCH
By:_____________________________
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:_____________________________
Title:
MORGAN GUARANTY TRUST COMPANY OF NEW YORK
By:_____________________________
Title:
NATIONAL WESTMINSTER BANK PLC
By:_____________________________
Title:
NORDDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
THE NORINCHUKIN BANK, NEW YORK BRANCH
By:_____________________________
Title:
THE NORTHERN TRUST COMPANY
By:_____________________________
Title:
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Title:
ROYAL BANK OF CANADA
By:_____________________________
Title:
THE SAKURA BANK, LIMITED
By:_____________________________
Title:
THE SANWA BANK LTD, NEW YORK
BRANCH
By:_____________________________
Title:
SHAWMUT BANK CONNECTICUT, N.A.
By:_____________________________
Title:
SOCIETE GENERALE
By:_____________________________
Title:
STANDARD CHARTERED BANK
By:_____________________________
Title:
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By:_____________________________
Title:
THE SUMITOMO TRUST & BANKING CO.
By:_____________________________
Title:
SWISS BANK CORPORATION, NEW YORK BRANCH
By:_____________________________
Title:
THE TOKAI BANK, LIMITED
NEW YORK BRANCH
By:_____________________________
Title:
TORONTO DOMINION (NEW YORK), INC.
By:_____________________________
Title:
TOYO TRUST & BANKING CO.
By:_____________________________
Title:
WACHOVIA BANK OF GEORGIA, N.A.
By:_____________________________
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK AND
CAYMAN ISLANDS BRANCHES
By:_____________________________
Title:
WESTPAC BANKING CORPORATION
By:_____________________________
Title:
YASUDA TRUST & BANKING
By:_____________________________
Title:
Exhibit 10.4
FIRST AMENDMENT TO B CREDIT AGREEMENT
First Amendment (this "Amendment"), dated as of August
4, 1995, among American Home Food Products, Inc., Sherwood
Medical Company, A.H. Robins Company, Incorporated (each, a
"Subsidiary Borrower"), American Home Products Corporation
(the "Company", and together with the Subsidiary Borrowers,
the "Borrowers"), the lending institutions party to the B
Credit Agreement referred to below (the "Banks") and
Chemical Bank, as Agent (in such capacity, the "Agent").
All capitalized terms used herein and not otherwise defined
shall have the respective meanings provided such terms in
the B Credit Agreement referred to below.
W I T N E S S E T H :
WHEREAS, the Borrowers, the Banks and the Agent are
parties to a Credit Agreement, dated as of September 9,
1994, (the "B Credit Agreement");
WHEREAS, the parties hereto wish to amend the B Credit
Agreement as herein provided;
NOW THEREFORE, it is agreed:
1. Section 1.1 of the B Credit Agreement is hereby
amended by deleting the definition of "Applicable Margin"
in its entirety and inserting in lieu thereof the following
new definition:
"Applicable Margin": for any day, the rate per annum
set forth below opposite the Rating Period then in effect,
it being understood that the Applicable Margin for (x)
Alternate Base Rate Loans shall be the percentage set forth
under the column "Alternate Base Rate Margin", (y) C/D Rate
Loans shall be the percentage set forth under the column
"C/D Rate Margin" and (z) Eurodollar Rate Loans shall be
the percentage set forth under the column "Eurodollar Rate
Margin":
<TABLE>
<CAPTION>
Alternative Eurodollar
Rating Base Rate C/D Rate- Rate
Period Margin Margin Margin
<S> <C> <C> <C>
Category A Period 0% .2400% .1150%
Category B Period 0% .2575% .1325%
Category C Period 0% .2950% .1700%
Category D Period 0% .3500% .2250%
Cateogry E Period 0% .4250% .3000%
</TABLE>
2. Section 1.1 of the B Credit Agreement is hereby
amended by deleting the definition of "Facility Fee
Percentage" in its entirety and inserting in lieu thereof
the following definition:
"Facility Fee Percentage": a percentage equal to
at any time (i) during a Category A Period,
0.0600%, (ii) during a Category B Period, .0675%,
(iii) during a Category C Period, .0800%, (iv)
during a Category D Period, .1250% and (v) during
a Category E Period, .2000%."
3. Section 1.1 of the B Credit Agreement is hereby
amended by deleting the definition of "Significant Usage
Period" in its entirety.
4. Section 1.1 of the B Credit Agreement is hereby
amended by deleting clause (a) of the definition of
"Termination Date" in its entirety and inserting in lieu
thereof "(a) August 4, 2000 and ".
5. In order to induce the Agent and the Banks to
enter into this Amendment, the Borrowers hereby represent
and warrant that (x) no Default or Event of Default exists
on the First Amendment Effective Date (as defined herein)
both before and after giving effect to this Amendment and
(y) all of the representations and warranties contained in
the Credit Documents shall be true and correct in all
material respects on the First Amendment Effective Date
both before and after giving effect to this Amendment with
the same effect as though such representations and
warranties had been made on and as of the First Amendment
Effective Date (it being understood that any representation
or warranty made as of a specific date shall be true and
correct in all material respects as of such specific date).
6. This Amendment is limited as specified and shall
not constitute a modification, acceptance or waiver of any
other provision of the B Credit Agreement or any other
Credit Document.
7. This Amendment may be executed in any number of
counterparts and by the different parties hereto on
separate counterparts, each of which counterparts when
executed and delivered shall be an original, but all of
which shall together constitute one and the same instru-
ment. A complete set of counterparts shall be lodged with
the Company and the Agent.
8. This Amendment and the rights and obligations of
the parties hereunder shall be construed in accordance with
and governed by the law of the State of New York.
9. Notwithstanding anything to the contrary
contained in the Credit Agreement or this Amendment, for
purposes of this Amendment "Banks" shall mean each of the
lending institutions who shall have delivered (including by
way of telecopier) by August 3, 1995 (or such later date as
the Agent and the Company shall agree) a signed copy hereof
to the Agent as provided in Section 8.2 of the Credit
Agreement.
10. This Amendment shall become effective as of the
date hereof (the "First Amendment Effective Date") on the
date upon which (i) each of the Borrowers, the Agent and
the Banks (after giving effect to paragraph 9) shall have
signed a copy hereof (whether the same or different copies)
and shall have delivered (including by way of telecopier)
the same to the Agent as provided in Section 8.2 of the
B Credit Agreement and (ii) the First Amendment to the A
Credit Agreement, dated as of the date hereof, has become
effective.
11. From and after the First Amendment Effective
Date, all references in the B Credit Agreement and each of
the other Credit Documents to the B Credit Agreement shall
be deemed to be references to the B Credit Agreement after
giving effect to this Amendment.
IN WITNESS WHEREOF, each of the parties hereto has
caused a counterpart of this Amendment to be duly executed
and delivered as of the date first above written.
AMERICAN HOME PRODUCTS CORPORATION
By:_______________________________
Title:
AMERICAN HOME FOOD PRODUCTS, INC.
By:_______________________________
Title:
SHERWOOD MEDICAL COMPANY
By:______________________________
Title:
A. H. ROBINS COMPANY, INCORPORATED
By:______________________________
Title:
CHEMICAL BANK,
as Agent and as a Lender
By:_____________________________
Title:
ABN AMRO BANK N.V.,
NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BANCA NAZIONALE DEL LAVORO S.p.A.
NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BANK OF AMERICA NT & SA
By:_____________________________
Title:
BANK OF AMERICA ILLINOIS
By:_____________________________
Title:
BANK BRUSSELS LAMBERT -
NEW YORK BRANCH
By:_____________________________
Title:
BANK OF MONTREAL
By:_____________________________
Title:
THE BANK OF NEW YORK
By:_____________________________
Title:
THE BANK OF NOVA SCOTIA
By:_____________________________
Title:
THE BANK OF TOKYO TRUST COMPANY
By:_____________________________
Title:
BANQUE NATIONALE DE PARIS -
NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BANQUE NATIONALE DE PARIS -
GEORGETOWN BRANCH, CAYMAN ISLANDS
By:_____________________________
Title:
By:_____________________________
Title:
BANQUE PARIBAS
By:_____________________________
Title:
By:_____________________________
Title:
BAYERISCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BAYERISCHE VEREINSBANK AG,
NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BANCA COMMERCIALE ITALIANA
NEW YORK BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
BHF - BANK
By:_____________________________
Title:
THE BOATMEN'S NATIONAL BANK OF
ST. LOUIS
By:_____________________________
Title:
CARIPLO - CASSA DI RISPARMIO
DELLE PROVINCIE LOMBARDE SPA
By:_____________________________
Title:
By:_____________________________
Title:
THE CHASE MANHATTAN BANK, N.A.
By:_____________________________
Title:
CANADIAN IMPERIAL BANK OF
COMMERCE, NEW YORK AGENCY
By:_____________________________
Title:
CITIBANK, N.A.
By:_____________________________
Title:
COMMERZBANK AKTIENGESELLSCHAFT
By:_____________________________
Title:
COOPERATIEVE CENTRALE RAIFFEISEN-
BOERENLEENBANK, B.A.,
"RABOBANK NEDERLAND"
By:_____________________________
Title:
CORESTATES BANK, N.A.
By:_____________________________
Title:
CREDIT LYONNAIS NEW YORK BRANCH
By:_____________________________
Title:
CREDIT LYONNAIS CAYMAN ISLAND BRANCH
By:_____________________________
Title:
CREDIT SUISSE
By:_____________________________
Title:
CRESTAR BANK
By:_____________________________
Title:
THE DAI-ICHI KANGYO BANK LTD.
By:_____________________________
Title:
THE DAIWA BANK LTD. - NEW YORK BRANCH
By:_____________________________
Title:
DEUTSCHE BANK AG, NEW YORK
AND/OR CAYMAN ISLANDS BRANCHES
By:_____________________________
Title:
By:_____________________________
Title:
DRESDNER BANK AG, NEW YORK BRANCH
By:_____________________________
Title:
DRESDNER BANK AG, GRAND CAYMAN BRANCH
By:_____________________________
Title:
FIRST FIDELITY BANK, NATIONAL
ASSOCIATION
By:_____________________________
Title:
FIRST INTERSTATE BANK OF CALIFORNIA
By:_____________________________
Title:
By:_____________________________
Title:
THE FIRST NATIONAL BANK OF BOSTON
By:_____________________________
Title:
THE FIRST NATIONAL BANK OF CHICAGO
By:_____________________________
Title:
FIRST UNION NATIONAL BANK OF NC
By:_____________________________
Title:
THE FUJI BANK, LIMITED
By:_____________________________
Title:
THE INDUSTRIAL BANK OF JAPAN, LIMITED
By:_____________________________
Title:
ISTITUTO BANCARIO SAN PAOLO DI
TORINA SpA - NEW YORK LIMITED
BRANCH
By:_____________________________
Title:
LLOYDS BANK PLC
By:_____________________________
Title:
LTCB TRUST COMPANY
By:_____________________________
Title:
MELLON BANK, N.A.
By:_____________________________
Title:
THE MITSUBISHI BANK, LIMITED -
NEW YORK BRANCH
By:_____________________________
Title:
THE MITSUI TRUST AND BANKING
COMPANY, LIMITED - NEW YORK
BRANCH
By:_____________________________
Title:
THE MITSUBISHI TRUST AND BANKING
CORPORATION
By:_____________________________
Title:
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By:_____________________________
Title:
NATIONAL WESTMINSTER BANK PLC
By:_____________________________
Title:
NORDDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK BRANCH
AND/OR CAYMAN ISLANDS BRANCH
By:_____________________________
Title:
By:_____________________________
Title:
THE NORINCHUKIN BANK, NEW YORK
BRANCH
By:_____________________________
Title:
THE NORTHERN TRUST COMPANY
By:_____________________________
Title:
PNC BANK, NATIONAL ASSOCIATION
By:_____________________________
Title:
ROYAL BANK OF CANADA
By:_____________________________
Title:
THE SAKURA BANK, LIMITED
By:_____________________________
Title:
THE SANWA BANK LTD, NEW YORK
BRANCH
By:_____________________________
Title:
SHAWMUT BANK CONNECTICUT, N.A.
By:_____________________________
Title:
SOCIETE GENERALE
By:_____________________________
Title:
STANDARD CHARTERED BANK
By:_____________________________
Title:
THE SUMITOMO BANK, LIMITED,
NEW YORK BRANCH
By:_____________________________
Title:
THE SUMITOMO TRUST & BANKING CO.
By:_____________________________
Title:
SWISS BANK CORPORATION, NEW YORK
BRANCH
By:_____________________________
Title:
THE TOKAI BANK, LIMITED
NEW YORK BRANCH
By:_____________________________
Title:
TORONTO DOMINION (NEW YORK), INC.
By:_____________________________
Title:
TOYO TRUST & BANKING CO.
By:_____________________________
Title:
WACHOVIA BANK OF GEORGIA, N.A.
By:_____________________________
Title:
WESTDEUTSCHE LANDESBANK
GIROZENTRALE, NEW YORK AND
CAYMAN ISLANDS BRANCHES
By:_____________________________
Title:
WESTPAC BANKING CORPORATION
By:_____________________________
Title:
YASUDA TRUST & BANKING
By:_____________________________
Title:
Exhibit 10.7
AMENDMENT TO THE
AMERICAN HOME PRODUCTS CORPORATION
1980 STOCK OPTION PLAN
WHEREAS, Section 8 of the American Home Products Corporation
(the "Company") 1980 Stock Option Plan (the "Plan") authorizes
the Board of Directors of the Company (the "Board") to amend the
Plan; and
WHEREAS, the Board has resolved to amend the Plan to provide
for a deferral mechanism with respect to the proceeds payable
upon the exercise of an option or stock appreciation right and
limited transferrability with respect to options; and
WHEREAS, the Board has directed the officers of the Company
to so amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows.
1. A new Section 11 is added as follows:
"Section 11. Deferral.
(a) Notwithstanding anything herein to the contrary, an
optionee may elect, at the discretion of, and in accordance with
rules which may be established by, the Committee, to defer delivery
of the proceeds of exercise of an unexercised Option or the
corresponding Stock Appreciation Right, provided such election is
irrevocable and is made (i) at least six months prior to the date
that such Option or the corresponding Stock Appreciation Right
otherwise would expire and (ii) at least one month prior to the
date such Option or the corresponding Stock Appreciation Right is
exercised (or such shorter period as may be determined by the
Committee). Upon such exercise, the amount deferred shall be equal
in value to the difference between the Option Price per share and
the fair market value per share of the Common Stock on the date of
exercise (determined in accordance with Section 5(b)), multiplied
by the number of shares covered by such exercise and in respect of
which the optionee shall have made the deferral election, and shall
be credited to an account in the name of the optionee on the books
and records of the Company (a "Deferred Compensation Account") at
the date of exercise. A separate Deferred Compensation Account
shall be maintained with respect to each Option or corresponding
Stock Appreciation Right subject to an effective deferral election.
(b) Interest shall be credited on amounts in the Deferred
Compensation Account from the date of exercise of the Option or the
corresponding Stock Appreciation Right to the date of payment, as
of the last day of each complete calendar month during the deferral
period, at the rate of interest determined by the Committee and
communicated to the optionees. The value of an optionee's Deferred
Compensation Account shall be payable in a lump sum cash payment or
in annual installments over a period not to exceed 10 years or as
otherwise determined by the Committee. At the time an optionee
makes such deferral election, the optionee shall elect the form of
payment and date for lump sum payment or commencement of annual
payments of the Deferred Compensation Account, with such date at
least one year subsequent to the date of exercise of the Option or
corresponding Stock Appreciation Right, but not later than the date
of the optionee's termination of employment with Company.
Notwithstanding any election by an optionee, in the event of
Disability or death of the optionee, the optionee's Deferred
Compensation Account shall be paid within 90 days in the form of a
single lump sum.
(c) Notwithstanding the deferred payment date elected by the
optionee, the Committee may, in its discretion, allow for early
payment of an optionee's Deferred Compensation Account in the event
of an "unforeseeable emergency." For this purpose, an
unforeseeable emergency shall be defined as an unanticipated
emergency that is caused by an event beyond the control of the
optionee and that would result in severe financial hardship to the
optionee if early withdrawal were not permitted. Any withdrawal on
account of an unforeseeable emergency must be limited to the amount
necessary to meet the emergency. The above provisions regarding a
withdrawal upon an unforeseeable emergency shall be interpreted in
accordance with published revenue procedures, regulations, releases
or interpretations. In addition, Deferred Compensation Accounts
may be distributed on an accelerated basis in the discretion of the
Committee.
(d) Optionees have the status of general unsecured creditors
of the Company with respect to their Deferred Compensation
Accounts, and such accounts constitute a mere promise by the
Company to make payments with respect thereto.
(e) An optionee's right to benefit payments under the Plan
with respect to the Deferred Compensation Accounts may not be
anticipated, alienated, sold, transferred, assigned, pledged,
encumbered, attached or garnished by creditors of the optionee or
the optionee's beneficiary and any attempt to do so shall be void."
2. The following clause is added to the end of the first
sentence of Section 5(h):
"; provided, however, that the Committee may, in its sole
discretion, allow for transfer of Options (other than
incentive stock options, unless such transferability would
not adversely affect incentive stock option tax treatment)
to other persons or entities, subject to such conditions or
limitations as it may establish to ensure that transactions
with respect to Options intended to be exempt from Section
16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), pursuant to Rule 16b-3 thereunder do
not fail to maintain such exemption as a result of the
Committee causing Options to be transferrable or for other
purposes; provided further, however, that for any Option
that is transferred, other than by the laws of descent and
distribution, any related Stock Appreciation Right shall be
extinguished."
IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed and effective as of January 25, 1996.
Exhibit 10.9
AMENDMENT TO THE
AMERICAN HOME PRODUCTS CORPORATION
1985 STOCK OPTION PLAN
WHEREAS, Section 8 of the American Home Products Corporation
(the "Company") 1985 Stock Option Plan (the "Plan") authorizes
the Board of Directors of the Company (the "Board") to amend the
Plan; and
WHEREAS, the Board has resolved to amend the Plan to provide
for a deferral mechanism with respect to the proceeds payable
upon the exercise of an option or stock appreciation right and
limited transferrability with respect to options; and
WHEREAS, the Board has directed the officers of the Company
to so amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows.
1. A new Section 11 is added as follows:
"Section 11. Deferral.
(a) Notwithstanding anything herein to the contrary, an
optionee may elect, at the discretion of, and in accordance with
rules which may be established by, the Committee, to defer delivery
of the proceeds of exercise of an unexercised Option or the
corresponding Stock Appreciation Right, provided such election is
irrevocable and is made (i) at least six months prior to the date
that such Option or the corresponding Stock Appreciation Right
otherwise would expire and (ii) at least one month prior to the
date such Option or the corresponding Stock Appreciation Right is
exercised (or such shorter period as may be determined by the
Committee). Upon such exercise, the amount deferred shall be equal
in value to the difference between the Option Price per share and
the fair market value per share of the Common Stock on the date of
exercise (determined in accordance with Section 5(b)), multiplied
by the number of shares covered by such exercise and in respect of
which the optionee shall have made the deferral election, and shall
be credited to an account in the name of the optionee on the books
and records of the Company (a "Deferred Compensation Account") at
the date of exercise. A separate Deferred Compensation Account
shall be maintained with respect to each Option or corresponding
Stock Appreciation Right subject to an effective deferral election.
(b) Interest shall be credited on amounts in the Deferred
Compensation Account from the date of exercise of the Option or the
corresponding Stock Appreciation Right to the date of payment, as
of the last day of each complete calendar month during the deferral
period, at the rate of interest determined by the Committee and
communicated to the optionees. The value of an optionee's Deferred
Compensation Account shall be payable in a lump sum cash payment or
in annual installments over a period not to exceed 10 years or as
otherwise determined by the Committee. At the time an optionee
makes such deferral election, the optionee shall elect the form of
payment and date for lump sum payment or commencement of annual
payments of the Deferred Compensation Account, with such date at
least one year subsequent to the date of exercise of the Option or
corresponding Stock Appreciation Right, but not later than the date
of the optionee's termination of employment with Company.
Notwithstanding any election by an optionee, in the event of
Disability or death of the optionee, the optionee's Deferred
Compensation Account shall be paid within 90 days in the form of a
single lump sum.
(c) Notwithstanding the deferred payment date elected by the
optionee, the Committee may, in its discretion, allow for early
payment of an optionee's Deferred Compensation Account in the event
of an "unforeseeable emergency." For this purpose, an
unforeseeable emergency shall be defined as an unanticipated
emergency that is caused by an event beyond the control of the
optionee and that would result in severe financial hardship to the
optionee if early withdrawal were not permitted. Any withdrawal on
account of an unforeseeable emergency must be limited to the amount
necessary to meet the emergency. The above provisions regarding a
withdrawal upon an unforeseeable emergency shall be interpreted in
accordance with published revenue procedures, regulations, releases
or interpretations. In addition, Deferred Compensation Accounts
may be distributed on an accelerated basis in the discretion of the
Committee.
(d) Optionees have the status of general unsecured creditors
of the Company with respect to their Deferred Compensation
Accounts, and such accounts constitute a mere promise by the
Company to make payments with respect thereto.
(e) An optionee's right to benefit payments under the Plan
with respect to the Deferred Compensation Accounts may not be
anticipated, alienated, sold, transferred, assigned, pledged,
encumbered, attached or garnished by creditors of the optionee or
the optionee's beneficiary and any attempt to do so shall be void."
2. The following clause is added to the end of the first
sentence of Section 5(h):
"; provided, however, that the Committee may, in its sole
discretion, allow for transfer of Options (other than
incentive stock options, unless such transferability would
not adversely affect incentive stock option tax treatment)
to other persons or entities, subject to such conditions or
limitations as it may establish to ensure that transactions
with respect to Options intended to be exempt from Section
16(b) of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"), pursuant to Rule 16b-3 thereunder do
not fail to maintain such exemption as a result of the
Committee causing Options to be transferrable or for other
purposes; provided further, however, that for any Option
that is transferred, other than by the laws of descent and
distribution, any related Stock Appreciation Right shall be
extinguished."
IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed and effective as of January 25, 1996.
Exhibit 10.13
AMENDMENT TO THE
AMERICAN HOME PRODUCTS CORPORATION
1990 STOCK INCENTIVE PLAN
WHEREAS, Section 9 of the American Home Products Corporation
(the "Company") 1990 Stock Incentive Plan (the "Plan") authorizes
the Board of Directors of the Company (the "Board") to amend the
Plan; and
WHEREAS, the Board has resolved to amend the Plan to provide
for a deferral mechanism with respect to the proceeds payable
upon the exercise of an option or stock appreciation right and
limited transferrability with respect to options and restricted
stock awarded pursuant to the Plan; and
WHEREAS, the Board has directed the officers of the Company
to so amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows.
1. A new Section 12 is added as follows:
"Section 12. Deferral.
(a) Notwithstanding anything herein to the contrary, an
optionee may elect, at the discretion of, and in accordance with
rules which may be established by, the Committee, to defer delivery
of the proceeds of exercise of an unexercised Option or the
corresponding Stock Appreciation Right, provided such election is
irrevocable and is made (i) at least six months prior to the date
that such Option or the corresponding Stock Appreciation Right
otherwise would expire and (ii) at least one month prior to the
date such Option or the corresponding Stock Appreciation Right is
exercised (or such shorter period as may be determined by the
Committee). Upon such exercise, the amount deferred shall be equal
in value to the difference between the Option Price per share and
the fair market value per share of the Common Stock on the date of
exercise (determined in accordance with Section 5(b)), multiplied
by the number of shares covered by such exercise and in respect of
which the optionee shall have made the deferral election, and shall
be credited to an account in the name of the optionee on the books
and records of the Company (a "Deferred Compensation Account") at
the date of exercise. A separate Deferred Compensation Account
shall be maintained with respect to each Option or corresponding
Stock Appreciation Right subject to an effective deferral election.
(b) Interest shall be credited on amounts in the
Deferred Compensation Account from the date of exercise of the
Option or the corresponding Stock Appreciation Right to the date of
payment, as of the last day of each complete calendar month during
the deferral period, at the rate of interest determined by the
Committee and communicated to the optionees. The value of an
optionee's Deferred Compensation Account shall be payable in a lump
sum cash payment or in annual installments over a period not to
exceed 10 years or as otherwise determined by the Committee. At
the time an optionee makes such deferral election, the optionee
shall elect the form of payment and date for lump sum payment or
commencement of annual payments of the Deferred Compensation
Account, with such date at least one year subsequent to the date of
exercise of the Option or corresponding Stock Appreciation Right,
but not later than the date of the optionee's termination of
employment with Company. Notwithstanding any election by an
optionee, in the event of Disability or death of the optionee, the
optionee's Deferred Compensation Account shall be paid within 90
days in the form of a single lump sum.
(c) Notwithstanding the deferred payment date elected by
the optionee, the Committee may, in its discretion, allow for early
payment of an optionee's Deferred Compensation Account in the event
of an "unforeseeable emergency." For this purpose, an
unforeseeable emergency shall be defined as an unanticipated
emergency that is caused by an event beyond the control of the
optionee and that would result in severe financial hardship to the
optionee if early withdrawal were not permitted. Any withdrawal on
account of an unforeseeable emergency must be limited to the amount
necessary to meet the emergency. The above provisions regarding a
withdrawal upon an unforeseeable emergency shall be interpreted in
accordance with published revenue procedures, regulations, releases
or interpretations. In addition, Deferred Compensation Accounts
may be distributed on an accelerated basis in the discretion of the
Committee.
(d) Optionees have the status of general unsecured
creditors of the Company with respect to their Deferred
Compensation Accounts, and such accounts constitute a mere promise
by the Company to make payments with respect thereto.
(e) An optionee's right to benefit payments under the
Plan with respect to the Deferred Compensation Accounts may not be
anticipated, alienated, sold, transferred, assigned, pledged,
encumbered, attached or garnished by creditors of the optionee or
the optionee's beneficiary and any attempt to do so shall be void."
2. The following clause is added to the end of the first sentence
of Section 5(h):
"; provided, however, that the Committee may, in its sole
discretion, allow for transfer of Options (other than incentive
stock options, unless such transferability would not adversely
affect incentive stock option tax treatment) to other persons or
entities, subject to such conditions or limitations as it may
establish to ensure that transactions with respect to Options
intended to be exempt from Section 16(b) of the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), pursuant to Rule 16b-
3 thereunder do not fail to maintain such exemption as a result of
the Committee causing Options to be transferrable or for other
purposes; provided further, however, that for any Option that is
transferred, other than by the laws of descent and distribution,
any related Stock Appreciation Right shall be extinguished."
3. The following clause is added to the end of the first sentence
of Section 7(c):
"; provided, however, that the Committee may, in its sole
discretion, allow for the assignment, transfer or pledge of shares
of Restricted Stock, or rights thereto, to other persons or
entities, subject to such conditions or limitations as it may
establish."
IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed and effective as of January 25, 1996.
Exhibit 10.15
AMENDMENT TO THE
AMERICAN HOME PRODUCTS CORPORATION
1993 STOCK INCENTIVE PLAN
WHEREAS, Section 9 of the American Home Products Corporation
(the "Company") 1993 Stock Incentive Plan (the "Plan") authorizes
the Board of Directors of the Company (the "Board") to amend the
Plan; and
WHEREAS, the Board has resolved to amend the Plan to provide
for a deferral mechanism with respect to the proceeds payable
upon the exercise of an option or stock appreciation right and
limited transferrability with respect to options and restricted
stock awarded pursuant to the Plan; and
WHEREAS, the Board has directed the officers of the Company
to so amend the Plan;
NOW, THEREFORE, the Plan is hereby amended as follows.
1. A new Section 12 is added as follows:
"Section 12. Deferral.
(a) Notwithstanding anything herein to the contrary, an
optionee may elect, at the discretion of, and in accordance with
rules which may be established by, the Committee, to defer
delivery of the proceeds of exercise of an unexercised Option or
the corresponding Stock Appreciation Right, provided such
election is irrevocable and is made (i) at least six months prior
to the date that such Option or the corresponding Stock
Appreciation Right otherwise would expire and (ii) at least one
month prior to the date such Option or the corresponding Stock
Appreciation Right is exercised (or such shorter period as may be
determined by the Committee). Upon such exercise, the amount
deferred shall be equal in value to the difference between the
Option Price per share and the fair market value per share of the
Common Stock on the date of exercise (determined in accordance
with Section 5(b)), multiplied by the number of shares covered by
such exercise and in respect of which the optionee shall have
made the deferral election, and shall be credited to an account
in the name of the optionee on the books and records of the
Company (a "Deferred Compensation Account") at the date of
exercise. A separate Deferred Compensation Account shall be
maintained with respect to each Option or corresponding Stock
Appreciation Right subject to an effective deferral election.
(b) Interest shall be credited on amounts in the Deferred
Compensation Account from the date of exercise of the Option or
the corresponding Stock Appreciation Right to the date of
payment, as of the last day of each complete calendar month
during the deferral period, at the rate of interest determined by
the Committee and communicated to the optionees. The value of an
optionee's Deferred Compensation Account shall be payable in a
lump sum cash payment or in annual installments over a period not
to exceed 10 years or as otherwise determined by the Committee.
At the time an optionee makes such deferral election, the
optionee shall elect the form of payment and date for lump sum
payment or commencement of annual payments of the Deferred
Compensation Account, with such date at least one year subsequent
to the date of exercise of the Option or corresponding Stock
Appreciation Right, but not later than the date of the optionee's
termination of employment with Company. Notwithstanding any
election by an optionee, in the event of Disability or death of
the optionee, the optionee's Deferred Compensation Account shall
be paid within 90 days in the form of a single lump sum.
(c) Notwithstanding the deferred payment date elected by
the optionee, the Committee may, in its discretion, allow for
early payment of an optionee's Deferred Compensation Account in
the event of an "unforeseeable emergency." For this purpose, an
unforeseeable emergency shall be defined as an unanticipated
emergency that is caused by an event beyond the control of the
optionee and that would result in severe financial hardship to
the optionee if early withdrawal were not permitted. Any
withdrawal on account of an unforeseeable emergency must be
limited to the amount necessary to meet the emergency. The above
provisions regarding a withdrawal upon an unforeseeable emergency
shall be interpreted in accordance with published revenue
procedures, regulations, releases or interpretations. In
addition, Deferred Compensation Accounts may be distributed on an
accelerated basis in the discretion of the Committee.
(d) Optionees have the status of general unsecured
creditors of the Company with respect to their Deferred
Compensation Accounts, and such accounts constitute a mere
promise by the Company to make payments with respect thereto.
(e) An optionee's right to benefit payments under the Plan
with respect to the Deferred Compensation Accounts may not be
anticipated, alienated, sold, transferred, assigned, pledged,
encumbered, attached or garnished by creditors of the optionee or
the optionee's beneficiary and any attempt to do so shall be
void."
2. The following clause is added to the end of the first
sentence of Section 5(h):
"; provided, however, that the Committee may, in its sole
discretion, allow for transfer of Options (other than incentive
stock options, unless such transferability would not adversely
affect incentive stock option tax treatment) to other persons or
entities, subject to such conditions or limitations as it may
establish to ensure that transactions with respect to Options
intended to be exempt from Section 16(b) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), pursuant
to Rule 16b-3 thereunder do not fail to maintain such exemption
as a result of the Committee causing Options to be transferrable
or for other purposes; provided further, however, that for any
Option that is transferred, other than by the laws of descent and
distribution, any related Stock Appreciation Right shall be
extinguished."
3. The following clause is added to the end of the first
sentence of Section 7(c):
"; provided, however, that the Committee may, in its sole
discretion, allow for the assignment, transfer or pledge of
shares of Restricted Stock, or rights thereto, to other persons
or entities, subject to such conditions or limitations as it may
establish."
IN WITNESS WHEREOF, the Company has caused this Amendment to
be executed and effective as of January 25, 1996.
Exhibit 10.17
DEFERRED COMPENSATION AGREEMENT
between
American Home Products Corporation
and
AGREEMENT made this _____ day of _____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
(Title)
____________ [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:
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 [Year] and payable in [Year], if any, which
shall be deferred and distributed as hereinafter provided (the
"Deferred MIP Compensation").
2. The Deferred MIP Compensation will accrue deemed
interest from the date of the award at a deemed rate of interest
based on the average of the quarter end yields for a ten year
period (ending September 30 of the prior year) of 10 Year U.S.
Treasury notes plus 2 percent. 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 [Year] 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 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 based on the average of the quarter end yields for
a ten year period (ending September 30 of the prior year) of 10
Year U.S. Treasury notes plus 2 percent. 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 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 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 Jersey.
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: Vice President - Finance
<PAGE>
ATTACHMENT SCHEDULE (REGARDING PART A)
_______________________________ , hereby elects to defer
(Print Name)
________ percent of the portion of any Management Incentive Plan
Award eligible to be taken in cash which may be awarded in
January [Year] for [Year] 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 payable
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. 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 B)
_________________ , hereby elects to defer ________ percent of my
(Print Name)
eligible [Year] 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 [Year]. This
election under Part B of the Deferred Compensation Agreement
shall be irrevocable upon execution of the Agreement.
III. (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 III(a) above) or
______ 5 annual installments (first installment payable
within 90 days of termination of the period designated in III(a)
and remaining installments payable within 90 days of the
anniversaries of that termination date)
IV. 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 ______________________________
Exhibit 10.20
AMERICAN HOME PRODUCTS CORPORATION
RESTRICTED STOCK PERFORMANCE AWARD AGREEMENT
UNDER THE 1993 STOCK INCENTIVE PLAN
DATE: [ ]
NUMBER OF SHARES SUBJECT
TO TARGET AWARD: [ ]
______________________________
[Address]
Under the terms and conditions of this Agreement and of the
Company's 1993 Stock Incentive Plan (the "Plan"), a copy of which
has been delivered to you and is made a part hereof, the Company
hereby awards to you units (the "Units") representing shares of
the Company's Common Stock (the "Common Stock") subject to the
restrictions set forth in this Agreement in the amount set forth
above (the "Target Award"). Upon the satisfaction by the Company
of certain performance criteria as described in Paragraph 3 of
this Agreement, the Units will be converted into shares of the
Company's Common Stock entitling the holder to all of the rights
of a stockholder as described herein but subject to the
restrictions set forth in this Agreement (the "Restricted
Stock"). Except as provided herein, the terms used in this
Agreement shall have the same meanings as in the Plan.
1. Rights as Stockholders. During the period from the
date of this Agreement through the Conversion Date (as defined
herein), no shares of the Company's Common Stock represented by
the Units will be earmarked for you or your account nor shall you
have any of the rights of a stockholder with respect to such
shares. Upon issuance of the Restricted Stock as of the
Conversion Date, you will be the owner of record of the shares of
Common Stock represented by the Restricted Stock and shall be
entitled to all of the rights of a stockholder of the Company,
including the right to vote and the right to receive dividends,
subject to the restrictions stated in this Agreement and referred
to in the legend described in Paragraph 7 below. If you receive
any additional shares by reason of being the holder of Restricted
Stock under this Agreement, all the additional shares shall be
subject to the provisions of this Agreement and all certificates
evidencing ownership of the additional shares shall bear the
legend.
2. Restricted Period. During the period from the date of
this Agreement through the date which is three years after such
date (the "Restricted Period"), you may not sell, transfer,
assign, pledge, or otherwise encumber or dispose of any Units or
Restricted Stock granted hereunder.
3. Conversion to Restricted Stock. (a) At meetings of the
Committee to be held within 60 days after the end of each of the
current year and the two immediately succeeding years or at such
other time or times as the Committee in its discretion deems
appropriate, the Committee shall compare the EPS (as defined
below) for such year with the EPS Target (as defined below) for
such year (the date on which each such determination is made
being referred to herein as a "Conversion Date"). If, on the
date of such meeting, the Committee determines that, with respect
to the preceding year:
(i) EPS is less than 90% of the EPS Target, then all
rights with respect to one-third of the Target Award (the
"Annual Target Amount") shall thereupon be forfeited;
(ii) EPS is greater than or equal to 90% of the EPS
Target and less than or equal to 95% of the EPS Target, then
Units representing 75% of the Annual Target Amount shall be
converted into Restricted Stock and all rights with respect
to the remaining portion of such Annual Target Amount shall
thereupon be forfeited;
(iii) EPS is greater than 95% of the EPS Target and
less than or equal to 105% of the EPS Target, then Units
representing the entire Annual Target Amount shall be
converted into Restricted Stock; and
(iv) EPS is greater than 105% of the EPS Target, then
Units representing the entire Annual Target Amount shall be
converted into Restricted Stock and you shall be entitled to
receive an additional grant of Restricted Stock representing
25% of the Annual Target Amount (a "Bonus Award"); such
additional grant to be made by the Committee at such
meeting.
(b) Notwithstanding anything to the contrary contained
in this Agreement, Units shall be converted into Restricted Stock
in whole numbers of shares only and, if necessary, (i) the Annual
Target Amount shall be rounded up or down (A) to the nearest
whole number for the first two years and (B) for the third year
to equal, together with the Annual Target Amounts for the first
two years, the Target Award; and (ii) the calculations based upon
such amounts in subparagraphs 3(a)(ii) and 3(a)(iv) above shall
be rounded up or down to the nearest whole number.
(c) As used in this Agreement, the term:
(i) "EPS" for any year means the earnings or net
income per share of common stock of the Company for such
year, adjusted to exclude the effect of extraordinary or
unusual items of income or expense, all as determined in
good faith by the Committee acting in its sole discretion.
(ii) "EPS Target" shall be $4.62 for 1995 and, for
1996 and 1997, shall be the amount established by the
Committee at a meeting to be held no later than March 1 of
each such year; provided, however, that if for any reason
the Committee shall determine that the EPS Target is no
longer a practicable or appropriate measure of financial
performance, the Committee may take action to substitute
another financial measure as it deems appropriate under the
circumstances.
4. Restricted Stock Trust. (a) Subject to Paragraph 4(b)
below, you are eligible to make a one-time irrevocable election
to cause the Company to deposit as of each Conversion Date the
shares of Restricted Stock into which Units shall be converted on
such date, together with a stock power to be executed by you, to
an account in your name in the Restricted Stock Trust (as defined
below) by completing the form set forth on Schedule A attached
hereto. Subject to Paragraph 4(b), below, if you do not make such
election, such shares shall be delivered to you as provided in
Paragraph 5(a)(i) of this Agreement.
(b) Notwithstanding anything to the contrary contained in
this Agreement, if you are or, in the judgment of the Committee,
are expected to be a Named Executive Officer with respect to any
year in which a Conversion Date occurs, then you will be deemed
to have made the election under Paragraph 4(a) above to have the
Restricted Stock into which Units shall be converted on such date
and thereafter deposited into the Restricted Stock Trust.
(c) For purposes of this Agreement:
(i) "Named Executive Officer" shall mean the Chief
Executive Officer of the Company or any of the four highest
compensated officers (other than the Chief Executive Officer
of the Company) whose total compensation payable is required
to be reported to shareholders under the Securities Exchange
Act of 1934, as amended; and
(ii) "Restricted Stock Trust" means the trust fund
established or to be established by a trust agreement (the
"Trust Agreement") to accommodate the deferral of delivery
of shares of Common Stock represented by Units and/or
Restricted Stock (and dividends paid thereon) until your
termination of employment for any reason or as otherwise
provided in the Trust Agreement, such trust fund to be
subject to the claims of the Company's general creditors
under federal and state law in the event of insolvency of
the Company as described in the Trust Agreement.
5. Delivery of Shares of Common Stock. (a) Subject to
Paragraphs 4 and 9 of this Agreement, as soon as practicable
after the Restricted Period (or six months after the last
Conversion Date with respect to a Bonus Award made on the final
Conversion Date), all shares of Restricted Stock granted
hereunder shall be cancelled and replaced with certificates
representing Common Stock free of any restrictive legend other
than as may be required by applicable state or federal securities
law, such certificates to be either (i) delivered to you promptly
or (ii) if you have made or are deemed to have made the election
under Paragraph 4 above, deposited on your behalf in the
Restricted Stock Trust, in which case delivery of such shares
shall be deferred as provided in the Trust Agreement until the
first business day of the calendar year following your
termination of employment or as otherwise provided in the Trust
Agreement.
(b) Notwithstanding any other provisions hereof, the
number of shares of Common Stock which shall be delivered to you
pursuant to Paragraph 5(a) either directly or from the Restricted
Stock Trust shall be (i) the number of such shares which would
have been delivered in the absence of this Paragraph 5(b) minus
(ii) the number of whole shares of Common Stock necessary to
satisfy the minimum federal, state and/or local income tax
withholding obligations which are imposed on the Company by
applicable law in respect of the delivery of such award (and
which may be satisfied by the reduction effected hereby in the
number of deliverable shares), it being understood that the value
of the shares referred to in clause (ii) above shall be
determined, for the purposes of satisfying such withholding
obligations, on the basis of the average of the high and low per
share prices for the Common Stock as reported on the Consolidated
Transaction Reporting System on the designated date of delivery,
or on such other reasonable basis for determining fair market
value as the Committee may from time to time adopt. Any other
withholding obligations (e.g. Social Security and Medicare) with
respect to such award will be satisfied by separate arrangements
between the Company and you but will not in any event involve a
reduction in the number of shares that you are to receive.
6. Termination of Employment. (a) Subject to Section 7(f)
of the Plan, in the event of your termination of employment
during the Restricted Period for any reason other than death,
disability or retirement, you shall forfeit all rights to all
Units and Restricted Stock granted hereunder and you agree (i) to
assign, transfer, and deliver the Restricted Stock to the Company
and (ii) that you shall cease to be a shareholder of the Company
with respect to such shares, provided, the Committee may provide
for a partial or complete exception to this requirement as it
deems equitable in its sole discretion.
(b) In the event that your employment is terminated
due to death, disability or retirement, vesting of all shares of
Restricted Stock covered by the Target Award and any related
Bonus Award and delivery of the shares of Common Stock of the
Company represented thereby will be made to you or your
designated beneficiary or your legal representative, legatee or
such other person designated by an appropriate court as entitled
to receive the same, as the case may be, on the terms and,
subject to the conditions of this Agreement, including Paragraph
3 above.
7. Legend on Certificates. Each certificate evidencing
ownership of Restricted Stock issued during the Restricted Period
shall bear the following legend:
"These shares have been issued or transferred subject to a
Restricted Stock Performance Award and are subject to
substantial restrictions, including a prohibition against
transfer and a provision requiring transfer of these shares
to the Company without payment in the event of termination
of the employment of the registered owner under certain
circumstances all as more particularly set forth in a
Restricted Stock Performance Award Agreement dated May 25,
1995, a copy of which is on file with the Company."
8. Miscellaneous. This Agreement may not be amended
except in writing and neither the existence of the Plan and this
Agreement nor the Target Award granted hereby shall create any
right to continue to be employed by the Corporation or its
subsidiaries and your employment will continue to be at will and
terminable at will by the Corporation. In the event of a
conflict between this Agreement and the Plan, the Plan shall
govern.
9. Compliance With Laws. (a) This Agreement shall be
governed by the laws of the state of Delaware and any applicable
laws of the United States. Notwithstanding anything herein to the
contrary, the Corporation shall not be obligated to cause to be
delivered any Restricted Stock or shares of Common Stock of the
Company represented thereby pursuant to this Agreement unless and
until the Company is advised by its counsel that the issuance and
delivery of such certificates is in compliance with all
applicable laws and regulations of governmental authority. The
Corporation shall in no event be obliged to register any
securities pursuant to the Securities Act of 1933 (as now in
effect or as hereafter amended) or to take any other action in
order to cause the issuance and delivery of such certificates to
comply with any such law or regulation.
(b) If you are subject to Section 16 of the Securities
Exchange Act of 1934, as amended (the "1934 Act"), transactions
under the Plan and this Agreement are intended to comply with all
applicable conditions of Rule 16b-3 or its successors under the
1934 Act. To the extent any provision of the Plan, this
Agreement or action by the Committee involving you is deemed not
to comply with an applicable condition of Rule 16b-3, such
provision or action shall be deemed null and void as to you, to
the extent permitted by law and deemed advisable by the
Committee. Moreover, in the event the Plan and/or this Agreement
does not include a provision required by Rule 16b-3 to be stated
therein, such provision (other than one relating to eligibility
requirements or the price and amount of awards as applicable)
shall be deemed automatically to be incorporated by reference
into the Plan and/or this Agreement insofar as you are concerned,
with such incorporation to be deemed effective as of the
effective date of such Rule 16b-3 provision. In addition, the
Committee in its discretion may cause the Company to retain
custody of the certificates representing the Common Stock to be
delivered under Paragraph 5 above so long as necessary or
appropriate to ensure that any minimum holding period under Rule
16b-3 is satisfied.
AMERICAN HOME PRODUCTS CORPORATION
By: ______________________________
Corporate Treasurer
Accepted and agreed to:
____________________________________ _______________________
Name (Please Print) Social Security Number
____________________________________ _______________________
Signature Date of Birth
<PAGE>
SCHEDULE A
ELECTION FORM
(To Be Completed in Conjunction with Your
Restricted Stock Performance Award Agreement)
I, ______________________________, hereby make an election to defer
(PRINT NAME)
distribution of all shares of Restricted Stock and to cause the
Company to deposit such shares to an account in my name in the
Restricted Stock Trust (with any dividends thereon to be reinvested
under the AHPC Master Investment Plan) together with a stock power
to be executed by me.
See Note Below
This election shall be irrevocable upon execution of the Agreement.
_________________________________
Signature of Executive
Dated: ______________________________________________________
Witnessed: __________________________________________________
NOTE: 1. If you are or are expected to be a Named Executive
Officer with respect to any year in which a Conversion Date occurs,
you will be deemed to have elected deferred distribution hereunder.
<PAGE>
Beneficiary Designation
In the event of my death, I designate the following
beneficiary(ies) to receive any shares of the Company's Common
Stock to be distributed to me or which have been deferred on my
behalf to the Restricted Stock Trust under this Agreement together
with any dividends thereon.
______________________________________________
Beneficiary (ies)
_______________________________________________
Contingent Beneficiary (ies)
_____________________________
Signature of Executive
Dated: _______________________________
Witnessed: ____________________________
Exhibit 10.23
RESTRICTED STOCK TRUST AGREEMENT
UNDER THE 1993 STOCK INCENTIVE PLAN
This Declaration of Trust is made effective as of April 20,
1994 and entered into by and between American Home Products
Corporation (the "Company") which adopts this Trust Agreement and
Jack M. O'Connor, (hereinafter referred to as the "Trustee") as
Trustee. This Trust is established to implement the Restricted
Stock Performance Award Agreements entered into between the
Company and certain key employees under the 1993 Stock Incentive
Plan (the "Plan").
ARTICLE I
TITLE AND DEFINITIONS
1.1 Title
This Trust Agreement shall be known as the Restricted Stock
Trust.
1.2 Definitions
All of the definitions set forth in Section 2 of the Plan
are hereby incorporated by reference. Notwithstanding any
inference to the contrary contained in said Plan, the Trustee's
rights, powers, titles, duties, responsibilities, discretions and
immunities shall be governed solely by this Trust Agreement
without reference to the provisions of the Plan.
ARTICLE II
ADMINISTRATOR
2.1 Committee
The Company shall notify the Trustee, in writing, of the
names of the members of the committee appointed pursuant to the
terms of the Plan ("Committee"), including the persons acting as
Secretary and Assistant Secretary, respectively, and of any
change in the identity of the members of the Committee. Until so
notified of a change, the Trustee shall act upon the direction of
the members of the Committee last designated by the Company in
writing.
2.2 Committee Directions to Trustee
All directions by the Committee to the Trustee shall be in
writing and signed by the member or members of the Committee
specifically authorized to give the Trustee written directions,
or by the agents of the Committee as may be designated under
Section 2.5 hereof, which authorizations shall likewise be
contained in a written notice to the Trustee. The Company shall
furnish to the Trustee specimen signatures of the members of the
Committee at the time they are appointed and specimen signatures
of any successor members of the Committee at the time the Trustee
is notified in writing of any change in membership of the
Committee and specimen signatures of any duly authorized agents
of the Committee who are authorized to give the Trustee written
directions pursuant to Section 2.5 hereof. The Trustee shall not
be liable for losses or unfavorable results arising from
compliance with the directions of the Committee made in
accordance with the Trust Agreement.
2.3 Committee Sole Responsibility
The Committee shall have sole responsibility for the
exercise of its rights and duties as set forth in Section 3 and
elsewhere in the Plan, specifically including the determination
of the existence, non-existence, nature and amount of rights and
interests of all persons in the Trust.
2.4 Maintenance of Accounts
(a) The Trustee will create and maintain a separate account
("Participant's Account") for each participant ("Participant").
The Trustee shall credit a Participant's Account with (i) the
number of shares of Company Stock awarded to the Participant,
(ii) the number of shares of Company Stock purchased with any
cash dividend paid on the Company Stock held in the Participant's
Account and any cash remaining after such purchase, (iii) the
number of shares of Company Stock received as stock splits with
respect to the shares of Company Stock in such Participant's
Account and (iv) warrants or any other property received with
respect to the Company Stock in such Participant's Account. The
Trustee shall debit a Participant's Account to reflect any
distributions or forfeitures with respect to the Participant.
Company Stock that is contributed to the Plan for any year and
Company Stock that is purchased by the Trustee with the
contributions of the Company for such year shall each be
separately allocated to the Participant's Accounts on a pro-rata
basis based on the Participants respective awards ("Awards") for
such year. Any Trust assets distributed by the Trustee to the
judgment creditors of the Company shall be debited to the
Participant's Accounts on a pro-rata basis based on the value of
the respective Participant's Accounts that is attributable to
contributions made by the Company at the time of such
distribution.
(b) The Trustee shall maintain records for each
Participant's Account showing (i) the aggregate number of shares
of Company Stock so credited and debited, (ii) the number of
shares of Company Stock which are awarded or purchased for each
calendar year during which the Plan is in effect and (iii) such
other matters as the Trustee and/or the Company may deem
necessary or advisable.
(c) No fractional share shall be purchased for or credited
to the Participant's Accounts.
(d) Unless otherwise provided by the Company, the Trustee
shall have custody of the certificate or certificates
representing all the shares of Company Stock held in the Trust
under the Plan. The Trustee shall register such certificate or
certificates in its own name or in the name of a nominee of the
Trustee.
2.5 Designation of Agents
The Committee shall in its sole discretion have the right to
appoint such agents as it may deem necessary to carry out its
duties pursuant to the provisions of the Plan and this Trust.
ARTICLE III
CONTRIBUTIONS
3.1 Contributions
The Trustee shall receive all contributions paid by the
Company in Company Stock and all contributions so received,
together with the income therefrom and any increment thereon,
shall be held, managed and administered by the Trustee as a
single Trust pursuant to the terms of this Agreement for the
Company without distinction between principal and income. The
Trustee shall have no duty to require any contributions to be
made to it by the Company and shall have no duty or authority to
compute any amount to be paid to it by the Company nor to
determine whether the amounts received by it from the Company
comply with the Plan or to determine that the assets of the Trust
are adequate to provide any benefits payable pursuant to the
Plan.
ARTICLE IV
PAYMENT FROM TRUST FUND
4.1 Payments by Trustee
All payments from the Trust shall be made by the Trustee to
such persons, in such manner, at such times and in such amounts
as the Committee shall direct and the Trustee shall be under no
duty to make inquiry as to whether any distribution direction by
the Committee is made pursuant to the provisions of the Plan.
4.2 Trustee, Compensation and Expenses
The Trustee shall be paid such reasonable compensation for
its services as shall be agreed upon from time to time by the
Company and the Trustee, and the Trustee shall be reimbursed for
its expenses that are reasonably necessary and incident to its
administration of the Trust. Such expenses shall include outside
counsel fees, if any, incurred by the Trustee for the purpose of
determining its responsibilities under the Trust. All such
compensation, expenses and fees may be paid to the Trustee from
the Trust assets or directly by the Company, in the discretion of
the Committee; provided, however, if the Committee fails to
direct payment of what is agreed between the Trustee and the
Company to be a proper amount of compensation or reimbursement,
the Trustee may withdraw such proper amount from the Trust.
4.3 Taxes
The Trustee shall not be personally liable for any real and
personal property taxes, income taxes and other taxes of any kind
levied or assessed under the existing or future laws against the
Trust assets. Such taxes may be paid directly from the Trust
assets or by the Company in the discretion of the Committee.
4.4 Alienation
The rights, benefits, and payments of any Participant or
beneficiary payable from the Trust assets shall not be subject in
any manner to anticipation, sale, assignment, pledge,
encumbrance, or charge, voluntary or involuntary, by any
Participant or beneficiary. Any attempt by a Participant or
Beneficiary to anticipate, alienate, sell, transfer, assign,
pledge, encumber, or charge the same shall be void. The Trust
assets shall not in any manner be liable for or subject to the
debts, contracts, liabilities, engagements or torts of any
Participant or beneficiary entitled to benefits hereunder and
such benefits shall not be considered an asset of a Participant
or a beneficiary in the event of his insolvency or bankruptcy.
4.5 Committee Expenses
Expenses and fees of the Committee or Company for the
administration of the Plan and services in relation thereto for
legal and accounting and other similar expenses, including any
costs with respect to the creation of the Plan and Trust, may be
paid either from the Trust assets or by the Company at the
discretion of the Committee.
ARTICLE V
INVESTMENT OF TRUST ASSETS
5.1 Trustee Has Fiduciary Responsibility
(a) The Trustee shall have full discretion in and sole
responsibility for investment in Company Stock, management and
control of Trust assets including, without limitation, discretion
in the responsibility for determining the method to be used to
purchase Company Stock, either through open market or private
purchase from the Company or others, the time when and the price
at which Company Stock shall be purchased, the amount of Company
Stock to be purchased, or the broker or dealer, if any, to be
used to effect purchases of Company Stock for Section 5 of the
Plan and Section 5.4 of the Trust.
(b) As soon as practicable after the Trustee receives (i)
any cash awarded to a Participant or (ii) any cash dividend paid
on Company Stock held in a Participant's Account, the Trustee
shall use such cash (any other cash then in the Participant's
Account) to buy in one or more transactions the largest
practicable whole number of shares of Company Stock for such
Participant's Account (which may include purchases of Company
Stock executed on a national securities exchange) after
deductions for the payment of brokers' fees and stock transfer
and similar taxes, if any, applicable to such purchases. The
Trustee shall limit the daily volume and prices of such purchases
as required by regulations of the Securities and Exchange
Commission, if applicable, and otherwise to the extent it deems
necessary or advisable.
5.2 Relationship of Fiduciaries
It is the intent of all fiduciaries under the Plan and Trust
that each fiduciary shall be solely responsible for its own acts
or omissions. No fiduciary shall have the duty to question
whether any other fiduciary is fulfilling all of the
responsibilities imposed upon such other fiduciary. No fiduciary
shall have any liability for a breach of fiduciary responsibility
of another fiduciary with respect to the Plan and Trust unless
(1) he participates knowingly in such breach or knowingly
undertakes to conceal such breach, knowing such act or omission
to be a breach, (2) has actual knowledge of such breach and fails
to take responsible remedial action to remedy said breach, or (3)
through this negligence in performing his own specific fiduciary
responsibilities which give rise to his status as a fiduciary,
has enabled such other fiduciary to commit a breach of the
latter's fiduciary responsibilities.
5.3 Duty of Care
Subject to the investment directions in Section 5 of the
Plan and Section 5.4 of the Trust, the Trustee shall discharge
its responsibilities for the investment, management and control
of the Trust assets solely in the interest of the Participants
and beneficiaries of the Plan for the exclusive purpose of
providing benefits to Participants and their beneficiaries and
defraying reasonable expenses of administering the Plan with the
care, skill, prudence and diligence under the circumstances then
prevailing that a prudent man acting in a like capacity and
familiar with such matters would use in the conduct of an
enterprise of a like character and with like aims. All actions
by the Trustee shall be in accordance with the documents and
instruments governing the Plan and this Trust.
5.4 Plan and Trust Constitute a Key Employees Restricted Stock
Performance Award Plan
This Plan and Trust constitute a key employees restricted
stock performance award plan, not designed to be a qualified plan
under Section 401(a) of the Internal Revenue Code. Because a
significant purpose of the Plan is to foster an increased
ownership interest by key employees of the Company in the
Company, all investments of Trust assets shall be made in Company
Stock; provided that, from time to time the Trustee may maintain
such portion of the Trust assets in cash or forms of short-term
liquid investments, including short-term collective investment
funds maintained by the Trustee, as it deems in the best
interests of the Trust provided that the Trust remains primarily
invested in Company Stock.
ARTICLE VI
POWERS OF TRUSTEE
6.1 Investment Powers
The Trustee is authorized and empowered.
(a) To purchase, hold, sell, invest and reinvest Trust
Assets ("Trust Assets"), together with the income therefrom, in
Company Stock;
(b) To transfer part or all of the money constituting Trust
Assets to and as an investment in any type of interest bearing
account, including but not limited to savings accounts and time
certificates of deposit;
(c) To hold, manage and control all property at any time
forming part of the Trust Assets; to sell, convey, transfer,
exchange, and otherwise dispose of the same from time to time in
such manner, for such consideration and upon such terms and
conditions as it shall determine;
(d) Except to the extent its powers are modified by Section
6.3 of the Trust, to exercise any option, conversion privilege or
subscription right given to the Trustee as the owner of any
security forming part of the Trust assets; except to the extent
its powers are modified by Section 6.3 of the Trust, to consent
to or oppose any reorganization, consolidation, merger,
readjustment of the financial structure, sale, lease, or other
disposition of the assets of any corporation or other
organization, the securities of which may be an asset of the
Trust and to take any action in connection therewith and receive
and retain any securities resulting therefrom;
(e) To make distributions from the Trust at such times and
in such number of shares of Company Stock and amounts of cash to
or for the benefit of the person entitled thereto under the Plan,
as the Committee directs in writing. Where distribution is
directed in Company Stock, the Committee shall cause the Trustee
to obtain an appropriate stock certificate for the person
entitled thereto, to be delivered to such person by the Trustee.
Any portion of a Participant's Account to be distributed in cash
shall be paid by the Trustee furnishing its check to the
Participant or to the Committee for delivery to the Participant
(or beneficiary). Shares of Company Stock distributed by the
Trustee may include such restrictions on transferability as the
Committee may require;
(f) To exercise all the further rights, powers, options and
privileges granted, provided for, or vested in Trustees generally
under applicable federal or state law, as amended from time to
time, it being intended that, except as herein otherwise
provided, the powers conferred upon the Trustee herein shall not
be construed as being in limitation of any authority conferred by
law, but shall be construed as in addition thereto.
6.2 General Powers
The Trustee in any and all events is authorized and
empowered:
(a) To cause any property of the Trust to be issued, held
or registered in the individual name of the Trustee, or in the
name of its nominee, or in such form that title will pass by
delivery, provided the records of the Trustee shall indicate the
true ownership of such property;
(b) To employ such agents and counsel as may be reasonably
necessary in managing and protecting the Trust assets and to pay
them reasonable compensation; and to settle, compromise or
abandon all claims and demands in favor of or against the Trust
assets;
(c) In addition to the enumerated powers herein, to do all
other acts necessary or desirable for the proper administration
of the Trust assets, as though the absolute owner thereof.
6.3 Voting Rights; Offer to Purchase Stock
Each Participant shall have the right and shall be afforded
the opportunity to instruct the Trustee how to vote the shares of
Company Stock held in Participant's Account. The Trustee shall
vote any shares of Company Stock for which it does not receive
instructions in the same proportions on each matter to be voted
upon as the shares for which the Trustee does receive
instructions. In the event any offer is made to shareholders of
the Company generally by any person, corporation or other entity
(the "Offeror") to purchase any or all of the outstanding Company
Stock, including the Company Stock then held in Participant's
Accounts, then and in that event the Trustee shall promptly
forward to each Participant all materials and written information
furnished to the Trustee by the Offeror and/or by the Company in
connection therewith, and shall notify each Participant in
writing of the number of shares of Company Stock which is then
credited to such Participant's Account. Such notice shall also
set forth the rights afforded each Participant by the following
sentence and shall state that, absent timely instructions from
such Participant to the Trustee, no tender to the Offeror shall
be made of any of the shares specified in such written notice.
Each Participant shall be entitled to instruct the Trustee as to
whether all (but not less than all) of the shares of Stock
standing to his credit should be tendered by the Trustee pursuant
to such offer. The Trustee shall tender only those shares of
stock held in a Participant's Account for which it receives
instructions to so tender from such Participant, and shall not
tender any shares as to which such instructions are not so
received. In the event that Company Stock held in a
Participant's Account is tendered pursuant to this paragraph, the
proceeds received upon the acceptance of such tender by the
Offeror shall be credited to such Participant's Account (and
shall be subject to the same terms and conditions as were
applicable to the Company Stock so tendered). Pending the
distribution of such proceeds pursuant to Section 7 of the Plan,
the Trustee shall invest any cash portion of such proceeds in
such short-term or intermediate-term obligations issued or
guaranteed by the Government of the United States or any agency
or instrumentality thereof, and in such commercial paper (other
than obligation of the Company), certificates of deposit and
other investments of a short-term or intermediate-term nature, as
the Trustee, in its discretion, deems suitable for the investment
of trust funds.
ARTICLE VII
ACCOUNTS OF THE TRUSTEE
7.1 Records
The Trustee shall maintain accurate records and accounts of
all transactions hereunder, which shall be available at all
reasonable times for inspection or audit by any person or persons
designated by the Committee.
7.2 Reports
If the Committee so directs, the Trustee shall submit to the
committee such interim valuations, reports, or other information
as the Committee may reasonably require. Within 90 days
following (a) the close of each calendar year of the Trust or (b)
the effective date of the removal or resignation of the Trustee,
the Trustee shall file with the Committee a written account
setting forth all transactions effected by it subsequent to the
end of the period covered by its last previous annual account,
and listing the assets of the Trust, showing carry and market
values of such assets, at the close of the period covered by such
account.
7.3 Value of Trust Assets
For the purposes of this Article 7.3, the fair market value
of assets in the Trust shall be determined by the Trustee based
upon such sources of information as it may deem reliable
including, but not limited to, information reported in (1)
newspapers of general circulation, (2) standard financial
periodicals or publications, (3) statistical and valuation
services, (4) the records of securities exchanges or brokerage
firms deemed by the Trustee to be reliable, or any combination
thereof.
ARTICLE VIII
RESIGNATION AND REMOVAL OF TRUSTEE
8.1 Method and Procedure
The Trustee may resign at any time by delivering to the
Company a written notice of resignation, to take effect at a date
specified therein, which shall not be less than 60 days after the
delivery thereof, unless such notice shall be waived.
The Company shall have the right to remove the Trustee by
delivery of a written notice of removal to take effect at a date
specified therein, which shall not take effect less than 60 days
after the delivery thereof, unless such notice shall be waived.
In the event the Trustee notifies the Company of its
intention to resign, or the Company removes the Trustee, in
accordance with the foregoing provisions of the Article VIII, the
Company, by resolution of its Board of Directors, shall appoint a
successor-trustee and in default thereof, such successor-trustee
may be appointed by a court of competent jurisdiction. The
Trustee hereunder shall thereupon deliver to the
successor-trustee all property of this Trust Fund, together with
such records as may be reasonably required to enable the
successor-trustee to property administer the Trust.
In the cases of its resignation or removal, the Trustee
shall have the right to a settlement of its account, which may be
made, at the option of the Trustee, either (1) by agreement of
settlement between the Trustee and the Company, including
payments by the Company to the Trustee pursuant to the provisions
of section 4.2 hereof, or (2) at the expense of the Trust (other
than legal fees incurred by the Trustee) by a judicial statement
in an action instituted by the Trustee in a court of competent
jurisdiction.
Upon such settlement, all right, title and interest of such
Trustee in the assets of the Trust and all rights and privileges
under this Agreement theretofore vested in such Trustee shall
vest in the successor trustee where applicable, and thereupon all
future liability of such Trustee shall terminate; provided,
however, that the Trustee shall execute, acknowledge and deliver
all documents and written instruments which are necessary to
transfer and convey the right, title and interest in the Trust
assets, and all rights and privileges, to the successor trustee.
ARTICLE IX
AMENDMENT AND TERMINATION
Subject to the limitations of Section 11 of the Plan, the
Company shall have the right to amend the Plan and Trust from
time to time and to amend further or cancel any such amendment.
Any amendment shall be stated in an instrument in writing
executed by the Company and this Trust Agreement shall be amended
in the manner and at the time therein set forth, and the Company
and the Trustee shall be bound thereby; provided, however that:
(a) No amendment shall deprive any Participant of any
benefit already vested.
(b) No amendment shall increase the duties or liabilities
of the Trustee without its written consent.
ARTICLE X
MISCELLANEOUS
10.1 Irrevocable Trust with Assets Subject to Claims of Creditors
of Company and Participating Subsidiaries
This Trust shall be irrevocable, provided, however, that it
will be a grantor trust, with the Trust Assets being treated as
assets of the Company, as the case may be. Any stock, cash or
other property held in the Trust that was contributed by the
Company shall at all times be subject to the claims of judgement
creditors of the Company.
10.2 Limitation on Participants' Rights
Participation in this Trust shall not give any Participant
the right to be retained as an employee of the Company or any
right or interest in this Trust. All rights created under the
Plan and this Trust shall be mere unsecured contractual rights of
Participants against the Company, as the case may be. The
Company reserves the right to dismiss any Participant without any
liability for any claim either against this Trust, except to the
extend provided herein, or against the Company.
10.3 Receipt or Release
Any payment to any Participant or his beneficiary in
accordance with the provisions of this Trust shall, to the extent
thereof, be in full satisfaction of all claims against the
Trustee, the Committee and the Company, as the case may be, and
the Trustee may require such Participant or beneficiary, as a
condition precedent to such payment, to execute a receipt and
release to such effect.
10.4 New Jersey Law Governs
This Agreement and the Trust hereby created shall be
construed, administered and governed in all respects under
applicable New Jersey law.
10.5 Headings, etc., No Part of Agreement
Headings and subheadings in this Agreement are inserted for
convenience of reference only and are not to be considered in the
construction of the previous hereof.
10.6 Instrument in Counterparts
This Agreement has been executed in several counterparts,
each of which shall be deemed an original, and said counterparts
shall constitute but one and the same instrument, which may be
sufficiently evidenced by any one counterpart.
10.7 Successors and Assigns
This Agreement shall inure to the benefit of, and be binding
upon, the parties hereto and their successors and assigns.
10.8 Masculine Gender Includes Feminine and Neuter
As used in this Plan, the masculine gender shall include the
feminine and neuter genders.
IN WITNESS WHEREOF, the Company has caused these presents to
be executed by its duly authorized officer and the corporate seal
to be hereunto affixed, and the Trustee has executed these
presents.
______________________________
Jack M. O'Connor
as Trustee
______________________________
John R. Considine
Vice President - Finance
for American Home Products
Corporation
Attested:
______________________________
Carol G. Emerling
Secretary
Exhibit 10.24
American Home Products Corporation
1996 STOCK INCENTIVE PLAN
(As approved by the Board of Directors on January 25, 1996,
subject to the approval of stockholders at the April 1996 Annual
Meeting)
Section 1. Purpose. The purpose of the 1996 Stock
Incentive Plan (the "Plan") is to provide favorable opportunities
for officers and other key employees of American Home Products
Corporation (the "Company") and its subsidiaries to acquire
shares of Common Stock of the Company or to benefit from the
appreciation thereof. Such opportunities should provide an
increased incentive for these employees to contribute to the
future success and prosperity of the Company, thus enhancing the
value of the stock for the benefit of the stockholders, and
increase the ability of the Company to attract and retain
individuals of exceptional skill upon whom, in large measure, its
sustained progress, growth and profitability depend.
Pursuant to the Plan, options to purchase the Company's
Common Stock ("Options") and Stock Appreciation Rights may be
granted and Restricted Stock may be awarded by the Company.
Options granted under the Plan may be either incentive stock
options, as defined in Section 422(b) of the Internal Revenue
Code of 1986, as amended (the "Code"), or options which do not
meet the requirements of said Section 422(b) of the Code, herein
referred to as non-qualified stock options.
It is intended, except as otherwise provided herein, that
incentive stock options may be granted under the Plan and that
such incentive stock options shall conform to the requirements of
Section 422 and 424 of the Code and to the provisions of this
Plan and shall otherwise be as determined by the Committee and,
to the extent provided in the last sentence of Section 2 hereof,
approved by the Board of Directors. The terms "subsidiaries" and
"subsidiary corporation" shall have the meanings given to them by
Section 424 of the Code. All section references to the Code in
this Plan are intended to include any amendments or substitutions
therefor subsequent to the adoption of the Plan.
Section 2. Administration. The Plan shall be administered
by the Compensation and Benefits Committee (the "Committee")
consisting of two or more members of the Board of Directors of
the Company, each of whom shall be (i) a "disinterested person"
within the meaning of Rule 16b-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act"), and (ii) an
"outside director" within the meaning of Section 162(m) of the
Code. The Committee shall have full authority to grant Options
and Stock Appreciation Rights, and make Restricted Stock awards,
to interpret the Plan and to make such rules and regulations and
establish such procedures as it deems appropriate for the
administration of the Plan, taking into consideration the
recommendations of management. The decisions of the Committee
shall be binding and conclusive for all purposes and upon all
persons unless and except to the extent that the Board of
Directors of the Company shall have previously directed that all
or specified types of decisions of the Committee shall be subject
to approval by the Board of Directors.
Section 3. Number of Shares. The total number of shares
which may be sold or awarded under the Plan and with respect to
which Stock Appreciation Rights may be exercised shall not exceed
15,000,000 shares of the Company's Common Stock. Such number
shall be, without further action, adjusted to 30,000,000 in
accordance with Section 8 hereof upon the consummation of a two-
for-one stock split (in the form of a dividend) anticipated to
occur in 1996. The total number of shares which may be sold or
awarded under the Plan to any optionee (hereinafter defined),
including shares for which Stock Appreciation Rights may be
exercised, shall not exceed 10% of such number, as and if
adjusted, over the life of the Plan. The shares may be
authorized and unissued or issued and reacquired shares, as the
Board of Directors from time to time may determine. Shares with
respect to which Options or Stock Appreciation Rights are not
exercised prior to termination of the Option and shares that are
part of a Restricted Stock award which are forfeited before the
restrictions lapse shall be available for Options and Stock
Appreciation Rights thereafter granted and for Restricted Stock
thereafter awarded under the Plan, to the fullest extent
permitted by Rule 16b-3 under the Exchange Act (if applicable at
the time).
Section 4. Participation. The Committee may, from time to
time, select and grant Options and Stock Appreciation Rights to
officers (whether or not directors) and other key employees of
the Company and its subsidiaries ("optionees") and award
Restricted Stock to officers (whether or not directors) and other
key employees of the Company and its subsidiaries and shall
determine the number of shares subject to each Option or award.
Section 5. Terms and Conditions of Options. The terms and
conditions of each Option and each Stock Appreciation Right shall
be set forth in an agreement or agreements between the Company
and the optionee. Such terms and conditions shall include the
following as well as such other provisions, not inconsistent with
the Plan, as may be deemed advisable by the Committee:
(a) Number of Shares. The number of shares subject to the
Option.
(b) Option Price. The option price per share (the "Option
Price"), which shall not be less than 100% of the fair market
value of the Company's Common Stock on the date the Option is
granted. Fair market value shall be deemed to be the mean
between the highest and lowest sale prices of the Common Stock on
the Consolidated Transaction Reporting System on the date the
Option is granted.
(c) Date of Grant. Subject to previous directions of the
Board of Directors pursuant to the last sentence of Section 2,
the date of grant of an Option shall be the date when the
Committee meets and awards such Option.
(d) Payment. The Option Price multiplied by the number of
shares to be purchased by exercise of the Option shall be paid
upon the exercise thereof. Unless the terms of an Option provide
to the contrary, upon exercise, the aggregate Option Price shall
be payable by delivering to the Company (i) cash equal to such
aggregate Option Price, (ii) shares of the Company's Common Stock
owned by the grantee having a fair market value (determined in
accordance with Section 5(b)) at least equal to such aggregate
Option Price, (iii) a combination of any of the above methods
which total to such aggregate Option Price, or (iv) any other
form of consideration which has been approved by the Committee,
including under any approved cashless exercise mechanism; and
payment of such aggregate Option Price by any such means shall be
made and received by the Company prior to the delivery of the
shares as to which the Option was exercised. The right to deliver
in full or partial payment of such Option Price any consideration
other than cash shall be limited to such frequency as the
Committee shall determine in its absolute discretion. A holder
of an Option shall have none of the rights of a stockholder until
the shares are issued to him or her; provided that if an optionee
exercises an Option and the appropriate purchase price is
received by the Company in accordance with this Section 5(d)
prior to any dividend record date, such optionee shall be
entitled to receive the dividends which would be paid on the
shares subject to such exercise if such shares were outstanding
on such record date.
(e) Term of Options. Each Option granted pursuant to the
Plan shall be for the term specified in the applicable option
agreement (the "Option Agreement") subject to earlier termination
in all cases as provided in paragraph (g) of this Section.
(f) Exercise of Option. Options granted under the Plan may
be exercised during the period and in accordance with the
conditions set forth in the Plan and the applicable Option
Agreement; provided, however, that (i) no option granted under
the Plan may be exercisable earlier than the later of (A) one
year from the date of grant or (B) the date on which the optionee
completes two years of continuous employment with the Company or
one or more of its subsidiaries and (ii) in the event of an
optionee's death, Retirement (as defined below) or Disability (as
defined below), any options held by such optionee shall become
exercisable on his or her Retirement date, the date his or her
employment terminates on account of Disability or the date of his
or her death provided he or she has been in the continuous
employment of the Company or one or more of its subsidiaries for
at least two years at such time. No Option may be exercised
after it is terminated as provided in paragraph (g) of this
Section, and no Option may be exercised unless the optionee,
except as provided in paragraph (g) of this Section, is then
employed by the Company or any of its subsidiaries and shall have
been continuously employed by the Company or one or more of such
subsidiaries since the date of the grant of his or her Option.
Non-qualified stock options and incentive stock options may be
exercised regardless of whether or not other Options granted to
the optionee pursuant to the Plan are outstanding or whether or
not other stock options granted to the optionee pursuant to any
other plan are outstanding.
(g) Termination of Options. An Option, to the extent not
validly exercised, shall terminate upon the occurrence of the
first of the following events:
(i) On the date specified in the Option Agreement;
(ii) Three years after the date of termination of the
optionee's employment by the Company or its subsidiaries due to
"Retirement" (defined as termination of full time employment on
or after the earliest retirement age under any qualified
retirement plan of the Company or its subsidiaries which covers
the optionee, or age 55 with 5 continuous years of such
employment if there is no such plan) or "Disability" (defined as
disability for purposes of at least one qualified retirement plan
or long term disability plan maintained by the Company or its
subsidiaries in which the optionee participates), during which
three year period the optionee may exercise the Option to the
extent he or she was entitled to exercise it at the time of such
termination or such shorter period as may be provided in the
Option Agreement;
(iii) Three years after the date of the optionee's
death during which three year period the Option may be exercised
by the optionee's legal representative or legatee or such other
person designated by an appropriate court as the person entitled
to exercise such Option to the extent the optionee was entitled
to exercise it at the time of his or her death;
(iv) Three months after termination by the Company or
one of its subsidiaries of the optionee's employment for any
reason other than death, Retirement, Disability or deliberate
gross misconduct, determined in the sole discretion of the
Committee, during which three month period the Option may be
exercised by the optionee to the extent the optionee was entitled
to exercise it at the time of such termination;
(v) Concurrently with the time of termination by the
Company or one of its subsidiaries of the optionee's employment
for deliberate gross misconduct, determined in the sole
discretion of the Committee (for purposes only of this
subparagraph (v) an Option shall be deemed to be exercised when
the optionee has received the stock certificate representing the
shares for which the Option was exercised); or
(vi) Concurrently with the time of termination by the
employee of his or her employment with the Company or one of its
subsidiaries for reasons other than Retirement, Disability or
death.
Notwithstanding the above, no Option shall be exercisable
after termination of employment unless the optionee shall have,
during the entire time period in which his or her Options are
exercisable, (a) refrained from becoming or serving as an
officer, director, partner or employee of any individual
proprietorship, partnership or corporation, or the owner of a
business, or a member of a partnership which conducts a business
in competition with the Company or renders a service (including
without limitation, advertising agencies and business
consultants) to competitors with any portion of the business of
the Company, (b) made himself or herself available, if so
requested by the Company, at reasonable times and upon a
reasonable basis to consult with, supply information to, and
otherwise cooperate with, the Company and (c) refrained from
engaging in deliberate action which, as determined by the
Committee, causes substantial harm to the interests of the
Company. If these conditions are not fulfilled, the optionee
shall forfeit all rights to any unexercised Option as of the date
of the breach of the condition.
Notwithstanding the provisions of subparagraphs (ii) and
(iii) of this Section 5(g), an Option granted under the Plan to
an optionee who dies or terminates employment due to Retirement
or Disability before this Plan is approved by the stockholders of
the Company, to the extent not validly exercised, shall terminate
three years after the date the Plan is approved by the
stockholders of the Company.
(h) Non-transferability of Options and Stock Appreciation
Rights. Options and Stock Appreciation Rights shall not be
transferable by the optionee other than by will or the laws of
descent and distribution, and Options and Stock Appreciation
Rights shall during his or her lifetime be exercisable only by
the optionee; provided, however, that the Committee may, in its
sole discretion, allow for transfer of Options (other than
incentive stock options, unless such transferability would not
adversely affect incentive stock option tax treatment) to other
persons or entities, subject to such conditions or limitations as
it may establish to ensure that transactions with respect to
Options intended to be exempt from Section 16(b) of the Exchange
Act pursuant to Rule 16b-3 under the Exchange Act do not fail to
maintain such exemption as a result of the Committee causing
Options to be transferrable, or for other purposes; provided
further, however, that for any Option that is transferred, other
than by the laws of descent and distribution, any related Stock
Appreciation Right shall be extinguished.
(i) Applicable Laws or Regulations. The Company's
obligation to sell and deliver stock under the Option is subject
to such compliance as the Company deems necessary or advisable
with federal and state laws, rules and regulations.
(j) Limitations on Incentive Stock Options. To the extent
that the aggregate fair market value of the Company's Common
Stock, determined at the time of grant in accordance with the
provisions of Section 5(b), with respect to which incentive stock
options granted under this or any other Plan of the Company are
exercisable for the first time by an optionee during any calendar
year exceeds $100,000, or such other amount as may be permitted
under the Code, such excess shall be considered non-qualified
stock options.
Notwithstanding anything in the Plan to the contrary, any
incentive stock option granted to any individual who, at the time
of grant, is the owner, directly or indirectly, of stock
possessing more than ten percent (10%) of the total combined
voting power of all classes of stock of the Company or any
subsidiary thereof, shall (i) have a term not exceeding five
years from the date of grant and (ii) shall have an option price
per share of not less than 110% of the fair market value of the
Company's Common Stock on the date the incentive stock option is
granted (determined in accordance with the last sentence of
Section 5(b)).
Section 6. Stock Appreciation Rights.
(a) The Committee may, in its sole discretion, from time to
time grant Stock Appreciation Rights to certain optionees in
connection with any Option granted under this Plan and in
connection with Options granted under the 1990 and 1993 Stock
Incentive Plans and under the 1985 Stock Option Plan. Stock
Appreciation Rights may be granted either at the time of the
grant of an Option under the Plan or at any time thereafter
during the term of the Option, provided such Stock Appreciation
Rights may also be granted with respect to outstanding Options
under the 1990 and 1993 Stock Incentive Plans and the 1985 Stock
Option Plan. Stock Appreciation Rights may be granted with
respect to all or part of the stock under a particular Option.
(b) Stock Appreciation Rights shall entitle the holder of
the related Option, upon exercise, in whole or in part, of the
Stock Appreciation Rights, to receive payment in the amount and
form determined pursuant to subparagraph (iii) of paragraph (c)
of this Section 6. Stock Appreciation Rights may be exercised
only to the extent that the related Option has not been
exercised. The exercise of Stock Appreciation Rights shall
result in a pro rata surrender of the related Option to the
extent that the Stock Appreciation Rights have been exercised.
(c) Stock Appreciation Rights shall be subject to such
terms and conditions which are not inconsistent with the Plan as
shall from time to time be approved by the Committee and
reflected in the applicable Option Agreement (or in a separate
document, which shall be considered for purposes of the Plan to
be incorporated into and part of the applicable Option
Agreement), and to the following terms and conditions.
(i) Stock Appreciation Rights shall be exercisable at such
time or times and to the extent, but only to the extent, that the
Option to which they relate shall be exercisable.
(ii) Subject to Section 9, Stock Appreciation Rights and
any Options to which they relate shall in no event be exercisable
during the first six months after the date of grant; provided
that this limitation shall apply only to persons who are subject
to Section 16(b) of the Exchange Act.
(iii) Upon exercise of Stock Appreciation Rights, the
holder thereof shall be entitled to elect to receive therefor
payment in the form of shares of the Company's Common Stock
(rounded down to the next whole number so no fractional shares
are issued), cash or any combination thereof in an amount equal
in value to the difference between the Option Price per share and
the fair market value per share of Common Stock on the date of
exercise multiplied by the number of shares in respect of which
the Stock Appreciation Rights shall have been exercised, subject
to any limitation on such amount which the Committee may in its
discretion impose at the time of grant of the Stock Appreciation
Rights. Such election as to the form of payment shall be subject
to the consent of the Committee which consent or disapproval may
be given at any time after the election to which it relates. The
fair market value of Common Stock shall be deemed to be the mean
between the highest and lowest sale prices of the Common Stock on
the Consolidated Transaction Reporting System on the date the
Stock Appreciation Right is exercised or if no transaction on the
Consolidated Transaction Reporting System occurred on such date,
then on the last preceding day on which a transaction did take
place.
(iv) Any exercise of Stock Appreciation Rights by an
officer or director subject to Section 16(b) of the Exchange Act,
as well as any election by such officer or director as to the
form of payment of Stock Appreciation Rights (Common Stock, cash
or any combination thereof), which election is subject to the
consent of the Committee in its sole discretion as provided in
subparagraph (iii) hereof, shall be made during the ten-day
period beginning on the third business day following the release
for publication of any quarterly or annual statement of sales and
earnings by the Company and ending on the twelfth business day
following the date of such release. In the event that such a
director or officer exercises a Stock Appreciation Right for cash
or stock pursuant to this Section 6 during a "window period" as
provided in Rule 16b-3 under the Exchange Act, the day on which
such right is effectively exercised shall be that day, if any,
during such "window period" which is designated by the Committee
in its discretion for all such exercises by such individuals
during such period. If no such day is designated, the day of
effective exercise shall be determined in accordance with normal
administrative practices of the Plan. This clause (iv) shall
cease to apply at the discretion of the Committee if any
amendment or Securities and Exchange Commission interpretation of
such Rule 16b-3 makes the application of this clause (iv)
unnecessary to exempt the grant and/or exercise of Stock
Appreciation Rights from the application of Section 16(b) of the
Exchange Act.
(d) To the extent that Stock Appreciation Rights shall be
exercised, the Option in connection with which such Stock
Appreciation Rights shall have been granted shall be deemed to
have been exercised for the purpose of the maximum limitations
set forth in the Plan under which such Options shall have been
granted. Any shares of Common Stock which are not purchased due
to the surrender in whole or in part of an Option pursuant to
this Section 6 shall not be available for granting further
Options under the Plan.
Section 6A. Deferral.
(a) Notwithstanding anything herein to the contrary, an
optionee may elect, at the discretion of, and in accordance with
rules which may be established by, the Committee, to defer delivery
of the proceeds of exercise of an unexercised Option or the
corresponding Stock Appreciation Right, provided such election is
irrevocable and is made (i) at least six months prior to the date
that such Option or the corresponding Stock Appreciation Right
otherwise would expire and (ii) at least one month prior to the
date such Option or the corresponding Stock Appreciation Right is
exercised (or such shorter period as may be determined by the
Committee). Upon such exercise, the amount deferred shall be equal
in value to the difference between the Option Price per share and
the fair market value per share of the Common Stock on the date of
exercise (determined in accordance with Section 5(b)), multiplied
by the number of shares covered by such exercise and in respect of
which the optionee shall have made the deferral election, and shall
be credited to an account in the name of the optionee on the books
and records of the Company (a "Deferred Compensation Account") at
the date of exercise. A separate Deferred Compensation Account
shall be maintained with respect to each Option or corresponding
Stock Appreciation Right subject to an effective deferral election.
(b) Interest shall be credited on amounts in the Deferred
Compensation Account from the date of exercise of the Option or the
corresponding Stock Appreciation Right to the date of payment, at
the rate of interest determined by the Committee and communicated
to the optionees. The value of an optionee's Deferred Compensation
Account shall be payable in a lump sum cash payment or in annual
installments over a period not to exceed 10 years or as otherwise
determined by the Committee. At the time an optionee makes such
deferral election, the optionee shall elect the form of payment and
date for lump sum payment or commencement of annual payments of the
Deferred Compensation Account, with such date at least one year
subsequent to the date of exercise of the Option or corresponding
Stock Appreciation Right, but not later than the date of the
optionee's termination of employment with Company. Notwithstanding
any election by an optionee, in the event of Disability or death of
the optionee, the optionee's Deferred Compensation Account shall be
paid within 90 days in the form of a single lump sum.
(c) Notwithstanding the deferred payment date elected by the
optionee, the Committee may, in its discretion, allow for early
payment of an optionee's Deferred Compensation Account in the event
of an "unforeseeable emergency." For this purpose, an
unforeseeable emergency shall be defined as an unanticipated
emergency that is caused by an event beyond the control of the
optionee and that would result in severe financial hardship to the
optionee if early withdrawal were not permitted. Any withdrawal on
account of an unforeseeable emergency must be limited to the amount
necessary to meet the emergency. The above provisions regarding a
withdrawal upon an unforeseeable emergency shall be interpreted in
accordance with published revenue procedures, regulations, releases
or interpretations. In addition, Deferred Compensation Accounts
may be distributed on an accelerated basis in the discretion of the
Committee.
(d) Optionees have the status of general unsecured creditors
of the Company with respect to their Deferred Compensation
Accounts, and such accounts constitute a mere promise by the
Company to make payments with respect thereto.
(e) An optionee's right to benefit payments under the Plan
with respect to the Deferred Compensation Accounts may not be
anticipated, alienated, sold, transferred, assigned, pledged,
encumbered, attached or garnished by creditors of the optionee or
the optionee's beneficiary and any attempt to do so shall be void.
Section 7. Restricted Stock Performance Awards. The
Committee may, in its sole discretion, from time to time, make
awards of shares of the Company's Common Stock or awards of units
representing shares of the Company's Common Stock, up to 2,000,000
shares in the aggregate (such number to be adjusted without further
action to 4,000,000 in accordance with Section 8 hereof upon the
consummation of the stock split referred to in Section 3), to such
officers and other key employees of the Company and its
subsidiaries in such quantity, and on such terms, conditions and
restrictions (whether based on performance standards, periods of
service or otherwise) as the Committee shall establish ("Restricted
Stock"). The terms, conditions and restrictions of any Restricted
Stock award made under this Plan shall be set forth in an agreement
or agreements between the Company and the recipient of the award.
(a) Issuance of Restricted Stock. The Committee shall
determine the manner in which Restricted Stock shall be held during
the period it is subject to restrictions.
(b) Stockholder Rights. Beginning on the date of grant of
the Restricted Stock award and subject to the execution of the
award agreement by the recipient of the award and subject to the
terms, conditions and restrictions of the award agreement, the
Committee shall determine to what extent the recipient of the award
has the rights of a stockholder of the Company including, but not
limited to, whether or not the employee receiving the award has the
right to vote the shares or to receive dividends or dividend
equivalents.
(c) Restriction on Transferability. None of the shares or
units of a Restricted Stock award may be assigned or transferred,
pledged or sold prior to their delivery to a recipient or, in the
case of a recipient's death, to the recipient's legal
representative or legatee or such other person designated by an
appropriate court; provided, however, that the Committee may, in
its sole discretion, allow for transfer of shares or units of a
Restricted Stock Award to other persons or entities.
(d) Delivery of Shares. Upon the satisfaction of the terms,
conditions and restrictions contained in the Restricted Stock award
agreement or the release from the terms, conditions and
restrictions of a Restricted Stock award agreement, as determined
by the Committee, the Company shall deliver, as soon as
practicable, to the recipient of the award (or permitted
transferee), or in the case of his or her death to his or her legal
representative or legatee or such other person designated by an
appropriate court, a stock certificate for the appropriate number
of shares of the Company's Common Stock, free of all such
restrictions, except for any restrictions that may be imposed by
law.
(e) Forfeiture of Restricted Stock. Subject to Section 7(f),
all of the restricted shares or units with respect to a Restricted
Stock award shall be forfeited and all rights of the recipient with
respect to such restricted shares or units shall terminate unless
the recipient continues to be employed by the Company or its
subsidiaries until the expiration of the forfeiture period and the
satisfaction of any other conditions set forth in the award
agreement.
(f) Waiver of Forfeiture Period. Notwithstanding any other
provisions of the Plan, the Committee may, in its sole discretion,
waive the forfeiture period and any other conditions set forth in
any award agreement under certain circumstances (including the
death, Disability or Retirement of the recipient of the award or a
material change in circumstances arising after the date of an
award) and subject to such terms and conditions (including
forfeiture of a proportionate number of the restricted shares) as
the Committee shall deem appropriate.
Section 8. Adjustment in Event of Change in Stock. Subject
to Section 9, in the event of stock split, stock dividend, cash
dividend (other than a regular cash dividend), combination of
shares, merger, or other relevant change in the Company's
capitalization, the Committee shall, subject to the approval of the
Board of Directors, appropriately adjust the number and kind of
shares available for issuance under the Plan, the number, kind and
Option Price of shares subject to outstanding Options and Stock
Appreciation Rights and the number and kind of shares subject to
outstanding Restricted Stock awards; provided, however, that to the
extent permitted in the case of incentive stock options by Sections
422 and 424 of the Code, in the event that the outstanding shares
of Common Stock of the Company are increased or decreased or
changed into or exchanged for a different number or kind of shares
or other securities of the Company or of another corporation,
through reorganization, merger, consolidation, liquidation,
recapitalization, reclassification, stock split-up, combination of
shares or dividend, appropriate adjustment in the number and kind
of shares as to which Options may be granted and as to which
Options or portions thereof then unexercised shall be exercisable,
and in the Option Price thereof, shall be made to the end that the
proportionate number of shares or other securities as to which
Options may be granted and the optionee's proportionate interests
under outstanding Options shall be maintained as before the
occurrence of such event; provided, that any such adjustment in
shares subject to outstanding Options (including any adjustments in
the Option Price) shall be made in such manner as not to constitute
a modification as defined by subsection (h)(3) of Section 424 of
the Code; and provided, further, that, in the event of an
adjustment in the number or kind of shares under a Restricted Stock
award pursuant to this Section 8, any new shares or units issued to
a recipient of a Restricted Stock award shall be subject to the
same terms, conditions and restrictions as the underlying
Restricted Stock award for which the adjustment was made.
Section 9. Effect of a Change of Control.
(a) For purposes of this Section 9, "Change in Control"
shall, unless the Board of Directors of the Company otherwise
directs by resolution adopted prior thereto or, in the case of a
particular award, the applicable award agreement states otherwise,
be deemed to occur if (i) any "person" (as that term is used in
Sections 13 and 14(d)(2) of the Exchange Act) other than a
Permitted Holder (as defined below) is or becomes the beneficial
owner (as that term is used in Section 13(d) of the Exchange Act),
directly or indirectly, of 50% or more of either the outstanding
shares of Common Stock or the combined voting power of the
Company's then outstanding voting securities entitled to vote
generally, (ii) during any period of two consecutive years,
individuals who constitute the Board of Directors of the Company at
the beginning of such period cease for any reason to constitute at
least a majority thereof, unless the election or the nomination for
election by the Company's stockholders of each new director was
approved by a vote of at least three-quarters of the directors then
still in office who were directors at the beginning of the period
or (iii) the Company undergoes a liquidation or dissolution or a
sale of all or substantially all of the assets of the Company. No
merger, consolidation or corporate reorganization in which the
owners of the combined voting power of the Company's then
outstanding voting securities entitled to vote generally prior to
said combination, own 50% or more of the resulting entity's
outstanding voting securities shall, by itself, be considered a
Change in Control. As used herein, "Permitted Holder" means (i)
the Company, (ii) any corporation, partnership, trust or other
entity controlled by the Company and (iii) any employee benefit
plan (or related trust) sponsored or maintained by the Company or
any such controlled entity.
(b) Except to the extent reflected in a particular award
agreement, in the event of a Change of Control:
(i) notwithstanding any vesting schedule, or any other
limitation on exercise or vesting, with respect to an award of
Options, Stock Appreciation Rights or Restricted Stock, such
Options or Stock Appreciation Rights shall become immediately
exercisable with respect to 100 percent of the shares subject
thereto, and the restrictions shall expire immediately with respect
to 100 percent of such Restricted Stock award; and
(ii) the Committee may, in its discretion and upon at least 10
days advance notice to the affected persons, cancel any outstanding
Options, Stock Appreciation Rights or Restricted Stock awards and
pay to the holders thereof, in cash, the value of such awards based
upon the highest price per share of Company Common Stock received
or to be received by other stockholders of the Company in
connection with the Change of Control.
Section 10. Amendment and Discontinuance. The Board of
Directors of the Company may from time to time amend or revise the
terms of the Plan, or may discontinue the Plan at any time as
permitted by law, provided, however, that such amendment shall not
(except as provided in Section 8), without further approval of the
stockholders, (i) increase the aggregate number of shares with
respect to which awards may be made under the Plan; (ii) change the
manner of determining the Option Price (other than determining the
fair market value of the Common Stock to conform with applicable
provisions of the Code or regulations and interpretations
thereunder); (iii) extend the term of the Plan or the maximum
period during which any Option may be exercised or (iv) make any
other change which, in the absence of stockholder approval, would
cause awards granted under the Plan which are then outstanding, or
which may be granted in the future, to fail to meet the exemptions
provided by Rule 16b-3 under the Exchange Act and Section 162(m) of
the Code. No amendments, revision or discontinuance of the Plan
shall, without the consent of an optionee or a recipient of a
Restricted Stock award, in any manner adversely affect his or her
rights under any Option theretofore granted under the Plan.
Section 11. Effective Date and Duration. The Plan was
adopted by the Board of Directors of the Company on January 25,
1996, subject to approval by the stockholders of the Company at a
meeting to be held in April 1996. Neither the Plan nor any Option
or Stock Appreciation Right or Restricted Stock award shall become
binding until the Plan is approved by a vote of the stockholders in
a manner which complies with Rule 16b-3 promulgated pursuant to the
Exchange Act and Sections 162(m) and 422(b)(1) of the Code. No
Option may be granted and no stock may be awarded under the Plan
before January 25, 1996 nor after January 24, 2006.
Section 12. Tax Withholding. Notwithstanding any other
provision of the Plan, the Company or its subsidiaries, as
appropriate, shall have the right to deduct from all awards under
the Plan cash and/or stock, valued at fair market value on the date
of payment in accordance with Section 5(b), in an amount necessary
to satisfy all federal, state or local taxes as required by law to
be withheld with respect to such awards. In the case of awards
paid in the Company's Common Stock, the optionee or permitted
transferee may be required to pay to the Company or a subsidiary
thereof, as appropriate, the amount of any such taxes which the
Company or subsidiary is required to withhold, if any, with respect
to such stock. Subject in particular cases to the disapproval of
the Committee, the Company may accept shares of the Company's
Common Stock of equivalent fair market value in payment of such
withholding tax obligations if the optionee elects to make payment
in such manner.
Section 13. Construction and Conditions. The Plan and
Options, Restricted Stock awards, and Stock Appreciation Rights
granted thereunder shall be governed by and construed in accordance
with the laws of the State of Delaware and in accordance with such
federal law as may be applicable.
Neither the existence of the Plan nor the grant of any Options
or Stock Appreciation Rights or awards of Restricted Stock pursuant
to the Plan shall create in any optionee the right to continue to
be employed by the Company or its subsidiaries. Employment shall
be "at will" and shall be terminable "at will" by the Company or
employee with or without cause. Any oral statements or promises to
the contrary are not binding upon the Company or the employee.
Exhibit 10.25
AMERICAN HOME PRODUCTS CORPORATION
NONFUNDED DEFERRED COMPENSATION PLAN
FOR DIRECTORS, AS AMENDED JANUARY 25, 1996
1. Method of Election to Defer Payment
Pursuant to the provisions of this Plan, any director of the
Company not a corporate officer may elect on or before the
last business day of any month to defer payment of all or a
specified part of that director's retainer and fee for
service and attendance at Board and Committee meetings for
the following calendar month and thereafter by filing a
written notice substantially in the form attached hereto as
Annex A with the Secretary of the Company. This notice
shall specify:
a) the effective date of the deferral;
b) the amounts to be deferred;
c) the length of time of the deferral;
d) the method of payment of the deferred amount.
2. Deferral in Cash With Interest
The deferred payment will accrue interest from the date on
which payment thereof would have been made if this Agreement
were not in effect. Such interest shall accrue up to the
date of distribution at a rate based on the average of the
quarter end yields for a ten year period (ending September
30 of the prior year) of 10 Year U.S. Treasury notes plus 2
percent.
3. Time and Method of Payment
Payment of the deferred amount shall be made in a lump sum
in January of the first calendar year after the individual
ceases to be a director of the Company, unless the
individual has indicated on the notice filed with the
Secretary of the Company that payment shall be made in not
more than ten annual installments beginning:
a) on January 10th of a specified calendar year; or
b) on January 10th of the first calendar year after the
individual ceases to be a director of the Company.
In the event the individual dies before payment of all of
the deferred amount, the full remaining balance shall be
paid in a lump sum to the individual's estate or as
specified in his or her will.
Where the director receives the balance of the deferred
account in annual installments, the first installment of
deferred compensation shall be a fraction of the value of
the entire deferred compensation credited to a director's
account under this Plan. The numerator of that fraction
shall be "one" (1) and the denominator shall be the total
number of installments during which the compensation is to
be paid. Each subsequent annual installment shall be
calculated in the same manner except that (a) the
denominator in the fraction shall be reduced by the number
of annual installments which have been previously paid and
(b) the director's account shall be reduced by the amount of
any installments paid, but shall be credited with interest
at the rate set out in Section 2 hereof.
4. Termination or Modification of Election to Defer Payment
A written election to defer payment pursuant to this Plan
shall continue in effect until the director files a written
notice of termination or modification of such election with
the Secretary of the Company. The termination shall be
effective as of the date of receipt by the Secretary or as
of such future date as is specified in such notice. An
election may be modified as to:
a) amount of deferral;
b) length of time of deferral; and
c) method of payment of the deferred amount.
Any modification shall be effective upon the last day of the
calendar month in which such written notice is received by
the Secretary of the Company or such later date as is
specified in the notice. No more than two (2) modifications
of (a), (b) or (c) may be made in any calendar year.
Amounts credited to the account of a director prior to the
effective date of any such termination or modification shall
not be affected thereby and, subject to paragraph 6 below,
shall be paid only in accordance with paragraph 3 of the
Plan.
5. Payments Not Assignable
The deferred amount, including the interest thereon credited
to the account of an individual under this Plan shall not be
subject to assignment by the individual. If any such
assignment is made, the Company may disregard such
assignment and discharge its obligation hereunder by making
payment as though no such assignment had been made.
6. Payment in Hardship Cases
A director may request, and the Company may for good cause
in its sole discretion approve, the payment of principal and
accrued interest in a lump sum or accelerated installments
in lieu of the method of payment elected by the director.
7. Amendment or Termination of Plan
The Company reserves the right to amend, modify or terminate
this Plan at any time by action of its Board of Directors,
provided that such action shall not adversely affect any
participant's right to receive payment pursuant to the terms
of this Plan of any unpaid amounts which were deferred prior
to such action.
8. Annual Statements
A statement shall be delivered to each participant in this
Plan as soon as practicable after the end of each calendar
year setting forth the amount deferred, the amount of
interest accrued thereon, the amount of any payments during
the year and the current rate of interest applicable to the
Plan as determined by the Treasurer of the Company.
<PAGE>
Annex A
NOTICE OF ELECTION
TO DEFER PAYMENT
OF
DIRECTOR'S COMPENSATION
To: Corporate Secretary
American Home Products Corporation
Five Giralda Farms
Madison, NJ 07940
Pursuant to the terms of the American Home Products Corporation
Nonfunded Deferred Compensation Plan for Directors (the "Plan"),
I hereby elect to defer payment of my director's compensation as
follows:
1) Effective Date of Deferral:
Effective the last day of this month until further
notice; or
Effective from _____________, 19___, until further
notice; or
Effective from _____________, 19___, until ___________,
19___,
2) Amount of Compensation to be Deferred:
The entire amount of my compensation; or
_______________ % of my compensation each month.
3) Method of Payment:
Payment of my deferred compensation shall be made as
follows:
Lump-sum; or
Ten Annual Installments; or
____________ Annual Installments (not exceeding 10).
4) Time of Payment:
Payment of my deferred compensation shall be made (in a
lump-sum, or in the number of installments indicated above)
beginning;
On January 10th of the first calendar year after I
cease to be a director of the Company; or
On January 10th of 19___.
Pursuant to the terms of the Plan, this election shall
continue in effect until I file a written notice of
termination or modification with the Secretary of the
Company.
Signed:__________________________
Dated: __________________________
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION
NONFUNDED DEFERRED COMPENSATION PLAN
FOR DIRECTORS, AS AMENDED JANUARY 25, 1996
INDEX
Page
Method of Election to Defer Payment.......................1
Deferral in Cash with Interest............................1
Time and Method of Payment................................1
Termination or Modification of Election to Defer Payment..2
Payments Not Assignable...................................2
Payment in Hardship Cases.................................3
Amendment or Termination of Plan..........................3
Annual Statements.........................................3
Form of Notice of Election to Defer.......................Annex A
Exhibit 10.26
AMERICAN HOME PRODUCTS CORPORATION
STOCK OPTION AGREEMENT
[Name and address] UNDER [YEAR] STOCK INCENTIVE PLAN
DATED
OPTION PRICE
[NON-QUALIFIED OR INCENTIVE] STOCK OPTION
SHARES
BASIC TERMINATION DATE
1. Under the terms and conditions of this Agreement and of the
American Home Products Corporation's [Year] Stock Incentive Plan,
a copy of which is attached hereto and incorporated herein by
reference, the Corporation hereby grants to the optionee named
above an option or options to purchase the number of shares of
the Corporation's common stock as specified above opposite the
optionee's name ("Option Shares") at the price also above
specified.
2. These options may be exercised one year from the date hereof,
or within one year in the case of retirement, disability or
death, either in whole at any time or in part from time to time
in full shares, provided the optionee is then in the employ of
the Corporation or any of its subsidiaries and has been
continuously so employed since the date the options were granted,
further provided, that the optionee has, at the date of exercise,
been in the continuous employment of the Corporation and/or one
or more of its subsidiaries for at least two years, and still
further provided, that any Incentive Stock Option granted hereby
shall become exercisable for the first time in the aggregate
amount of no more than $100,000 (fair market value at time of
grant) during any calendar year. If the optionee should retire,
become disabled or die before the Option Shares become
exercisable, the optionee or the optionee's estate will have up
to three years from the date of retirement, disability or death
to exercise all of the Option Shares covered by this Agreement,
subject to the condition of non-competition in Section 5(g)(vii)
of the Plan.
3. These options may be exercised by sending the Treasurer of
the Corporation an option exercise notice indicating the number
of shares for which the option is to be exercised at that time
and the form in which the certificates are to be registered for
shares purchased (in the name of the optionee or in his or her
name and that of another person(s) as joint tenants with the
right of survivorship). This notice shall be accompanied by a
personal or bank check in U.S. Dollars payable to American Home
Products Corporation and drawn on or payable at a United States
bank and/or shares of the Corporation's common stock issued in
the optionee's name and duly assigned to the Corporation or by
any other form of consideration which has been approved by the
Compensation and Benefits Committee, as and to the extent
provided and permitted by Section 5(d) of the Plan, for the full
purchase price of the number of shares.
4. This Agreement and these options as well as the Corporation's
obligation to sell and deliver stock covered by these options is
subject to all federal, state and other laws, rules and
regulations of the United Stated and/or of the country wherein
the optionee resides. Compliance with any recording,
protocolization or registration requirements and payment of any
fees or taxes applicable to this Agreement or the transactions it
contemplates are the exclusive responsibility of the optionee.
5. These options are not transferable or assignable other than
by will or by the laws of descent and distribution and may be
exercised during the optionee's lifetime only by him or her.
After the optionee's death the option may be exercised only the
by the optionee's legal representative or legatee or such other
person designated by an appropriate court as the person entitled
to make such exercise. The option may be exercised after the
optionee's death only to the extent that he or she was entitled
to exercise it at the time of his or her death.
6. Subject to the express provisions of the Plan, this Agreement
and such Plan are to be interpreted and administered by the
Compensation and Benefits Committee, whose determination will be
final.
7. This Agreement shall be governed by the laws of the State of
Delaware and in accordance with such Federal law as may be
applicable.
________________________________
*Or as otherwise provided in Section 5 of the Plan.
Accepted and agree to: AMERICAN HOME PRODUCTS CORPORATION
/S/ John R. Stafford
Chairman of the Board
...................................
Optionee's Signature
...................................
Optionee's Social Security Number
Exhibit 10.27
AMERICAN HOME PRODUCTS CORPORATION
SPECIAL STOCK OPTION AGREEMENT
Social Security Number:[ ] Option Price: [ ]
Non-Qualified Stock Option Shares:
Date: [ ] Basic Termination Date: [ ]*
1. Under the terms and conditions of this Agreement and of the
American Home Products Corporation's amended 1993 Stock Incentive
Plan, a copy of which is attached hereto and incorporated herein by
reference, the Corporation hereby grants to the optionee named
above an option or options to purchase the number of shares of the
Corporation's common stock as specified above opposite the
optionee's name ("Option Shares") at the price also above
specified.
2. One-third of these options may be exercised one year from the
date hereof, an additional one-third of these options may be
exercised two years from the date hereof and the remaining one-
third of these options may be exercised three years from the date
hereof (such one, two and three year periods each being referred to
herein as a "Holding Period") provided that all such options may be
exercised earlier in the case of disability or death, either in
whole at any time or in part from time to time in full shares,
provided the optionee is then in the employ of the Corporation or
any of its subsidiaries and has been continuously so employed since
the date the options were granted, and further provided that the
optionee has, at the date of exercise, been in the continuous
employment of the Corporation and/or one or more of its
subsidiaries for at least two years. If the optionee should become
disabled or die before the Option Shares become exercisable, the
optionee or the optionee's estate will have up to three years from
the date of disability or death to exercise all of the Option
Shares covered by this Agreement, subject to the condition of non-
competition in Section 5(g)(vii) of the Plan. Notwithstanding
Section 5(g)(ii) of the Plan, upon termination of the optionee's
employment by the Company or its subsidiaries due to any reason
other than death (which is covered by Section 5(g)(iii) of the
Plan) or disability (as to which Section 5(g)(ii) of the Plan
remains applicable), any portion of these options that has not
theretofore become exercisable as a result of the expiration of the
Holding Period with respect thereto shall terminate concurrently
with the time of such termination.
3. These options may be exercised by sending the Treasurer of the
Corporation an option exercise notice indicating the number of
shares for which the option is to be exercised at that time and the
form in which the certificates are to be registered for shares
purchased (in the name of the optionee or in his or her name and
that of another person(s) as joint tenants with the right of
survivorship). This notice shall be accompanied by a personal or
bank check in U.S. Dollars payable to American Home Products
Corporation and drawn on or payable at a United States bank and/or
shares of the Corporation's common stock issued in the optionee's
name and duly assigned to the Corporation or by any other form of
consideration which has been approved by the Compensation and
Benefits Committee, as and to the extent provided and permitted by
Section 5(d) of the Plan, for the full purchase price of the number
of shares.
4. This Agreement and these options as well as the Corporation's
obligation to sell and deliver stock covered by these options is
subject to all federal, state and other laws, rules and regulations
of the United States and/or of the country wherein the optionee
resides. Compliance with any recording, protocolization or
registration requirements and payment of any fees or taxes
applicable to this Agreement or the transactions it contemplates
are the exclusive responsibility of the optionee.
5. These options are not transferable or assignable other than by
will or by the laws of descent and distribution and may be
exercised during the optionee's lifetime only by him or her. After
the optionee's death the option may be exercised only by the
optionee's legal representative or legatee or such other person
designated by an appropriate court as the person entitled to make
such exercise. The option may be exercised after the optionee's
death only to the extent that he or she was entitled to exercise it
at the time of his or her death.
6. Subject to the express provisions of the Plan, this Agreement
and such Plan are to be interpreted and administered by the
Compensation and Benefits Committee, whose determination will be
final.
7. This Agreement shall be governed by the laws of the State of
Delaware and in accordance with such Federal law as may be
applicable.
8. The optionee hereby consents to the amendments to the Plan
adopted by the Board of Directors of the Corporation on June 29,
1995 and reflected in the restated 1993 Stock Incentive Plan as
amended through June 29, 1995 and agrees that such amendments shall
apply to the Option granted hereby.
________________________________
*Or as otherwise provided in Section 5 of the Plan.
Accepted and agreed to:
AMERICAN HOME PRODUCTS CORPORATION
- --------------------- ----------------------
Optionee's Signature Chairman of the Board
Exhibit 10.28
AMERICAN HOME PRODUCTS CORPORATION
SPECIAL STOCK OPTION AGREEMENT
Social Security Number: [ ] Option Price: [ ]
[ ] Non-Qualified Stock Option Shares:
Date: [ ] Basic Termination Date: [ ]*
1. Under the terms and conditions of this Agreement and of the
American Home Products Corporation's amended 1993 Stock Incentive
Plan, a copy of which is attached hereto and incorporated herein
by reference, the Corporation hereby grants to the optionee named
above an option or options to purchase the number of shares of
the Corporation's common stock as specified above opposite the
optionee's name ("Option Shares") at the price also above
specified.
2. These options may be exercised three years from the date
hereof, or earlier in the case of disability or death, either in
whole at any time or in part from time to time in full shares,
provided the optionee is then in the employ of the Corporation or
any of its subsidiaries and has been continuously so employed
since the date the options were granted, and further provided
that the optionee has, at the date of exercise, been in the
continuous employment of the Corporation and/or one or more of
its subsidiaries for at least two years. If the optionee should
become disabled or die before the Option Shares become
exercisable, the optionee or the optionee's estate will have up
to three years from the date of disability or death to exercise
all of the Option Shares covered by this Agreement, subject to
the condition of non-competition in Section 5(g)(vii) of the
Plan. Notwithstanding Section 5(g)(ii) of the Plan, this Option
shall terminate concurrently with the time of termination of the
optionee's employment by the Company or its subsidiaries if such
termination occurs before the Option Shares become exercisable
and is due to any reason other than death (which is covered by
Section 5(g)(iii) of the Plan) or disability (as to which Section
5(g)(ii) of the Plan remains applicable).
3. These options may be exercised by sending the Treasurer of
the Corporation an option exercise notice indicating the number
of shares for which the option is to be exercised at that time
and the form in which the certificates are to be registered for
shares purchased (in the name of the optionee or in his or her
name and that of another person(s) as joint tenants with the
right of survivorship). This notice shall be accompanied by a
personal or bank check in U.S. Dollars payable to American Home
Products Corporation and drawn on or payable at a United States
bank and/or shares of the Corporation's common stock issued in
the optionee's name and duly assigned to the Corporation or by
any other form of consideration which has been approved by the
Compensation and Benefits Committee, as and to the extent
provided and permitted by Section 5(d) of the Plan, for the full
purchase price of the number of shares.
4. This Agreement and these options as well as the Corporation's
obligation to sell and deliver stock covered by these options is
subject to all federal, state and other laws, rules and
regulations of the United States and/or of the country wherein
the optionee resides. Compliance with any recording,
protocolization or registration requirements and payment of any
fees or taxes applicable to this Agreement or the transactions it
contemplates are the exclusive responsibility of the optionee.
5. These options are not transferable or assignable other than
by will or by the laws of descent and distribution and may be
exercised during the optionee's lifetime only by him or her.
After the optionee's death the option may be exercised only by
the optionee's legal representative or legatee or such other
person designated by an appropriate court as the person entitled
to make such exercise. The option may be exercised after the
optionee's death only to the extent that he or she was entitled
to exercise it at the time of his or her death.
6. Subject to the express provisions of the Plan, this Agreement
and such Plan are to be interpreted and administered by the
Compensation and Benefits Committee, whose determination will be
final.
7. This Agreement shall be governed by the laws of the State of
Delaware and in accordance with such Federal law as may be
applicable.
8. The optionee hereby consents to the amendments to the Plan
adopted by the Board of Directors of the Corporation on June 29,
1995 and reflected in the restated 1993 Stock Incentive Plan as
amended through June 29, 1995 and agrees that such amendments
shall apply to the Option granted hereby.
________________________________
*Or as otherwise provided in Section 5 of the Plan.
Accepted and agreed to:
AMERICAN HOME PRODUCTS CORPORATION
- --------------------- ----------------------
Optionee's Signature Chairman of the Board
Exhibit 11
American Home Products Corporation and Subsidiaries
Computation of Per Share Earnings
(In thousands except per share amounts)
Year Ended
December 31,
1995
------------
1. Net income ................................................... $1,680,418
2. Reported earnings per share:
a. Average number of shares outstanding during the year ..... 309,516
b. Shares issuable upon the conversion of preferred stock ... 319
---------
c. Shares for reported earnings per share calculation (2a+2b) 309,835
=========
d. Reported earnings per share(1/2c)......................... $5.42
=========
3. Primary earnings per share:
a. Average number of shares outstanding during the year...... 309,516
b. Shares issuable upon the conversion of preferred stock.... 319
c. Shares deemed outstanding from the assumed exercise of
stock options reduced by the number of shares purchased
with the proceeds (determined using average market price
during the year) ......................................... 2,884
d. Deferred contingent common stock awards .................. 337
--------
e. Shares for primary earnings per share calculation
(3a+3b+3c+3d) ............................................ 313,056
=========
f. Primary earnings per share (1/3e) ........................ $5.37
=========
4. Fully diluted earnings per share:
a. Average number of shares outstanding during the year...... 309,516
b. Shares issuable upon conversion of preferred stock ....... 319
c. Shares deemed outstanding from the assumed exercise
of stock options reduced by the number of shares
purchased with the proceeds (determined using market
price at year-end) ....................................... 6,316
d. Deferred contingent common stock awards .................. 337
---------
e. Shares for fully diluted earnings per share calculation
(4a+4b+4c+4d) ............................................ 316,488
=========
f. Fully diluted earnings per share (1/4e) .................. $5.31
=========
Exhibit 12
<TABLE>
AMERICAN HOME PRODUCTS CORPORATION
RATIO OF EARNINGS TO FIXED CHARGES
(Thousands of dollars, except ratio amounts)
<CAPTION>
Year Ended December 31,
------------------------------------------------------
Earnings: 1995 1994* 1993 1992 1991
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Earnings from continuing
operations before taxes
on income $2,438,698 $2,029,760 $1,992,665 $1,724,070 $1,759,810
Add:
Fixed charges 704,903 155,187 91,500 63,403 50,554
Minority interest in
earnings of consolidated
subsidiary 5,642 5,303 4,027 3,803 3,823
Minority interest in loss
of consolidated subsidiary (4,925) (17,873) (9,129) (3,149) -
Equity loss - 1,691 - - -
Amortization of capitalized
interest 768 497 - - -
Less:
Capitalized interest 7,681 9,792 14,898 - -
Equity income 8,129 - - - -
Dividends on preferred
stock of majority-owned
subsidiary - - 3,436 4,589 -
---------- ---------- ---------- ---------- ----------
Total earnings
as defined $3,129,276 $2,164,773 $2,060,729 $1,783,538 $1,814,187
========== ========== ========== ========== ==========
Fixed Charges:
Interest and amortization
of debt expense $665,021 $116,661 $47,871 $35,503 $31,431
Capitalized interest 7,681 9,792 14,898 - -
Interest factor of rental
expense (a) 32,201 28,734 25,295 23,311 19,123
Dividends on preferred
stock of majority-owned
subsidiary - - 3,436 4,589 -
-------- -------- ------- ------- -------
Total fixed charges
as defined $704,903 $155,187 $91,500 $63,403 $50,554
======== ======== ======= ======= =======
Ratio of earnings to
fixed charges 4.4 13.9 22.5 28.1 35.9
</TABLE>
* - The 1994 results include one-month results of American Cyanamid
Company which was acquired by American Home Products in December in a
purchase transaction. Assuming the acquisition took place on January 1,
1994 the pro forma ratio of earnings to fixed charges would be 2.9 for the
year ended December 31, 1994.
(a) - A 1/3 factor was utilized to compute the portion of rental expenses
deemed representative of the interest factor.
Exhibit 13
[PHOTO]
[LOGO]
American Home Products Corporation
1995 Annual Report
American Home Products Corporation
1995 Annual Report
Special Report:
Growth through Innovation
<PAGE>
American Home Products Corporation
[LOGO]
American Home Products Corporation is a global leader in discovering and
commercializing innovative, cost-effective health care and agricultural
products that contribute to the quality of life for millions of people.
We are at the leading edge of medical science, focusing one of the
largest scientific discovery and clinical programs in our industry on finding
breakthrough therapies for some of the most serious health problems.
Our Company's broad, growing lines of prescription drugs, vaccines,
nutritionals, over-the-counter medications and medical devices benefit health
care worldwide. We are at the forefront of developing, manufacturing and
marketing crop protection and animal health care products. AHP also is known
for quality food brands in the United States and Canada.
In 1995, the Company achieved record sales and earnings, and the
dividend was increased for the 44th consecutive year.
Pharmaceuticals 56%
Consumer Health Care 15%
Agricultural Products 14%
Medical Devices 9%
Food Products 6%
[CHART]
Net Sales by Segment
Contents:
2 Chairman's Report to Shareholders
5 Special Report: Growth through Innovation
12 Pharmaceutical Products Pipeline
14 Review of Operations
27 Principal Products - United States
28 Financial Section
50 Principal Officers
50 Corporate Data
IBC Board of Directors
Cover:
Susan Christman, Associate Chemist,
Wyeth-Ayerst Research, Princeton,
New Jersey.
Wyeth-Ayerst's three-dimensional
molecular modeling system allows optimal
visualization of the molecular structure
of new drug candidates.
<PAGE>
Financial Highlights
<TABLE>
<CAPTION>
Years Ended December 31, 1995 1994*
- --------------------------------------------------------------------------------
<S> <C> <C>
(In thousands except per share amounts)
Net sales . . . . . . . . . . . . . . . . . . . . $13,376,089 $8,966,214
Net income . . . . . . . . . . . . . . . . . . . 1,680,418 1,528,254
Net income per common share . . . . . . . . . . . 5.42 4.97
Dividends per common share . . . . . . . . . . . 3.02 2.94
Working capital . . . . . . . . . . . . . . . . . 3,429,889 3,203,160
Shareholders' equity . . . . . . . . . . . . . . 5,542,998 4,254,101
- --------------------------------------------------------------------------------
</TABLE>
* The 1994 information reflects the acquisition of American Cyanamid Company,
effective December 1, 1994.
[CHART]
Earnings per Share
[CHART]
Dividends per Share
[CHART]
Net Sales
[CHART]
Net Income
Net income in 1987 excludes a provision related
to Dalkon Shield claims of $1.75 billion recorded by
A.H. Robins Company, Incorporated prior to its
acquisition by the Company in 1989.
1
<PAGE>
Chairman's Report to Shareholders
I am pleased to report that 1995 was a year of considerable
achievement for American Home Products Corporation. The integration of American
Cyanamid neared completion, significantly strengthening American Home Products'
health care businesses and signaling the successful transition of our Company
into a stronger, research-based organization with an enhanced presence in
important international markets and a major crop protection business. The
continued expansion of our global franchise and good results for many major
products outside the United States - where more than 40% of total sales were
recorded - sustained our growth even as we experienced lower sales
contributions from some of our key domestic businesses. Further, the
combination of AHP and Cyanamid provided significant cost savings that will
fuel our profits and give us the flexibility to capitalize on opportunities.
Since August 1994, when we initiated our efforts to acquire American
Cyanamid Company, our stock price has grown to its recent all-time high, an
increase of approximately 80%. In January 1996, we announced the Board of
Directors' approval of a two-for-one split in the Company's common stock,
subject to stockholder approval of an increase in the number of authorized
shares from 600,000,000 to 1,200,000,000. Upon approval, the record date for
stockholders entitled to receive such shares is April 24, 1996.
In 1995, we reported increased sales and earnings, and the dividend
increased for the 44th consecutive year. Reported net sales increased 49% to
$13.4 billion. On a pro forma basis after adjusting for the Cyanamid
acquisition and other businesses sold or purchased in 1994 and 1995, the
increase was 4%.
Reported earnings and earnings per share in 1995 were $1.68 billion
and $5.42, respectively, compared with $1.53 billion and $4.97, respectively,
for 1994. The 1995 results include an after-tax gain of $623.9 million related
to the sale of the oral health care business in South America and charges of
$425.5 million covering restructuring, environmental and other special charges.
Excluding these items, net income and earnings per share were $1.48 billion and
$4.78, respectively, for 1995.
These results are consistent with our projections that 1995 earnings
would be slightly behind 1994 due to the fact that initial dilution resulting
from goodwill amortization and interest expense would exceed Cyanamid's income
contribution. This dilution was greatly mitigated in 1995 by significant cost
savings as we consolidated operations. In 1996, we expect additional
incremental savings and higher sales that will result in a substantial increase
in earnings over 1995.
Pharmaceutical Research and Development
We invested more than $1.35 billion in R&D in 1995, of which $1.1 billion was
targeted for pharmaceutical research. This level of commitment puts AHP in the
top tier of the world's pharmaceutical companies and underscores our
determination to achieve growth through product innovation.
Our R&D investment shows much promise with a pipeline which now
includes more than 50 potential new pharmaceutical products in clinical
development or on file with the U.S. Food and Drug Administration (FDA).
Several New Drug Applications (NDA) are awaiting FDA approval, and there are
numerous candidates in Phase III and Phase II clinical trials. The majority of
these products have opportunities in markets around the world. Pages 12 and 13
of this report highlight some of the most promising new products in our
pipeline.
Importantly, our R&D shows strength across the spectrum of scientific
discovery, from Wyeth-Ayerst's synthetic chemical-based research to the
emerging field of biotechnology. Further, our extensive resources are focused
on major, growing areas of medical therapy such as women's health,
cardiovascular and metabolic disease, immuno-inflammatory disease, central
nervous system disorders, vaccines and oncology.
We continue to supplement our R&D by aggressively seeking alliances
through licensing and co-development programs. Included among our recent
collaborations is an agreement with Roussel Uclaf to jointly develop
Trimegestone, a progestin for hormone replacement therapy and contraception.
Ethical Pharmaceuticals
We continued to build our pharmaceutical franchise worldwide, introducing new
products, expanding sales for established lines in many markets and gaining
registration approvals in numerous countries. Pharmaceutical sales were up on a
worldwide basis but decreased slightly in the United States due in large part
to our decision to change the timing of certain trade incentives on
Wyeth-Ayerst products. The lower inventory that now is held by the trade will
benefit our sales in 1996.
Wyeth-Ayerst is making excellent progress in bringing to medical
practitioners and patients new, breakthrough
2
<PAGE>
[PHOTO]
John R. Stafford Chairman, President and Chief Executive Officer
therapies. A highlight in 1995 was the FDA's approval of Cordarone I.V., which
is indicated for the treatment of life-threatening ventricular arrhythmia.
Cordarone now is the only approved Class III antiarrhythmic product available
in oral and intravenous forms.
In January 1996, Wyeth-Ayerst introduced single tablet Prempro and
Premphase in the United States. These are the first estrogen and progestin
products to provide one-tablet per day dosing for prevention of osteoporosis
and relief of menopausal symptoms.
Also in January, we received marketing clearance for Naprelan,
licensed from Elan Corporation, and RespiGam. Naprelan is the first
prescription product to offer convenient, once-a-day dosing of naproxen sodium,
a medication long considered a standard in arthritis treatment. RespiGam, which
will be co-promoted with MedImmune, is the first product to protect high-risk
infants against the worst effects of respiratory syncytial virus, the leading
cause of pneumonia and bronchiolitis in infants.
We expect to receive several other U.S. marketing approvals in 1996.
Redux, co-marketed with Interneuron Pharmaceuticals, is expected to be
indicated for the long-term treatment of obesity. This product was recommended
for approval by the FDA's Endocrinologic & Metabolic Drugs Advisory Committee
in 1995. Sales potential will be influenced by the product's labeling, which is
under discussion with the FDA. In 1995, Lodine, a non-steroidal
anti-inflammatory drug, received an approvable letter for the additional
indication of rheumatoid arthritis. Duract is a non-narcotic analgesic
developed for management of pain. Normiflo is a low molecular-weight heparin
for prevention of venous thromboembolic disease in orthopedic surgery patients.
Consumer Health Care
Whitehall-Robins Healthcare, which now includes Lederle Consumer Products, is
one of the world's leading OTC health care companies. Whitehall-Robins sales
increased internationally while U.S. sales remained even versus the prior year.
Of interest, marketing programs initiated in the fourth quarter of 1994, while
resulting in lower U.S. factory sales of Advil during 1995, have enabled us to
increase U.S. consumer sales and improve market share for this important
analgesic in the face of major new competition.
Our consumer health care business is well-positioned to sustain strong
growth in the future. We have brands with leading market positions
internationally, and in many major OTC categories in the United States. We are
at the forefront of converting major ethical pharmaceuticals to OTC status in
the United States - an initiative that benefits significantly from our
strengths in the prescription and OTC businesses. In November, Whitehall-Robins
launched Orudis KT, the OTC version of the prescription ketoprofen pain
reliever Orudis, which has been marketed by Wyeth-Ayerst since 1986. In
September, an NDA for an OTC version of the H2 antagonist Axid, licensed from
Eli Lilly, was unanimously recommended for approval by the FDA's
Non-Prescription Drugs and Gastrointestinal Drugs Advisory Committees. Upon
approval, OTC Axid will compete in the rapidly expanding non-prescription
acid-reducer/antacid category. Whitehall-Robins also expects approval in 1996
to switch Children's Advil Suspension, a Wyeth-Ayerst prescription product, to
OTC status.
Agricultural Products
Cyanamid Agricultural Products is another business being driven by innovative
R&D. The Company, which ranks among the leaders in agricultural products sales
worldwide, achieved broad and significant growth in 1995.
Cyanamid is at the leading edge of new product development in two of
the key global crop protection markets: herbicides and insecticides. The
Company's major herbicides are formulated with a unique class of chemical
compounds that are essentially safe to wildlife and are effective at low
application rates. In 1995, Cyanamid introduced a novel insecticide product in
the United States that has proved to be highly effective against insects that
are resistant to other insecticides.
3
<PAGE>
Medical Devices
The introduction of new products that improve productivity and cost-efficiency
in clinical facilities, coupled with continued growth internationally, resulted
in increased worldwide sales for our medical devices business. Davis & Geck, a
leading wound closure company obtained in the Cyanamid acquisition, was merged
with Sherwood Medical in September 1995. The new company, Sherwood-Davis &
Geck, is one of the world's leading manufacturers and marketers of specialized
medical devices.
Animal Health Care
On a pro forma basis, strong gains were recorded internationally for Fort Dodge
Animal Health, but domestic sales declined primarily due to competition from
new products. The research and development entities of Fort Dodge and Cyanamid
were merged in 1995 to focus on new technologies for animal pharmaceutical and
biological products.
Food Products
Sales were down significantly in our North American food products business. We
have moved quickly to regain momentum for American Home Food Products,
addressing problems related to excess inventories, trade incentive programs and
operating costs as well as increased competition. We expect that these changes,
as well as an increased emphasis on consumer advertising, will restore the
growth of our leading food brands.
Changes in Management
Robert G. Blount was named Senior Executive Vice President. In addition to his
existing responsibilities as chief financial officer, Mr. Blount now oversees
our worldwide agricultural and animal health products businesses.
Fred Hassan was named Executive Vice President. He had been senior
vice president responsible for AHP's global pharmaceutical business. In his new
position, Mr. Hassan is responsible for our global pharmaceutical and medical
devices businesses.
William J. Murray was named Senior Vice President, responsible for our
global agricultural products and worldwide animal health products businesses.
In January 1996, David M. Olivier was named Senior Vice President,
responsible for the worldwide non-prescription drug business of
Whitehall-Robins. Bernard Poussot was named President, Wyeth-Ayerst
International, replacing Mr. Olivier. Jack M. O'Connor was elected Treasurer,
American Home Products Corporation.
Paul J. Jones was elected Vice President and Comptroller, American
Home Products Corporation, and Kenneth J. Martin was named President of
American Home Food Products.
Outlook for 1996 and Beyond
The acquisition of American Cyanamid and its integration into AHP have been two
of the most significant events in the history of our Company. We are moving
forward as a larger, more streamlined organization with the market presence,
broad product franchise, R&D programs, organizational structure and financial
strength to act quickly and decisively to capitalize on opportunities on a
global scale.
Our growth strategies are directed in large part at achieving several
principal objectives: accelerated earnings-per-share growth and increased
market share in our categories; the development of innovative products that
become market leaders by contributing to the well-being of people worldwide;
and the strengthening of our Company in ways that continue to be reflected in
shareholder value.
All of the successes outlined in this report have stemmed from the
skill and dedication of our employees. On behalf of the Board of Directors,
whose support in this year of transition has been invaluable, I would like to
thank our employees throughout the world for their past efforts and express our
enthusiasm about working with them in the future. Together, I am confident that
we can take the actions necessary to continue to build shareholder value.
/s/ John R. Stafford
- --------------------
John R. Stafford
Chairman, President and Chief Executive Officer
March 5, 1996
4
<PAGE>
Growth through innovation
American Home Products Corporation is dedicated to building global leadership
in its highly competitive markets through an expanding portfolio of innovative
health care and crop protection products that help improve the quality of life
worldwide.
AHP's commitment to product innovation is supported by one of the
largest research and development efforts in the industry. During 1995, AHP
invested nearly $1.4 billion in R&D.
Wyeth-Ayerst Research is focused on advancing medical therapy in areas
of critical need, including: women's health, cardiovascular and metabolic
diseases, central nervous system disorders, infectious disease,
immuno-inflammatory disease and oncology. Wyeth-Lederle Vaccines and Pediatrics
is a leader in the development of novel childhood and adult vaccines. Genetics
Institute, Inc. and Immunex Corporation, companies in which AHP has majority
ownership, have demonstrated success in using biotechnology and genetic
engineering to discover and develop breakthrough therapies for a range of
health problems. Expertise in switching products from prescription to
over-the-counter status is enabling Whitehall-Robins to broaden self-medication
options for consumers. Research at Cyanamid is generating unique products that
are enhancing global agriculture.
In this special section, products recently introduced to the
marketplace or in late stages of development are profiled to exemplify how
innovation is fueling near-term growth in AHP's core businesses worldwide.
Research &
Development Spending
[CHART]
[PHOTO]
Researchers at Wyeth-Ayerst's Research Center in Pearl River, New York, enjoy a
bright and spacious working environment in their new, state-of-the-art Chemical
Research Laboratory, which was dedicated in September 1995.
5
<PAGE>
Women's Health Care
[PHOTO]
Diane Pryde is a former fashion model and a principal in Model Image, an image
consulting company in Chicago. Ms. Pryde began using Premarin about four years
ago and feels that single tablet Prempro will make it even easier to maintain
her very active and dynamic lifestyle.
Wyeth-Ayerst is at the forefront of women's health care worldwide,
leading the way in product sales, product innovation, research and clinical
studies, and educational and informational initiatives. Underscoring this
singular commitment is the Women's Health Research Institute - the first U.S.
research facility devoted exclusively to finding new pharmaceutical options to
improve women's health.
A milestone was achieved in hormone replacement therapy in January 1996 when
Wyeth-Ayerst introduced single tablet Prempro and Premphase (conjugated
estrogens/medroxyprogesterone acetate), the next generation of therapies
in the Premarin (conjugated estrogens) family. These products provide the more
than 4.5 million postmenopausal women in the United States who use estrogen and
progestin an opportunity for the first time to take just one tablet each day
for prevention of osteoporosis and relief of menopausal symptoms.
Prempro tablets, protected by U.S. and foreign patents, are being used
in the Heart and Estrogen-Progestin Replacement Study (HERS), a $40 million
clinical trial involving 2,700 patients that is being conducted and funded by
Wyeth-Ayerst in the United States. HERS is the largest clinical study ever
undertaken to examine the role of hormone replacement therapy in protecting
against coronary heart disease events in postmenopausal women with existing
coronary heart disease.
[PHOTO]
James H. Pickar, M.D., Senior Director of Clinical Research at Wyeth-Ayerst
Research. Dr. Pickar and the Menopause Study Group that he directed were
responsible for the research and clinical initiatives that resulted in the
approval and marketing of Prempro and Premphase. The safety and efficacy
profile of these therapies was confirmed in the largest prospective hormone
replacement study ever conducted.
6
<PAGE>
Cardiovascular Therapy
A major contribution to the treatment of heart disease is made by
Wyeth-Ayerst's extensive, growing line of cardiovascular products.
The introduction of Cordarone I.V. (amiodarone HCl) in 1995 represents
a significant addition to the therapeutic options for life-threatening
ventricular arrhythmias, one of the most serious of cardiac emergencies. This
intravenous formulation builds on the well-established value of oral
Cordarone - which is not appropriate for emergency administration - by
providing prompt antiarrhythmic action.
The results of two ongoing studies could earn Cordarone I.V. a place
on the Advanced Cardiac Life Support Guidelines, which is followed by emergency
personnel in treating patients with out-of-hospital cardiac arrest.
Tasosartan, an angiotensin II receptor antagonist, is being developed
for the treatment of hypertension. This compound, which entered Phase III
trials during 1995, effectively controls blood pressure with once-daily dosing
and is well-tolerated by patients. A New Drug Application is planned in 1996
for tasosartan.
[PHOTO]
Gil Rose, M.D., Director of Clinical Research at Wyeth-Ayerst Research. The
Cordarone I.V. project team, led by Dr. Rose, faced complex challenges in
designing, undertaking and interpreting clinical trial data within the acute
cardiac care setting. These trials were critical to obtaining market clearance
for this important new antiarrhythmic therapy.
[PHOTO]
George S. Groman, M.D., of Columbia, Maryland, was among the first
cardiologists in the United States to use Cordarone I.V. At Dr. Groman's
request, Wyeth-Ayerst rushed the new product to him, on an emergency basis,
virtually within hours of its commercial release. By administering Cordarone
I.V., Dr. Groman was able to restore his patient's cardiac rhythm and achieve
vascular stabilization.
7
<PAGE>
Biotechnology
[PHOTO]
Recombinant Factor IX may provide persons with Hemophilia B - such as 12-
year-old Gregory Price (above) of Falls Church, Virginia, who is participating
in Genetics Institute's Phase III clinical trials - with an alternative to
plasma-derived clotting factors and their associated risks.
Genetics Institute, Inc. is focused on developing portfolios of genetically
engineered human proteins and small molecules for use in treating a wide range
of health problems. Recombinant hemophilia therapy is one of the areas in which
Genetics Institute is a leader.
In 1995, Phase III clinical trials were begun for recombinant Factor
IX (rFIX), a blood-clotting protein that represents a potential breakthrough in
the treatment of patients with Hemophilia B. Also known as Christmas disease,
Hemophilia B is a blood-coagulation disorder caused by an inability to produce
Factor IX. The condition can result in severe, uncontrollable bleeding and
crippling joint destruction.
People with Hemophilia B currently are treated with clotting factor
products that are derived from human plasma. rFIX, manufactured and formulated
without the use of animal- or human-derived proteins, eliminates the risk of
viral contamination. Its supply is not dependent on blood donors.
The progress of rFIX builds on the success of Genetics Institute's
recombinant Factor VIII, the first protein-based therapy to reach patients with
Hemophilia A, a bleeding disorder.
[PHOTO]
John B. Edwards, Recombinant Factor IX Project Director. More than 400
scientists, engineers, clinicians and support personnel at Genetics Institute
are members of the team - led by Mr. Edwards - responsible for global
commercialization of recombinant Factor IX.
8
<PAGE>
Vaccines
Wyeth-Ayerst, through its business group Wyeth-Lederle Vaccines and
Pediatrics, is placing increased emphasis on infant and adult vaccines for
global use, especially in developing countries where young children are still
at significant risk of deadly diseases.
Wyeth-Ayerst's research is focused on respiratory and gastrointestinal
tract infection, sexually transmitted disease and novel vaccine delivery
methodologies. A vaccine to prevent rotavirus infections in infants has been
the subject of research activity for several years.
Rotavirus is a leading cause of the most severe cases of acute
infantile gastroenteritis, a disease that claims nearly 1 million lives each
year. Diarrheal diseases are an important cause of morbidity in infants and
young children worldwide and a leading cause of mortality.
In the United States alone, the disease results in more than 3 million
cases per year with 70,000 hospitalizations and over 100 deaths in infants and
young children. In Asia, Latin America and Africa, the impact of this disease
is enormous. The significant medical and economic costs which result may be
vaccine preventable.
In 1996, Wyeth-Ayerst plans to file a Product License Application for
Rotashield, an orally administered rotavirus vaccine tested in concert with the
World Health Organization and European government health agencies. Rotashield
will be available under the trademark Rotamune outside the United States.
In clinical trials, vaccinated infants have shown an 80% decrease in
severe diarrheal episodes and have tolerated the vaccine well. The vaccine's
effectiveness against diarrheal illnesses requiring medical intervention was
more than 80%, and was even greater against dehydration due to rotavirus.
[PHOTO]
Edward Zito, Ph.D., Associate Director of Clinical Research and Development at
Wyeth-Lederle Vaccines and Pediatrics. To date, more than 9,000 subjects
worldwide have been studied in clinical trials for Rotashield. Dr. Zito plays a
key role in the coordination of activities at the field clinical test sites
with Wyeth-Ayerst research professionals and government health officials and in
the handling and analysis of trial data.
[PHOTO]
Raymond Reid, M.D. - shown here with clinical field worker Carmelita Leonard
and several patients - supervised the rotavirus vaccine clinical trials at the
Johns Hopkins Clinic in Fort Defiance, Arizona.
9
<PAGE>
Consumer Health Care
[PHOTO]
Ed LeCert (right), team trainer for the Boston Celtics, recommends Orudis KT
for minor sprains and strains. Arnold Scheller, M.D., the Celtics team
physician, is a well-known orthopedist who has prescribed Orudis for many
years. Dr. Scheller is pleased that he now can offer his patients a convenient
OTC alternative.
Underscoring the deep commitment of Whitehall-Robins Healthcare to
deliver new, cost-effective products to the consumer by switching from
prescription to OTC status was the 1995 introduction of Orudis KT (ketoprofen)
and the anticipated 1996 approval of OTC Axid (nizatidine).
Orudis KT provides consumers with a new choice for OTC pain relief and
gives Whitehall-Robins a major opportunity to expand its position as a leader
in the $2.4 billion U.S. OTC analgesic category. The heritage of Orudis KT
dates back to 1986 when the prescription formulation was successfully
introduced by Wyeth-Ayerst. Prior to its recent introduction as an OTC product,
more than 18 million Orudis prescriptions had been written and nearly a billion
tablets sold.
An OTC version of Axid, an H2 antagonist for the prevention of
heartburn, acid indigestion and sour stomach, was unanimously recommended for
approval by the U.S. Food and Drug Administration's (FDA) Non-Prescription
Drugs and Gastrointestinal Drugs Advisory Committees in 1995. Whitehall-Robins
is working with the FDA to obtain final approval and expects to market this
product in 1996 under a licensing agreement with Eli Lilly and Company.
With a favorable safety profile and fast onset of action, OTC Axid is
well-suited to compete in the growing OTC acid reducer/antacid category, which
is projected to exceed sales of $1 billion on an annual basis.
[PHOTO]
Jamie Greene, Ph.D., Senior Director of Clinical Research at Whitehall-Robins.
Dr. Greene led the clinical research team that developed Orudis KT. The
successful switch program for this important new OTC analgesic involved
defining the optimal dosing regimen and conducting efficacy and safety studies
that led to FDA approval.
10
<PAGE>
Agricultural Products
The world's food production system is challenged to support the needs
of a global population that is expected to grow from less than 6 billion to
more than 8 billion in the next 30 years. Cyanamid is responding with
innovative products that are setting new standards for effectiveness and safety
for users and for the environment.
Herbicides are the largest business for Cyanamid, and its key products
are from the imidazolinone family.
Imidazolinones, which are essentially non-toxic to wildlife and other
non-target species, also are effective at low application rates under a variety
of agricultural practices. This has made for widespread acceptance of
imidazolinone products in weed control worldwide.
The pyrrole family of compounds represents a new major insecticide
class for controlling insects that infest a wide variety of crops. The pyrroles
have proved to be effective even where resistance to current insecticides
exists.
The first of the pyrrole insecticides, Pirate (chlorfenapyr), was sold
in several U.S. states in 1995 under an emergency exemption for use on cotton
and is marketed internationally. Pirate cotton insecticide and Alert, the
formulation for fruits, vegetables and citrus, currently are under review for
registration in the United States.
Like the imidazolinones, the pyrroles have excellent prospects for
becoming major global franchises.
[PHOTO]
Jody Furch, Research Chemist in Cyanamid's Agricultural Products Research
Division. Jody Furch contributed to the synthesis of the breakthrough pyrrole
compound used in Pirate. This compound is extremely effective against insects
and mites. Mr. Furch also is co-inventor of a process that has allowed Cyanamid
to prepare commercial quantities of pyrrole insecticides.
[PHOTO]
Mike Brunetti, a cotton producer in Jonesville, Louisiana, found that certain
insects were resistant to his usual insecticides. In 1995, Mr. Brunetti used
Pirate, which was available in certain states under an emergency exemption. He
had excellent results and looks forward to EPA approval of this novel
insecticide.
11
<PAGE>
Pharmaceutical Products Pipeline
More than 50 potential new pharmaceutical products are in clinical development
at American Home Products. Certain of the most promising projects that are in
Phase II and beyond are detailed below.
We expect that many of the therapies, indications, dosage forms and
vaccines in our pipeline will be made available to the medical community and
patients within the next few years. More than half of these major clinical
projects are either under review by regulatory authorities for marketing
approval or are in advanced Phase III clinical development - the final step
before a New Drug Application (NDA) is submitted. The majority of these
products have significant potential in markets worldwide.
A Approved
NDA NDA filed
PLA PLA amendment filed
III Phase 3
II Phase 2
x United States / / International /x/ Worldwide
<TABLE>
<CAPTION>
NDA
---
Product Name Description / Indication Status A PLA III II
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Lodine(R) XL Once-a-day dosing for osteoarthritis, rheumatoid arthritis
and management of chronic pain / / x
- -----------------------------------------------------------------------------------------------------------------------------------
Zosyn(R) Nosocomial pneumonia (additional indication) / / x
- -----------------------------------------------------------------------------------------------------------------------------------
Duract(TM) Analgesia for acute and chronic pain (including primary
dysmenorrhea) x
- -----------------------------------------------------------------------------------------------------------------------------------
Normiflo(TM) Prophylaxis of DVT and PE in knee surgery x
- -----------------------------------------------------------------------------------------------------------------------------------
Redux(TM) Long-term treatment of obesity in patients on a reduced calorie diet x
- -----------------------------------------------------------------------------------------------------------------------------------
Lyrelle(R) Patch Estrogen replacement therapy for treatment of vasomotor symptoms
related to menopause / /
- -----------------------------------------------------------------------------------------------------------------------------------
Leukine(R) a b,d c
(Immunex) a Prophylaxis of neutropenia resulting from chemotherapy x x x
b Prevention of post-operative infection
c Reduction of infection in HIV
d Neonatal infection
- -----------------------------------------------------------------------------------------------------------------------------------
Alredase(R) Adjunct to insulin/oral hypoglycemic agents for prevention/treatment
of diabetic complications / / x
- -----------------------------------------------------------------------------------------------------------------------------------
Harmonet(R) Lower dose estrogen with benefits of the progestin gestodene / / x
- -----------------------------------------------------------------------------------------------------------------------------------
Tri-Minulet(R)/Minulet(R) Oral contraceptives containing the progestin gestodene / / x
- -----------------------------------------------------------------------------------------------------------------------------------
Acel-Imune(R) Prophylaxis vs. D,T and P for children up to 7 years old
(acellular pertussis component) /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Effexor(R)XR Once-a-day dosing alternative for Effexor(R) antidepressant /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Recombinant Factor IX
(Genetics Institute) Hemophilia B; blood-clotting factor /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Gestodene/EE Lowest-dose estrogen/progestin oral contraceptive / /
- -----------------------------------------------------------------------------------------------------------------------------------
Levonorgestrel/EE Lowest available estrogen dose with the progestin levonorgestrel /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Neumega(TM)rhIL-11
(Genetics Institute) Chemotherapy-induced thrombocytopenia and epithelial protection /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Pneumococcal Conjugate Vaccine Prophylaxis against pneumococcal systemic disease /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Prempro(TM) Secondary prevention of cardiovascular disease /x/
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
12
<PAGE>
x United States / / International /x/ Worldwide
<TABLE>
<CAPTION>
NDA
---
Product Name Description / Indication Status A PLA III II
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Rotashield(TM)/Rotamune(TM) Orally administered vaccine to prevent rotaviral gastroenteritis
in infants /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Tasosartan Once-a-day A-II antagonist anti-hypertensive with improved side
effects and compliance /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Tasosartan/HCTZ Once-a-day A-II antagonist anti-hypertensive/diuretic with improved
side effects and compliance /x/
- -----------------------------------------------------------------------------------------------------------------------------------
DTaP-HibTITER(R) Prophylaxis vs. D,T, P and Haemophilus influenzae b diseases
(acellular pertussis component) /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Trimegestone/17B-estradiol Treatment of vasomotor symptoms and prevention of osteoporosis
with endometrial protection / /
- -----------------------------------------------------------------------------------------------------------------------------------
Zaleplon Non-benzodiazepine sedative/hypnotic for the treatment of general
insomnia /x/
- -----------------------------------------------------------------------------------------------------------------------------------
GPA-748 Oral therapy for the treatment of growth hormone deficiency x
- -----------------------------------------------------------------------------------------------------------------------------------
Novantrone(R) a,b b,c
(Immunex) a Hormone refractory prostate cancer x x
b Metastatic breast cancer
c Non-Hodgkin's lymphoma (Phase I and II)
- -----------------------------------------------------------------------------------------------------------------------------------
Adatanserin Non-benzodiazepine for the treatment of anxiety /x/
- -----------------------------------------------------------------------------------------------------------------------------------
ARI-509 Adjunct to insulin/oral hypoglycemic agents for prevention/treatment
of diabetic complications /x/
- -----------------------------------------------------------------------------------------------------------------------------------
rhBMP-2
(Genetics Institute) Bone repair and regeneration* (Phase I and II) /x/
- -----------------------------------------------------------------------------------------------------------------------------------
BTA-243 Antiobesity agent with no CNS action for chronic obesity treatment /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Effexor(R)XL Once-a-day OROS(R) Effexor(R) dose form with improved convenience,
compliance and side effects /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Gestodene/17B-estradiol Novel oral contraceptive; combination of gestodene and
17B-estradiol / /
- -----------------------------------------------------------------------------------------------------------------------------------
rhIL-12 Novel immunomodulator (Phase I and II); joint venture with Genetics
Institute /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Meningococcal Conjugate Vaccine Prophylaxis against meningococcal systemic type C disease /x/
- -----------------------------------------------------------------------------------------------------------------------------------
PDA-641 Oral prophylaxis for treatment of asthma; replacement for oral/inhaled
steroids /x/
- -----------------------------------------------------------------------------------------------------------------------------------
Rapamune(TM) Immunosuppressive therapy for prophylaxis of renal transplant rejection /x/
- -----------------------------------------------------------------------------------------------------------------------------------
RSV Subunit Vaccine Prevention of RSV-mediated lower respiratory disease for at-risk children
and the elderly /x/
- -----------------------------------------------------------------------------------------------------------------------------------
S-TNF-R Management of rheumatoid arthritis; joint venture with Immunex /x/
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
* Under evaluation by the U.S. Food and Drug Administration as a combination
device
13
<PAGE>
Review of Operations
[PHOTO]
Ethical Pharmaceuticals, Vaccines
and Nutritionals
Wyeth-Ayerst is one of the largest pharmaceutical organizations in the
world. Significant progress in integrating and consolidating operations
worldwide after the American Cyanamid acquisition has created a highly
coordinated, global enterprise that can quickly and efficiently focus resources
on markets with the most potential for growth.
In the United States, Wyeth-Ayerst products are prescribed more often
and used in a broader range of therapeutic categories than those of any other
research-based pharmaceutical company. Major programs are under way to position
Wyeth-Ayerst as a valuable partner with managed care providers that account for
an increasing percentage of health care products purchases. Wyeth-Ayerst has
entered into agreements with most major managed care organizations and
continues to establish customized programs, services, software and educational
resources that support these growing customers. Additionally, by offering both
branded and generic products, Wyeth-Ayerst is meeting the preference of many
managed care providers to work with fewer suppliers of pharmaceutical products
to achieve cost-efficiency.
Internationally, Wyeth-Ayerst is a leader in women's health care,
mental health and nutritionals. Indicative of its expanding, global presence
are activities in the emerging markets of China, Southeast Asia and Eastern
Europe.
Wyeth-Ayerst is among the world leaders in pharmaceutical research and
development investment. Clinical programs are global in scope and involve
thousands of patients in a wide range of therapeutic areas.
American Home Products is the majority shareholder in Genetics
Institute, Inc., a leading company in biotechnology, and also is a majority
owner of Immunex Corporation. In November 1995, American Home Products made a
proposal to acquire all of the outstanding shares of Immunex not already owned
by AHP for $14.50 per share in cash. Immunex subsequently rejected the
proposal.
Cardiovascular and Metabolic Disease Therapies
Wyeth-Ayerst offers physicians a wide range of cardiovascular products for
treating patients with arrhythmia, hypertension and angina.
Cordarone (amiodarone HCl) oral was strengthened as the number one
selling antiarrhythmia product in the United States. The growth of Cordarone
reflects increasing acceptance among electrophysiologists and cardiologists.
Cordarone I.V. was launched in the United States in October 1995 as therapy for
life-threatening ventricular arrhythmias and will have market exclusivity for
seven years. This new product also was approved for marketing in Canada. The
synergy between the intravenous and oral formulations is expected to accelerate
growth for the Cordarone family.
Wyeth-Ayerst is represented in virtually all of the major
anti-hypertensive classes. Leading products include Verelan (verapamil HCl),
Ziac (bisoprolol fumarate/hydrochlorothiazide), Maxzide
(triamterene/hydrochlorothiazide), Tenex (guanfacine HCl), Inderal LA
(propranolol HCl) and Cardene I.V. (nicardipine HCl).
Verelan remained an important product in the $3.7 billion calcium
channel-blocker category. Verelan offers a unique sustained release delivery
system that provides 24-hour blood pressure control in a single dose.
Ziac was up significantly in sales in its second year on the market as
the first and only low-dose combination product recommended for first-line
therapy in mild-to-moderate hypertension. It provides efficacy with very few
side effects.
14
<PAGE>
[PHOTO]
Maxzide, a potassium-conserving diuretic, is indicated for controlling
blood pressure and offers physicians an alternative for patients who are
susceptible to hypokalemia. Tenex is a centrally acting agent with a low
side-effect profile that is highly suited to elderly patients. Cardene I.V.
gives surgeons and anesthesiologists an easy and predictable option for
controlling hypertensive situations in the hospital.
In the angina category, ISMO (isosorbide mononitrate) and Isordil
(isosorbide dinitrate) continue to give Wyeth-Ayerst a strong presence. ISMO
was the first mononitrate on the market and maintains a leadership position.
Wyeth-Ayerst expects to further expand its presence in institutional
vascular products sales with the registration and introduction of Normiflo
(ardeparin sodium), a low molecular-weight heparin for prevention of venous
thromboembolic disease in orthopedic surgery patients.
The U.S. Food and Drug Administration's (FDA) Endocrinologic &
Metabolic Drugs Advisory Committee recommended approval of Redux
(dexfenfluramine HCl). Final labeling for this product currently is under
review at the FDA. Redux is the first new prescription antiobesity therapy in
nearly 20 years and is expected to be indicated for long-term treatment of
obesity.
In 1996, data on the retinopathy indication for Alredase (tolrestat)
will be analyzed, and a decision regarding a New Drug Application (NDA)
submission is expected to be made.
Anti-Inflammatory and Gastroenterology Drugs
Wyeth-Ayerst is building leadership in pharmaceutical products for the
treatment of pain and inflammation.
Growth for Lodine (etodolac) and Oruvail (ketoprofen) strengthened
Wyeth-Ayerst's number one position in the highly competitive $1.8 billion
non-steroidal anti-inflammatory drug (NSAID) category in the United States.
Lodine is the second most widely dispensed branded NSAID. In 1996, Wyeth-Ayerst
expects to introduce a 500 mg. dosage form of Lodine which will further
strengthen this franchise.
Impressive sales growth for Lodine also was recorded internationally.
The drug currently is registered in 52 countries as therapy for osteoarthritis,
rheumatoid arthritis and pain and is marketed in 33 countries. The Wyeth-Ayerst
and Takeda Chemical Industries, Inc. (Takeda) joint venture will markedly
increase the size of the sales force promoting Lodine in Japan, where this
product was launched in 1994.
The introduction of new 100 mg. and 150 mg. dosage strengths
contributed to significant sales growth for Oruvail, the extended release form
of Orudis.
Early in 1996, Wyeth-Ayerst received FDA market clearance for Naprelan
(naproxen sodium), a product offering important improvements over the widely
used conventional formulation of naproxen sodium. Naprelan uses the
breakthrough Intestinal Protective Drug Absorption System to provide patients
with both rapid onset and 24-hour relief from inflammation and pain with a
single dose.
Wyeth-Ayerst anticipates receipt of FDA market clearance in 1996 for
Duract (bromfenac sodium), a potent non-narcotic analgesic developed for
management of pain.
Immunex research programs include a tumor necrosis factor receptor in
Phase II trials that has shown promise in reducing symptoms of advanced
rheumatoid arthritis. Genetics Institute is evaluating Neumega recombinant
human interleukin-eleven (Neumega rhIL-11) in a Phase I study of Crohn's
disease, a form of inflammatory bowel disease.
Zoton/Lanzo (lansoprazole), a proton pump inhibitor licensed from
Takeda, had strong sales in most of the 10 international markets where it is
sold by Wyeth-Ayerst. Proton pump inhibitors are the latest and most effective
treatment for reflux esophagitis and duodenal ulcers.
15
<PAGE>
[PHOTO]
Mental Health Products
Wyeth-Ayerst markets important, innovative therapies for depression, anxiety
and related disorders.
Effexor (venlafaxine HCl), a structurally novel antidepressant, is
experiencing steady growth and continued to expand in the United States and in
international markets. Effexor is registered in 26 countries, was introduced in
several important European markets in 1995 and has registrations pending in 20
countries. Launches scheduled for 1996 include major markets in Europe and
Latin America.
[PHOTO]
More than 2 million prescriptions were dispensed for Effexor in its first full
year on the market in the United States. Mounting worldwide acceptance is
giving this unique product strong sales opportunities in the nearly $3.4
billion antidepressant market, which is growing by approximately 29% annually.
Effexor inhibits both serotonin and norepinephrine reuptake, which are
believed to play central roles in the cause of depression. A claim for rapid
onset of action has been obtained in the majority of international markets
where it has been approved, and Effexor began a U.S. clinical trial for this
claim in 1995. Effexor also has been approved for use in some international
markets in treating depression that often accompanies anxiety, and a Phase III
trial is under way for this claim.
In Europe, Wyeth-Ayerst is a leader in sales of tranquilizers and
hypnotics. Ativan (lorazepam), one of the world's leading anti-anxiety drugs,
grew in sales in many markets outside the United States. Sales declined in the
United States due to generic competition. Other products recording increased
sales internationally were Serepax (oxazepam), for short-term treatment of
anxiety; Loramet (lormetazepam), a therapy for insomnia and sleep disorders;
and Normison (temazepam), a hypnotic/sedative compound.
Anti-Infectives
Wyeth-Ayerst maintains a strong presence in anti-infectives with major products
that are marketed worldwide. In the United States, sales of anti-infectives
declined during 1995 due to increased competition from generics and new branded
products.
Suprax (cefixime) is an important once-a-day oral, third-generation
cephalosporin indicated for adult and pediatric respiratory and urinary tract
infections. Phase IIIb clinical trials are ongoing to support expanded
indications. A supplemental NDA filing for sinusitis is expected in 1996.
Zosyn (piperacillin sodium/tazobactam sodium) is a broad spectrum
intravenous product that represents a therapeutic advance due to its stability
in the presence of enzymes produced by some bacteria that inactivate certain
antibiotics. Zosyn is expected to receive clearance in 1996 for the critically
important indication of nosocomial pneumonia, a condition accounting for the
largest hospital usage of antibiotics. Sales significantly increased for this
product internationally, where it is marketed in 20 countries as Tazocin.
Increased competition reduced sales for Pipracil (piperacillin), a broad
spectrum, semi-synthetic penicillin.
Minocin (minocycline HCl) declined slightly in sales in 1995 but
maintained its position as the world's leading oral antibiotic for the
treatment of moderate-to-severe acne.
16
<PAGE>
[PHOTO]
Genetics Institute and Wyeth-Ayerst are jointly evaluating recombinant
human interleukin-twelve (rhIL-12) in early clinical studies of human
immunodeficiency virus (HIV) and cancer to determine rhIL-12's potential as a
novel anti-viral agent.
Vaccines
Wyeth-Lederle Vaccines and Pediatrics develops and markets a broad array of
leading childhood and adult vaccines in the United States and is in the
vanguard of efforts to discover new vaccines to prevent several of the most
serious infectious diseases worldwide. In the United States, sales of vaccines
showed modest growth in 1995 mainly due to the Vaccines for Children program, a
new government entitlement that provides free vaccines not only to the
underprivileged but increasingly to those who can afford to pay for them. We
continue to regard vaccines as one of the most cost-effective components of
health care.
Tetramune, the leading combination vaccine licensed for protection
against diphtheria, tetanus, pertussis and Haemophilus influenzae type b,
recorded sales growth in its second full year on the market in the United
States. This vaccine reduces by half the number of injections a child requires
by age 15 months for immunization against these diseases. Tetramune also is
sold internationally.
Wyeth-Lederle is one of the largest suppliers of influenza, cholera,
typhoid and adenovirus vaccines in the United States and is the only U.S.
manufacturer of oral polio vaccine, marketed under the Orimune trademark. Sales
of Pnu-Imune 23, a pneumococcal vaccine, increased as a result of growing
physician and patient acceptance of adult immunization.
RespiGam, an immune globulin with high levels of antibodies against
respiratory syncytial virus (RSV), was licensed for marketing in January 1996.
RespiGam, which is co-promoted with MedImmune, is indicated in certain
high-risk children for the prevention of respiratory syncytial virus, the
leading cause of pneumonia and bronchiolitis in infants.
Phase III studies are nearing completion, and a Product License
Application (PLA) is planned in late 1996 for Rotashield/ Rotamune, the first
vaccine to prevent a major cause of severe acute gastroenteritis in infants and
young children. A supplement to the PLA for Acel-Imune, a combination of
diphtheria and tetanus toxoids with an acellular pertussis component, will be
filed in early 1996 to support its use in infants, based on recently completed
efficacy trials.
New vaccines are being developed to protect against infant pneumonia
and middle ear infections. Research priorities also include new combination
vaccines and delivery systems designed to reduce the number of injections
required to fully immunize children.
Pediatric Health Care
In January 1996, Wyeth-Ayerst announced that it will phase out its U.S. infant
nutritional products business, largely due to a changing marketplace and the
spiraling growth of the Women, Infants and Children (WIC) Supplemental Food
Program, which now accounts for more than half of all formula consumed in the
United States and requires product to be sold below our cost of production.
Wyeth-Ayerst will continue to market infant formula outside the United States,
where more than 85% of global sales are recorded and category growth potential
remains strong.
Nutritional franchise sales increased internationally. The first-age
formula S-26 has widespread support and is a leader in Australia, China, Hong
Kong and the United Kingdom. S-26 incorporates the latest scientific advances
in infant nutritional formulas to physiologically simulate human milk. Nursoy,
a soy-based formula for infants and children allergic to cow's milk, had steady
sales increases in many countries.
Follow-on formulas such as Promil for infants aged six months and
older posted excellent sales gains and continued to grow in importance as a
result of increased support from the pediatric community. Sales exceeded
expectations for Progress, a
17
<PAGE>
[PHOTO]
growing-up milk specially formulated for children one to four years of age.
Generic Products
ESI Lederle, a business division of Wyeth-Ayerst, is among the largest
manufacturers and suppliers of generic oral and injectable products in the
United States and is a leading supplier of injectables to hospitals. It offers
more than 125 different oral and injectable products in over 550 different
dosage sizes and packages.
ESI Lederle is positioned to benefit from the favorable long-term
growth prospects of the generics business. In 1995, ESI Lederle launched 11 new
products. Abbreviated New Drug Applications were filed for six new products.
Wyeth-Ayerst also is intensifying efforts to build the generics
business in Europe through Pan-Efeka, a new company that became fully
operational in 1995. Pan-Efeka is focused on Germany, where Wyeth-Ayerst has
developed a major, growing generics business through acquisitions, as well as
Denmark, the Netherlands, the United Kingdom and other major markets.
Cough/Cold/Allergy Products
Wyeth-Ayerst is a leader in prescriptions for cough/cold/allergy products in
the United States. Key products include the Robitussin lines of cough control
products, the combination antihistamine/decongestant formulas of Dimetane and
the codeine formulas of the Phenergan (promethazine) line which are used in the
treatment of serious colds and allergies.
Oncology Therapies
Several advances in oncology therapy were made by Immunex, which markets
anti-cancer products in North America.
The FDA approved Leukine (sargramostim) for several new indications in
1995. This product became the first white blood cell stimulant to receive
clearance for use in older adults following high-dose chemotherapy for acute
myelogenous leukemia. Leukine also was approved for use following allogeneic
bone marrow transplantation from genetically matched donors and is the first
growth factor indicated for use in mobilizing peripheral blood progenitor cells
(PBPC) and for use after PBPC transplantation. Leukine was found to shorten the
time for white blood cell recovery and to decrease the overall incidence of
infection and length of hospital stays.
Sales of Novantrone (mitoxantrone) were up in 1995. Novantrone is used
in the treatment of acute myelogenous leukemia in the United States and also is
registered internationally for the treatment of breast cancer and non-Hodgkin's
lymphoma.
Biopharmaceuticals and Immunomodulators
Phase II clinical studies are proceeding for Wyeth-Ayerst's Rapamune
(sirolimus) as first-line chronic therapy in renal transplant patients for the
prevention and treatment of acute rejection. Rapamune has been shown to be safe
and well-tolerated and to significantly reduce the occurrence of acute
rejection episodes in renal transplant recipients when taken with certain other
therapies. Phase III trials are planned for 1996.
Significant progress was made in several areas by Genetics Institute,
which is focused on developing portfolios of genetically engineered human
proteins for use in treating a range of health problems. Genetics Institute is
one of the world's two suppliers of recombinant Factor VIII for the treatment
of Hemophilia A, a bleeding disorder. In 1995, Genetics Institute's sales of
recombinant Factor VIII to its marketing partner, Baxter Healthcare
Corporation, increased by more than 90%.
Recombinant Factor IX advanced into global Phase III clinical trials
for the treatment of Hemophilia B. Submissions for market approvals are
expected to be made in the United States and Europe by the second half of 1996.
Phase III clinical trials were begun for Neumega rhIL-11, an agent for
enhancing blood platelet production.
18
<PAGE>
[PHOTO]
Recombinant human bone morphogenetic protein-two (rhBMP-2) is expected
to enter pivotal clinical trials in 1996. This protein has shown encouraging
preclinical activity as a treatment for multiple indications where bone growth
or repair is desired.
Phase I/II clinical trials began for rhIL-12 in cancer patients.
Wyeth-Ayerst and Genetics Institute are jointly developing and commercializing
this immune system modulator.
Women's Health Care
A world leader in women's health care, Wyeth-Ayerst is the largest provider of
hormone replacement therapy (HRT) and hormonal contraceptive products.
In the United States, Premarin (conjugated estrogens) continued to be
the most widely dispensed product and was among the most economical
prescription medications, costing patients approximately 40 cents per day.
Internationally, the Premarin family of products reached higher levels of
acceptance and recorded significant sales growth in many markets. Premarin is
registered in 86 countries, and approvals for various Premarin products are
pending in 43 countries.
Premarin is indicated for prevention of osteoporosis, a debilitating
bone disease that begins soon after menopause, and as therapy for short-term
symptoms of menopause such as hot flashes and vaginal atrophy. Approximately
one in four women over the age of 50 are at risk for osteoporosis, which causes
approximately 1.5 million bone fractures each year in the United States alone
and results in medical costs exceeding $10 billion annually.
The Premarin franchise continued to expand with products that provide
individualized therapy for menopausal and postmenopausal women. The recent
introduction of single tablet Prempro and Premphase in the United States in
January 1996 marked a major advance in HRT therapy.
Wyeth-Ayerst's commitment to osteoporosis therapy was broadened this
year by a collaborative venture with Merck & Co., Inc. (Merck) involving
Fosamax (alendronate sodium). Fosamax, the first in a new class of medicines
for the treatment of osteoporosis in postmenopausal women, received FDA
clearance in October 1995. Under its agreement with Merck, Wyeth-Ayerst is
promoting Fosamax to obstetricians and gynecologists in the United States. This
venture is expected to complement the Premarin business and to further develop
the expanding market for osteoporosis therapies.
Wyeth-Ayerst continued to be the leader in the $2.6 billion global
oral contraceptive market. Triphasil (levonorgestrel), also marketed
internationally under the trademark Trinordiol, remained the second most widely
prescribed triphasic oral contraceptive in the United States. It is registered
in 82 countries worldwide and has registration approvals pending in five.
Minulet (monophasic gestodene) and Tri-Minulet (triphasic gestodene)
recorded sales gains in Europe. These third-generation progestins have
pharmacologic and biochemical profiles similar to natural progesterone and
provide a low dose of steroid per cycle.
PEPI Results Confirm Benefits
of Combination HRT
The benefits of combination hormone replacement therapy (HRT) have been
reconfirmed for postmenopausal women. According to the latest Postmenopausal
Estrogen/Progestin Interventions (PEPI) trial finding, adding a progestin to
estrogen replacement therapy offers protection of the uterus in
nonhysterectomized women by helping to prevent endometrial hyperplasia
(overgrowth of the lining of the uterus). These findings, recently published in
the Journal of the American Medical Association, emphasize the benefits of HRT,
a therapy combining estrogen and progestin.
19
<PAGE>
[PHOTO]
Tri-Minulet is available in 22 countries and has registrations pending in two
others. Minulet is available in 74 countries with registrations pending in nine
others.
Recently published data regarding a possible association between oral
contraceptives and the risk of venous thromboembolism led to a review of oral
contraceptive products by the European regulatory committee - the Committee on
Proprietary Medicinal Products or the CPMP. After its preliminary review, the
CPMP decided to take no formal action. However, along with other manufacturers,
Wyeth-Ayerst is submitting additional data for further evaluation by the CPMP.
An NDA is scheduled to be submitted early in 1996 for a new, low-dose
levonorgestrel product that would have the lowest estrogen content available in
the United States.
Specialty Pharmaceuticals
The Specialty Pharmaceuticals Division companies provide specialized products
and services to the pharmaceutical industry. The Eurand Group offers a broad
spectrum of oral drug delivery technologies for tastemasking and for
controlling the release of a pharmaceutical product in the body to prolong
activity or provide improved absorption. During 1995, Eurand achieved two major
milestones: completion of construction of its technologically advanced research
and production facility near Milan, Italy, and completion of formulation
development of an oral form of calcitonin for the treatment of osteoporosis.
Scientific Protein Laboratories (SPL) is a leading supplier of heparin
and pancreatin bulk drug substances, which are derived from animal tissue.
During 1995, under agreements with two pharmaceutical research companies, SPL
also scaled up processes and produced drug substances for Phase III clinical
trials on two new drugs for which the active component is extracted from
material of animal origin.
Disease Management
A joint venture company was formed in 1995 by Wyeth-Ayerst and Medco
Containment Services, Inc., a subsidiary of Merck, to develop, market and
implement comprehensive disease management and health management programs. The
mission of the new company is to meet the U.S. health care system's need for
integrated medical, pharmaceutical and patient management services in selected
therapeutic areas, thereby improving the quality of care and reducing overall
costs. The venture will strive to become the premier designer, developer and
provider of women's health management programs in areas such as menopause,
osteoporosis, family planning and prenatal care. Programs also will be
developed for arthritis and cardiac arrhythmias.
Consumer Health Care
The OTC medications and vitamin and mineral supplements of Whitehall-Robins and
Lederle represent one of the largest consumer health care franchises in the
world with premier brands that receive high consumer recognition. On a pro
forma basis, OTC sales in the United States during 1995 remained even versus
the prior year while international sales increased. Higher worldwide sales of
vitamins and nutritional products and cough/cold products largely were offset
by lower sales of analgesic, asthma and family planning products.
Whitehall-Robins and Lederle have three of the top 10 selling brands
in the large and intensely competitive U.S. marketplace - Advil, Robitussin
and Centrum - and overall maintain the number one or number two position in 12
major OTC segments. A key to this leadership is a major, coordinated research,
development, marketing and manufacturing effort to bring prescription drugs to
the OTC market. Orudis KT (ketoprofen) was approved by the FDA for OTC
marketing in the United States and was launched on November 8, 1995. In
addition, the FDA Non-Prescription and Gastrointestinal Drugs Advisory
20
<PAGE>
[PHOTO]
Committees unanimously recommended approval of a non-prescription version of
Axid (nizatidine), an H2 antagonist for the prevention of heartburn, acid
indigestion and sour stomach.
Whitehall-Robins also is a leading supplier of OTC medicines in Canada
and continues to build major franchises in Europe, Asia and Latin America
through expansion of popular brands in core categories such as analgesics,
digestive remedies, cough medicines, cold remedies and vitamins. New products
developed specifically for local markets are contributing to growth as well.
New Advil Gel Caplets, a concentrated medication with an easy-to-swallow
gelatin coating, strengthened the competitive position of Advil in the United
States and reinforced the brand's "advanced medicine" image. Advil is the
largest-selling OTC ibuprofen product in the United States, Canada and France
and is the second largest-selling OTC analgesic in the United States.
Analgesics
Whitehall-Robins further strengthened its position in the U.S. analgesic
category by increasing share for the Advil (ibuprofen) line. While factory
sales declined, consumer sales growth for Advil was achieved in the face of
intense competition and was fueled by heavy advertising and the introduction of
Advil Gel Caplets.
An NDA was filed in 1995 to switch Children's Advil Suspension, a
Wyeth-Ayerst prescription product, to OTC status. FDA approval to market this
product in the growing OTC children's analgesics category is anticipated in
1996.
Cough/Cold/Allergy Remedies
During 1995, Robitussin cough syrups outpaced the category in sales growth,
reaching a new high in share. A major sales contribution was made by Robitussin
Cold, Cough & Flu Liqui-Gels, introduced last year. Additional contributions
were made by Robitussin Pediatric Night Relief and by the launch of Robitussin
Pediatric Drops, an expectorant/decongestant/cough suppressant combination.
Consumer sales gains also were recorded for Robitussin Cough Drops, the second
largest-selling brand of cough drops in the United States.
In the highly competitive cold segment, Dimetapp sales growth outpaced
that of the category. The brand capitalized on growth in the allergy segment,
recording increased sales from the introduction of Dimetapp Allergy Dye-Free
Elixir and Dimetapp Allergy Sinus caplets. The successful introduction of
Dimetapp Cold & Fever in the growing children's cough/cold category benefited
sales as well.
Advil Cold & Sinus (ibuprofen and pseudoephedrine) continued to record
growth in the United States and Canada.
Vitamin and Mineral Supplements
Significant increases in sales and market share were exhibited by Centrum and
Centrum Silver, the number one and number two selling products, respectively,
in the growing U.S. adult multivitamin category. Centrum, Jr. holds the number
two position in the U.S. children's vitamin category.
Caltrate PLUS, an advanced formula introduced at the end of 1994,
posted sales gains and helped to establish Caltrate as the number two brand in
the calcium supplement category. This category is experiencing strong growth
primarily due to media coverage of the benefits of calcium supplements and the
increasing number of women who are entering menopause and are at risk of
osteoporosis. Consumer sales were up for FiberCon, a bulk-forming fiber
laxative in the United States.
21
<PAGE>
[PHOTO]
Hemorrhoidal and Asthma Relief
U.S. sales for Preparation H increased relative to the prior year. The brand
continued to lead in the hemorrhoidal relief category in the United States,
Canada, Mexico and several European countries.
Sales of Primatene, the number one OTC asthma relief product in the
United States, were lower in 1995 due to competition from private label
products.
In-Home Diagnostics
A sales gain was recorded for Clearplan Easy, the leader in the growing U.S.
ovulation predictor category. Clearblue Easy declined in sales in the U.S.
pregnancy test kit category as a result of increasing price competition.
Lip Care, Topical Oral Analgesics and
Medicated Shampoo
The Chap Stick lip balm franchise grew in sales as a category leader in the
United States, bolstered by continued success of its medicated line and the
introduction of Chap Stick Ultra SPF 30 in the sun care segment.
Sales gains in the maximum strength segment sustained Anbesol as a
leading line of topical oral analgesics in the adult and baby categories.
Sales increases in the extra strength segment helped maintain Denorex
as a leader in medicated shampoos in the United States and Canada.
Medical Devices
Sherwood-Davis & Geck and Storz Instrument Company manufacture and market one
of the world's leading portfolios of specialized medical devices. Their
innovative products are recognized by patients and health care providers for
quality and cost-efficiency.
Sherwood-Davis & Geck was formed in 1995 through the merger of
Sherwood Medical and Davis & Geck. Complementary products and a broadened
research and development program are enabling the combined entities to more
effectively address new market requirements related to the proliferation of
national group purchasing organizations and the growth of local integrated
health care networks. The new company also is better positioned to capitalize
on opportunities in global markets.
Tubes, Catheters and Chest Drainage Products
Strong growth was recorded for the Argyle line, giving Sherwood-Davis & Geck
U.S. leadership in important categories such as umbilical vessel catheters,
naso-gastric tubes and incentive breathing exercisers. The company also holds a
major share in chest drainage products in the United States.
Sherwood-Davis & Geck expanded its presence in critical and chronic
care products by assuming responsibility for marketing the Quinton disposable
catheter product line. This line includes a variety of short- and long-term
vascular access catheters for hemodialysis as well as peritoneal dialysis
catheters and insertion accessories.
Disposable Syringes and Needles
Hypodermic needles and syringes continued to be an area of emphasis for
Sherwood-Davis & Geck. In the safety category, a complete range of Monoject
needle and syringe combinations is marketed to protect health care workers from
accidental needlesticks and exposure to blood-borne pathogens. The Monoject
Bone Marrow Biopsy needle was introduced in 1995. This product provides more
control and effectiveness in obtaining biopsy samples.
Enteral Feeding Systems
The introduction of the new Kangaroo EntriFlush pump strengthened
Sherwood-Davis & Geck's leadership in enteral feeding devices in the United
States. The pump features a unique pro-
22
<PAGE>
[PHOTO]
grammable flushing system that enhances the ease of fluid control. Sales of
enteral access devices increased significantly in the United States led by
jejunal feeding tubes, which are used to reach and feed the jejunum section of
the small intestine.
Thermometry
Sales for Sherwood-Davis & Geck's FirstTemp Genius infrared tympanic
thermometers increased significantly in the United States, fueled by agreements
with three major national purchasing alliances. Growth also was achieved
internationally, led by sales increases in Europe and Australia.
Wound Care and Wound Closure Products
Sherwood-Davis & Geck's non-adherent dressing line in the United States was
broadened by the introduction of the new Vaseline oil emulsion dressing. Wound
closure products posted sales growth internationally, led by Dexon II, Maxon
and Surgilene sutures. The introduction of Staysharp plastic surgery needles in
the United States marked a significant improvement in strength and sharpness in
the area of cosmetic and reconstructive surgery.
Cardiopulmonary Instrumentation and Devices
The introduction of a new generation of technologically advanced cardiac
testing systems strengthened Quinton Instrument Company as a leading provider
of monitoring products that support the patient from initial diagnosis through
cardiac rehabilitation.
Quinton's position as a leader in stress-testing equipment is expected
to benefit significantly from the release of the Q710 Monitor. Designed as a
cost-efficient system for physicians' offices, this product combines
sophisticated exercise and resting electrocardiogram testing in a single
portable system.
Vision Care Products
Storz is a global manufacturer and marketer of ophthalmic products. In 1995,
Storz extended its market penetration in ophthalmic surgical equipment
throughout the world. Hydroview foldable lens was introduced into international
markets and currently is in Phase II clinical trials in the United States.
Research and development activity is focused on innovative
technologies for new markets. Chondroitinase, an enzyme to facilitate and
enhance safety during certain retinal procedures, entered Phase I clinical
trials. An Investigational New Drug application was filed for cidofovir, a
broad spectrum topical anti-viral agent for the treatment of herpes and
adenovirus. Work is in progress on an injectable gel for the correction of
myopia and astigmatism.
Agricultural Products
Cyanamid is a leader in the global agricultural market. Innovative research
vaulted Cyanamid to the forefront in marketing novel compounds for crop and
noncrop uses that meet increasingly stringent safety and environmental demands.
Cyanamid continued to expand its presence in emerging markets by receiving more
than 100 worldwide registrations in 1995 for new uses and combinations of
existing products and began 1996 with six new compounds under regulatory
review. A large number of discovery compounds, many with potential worldwide
application, moved through the discovery phase, including three which advanced
to full development. Cyanamid's global research and development network
expanded with the opening of a new Discovery and Development Agricultural
Center in Japan that primarily will support commercial activities in the Far
East.
Herbicides
The principal Cyanamid herbicides are based on the imidazolinones, a unique
class of chemical compounds that are essentially safe to wildlife and are
effective at low application rates.
23
<PAGE>
[PHOTO]
Pursuit (imazethapyr) recorded excellent sales growth, further
strengthening its position as the leading broadleaf soybean herbicide in the
United States, Argentina and Canada. Gains in the United States were
attributable to higher soybean acreage and weather that increased the demand
for this premier post-emergent product. Farmers also responded favorably to
Pursuit in the ECO-PAK, a water soluble package that eliminates container
disposal problems. Pursuit also is used in the United States for weed control
in peanuts and was introduced to the alfalfa market in 1995.
Prowl (pendimethalin) recorded strong sales growth in the United
States as the leading grass herbicide in soybeans. The brand had a substantial
sales increase internationally, where it is marketed as Stomp. Gains also were
registered in Europe and the Middle East for Assert (imazamethabenz-methyl), a
herbicide used on cereal crops. Arsenal (imazapyr), the leading forestry
herbicide in the United States, was up in sales and registered gains
internationally. Other important crop herbicides sold in various markets are
Squadron (pendimethalin/imazaquin) and Scepter (imazaquin).
New product introductions include Detail (imazaquin/ dimethenamid), a
soybean herbicide combining broadleaf and grass control, and Resolve SG
(imazethapyr/dicamba), a broad spectrum corn herbicide that improves weed
control and minimizes the potential for development of weed resistance.
The U.S. Environmental Protection Agency (EPA) granted an Experimental
Use Permit for Raptor (imazamox), which provides a broad spectrum of weed
control for a variety of crops, including imidazolinone-resistant crops.
A new rice herbicide is under development that offers effective weed
control when applied at transplanting. This feature makes it particularly
appropriate for Japan, the number one rice herbicide market in the world, where
the majority of rice grown is transplanted. Registration filings are under way
in key markets throughout the Asia/Pacific region.
Insecticides
Counter (terbufos) increased its share of corn soil insecticide sales in the
United States and recorded a major increase in sales internationally. Customers
continued to shift to the new, easier-to-use packaging and a low-dust,
controlled-release formulation. Counter, together with Thimet (phorate), which
also is sold internationally, maintained the leading position in corn soil
insecticides in the United States. Cascade (flufenoxuron) and Fastac
(alpha-cypermethrin), used for a variety of crops, achieved strong sales gains
internationally.
Pirate (chlorfenapyr), a new cotton insecticide, was introduced under
an emergency exemption for use on cotton in several U.S. states. This
insecticide, marketed internationally, is the first product from the novel
pyrrole family, a new class of compounds developed by Cyanamid researchers. The
pyrroles have produced excellent results in field trials for controlling
insects, including those that have become resistant to other insecticides.
Fungicides
Excellent growth for the fungicide business internationally was due in large
part to the continued success of Caramba (metconazole), Delan (dithianon) and
Acrobat (dimethomorph), which are used on a wide range of crops. Acrobat MZ
became the first product from the acquisition of the agricultural business of
Shell Petroleum Company Ltd. to be launched by Cyanamid in the United States.
This fungicide, which has a new mode of action that has proved to be effective
in controlling late blight in potatoes, was sold under an emergency exemption
in 1995. An EPA registration application has been submitted. Acrobat has been
approved for marketing in key Latin American markets.
24
<PAGE>
[PHOTO]
Animal Health Care
Fort Dodge Animal Health is a leader in animal health care worldwide, ranking
second in animal vaccines in North America and expanding rapidly in
international biological and pharmaceutical markets. A significant research and
development effort is focused on finding new technologies for a wide range of
animal health problems.
On a pro forma basis, U.S. sales of animal health care products
declined in 1995 while international sales increased.
Small Animal and Equine Products
Increased sales for Duramune combination canine biologicals maintained Fort
Dodge's leadership in U.S. canine biologicals. Duramune products were licensed
in Denmark, Holland and Spain. LymeVax (Borrelia burgdorferi bacterin), the
canine Lyme disease vaccine, entered the European market with license approval
in Spain.
Fel-O-Vax Lv-K IV, a combination vaccine, recorded a sales increase in
the growing U.S. feline biological market. This product also is the largest
dollar-volume companion animal vaccine in Canada. Licenses were approved for
other Fel-O-Vax combination vaccines in Denmark, Holland, Italy, Switzerland
and the United Kingdom.
The first moxidectin formulation for horses, Equest Gel, was launched
in New Zealand. It is the only product on the market to provide single-dose
control of encysted cyathostomes, an internal parasite that is a common cause
of equine colic.
Dairy, Cattle and Sheep Products
Fort Dodge strengthened its position in the beef cattle market by acquiring the
Syntex Animal Health business from affiliates of F. Hoffmann-La Roche Ltd.
Acquired products include the Synovex line of hormonal implants, designed to
improve the feed efficiency and increase the rate of weight gain in beef
cattle, and Synanthic (oxfendazole), used for removal and control of parasites
in beef and non-lactating dairy cattle. Approval was received early in 1996 for
Synovex Plus, which will enable Fort Dodge to compete in the fast-growing
trenbolone acetate combination implant market.
Fort Dodge Animal Health holds a leading position in sales of
intra-mammary mastitis prevention and treatment products for the U.S. dairy
industry with ToDAY, ToMORROW, Cefa-Lak and Cefa-Dri.
Bovine biological sales were strengthened by the strong performance of
PYRAMID MLV 4, which was introduced in 1994. This is the first four-way
modified live vaccine licensed by the U.S. Department of Agriculture (USDA)
that provides single-dose administration as well as the option of subcutaneous
or intramuscular injection.
[PHOTO]
Cydectin, a formulation of moxidectin, received European registration approvals
in 1995 for use in treating sheep and cattle. A major effort is under way to
develop new label claims and novel formulations for moxidectin, an endectocide
developed by Cyanamid to protect livestock and companion animals against a
broad range of internal and external parasites. The worldwide market for
endectocides is estimated to be more than $700 million.
Registration approvals were received in Europe for moxidectin
formulations under the Cydectin trademark for use in treating sheep and cattle.
Eweguard, the first and only endectocide and vaccine combination product, was
registered for sheep in New Zealand and gained a leadership position in ovine
endectocides within three months of its introduction.
25
<PAGE>
[PHOTO]
Integrated Global Research and Development
The research and development entities of Fort Dodge and Cyanamid merged in 1995
to form global units for animal biological and pharmaceutical R&D.
U.S. biological research and development primarily is focused on areas
of traditional strength - dogs, cats, cattle and horses. Second- and
third-generation Lyme disease products are under development in the canine
area. Feline pipeline products include recombinant DNA-delivered vaccines for
protection against an AIDS-like syndrome and peritonitis disease. New bovine
respiratory and shipping fever vaccines are being developed. In early 1996, a
new strain of equine influenza vaccine was approved by the USDA.
Food Products
American Home Food Products and Canadian Home Products are recognized for
high-quality, nutritious convenience foods. In the United States during 1995,
sales for all major brands declined due to higher trade inventories - resulting
from previous trade-incentive programs - and new competitive entries. Despite
these pressures, key brands continued to be leaders in major categories, and
several initiatives were undertaken late in the year to expand these leadership
positions. These steps include a significant increase in consumer advertising
support and the planned introduction of aggressive new advertising and public
relations campaigns.
Prepared Meals and Side Dishes
Chef Boyardee, the leading brand in the prepared pasta category in the United
States, expanded its offerings for toddlers and children through the
introduction of Spider-Man and X-Men canned pasta varieties. These line
extensions obtained high distribution and were well-received by consumers. Chef
Boyardee Microwave Meals, which holds a leading share in the microwave pasta
segment, benefited from the success of rice products in chicken and beef
varieties.
Food Enhancements and Snacks
PAM, the largest-selling no-stick cooking spray in the United States, continued
to be favored by consumers as a low-fat, no cholesterol alternative to butter,
margarine and oil.
Polaner All Fruit, which contains no added sugar or fat, remained the
number one fruit juice sweetened spreadable fruit. A new boysenberry variety
was added to the line, and aggressive efforts to expand the brand's
availability resulted in an increased presence in mass merchandisers.
Crunch 'n Munch, a leading brand of glazed popcorn in the United
States, expanded its presence in the warehouse-snack category. Crunch 'n Munch
Reduced Fat was launched successfully, and the introduction of Buttery Toffee
in a 3.5-ounce size provided an additional opportunity to increase distribution
in smaller retail outlets as well as drug stores and special market franchises.
Gulden's remained the largest-selling spicy brown mustard in the
United States. Ro*Tel continued as the number one selling brand of canned
tomatoes and green chilies.
26
<PAGE>
Principal Products - United States
Ethical
Pharmaceuticals,
Vaccines and
Nutritionals
- --------------------
Women's Health
Lo/Ovral
Nordette
Ovral
Ovrette
Premarin
Premphase
Prempro
Stuartnatal Plus
Triphasil
- --------------------
Cardiovascular
Cordarone
Cordarone I.V.
Inderal LA
ISMO
Isordil
Maxzide
Quinidex
Sectral
Tenex
Verelan
Ziac
- --------------------
Mental Health
Ativan
Effexor
Serax
- --------------------
Anti-Inflammatories
Lodine
Naprelan
Orudis
Oruvail
- --------------------
Anti-Infectives
Minocin
Myambutol
Pipracil
Suprax
Zosyn
- --------------------
Vaccines
Acel-Imune
FluShield
HibTITER
Orimune
Pnu-Imune 23
Tetramune
Tri-Immunol
- --------------------
Pediatric Health
Children's Advil
Suspension
Donnagel
- --------------------
Oncology Therapies
Ativan Injection
Leukine
Novantrone
Reglan
Thioplex
- --------------------
Generic Products
atenolol
Aygestin
cefaclor
cimetidine
Cycrin
gemfibrozil
heparin
propranolol HCl
Tubex
vancomycin HCl
Wydase
- --------------------
Other Products
Dimetane
Micro-K
Phenergan
Consumer Health
Care
- --------------------
Analgesics and
Cough/Cold/Allergy
Advil
Advil Cold & Sinus
Anacin
Dimetapp
Dristan
Orudis KT
Robitussin
- --------------------
Vitamin and
Mineral
Supplements
Caltrate
Centrum
Centrum, Jr.
Centrum Silver
- --------------------
Other Products
Anbesol
Chap Stick
Clearblue Easy
Clearplan Easy
Denorex
FiberCon
Preparation H
Primatene
Food Products
- --------------------
Chef Boyardee
Prepared Foods
Canned and microwave
entrees
Packaged dinners
Pizza mixes, sauces
- --------------------
Regional Specialties
Dennison's
Luck's
Ranch Style
Ro*Tel
- --------------------
Food Enhancements
and Snacks
Crunch 'n Munch
Gulden's
Jiffy Pop
PAM
Polaner
Medical Devices
- --------------------
Sherwood-Davis
& Geck
Argyle tubes, catheters
and drainage devices
Blisterfilm, Ultec and
Viasorb dressings
Davis & Geck wound
closure products,
including sutures, nee-
dles and skin staplers
FirstTemp Genius tym-
panic thermometers
and Filac predictive
thermometers
Kangaroo enteral feed-
ing systems and enteral
access devices
Monoject needles and
syringes
Quinton dialysis
catheters
Voldyne incentive
breathers
- --------------------
Quinton Instruments
Cardiac stress test
systems
Cardiopulmonary
exercise systems
Cath lab hemodynamic
systems
Digital imaging and
analysis systems
Electrocardiographs
Electrophysiology
systems
Holter monitoring
systems
Telemetry systems
Treadmills
- --------------------
Storz Instruments
Diamox, Neptazane
glaucoma therapies
EZE-FIT intraocular
lenses
Microseal microsurgery
handpieces
Ocuvite ocular vitamins
Premiere, Protege
microsurgical equip-
ment
Agricultural
Products
- --------------------
Herbicides
Arsenal
Assert
Detail
Prowl
Pursuit
Resolve
Scepter
Squadron
- --------------------
Insecticides
Amdro
Counter
Thimet
Animal Health Care
- --------------------
Veterinary
Pharmaceuticals
and Biologicals
Cydectin
Discovery
Duramune
Fel-O-Vax
Fluvac
Ketaset
LymeVax
Presponse
PYRAMID
Synanthic
Synovex
ToDAY
ToMORROW
Triangle
27
<PAGE>
Ten-Year Selected Financial Data
<TABLE>
<CAPTION>
American Home Products Corporation and Subsidiaries
- -------------------------------------------------------------------------------------------------------
(Dollar amounts in thousands except per share amounts)
Years Ended December 31, 1995 1994(2) 1993
=======================================================================================================
<S> <C> <C> <C>
Summary of Sales and Earnings
Net sales . . . . . . . . . . . . . . . . . . . . . . . . . $13,376,089 $8,966,214 $8,304,851
Net income(1) . . . . . . . . . . . . . . . . . . . . . . . 1,680,418 1,528,254 1,469,300
Net income per common share . . . . . . . . . . . . . . . . 5.42 4.97 4.73
Dividends per common share . . . . . . . . . . . . . . . . 3.02 2.94 2.86
=======================================================================================================
Year-End Financial Position
Current assets . . . . . . . . . . . . . . . . . . . . . . $7,986,137 $7,821,246 $4,807,684
Current liabilities . . . . . . . . . . . . . . . . . . . . 4,556,248 4,618,086 1,584,411
Ratio of current assets to current liabilities . . . . . . 1.75 1.69 3.03
Total assets . . . . . . . . . . . . . . . . . . . . . . . 21,362,923 21,674,812 7,687,353
Long-term debt . . . . . . . . . . . . . . . . . . . . . . 7,808,757 9,973,240 859,278
Average shareholders' equity . . . . . . . . . . . . . . . 4,898,550 4,065,295 3,719,539
=======================================================================================================
Shareholders - Outstanding Shares
Number of common shareholders . . . . . . . . . . . . . . . 68,763 71,223 72,664
Number of preferred shareholders . . . . . . . . . . . . . 605 666 726
Average number of common shares outstanding
used for earnings per share calculation (in thousands) . 309,835 307,413 310,668
Preferred shares outstanding at year-end (in thousands) . . 34 37 40
=======================================================================================================
Employment Data
Number of employees at year-end . . . . . . . . . . . . . . 64,712 74,759 51,399
Wages and salaries . . . . . . . . . . . . . . . . . . . . $2,674,330 $1,820,450 $1,654,984
Benefits (including social security taxes) . . . . . . . . 684,077 441,768 396,045
- -------------------------------------------------------------------------------------------------------
</TABLE>
(1) Net income in 1995 includes a gain of $623,870 on the sale of the South
American oral health care business, special charges of $308,317 and a
restructuring charge of $117,156. Excluding these items, 1995 net income
was $1,482,021, and net income per common share was $4.78. Net income in
1992 includes the impact of Statement of Financial Accounting Standards
Nos. 106 and 109, adopted January 1, 1992. The net effect of these
statements increased net income $310,104. Net income in 1992 also includes
a charge of $220,000 for research acquired from Genetics Institute, Inc.
Excluding these items, 1992 net income was $1,370,738, and net income per
common share was $4.36. Net income in 1987 excludes a provision related to
Dalkon Shield claims of $1.75 billion recorded by A.H. Robins Company,
Incorporated prior to its acquisition by the Company in 1989.
(2) The 1994 information reflects the acquisition of American Cyanamid Company
for the one month ended December 31, 1994.
28
<PAGE>
<TABLE>
<CAPTION>
- -----------------------------------------------------------------------------------------------------------
1992 1991 1990 1989 1988 1987 1986
===========================================================================================================
<S> <C> <C> <C> <C> <C> <C>
$7,873,687 $7,079,443 $6,775,182 $6,747,016 $6,401,454 $5,850,383 $5,683,507
1,460,842 1,375,273 1,230,597 1,102,158 995,461 928,232 865,922
4.65 4.36 3.92 3.54 3.22 2.98 2.73
2.66 2.375 2.15 1.95 1.80 1.67 1.55
===========================================================================================================
$4,552,077 $4,119,057 $3,826,075 $3,532,786 $3,256,494 $3,310,467 $3,249,404
1,492,717 1,270,135 1,693,852 1,108,895 1,067,599 1,392,800 1,103,109
3.05 3.24 2.26 3.19 3.05 2.38 2.95
7,141,405 5,938,797 5,637,107 5,681,487 5,492,424 5,411,150 4,928,476
601,934 104,710 111,430 1,895,796 100,057 90,076 70,815
3,431,568 2,987,885 2,322,623 1,651,050 1,077,462 1,572,972 2,227,801
===========================================================================================================
73,064 71,209 69,907 70,904 70,021 73,353 75,405
780 870 931 1,021 1,110 1,187 1,314
314,201 315,726 314,066 311,644 309,396 311,975 317,678
43 51 57 64 71 77 87
===========================================================================================================
50,653 47,938 48,700 50,816 51,464 50,623 49,896
$1,575,615 $1,388,397 $1,398,721 $1,391,233 $1,284,208 $1,171,788 $1,045,691
367,899 300,810 312,750 256,458 245,834 215,109 164,306
- -----------------------------------------------------------------------------------------------------------
</TABLE>
29
<PAGE>
Consolidated Balance Sheets
<TABLE>
<CAPTION>
American Home Products Corporation and Subsidiaries
- ----------------------------------------------------------------------------------------------------------------------
(In thousands except share amounts)
December 31, 1995 1994
======================================================================================================================
<S> <C> <C>
Assets
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,802,397 $ 1,696,204
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217,672 247,970
Accounts receivable less allowances (1995 - $135,609 and 1994 - $99,468) . . . . . . . . 2,613,439 2,380,730
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,301,953 2,246,150
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,050,676 1,250,192
--------------------------
Total Current Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,986,137 7,821,246
Property, plant and equipment:
Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 174,534 178,693
Buildings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,705,772 2,422,113
Machinery and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,165,440 2,857,269
--------------------------
6,045,746 5,458,075
Less accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,085,411 1,646,145
--------------------------
3,960,335 3,811,930
Goodwill and other intangibles, net of accumulated amortization
(1995 - $971,057 and 1994 - $705,399) . . . . . . . . . . . . . . . . . . . . . . . . 8,649,985 9,181,129
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 766,466 860,507
--------------------------
$21,362,923 $21,674,812
--------------------------
======================================================================================================================
Liabilities
Loans payable to banks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 72,217 $ 113,284
Trade accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 980,114 1,042,468
Accrued expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,150,758 2,999,127
Accrued federal and foreign taxes on income . . . . . . . . . . . . . . . . . . . . . . . 353,159 463,207
--------------------------
Total Current Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,556,248 4,618,086
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7,808,757 9,973,240
Accrued postretirement benefit obligation . . . . . . . . . . . . . . . . . . . . . . . . 732,063 696,814
Other noncurrent liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2,415,620 1,809,153
Minority interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 307,237 323,418
======================================================================================================================
Shareholders' Equity
$2 convertible preferred stock, par value $2.50 per share; 5,000,000 shares authorized . 85 91
Common stock, par value $.33 1/3 per share; 600,000,000 shares authorized
(outstanding shares: 1995 - 313,700,000 and 1994 - 305,981,000) . . . . . . . . . . . 104,567 101,994
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,515,154 1,020,658
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3,980,665 3,226,100
Currency translation adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . (57,473) (94,742)
--------------------------
Total Shareholders' Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5,542,998 4,254,101
--------------------------
$21,362,923 $21,674,812
--------------------------
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated balance
sheets.
30
<PAGE>
Consolidated Statements of Income
<TABLE>
<CAPTION>
American Home Products Corporation and Subsidiaries
- -------------------------------------------------------------------------------------------------------
(In thousands except per share amounts)
Years Ended December 31, 1995 1994 1993
<S> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . . . . . . . . . . . $13,376,089 $8,966,214 $8,304,851
------------------------------------------
Cost of goods sold . . . . . . . . . . . . . . . . . . . . 4,534,320 2,795,581 2,723,902
Selling, general and administrative expenses . . . . . . . 4,974,253 3,175,684 2,922,579
Research and development expenses . . . . . . . . . . . . . 1,354,963 817,090 662,689
Interest expense (income), net . . . . . . . . . . . . . . 514,920 8,756 (42,503)
Other (income) expense, net . . . . . . . . . . . . . . . . (98,184) (34,354) 45,519
Gain on sale of oral health care business . . . . . . . . . (959,845) - -
Restructuring charges . . . . . . . . . . . . . . . . . . . 180,240 173,697 -
Special charges . . . . . . . . . . . . . . . . . . . . . . 436,724 - -
------------------------------------------
10,937,391 6,936,454 6,312,186
------------------------------------------
Income before federal and foreign taxes on income . . . . . 2,438,698 2,029,760 1,992,665
Provision for taxes on income:
Federal . . . . . . . . . . . . . . . . . . . . . . . . 401,573 249,961 287,846
Foreign . . . . . . . . . . . . . . . . . . . . . . . . 356,707 251,545 235,519
------------------------------------------
758,280 501,506 523,365
------------------------------------------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . $ 1,680,418 $1,528,254 $1,469,300
==========================================
Net Income per Share of Common Stock . . . . . . . . . . . $ 5.42 $ 4.97 $ 4.73
==========================================
- -------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
31
<PAGE>
Consolidated Statements of Retained Earnings and Additional Paid-in Capital
<TABLE>
<CAPTION>
American Home Products Corporation and Subsidiaries
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands except per share amounts)
Years Ended December 31, 1995 1994 1993
=================================================================================================================================
<S> <C> <C> <C>
Retained Earnings
Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,226,100 $2,884,244 $2,547,719
Add: Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,680,418 1,528,254 1,469,300
--------------------------------------
4,906,518 4,412,498 4,017,019
--------------------------------------
Less: Cash dividends declared:
Preferred stock (per share: 1995 - 1993, $2.00) . . . . . . . . . . . . . . . . 71 76 82
Common stock (per share: 1995 - 1993, $3.02, $2.94, $2.86) . . . . . . . . . . . 934,725 903,089 888,100
--------------------------------------
934,796 903,165 888,182
Cost of treasury stock acquired, less amounts charged to capital . . . . . . . . . 6,544 272,061 244,593
--------------------------------------
941,340 1,175,226 1,132,775
--------------------------------------
Change in unrealized gain/(loss) on marketable securities . . . . . . . . . . . . . . 15,487 (11,172) -
--------------------------------------
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $3,980,665 $3,226,100 $2,884,244
--------------------------------------
=================================================================================================================================
Additional Paid-in Capital
Balance, beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,020,658 $1,014,911 $953,155
Add: Excess over par value of common stock issued . . . . . . . . . . . . . . . . . . 495,323 41,448 84,013
Less: Cost of treasury stock acquired, less amounts
charged to retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . 827 35,701 22,257
--------------------------------------
Balance, end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $1,515,154 $1,020,658 $1,014,911
--------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
32
<PAGE>
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
American Home Products Corporation and Subsidiaries
- ---------------------------------------------------------------------------------------------------------------------------------
(In thousands)
Years Ended December 31, 1995 1994 1993
=================================================================================================================================
<S> <C> <C> <C>
Operating Activities
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,680,418 $ 1,528,254 $ 1,469,300
Adjustments to reconcile net income to
net cash provided from operating activities:
Gains on sales of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . (959,845) (51,612) -
Restructuring and special charges . . . . . . . . . . . . . . . . . . . . . . . . 616,964 173,697 -
Gains on sales of other assets . . . . . . . . . . . . . . . . . . . . . . . . . (23,703) (42,115) -
Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . 679,221 306,169 241,068
Deferred income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (145,070) (92,259) 153,314
Changes in working capital, net of businesses acquired or sold:
Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (268,445) 13,972 (135,038)
Inventories . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (111,147) (157,072) (8,341)
Other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (102,073) (161,674) (13,101)
Trade accounts payable and accrued expenses . . . . . . . . . . . . . . . . . . (85,331) 324,795 62,758
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (110,720) 121,807 27,333
Other items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 342,795 (16,040) (115,905)
---------------------------------------
Net cash provided from operating activities . . . . . . . . . . . . . . . . . . . . . $ 1,513,064 $ 1,947,922 $ 1,681,388
---------------------------------------
=================================================================================================================================
Investing Activities
Purchases of property, plant and equipment . . . . . . . . . . . . . . . . . . . . . $ (637,501) $ (472,510) $ (517,912)
Purchases of businesses for cash, net of cash acquired . . . . . . . . . . . . . . . (130,000) (9,356,230) (67,500)
Proceeds from sales of businesses . . . . . . . . . . . . . . . . . . . . . . . . . . 1,519,059 113,539 13,614
Proceeds from sales of other assets/(purchases of other assets), net . . . . . . . . 526,988 75,435 (16,038)
Proceeds from marketable securities, net . . . . . . . . . . . . . . . . . . . . . . 45,842 24,307 6,154
---------------------------------------
Net cash provided from/(used for) investing activities . . . . . . . . . . . . . . . $ 1,324,388 $(9,615,459) $ (581,682)
---------------------------------------
=================================================================================================================================
Financing Activities
Net proceeds from commercial paper and notes . . . . . . . . . . . . . . . . . . . . $ - $ 8,639,718 $ 251,646
Net repayments of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,205,550) - -
Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (934,796) (903,165) (888,182)
Purchases of treasury stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7,402) (313,807) (277,495)
Exercise of stock options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 469,763 37,805 69,255
Other items, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (58,502) (46,413) -
---------------------------------------
Net cash provided from/(used for) financing activities . . . . . . . . . . . . . . . (2,736,487) 7,414,138 (844,776)
---------------------------------------
Effects of exchange rates on cash balances . . . . . . . . . . . . . . . . . . . . . 5,228 12,769 (10,857)
---------------------------------------
Increase/(decrease) in cash and cash equivalents . . . . . . . . . . . . . . . . . . 106,193 (240,630) 244,073
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . . . . . 1,696,204 1,936,834 1,692,761
---------------------------------------
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . . . . $ 1,802,397 $ 1,696,204 $ 1,936,834
---------------------------------------
- ---------------------------------------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these consolidated statements.
33
<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). The financial statements have been prepared in accordance with
generally accepted accounting principles and necessarily include amounts based
on judgments and estimates made by management.
As of December 31, 1995, the Company owned approximately 63% of
Genetics Institute, Inc. (G.I.) and 53% of Immunex Corporation. The Company
holds an option to acquire the remaining shares of G.I. from the public
shareholders until December 31, 1996 at prices escalating by approximately
$1.84 per quarter, to $85 per share.
Description of Business: The Company is a U.S.-based multi-national
corporation engaged in the discovery, development, manufacture, distribution
and sale of a diversified line of products in three business segments: health
care products, agricultural products and food products. Health care products
include branded and generic ethical pharmaceuticals, biologicals, nutritionals,
consumer health care products, medical devices, and animal biologicals and
pharmaceuticals. Agricultural products include crop protection and pest control
products such as herbicides, insecticides, fungicides and plant growth
regulators. Food products include entrees, side dishes, spreadable fruit
products, snacks and other food products. The Company sells its diversified
line of products to wholesalers, pharmacies, hospitals, physicians, retailers
and other health care institutions located in various markets in 145 countries
throughout the world. The Company is not dependent on any single or major group
of customers for its sales.
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 has not had patent
protection for many years, does contribute significantly to sales and results
of operations. See "Competition" in Management's Discussion and Analysis of
Financial Condition and Results of Operations on page 49 for further details.
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 fair value, which approximates amortized
cost. The fair values are estimated based on quoted market prices.
Inventories are valued at the lower of cost or market. Inventories valued under
the last-in, first-out (LIFO) method amounted to $688,736,000 at December 31,
1995 and $716,354,000 at December 31, 1994. Current value exceeded LIFO value
by $66,367,000 and $70,206,000 at December 31, 1995 and 1994, respectively. The
remaining inventories are valued under the first-in, first-out (FIFO) or the
average cost method.
Inventories at December 31 consisted of:
<TABLE>
<CAPTION>
In thousands) 1995 1994
- ---------------------------------------------------------
<S> <C> <C>
Finished goods . . . . . . . $1,142,174 $1,158,045
Work in progress . . . . . . 567,437 525,269
Materials and supplies . . . 592,342 562,836
-------------------------
$2,301,953 $2,246,150
=========================
</TABLE>
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, the excess of cost over the fair value of net assets acquired, is
being amortized on the straight-line method over various periods not exceeding
40 years. The Company continually reviews goodwill to evaluate whether changes
have occurred that would suggest goodwill may be impaired based on the
estimated cash flows of the entity acquired over the remaining amortization
period. If this review indicates that the remaining estimated useful life of
goodwill requires revision or that the goodwill is not recoverable, the
carrying amount of the goodwill is reduced by the estimated shortfall of cash
flows on a discounted basis.
During 1995, Statement of Financial Accounting Standards (SFAS) No.
121 - "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of " was issued. SFAS No. 121 is effective for fiscal
years beginning after December 15, 1995 and is not expected to have a material
impact on the Company's results of operations.
Long-Term Debt is stated at face value, which approximates fair value. The fair
value of the Company's long-term debt is estimated based on market prices.
Interest Rate Swap and Foreign Currency Agreements: The Company enters into
interest rate swap and foreign currency agreements to manage specifically
identifiable risks. The Company does not speculate on interest or currency
exchange rates. The fair value of interest rate swap and foreign currency
agreements is based on market prices. The value represents the estimated amount
the Company would receive/pay to terminate the agreements taking into
consideration current interest rates or currency exchange rates.
34
<PAGE>
Currency Translation: The majority of the Company's international operations
are translated into U.S. dollars using current exchange rates with translation
adjustments accumulated in shareholders' equity.
Net Income per Share of Common Stock is based on the average number of common
shares outstanding during the year: 309,835,000 shares in 1995, 307,413,000
shares in 1994 and 310,668,000 shares in 1993. The dilutive effect of the
Company's common share equivalents related to outstanding stock options was not
considered in the calculations of net income per share of common stock since
the effect was less than 3%. As a result, the presentation of fully diluted
earnings per share is not shown.
Common Stock Split: There were 600,000,000 shares of common stock authorized at
December 31, 1995. In January 1996, the Company's Board of Directors approved a
stock split in the form of a 100% stock dividend, subject to shareholder
approval of an increase in the number of authorized shares of common stock from
600,000,000 to 1,200,000,000 at the Company's annual meeting on April 23, 1996.
The amount of outstanding shares and related per share amounts for the current
and prior periods presented in the accompanying consolidated financial
statements have not been adjusted retroactively to reflect the proposed common
stock split.
Reclassifications: Certain reclassifications have been made to the 1994 and
1993 consolidated financial statements to conform with the 1995 presentation.
2
Acquisitions and Divestitures
On November 21, 1994, the Company acquired substantially all the outstanding
shares of American Cyanamid Company (ACY) for approximately $9.6 billion,
including acquisition-related costs. The acquisition was accounted for under
the purchase method of accounting, and, accordingly, ACY's operating results
have been included with the Company's since December 1, 1994. Based upon a
final evaluation of the fair values allocated to the net assets of ACY, the
purchase price exceeded the net assets acquired by approximately $8.1 billion.
The amount differs from the initial estimate of $8.5 billion due to additional
adjustments in 1995 to the net assets of ACY.
The following unaudited pro forma results of operations reflect the
ACY acquisition as if it had occurred at the beginning of 1994 after including
the impact of adjustments for interest expense on ACY acquisition debt,
amortization of ACY goodwill and merger-related financing costs, and related
income tax benefits:
<TABLE>
<CAPTION>
(In thousands except per share amounts) 1994
- ---------------------------------------------------------
<S> <C>
Sales . . . . . . . . . . . . . . . . . . $13,500,376
Net income . . . . . . . . . . . . . . . $ 1,273,000
Net income per share of common stock . . $ 4.14
- ---------------------------------------------------------
</TABLE>
The unaudited pro forma results are not necessarily indicative of what
actually would have occurred if the ACY acquisition had been in effect for the
period presented. Further, the pro forma results are not intended to be a
projection of future results and do not reflect any integration costs, cost
savings resulting from synergistic opportunities or the results of operations
of other businesses acquired or disposed of in 1995 and 1994.
In addition to the ACY acquisition, the Company divested various
businesses and other assets as follows:
In January 1995, the Company sold its South American oral health care
business for approximately $1.0 billion, resulting in a pre-tax gain of
$959,845,000. The net proceeds from the sale were used primarily to reduce the
debt relating to the ACY acquisition. Net income and net income per share for
1995 include an after-tax gain of $623,870,000 or $2.01 per share related to
this transaction.
During 1995, the Company sold certain businesses and other assets
acquired in the ACY acquisition for total pre-tax proceeds aggregating
$956,004,000. Gains on the sales of these items reduced ACY acquisition-related
goodwill. The businesses sold in 1995 were not material to the Company's
consolidated financial position or results of operations.
The Company had other acquisitions and divestitures during the 1993 -
1995 period, the effects of which, individually and in the aggregate, were not
material to the Company's consolidated financial position or results of
operations.
3
Restructuring and Special Charges
In the 1995 third quarter, the Company recorded a restructuring charge of
$180,240,000 ($117,156,000 after-tax) to recognize the costs of implementing
the integration plan for the ACY acquisition related to American Home Products
Corporation operations. The integration plan eliminates excess production
capacity and facilities, reduces overhead and realigns the Company's resources
to achieve its strategic objectives. The restructuring charge excluded costs
associated with ACY personnel and facilities as these costs were included in
the overall evaluation of net assets acquired from ACY.
35
<PAGE>
In the 1994 second quarter, the Company recorded a restructuring
charge of $173,697,000 ($112,903,000 after-tax) to recognize the costs of
consolidating the manufacturing, distribution and quality control functions for
the U.S. pharmaceutical and consumer health care businesses.
Since the implementation of these restructuring programs, the combined
restructuring accruals have decreased by approximately $135,329,000 due to cash
expenditures related primarily to severance and related outplacement costs,
production and administrative facility closure costs, and noncash charges to
reduce the carrying value of certain assets related to manufacturing
operations. Since 1994, total workforce reductions related to all restructuring
and integration plans have resulted in the elimination of approximately 6,900
positions worldwide.
Special charges aggregating $436,724,000 ($308,317,000 after-tax) were
recorded in the 1995 fourth quarter. The special charges included provisions
for environmental liabilities related to ACY due to changes in estimates of
$228,224,000 and provisions for other special charges of $208,500,000,
including the shutdown and discontinuance of the U.S. infant nutritional
business and other contingent liability adjustments. The U.S. infant
nutritional business is not material to the Company's consolidated financial
position or results of operations.
4
Debt and Financing Arrangements
The Company's debt at December 31 consisted of:
<TABLE>
<CAPTION>
In thousands) 1995 1994
- ----------------------------------------------------------------
<S> <C> <C>
Commercial paper . . . . . . . . . . . $4,749,680 $ 8,796,507
Notes payable:
6.875% notes due 1997 . . . . . . . 250,000 250,000
7.70% notes due 2000 . . . . . . . 1,000,000 -
6.50% notes due 2002 . . . . . . . 250,000 250,000
7.90% notes due 2005 . . . . . . . 1,000,000 -
7.25% debentures due 2023 . . . . . 250,000 250,000
Pollution control and industrial
revenue bonds:
5.10% - 8.75% due 1996 - 2020 . . . 162,405 165,932
Sinking fund debentures:
7.375% - 8.375% due 2001 - 2006 . . - 95,129
Other debt:
1.53% - 9.61% due 1996 - 2009 . . . 218,889 278,956
------------------------
7,880,974 10,086,524
Less current portion . . . . . . . . . 72,217 113,284
------------------------
$7,808,757 $ 9,973,240
========================
</TABLE>
In connection with the acquisition of ACY, the Company and certain of
its subsidiaries issued short-term notes (commercial paper), of which $4.7
billion was outstanding at December 31, 1995. The weighted average interest
rate on the commercial paper outstanding at December 31, 1995 and 1994 was
5.69% and 6.06%, respectively. The commercial paper has original maturities not
exceeding 270 days and a weighted average remaining maturity of 44 days as of
December 31, 1995.
The commercial paper is supported by two credit agreements,
established in 1994 to finance the acquisition of ACY, among the Company and
certain of its subsidiaries and a syndicate of lenders. The credit facilities
were composed initially of a $3.0 billion, five-year credit facility and a $7.0
billion, 364-day credit facility. In 1995, the $10.0 billion of credit
facilities were amended to $7.0 billion of credit facilities consisting of a
$3.0 billion, five-year credit facility and a $4.0 billion, 364-day credit
facility which may be renewed annually with the consent of the majority lenders
for an additional 364-day period. Under the terms of the credit facility, if
the 364-day credit facility is utilized, the borrowing is extendible for
another 364-day period at the option of the Company.
The interest rate on borrowings under the credit facilities is based
on various rate options available to the Company. The proceeds of the credit
facilities may be used to support commercial paper and the Company's general
corporate and working capital purposes. The credit facilities contain a
financial covenant and various other customary covenants, representations,
warranties, conditions and default provisions. As of December 31, 1995, there
were no borrowings outstanding under the credit facilities. Commercial paper
outstanding at December 31, 1995 is classified as long-term since the Company
intends, and has the ability, to refinance these obligations through the
issuance of additional commercial paper, through the use of its credit
facilities or through the issuance of long-term debt.
In February 1995, the Company issued, under a $3.5 billion shelf
registration statement, $1.0 billion of 7.70% notes due February 2000 and $1.0
billion of 7.90% notes due February 2005. Net proceeds from these issuances
were used to repay commercial paper. The non-callable notes, which have
semiannual interest payments due on February 15 and August 15, are unsecured
and unsubordinated.
36
<PAGE>
The 6.875% and 6.50% non-callable notes have semiannual interest
payments due on April 15 and October 15. The 7.25% non-callable debentures have
semiannual interest payments due on March 1 and September 1. These notes
payable are unsecured and unsubordinated.
The aggregate maturities of debt during the next five years as of
December 31, 1995 are as follows:
<TABLE>
<CAPTION>
(In thousands)
- ---------------------------------------------------------
<S> <C>
1996 . . . . . . . . . . . . . . . . . . . $ 72,217
1997 . . . . . . . . . . . . . . . . . . . 293,135
1998 . . . . . . . . . . . . . . . . . . . 60,652
1999 . . . . . . . . . . . . . . . . . . . 20,697
2000 . . . . . . . . . . . . . . . . . . . 1,024,599
Thereafter . . . . . . . . . . . . . . . . 1,659,994
----------
3,131,294
Commercial paper . . . . . . . . . . . . . 4,749,680
----------
Total debt . . . . . . . . . . . . . . . . $7,880,974
==========
</TABLE>
Interest payments in connection with the Company's debt obligations
for the years ended December 31, 1995, 1994 and 1993 amounted to $655,111,000,
$114,831,000 and $55,215,000, respectively.
In October 1994, the Company entered into $4.75 billion notional
amount of simple, unleveraged interest rate swap agreements as a means of (1)
locking in the underlying U.S. treasury security rates to be paid in connection
with long-term debt planned to be issued during 1995 and (2) converting a
portion of the commercial paper issued in connection with the acquisition of
ACY from a floating rate obligation to a fixed rate obligation.
The swap agreements are contracts under which the Company pays a fixed
rate of interest and receives a floating rate of interest over the term of the
swap agreements without the exchange of the underlying notional amounts. During
1995, the weighted average interest rates paid and received on these agreements
were 7.8% and 6.0%, respectively. The swap agreements have maturities ranging
from 1996 to 2005.
In February 1995, the Company terminated $2.0 billion of interest rate
swap agreements in connection with the $2.0 billion issuance of five- and
10-year notes, as discussed above. The effect of terminating these swap
agreements was deferred and is being amortized to interest expense over the
five- and 10-year terms of the related notes. At December 31, 1995, the fair
value of the remaining $2.75 billion of interest rate swap agreements was a
payable of $216,906,000.
The Company enters into foreign exchange forward contracts as part of
its management of foreign currency exposures. The Company does not engage in
speculation on foreign currency. At December 31, 1995 and 1994, the Company had
notional amounts of $458,900,000 and $312,100,000, respectively, of foreign
exchange forward contracts outstanding. The notional amounts of foreign
exchange forward contracts approximate fair value.
The Company believes that the risk of loss associated with the
interest rate or foreign currency agreements, from either non-performance by
the counterparties or due to fluctuations in interest or foreign exchange
rates, is not material to results of operations.
5
Employee Benefit Plans
Pension Plans: The Company sponsors various retirement plans for most full-time
employees. Total pension expense for 1995, 1994 and 1993 was $139,329,000,
$90,395,000 and $69,741,000, respectively. The Company sponsors defined benefit
plans for most domestic and certain foreign locations. Pension plan benefits
for the defined benefit plans are based primarily on participants' compensation
and years of credited service. It has been the Company's policy to fund all
current and prior year service costs under defined benefit retirement plans,
and substantially all liabilities for accrued vested and nonvested benefits
have been fully funded. The Company also sponsors defined contribution plans
for most domestic and certain foreign locations. Contributions to the defined
contribution plans are based on a percentage of employees' compensation.
Pension expense recognized for these plans totaled $64,682,000 in 1995,
$43,029,000 in 1994 and $34,487,000 in 1993.
Prior to the ACY acquisition, ACY had various pension plans covering
substantially all employees in the United States, Canada and certain European
locations. Effective December 31, 1994, ACY's U.S. Employee Retirement Plan was
merged with the Company's U.S. pension plan.
Net periodic pension cost of defined benefit pension plans was as
follows (principally U.S. pension plans):
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost on benefits earned
during the year . . . . . . . . . . $ 55,283 $ 35,642 $ 31,520
Interest cost on projected
benefit obligation . . . . . . . . 180,859 69,598 59,485
Actual (return) loss on plan
assets . . . . . . . . . . . . . . (490,286) 62,498 (113,393)
Net amortization and deferral . . . . . 328,791 (120,372) 57,642
-------------------------------------
Net periodic pension cost . . . . . . . $ 74,647 $ 47,366 $ 35,254
=====================================
</TABLE>
37
<PAGE>
The actuarial present value of benefit obligations and funded status
of the Company's defined benefit pension plans, as of December 31, was as
follows (principally U.S. pension plans):
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Benefit obligations:
Vested benefits . . . . . . . . . . . . . . . . $2,126,995 $2,062,791
Nonvested benefits . . . . . . . . . . . . . . 85,840 89,103
------------------------
Accumulated benefit obligation . . . . . . . . . . 2,212,835 2,151,894
Effect on benefits from projected
compensation increases . . . . . . . . . . . . 244,943 276,139
------------------------
Projected benefit obligation . . . . . . . . . . . 2,457,778 2,428,033
Plan assets at fair value, primarily
listed stocks and bonds . . . . . . . . . . . . 2,281,772 2,053,595
------------------------
Projected benefit obligation in
excess of plan assets . . . . . . . . . . . . . 176,006 374,438
Unrecognized net gain (loss) . . . . . . . . . . . 171,404 (36,235)
Unrecognized net transition obligation . . . . . . (5,499) (3,787)
Unrecognized prior service cost . . . . . . . . . . 5,925 (18,991)
------------------------
Net pension liability . . . . . . . . . . . . . . . $ 347,836 $ 315,425
========================
</TABLE>
The change in the unrecognized net gain (loss) in 1995 is due
primarily to the deferral of the difference between the expected return on plan
assets and the actual return on plan assets, offset partially by an
unrecognized loss due to the decrease in the discount rate.
Assumptions used in developing the projected benefit obligation as of
December 31 were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate . . . . . . . . . . . . . 7.5% 8.5% 7.5%
Rate of increase in compensation . . . 4.0% 5.0% 4.5%
Rate of return on plan assets . . . . . 9.0% 8.5-9.0% 8.5%
- ------------------------------------------------------------------------------
</TABLE>
Postretirement Benefits: The Company provides postretirement health care and
life insurance benefits for retired employees of most domestic locations and
Canada. Most full-time employees become eligible for these benefits after
attaining specified age and service requirements.
Prior to the ACY acquisition, ACY had various postretirement benefit
plans covering substantially all employees in the United States and Canada.
Effective December 31, 1995, ACY's U.S. postretirement plan was combined with
the Company's U.S. postretirement plan.
Net periodic postretirement health care cost includes the following
components:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Service cost on benefits
earned during the year . . . . . . $15,057 $13,447 $9,759
Interest cost on accumulated
postretirement benefit
obligation (APBO) . . . . . . . . . 61,693 31,612 26,765
Net amortization . . . . . . . . . . . 290 6,016 1,230
-----------------------------------
Net periodic postretirement
health care cost . . . . . . . . . $77,040 $51,075 $37,754
===================================
</TABLE>
The APBO as of December 31 was as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Retirees . . . . . . . . . . . . . . . . . . . . . $540,404 $538,617
Fully eligible active
participants . . . . . . . . . . . . . . . . . 118,505 147,852
Other active participants . . . . . . . . . . . . . 164,500 144,156
----------------------
APBO . . . . . . . . . . . . . . . . . . . . . . . 823,409 830,625
Unrecognized net loss . . . . . . . . . . . . . . . (33,300) (78,811)
Unrecognized prior service cost . . . . . . . . . . (3,046) -
----------------------
Accrued postretirement
benefit obligation . . . . . . . . . . . . . . 787,063 751,814
Less current portion . . . . . . . . . . . . . . . 55,000 55,000
----------------------
$732,063 $696,814
======================
</TABLE>
Assumptions used in developing the APBO were as follows:
<TABLE>
<CAPTION>
1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Discount rate . . . . . . . . . . . . . 7.5% 8.5% 7.5%
Increase in per capita cost of
health care benefits
that gradually decreases
over 10 years and is held
constant thereafter . . . . . . . . 10%-6% 10.5%-6% 11%-6%
- ------------------------------------------------------------------------------
</TABLE>
A one percentage point increase in the assumed health care cost trend
rates would increase the APBO as of December 31, 1995 by approximately
$101,598,000, and the total of the service and interest cost components of the
net periodic postretirement health care cost would increase by approximately
$9,932,000.
38
<PAGE>
6
Other Noncurrent Liabilities
Other noncurrent liabilities include reserves for contingencies relating to
income taxes, environmental matters, product liability and other litigation, as
well as Management Incentive Plan and other employee benefit liabilities. Other
noncurrent liabilities also include reserves for restructurings, integration
and special charges as discussed in Note 3.
The Company has responsibility for environmental, safety and cleanup
obligations under various local, state and federal laws, including the
Comprehensive Environmental Response, Compensation and Liability Act, commonly
known as Superfund. As of December 31, 1995, the Company was a party to, or
otherwise involved in, legal proceedings directed at the cleanup of 70
Superfund sites. Thirty-five of these sites are the result of acquiring ACY.
These sites exclude sites for which full liability was assumed by Cytec
Industries Inc. (Cytec), which was spun off by ACY in 1993, but include certain
sites for which there is shared responsibility between ACY and Cytec.
In many cases, future environmental-related expenditures cannot be
quantified with a reasonable degree of accuracy. It is the Company's policy to
accrue environmental cleanup costs if it is probable that a liability has been
incurred and an amount is reasonably estimable. As investigations and cleanups
proceed, these liabilities are reviewed and adjusted as additional information
becomes available. The aggregate environmental-related accruals were
$467,800,000 and $248,772,000 at December 31, 1995 and 1994, respectively. As
discussed in Note 3, during 1995, a provision of $228,224,000 was recorded for
environmental liabilities related to ACY due to changes in estimates.
Environmental-related accruals have been recorded without giving effect to any
possible future insurance proceeds or the timing of the payments. See Note 11
for a discussion of contingencies.
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 shares of common stock, of which 8,900,968 have
been awarded through December 31, 1995. Deferred contingent common stock awards
plus accrued dividends totaling 421,126 shares were outstanding at December 31,
1995. Awards for 1995, which included ACY participants, amounted to
$52,909,000, which included deferred contingent common stock of $10,197,000
(106,271 shares). Total participants in the plan increased to 2,360 employees
in 1995 versus 1,429 in the prior year due primarily to the addition of ACY
participants. Awards for 1994 were $35,842,000, which included deferred
contingent common stock of $6,513,000 (102,398 shares). Awards for 1993
amounted to $31,266,000, which included deferred contingent common stock of
$7,120,000 (101,348 shares).
7
Capital Stock
There were 600,000,000 shares of common stock and 5,000,000 shares of preferred
stock authorized at December 31, 1995. Of the authorized preferred shares,
there is a series of shares (34,142 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. See Note 1 for a
discussion of the proposed stock split approved by the Company's Board of
Directors on January 25, 1996.
Changes in outstanding common shares during 1995, 1994 and 1993 are
summarized as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Balance, beginning of year . . . . . . 305,981 310,326 313,048
Issued for stock options and
Management Incentive Plan . . . . . 7,792 958 1,754
Conversions of preferred stock
(2,371, 3,624 and 3,011
shares in 1995, 1994
and 1993, respectively) . . . . . . 21 33 27
Purchase of shares for treasury . . . . (94) (5,336) (4,503)
-----------------------------------
Balance, end of year . . . . . . . . . 313,700 305,981 310,326
===================================
</TABLE>
39
<PAGE>
8
Stock Options
The Company has three Stock Option Plans - 1985, 1980 and 1978 - and two Stock
Incentive Plans - 1993 and 1990. Under the 1993 and 1990 plans, a maximum of
14,000,000 and 12,000,000 options to purchase 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. At December 31, 1995, 1,566,560 shares were available for future grants
under the 1993 and 1990 plans. In January 1996, the Board of Directors adopted,
subject to shareholder approval at the Company's annual meeting on April 23,
1996, the 1996 Stock Incentive Plan under which 15,000,000 shares are available
for future grants.
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. During 1995, SARs were granted to executive officers in tandem with
outstanding and newly granted stock options at the exercise price of the
underlying option. SARs in tandem with options covering 2,113,635 shares were
outstanding and exercisable at December 31, 1995. During 1995, a pre-tax charge
of $62,716,000 was incurred related to SARs due to an increase in the market
price of the Company's stock and the increased number of outstanding SARs.
The 1996, 1993 and 1990 plans, 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. Restricted stock performance awards
representing 26,100 and 54,400 units were granted in 1995 and 1994,
respectively, under the plans to certain key executives. These units will be
converted to shares of restricted stock based on the achievement of certain
performance criteria over a three-year period of restriction.
Transactions involving the plans are summarized as follows:
<TABLE>
<CAPTION>
Option Shares 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Outstanding January 1 . . . . . . . . . . . . . . . 21,468,032 21,340,924
Granted . . . . . . . . . . . . . . . . . . . . . . 10,419,750 1,984,050
Canceled . . . . . . . . . . . . . . . . . . . . . (408,540) (971,380)
Exercised (1995 - $31.75 to
$79.31 per share) . . . . . . . . . . . . . . . (7,735,850) (885,562)
------------------------
Outstanding December 31
(1995 - $35.59 to
$91.31 per share) . . . . . . . . . . . . . . . 23,743,392 21,468,032
========================
Exercisable December 31 . . . . . . . . . . . . . . 13,601,742 19,379,282
========================
</TABLE>
In April 1994, the shareholders approved the Restricted Stock Plan for
Non-Employee Directors. Under the plan, a maximum of 25,000 restricted shares
may be granted to non-employee directors at not less than 100% of the fair
market value at the date of grant. The restricted shares will not be delivered
until the end of the restricted period which does not exceed five years.
During 1995, SFAS No. 123 - "Accounting for Stock-Based Compensation"
was issued. SFAS No. 123 is effective for fiscal years beginning after December
15, 1995 and will have no impact on the Company's results of operations.
9
Interest Expense (Income), Net
Interest expense (income), net in the Consolidated Statements of Income
includes interest income of $150,101,000, $106,430,000 and $89,677,000 for the
years ended December 31, 1995, 1994 and 1993, respectively.
40
<PAGE>
10
Income Taxes
The provision for income taxes consisted of:
<TABLE>
<CAPTION>
(In thousands) 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Current:
Domestic . . . . . . . . . . . . . $545,434 $351,581 $150,916
Foreign . . . . . . . . . . . . . . 357,916 242,184 219,135
------------------------------------
903,350 593,765 370,051
Deferred:
Domestic . . . . . . . . . . . . . (143,861) (101,620) 136,930
Foreign . . . . . . . . . . . . . . (1,209) 9,361 16,384
------------------------------------
(145,070) (92,259) 153,314
------------------------------------
$758,280 $501,506 $523,365
====================================
</TABLE>
Deferred tax assets (liabilities), inclusive of a valuation allowance
for deferred tax assets, were reflected in the consolidated balance sheets at
December 31 as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Net current deferred tax assets . . . . . . . . . . $ 638,291 $629,205
Net noncurrent deferred tax assets . . . . . . . . 374,839 345,730
------------------------
Net deferred tax assets . . . . . . . . . . . . . . $1,013,130 $974,935
========================
</TABLE>
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 assets result principally from the recording of
certain accruals and reserves which currently are not deductible for tax
purposes. Deferred tax liabilities 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.
The components of the Company's deferred tax assets and liabilities at
December 31 are as follows:
<TABLE>
<CAPTION>
(In thousands) 1995 1994
- ------------------------------------------------------------------------------
<S> <C> <C>
Deferred tax assets:
Product and environmental liabilities
and other operating accruals . . . . . . . . $ 675,180 $ 630,272
Postretirement and other
employee benefits . . . . . . . . . . . . . . 478,177 422,458
Net operating loss and other tax
credit carryforwards . . . . . . . . . . . . 125,950 167,464
Restructuring and
reorganization accruals . . . . . . . . . . . 346,927 306,804
Inventory reserves . . . . . . . . . . . . . . . 131,657 118,817
Investments and advances . . . . . . . . . . . . 54,402 163,794
Other . . . . . . . . . . . . . . . . . . . . . . 67,757 133,592
------------------------
Total deferred tax assets . . . . . . . . . . . . . $1,880,050 $1,943,201
------------------------
Deferred tax liabilities:
Investments . . . . . . . . . . . . . . . . . . $ (228,394) $ (235,866)
Depreciation . . . . . . . . . . . . . . . . . (315,124) (207,637)
Pension benefits . . . . . . . . . . . . . . . (65,218) (79,999)
Other . . . . . . . . . . . . . . . . . . . . . (51,540) (193,788)
------------------------
Total deferred tax liabilities . . . . . . . . . . $ (660,276) $ (717,290)
------------------------
Deferred tax asset
valuation allowance . . . . . . . . . . . . . . (206,644) (250,976)
------------------------
Net deferred tax assets . . . . . . . . . . . . . . $1,013,130 $ 974,935
========================
</TABLE>
Valuation allowances have been established for certain deferred tax
assets related to net operating loss carryforwards, reorganizations, product
and environmental liabilities, and portions of other deferred tax assets as the
Company determined that it was more likely than not that these benefits will
not be realized. During 1995, the valuation allowance decreased by $44,332,000
due primarily to the reversal of allowances of $89,936,000 on investments which
were sold during the year. These decreases were offset partially by additional
allowances of $45,604,000 for deferred tax assets related to net operating loss
carryforwards and environmental liabilities. During 1994, the valuation
allowance increased by $159,613,000 as reductions in these reserves of
$68,929,000 were more than offset by increases of $228,542,000 as a result of
the ACY acquisition. During 1993, the valuation allowance was reduced by
$9,961,000.
A reconciliation between the Company's effective tax rate and the U.S.
statutory rate is as follows:
41
<PAGE>
<TABLE>
<CAPTION>
Tax Rate 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory rate . . . . . . . . . . 35.0% 35.0% 35.0%
Effect of Puerto Rico and Ireland
manufacturing operations . . . . . (6.4) (5.5) (6.1)
Research credits . . . . . . . . . . . (.6) (1.2) (1.3)
ACY goodwill amortization . . . . . . 3.3 - -
Other, net . . . . . . . . . . . . . . (.2) (3.6) (1.3)
--------------------------------
Effective tax rate . . . . . . . . . . 31.1% 24.7% 26.3%
================================
</TABLE>
The higher effective tax rate in 1995 was due primarily to
nondeductible goodwill amortization related to the ACY acquisition and the
reversal of certain tax reserves that no longer were deemed necessary in 1994.
Total income tax payments for the years ended December 31, 1995, 1994
and 1993 amounted to $992,393,000, $536,854,000 and $335,102,000, respectively.
11
Contingencies
The Company is involved in various legal proceedings, including product
liability and environmental matters of a nature considered normal to its
business (see Note 6 for a discussion of environmental matters). It is the
Company's policy to accrue for amounts related to these legal matters if it is
probable that a liability has been incurred and an amount is reasonably
estimable.
The Company has entered into an agreement to settle the class action
case in the Brand Name Prescription Drug Antitrust Litigation relating to
claims made by certain retail pharmacies against the Company. The settlement
agreement is subject to court approval. The Company continues to be a defendant
in the remaining cases in this litigation. The Company believes it has complied
with the antitrust laws and other applicable laws and has settled this matter
in order to avoid the costs and risks of litigation. The proposed settlement
is not an admission of any violation of law. The Company had accrued for the
costs of this proposed settlement at December 31, 1995.
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 legal
proceedings cannot be predicted with certainty, the ultimate liability of the
Company in connection with these proceedings will not have a material adverse
effect on the Company's financial position but could be material to the results
of operations in any one accounting period.
12
Company Data by Industry Segment
<TABLE>
<CAPTION>
(In millions)
Years Ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales to Customers
- ------------------------------------------------------------------------------
Health Care Products:
Pharmaceuticals . . . . . . . . . . $ 7,521.2 $ 5,180.8 $ 4,774.6
Consumer Health Care . . . . . . . 1,994.8 1,821.2 1,743.0
Medical Devices . . . . . . . . . . 1,131.4 883.6 851.5
-------------------------------------
10,647.4 7,885.6 7,369.1
Agricultural Products . . . . . . . . . 1,909.8 83.3 -
Food Products . . . . . . . . . . . . . 818.9 997.3 935.8
-------------------------------------
Consolidated Total . . . . . . . . . . $13,376.1 $ 8,966.2 $ 8,304.9
=====================================
Income before Taxes
- ------------------------------------------------------------------------------
Health Care Products(2)(4)(5)(6)(7) . . $ 2,873.4 $ 1,828.9 $ 1,836.7
Agricultural Products(2) . . . . . . . 284.0 8.7 -
Food Products . . . . . . . . . . . . . 59.1 155.6 152.4
Corporate(3)(4)(7) . . . . . . . . . . (777.8) 36.6 3.6
-------------------------------------
Consolidated Total . . . . . . . . . . $ 2,438.7 $ 2,029.8 $ 1,992.7
=====================================
Total Assets at December 31(1)
- ------------------------------------------------------------------------------
Health Care Products . . . . . . . . . $12,584.8 $13,026.2 $ 5,165.3
Agricultural Products . . . . . . . . . 4,671.2 4,616.1 -
Food Products . . . . . . . . . . . . . 485.9 558.8 504.4
Corporate . . . . . . . . . . . . . . . 3,621.0 3,473.7 2,017.7
-------------------------------------
Consolidated Total . . . . . . . . . . $21,362.9 $21,674.8 $ 7,687.4
=====================================
Depreciation and Amortization Expense
- ------------------------------------------------------------------------------
Health Care Products(2) . . . . . . . . $ 488.2 $ 258.7 $ 214.4
Agricultural Products(2) . . . . . . . 141.0 14.7 -
Food Products . . . . . . . . . . . . . 23.8 19.1 16.9
Corporate . . . . . . . . . . . . . . . 26.2 13.7 9.8
-------------------------------------
Consolidated Total . . . . . . . . . . $ 679.2 $ 306.2 $ 241.1
=====================================
Capital Expenditures
- ------------------------------------------------------------------------------
Health Care Products . . . . . . . . . $ 521.4 $ 424.4 $ 416.3
Agricultural Products . . . . . . . . . 52.1 6.3 -
Food Products . . . . . . . . . . . . . 26.4 35.5 24.9
Corporate . . . . . . . . . . . . . . 37.6 6.3 76.7
-------------------------------------
Consolidated Total . . . . . . . . . . $ 637.5 $ 472.5 $ 517.9
=====================================
</TABLE>
42
<PAGE>
Company Data by Geographic Segment
<TABLE>
<CAPTION>
(In millions)
Years Ended December 31, 1995 1994 1993
- ------------------------------------------------------------------------------
<S> <C> <C> <C>
Net Sales to Customers
- ------------------------------------------------------------------------------
United States . . . . . . . . . . . . . $ 7,929.1 $ 5,908.0 $ 5,695.8
Europe and Africa . . . . . . . . . . . 3,111.2 1,422.7 1,196.6
Canada and Latin America . . . . . . . 1,292.1 1,022.4 897.7
Asia and Australia . . . . . . . . . . 1,043.7 613.1 514.8
-------------------------------------
Consolidated Total . . . . . . . . . . $13,376.1 $ 8,966.2 $ 8,304.9
=====================================
Income before Taxes
- ------------------------------------------------------------------------------
United States(2)(3)(4)(5)(6)(7) . . . . $ 736.9 $ 1,353.0 $ 1,465.7
Europe and Africa(2)(5) . . . . . . . . 535.6 295.7 224.0
Canada and Latin America(2)(4)(5) . . . 1,031.3 269.1 214.9
Asia and Australia(2)(5) . . . . . . . 134.9 112.0 88.1
-------------------------------------
Consolidated Total . . . . . . . . . . $ 2,438.7 $ 2,029.8 $ 1,992.7
=====================================
Total Assets at December 31(1)
- ------------------------------------------------------------------------------
United States . . . . . . . . . . . . . $14,746.0 $14,794.5 $ 5,736.6
Europe and Africa . . . . . . . . . . . 3,894.2 4,098.6 1,075.7
Canada and Latin America . . . . . . . 1,547.4 1,517.5 467.5
Asia and Australia . . . . . . . . . . 1,175.3 1,264.2 407.6
-------------------------------------
Consolidated Total . . . . . . . . . . $21,362.9 $21,674.8 $ 7,687.4
=====================================
</TABLE>
(1) 1995 includes net goodwill of approximately $7,841.5 related to the
purchase of ACY identified as follows: Health Care Products - $4,509.6,
Agricultural Products - $3,331.9, United States - $5,042.1, Europe and
Africa - $1,717.3, Canada and Latin America - $588.1, Asia and Australia -
$494.0 (see Note 2).
1994 includes net goodwill of approximately $8,495.0 related to the
purchase of ACY identified as follows: Health Care Products - $4,907.8,
Agricultural Products - $3,442.2, Corporate - $145.0, United States -
$5,461.4, Europe and Africa - $1,906.1, Canada and Latin America - $614.8,
Asia and Australia - $512.7 (see Note 2).
(2) 1995 includes ACY goodwill amortization of $258.9 identified as follows:
Health Care Products - $155.8, Agricultural Products - $103.1, United
States - $156.7, Europe and Africa - $61.2, Canada and Latin America -
$23.3, Asia and Australia - $17.7 (see Note 2).
1994 includes ACY goodwill amortization of $19.1 identified as
follows: Health Care Products - $11.0, Agricultural Products - $8.1, United
States - $12.3, Europe and Africa - $4.2, Canada and Latin America - $1.4,
Asia and Australia - $1.2 (see Note 2).
(3) 1995 includes ACY acquisition-related interest expense of $559.1 identified
as follows:
Corporate - $559.1 and United States - $559.1 (see Note 4).
1994 includes ACY acquisition-related interest expense of $55.6
identified as follows: Corporate - $55.6 and United States $55.6 (see
Note 4).
(4) 1995 includes the gain on sale of South American oral health care business
of $959.8 identified as follows: Health Care Products - $814.9, Corporate
- $144.9, United States - $144.9, Canada and Latin America - $814.9 (see
Note 2).
(5) 1995 includes the restructuring charge of $180.2 identified as follows:
Health Care Products - $180.2, United States - $66.2, Europe and Africa -
$100.3, Canada and Latin America - $9.1, Asia and Australia - $4.6 (see
Note 3).
(6) 1994 includes the restructuring charge of $173.7 identified as follows:
Health Care Products - $173.7 and United States - $173.7 (see Note 3).
(7) 1994 includes gains on sales of assets of $75.8 identified as follows:
Health Care Products - $32.8, Corporate - $43.0, United States - $75.8.
43
<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, 1995 and 1994, 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, 1995. 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, 1995 and 1994, and the
results of their operations and cash flows for each of the three years in the
period ended December 31, 1995 in conformity with generally accepted accounting
principles.
Arthur Andersen LLP
New York, N.Y.
January 24, 1996
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, composed 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 Senior Executive Vice
Chief Executive Officer President and Chief
Financial Officer
44
<PAGE>
Quarterly Financial Data
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
(In thousands except per share amounts) 1995 1995 1995 1995
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . $3,491,029 $3,299,300 $3,257,789 $3,327,971
Gross Profit . . . . . . . . . . . . . 2,246,001 2,092,552 2,187,197 2,316,019
Net Income . . . . . . . . . . . . . . 1,022,620(1) 299,608 276,526(2) 81,664(3)
Net Income per Common Share . . . . . . $ 3.33(1) $ 0.97 $ 0.89(2) $ 0.26(3)
- --------------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------
First Quarter Second Quarter Third Quarter Fourth Quarter
1994 1994 1994 1994
- --------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net Sales . . . . . . . . . . . . . . . $2,144,045 $1,977,853 $2,258,525 $2,585,791
Gross Profit . . . . . . . . . . . . . 1,486,580 1,349,958 1,523,522 1,810,573
Net Income . . . . . . . . . . . . . . 415,800 299,981 412,985 399,488
Net Income per Common Share . . . . . . $ 1.34 $ 0.98 $ 1.35 $ 1.30
- --------------------------------------------------------------------------------------------------------
</TABLE>
(1) First quarter 1995 includes an after-tax gain of $623,870 ($2.03 per share)
on the sale of the South American oral health care business.
(2) Third quarter 1995 includes an after-tax restructuring charge of $117,156
($.38 per share) to record the costs of implementing the integration plan
for the ACY acquisition related to American Home Products Corporation
operations.
(3) Fourth quarter 1995 includes after-tax special charges of $308,317 ($.99
per share) to record provisions for ACY environmental liabilities due to
changes in estimates and provisions for other special charges, including
the shutdown and discontinuance of the U.S. infant nutritional business.
Market Prices of Common Stock and Dividends
<TABLE>
<CAPTION>
1995 Range of Prices* 1994 Range of Prices*
- ---------------------------------------------------------------------- ----------------------------
Dividends Dividends
High Low per Share High Low per Share
- -----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First Quarter . . . . . . . . . . . . . $76.38 $61.75 $0.75 $65.75 $57.25 $0.73
Second Quarter . . . . . . . . . . . . 79.75 71.50 0.75 60.50 55.63 0.73
Third Quarter . . . . . . . . . . . . . 87.50 73.63 0.75 60.50 55.38 0.73
Fourth Quarter . . . . . . . . . . . . 99.88 83.50 0.77 67.25 58.00 0.75
- -----------------------------------------------------------------------------------------------------
</TABLE>
* Prices are those of the New York Stock Exchange - Composite Transactions.
45
<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 on pages 30
to 43.
Results of Operations
Effective December 1, 1994, the Company consolidated the results of operations
of American Cyanamid Company (ACY). As a result, significant variations exist
when the results for the year ended 1995 are compared with those for the year
ended 1994 since the Company's 1995 operating results reflect ACY's operating
results and related acquisition interest expense and goodwill amortization for
the full year. Accordingly, management's discussion and analysis of results of
operations for the year ended 1995 has been presented, for the most part, on a
pro forma basis, including the sales of ACY and other acquired businesses as of
January 1, 1994 and excluding the sales of businesses disposed of in 1995 and
1994. The 1994 pro forma results of operations include the impact of
adjustments for interest expense on ACY acquisition debt, amortization of ACY
goodwill and merger-related financing costs, and related income tax benefits.
The 1994 pro forma results of operations are not necessarily indicative of what
actually would have occurred if the ACY acquisition had taken place on January
1, 1994 and do not reflect any integration costs, cost savings from
merger-related synergies or the results of operations of other businesses
acquired or disposed of in 1995 and 1994.
Management's discussion and analysis of results of operations for the
year ended 1994 has been presented on an as-reported basis excluding ACY's
operating results for the month of December 1994 and sales of businesses
disposed of in 1994.
Net sales increased 49% to $13.4 billion in 1995 on an as-reported
basis. On a pro forma basis, consolidated net sales increased 4% for the year
ended 1995. The results reflect higher sales of international health care and
worldwide agricultural products, offset partially by lower sales of domestic
food and health care products. The increase in 1995 sales was composed of
volume increases of 2%, price increases of 1% and favorable foreign exchange of
1%. Worldwide sales of health care products increased 4%, agricultural products
increased 18% and food products decreased 18% in 1995.
Net sales increased 8% to $9.0 billion in 1994 on an as-reported
basis. Excluding the impact of ACY, net sales for the year ended 1994 increased
4%. The increase of 4% was composed of unit volume growth of 2% and price
increases of 2%. Foreign exchange had less than a 1% effect on the Company's
consolidated worldwide sales for 1994. Worldwide sales of health care products
increased 4%, and food products increased 7% in 1994.
The following table sets forth net sales results by industry segment
and geographic segment together with percentage changes of the "As-Reported"
and "Pro Forma" net sales:
<TABLE>
<CAPTION>
As-Reported Pro Forma
($ in Millions) Year Ended December 31, % Increase % Increase
Net Sales to Customers 1995 1994 (Decrease) (Decrease)
- -------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Industry Segment
Health Care Products:
Pharmaceuticals . . . . . . . . . . . . . . $ 7,521.2 $5,180.8 45% 4%
Consumer Health Care . . . . . . . . . . . 1,994.8 1,821.2 10% 4%
Medical Devices . . . . . . . . . . . . . . 1,131.4 883.6 28% 3%
-----------------------------
Total Health Care Products . . . . . . . . . 10,647.4 7,885.6 35% 4%
Agricultural Products . . . . . . . . . . . . 1,909.8 83.3 - 18%
Food Products . . . . . . . . . . . . . . . . 818.9 997.3 (18)% (18)%
-----------------------------
Consolidated Net Sales . . . . . . . . . . . $13,376.1 $8,966.2 49% 4%
=============================
Geographic Segment
United States . . . . . . . . . . . . . . . . $ 7,929.1 $5,908.0 34% (2)%
Europe and Africa . . . . . . . . . . . . . . 3,111.2 1,422.7 119% 20%
Canada and Latin America . . . . . . . . . . 1,292.1 1,022.4 26% 3%
Asia and Australia . . . . . . . . . . . . . 1,043.7 613.1 70% 15%
-----------------------------
Consolidated Net Sales . . . . . . . . . . . $13,376.1 $8,966.2 49% 4%
=============================
</TABLE>
46
<PAGE>
Worldwide pharmaceutical sales increased 4% for the year ended 1995.
U.S. pharmaceutical sales decreased 1% for the year ended 1995 as higher sales
of Effexor, Oruvail, Ziac, Cordarone and Premarin products were offset by lower
sales of Ativan, oral contraceptives, infant nutritionals, veterinary products,
and Lederle antibiotic and generic products. U.S. pharmaceutical sales reflect
the impact of a change in timing of trade incentive programs on Wyeth-Ayerst
products in the 1995 second quarter, which affected all major Wyeth-Ayerst
product categories. The decrease in U.S. pharmaceutical sales was composed of
unit volume decreases of 1%.
International pharmaceutical sales increased 12% in 1995 due primarily
to higher sales of oral contraceptives, Tazocin, Premarin, infant nutritionals,
Ativan, Effexor and veterinary products. The increase in international sales
was composed of unit volume increases of 7%, price increases of 2% and
favorable foreign exchange of 3%.
Worldwide pharmaceutical sales increased 5% in 1994. U.S.
pharmaceutical sales increased 3% in 1994 due to unit volume growth. The 1994
sales growth was attributable to increased sales of Premarin, as well as
cardiovascular, anti-inflammatory and oral contraceptive products. Effexor,
which was introduced in the United States in early 1994, also contributed to
these sales increases. Offsetting these increases, in part, were lower sales
of Norplant, Ativan and infant nutritional products. The decline in Norplant
sales was attributable to patient and health care provider concerns over use of
the product, largely generated by adverse publicity associated with product
liability lawsuits. The Company intends to vigorously defend the product and
the lawsuits.
International pharmaceutical sales increased 9% in 1994 due to unit
volume growth of 4% and price increases of 5%. The 1994 sales increases were
driven by increased growth of infant nutritional and female health care
products.
Worldwide consumer health care sales increased 4% in 1995. U.S.
consumer health care sales in 1995 were comparable to 1994 levels as
introductory sales of Orudis KT and higher sales of Centrum and other vitamins
were offset by lower sales of Advil and Anacin. The decrease in Advil and
Anacin sales was due to a combination of increased competition and the timing
and extent of trade incentive programs and promotional efforts. U.S. consumer
health care sales in 1995 consisted of volume decreases of 1%, offset by price
increases of 1%.
International consumer health care sales increased 13% in 1995 due
principally to higher sales of vitamins, analgesics and cough/cold products.
Sales gains in the international consumer health care market were led by higher
sales of Centrum, Advil and Anacin. Higher sales of Robitussin and Dimetapp
also contributed to the increase. The increase in international sales was
composed of unit volume increases of 5% and price increases of 8%.
Worldwide consumer health care sales increased 3% in 1994. U.S.
consumer health care sales decreased 1% in 1994. U.S. consumer health care
price increases in 1994 of 4% were more than offset by a 5% decline in unit
volumes, particularly in the cough/cold/allergy, family planning and asthma
relief product lines. These decreases were offset partially by increased sales
of Advil and lip care products. The cough/cold/allergy product category,
particularly the Robitussin, Dimetapp and Dristan product lines, was negatively
impacted by the mild cold and flu season. Sales decreased in the family
planning category in 1994 as a result of lower sales of Today Sponge.
International consumer health care sales in 1994 increased 9%. This
increase is attributable to unit volume growth of 3%, with price increases of
7% being offset slightly by unfavorable foreign exchange of 1%. The Company was
able to increase prices in line with inflation and related currency
devaluations in several Latin American markets in 1994, particularly Brazil,
which contributed to the sales gains. The 1994 increase was due primarily to
increased sales of oral health care products and cough/cold products in certain
Latin American countries. In January 1995, the Company sold its oral health
care business in South America for approximately $1.0 billion. This business
had sales of approximately $270 million in 1994. Excluding these sales,
international consumer health care sales would have increased 6% in 1994.
Worldwide medical devices sales increased 3% for the year ended 1995
due principally to higher international sales of the Sherwood product line and
favorable foreign exchange. Sales gains in the international markets were led
by higher sales of needles and syringes, tubes and catheters, tympanic
thermometry products, probe covers and enteral feeding devices. The increase in
sales was composed of unit volume increases of 1%, with favorable foreign
exchange of 3% being partially offset by price decreases of 1%.
Worldwide sales of medical devices increased 6% in 1994 due to
increases in sales of needles and syringes, tympanic thermometry products and
surgical devices. The 1994 increase was composed of unit volume increases of 5%
and favorable foreign exchange of 1%. Competitive conditions in the hospital
supply market continued to place significant pressure on prices in both 1995
and 1994.
Worldwide agricultural products sales increased 18% in 1995. U.S. sales
increased 8% in 1995 as unusually wet spring conditions resulted in the
following: a shift in sales from pre-emergent herbicides to post-emergent
herbicides; a shift in acreage from corn to soybeans; and an extended planting
season into mid-July. These factors resulted in higher sales of Pursuit
47
<PAGE>
and Prowl herbicides and other crop protection products which were offset
partially by lower sales of Squadron and Scepter herbicides and Counter
insecticide. The increase in U.S. sales was composed of unit volume increases
of 7% and price increases of 1%. Due to the seasonality of the U.S.
agricultural products business, a majority of U.S. agricultural products sales
and results of operations are realized in the first half of the year.
International agricultural products sales increased 28% for the year
ended 1995 due primarily to higher sales of Prowl (marketed as Stomp
internationally) and Pursuit herbicides, Caramba and Delan fungicides, and
other international crop protection products. The increase in international
agricultural products sales was composed of unit volume increases of 21% and
favorable foreign exchange of 7%. Unit volume increases were due primarily to
favorable weather conditions in Europe throughout the 1995 growing season.
Sales of food products decreased 18% for the year ended 1995. The sales
decrease was due primarily to competitive new products and marketing activity
and the timing and extent of trade incentives, promotions and product
introductions. The decrease in sales was composed of unit volume decreases of
19%, offset by price increases of 1%. Sales of food products increased 7% in
1994. The 1994 increase was attributable to a 6% volume increase and a 1%
increase in price.
On a pro forma basis, cost of goods sold, as a percentage of net sales,
decreased for the year ended 1995. The decrease was due, in part, to the
changes in the pharmaceutical and agricultural product mix and the realization
of ACY acquisition-related synergies. Cost of goods sold in 1994, excluding the
impact of ACY, decreased compared with 1993 due to improved product mix,
reductions in inventory losses and reduced royalties.
On a pro forma basis, selling, general and administrative expenses, as
a percentage of net sales, increased for the year ended 1995. Lower selling and
administrative expenses resulting from ACY acquisition-related synergies were
offset by increased general expenses. Higher general expenses in 1995 were due,
in part, to the reversal of certain litigation reserves in 1994 that no longer
were required which lowered 1994 general expenses. Selling, administrative and
general expenses in 1994, excluding the impact of ACY, were comparable to 1993.
On a pro forma basis, research and development expenses decreased for
the year ended 1995 due primarily to ACY acquisition-related synergies.
Research and development expenses, excluding the impact of ACY, increased 16%
in 1994. Pharmaceutical research and development expense, as a percentage of
worldwide pharmaceutical sales, exclusive of nutritional sales, was 15% and 13%
in 1995 and 1994, respectively.
On a pro forma basis, interest expense decreased for the year ended
1995 due primarily to the reduction of long-term debt.
The effective tax rate increased to 31.1% in 1995 from 24.7% in 1994
due primarily to the non-deductibility of goodwill amortization related to the
ACY acquisition and the reversal of certain tax reserves which lowered the tax
provision in 1994. Also on June 30, 1995, the U.S. research tax credit expired,
which negatively impacted the effective tax rate. These items were offset
partially by additional Section 936 tax benefits derived from ACY manufacturing
operations in Puerto Rico. Additional tax benefits also were recognized from
the Company's manufacturing operations in Ireland.
Net income and net income per share for 1995 on an as-reported basis
increased 10% and 9%, respectively, above 1994 levels. ACY operating results
for 1995 were more than offset by acquisition-related interest expense and
goodwill amortization. Net income and net income per share for 1994 on an
as-reported basis increased 4% and 5%, respectively, above 1993 levels. ACY
operating results for the month of December 1994 were more than offset by
acquisition-related interest expense and goodwill amortization. Net income and
net income per share for 1994, excluding the impact of ACY, increased 5% and
6%, respectively, over 1993 levels.
The Company's 1995 operating results included a gain of $960 million
($624 million after-tax) from the sale of the South American oral health care
business, special charges of $437 million ($308 million after-tax) and a $180
million ($117 million after-tax) restructuring charge to record the costs of
implementing the integration plan for the ACY acquisition related to American
Home Products Corporation operations. In the aggregate, these items increased
net income and net income per share by $199 million and $.64, respectively.
Excluding these items, 1995 net income and net income per share on an
as-reported basis decreased 3% and 4%, respectively, due primarily to the net
dilution, as anticipated, resulting from the ACY acquisition. On a pro forma
basis, net income and net income per share for 1995, excluding the items
previously discussed, increased 16% and 15%, respectively, due principally to
lower interest expense, increased net sales, and cost savings from
acquisition-related synergies with ACY and the Company's previously announced
Organizational Effectiveness and Supply Chain programs. As of December 31,
1995, the Company had initiated all aspects of the integration plan for the ACY
acquisition, resulting in significant workforce reductions, realignment of
strategic resources, and closures of certain production and administrative
facilities.
The Company's 1994 operating results included a $174 million charge to
record the costs of implementing certain restructuring programs primarily
related to the U.S. pharmaceutical and consumer health care businesses and
gains of approximately $76 million from the sale of Corometrics Medical
Systems, Agri-Bio and the Company's former headquarters
48
<PAGE>
building. Also, a reversal of certain tax reserves of approximately $64 million
related to reserves that no longer were deemed necessary was recorded. In the
aggregate, these items had no net impact on 1994 net income and net income per
share.
Significant progress has been made in the integration of ACY's
business, which is expected to result in substantial production and
administrative cost savings in 1996.
Competition
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 has not had patent
protection for many years, does contribute significantly to sales and results
of operations. A U.S. Food and Drug Administration (FDA) advisory committee
meeting was held in July 1995 to discuss relative differences in safety and
efficacy among estrogen products and to advise the FDA on the activity of
various estrogenic components in Premarin relative to the FDA's review of
applications for generic conjugated estrogens. The FDA advisory committee
concluded that there is insufficient data to assess whether or not any
individual component or combination of components of Premarin, other than
estrone and equilin, must be present to achieve clinical efficacy and safety.
The Company cannot predict the timing or outcome of the FDA's action on
currently pending applications for generic conjugated estrogen products. While
the introduction of generic competition ordinarily is expected to significantly
impact the market for a brand name product, the extent of such impact on
Premarin and related products cannot be predicted with certainty due to a
number of factors, including the nature of the product and the introduction of
new combination estrogen and progestin products in the Premarin family.
Liquidity, Financial Condition and
Capital Resources
The Company's $10.0 billion of credit facilities, established in 1994 to
finance the ACY acquisition, were amended to $7.0 billion of credit facilities
in 1995. The amended credit facilities are composed of a $3.0 billion,
five-year credit facility and a $4.0 billion, 364-day credit facility. In
February 1995, the Company issued, under a $3.5 billion shelf registration
statement, $1.0 billion of 7.70% notes due February 2000 and $1.0 billion of
7.90% notes due February 2005. Net proceeds from these issuances were used to
repay commercial paper. The notes are unsecured and unsubordinated and may not
be redeemed prior to maturity. In connection with the $2.0 billion note issue,
the Company terminated $2.0 billion of the interest rate swap agreements that
previously had been entered into. The cost to unwind these swap agreements was
deferred and is being amortized to interest expense over the five- and 10-year
terms of the related notes.
Cash flows from operations continued to be strong in 1995. Cash flows
from operating activities of $1.5 billion, proceeds from sales of businesses
and other assets of $2.0 billion, and proceeds from the exercise of stock
options of $470 million were used principally for long-term debt reduction of
$2.2 billion, dividend payments of $935 million and capital expenditures of
$638 million. Capital expenditures included the expansion of the Company's
manufacturing/distribution and packaging facilities worldwide. The Company
believes that the foreign currency risks to which it is exposed are not
reasonably likely to have a material adverse effect on the Company's results of
operations or financial position given the concentration of sales in the United
States. No single foreign currency accounted for more than 5% of 1995 worldwide
sales.
The ratio of earnings to fixed charges decreased from 13.9 in 1994 to
4.4 in 1995 on an as-reported basis. The decrease is due primarily to increased
fixed charges related to ACY acquisition interest expense in 1995 (12 months)
versus one month in 1994. On a pro forma basis, the ratio increased from 2.9
in 1994 to 4.4 in 1995. The increase is due primarily to the gain on the sale
of the oral health care business and lower interest expense in 1995 due to the
reduction of long-term debt.
The Company has established aggressive objectives in order to reduce
its current debt position, including, but not limited to, additional sales of
non-strategic assets. Synergies from the ACY acquisition are expected to
substantially increase operating cash flows. Therefore, management is confident
that the cash flows from the combined businesses will be adequate to repay both
the principal and interest on the acquisition financing without requiring the
disposition of any significant strategic core businesses or assets and,
further, to allow the Company to continue to fund its operations, pay dividends
and maintain its ongoing programs of capital expenditures without restricting
its ability to make further acquisitions as may be appropriate.
49
<PAGE>
Principal Officers
Principal Corporate Officers
John R. Stafford(1,2,3)
Chairman, President and
Chief Executive Officer
Robert G. Blount(1,2,3)
Senior Executive Vice President
Fred Hassan(2,3)
Executive Vice President
Stanley F. Barshay(2,3)
Senior Vice President
Joseph J. Carr(2,3)
Senior Vice President
Louis L. Hoynes, Jr.(2,3)
Senior Vice President and General Counsel
William J. Murray(2,3)
Senior Vice President
David M. Olivier(2,3)
Senior Vice President
John B. Adams
Vice President-Corporate Development
Thomas G. Cavanagh
Vice President-Investor Relations
John R. Considine(2,3)
Vice President-Finance
Leo C. Jardot
Vice President-Government Relations
Gerald A. Jibilian
Vice President and
Associate General Counsel
Paul J. Jones(2)
Vice President and Comptroller
Rene R. Lewin(2)
Vice President-Human Resources
David Lilley(2,3)
Vice President
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
Jack M. O'Connor
Treasurer
Principal Division and Subsidiary Officers
American Home Food
Products, Inc.
Kenneth J. Martin,(3) President
Cyanamid Agricultural Products
Howard L. Minigh, Ph.D., President
Cyanamid Agricultural Products
Research
Mark W. Atwood, Ph.D., President
Cyanamid International
Agricultural Products
Marco A. Fonseca, President
Cyanamid Latin America
Agricultural Products
Ken Bakshi, Vice President
Fort Dodge Laboratories
E. Thomas Corcoran,(3) President
Genetics Institute, Inc.*
Gabriel Schmergel, President and
Chief Executive Officer
Immunex Corporation*
Edward V. Fritzky, Chairman and
Chief Executive Officer
Quinton Instrument Company
Steven C. Tallman, President
Sherwood-Davis & Geck
David A. Low,(3) President
Specialty Pharmaceuticals
Division
David G. Strunce, President
Storz Instrument Company
Robert H. Blankemeyer, President
Whitehall International, Inc.
Jean-Claude Leroux,(3) President
Whitehall-Robins Healthcare
Terrence L. Stecz,(3) President
Wyeth-Ayerst International, Inc.
Bernard Poussot,(3) President
Wyeth-Ayerst Laboratories
Robert Essner,(3) President
Wyeth-Ayerst Research
Robert I. Levy, M.D.,(3) President
(1) Executive Committee
(2) Finance Committee
(3) Operations Committee
* AHP is majority owner
Corporate Data
Independent Auditors
Arthur Andersen LLP
Transfer Agent and
Registrar
Chemical Mellon Shareholder
Services, L.L.C.
Overpeck Center
85 Challenger Road
Ridgefield Park, NJ 07660
Executive Offices
American Home Products
Corporation
Five Giralda Farms
Madison, NJ 07940
(201) 660-5000
Annual Meeting
The Annual Meeting of
Shareholders will be held on
April 23, 1996, in Whippany,
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 request to:
American Home Products
Corporation
Treasurer's Department
Five Giralda Farms
Madison, NJ 07940
(201) 660-6936
Equal Employment
Opportunity
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 disabled veteran.
Master Investment Plan
The plan provides shareholders
with the opportunity to auto-
matically reinvest dividends or
to make cash purchases of addi-
tional shares of the Company's
common stock. Inquiries should
be directed to:
Chemical Bank
c/o Chemical Mellon
Shareholder Services, L.L.C.
P.O. Box 750
Pittsburgh, PA 15230
(800) 565-2067
For the Hearing Impaired
(800) 231-5469 (TDD)
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
Department of
Environment and Safety
Five Giralda Farms
Madison, NJ 07940
Product designations appearing in
differentiated type are trademarks.
Design: Context Inc, South Norwalk, CT
Text: Gabbe & Gabbe Printing: Avanti/Case-Hoyt
Location Photography: Ted Horowitz and Mark Tuschman
Product Photography: Jim Barber
[RECYCLE LOGO]
Pages 27-50 are printed on
recycled paper.
50
<PAGE>
Board of Directors
John R. Stafford(1,2,3)
Chairman, President and
Chief Executive Officer
Clifford L. Alexander, Jr.
President, Alexander & Associates, Inc.
Frank A. Bennack, Jr.(1)
President and Chief Executive Officer,
The Hearst Corporation
Robert G. Blount(1,2,3)
Senior Executive Vice President
Robin Chandler Duke
National Chair, Population
Action International
John D. Feerick
Dean, Fordham University School of Law
Fred Hassan(2,3)
Executive Vice President
John P. Mascotte
Consultant
Mary Lake Polan, M.D., Ph.D.
Chairman, Department of OB/GYN,
Stanford University School of Medicine
John R. Torell III
Chairman, Torell Management Inc.
William Wrigley
President and Chief Executive Officer,
Wm. Wrigley Jr. Company
Directors Emeriti
John W. Culligan
Retired - Former Chairman of the Board
William F. Laporte
Retired - Former Chairman of the Board
(1) Executive Committee
(2) Finance Committee
(3) Operations Committee
[PHOTO]
(l to r): John R. Stafford, Robin Chandler Duke, John P. Mascotte
[PHOTO]
(l to r): Frank A. Bennack, Jr., Mary Lake Polan, M.D., Ph.D., Robert G. Blount
[PHOTO]
(l to r): John D. Feerick, John R. Torell III, Clifford L. Alexander, Jr., Fred
Hassan
[PHOTO]
(l to r): William F. Laporte, John W. Culligan, William Wrigley
<PAGE>
[LOGO]
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
DECEMBER 31, 1995
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 Cyanamid Company New Jersey
American Home Foods, Inc. Delaware
Ayerst Laboratories Incorporated New York
Ayerst-Wyeth Pharmaceuticals Inc. Delaware
Cyanamid Agricultural de Puerto Rico, Inc. New Jersey
Cyanamid de Argentina S.A. Delaware
Cyanamid International Corporation Limited Delaware
Davis & Geck, Inc. New Jersey
Genetics Institute, Inc. Delaware
Immunex Corporation Delaware
Lederle Parenterals, Inc. New Jersey
Lederle Piperacillin, Inc. New Jersey
Quinton Instrument Company Washington
Route 24 Holdings, Inc. Delaware
Sherwood Medical Company Delaware
Storz Instrument Company Missouri
Symbiosis Corp. Florida
Whitehall Laboratories Inc. Delaware
Wyeth-Ayerst International Inc. New York
Wyeth Laboratories Inc. New York
Wyeth Nutritionals Inc. Delaware
Foreign
AHP Holdings B.V. Netherlands
American Home Products Holdings (UK)plc Britain
Ayerst International S.A. France
Brenner-EFEKA Pharma G.m.b.H. Germany
Cyanamid Australia Pty. Limited Victoria
Cyanamid Finance B.V. Netherlands Netherlands
Cyanamid GmbH Germany
Cyanamid Iberica S.A. Spain
Cyanamid Italia, S.p.A. Italy
Cyanamid of Great Britain Limited United Kingdom
Cyanamid (Japan), Ltd. Japan
Cyanamid Quimica do Brasil Ltda. Brazil
Cyanamid Taiwan Corporation Republic of China
Dimminaco A.G./S.A./Ltd. Switzerland
Eurand International, S.p.A. Italy
John Wyeth Laboratorios S.A. Argentina
Laboratoires Lederle S.A. France
Laboratorios Wyeth Whitehall Ltda. Brazil
Sherwood Medical Industries Limited England
Whitehall Italia SpA Italy
State or Country of
Name Incorporation
Foreign (Continued)
Wyeth Australia Pty. Ltd Australia
Wyeth (Japan) Corporation Japan
John Wyeth & Brother Limited England
Wyeth-Ayerst Canada, Inc. Canada
Wyeth-Pharma G.m.b.H. Germany
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.
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 24, 1996 included in American Home Products Corporation's (the
Company) Annual Report to Shareholders for the year ended December 31,
1995. Furthermore, we consent to the incorporation of our reports
dated January 24, 1996 included in or made part of this Form 10-K,
into the Company's previously filed Registration Statements on Form
S-3 (File Nos. 33-45324 and 33-57339) and on Form S-8 (File Nos. 2-
96127, 33-24068, 33-53733, 33-41434, 33-55449, 33-45970, 33-14458, 33-
50149 and 33-55456).
ARTHUR ANDERSEN LLP
New York, New York
March 27, 1996
<TABLE> <S> <C>
<ARTICLE> 5
Exhibit 27
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE AMERICAN HOME PRODUCTS CORPORATION
AND SUBSIDIARIES CONSOLIDATED BALANCE SHEET AS OF
DECEMBER 31, 1995 AND CONSOLIDATED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1995, AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<CASH> 1,802,397
<SECURITIES> 217,672
<RECEIVABLES> 2,749,048
<ALLOWANCES> 135,609
<INVENTORY> 2,301,953
<CURRENT-ASSETS> 7,986,137
<PP&E> 6,045,746
<DEPRECIATION> 2,085,411
<TOTAL-ASSETS> 21,362,923
<CURRENT-LIABILITIES> 4,556,248
<BONDS> 7,808,757
<COMMON> 104,567
0
85
<OTHER-SE> 5,438,346
<TOTAL-LIABILITY-AND-EQUITY> 21,362,923
<SALES> 13,376,089
<TOTAL-REVENUES> 13,376,089
<CGS> 4,534,320
<TOTAL-COSTS> 4,534,320
<OTHER-EXPENSES> 1,354,963
<LOSS-PROVISION> 273,057
<INTEREST-EXPENSE> 514,920
<INCOME-PRETAX> 2,438,698
<INCOME-TAX> 758,280
<INCOME-CONTINUING> 1,680,418
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,680,418
<EPS-PRIMARY> 5.37
<EPS-DILUTED> 5.31
</TABLE>
