SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (Date of earliest event reported): November 3, 1999
AMERICAN HOME PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 1-1225 13-2526821
(State or other jurisdiction (Commission File (IRS Employer of
incorporation) Number) Identification No.)
Five Giralda Farms, Madison, New Jersey 07940
(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code: 973-660-5000
<PAGE>
Item 5. Other Events
On November 3, 1999, American Home Products Corporation ("AHP"),
Wolverine Sub Corp., a wholly owned subsidiary of AHP ("Merger Sub"), and
Warner-Lambert Company ("Warner-Lambert") entered into an Agreement and Plan
of Merger (the "Merger Agreement"). As a result of the merger (the
"Merger"), each outstanding share of Warner-Lambert common stock par value
$1.00 per share ("Warner-Lambert Common Stock") will be converted into
1.4919 shares of AHP common stock par value $0.33-1/3 ("AHP Common Stock").
The combined company after the merger will be named AmericanWarner, Inc. A
copy of the Merger Agreement is attached hereto as Exhibit 2.1 and is
incorporated herein by reference.
A copy of AHP's and Warner-Lambert's joint press release dated November
4, 1999 is attached hereto as Exhibit 99.1 and is incorporated herein by
reference.
In connection with the execution of the Merger Agreement, AHP and
Warner-Lambert entered into Stock Option Agreements, each dated as of
November 3, 1999 (the "Stock Option Agreements"), pursuant to which (i) AHP
has granted to Warner-Lambert an option to purchase up to 194,551,963 shares
of AHP Common Stock at a price of $56.00 per share, and (ii) Warner-Lambert
has granted AHP an option to purchase up to 127,940,538 shares of Warner-
Lambert Common Stock at a price of $83.81 per share. The Stock Option
Agreements are exercisable only upon the occurrence of certain events
specified in the Stock Option Agreements. Copies of the Stock Option
Agreements are attached hereto as Exhibits 10.1 and 10.2 and are incorporated
herein by reference.
The Merger is intended to constitute a reorganization under Section
368(a) of the Internal Revenue Code of 1986, as amended, and to be accounted
for as a pooling of interests. Consummation of the Merger is subject to
various conditions, including, among other things, receipt of the necessary
approvals of Warner-Lambert's and AHP's stockholders and receipt of required
regulatory approvals.
The foregoing description of the Merger Agreement, the Stock Option
Agreements and the transactions contemplated thereby do not purport to be
complete and are qualified in their entirety by reference to the Merger
Agreement and the Stock Option Agreements.
<PAGE>
Item 7. Financial Statements and Exhibits
(c) Exhibits
(2.1) Agreement and Plan of Merger, dated as of November 3,
1999 among American Home Products Corporation, Wolverine
Sub Corp., and Warner-Lambert Company.
(10.1) Stock Option Agreement, dated as of November 3, 1999
between American Home Products Corporation, as Issuer
and Warner-Lambert Company, as Grantee.
(10.2) Stock Option Agreement, dated as of November 3, 1999
between Warner-Lambert Company, as Issuer and American
Home Products Corporation, as Grantee.
(99.1) Press Release, dated November 4, 1999 announcing the
execution of the Merger Agreement.
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ Paul J. Jones
--------------------------------
Name: Paul J. Jones
Title: Vice President and Comptroller
(Duly Authorized Signatory and
Chief Accounting officer)
Dated: November 8, 1999
<PAGE>
EXHIBIT INDEX
(2.1) Agreement and Plan of Merger, dated as of November
3, 1999 among American Home Products Corporation,
Wolverine Sub Corp., and Warner-Lambert Company.
(10.1) Stock Option Agreement, dated as of November 3, 1999
between American Home Products Corporation, as
Issuer and Warner-Lambert Company, as Grantee.
(10.2) Stock Option Agreement, dated as of November 3, 1999
between Warner-Lambert Company, as Issuer and
American Home Products Corporation, as Grantee.
(99.1) Press Release, dated November 4, 1999 announcing the
execution of the Merger Agreement.
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 3, 1999
AMONG
AMERICAN HOME PRODUCTS CORPORATION,
WOLVERINE SUB CORP.
AND
WARNER-LAMBERT COMPANY
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS . . . . . . . . . . . . . . 2
1.1 The Merger . . . . . . . . . . . . . . . . . . 2
1.2 Closing . . . . . . . . . . . . . . . . . . . . 2
1.3 Effective Time . . . . . . . . . . . . . . . . 2
1.4 Effects of the Merger . . . . . . . . . . . . . 3
1.5 Certificate of Incorporation . . . . . . . . . 3
1.6 Bylaws . . . . . . . . . . . . . . . . . . . . 3
1.7 Officers and Directors of Surviving
Corporation and Newco . . . . . . . . . . . . . 4
1.8 Effect on Capital Stock . . . . . . . . . . . . 4
1.9 Warner-Lambert Stock Options and Other
Equity-Based Awards . . . . . . . . . . . . . . 5
1.10 Certain Adjustments . . . . . . . . . . . . . . 7
1.11 Associated Rights . . . . . . . . . . . . . . . 7
ARTICLE II
EXCHANGE OF CERTIFICATES . . . . . . . . . . . . . . . . . . . 8
2.1 Exchange Fund . . . . . . . . . . . . . . . . . 8
2.2 Exchange Procedures . . . . . . . . . . . . . . 8
2.3 Distributions with Respect to Unexchanged
Shares . . . . . . . . . . . . . . . . . . . . 9
2.4 No Further Ownership Rights in Warner-
Lambert Common Stock . . . . . . . . . . . . . 9
2.5 No Fractional Shares of AHP Common Stock . . . 10
2.6 Termination of Exchange Fund . . . . . . . . . 10
2.7 No Liability . . . . . . . . . . . . . . . . . 11
2.8 Investment of the Exchange Fund . . . . . . . . 11
2.9 Lost Certificates . . . . . . . . . . . . . . . 11
2.10 Withholding Rights . . . . . . . . . . . . . . 11
2.11 Further Assurances . . . . . . . . . . . . . . 12
2.12 Stock Transfer Books . . . . . . . . . . . . . 12
2.13 Affiliates . . . . . . . . . . . . . . . . . . 12
ARTICLE III
REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . 13
3.1 Representations and Warranties of AHP. . . . . 13
(a) Organization, Standing and Power;
Subsidiaries . . . . . . . . . . . . . 13
(b) Capital Structure . . . . . . . . . . . 14
(c) Authority; No Conflicts . . . . . . . . 16
(d) Reports and Financial Statements . . . 17
i
<PAGE>
(e) Information Supplied . . . . . . . . . 18
(f) Board Approval . . . . . . . . . . . . 19
(g) Vote Required . . . . . . . . . . . . . 20
(h) Litigation; Compliance with Laws . . . 20
(i) Absence of Certain Changes or
Events . . . . . . . . . . . . . . . . 21
(j) Environmental Matters . . . . . . . . . 22
(k) Intellectual Property . . . . . . . . . 23
(l) Brokers or Finders . . . . . . . . . . 24
(m) Opinions of AHP Financial Advisors . . 24
(n) Accounting Matters . . . . . . . . . . 24
(o) Taxes . . . . . . . . . . . . . . . . . 25
(p) Certain Contracts . . . . . . . . . . . 25
(q) AHP Stockholder Rights Plan . . . . . . 25
3.2 Representations and Warranties of Warner-
Lambert. . . . . . . . . . . . . . . . . . . 26
(a) Organization, Standing and Power;
Subsidiaries . . . . . . . . . . . . . 26
(b) Capital Structure . . . . . . . . . . . 27
(c) Authority; No Conflicts . . . . . . . . 29
(d) Reports and Financial Statements . . . 30
(e) Information Supplied . . . . . . . . . 32
(f) Board Approval . . . . . . . . . . . . 32
(g) Vote Required . . . . . . . . . . . . . 33
(h) Litigation; Compliance with Laws . . . 33
(i) Absence of Certain Changes or
Events . . . . . . . . . . . . . . . . 34
(j) Environmental Matters . . . . . . . . . 34
(k) Intellectual Property . . . . . . . . . 35
(l) Brokers or Finders . . . . . . . . . . 36
(m) Opinion of Warner-Lambert Financial
Advisor . . . . . . . . . . . . . . . . 36
(n) Accounting Matters . . . . . . . . . . 36
(o) Taxes . . . . . . . . . . . . . . . . . 36
(p) Certain Contracts . . . . . . . . . . . 36
(q) Warner-Lambert Stockholder Rights
Plan . . . . . . . . . . . . . . . . . 37
3.3 Representations and Warranties of AHP and
Merger Sub . . . . . . . . . . . . . . . . . . 37
(a) Organization . . . . . . . . . . . . . 37
(b) Corporate Authorization . . . . . . . . 37
(c) Non-Contravention . . . . . . . . . . . 38
(d) No Business Activities . . . . . . . . 38
ii
<PAGE>
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS . . . . . . . . . . . 38
4.1 Covenants of AHP. . . . . . . . . . . . . . . 38
(a) Ordinary Course . . . . . . . . . . . . 38
(b) Dividends; Changes in Share Capital . . 39
(c) Issuance of Securities . . . . . . . . 39
(d) Governing Documents . . . . . . . . . . 40
(e) No Acquisitions . . . . . . . . . . . . 40
(f) No Dispositions . . . . . . . . . . . . 41
(g) Investments; Indebtedness . . . . . . . 41
(h) Pooling; Tax-Free Qualification . . . . 41
(i) Compensation . . . . . . . . . . . . . 42
(j) Accounting Methods; Income Tax
Elections . . . . . . . . . . . . . . . 42
(k) Certain Agreements . . . . . . . . . . 42
(l) No Change or Amendment to Rights
Agreement . . . . . . . . . . . . . . . 42
(m) No Related Actions. . . . . . . . . . . 43
4.2 Covenants of Warner-Lambert . . . . . . . . . . 43
(a) Ordinary Course . . . . . . . . . . . . 43
(b) Dividends; Changes in Share Capital . . 44
(c) Issuance of Securities . . . . . . . . 44
(d) Governing Documents . . . . . . . . . . 45
(e) No Acquisitions . . . . . . . . . . . . 45
(f) No Dispositions . . . . . . . . . . . . 45
(g) Investments; Indebtedness . . . . . . . 46
(h) Pooling; Tax-Free Qualification . . . . 46
(i) Compensation . . . . . . . . . . . . . 47
(j) Accounting Methods; Income Tax
Elections . . . . . . . . . . . . . . . 47
(k) Certain Agreements . . . . . . . . . . 47
(l) No Change or Amendment to Rights
Agreement . . . . . . . . . . . . . . . 47
(m) No Related Actions . . . . . . . . . . 48
4.3 Governmental Filings . . . . . . . . . . . . . 48
4.4 Control of Other Party's Business . . . . . . . 48
ARTICLE V
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . 48
5.1 Preparation of Proxy Statement; Stockholders
Meetings . . . . . . . . . . . . . . . . . . . 48
5.2 Newco Board of Directors; Executive
Officers; Name; Headquarters . . . . . . . . . 53
5.3 Access to Information . . . . . . . . . . . . . 53
5.4 Reasonable Best Efforts . . . . . . . . . . . . 54
5.5 Acquisition Proposals . . . . . . . . . . . . . 57
5.6 Employee Benefits Matters . . . . . . . . . . . 59
5.7 Fees and Expenses . . . . . . . . . . . . . . . 60
iii
<PAGE>
5.8 Directors' and Officers' Indemnification and
Insurance . . . . . . . . . . . . . . . . . . . 61
5.9 Public Announcements . . . . . . . . . . . . . 61
5.10 Accountant's Letters . . . . . . . . . . . . . 62
5.11 Listing of Shares of AHP Common Stock . . . . . 63
5.12 Dividends . . . . . . . . . . . . . . . . . . . 63
5.13 Affiliates . . . . . . . . . . . . . . . . . . 63
5.14 Section 16 Matters . . . . . . . . . . . . . . 64
5.15 Specified Litigation . . . . . . . . . . . . . 64
ARTICLE VI
CONDITIONS PRECEDENT . . . . . . . . . . . . . . . . . . . . . . 65
6.1 Conditions to Each Party's Obligation to
Effect the Merger . . . . . . . . . . . . . . . 65
(a) Stockholder Approval . . . . . . . . . 65
(b) No Injunctions or Restraints,
Illegality . . . . . . . . . . . . . . 65
(c) HSR Act; EC Merger Regulation . . . . . 65
(d) Governmental and Regulatory
Approvals . . . . . . . . . . . . . . . 66
(e) NYSE Listing . . . . . . . . . . . . . 66
(f) Effectiveness of the Form S-4 . . . . . 66
(g) Pooling . . . . . . . . . . . . . . . . 66
6.2 Additional Conditions to Obligations of AHP
and Merger Sub . . . . . . . . . . . . . . . . 67
(a) Representations and Warranties . . . . 67
(b) Performance of Obligations of
Warner-Lambert. . . . . . . . . . . . 67
(c) Tax Opinion . . . . . . . . . . . . . . 67
(d) Warner-Lambert Rights Agreement . . . . 68
6.3 Additional Conditions to Obligations of
Warner-Lambert. . . . . . . . . . . . . . . . 68
(a) Representations and Warranties . . . . 68
(b) Performance of Obligations of AHP. . . 68
(c) Tax Opinion . . . . . . . . . . . . . . 68
(d) AHP Rights Agreement . . . . . . . . . 69
(e) Amendments . . . . . . . . . . . . . . 69
(f) Settlement Agreement . . . . . . . . . 69
ARTICLE VII
TERMINATION AND AMENDMENT . . . . . . . . . . . . . . . . . . . 69
7.1 Termination . . . . . . . . . . . . . . . . . . 69
7.2 Effect of Termination . . . . . . . . . . . . . 72
7.3 Amendment . . . . . . . . . . . . . . . . . . . 79
iv
<PAGE>
7.4 Extension; Waiver . . . . . . . . . . . . . . . 79
ARTICLE VIII
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . 79
8.1 Non-Survival of Representations, Warranties
and Agreements . . . . . . . . . . . . . . . . 79
8.2 Notices . . . . . . . . . . . . . . . . . . . . 79
8.3 Interpretation . . . . . . . . . . . . . . . . 81
8.4 Counterparts . . . . . . . . . . . . . . . . . 81
8.5 Entire Agreement; No Third Party
Beneficiaries . . . . . . . . . . . . . . . . . 81
8.6 Governing Law . . . . . . . . . . . . . . . . . 81
8.7 Severability . . . . . . . . . . . . . . . . . 81
8.8 Assignment . . . . . . . . . . . . . . . . . . 82
8.9 Submission to Jurisdiction; Waivers . . . . . . 82
8.10 Enforcement . . . . . . . . . . . . . . . . . . 83
8.11 Definitions . . . . . . . . . . . . . . . . . . 83
v
<PAGE>
LIST OF EXHIBITS
Exhibit Title
A Form of Warner-Lambert Stock Option Agreement
B Form of AHP Stock Option Agreement
1.5(a) Form of Amended and Restated Certificate of
Incorporation of Surviving Corporation
1.5(b) Form of Amendments to AHP Certificate of
Incorporation
1.6(a) Form of Bylaws of Surviving Corporation
1.6(b) Form of Amendments to Bylaws of AHP
1.7 Board of Directors of Surviving Corporation
5.2(a) Board of Directors of Newco
5.13 Form of Affiliate Letter
6.2(c)(1) Form of AHP Representations Letter
6.2(c)(2) Form of Warner-Lambert Representations Letter
vi
<PAGE>
AGREEMENT AND PLAN OF MERGER, dated as of November
3, 1999 (this "Agreement"), among AMERICAN HOME PRODUCTS CORPORATION, a
Delaware corporation ("AHP"), Wolverine Sub Corp., a Delaware corporation and
a direct wholly-owned subsidiary of AHP ("Merger Sub"), and WARNER-LAMBERT
COMPANY, a Delaware corporation ("Warner-Lambert").
W I T N E S S E T H:
WHEREAS, the Boards of Directors of Warner-Lambert
and AHP deem it advisable and in the best interests of each corporation and
its respective stockholders that Warner-Lambert and AHP engage in a business
combination as peer firms in a merger of equals in order to advance the long-
term strategic business interests of Warner-Lambert and AHP;
WHEREAS, the combination of Warner-Lambert and AHP
shall be effected by the terms of this Agreement through a merger as outlined
below (the "Merger");
WHEREAS, in furtherance thereof, the respective
Boards of Directors of Warner-Lambert and AHP have approved the Merger, upon
the terms and subject to the conditions set forth in this Agreement, pursuant
to which each share of common stock, par value $1.00 per share, of Warner-
Lambert ("Warner-Lambert Common Stock") issued and outstanding immediately
prior to the Effective Time (as defined in Section 1.3), other than shares
owned or held directly or indirectly by AHP or directly or indirectly by
Warner-Lambert, will be converted into the right to receive shares of common
stock, par value $0.33 1/3 per share, of AHP ("AHP Common Stock") as set
forth in Section 1.8;
WHEREAS, contemporaneously with the execution and
delivery of this Agreement, (i) as a condition and inducement to AHP's
willingness to enter into this Agreement and the AHP Stock Option Agreement
referred to below, AHP and Warner-Lambert are entering into a Stock Option
Agreement dated as of the date hereof in the form of Exhibit A (the "Warner-
Lambert Stock Option Agreement") pursuant to which Warner-Lambert is granting
to AHP an option to purchase shares of Warner-Lambert Common Stock and (ii)
as a condition and inducement to Warner-Lambert's willingness to enter into
this Agreement and the Warner-Lambert Stock Option Agreement, Warner-Lambert
and AHP are entering into a Stock Option Agreement dated as of the date
hereof in the form of Exhibit B (the "AHP Stock Option Agreement", and
together with the Warner-Lambert Stock Option Agreement, the "Stock Option
Agreements"), pursuant to which AHP is granting to Warner-Lambert an option
to purchase shares of AHP Common Stock;
<PAGE>
WHEREAS, for Federal income tax purposes, it is
intended that the Merger shall qualify as a reorganization within the meaning
of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the regulations promulgated thereunder; and
WHEREAS, for accounting purposes, it is intended
that the Merger shall be accounted for as a pooling of interests transaction
under United States generally accepted accounting principles ("GAAP").
NOW, THEREFORE, in consideration of the foregoing
and the respective representations, warranties, covenants and agreements set
forth in this Agreement and in the Stock Option Agreements, and intending to
be legally bound hereby and thereby, the parties hereto agree as follows:
ARTICLE I
THE MERGER; CERTAIN RELATED MATTERS
1.1 The Merger. Upon the terms and subject to
the conditions set forth in this Agreement, and in accordance with the
Delaware General Corporation Law (the "DGCL"), Merger Sub shall be merged
with and into Warner-Lambert at the Effective Time. Following the Merger,
the separate corporate existence of Merger Sub shall cease and Warner-Lambert
shall continue as the surviving corporation (the "Surviving Corporation").
1.2 Closing. Upon the terms and subject to the
conditions set forth in Article VI and the termination rights set forth in
Article VII, the closing of the Merger (the "Closing") will take place on the
first Business Day after the satisfaction or waiver (subject to applicable
law) of the conditions (excluding conditions that, by their nature, cannot be
satisfied until the Closing Date) set forth in Article VI, unless this
Agreement has been theretofore terminated pursuant to its terms or unless
another time or date is agreed to in writing by the parties hereto (the
actual time and date of the Closing being referred to herein as the "Closing
Date"). The Closing shall be held at the offices of Simpson Thacher &
Bartlett, 425 Lexington Avenue, New York, New York, 10017, unless another
place is agreed to in writing by the parties hereto.
1.3 Effective Time. As soon as practicable
following the satisfaction or waiver (subject to applicable law) of the
conditions set forth in Article VI, at the Closing the parties shall (i) file
a certificate of merger (the "Certificate of Merger") in such form as is
required by and executed in accordance with the relevant provisions of the
DGCL and (ii) make all other filings or recordings required under the DGCL.
The Merger shall become effective at such time as the Certificate of Merger
is duly filed with the Delaware Secretary of State or at such subsequent time
as AHP and Warner-Lambert shall agree and as shall be specified in the
<PAGE>
Certificate of Merger (the date and time the Merger becomes effective being
the "Effective Time").
1.4 Effects of the Merger. At and after the
Effective Time, the Merger will have the effects set forth in the DGCL.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time all the property, rights, privileges, powers and franchises of
Warner-Lambert and Merger Sub shall be vested in the Surviving Corporation,
and all debts, liabilities and duties of Warner-Lambert and Merger Sub shall
become the debts, liabilities and duties of the Surviving Corporation.
1.5 Certificate of Incorporation. (a) The
certificate of incorporation of Warner-Lambert, as in effect immediately
prior to the Effective Time, shall be amended and restated so as to read in
its entirety in the form set forth as Exhibit 1.5 and, as so amended and
restated, shall be the certificate of incorporation of the Surviving
Corporation, until thereafter changed or amended as provided therein or by
applicable law.
(b) The certificate of incorporation of AHP
shall be amended effective as of the Effective Time as set forth on Exhibit
1.5(b) hereto. Such amendment is referred to herein as the "Certificate
Amendment."
1.6 Bylaws. (a) The bylaws in the form
attached as Exhibit 1.6(a) shall be the bylaws of the Surviving Corporation
until thereafter changed or amended as provided therein or by applicable law.
(b) The bylaws of AHP shall be amended effective
as of the Effective Time to the effect provided in Exhibit 1.6(b), with such
changes therein as the parties may mutually agree. The amendment to the
bylaws of AHP if the Bylaw Amendment Vote is obtained is referred to in this
Agreement as the "AHP Bylaw Amendment." For purposes of this agreement, the
term "Bylaw Amendment Vote" means the affirmative vote of the holders of at
least 80% of the combined voting power of the then outstanding shares of AHP
stock entitled to vote generally in the election of directors, voting
together as a single class.
1.7 Officers and Directors of Surviving
Corporation and Newco. The officers of Warner-Lambert as of the Effective
Time shall be the officers of the Surviving Corporation, until the earlier of
their resignation or removal or otherwise ceasing to be an officer or until
their respective successors are duly elected and qualified, as the case may
be. The directors of the Surviving Corporation as of the Effective Time
shall be as provided in Exhibit 1.7, which individuals will serve as
3
<PAGE>
directors of the Surviving Corporation until the earlier of their resignation
or removal or otherwise ceasing to be a director or until their respective
successors are duly elected and qualified. The officers and directors of
AHP, as of the Effective Time, will be as provided in Section 5.2. AHP as of
and after the Effective Time is sometimes referred to herein as "Newco."
1.8 Effect on Capital Stock.
(a) At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, each share
of Warner-Lambert Common Stock issued and outstanding immediately prior to
the Effective Time (other than shares of Warner-Lambert Common Stock owned by
AHP or Merger Sub or held by Warner-Lambert, all of which shall be canceled
as provided in Section 1.8(c)), together with the associated Warner-Lambert
Rights, shall be converted into 1.4919 validly issued, fully paid and non-
assessable shares (the "Exchange Ratio") of AHP Common Stock and the
associated AHP Rights (as hereinafter defined) (together with any cash in
lieu of fractional shares of AHP Common Stock to be paid pursuant to Section
2.5, the "Merger Consideration").
(b) As a result of the Merger and without any
action on the part of the holders thereof, at the Effective Time, all shares
of Warner-Lambert Common Stock (together with the associated Warner-Lambert
Rights) shall cease to be outstanding and shall be canceled and retired and
shall cease to exist, and each holder of a certificate which immediately
prior to the Effective Time represented any such shares of Warner-Lambert
Common Stock (a "Certificate") shall thereafter cease to have any rights with
respect to such shares of Warner-Lambert Common Stock, except as provided
herein or by law.
(c) Each share of Warner-Lambert Common Stock
issued and owned by AHP or Merger Sub or held by Warner-Lambert at the
Effective Time shall, by virtue of the Merger, cease to be outstanding and
shall be canceled and retired and no stock of AHP or other consideration
shall be delivered in exchange therefor.
(d) At the Effective Time, by virtue of the
Merger and without any action on the part of the holder thereof, each share
of common stock, par value $0.01 per share, of Merger Sub issued and
outstanding immediately prior to the Effective Time, shall be converted into
one validly issued, fully paid and nonassessable share of common stock, par
value $0.01 per share, of the Surviving Corporation.
1.9 Warner-Lambert Stock Options and Other
Equity-Based Awards.
4
<PAGE>
(a) Each Warner-Lambert Stock Option (as defined
in Section 3.2(b)) that was granted pursuant to the Warner-Lambert Stock
Option Plans (as defined in Section 3.2(b)) prior to the Effective Time and
which remains outstanding immediately prior to the Effective Time shall cease
to represent a right to acquire shares of Warner-Lambert Common Stock and
shall be converted, at the Effective Time, into an option to acquire, on the
same terms and conditions as were applicable under the Warner-Lambert Stock
Option (but taking into account any changes thereto, including the
acceleration thereof, provided for in the Warner-Lambert Stock Option Plans
or in such option by reason of this Agreement or the transactions
contemplated hereby), that number of shares of AHP Common Stock determined by
multiplying the number of shares of Warner-Lambert Common Stock subject to
such Warner-Lambert Stock Option by the Exchange Ratio, rounded, if
necessary, to the nearest whole share of AHP Common Stock, at a price per
share (rounded to the nearest one-hundredth of a cent) equal to the per share
exercise price specified in such Warner-Lambert Stock Option divided by the
Exchange Ratio; provided, however, that in the case of any Warner-Lambert
Stock Option to which Section 421 of the Code applies by reason of its
qualification under Section 422 of the Code, the option price, the number of
shares subject to such option and the terms and conditions of exercise of
such option shall be determined in a manner consistent with the requirements
of Section 424(a) of the Code.
(b) Pursuant to the Warner-Lambert Stock Option
Plans, restricted shares of Warner-Lambert Common Stock granted pursuant
thereto which are outstanding immediately prior to the Effective Time shall
become fully vested and free of restrictions as of the Effective Time in
accordance with the terms thereof. Each such award shall be converted, as of
the Effective Time, into a number of shares of AHP Common Stock equal to the
product of (1) the number of shares subject to the award and (2) the Exchange
Ratio; and the number of shares of AHP Common Stock as so determined shall be
delivered to the holder of each such award as soon as practicable following
the Effective Time. On or prior to the Effective Time, Warner-Lambert will
take all actions necessary such that awards of restricted shares are treated
in accordance with the immediately preceding sentences, including, but not
limited to, precluding each holder from receiving any cash payments in
respect of such awards in connection with the Merger.
(c) All Warner-Lambert stock credits (including
any fractions thereof) in each stock account which is governed by the terms
of Warner-Lambert's 1996 Stock Plan ("Warner-Lambert Stock Credits") shall,
as of the Effective Time, be converted into a number of AHP stock credits
equal to the product of (1) the number of Warner-Lambert Stock Credits in
such stock account immediately prior to the Effective Time and (2) the
Exchange Ratio, and shall otherwise remain subject to the terms and
5
<PAGE>
conditions applicable to such Warner-Lambert Stock Credits. On or prior to
the Effective Time, Warner-Lambert shall take all actions necessary to ensure
that such Warner-Lambert Stock Credits are converted in accordance with the
immediately preceding sentence, including, but not limited to, precluding
each holder from receiving any cash payments in respect of such stock account
in connection with the Merger.
(d) As soon as practicable after the Effective
Time, Newco shall deliver to the holders of Warner-Lambert Stock Options
appropriate notices setting forth such holders' rights pursuant to the
Warner-Lambert Stock Option Plans (including that, in connection with the
Merger and pursuant to the terms of the Warner-Lambert Stock Option Plans,
the Warner-Lambert Stock Options have become fully vested and exercisable)
and the agreements evidencing the grants of such Warner-Lambert Stock Options
shall continue in effect on the same terms and conditions (subject to the
adjustments required by this Section 1.9 after giving effect to the Merger
and the terms of the Warner-Lambert Stock Option Plans). To the extent
permitted by law, Newco shall comply with the terms of the Warner-Lambert
Stock Option Plans and shall take such reasonable steps as are necessary or
required by, and subject to the provisions of, such Warner-Lambert Stock
Option Plans, to have the Warner-Lambert Stock Options which qualified as
incentive stock options prior to the Effective Time continue to qualify as
incentive stock options of Newco after the Effective Time.
(e) Newco shall take all corporate action
necessary to reserve for issuance a sufficient number of shares of AHP Common
Stock for delivery upon exercise of Warner-Lambert Stock Options or in
connection with restricted shares or in connection with the settlement of
stock accounts in accordance with this Section 1.9. Promptly after the
Effective Time, Newco shall file a registration statement on Form S-3 or Form
S-8, as the case may be (or any successor or other appropriate forms), with
respect to the shares of AHP Common Stock subject to such options or
restricted shares or stock accounts and shall use commercially reasonable
efforts to maintain the effectiveness of such registration statement or
registration statements (and maintain the current status of the prospectus or
prospectuses contained therein) for so long as such options, restricted
shares or stock accounts remain outstanding. With respect to those
individuals who subsequent to the Merger will be subject to the reporting
requirements under Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Exchange Act"), where applicable, Newco shall administer the
Warner-Lambert Stock Option Plans in a manner consistent with the exemptions
provided by Rule 16b-3 promulgated under the Exchange Act.
1.10 Certain Adjustments. If, between the date
of this Agreement and the Effective Time, the outstanding AHP Common Stock or
6
<PAGE>
Warner-Lambert Common Stock shall have been changed into a different number
of shares or different class by reason of any reclassification,
recapitalization, stock split, split-up, combination or exchange of shares or
a stock dividend or dividend payable in any other securities shall be
declared with a record date within such period, or any similar event shall
have occurred, the Exchange Ratio shall be appropriately adjusted to provide
to the holders of Warner-Lambert Common Stock the same economic effect as
contemplated by this Agreement prior to such event.
1.11 Associated Rights. References in Article I
and Article II of this Agreement to Warner-Lambert Common Stock shall
include, unless the context requires otherwise, the associated Warner-Lambert
Rights and references in Article I and Article II of this Agreement to AHP
Common Stock shall include, unless the context requires otherwise, the
associated AHP Rights.
ARTICLE II
EXCHANGE OF CERTIFICATES
2.1 Exchange Fund. Prior to the Effective Time,
AHP shall appoint a commercial bank or trust company reasonably acceptable to
Warner-Lambert having net capital of not less than $300,000,000, or a
subsidiary thereof, to act as exchange agent hereunder for the purpose of
exchanging Certificates for the Merger Consideration (the "Exchange Agent").
At or prior to the Effective Time, AHP shall deposit with the Exchange Agent,
in trust for the benefit of holders of shares of Warner-Lambert Common Stock,
certificates representing the AHP Common Stock issuable pursuant to Section
1.8 in exchange for outstanding shares of Warner-Lambert Common Stock. AHP
agrees to make available to the Exchange Agent from time to time as needed,
cash sufficient to pay cash in lieu of fractional shares pursuant to Section
2.5 and any dividends and other distributions pursuant to Section 2.3. Any
cash and certificates of AHP Common Stock deposited with the Exchange Agent
shall hereinafter be referred to as the "Exchange Fund".
2.2 Exchange Procedures. Promptly after the
Effective Time, the Surviving Corporation shall cause the Exchange Agent to
mail to each holder of a Certificate (i) a letter of transmittal which shall
specify that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon proper delivery of the Certificates to the
Exchange Agent, and which letter shall be in customary form and have such
other provisions as AHP may reasonably specify (such letter to be reasonably
acceptable to Warner-Lambert prior to the Effective Time) and
(ii) instructions for effecting the surrender of such Certificates in
7
<PAGE>
exchange for the applicable Merger Consideration. Upon surrender of a
Certificate to the Exchange Agent together with such letter of transmittal,
duly executed and completed in accordance with the instructions thereto, and
such other documents as may reasonably be required by the Exchange Agent, the
holder of such Certificate shall be entitled to receive in exchange therefor
(A) one or more shares of AHP Common Stock (which shall be in uncertificated
book-entry form unless a physical certificate is requested) representing, in
the aggregate, the whole number of shares that such holder has the right to
receive pursuant to Section 1.8 (after taking into account all shares of
Warner-Lambert Common Stock then held by such holder) and (B) a check in the
amount equal to the cash that such holder has the right to receive pursuant
to the provisions of this Article II, including cash in lieu of any
fractional shares of AHP Common Stock pursuant to Section 2.5 and dividends
and other distributions pursuant to Section 2.3. No interest will be paid or
will accrue on any cash payable pursuant to Section 2.3 or Section 2.5. In
the event of a transfer of ownership of Warner-Lambert Common Stock which is
not registered in the transfer records of Warner-Lambert, one or more shares
of AHP Common Stock evidencing, in the aggregate, the proper number of shares
of AHP Common Stock, a check in the proper amount of cash in lieu of any
fractional shares of AHP Common Stock pursuant to Section 2.5 and any
dividends or other distributions to which such holder is entitled pursuant to
Section 2.3, may be issued with respect to such Warner-Lambert Common Stock
to such a transferee if the Certificate representing such shares of Warner-
Lambert Common Stock is presented to the Exchange Agent, accompanied by all
documents required to evidence and effect such transfer and to evidence that
any applicable stock transfer taxes have been paid.
2.3 Distributions with Respect to Unexchanged
Shares. No dividends or other distributions declared or made with respect to
shares of AHP Common Stock with a record date after the Effective Time shall
be paid to the holder of any unsurrendered Certificate with respect to the
shares of AHP Common Stock that such holder would be entitled to receive upon
surrender of such Certificate and no cash payment in lieu of fractional
shares of AHP Common Stock shall be paid to any such holder pursuant to
Section 2.5 until such holder shall surrender such Certificate in accordance
with Section 2.2. Subject to the effect of applicable laws, following
surrender of any such Certificate, there shall be paid to such holder of
shares of AHP Common Stock issuable in exchange therefor, without interest,
(a) promptly after the time of such surrender, the amount of any cash payable
in lieu of fractional shares of AHP Common Stock to which such holder is
entitled pursuant to Section 2.5 and the amount of dividends or other
distributions with a record date after the Effective Time theretofore paid
with respect to such whole shares of AHP Common Stock, and (b) at the
appropriate payment date, the amount of dividends or other distributions with
a record date after the Effective Time but prior to such surrender and a
8
<PAGE>
payment date subsequent to such surrender payable with respect to such shares
of AHP Common Stock.
2.4 No Further Ownership Rights in Warner-
Lambert Common Stock. All shares of AHP Common Stock issued and cash paid
upon conversion of shares of Warner-Lambert Common Stock in accordance with
the terms of Article I and this Article II (including any cash paid pursuant
to Section 2.3 or 2.5) shall be deemed to have been issued or paid in full
satisfaction of all rights pertaining to the shares of Warner-Lambert Common
Stock.
2.5 No Fractional Shares of AHP Common Stock.
(a) No certificates or scrip or shares of AHP
Common Stock representing fractional shares of AHP Common Stock or book-entry
credit of the same shall be issued upon the surrender for exchange of
Certificates and such fractional share interests will not entitle the owner
thereof to vote or to have any rights of a stockholder of AHP or a holder of
shares of AHP Common Stock.
(b) Notwithstanding any other provision of this
Agreement, each holder of shares of Warner-Lambert Common Stock exchanged
pursuant to the Merger who would otherwise have been entitled to receive a
fraction of a share of AHP Common Stock (after taking into account all
Certificates delivered by such holder) shall receive, in lieu thereof, cash
(without interest) in an amount equal to the product of (i) such fractional
part of a share of AHP Common Stock multiplied by (ii) the closing price for
a share of AHP Common Stock on the New York Stock Exchange, Inc. ("NYSE")
Composite Transactions Tape on the date of the Effective Time or, if such
date is not a Business Day, the Business Day immediately following the date
on which the Effective Time occurs. As promptly as practicable after the
determination of the amount of cash, if any, to be paid to holders of
fractional interests, the Exchange Agent shall so notify AHP, and AHP shall
cause the Surviving Corporation to deposit such amount with the Exchange
Agent and shall cause the Exchange Agent to forward payments to such holders
of fractional interests subject to and in accordance with the terms hereof.
2.6 Termination of Exchange Fund. Any portion
of the Exchange Fund which remains undistributed to the holders of
Certificates for six months after the Effective Time shall be delivered to
Newco or otherwise on the instruction of Newco, and any holders of the
Certificates who have not theretofore complied with this Article II shall
thereafter look only to Newco for the Merger Consideration with respect to
the shares of Warner-Lambert Common Stock formerly represented thereby to
which such holders are entitled pursuant to Section 1.8 and Section 2.2, any
9
<PAGE>
cash in lieu of fractional shares of AHP Common Stock to which such holders
are entitled pursuant to Section 2.5 and any dividends or distributions with
respect to shares of AHP Common Stock to which such holders are entitled
pursuant to Section 2.3. Any such portion of the Exchange Fund remaining
unclaimed by holders of shares of Warner-Lambert Common Stock five years
after the Effective Time (or such earlier date immediately prior to such time
as such amounts would otherwise escheat to or become property of any
Governmental Entity (as defined in Section 3.1(c)(iii)) shall, to the extent
permitted by law, become the property of the Surviving Corporation free and
clear of any claims or interest of any Person previously entitled thereto.
2.7 No Liability. None of AHP, Merger Sub,
Warner-Lambert, the Surviving Corporation or the Exchange Agent shall be
liable to any Person in respect of any Merger Consideration from the Exchange
Fund delivered to a public official pursuant to any applicable abandoned
property, escheat or similar law.
2.8 Investment of the Exchange Fund. The
Exchange Agent shall invest any cash included in the Exchange Fund as
directed by Newco on a daily basis; provided, that no such investment or loss
thereon shall affect the amounts payable to Warner-Lambert stockholders
pursuant to Article I and the other provisions of this Article II. Any
interest and other income resulting from such investments shall promptly be
paid to Newco.
2.9 Lost Certificates. If any Certificate shall
have been lost, stolen or destroyed, upon the making of an affidavit of that
fact by the Person claiming such Certificate to be lost, stolen or destroyed
and, if required by the Surviving Corporation, the posting by such Person of
a bond in such reasonable amount as the Surviving Corporation may direct as
indemnity against any claim that may be made against it with respect to such
Certificate, the Exchange Agent will deliver in exchange for such lost,
stolen or destroyed Certificate the applicable Merger Consideration with
respect to the shares of Warner-Lambert Common Stock formerly represented
thereby, any cash in lieu of fractional shares of AHP Common Stock, and
unpaid dividends and distributions on shares of AHP Common Stock deliverable
in respect thereof, pursuant to this Agreement.
2.10 Withholding Rights. Each of the Surviving
Corporation and AHP shall be entitled to deduct and withhold from the
consideration otherwise payable pursuant to this Agreement to any holder of
shares of Warner-Lambert Common Stock such amounts as it is required to
deduct and withhold with respect to the making of such payment under the Code
and the rules and regulations promulgated thereunder, or any provision of
state, local or foreign tax law. To the extent that amounts are so withheld
10
<PAGE>
by the Surviving Corporation or AHP, as the case may be, such withheld
amounts shall be treated for all purposes of this Agreement as having been
paid to the holder of the shares of Warner-Lambert Common Stock in respect of
which such deduction and withholding was made by the Surviving Corporation or
AHP, as the case may be.
2.11 Further Assurances. At and after the
Effective Time, the officers and directors of the Surviving Corporation will
be authorized to execute and deliver, in the name and on behalf of Warner-
Lambert or Merger Sub, any deeds, bills of sale, assignments or assurances
and to take and do, in the name and on behalf of Warner-Lambert or Merger
Sub, any other actions and things to vest, perfect or confirm of record or
otherwise in the Surviving Corporation any and all right, title and interest
in, to and under any of the rights, properties or assets acquired or to be
acquired by the Surviving Corporation as a result of, or in connection with,
the Merger.
2.12 Stock Transfer Books. The stock transfer
books of Warner-Lambert shall be closed immediately upon the Effective Time
and there shall be no further registration of transfers of shares of Warner-
Lambert Common Stock thereafter on the records of Warner-Lambert. On or
after the Effective Time, any Certificates presented to the Exchange Agent or
AHP for any reason shall be converted into the Merger Consideration with
respect to the shares of Warner-Lambert Common Stock formerly represented
thereby (including any cash in lieu of fractional shares of AHP Common Stock
to which the holders thereof are entitled pursuant to Section 2.5) and any
dividends or other distributions to which the holders thereof are entitled
pursuant to Section 2.3.
2.13 Affiliates. Notwithstanding anything to the
contrary herein, to the fullest extent permitted by law, no certificates
representing shares of AHP Common Stock or cash shall be delivered to a
Person who may be deemed an "affiliate" of Warner-Lambert in accordance with
Section 5.13 hereof for purposes of Rule 145 under the Securities Act of
1933, as amended (the "Securities Act"), or for purposes of qualifying the
Merger for pooling of interests accounting treatment under Opinion 16 of the
Accounting Principles Board and applicable rules and regulations of the
Securities and Exchange Commission (the "SEC") until such Person has executed
and delivered an Affiliate Agreement (as defined in Section 5.13) to AHP.
11
<PAGE>
ARTICLE III
REPRESENTATIONS AND WARRANTIES
3.1 Representations and Warranties of AHP.
Except as set forth in the AHP Disclosure Schedule delivered by AHP to
Warner-Lambert prior to the execution of this Agreement (the "AHP Disclosure
Schedule") (each section of which qualifies the correspondingly numbered
representation and warranty or covenant to the extent specified therein), AHP
represents and warrants to Warner-Lambert as follows:
(a) Organization, Standing and Power;
Subsidiaries.
(i) Each of AHP and each of its Subsidiaries (as
defined in Section 8.11) is a corporation duly organized, validly
existing and in good standing under the laws of its jurisdiction of
incorporation or organization, has the requisite power and authority
to own, lease and operate its properties and to carry on its business
as now being conducted, except where the failures to be so organized,
existing and in good standing or to have such power and authority, in
the aggregate, would not reasonably be expected to have a Material
Adverse Effect on AHP, and is duly qualified and in good standing to
do business in each jurisdiction in which the nature of its business
or the ownership or leasing of its properties makes such
qualification necessary other than in such jurisdictions where the
failures so to qualify or to be in good standing, in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on
AHP. The copies of the certificate of incorporation and bylaws of
AHP which were previously furnished or made available to Warner-
Lambert are true, complete and correct copies of such documents as in
effect on the date of this Agreement.
(ii) Exhibit 21 to AHP's Annual Report on Form
10-K for the year ended December 31, 1998 includes all the
Subsidiaries of AHP which as of the date of this Agreement are
Significant Subsidiaries (as defined in Rule 1-02 of Regulation S-X
of the SEC). All the outstanding shares of capital stock of, or
other equity interests in, each such Significant Subsidiary have been
validly issued and are fully paid and nonassessable and are, except
as set forth in Exhibit 21, owned directly or indirectly by AHP, free
and clear of all pledges, claims, liens, charges, encumbrances and
security interests of any kind or nature whatsoever (collectively
"Liens") and free of any other restriction (including any restriction
on the right to vote, sell or otherwise dispose of such capital stock
12
<PAGE>
or other ownership interests), except for restrictions imposed by
applicable securities laws. Except as set forth in the AHP SEC
Reports (as defined in Section 3.1(d)) filed prior to the date
hereof, as of the date of this Agreement, neither AHP nor any of its
Subsidiaries directly or indirectly owns any equity or similar
interest in, or any interest convertible into or exchangeable or
exercisable for, any corporation, partnership, joint venture or other
business association or entity (other than Subsidiaries), that is or
would reasonably be expected to be material to AHP and its
Subsidiaries taken as a whole.
(b) Capital Structure.
(i) As of October 31, 1999, the authorized
capital stock of AHP consisted of (A) 2,400,000,000 shares of AHP
Common Stock of which 1,305,717,877 shares were outstanding and
116,374,487 shares were held in the treasury of AHP and (B) 5,000,000
shares of Preferred Stock, par value $2.50 per share, of which 24,466
shares designated as $2 Convertible Preferred Stock (the "$2
Convertible Preferred Stock") were outstanding and of which 1,400,000
shares have been designated Series A Junior Participating Preferred
Stock and reserved for issuance upon exercise of the rights (the "AHP
Rights") distributed to the holders of AHP Common Stock pursuant to
the Rights Agreement, dated as of October 13, 1999 between AHP and
ChaseMellon Shareholder Services, L.L.C. (the "AHP Rights
Agreement"). As of October 31, 1999, AHP had reserved or has
available 880,776 shares of AHP Common Stock for issuance upon
conversion of the $2 Convertible Preferred Stock. Since October 31,
1999 to the date of this Agreement, there have been no issuances of
shares of the capital stock of AHP or any other securities of AHP
other than issuances of shares (and accompanying AHP Rights) upon
conversion of the $2 Convertible Preferred Stock or pursuant to
options or rights outstanding as of October 31, 1999 under the
Benefit Plans (as defined in Section 8.11(b)) of AHP. All issued and
outstanding shares of the capital stock of AHP are, and when shares
of AHP Common Stock are issued in the Merger or upon exercise of
stock options converted in the Merger pursuant to Section 1.9, such
shares will be, duly authorized, validly issued, fully paid and
nonassessable and free of any preemptive rights. There were
outstanding as of October 31, 1999 no options, warrants or other
rights to acquire capital stock from AHP other than (x) the AHP
Rights and (y) options, restricted stock and other rights to acquire
capital stock from AHP representing in the aggregate the right to
purchase approximately 87,479,042 shares of AHP Common Stock
(collectively, the "AHP Stock Options") under AHP's 1980 Stock Option
13
<PAGE>
Plan, AHP's 1985 Stock Option Plan, AHP's Management Incentive Plan,
AHP's 1990 Stock Incentive Plan, AHP's 1993 Stock Incentive Plan,
AHP's 1996 Stock Incentive Plan, 1999 Stock Incentive Plan, Stock
Option Plan for Non-Employee Directors and the 1994 Restricted Stock
Plan for Non-Employee Directors (collectively, the "AHP Stock Option
Plans"). Section 3.1(b) of the AHP Disclosure Schedule sets forth a
complete and correct list, as of October 31, 1999, of the number of
shares of AHP Common Stock subject to AHP Stock Options or other
rights to purchase or receive AHP Common Stock granted under the AHP
Benefit Plans or otherwise, the dates of grant and the exercise
prices thereof. No options or warrants or other rights to acquire
capital stock from AHP have been issued or granted since October 31,
1999 to the date of this Agreement.
(ii) No bonds, debentures, notes or other
indebtedness of AHP having the right to vote on any matters on which
holders of capital stock of AHP may vote ("AHP Voting Debt") are
issued or outstanding.
(iii) Except as otherwise set forth in this
Section 3.1(b) and as contemplated by Section 1.8 and Section 1.9, as
of the date of this Agreement, there are no securities, options,
warrants, calls, rights, commitments, agreements, arrangements or
undertakings of any kind to which AHP or any of its Subsidiaries is a
party or by which any of them is bound obligating AHP or any of its
Subsidiaries to issue, deliver or sell, or cause to be issued,
delivered or sold, additional shares of capital stock or other voting
securities of AHP or any of its Subsidiaries or obligating AHP or any
of its Subsidiaries to issue, grant, extend or enter into any such
security, option, warrant, call, right, commitment, agreement,
arrangement or undertaking. As of the date of this Agreement, there
are no outstanding obligations of AHP, any of its Subsidiaries or, to
the knowledge of AHP, any of its Majority Owned Restricted Affiliates
to repurchase, redeem or otherwise acquire any shares of capital
stock of AHP, any of its Subsidiaries or any of its Majority Owned
Restricted Affiliates.
(c) Authority; No Conflicts.
(i) AHP has all requisite corporate power and
authority to enter into this Agreement and the Stock Option
Agreements and to consummate the transactions contemplated hereby and
thereby, subject to obtaining the requisite stockholder approval of
the issuance of the shares of AHP Common Stock to be issued in the
Merger (the "Share Issuance") and the Certificate Amendment
14
<PAGE>
(collectively, the "AHP Stockholder Approval"). The execution and
delivery of this Agreement and the Stock Option Agreements and the
consummation of the transactions contemplated hereby and thereby have
been duly authorized by all necessary corporate action on the part of
AHP, subject to obtaining the AHP Stockholder Approval. This
Agreement and the Stock Option Agreements have been duly executed and
delivered by AHP and constitute valid and binding agreements of AHP,
enforceable against it in accordance with their respective terms,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution and delivery of this Agreement
and the Stock Option Agreements by AHP does not or will not, as the
case may be, and the consummation by AHP of the Merger and the other
transactions contemplated hereby and thereby will not, conflict with,
or result in any violation of, or constitute a default (with or
without notice or lapse of time, or both) under, or give rise to a
right of, or result by its terms in the, termination, amendment,
cancellation or acceleration of any obligation or the loss of a
material benefit under, or the creation of a lien, pledge, security
interest, charge or other encumbrance on, or the loss of, any assets,
including Intellectual Property (any such conflict, violation,
default, right of termination, amendment, cancellation or
acceleration, loss or creation, a "Violation") pursuant to: (A) any
provision of the certificate of incorporation or Bylaws of AHP, any
material Subsidiary of AHP or, to the knowledge of AHP, any of its
Majority Owned Restricted Affiliates, or (B) except as, in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on AHP, subject to obtaining or making the consents,
approvals, orders, authorizations, registrations, declarations and
filings referred to in paragraph (iii) below, any loan or credit
agreement, note, mortgage, bond, indenture, lease, benefit plan or
other agreement, obligation, instrument, permit, concession,
franchise, license, judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to AHP, any Subsidiary of AHP or, to
the knowledge of AHP, any of its Majority Owned Restricted
Affiliates, or their respective properties or assets.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any supranational,
national, state, municipal, local or foreign government, any
instrumentality, subdivision, court, administrative agency or
15
<PAGE>
commission or other authority thereof, or any quasi-governmental or
private body exercising any regulatory, taxing, importing or other
governmental or quasi-governmental authority (a "Governmental
Entity"), is required by or with respect to AHP or any Subsidiary of
AHP in connection with the execution and delivery of this Agreement
and the Stock Option Agreements by AHP or the consummation of the
Merger and the other transactions contemplated hereby and thereby,
except for those required under or in relation to (A) the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR
Act"), (B) state securities or "blue sky" laws (the "Blue Sky Laws"),
(C) the Securities Act, (D) the Exchange Act, (E) the DGCL with
respect to the filing of the Certificate of Merger, (F) rules and
regulations of the NYSE, (G) antitrust or other competition laws of
other jurisdictions, and (H) such consents, approvals, orders,
authorizations, registrations, declarations and filings the failures
of which to make or obtain, in the aggregate, would not reasonably be
expected to have a Material Adverse Effect on AHP. Consents,
approvals, orders, authorizations, registrations, declarations and
filings required under or in relation to any of the foregoing clauses
(A) through (G) are hereinafter referred to as "Necessary Consents".
(d) Reports and Financial Statements.
(i) AHP has filed all required registration
statements, prospectuses, reports, schedules, forms, statements and
other documents required to be filed by it with the SEC since January
1, 1998 (collectively, including all exhibits thereto, the "AHP SEC
Reports"). No Subsidiary of AHP is required to file any form,
report, registration statement, prospectus or other document with the
SEC. None of the AHP SEC Reports, as of their respective dates (and,
if amended or superseded by a filing prior to the date of this
Agreement or the Closing Date, then on the date of such filing),
contained or will contain any untrue statement of a material fact or
omitted or will omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in
the AHP SEC Reports presents fairly, in all material respects, the
consolidated financial position and consolidated results of
operations and cash flows of AHP and its consolidated Subsidiaries as
of the respective dates or for the respective periods set forth
therein, all in conformity with GAAP consistently applied during the
periods involved except as otherwise noted therein, and subject, in
the case of the unaudited interim financial statements, to the
absence of notes and normal year-end adjustments that have not been
16
<PAGE>
and are not expected to be material in amount. All of such AHP SEC
Reports, as of their respective dates (and as of the date of any
amendment to the respective AHP SEC Report), complied as to form in
all material respects with the applicable requirements of the
Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except as disclosed in the AHP SEC Reports
filed prior to the date hereof, since December 31, 1998, AHP and its
Subsidiaries have not incurred any liabilities that are of a nature
that would be required to be disclosed on a balance sheet of AHP and
its Subsidiaries or the footnotes thereto prepared in conformity with
GAAP, other than (A) liabilities incurred in the ordinary course of
business or (B) liabilities that, in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on AHP.
(e) Information Supplied.
(i) None of the information supplied or to be
supplied by AHP for inclusion or incorporation by reference in (A)
the Form S-4 (as defined in Section 5.1) will, at the time the Form
S-4 is filed with the SEC, at any time it is amended or supplemented
or at the time it becomes effective under the Securities Act, contain
any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading and (B) the Joint Proxy
Statement/Prospectus (as defined in Section 5.1) will, on the date it
is first mailed to Warner-Lambert stockholders or AHP stockholders or
at the time of the Warner-Lambert Stockholders Meeting or the AHP
Stockholders Meeting (each as defined in Section 5.1), contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they
were made, not misleading. The Form S-4 and the Joint Proxy
Statement/Prospectus will comply as to form in all material respects
with the requirements of the Exchange Act and the Securities Act and
the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of
this Section 3.1(e), no representation or warranty is made by AHP
with respect to statements made or incorporated by reference in the
Form S-4 or the Joint Proxy Statement/Prospectus based on information
supplied by Warner-Lambert for inclusion or incorporation by
reference therein.
17
<PAGE>
(f) Board Approval. The Board of Directors of
AHP, by resolutions duly adopted by unanimous vote at a meeting duly called
and held and not subsequently rescinded or modified in any way (the "AHP
Board Approval"), has duly (i) determined that this Agreement and the Merger
and the AHP Stock Option Agreement are fair to and in the best interests of
AHP and its stockholders, (ii) approved this Agreement, the AHP Stock Option
Agreement, the Merger, the Certificate Amendment, the amendments to the
bylaws of AHP provided for in Section 1.6(b) hereto and the Share Issuance
and (iii) recommended that the stockholders of AHP approve the Share
Issuance, the AHP Bylaw Amendment and adopt the Certificate Amendment and
directed that the Certificate Amendment, the AHP Bylaw Amendment and the
Share Issuance be submitted for consideration by AHP's stockholders at the
AHP Stockholders Meeting. The AHP Board Approval constitutes approval of
this Agreement, the AHP Stock Option Agreement and the Merger for purposes of
Section 203 of the DGCL. To the knowledge of AHP, except for Section 203 of
the DGCL (which has been rendered inapplicable), no state takeover statute is
applicable to this Agreement, the AHP Stock Option Agreement or the Merger or
the other transactions contemplated hereby or thereby.
(g) Vote Required. The adoption of the
Certificate Amendment by (i) the holders of a majority of the outstanding
shares of AHP Common Stock and $2 Convertible Preferred Stock, voting
together as a single class, and (ii) the holders of a majority of the
outstanding shares of AHP Common Stock voting as a separate class, and the
approval of the Stock Issuance by a majority of the votes cast thereon by the
holders of shares of AHP Common Stock and shares of $2 Convertible Preferred
Stock, voting together as a single class, are the only votes of the holders
of any class or series of AHP capital stock necessary to approve the
transactions contemplated by the Merger Agreement, including, the Certificate
Amendment and the Share Issuance.
(h) Litigation; Compliance with Laws.
(i) Except as disclosed in the AHP SEC Reports
filed prior to the date of this Agreement, there are no suits,
actions or proceedings (collectively "Actions") pending or, to the
knowledge of AHP, threatened, against or affecting AHP or any
Subsidiary of AHP which, in the aggregate, would reasonably be
expected to have a Material Adverse Effect on AHP, nor are there any
judgments, decrees, injunctions, rules or orders of any Governmental
Entity or arbitrator outstanding against AHP or any Subsidiary of AHP
which, in the aggregate, would reasonably be expected to have a
Material Adverse Effect on AHP.
18
<PAGE>
(ii) Except as disclosed in the AHP SEC Reports
filed prior to the date of this Agreement and except as, in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on AHP, AHP and its Subsidiaries hold all permits,
licenses, variances, exemptions, orders and approvals of all
Governmental Entities which are necessary for the operation of the
businesses of AHP and its Subsidiaries, taken as a whole (the "AHP
Permits"). AHP and its Subsidiaries are in compliance with the terms
of the AHP Permits, except where the failures to so comply, in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on AHP. Except as disclosed in the AHP SEC Reports
filed prior to the date of this Agreement, neither AHP nor its
Subsidiaries is in violation of, and AHP and its Subsidiaries have
not received any notices of violations with respect to, any laws,
ordinances or regulations of any Governmental Entity, except for
violations which, in the aggregate, would not reasonably be expected
to have a Material Adverse Effect on AHP.
(iii) As of the date of this Agreement, AHP has
provided to Warner-Lambert prior to the execution of this Agreement
all information known to AHP which is relevant and material to an
assessment of the liability exposure of AHP and its Subsidiaries with
respect to the matters referred to in clauses (I) and (II) of the
proviso in the definition of Material Adverse Effect as to which
Warner-Lambert has requested such information prior to the date
hereof. As of the date hereof, there is no information relating to
the litigation matters and Actions disclosed in the AHP SEC Reports
or included on the AHP Disclosure Schedule as to which Warner-Lambert
has requested such information, including the matters referred to in
the preceding sentence (the "AHP Specified Litigation Matters") in
the possession of AHP, its Subsidiaries or their counsel not
heretofore provided to Warner-Lambert which, in the aggregate, would
reasonably be expected to have a Material Adverse Effect.
(i) Absence of Certain Changes or Events.
Except for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, except as disclosed in the AHP SEC Reports
filed prior to the date of this Agreement, and except as permitted by Section
4.1, since December 31, 1998, (i) AHP and its Subsidiaries have conducted
their business only in the ordinary course and (ii) there has not been any
action taken by AHP or any of its Subsidiaries during the period from
December 31, 1998 through the date of this Agreement that, if taken during
the period from the date of this Agreement through the Effective Time, would
constitute a breach of Section 4.1. Except as disclosed in the AHP SEC
Reports filed prior to the date of this Agreement, since December 31, 1998
19
<PAGE>
(or in the event the second proviso in the definition of Material Adverse
Effect is applicable (and accordingly so that the exclusion in the first
proviso of the definition of Material Adverse Effect is inoperative with
respect to Section 3.1(i)) in the case of matters referred to in clauses (I)
and (II) of the proviso in the definition of Material Adverse Effect, since
the date of the Agreement), there have not been any changes, circumstances or
events (including changes, circumstances or events involving, impacting or
related to development stage products of AHP) which, in the aggregate, have
had, or would reasonably be expected to have, a Material Adverse Effect on
AHP.
(j) Environmental Matters. Except as, in the
aggregate, would not reasonably be expected to have a Material Adverse
Effect on AHP and except as disclosed in the AHP SEC Reports filed prior to
the date of this Agreement (i) the operations of AHP and its Subsidiaries
have been and are in compliance with all Environmental Laws (as defined
below), and with all licenses required by Environmental Laws, (ii) there are
no pending or, to the knowledge of AHP, threatened, Actions under or pursuant
to Environmental Laws against AHP or its Subsidiaries or involving any real
property currently or, to the knowledge of AHP, formerly owned, operated or
leased by AHP or its Subsidiaries, (iii) AHP and its Subsidiaries are not
subject to any Environmental Liabilities (as defined below), and, to the
knowledge of AHP, no facts, circumstances or conditions relating to, arising
from, associated with or attributable to any real property currently or, to
the knowledge of AHP, formerly owned, operated or leased by AHP or its
Subsidiaries or operations thereon would reasonably be expected to result in
Environmental Liabilities, (iv) all real property owned and to the knowledge
of AHP all real property operated or leased by AHP or its Subsidiaries is
free of contamination from Hazardous Material (as defined below) that would
have an adverse effect on human health or the environment and (v) there is
not now, nor, to the knowledge of AHP, has there been in the past, on, in or
under any real property owned, leased or operated by AHP or any of its
predecessors (a) any underground storage tanks regulated pursuant to 40
C.F.R. Part 280 or delegated state programs, dikes or impoundments containing
more than a reportable quantity of Hazardous Materials, (b) any friable
asbestos-containing materials or (c) any polychlorinated biphenyls.
As used in this Agreement, "Environmental Laws"
means any and all federal, state, foreign, interstate, local or municipal
laws, rules, orders, regulations, statutes, ordinances, codes, decisions,
injunctions, orders, decrees, requirements of any Governmental Entity, any
and all common law requirements, rules and bases of liability regulating,
relating to or imposing liability or standards of conduct concerning
pollution, Hazardous Materials or protection of human health, safety or the
environment, as currently in effect and includes the Comprehensive
20
<PAGE>
Environmental Response, Compensation and Liability Act, 42 U.S.C.
Section 9601 et seq., the Hazardous Materials Transportation Act, 49 U.S.C.
Section 1801 et seq., the Resource Conservation and Recovery Act, 42 U.S.C.
Section 6901 et seq., the Clean Water Act, 33 U.S.C. Section 1251 et seq.,
the Clean Air Act, 33 U.S.C. Section 2601 et seq., the Toxic Substances
Control Act, 15 U.S.C. Section 2601 et seq., the Federal Insecticide,
Fungicide and Rodenticide Act, 7 U.S.C., Section 136 et seq., Occupational
Safety and Health Act 29 U.S.C. Section 651 et seq. and the Oil Pollution Act
of 1990, 33 U.S.C. Section 2701 et seq., as such laws have been amended or
supplemented, and the regulations promulgated pursuant thereto, and all
analogous state or local statutes. As used in this Agreement, "Environmental
Liabilities" with respect to any person means any and all liabilities of or
relating to such person or any of its Subsidiaries (including any entity
which is, in whole or in part, a predecessor of such person or any of such
Subsidiaries), whether vested or unvested, contingent or fixed, actual or
potential, known or unknown, which (i) arise under or relate to matters
covered by Environmental Laws and (ii) relate to actions occurring or
conditions existing on or prior to the Closing Date. As used in this
Agreement, "Hazardous Materials" means any materials or wastes, defined,
listed, classified or regulated as hazardous, toxic, a pollutant, a
contaminant or dangerous in or under any Environmental Laws which includes
petroleum, petroleum products, friable asbestos, urea formaldehyde,
radioactive materials and polychlorinated biphenyls.
(k) Intellectual Property. Except as, in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
on AHP and except as disclosed in the AHP SEC Reports filed prior to the date
of the Agreement: (a) AHP and each of its Subsidiaries owns, or is licensed
to use (in each case, free and clear of any Liens), all Intellectual Property
(as defined below) used in or necessary for the conduct of its business as
currently conducted; (b) the use of any Intellectual Property by AHP and its
Subsidiaries does not infringe on or otherwise violate the rights of any
Person and is in accordance with any applicable license pursuant to which AHP
or any Subsidiary acquired the right to use any Intellectual Property; (c) to
the knowledge of AHP, no Person is challenging, infringing on or otherwise
violating any right of AHP or any of its Subsidiaries with respect to any
Intellectual Property owned by and/or licensed to AHP or its Subsidiaries;
and (d) neither AHP nor any of its Subsidiaries has received any written
notice or otherwise has knowledge of any pending claim, order or proceeding
with respect to any Intellectual Property used by AHP and its Subsidiaries
and to its knowledge no Intellectual Property owned and/or licensed by AHP or
its Subsidiaries is being used or enforced in a manner that would reasonably
be expected to result in the abandonment, cancellation or unenforceability of
such Intellectual Property. For purposes of this Agreement, "Intellectual
Property" shall mean trademarks, service marks, brand names, certification
21
<PAGE>
marks, trade dress and other indications of origin, the goodwill associated
with the foregoing and registrations in any jurisdiction of, and applications
in any jurisdiction to register, the foregoing, including any extension,
modification or renewal of any such registration or application; inventions,
discoveries and ideas, whether patentable or not, in any jurisdiction;
patents, applications for patents (including, without limitation, divisions,
continuations, continuations in part and renewal applications), and any
renewals, extensions or reissues thereof, in any jurisdiction; nonpublic
information, trade secrets and confidential information and rights in any
jurisdiction to limit the use or disclosure thereof by any person; writings
and other works, whether copyrightable or not, in any jurisdiction; and
registrations or applications for registration of copyrights in any
jurisdiction, and any renewals or extensions thereof; any similar
intellectual property or proprietary rights.
(l) Brokers or Finders. No agent, broker,
investment banker, financial advisor or other firm or Person is or will be
entitled to any broker's or finder's fee or any other similar commission or
fee in connection with any of the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of AHP, except Chase Securities
Inc. and Morgan Stanley & Co. Incorporated, each of whose fees and expenses
will be paid by AHP in accordance with AHP's agreements with such firms,
copies of which have been provided to Warner-Lambert.
(m) Opinions of AHP Financial Advisors. AHP has
received the opinions of Chase Securities Inc. and Morgan Stanley & Co.
Incorporated, each dated the date of this Agreement, to the effect that, as
of such date, the Exchange Ratio is fair, from a financial point of view, to
AHP and its stockholders, a copy of which opinions have been made available
to Warner-Lambert.
(n) Accounting Matters. To the knowledge of
AHP, neither AHP nor any of its affiliates has taken or agreed to take any
action, and no fact or circumstance is known to AHP, that would prevent AHP
from accounting for the Merger as a "pooling of interests". At or prior to
the date hereof, AHP has received a letter from its independent public
accountants addressed to AHP, with a copy to Warner-Lambert, to the effect
that, based upon representations provided by AHP and Warner-Lambert and a
poolability letter from the independent public accountants of Warner-Lambert,
accounting for the Merger as a pooling of interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations is
appropriate if the Merger is consummated and closed as contemplated by this
Agreement.
22
<PAGE>
(o) Taxes. Each of AHP and its Subsidiaries has
filed all Tax Returns required to have been filed (or extensions have been
duly obtained) and has paid all Taxes required to have been paid by it,
except where failure to file such Tax Returns or pay such Taxes would not, in
the aggregate, reasonably be expected to have a Material Adverse Effect on
AHP. For purposes of this Agreement: (i) "Tax" (and, with correlative
meaning, "Taxes") means any federal, state, local or foreign income, gross
receipts, property, sales, use, license, excise, franchise, employment,
payroll, withholding, alternative or add on minimum, ad valorem, transfer or
excise tax, or any other tax, custom, duty, governmental fee or other like
assessment or charge of any kind whatsoever, together with any interest or
penalty, imposed by any governmental authority or any obligation to pay Taxes
imposed on any entity for which a party to this Agreement is liable as a
result of any indemnification provision or other contractual obligation, and
(ii) "Tax Return" means any return, report or similar statement required to
be filed with respect to any Tax (including any attached schedules),
including, without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax.
(p) Certain Contracts. As of the date hereof,
except as set forth in the AHP SEC Reports filed prior to the date of this
Agreement, neither AHP nor any of its Subsidiaries is a party to or bound by
(i) any "material contracts" (as such term is defined in Item 601(b)(10) of
Regulation S-K of the SEC) or (ii) any non-competition agreements or any
other agreements or arrangements that limit or otherwise restrict AHP or any
of its Subsidiaries or any of their respective affiliates or any successor
thereto, or that would, after the Effective Time, to the knowledge of AHP,
limit or restrict Newco or any of its affiliates (including the Surviving
Corporation) or any successor thereto, from engaging or competing in any line
of business or in any geographic area, which agreements or arrangements, in
the aggregate, would reasonably be expected to have a Material Adverse Effect
on Newco and its Subsidiaries (including the Surviving Corporation and its
Subsidiaries), taken together, after giving effect to the Merger.
(q) AHP Stockholder Rights Plan. The Board of
Directors of AHP has amended the AHP Rights Agreement in accordance with its
terms to render it inapplicable to the transactions contemplated by this
Agreement and the AHP Stock Option Agreement. AHP has delivered to Warner-
Lambert a true and correct copy of the AHP Rights Agreement, as amended, in
effect as of execution and delivery of this Agreement.
3.2 Representations and Warranties of Warner-
Lambert. Except as set forth in the Warner-Lambert Disclosure Schedule
delivered by Warner-Lambert to AHP prior to the execution of this Agreement
(the "Warner-Lambert Disclosure Schedule") (each section of which qualifies
23
<PAGE>
the correspondingly numbered representation and warranty or covenant to the
extent specified therein), Warner-Lambert represents and warrants to AHP as
follows:
(a) Organization, Standing and Power;
Subsidiaries.
(i) Each of Warner-Lambert and
each of its Subsidiaries is a corporation
duly organized, validly existing and in good
standing under the laws of its jurisdiction
of incorporation or organization, has the
requisite power and authority to own, lease
and operate its properties and to carry on
its business as now being conducted, except
where the failures to be so organized,
existing and in good standing or to have
such power and authority, in the aggregate,
would not reasonably be expected to have a
Material Adverse Effect on Warner-Lambert
and is duly qualified and in good standing
to do business in each jurisdiction in which
the nature of its business or the ownership
or leasing of its properties makes such
qualification necessary other than in such
jurisdictions where the failures so to
qualify or to be in good standing in the
aggregate would not reasonably be expected
to have a Material Adverse Effect on Warner-
Lambert. The copies of the certificate of
incorporation and Bylaws of Warner-Lambert
which were previously furnished or made
available to AHP are true, complete and
correct copies of such documents as in
effect on the date of this Agreement.
(ii) Exhibit 21 to Warner-
Lambert's Annual Report on Form 10-K for the
year ended December 31, 1998 includes all
the Subsidiaries of Warner-Lambert which as
of the date of this Agreement are
Significant Subsidiaries (as defined in Rule
1-02 of Regulation S-X of the SEC). All the
outstanding shares of capital stock of, or
other equity interests in, each such
24
<PAGE>
Significant Subsidiary have been validly
issued and are fully paid and nonassessable
and are, except as set forth in Exhibit 21,
owned directly or indirectly by Warner-
Lambert, free and clear of all Liens and
free of any other restriction (including any
restriction on the right to vote, sell or
otherwise dispose of such capital stock or
other ownership interests), except for
restrictions imposed by applicable
securities laws. Except as set forth in the
Warner-Lambert SEC Reports (as defined in
Section 3.2(d)) filed prior to the date
hereof, neither Warner-Lambert nor any of
its Subsidiaries directly or indirectly owns
any equity or similar interest in, or any
interest convertible into or exchangeable or
exercisable for, any corporation,
partnership, joint venture or other business
association or entity (other than
Subsidiaries), that is or would reasonably
be expected to be material to Warner-Lambert
and its Subsidiaries taken as a whole.
(b) Capital Structure.
(i) As of October 31, 1999, the authorized
capital stock of Warner-Lambert consisted of (A) 1,200,000,000 shares
of Warner-Lambert Common Stock, of which 858,661,329 shares were
outstanding and 103,320,279 shares were held in the treasury of
Warner-Lambert and (B) 5,000,000 shares of Preferred Stock, par value
$1.00 per share, none of which were outstanding and 400,000 shares of
which have been designated Series A Junior Participating Preferred
Stock and reserved for issuance upon exercise of the rights (the
"Warner-Lambert Rights") distributed to the holders of Warner-Lambert
Common Stock pursuant to the Rights Agreement dated as of March 25,
1997, between Warner-Lambert and First Chicago Trust Company of New
York (the "Warner-Lambert Rights Agreement"). Since October 31, 1999
to the date of this Agreement, there have been no issuances of shares
of the capital stock of Warner-Lambert or any other securities of
Warner-Lambert other than issuances of shares (and accompanying
Warner-Lambert Rights) pursuant to options or rights outstanding as
of October 31, 1999 under the Benefit Plans of Warner-Lambert. All
issued and outstanding shares of the capital stock of Warner-Lambert
are duly authorized, validly issued, fully paid and nonassessable,
25
<PAGE>
and no class of capital stock is entitled to preemptive rights.
There were outstanding as of October 31, 1999 no options, warrants or
other rights to acquire capital stock from Warner-Lambert other than
(x) the Warner-Lambert Rights and (y) options and other rights to
acquire capital stock of Warner-Lambert representing in the aggregate
the right to purchase 75,056,685 shares of Warner-Lambert Common
Stock (collectively, the "Warner-Lambert Stock Options") under the
1989 Stock Plan, the 1992 Stock Plan, the 1996 Stock Plan, the
Restricted Stock Plan for Directors and the Deferred Compensation
Plan for Directors (collectively, the "Warner-Lambert Stock Option
Plans"). Except in connection with pre-employment grants of Warner-
Lambert Stock Options made in a manner consistent with past practice
to purchase, in the aggregate, not more than 5,000 shares of Warner-
Lambert Common Stock, Section 3.2(b) of the Warner-Lambert Disclosure
Schedule sets forth a complete and correct list, as of October 31,
1999, of the number of shares of Warner-Lambert Common Stock subject
to Warner-Lambert Stock Options or other rights to purchase or
receive Warner-Lambert Common Stock granted under the Warner-Lambert
Benefit Plans or otherwise, the dates of grant and the exercise
prices thereof. Except in connection with pre-employment grants of
Warner-Lambert Stock Options made in a manner consistent with past
practice to purchase, in the aggregate, not more than 5,000 shares of
Warner-Lambert Common Stock, no options or warrants or other rights
to acquire capital stock from Warner-Lambert have been issued or
granted since October 31, 1999 to the date of this Agreement.
(ii) No bonds, debentures, notes or other
indebtedness of Warner-Lambert having the right to vote on any
matters on which stockholders may vote ("Warner-Lambert Voting Debt")
are issued or outstanding.
(iii) Except as otherwise set forth in this
Section 3.2(b), as of the date of this Agreement, there are no
securities, options, warrants, calls, rights, commitments,
agreements, arrangements or undertakings of any kind to which Warner-
Lambert or any of its Subsidiaries is a party or by which any of them
is bound obligating Warner-Lambert or any of its Subsidiaries to
issue, deliver or sell, or cause to be issued, delivered or sold,
additional shares of capital stock or other voting securities of
Warner-Lambert or any of its Subsidiaries or obligating Warner-
Lambert or any of its Subsidiaries to issue, grant, extend or enter
into any such security, option, warrant, call, right, commitment,
agreement, arrangement or undertaking. As of the date of this
Agreement, there are no outstanding obligations of Warner-Lambert,
any of its Subsidiaries or to the knowledge of Warner-Lambert, any of
26
<PAGE>
its Majority Owned Restricted Affiliates to repurchase, redeem or
otherwise acquire any shares of capital stock of Warner-Lambert, any
of its Subsidiaries or, to the knowledge of Warner-Lambert, any of
its Majority Owned Restricted Affiliates.
(c) Authority; No Conflicts.
(i) Warner-Lambert has all requisite corporate
power and authority to enter into this Agreement and the Stock Option
Agreements and to consummate the transactions contemplated hereby and
thereby, subject in the case of the consummation of the Merger to the
adoption of this Agreement by the Required Warner-Lambert Vote (as
defined in Section 3.2(g)). The execution and delivery of this
Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly authorized by all necessary
corporate action on the part of Warner-Lambert, subject in the case
of the consummation of the Merger to the adoption of this Agreement
by the Required Warner-Lambert Vote. This Agreement and the Stock
Option Agreements have been duly executed and delivered by Warner-
Lambert and constitute valid and binding agreements of Warner-
Lambert, enforceable against it in accordance with their respective
terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and similar laws relating to
or affecting creditors generally or by general equity principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law).
(ii) The execution and delivery of this Agreement
and the Stock Option Agreements by Warner-Lambert does not or will
not, as the case may be, and the consummation by Warner-Lambert of
the Merger and the other transactions contemplated hereby and thereby
will not, conflict with, or result in a Violation pursuant to: (A)
any provision of the certificate of incorporation or Bylaws of
Warner-Lambert, any material Subsidiary of Warner-Lambert or, to the
knowledge of Warner-Lambert, any of its Majority Owned Restricted
Affiliates or (B) except as, in the aggregate, would not reasonably
be expected to have a Material Adverse Effect on Warner-Lambert or,
subject to obtaining or making the consents, approvals, orders,
authorizations, registrations, declarations and filings referred to
in paragraph (iii) below, any loan or credit agreement, note,
mortgage, bond, indenture, lease, benefit plan or other agreement,
obligation, instrument, permit, concession, franchise, license,
judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to Warner-Lambert, any Subsidiary of Warner-Lambert or, to
27
<PAGE>
the knowledge of Warner-Lambert, any of its Majority Owned Restricted
Affiliates or their respective properties or assets.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental
Entity is required by or with respect to Warner-Lambert or any
Subsidiary of Warner-Lambert in connection with the execution and
delivery of this Agreement and the Stock Option Agreements by Warner-
Lambert or the consummation of the Merger and the other transactions
contemplated hereby and thereby, except the Necessary Consents and
such consents, approvals, orders, authorizations, registrations,
declarations and filings the failure of which to make or obtain, in
the aggregate, would not reasonably be expected to have a Material
Adverse Effect on Warner-Lambert.
(d) Reports and Financial Statements.
(i) Warner-Lambert has filed all required
registration statements, prospectuses, reports, schedules, forms,
statements and other documents required to be filed by it with the
SEC since January 1, 1998 (collectively, including all exhibits
thereto, the "Warner-Lambert SEC Reports"). No Subsidiary of Warner-
Lambert is required to file any form, report, registration statement
or prospectus or other document with the SEC. None of the Warner-
Lambert SEC Reports, as of their respective dates (and, if amended or
superseded by a filing prior to the date of this Agreement or the
Closing Date, then on the date of such filing), contained or will
contain any untrue statement of a material fact or omitted or will
omit to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. Each of
the financial statements (including the related notes) included in
the Warner-Lambert SEC Reports presents fairly, in all material
respects, the consolidated financial position and consolidated
results of operations and cash flows of Warner-Lambert and its
consolidated Subsidiaries as of the respective dates or for the
respective periods set forth therein, all in conformity with GAAP
consistently applied during the periods involved except as otherwise
noted therein, and subject, in the case of the unaudited interim
financial statements, to the absence of notes and normal and
recurring year-end adjustments that have not been and are not
expected to be material in amount. All of such Warner-Lambert SEC
Reports, as of their respective dates (and as of the date of any
amendment to the respective Warner-Lambert SEC Report), complied as
to form in all material respects with the applicable requirements of
28
<PAGE>
the Securities Act and the Exchange Act and the rules and regulations
promulgated thereunder.
(ii) Except as disclosed in the Warner-Lambert
SEC Reports filed prior to the date hereof, since December 31, 1998,
Warner-Lambert and its Subsidiaries have not incurred any liabilities
that are of a nature that would be required to be disclosed on a
balance sheet of Warner-Lambert and its Subsidiaries or the footnotes
thereto prepared in conformity with GAAP, other than (A) liabilities
incurred in the ordinary course of business or (B) liabilities that,
in the aggregate, would not reasonably be expected to have a Material
Adverse Effect on Warner-Lambert.
(e) Information Supplied.
(i) None of the information supplied or to be
supplied by Warner-Lambert for inclusion or incorporation by
reference in (A) the Form S-4 will, at the time the Form S-4 is filed
with the SEC, at any time it is amended or supplemented or at the
time it becomes effective under the Securities Act, contain any
untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary to make the
statements therein not misleading, and (B) the Joint Proxy
Statement/Prospectus will, on the date it is first mailed to Warner-
Lambert stockholders or AHP stockholders or at the time of the
Warner-Lambert Stockholders Meeting or the AHP Stockholders Meeting,
contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under
which they were made, not misleading. The Form S-4 and the Joint
Proxy Statement/Prospectus will comply as to form in all material
respects with the requirements of the Exchange Act and the Securities
Act and the rules and regulations of the SEC thereunder.
(ii) Notwithstanding the foregoing provisions of
this Section 3.2(e), no representation or warranty is made by Warner-
Lambert with respect to statements made or incorporated by reference
in the Form S-4 or the Joint Proxy Statement/Prospectus based on
information supplied by AHP or Merger Sub for inclusion or
incorporation by reference therein.
(f) Board Approval. The Board of Directors of
Warner-Lambert, by resolutions duly adopted by unanimous vote of those voting
at a meeting duly called and held and not subsequently rescinded or modified
in any way (the "Warner-Lambert Board Approval"), has duly (i) determined
29
<PAGE>
that this Agreement and the Merger and the Warner-Lambert Stock Option
Agreement are fair to and in the best interests of Warner-Lambert and its
stockholders, (ii) approved this Agreement, the Warner-Lambert Stock Option
Agreement and the Merger and (iii) recommended that the stockholders of
Warner-Lambert adopt this Agreement and approve the Merger and directed that
this Agreement and the transactions contemplated hereby be submitted for
consideration by Warner-Lambert's stockholders at the Warner-Lambert
Stockholders Meeting. The Warner-Lambert Board Approval constitutes approval
of this Agreement, the Warner-Lambert Stock Option Agreement and the Merger
for purposes of Section 203 of the DGCL. To the knowledge of Warner-Lambert,
except for Section 203 of the DGCL (which has been rendered inapplicable), no
state takeover statute is applicable to this Agreement, the Warner-Lambert
Stock Option Agreement or the Merger or the other transactions contemplated
hereby or thereby.
(g) Vote Required. The affirmative vote of the
holders of a majority of the outstanding shares of Warner-Lambert Common
Stock to adopt this Agreement and approve the Merger (the "Required Warner-
Lambert Vote") is the only vote of the holders of any class or series of
Warner-Lambert capital stock necessary to adopt this Agreement and approve
the Merger and the other transactions contemplated hereby.
(h) Litigation; Compliance with Laws.
(i) Except as disclosed in the Warner-Lambert
SEC Reports filed prior to the date of this Agreement, there are no
Actions pending or, to the knowledge of Warner-Lambert, threatened,
against or affecting Warner-Lambert or any Subsidiary of Warner-
Lambert which, in the aggregate, would reasonably be expected to have
a Material Adverse Effect on Warner-Lambert, nor are there any
judgments, decrees, injunctions, rules or orders of any Governmental
Entity or arbitrator outstanding against Warner-Lambert or any
Subsidiary of Warner-Lambert which, in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Warner-
Lambert.
(ii) Except as disclosed in the Warner-Lambert
SEC Reports filed prior to the date of the Agreement and except as
would, in the aggregate, not reasonably be expected to have a
Material Adverse Effect on Warner-Lambert, Warner-Lambert and its
Subsidiaries hold all permits, licenses, variances, exemptions,
orders and approvals of all Governmental Entities necessary for the
operation of the businesses of Warner-Lambert and its Subsidiaries,
taken as a whole (the "Warner-Lambert Permits"). Warner-Lambert and
its Subsidiaries are in compliance with the terms of the Warner-
30
<PAGE>
Lambert Permits, except where the failures to so comply, in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on Warner-Lambert. Except as disclosed in the Warner-
Lambert SEC Reports filed prior to the date of this Agreement,
neither Warner-Lambert nor its Subsidiaries is in violation of, and
Warner-Lambert and its Subsidiaries have not received any notices of
violations with respect to, any laws, ordinances or regulations of
any Governmental Entity, except for violations which, in the
aggregate, would not reasonably be expected to have a Material
Adverse Effect on Warner-Lambert.
(iii) As of the date hereof, there is no
information relating to litigation matters disclosed in the Warner-
Lambert SEC Reports or included on the Warner-Lambert Disclosure
Schedule as to which AHP has requested such information (the "Warner-
Lambert Specified Litigation Matters") in the possession of Warner-
Lambert, its Subsidiaries or their counsel not heretofore provided to
AHP which, in the aggregate, would reasonably be expected to have a
Material Adverse Effect.
(i) Absence of Certain Changes or Events.
Except for liabilities incurred in connection with this Agreement or the
transactions contemplated hereby, except as disclosed in the Warner-Lambert
SEC Reports filed prior to the date of this Agreement, and except as
permitted by Section 4.2, since December 31, 1998, (i) Warner-Lambert and its
Subsidiaries have conducted their business only in the ordinary course and
(ii) there has not been any action taken by Warner-Lambert or any of its
Subsidiaries during the period from December 31, 1998 through the date of
this Agreement that, if taken during the period from the date of this
Agreement through the Effective Time, would constitute a breach of Section
4.2. Except as disclosed in the Warner-Lambert SEC Reports filed prior to
the date of this Agreement, since December 31, 1998, there have not been any
changes, circumstances or events (including changes, circumstances or events
involving, impacting or related to development stage products of Warner-
Lambert) which, in the aggregate, have had, or would reasonably be expected
to have, a Material Adverse Effect on Warner-Lambert.
(j) Environmental Matters. Except as, in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
on Warner-Lambert and except as disclosed in the Warner-Lambert SEC Reports
filed prior to the date of this Agreement, (i) the operations of Warner-
Lambert and its Subsidiaries have been and are in compliance with all
Environmental Laws and with all licenses required by Environmental Laws (ii)
there are no pending or, to the knowledge of Warner-Lambert, threatened,
Actions under or pursuant to Environmental Laws against Warner-Lambert or its
31
<PAGE>
Subsidiaries or involving any real property currently or, to the knowledge of
Warner-Lambert, formerly owned, operated or leased by Warner-Lambert or its
Subsidiaries, (iii) Warner-Lambert and its Subsidiaries are not subject to
any Environmental Liabilities and, to the knowledge of Warner-Lambert, no
facts, circumstances or conditions relating to, arising from, associated with
or attributable to any real property currently or, to the knowledge of
Warner-Lambert, formerly owned, operated or leased by Warner-Lambert or its
Subsidiaries or operations thereon would reasonably be expected to result in
Environmental Liabilities, (iv) all real property owned and to the knowledge
of Warner-Lambert all real property operated or leased by Warner-Lambert or
its Subsidiaries is free of contamination from Hazardous Material that would
have an adverse effect on human health or the environment and (v) there is
not now, nor, to the knowledge of Warner-Lambert, has there been in the past,
on, in or under any real property owned, leased or operated by Warner-Lambert
or any of its predecessors (a) any underground storage tanks, regulated
pursuant to 40 C.F.R. Part 280 or delegated state programs, dikes or
impoundments containing more than a reportable quantity of Hazardous
Materials, (b) any friable asbestos-containing materials or (c) any
polychlorinated biphenyls.
(k) Intellectual Property. Except as, in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
on Warner-Lambert and except as disclosed in the Warner-Lambert SEC Reports
filed prior to the date of this Agreement, (a) Warner-Lambert and each of its
Subsidiaries owns, or is licensed to use (in each case, free and clear of any
Liens), all Intellectual Property used in or necessary for the conduct of its
business as currently conducted; (b) the use of any Intellectual Property by
Warner-Lambert and its Subsidiaries does not infringe on or otherwise violate
the rights of any Person and is in accordance with any applicable license
pursuant to which Warner-Lambert or any Subsidiary acquired the right to use
any Intellectual Property; (c) to the knowledge of Warner-Lambert, no Person
is challenging, infringing on or otherwise violating any right of Warner-
Lambert or any of its Subsidiaries with respect to any Intellectual Property
owned by and/or licensed to Warner-Lambert or its Subsidiaries; and (d)
neither Warner-Lambert nor any of its Subsidiaries has received any written
notice or otherwise has knowledge of any pending claim, order or proceeding
with respect to any Intellectual Property used by Warner-Lambert and its
Subsidiaries and to its knowledge no Intellectual Property owned and/or
licensed by Warner-Lambert or its Subsidiaries is being used or enforced in a
manner that would reasonably be expected to result in the abandonment,
cancellation or unenforceability of such Intellectual Property.
(l) Brokers or Finders. No agent, broker,
investment banker, financial advisor or other firm or Person is or will be
entitled to any broker's or finder's fee or any other similar commission or
32
<PAGE>
fee in connection with any of the transactions contemplated by this
Agreement, based upon arrangements made by or on behalf of Warner-Lambert
except Bear, Stearns & Co. Inc., whose fees and expenses will be paid by
Warner-Lambert in accordance with Warner-Lambert's agreements with such firm,
copies of which have been provided to AHP.
(m) Opinion of Warner-Lambert Financial Advisor.
Warner-Lambert has received the opinion of Bear, Stearns & Co. Inc., dated
the date of this Agreement, to the effect that, as of such date, the Exchange
Ratio is fair, from a financial point of view, to the holders of Warner-
Lambert Common Stock, a copy of which opinion has been made available to AHP.
(n) Accounting Matters. To the knowledge of
Warner-Lambert, neither Warner-Lambert nor any of its affiliates has taken or
agreed to take any action, and no fact or circumstance is known to Warner-
Lambert, that would prevent AHP from accounting for the Merger as a "pooling
of interests". At or prior to the date hereof, Warner-Lambert has received a
letter from its independent public accountants addressed to Warner-Lambert,
with a copy to AHP and AHP's independent public accountants, to the effect,
that, based upon representations provided by Warner-Lambert, they concur with
Warner-Lambert's conclusion that, as of the date of their report, no
conditions exist that would preclude Warner-Lambert's ability to be a party
in a business combination to be accounted for as a pooling of interests.
(o) Taxes. Each of Warner-Lambert and its
Subsidiaries has filed all Tax Returns required to have been filed (or
extensions have been duly obtained) and has paid all Taxes required to have
been paid by it, except where failure to file such Tax Returns or pay such
Taxes would not, in the aggregate, reasonably be expected to have a Material
Adverse Effect on Warner-Lambert.
(p) Certain Contracts. As of the date hereof,
except as set forth in the Warner-Lambert SEC Reports filed prior to the date
of this Agreement, neither Warner-Lambert nor any of its Subsidiaries is a
party to or bound by (i) any "material contracts" (as such term is defined in
Item 601(b)(10) of Regulation S-K of the SEC) or (ii) any non-competition
agreements or any other agreements or arrangements that limit or otherwise
restrict Warner-Lambert or any of its Subsidiaries or any of their respective
affiliates or any successor thereto or that would, after the Effective Time,
to the knowledge of Warner-Lambert, limit or restrict Newco or any of its
affiliates (including the Surviving Corporation) or any successor thereto,
from engaging or competing in any line of business or in any geographic area,
which agreements or arrangements, in the aggregate, would reasonably be
expected to have a Material Adverse Effect on Newco and its Subsidiaries
33
<PAGE>
(including the Surviving Corporation and its Subsidiaries), taken together,
after giving effect to the Merger.
(q) Warner-Lambert Stockholder Rights Plan. The
Board of Directors of Warner-Lambert has amended the Warner-Lambert Rights
Agreement in accordance with its terms to render it inapplicable to the
transactions contemplated by this Agreement and the Warner-Lambert Stock
Option Agreement. Warner-Lambert has delivered to AHP a true and correct
copy of the Warner-Lambert Rights Agreement, as amended, in effect as of
execution and delivery of this Agreement.
3.3 Representations and Warranties of AHP and
Merger Sub. AHP and Merger Sub represent and warrant to Warner-Lambert as
follows:
(a) Organization. Merger Sub is a corporation
duly incorporated, validly existing and in good standing under the
laws of Delaware. Merger Sub is a direct wholly-owned subsidiary of
AHP.
(b) Corporate Authorization. Merger Sub has all
requisite corporate power and authority to enter into this Agreement
and to consummate the transactions contemplated hereby. The
execution, delivery and performance by Merger Sub of this Agreement
and the consummation by Merger Sub of the transactions contemplated
hereby have been duly authorized by all necessary corporate action on
the part of Merger Sub. This Agreement has been duly executed and
delivered by Merger Sub and constitutes a valid and binding agreement
of Merger Sub, enforceable against it in accordance with its terms,
except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium and other similar laws
relating to or affecting creditors generally or by general equity
principles (regardless of whether such enforceability is considered
in a proceeding in equity or at law).
(c) Non-Contravention. The execution, delivery
and performance by Merger Sub of this Agreement and the consummation
by Merger Sub of the transactions contemplated hereby do not and will
not contravene or conflict with the certificate of incorporation or
bylaws of Merger Sub.
(d) No Business Activities. Merger Sub has not
conducted any activities other than in connection with the
organization of Merger Sub, the negotiation and execution of this
34
<PAGE>
Agreement and the consummation of the transactions contemplated
hereby. Merger Sub has no Subsidiaries.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
4.1 Covenants of AHP. During the period from
the date of this Agreement and continuing until the Effective Time, AHP
agrees as to itself and its Subsidiaries that (except as expressly
contemplated or permitted by this Agreement, the Stock Option Agreements or
the AHP Disclosure Schedule or as required by a Governmental Entity of
competent jurisdiction or to the extent that Warner-Lambert shall otherwise
consent in writing, which consent shall not be unreasonably withheld or
delayed):
(a) Ordinary Course.
(i) AHP and its Subsidiaries shall carry on
their respective businesses in the usual, regular and ordinary course
in all material respects, in substantially the same manner as
heretofore conducted, and shall use all reasonable efforts to
preserve intact their present lines of business, maintain their
rights and franchises and preserve their relationships with
customers, suppliers and others having business dealings with them to
the end that their ongoing businesses shall not be impaired in any
material respect at the Effective Time; provided, however, that no
action by AHP or its Subsidiaries with respect to matters
specifically addressed by any other provision of this Section 4.1
shall be deemed a breach of this Section 4.1(a)(i) unless such action
would constitute a breach of one or more of such other provisions.
(ii) Other than in connection with acquisitions
permitted by Section 4.1(e), AHP shall not, and shall not permit any
of its Subsidiaries to, (A) enter into any new material line of
business or (B) incur or commit to any capital expenditures or any
obligations or liabilities in connection therewith other than capital
expenditures and obligations or liabilities in connection therewith
incurred or committed to in the ordinary course of business
consistent with past practice and which, together with all such
expenditures incurred or committed since January 1, 1999, are not in
excess of the amounts set forth in Section 4.1(a) of the AHP
Disclosure Schedule.
35
<PAGE>
(b) Dividends; Changes in Share Capital. AHP
shall not, and shall not permit any of its Subsidiaries to, and shall not
propose to, (i) declare or pay any dividends on or make other distributions
in respect of any of its capital stock, except (A) the declaration and
payment of regular quarterly cash dividends not in excess of $.23 per share
of AHP Common Stock with usual record and payment dates for such dividends in
accordance with past dividend practice, (B) the declaration and payment of
regular quarterly cash dividends not in excess of $.50 per share on the $2
Convertible Preferred Stock with usual record and payment dates for such
dividends in accordance with past dividend practice and (C) for dividends by
wholly owned Subsidiaries of AHP, (ii) split, combine or reclassify any of
its capital stock or issue or authorize or propose the issuance of any other
securities in respect of, in lieu of or in substitution for, shares of its
capital stock, except for any such transaction by a wholly owned Subsidiary
of AHP which remains a wholly owned Subsidiary after consummation of such
transaction or (iii) repurchase, redeem or otherwise acquire any shares of
its capital stock or any securities convertible into or exercisable for any
shares of its capital stock except for the purchase from time to time by AHP
of AHP Common Stock (and the associated AHP Rights) in the ordinary course of
business consistent with past practice in connection with the AHP Benefit
Plans. Prior to the Effective Time, AHP shall not redeem the AHP Rights.
(c) Issuance of Securities. AHP shall not, and
shall not permit any of its Subsidiaries to, issue, deliver or sell, or
authorize or propose the issuance, delivery or sale of, any shares of its
capital stock of any class, any AHP Voting Debt or any securities convertible
into or exercisable for, or any rights, warrants, calls or options to
acquire, any such shares or AHP Voting Debt, or enter into any commitment,
arrangement, undertaking or agreement with respect to any of the foregoing,
other than (i) the issuance of AHP Common Stock (and the associated AHP
Rights) upon the exercise of AHP Stock Options or in connection with other
stock-based benefit plans outstanding on the date hereof, in each case in
accordance with their present terms or pursuant to AHP Stock Options or other
stock based awards granted pursuant to clause (ii) below, (ii) the granting
of AHP Stock Options or other stock based awards to acquire shares of AHP
Common Stock granted under stock based benefit plans outstanding on the date
hereof in the ordinary course of business consistent with past practice not
in excess of the amounts set forth in Section 4.1(c) of the AHP Disclosure
Schedule, (iii) issuances by a wholly owned Subsidiary of AHP of capital
stock to such Subsidiary's parent or another wholly owned Subsidiary of AHP,
(iv) pursuant to acquisitions set forth on the AHP Disclosure Schedule or the
financings therefor, (v) issuances in accordance with the AHP Rights
Agreement or (vi) issuances pursuant to the AHP Stock Option Agreement.
36
<PAGE>
(d) Governing Documents. Except to the extent
required to comply with their respective obligations hereunder or with
applicable law, AHP and Merger Sub shall not amend or propose to so amend
their respective certificates of incorporation, bylaws or other governing
documents.
(e) No Acquisitions. Other than (i) pursuant to
the Warner-Lambert Stock Option Agreement, (ii) acquisitions disclosed on the
AHP Disclosure Schedule and (iii) acquisitions for cash in existing or
related lines of business of AHP the fair market value of the total
consideration (including the value of indebtedness acquired or assumed) for
which does not exceed the amount specified in the aggregate for all such
acquisitions in Section 4.1(e) of the AHP Disclosure Schedule and none of
which acquisitions referred to in this clause (iii) presents a material risk
of making it more difficult to obtain any approval or authorization required
in connection with the Merger under Regulatory Laws, AHP shall not, and shall
not permit any of its Subsidiaries to, acquire or agree to acquire by merging
or consolidating with, or by purchasing a substantial equity interest in or a
substantial portion of the assets of, or by any other manner, any business or
any corporation, partnership, association or other business organization or
division thereof or otherwise acquire or agree to acquire any assets (other
than the acquisition of assets used in the operations of the business of AHP
and its Subsidiaries in the ordinary course, which assets do not constitute a
business unit, division or all or substantially all of the assets of the
transferor); provided, however, that the foregoing shall not prohibit (x)
internal reorganizations or consolidations involving existing Subsidiaries of
AHP or (y) the creation of new Subsidiaries of AHP organized to conduct or
continue activities otherwise permitted by this Agreement.
(f) No Dispositions. Other than (i) internal
reorganizations or consolidations involving existing Subsidiaries of AHP,
(ii) dispositions referred to in AHP SEC Reports filed prior to the date of
this Agreement or (iii) as may be required by or in conformance with law or
regulation in order to permit or facilitate the consummation of the
transactions contemplated hereby or the transactions disclosed in the AHP
Disclosure Schedule, AHP shall not, and shall not permit any of its
Subsidiaries to, sell, lease or otherwise dispose of, or agree to sell, lease
or otherwise dispose of, any of its assets (including capital stock of
Subsidiaries of AHP but excluding inventory in the ordinary course of
business), if the fair market value of the total consideration (including the
value of the indebtedness acquired or assumed) therefor exceeds the amount
specified in the aggregate for all such dispositions in Section 4.1(f) of the
AHP Disclosure Schedule.
37
<PAGE>
(g) Investments; Indebtedness. AHP shall not,
and shall not permit any of its Subsidiaries to, other than in connection
with actions permitted by Section 4.1(e), (i) make any loans, advances or
capital contributions to, or investments in, any other Person, other than
(x) by AHP or a Subsidiary of AHP to or in AHP or any Subsidiary of AHP,
(y) pursuant to any contract or other legal obligation of AHP or any of its
Subsidiaries existing at the date of this Agreement or (z) in the ordinary
course of business consistent with past practice in an aggregate amount not
in excess of the aggregate amount specified in Section 4.1(g) of the AHP
Disclosure Schedule (provided that none of such transactions referred to in
this clause (z) presents a material risk of making it more difficult to
obtain any approval or authorization required in connection with the Merger
under Regulatory Laws) or (ii) create, incur, assume or suffer to exist any
indebtedness, issuances of debt securities, guarantees, loans or advances not
in existence as of the date of this Agreement except pursuant to the credit
facilities, indentures and other arrangements in existence on the date of
this Agreement or in the ordinary course of business consistent with past
practice, in each case as such credit facilities, indentures and other
arrangements may be amended, extended, modified, refunded, renewed or
refinanced after the date of this Agreement.
(h) Pooling; Tax-Free Qualification. AHP shall
use its reasonable best efforts not to, and shall use its reasonable best
efforts not to permit any of its Subsidiaries to, take any action (including
any action otherwise permitted by this Section 4.1) that would prevent or
impede the Merger from qualifying as a "pooling of interests" for accounting
purposes or as a "reorganization" under Section 368 of the Code; provided,
however, that nothing hereunder shall limit the ability of AHP to exercise
its rights and/or fulfill its obligations under the Stock Option Agreements.
(i) Compensation. Other than as contemplated by
Section 5.6 or by Section 4.1(c) or 4.1(i) of the AHP Disclosure Schedule,
AHP shall not increase the amount of compensation of any director or
executive officer except in the ordinary course of business consistent with
past practice or as required by an existing agreement, make any increase in
or commitment to increase any employee benefits, issue any additional AHP
Stock Options, adopt or make any commitment to adopt any additional employee
benefit plan or make any contribution, other than regularly scheduled
contributions, to any AHP Benefit Plan.
(j) Accounting Methods; Income Tax Elections.
Except as disclosed in AHP SEC Reports filed prior to the date of this
Agreement, or as required by a Governmental Entity, AHP shall not change its
methods of accounting in effect at December 31, 1998, except as required by
changes in GAAP as concurred in by AHP's independent public accountants. AHP
38
<PAGE>
shall not (i) change its fiscal year or (ii) make any material tax election,
other than in the ordinary course of business consistent with past practice.
(k) Certain Agreements. AHP shall not, and
shall not permit any of its Subsidiaries to, enter into any agreements or
arrangements that limit or otherwise restrict AHP or any of its Subsidiaries
or any of their respective affiliates or any successor thereto or that could,
after the Effective Time, limit or restrict Newco or any of its affiliates
(including the Surviving Corporation) or any successor thereto, from engaging
or competing in any line of business or in any geographic area which
agreements or arrangements, individually or in the aggregate, would
reasonably be expected to have a Material Adverse Effect on Newco and its
Subsidiaries (including the Surviving Corporation and its Subsidiaries),
taken together, after giving effect to the Merger.
(l) No Change or Amendment to Rights Agreement.
AHP shall not amend, modify or waive any provision of the AHP Rights
Agreement, and shall not take any action to redeem the rights or render the
rights inapplicable to any transaction, other than the Merger and the
transactions contemplated by the AHP Stock Option Agreement.
(m) No Related Actions. AHP will not, and will
not permit any of its Subsidiaries to, agree or commit to do any of the
foregoing.
4.2 Covenants of Warner-Lambert. During the
period from the date of this Agreement and continuing until the Effective
Time, Warner-Lambert agrees as to itself and its Subsidiaries that (except as
expressly contemplated or permitted by this Agreement, the Stock Option
Agreements or the Warner-Lambert Disclosure Schedule or as required by a
Governmental Entity of competent jurisdiction or to the extent that AHP shall
otherwise consent in writing, which consent shall not be unreasonably
withheld or delayed):
(a) Ordinary Course.
(i) Warner-Lambert and its Subsidiaries shall
carry on their respective businesses in the usual, regular and
ordinary course in all material respects, in substantially the same
manner as heretofore conducted, and shall use all reasonable efforts
to preserve intact their present lines of business, maintain their
rights and franchises and preserve their relationships with
customers, suppliers and others having business dealings with them to
the end that their ongoing businesses shall not be impaired in any
material respect at the Effective Time; provided, however, that no
39
<PAGE>
action by Warner-Lambert or its Subsidiaries with respect to matters
specifically addressed by any other provision of this Section 4.2
shall be deemed a breach of this Section 4.2(a)(i) unless such action
would constitute a breach of one or more of such other provisions.
(ii) Other than in connection with acquisitions
permitted by Section 4.2(e), Warner-Lambert shall not, and shall not
permit any of its Subsidiaries to, (A) enter into any new material
line of business or (B) incur or commit to any capital expenditures
or any obligations or liabilities in connection therewith other than
capital expenditures and obligations or liabilities in connection
therewith incurred or committed to in the ordinary course of business
consistent with past practice and which, together with all such
expenditures incurred or committed since January 1, 1999, are not in
excess of the amounts set forth in Section 4.2(a) of the Warner-
Lambert Disclosure Schedule.
(b) Dividends; Changes in Share Capital.
Warner-Lambert shall not, and shall not permit any of its Subsidiaries to,
and shall not propose to, (i) declare or pay any dividends on or make other
distributions in respect of any of its capital stock, except (A) the
declaration and payment of regular quarterly cash dividends not in excess of
$.20 per share of Warner-Lambert Common Stock with usual record and payment
dates for such dividends in accordance with past dividend practice and (B)
for dividends by wholly owned Subsidiaries of Warner-Lambert, (ii) split,
combine or reclassify any of its capital stock or issue or authorize or
propose the issuance of any other securities in respect of, in lieu of or in
substitution for, shares of its capital stock, except for any such
transaction by a wholly owned Subsidiary of Warner-Lambert which remains a
wholly owned Subsidiary after consummation of such transaction, or (iii)
repurchase, redeem or otherwise acquire any shares of its capital stock or
any securities convertible into or exercisable for any shares of its capital
stock except for the purchase from time to time by Warner-Lambert of Warner-
Lambert Common Stock (and the associated Warner-Lambert Rights) in the
ordinary course of business consistent with past practice in connection with
the Warner-Lambert Benefit Plans. Prior to the Effective Time, Warner-
Lambert shall not redeem the Warner-Lambert Rights.
(c) Issuance of Securities. Warner-Lambert
shall not, and shall not permit any of its Subsidiaries to, issue, deliver or
sell, or authorize or propose the issuance, delivery or sale of, any shares
of its capital stock of any class, any Warner-Lambert Voting Debt or any
securities convertible into or exercisable for, or any rights, warrants,
calls or options to acquire, any such shares or Warner-Lambert Voting Debt,
or enter into any commitment, arrangement, undertaking or agreement with
40
<PAGE>
respect to any of the foregoing, other than (i) the issuance of Warner-
Lambert Common Stock (and the associated Warner-Lambert Rights) upon the
exercise of Warner-Lambert Stock Options or in connection with other stock-
based benefits plans outstanding on the date hereof, in each case in
accordance with their present terms or pursuant to Warner-Lambert Stock
Options or other stock based awards granted pursuant to clause (iii) below,
(ii) issuances by a wholly owned Subsidiary of Warner-Lambert of capital
stock to such Subsidiary's parent or another wholly owned subsidiary of
Warner-Lambert, (iii) the granting of Warner-Lambert Stock Options or other
stock based awards to acquire shares of Warner-Lambert Common Stock granted
under stock based benefit plans outstanding on the date hereof in the
ordinary course of business consistent with past practice not in excess of
the amounts set forth in Section 4.2(c) of the Warner-Lambert Disclosure
Schedule, (iv) pursuant to acquisitions set forth on the Warner-Lambert
Disclosure Schedule or the financings therefor, (v) issuances in accordance
with the Warner-Lambert Rights Agreement or (vi) issuances pursuant to the
Warner-Lambert Stock Option Agreement.
(d) Governing Documents. Except to the extent
required to comply with its obligations hereunder or with applicable law,
Warner-Lambert shall not amend or propose to so amend its respective
certificates of incorporation, bylaws or other governing documents.
(e) No Acquisitions. Other than (i) pursuant to
the AHP Stock Option Agreement, (ii) acquisitions disclosed on the Warner-
Lambert Disclosure Schedule and (iii) acquisitions for cash in existing or
related lines of business of Warner-Lambert the fair market value of the
total consideration (including the value of indebtedness acquired or assumed)
for which does not exceed the amount specified in the aggregate for all such
acquisitions in Section 4.2(e) of the Warner-Lambert Disclosure Schedule and
none of which acquisitions referred to in this clause (iii) presents a
material risk of making it more difficult to obtain any approval or
authorization required in connection with the Merger under Regulatory Laws,
Warner-Lambert shall not, and shall not permit any of its Subsidiaries to,
acquire or agree to acquire by merging or consolidating with, or by
purchasing a substantial equity interest in or a substantial portion of the
assets of, or by any other manner, any business or any corporation,
partnership, association or other business organization or division thereof
or otherwise acquire or agree to acquire any assets (other than the
acquisition of assets used in the operations of the business of Warner-
Lambert and its Subsidiaries in the ordinary course, which assets do not
constitute a business unit, division or all or substantially of the assets of
the transferor); provided, however, that the foregoing shall not prohibit (x)
internal reorganizations or consolidations involving existing Subsidiaries of
Warner-Lambert or (y) the creation of new Subsidiaries of Warner-Lambert
41
<PAGE>
organized to conduct or continue activities otherwise permitted by this
Agreement.
(f) No Dispositions. Other than (i) internal
reorganizations or consolidations involving existing Subsidiaries of Warner-
Lambert, (ii) dispositions referred to in Warner-Lambert SEC Reports filed
prior to the date of this Agreement or (iii) as may be required by or in
conformance with law or regulation in order to permit or facilitate the
consummation of the transactions contemplated hereby or the transactions
disclosed in the Warner-Lambert Disclosure Schedule, Warner-Lambert shall
not, and shall not permit any of its Subsidiaries to, sell, lease or
otherwise dispose of, or agree to sell, lease or otherwise dispose of, any of
its assets (including capital stock of Subsidiaries of Warner-Lambert but
excluding inventory in the ordinary course of business), if the fair market
value of the total consideration (including the value of the indebtedness
acquired or assumed) therefor exceeds the amount specified in the aggregate
for all such dispositions in Section 4.2(f) of the Warner-Lambert Disclosure
Schedule.
(g) Investments; Indebtedness. Warner-Lambert
shall not, and shall not permit any of its Subsidiaries to, other than in
connection with actions permitted by Section 4.2(e), (i) make any loans,
advances or capital contributions to, or investments in, any other Person,
other than (x) by Warner-Lambert or a Subsidiary of Warner-Lambert to or in
Warner-Lambert or any Subsidiary of Warner-Lambert, (y) pursuant to any
contract or other legal obligation of Warner-Lambert or any of its
Subsidiaries existing at the date of this Agreement or (z) in the ordinary
course of business consistent with past practice in an aggregate amount not
in excess of the aggregate amount specified in Section 4.2(g) of the Warner-
Lambert Disclosure Schedule (provided that none of such transactions referred
to in this clause (z) presents a material risk of making it more difficult to
obtain any approval or authorization required in connection with the Merger
under Regulatory Laws) or (ii) create, incur, assume or suffer to exist any
indebtedness, issuances of debt securities, guarantees, loans or advances not
in existence as of the date of this Agreement except pursuant to the credit
facilities, indentures and other arrangements in existence on the date of
this Agreement or in the ordinary course of business consistent with past
practice, in each case as such credit facilities, indentures and other
arrangements and other existing indebtedness may be amended, extended,
modified, refunded, renewed or refinanced after the date of this Agreement.
(h) Pooling; Tax-Free Qualification. Warner-
Lambert shall use its reasonable best efforts not to, and shall use its
reasonable best efforts not to permit any of its Subsidiaries to, take any
action (including any action otherwise permitted by this Section 4.2) that
42
<PAGE>
would prevent or impede the Merger from qualifying as a "pooling of
interests" for accounting purposes or as a "reorganization" under Section 368
of the Code; provided, however, that nothing hereunder shall limit the
ability of Warner-Lambert to exercise its rights and/or fulfill its
obligations under the Stock Option Agreements.
(i) Compensation. Other than as contemplated by
Section 5.6 or by Sections 4.2(c) or 4.2(i) of the Warner-Lambert Disclosure
Schedule, Warner-Lambert shall not increase the amount of compensation of any
director or executive officer except in the ordinary course of business
consistent with past practice or as required by an existing agreement, make
any increase in or commitment to increase any employee benefits, issue any
additional Warner-Lambert Stock Options, adopt or make any commitment to
adopt any additional employee benefit plan or make any contribution, other
than regularly scheduled contributions, to any Warner-Lambert Benefit Plan.
(j) Accounting Methods; Income Tax Elections.
Except as disclosed in Warner-Lambert SEC Reports filed prior to the date of
this Agreement, or as required by a Governmental Entity, Warner-Lambert shall
not change its methods of accounting in effect at December 31, 1998, except
as required by changes in GAAP as concurred in by Warner-Lambert's
independent public accountants. Warner-Lambert shall not (i) change its
fiscal year or (ii) make any material tax election, other than in the
ordinary course of business consistent with past practice.
(k) Certain Agreements. Warner-Lambert shall
not, and shall not permit any of its Subsidiaries to, enter into any
agreements or arrangements that limit or otherwise restrict Warner-Lambert or
any of its Subsidiaries or any of their respective affiliates or any
successor thereto, or that could, after the Effective Time, limit or restrict
Newco or any of its affiliates (including the Surviving Corporation) or any
successor thereto, from engaging or competing in any line of business or in
any geographic area which agreements or arrangements, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Newco and its Subsidiaries (including the Surviving Corporation and its
Subsidiaries), taken together, after giving effect to the Merger.
(l) No Change or Amendment to Rights Agreement.
Warner-Lambert shall not amend, modify or waive any provision of the Warner-
Lambert Rights Agreement, and shall not take any action to redeem the rights
or render the rights inapplicable to any transaction, other than the Merger
and the transactions contemplated by the Warner-Lambert Stock Option
Agreement.
43
<PAGE>
(m) No Related Actions. Warner-Lambert will
not, and will not permit any of its Subsidiaries to, agree or commit to any
of the foregoing.
4.3 Governmental Filings. Each party shall (a)
confer on a regular and frequent basis with the other and (b) report to the
other (to the extent permitted by law or regulation or any applicable
confidentiality agreement) on operational matters. Warner-Lambert and AHP
shall file all reports required to be filed by each of them with the SEC (and
all other Governmental Entities) between the date of this Agreement and the
Effective Time and shall (to the extent permitted by law or regulation or any
applicable confidentiality agreement) deliver to the other party copies of
all such reports, announcements and publications promptly after the same are
filed.
4.4 Control of Other Party's Business. Nothing
contained in this Agreement shall give Warner-Lambert, directly or
indirectly, the right to control or direct AHP's operations prior to the
Effective Time. Nothing contained in this Agreement shall give AHP, directly
or indirectly, the right to control or direct Warner-Lambert's operations
prior to the Effective Time. Prior to the Effective Time, each of Warner-
Lambert and AHP shall exercise, consistent with the terms and conditions of
this Agreement, complete control and supervision over its respective
operations.
ARTICLE V
ADDITIONAL AGREEMENTS
5.1 Preparation of Proxy Statement; Stockholders
Meetings.
(a) As promptly as reasonably practicable
following the date hereof, AHP and Warner-Lambert shall prepare and file with
the SEC mutually acceptable proxy materials which shall constitute the Joint
Proxy Statement/Prospectus (such proxy statement/prospectus, and any
amendments or supplements thereto, the "Joint Proxy Statement/Prospectus")
and AHP shall prepare and file a registration statement on Form S-4 with
respect to the issuance of AHP Common Stock in the Merger (the "Form S-4").
The Joint Proxy Statement/Prospectus will be included in and will constitute
a part of the Form S-4 as AHP's prospectus. The Form S-4 and the Joint Proxy
Statement/Prospectus shall comply as to form in all material respects with
the applicable provisions of the Securities Act and the Exchange Act and the
rules and regulations thereunder. Each of AHP and Warner-Lambert shall use
44
<PAGE>
reasonable best efforts to have the Form S-4 declared effective by the SEC
and to keep the Form S-4 effective as long as is necessary to consummate the
Merger and the transactions contemplated thereby. AHP and Warner-Lambert
shall, as promptly as practicable after receipt thereof, provide the other
party copies of any written comments and advise the other party of any oral
comments, with respect to the Joint Proxy Statement/Prospectus received from
the SEC. AHP will provide Warner-Lambert with a reasonable opportunity to
review and comment on any amendment or supplement to the Form S-4 prior to
filing such with the SEC, and will provide Warner-Lambert with a copy of all
such filings made with the SEC. Notwithstanding any other provision herein
to the contrary, no amendment or supplement (including by incorporation by
reference) to the Joint Proxy Statement/Prospectus or the Form S-4 shall be
made without the approval of both parties, which approval shall not be
unreasonably withheld or delayed; provided, that with respect to documents
filed by a party which are incorporated by reference in the Form S-4 or Joint
Proxy Statement/Prospectus, this right of approval shall apply only with
respect to information relating to the other party or its business, financial
condition or results of operations; and provided, further, that AHP, in
connection with a Change in the AHP Recommendation, and Warner-Lambert, in
connection with a Change in the Warner-Lambert Recommendation, may amend or
supplement the Joint Proxy Statement/Prospectus or Form S-4 (including by
incorporation by reference) pursuant to a Qualifying Amendment (as defined
below)to effect such a Change, and in such event, this right of approval
shall apply only with respect to information relating to the other party or
its business, financial condition or results of operations, and shall be
subject to the right of each party to have its Board of Directors'
deliberations and conclusions to be accurately described. A "Qualifying
Amendment" means an amendment or supplement to the Joint Proxy
Statement/Prospectus or Form S-4 (including by incorporation by reference) to
the extent it contains (i) a Change in the AHP Recommendation or a Change in
the Warner-Lambert Recommendation (as the case may be), (ii) a statement of
the reasons of the Board of Directors of AHP or Warner-Lambert (as the case
may be) for making such Change in the AHP Recommendation or Change in the
Warner-Lambert Recommendation (as the case may be) and (iii) additional
information reasonably related to the foregoing. AHP will use reasonable best
efforts to cause the Joint Proxy Statements/Prospectus to be mailed to AHP
stockholders, and Warner-Lambert will use reasonable best efforts to cause
the Joint Proxy Statement/Prospectus to be mailed to Warner-Lambert's
stockholders, in each case after the Form S-4 is declared effective under the
Securities Act. AHP shall also take any action (other than qualifying to do
business in any jurisdiction in which it is not now so qualified or to file a
general consent to service of process) required to be taken under any
applicable state securities laws in connection with the Share Issuance and
Warner-Lambert shall furnish all information concerning Warner-Lambert and
the holders of Warner-Lambert Common Stock as may be reasonably requested in
45
<PAGE>
connection with any such action. Each party will advise the other party,
promptly after it receives notice thereof, of the time when the Form S-4 has
become effective, the issuance of any stop order, the suspension of the
qualification of the AHP Common Stock issuable in connection with the Merger
for offering or sale in any jurisdiction, or any request by the SEC for
amendment of the Joint Proxy Statement/Prospectus or the Form S-4. If at any
time prior to the Effective Time any information relating to AHP or Warner-
Lambert, or any of their respective affiliates, officers or directors, should
be discovered by AHP or Warner-Lambert which should be set forth in an
amendment or supplement to any of the Form S-4 or the Joint Proxy
Statement/Prospectus so that any of such documents would not include any
misstatement of a material fact or omit to state any material fact necessary
to make the statements therein, in light of the circumstances under which
they were made, not misleading, the party which discovers such information
shall promptly notify the other party hereto and, to the extent required by
law, rules or regulations, an appropriate amendment or supplement describing
such information shall be promptly filed with the SEC and disseminated to the
stockholders of AHP and Warner-Lambert.
(b) Warner-Lambert shall, duly take (subject to
compliance with the provisions of Section 3.1(e) and Section 3.2(e) (provided
that Warner-Lambert shall have used reasonable best efforts to ensure that
such representation is true and correct)), all lawful action to call, give
notice of, convene and hold a meeting of its stockholders on a date
determined in accordance with the mutual agreement of Warner-Lambert and AHP
(the "Warner-Lambert Stockholders Meeting") for the purpose of obtaining the
Required Warner-Lambert Vote with respect to the transactions contemplated
by this Agreement and shall take all lawful action to solicit the adoption of
this Agreement by the Required Warner-Lambert Vote; and the Board of
Directors of Warner-Lambert shall recommend adoption of this Agreement by the
stockholders of Warner-Lambert to the effect as set forth in Section 3.2(f)
(the "Warner-Lambert Recommendation"), and shall not withdraw, modify or
qualify (or propose to withdraw, modify or qualify) in any manner adverse to
AHP such recommendation or take any action or make any statement in
connection with the Warner-Lambert Stockholders Meeting inconsistent with
such recommendation (collectively, a "Change in the Warner-Lambert
Recommendation"); provided the foregoing shall not prohibit accurate
disclosure (and such disclosure shall not be deemed to be a Change in the
Warner-Lambert Recommendation) of factual information regarding the business,
financial condition or results of operations of AHP or Warner-Lambert or the
fact that an Acquisition Proposal has been made, the identity of the party
making such proposal or the material terms of such proposal (provided, that
the Board of Directors of Warner-Lambert does not withdraw, modify or qualify
(or propose to withdraw, modify or qualify) in any manner adverse to AHP its
recommendation) in the Form S-4 or the Joint Proxy Statement/Prospectus, to
46
<PAGE>
the extent such information, facts, identity or terms is required to be
disclosed therein under applicable law; and, provided further, that the Board
of Directors of Warner-Lambert may make a Change in the Warner-Lambert
Recommendation (x) pursuant to Section 5.5 hereof or (y) prior to the Warner-
Lambert Stockholders Meeting if (i) after the date of this Agreement, Warner-
Lambert acquires knowledge of facts or circumstances that the Board of
Directors of Warner-Lambert determines in good faith, after taking into
account those facts and circumstances concerning AHP that are disclosed in
the AHP SEC Reports filed prior to the date of this Agreement (or that
Warner-Lambert otherwise has knowledge of as of the date of this Agreement),
constitute a material adverse development with respect to AHP and (ii) the
Board of Directors of Warner-Lambert determines in good faith that, by reason
of its determination in clause (i) and based upon the advice of outside
counsel to Warner-Lambert, the failure to effect such Change in the Warner-
Lambert Recommendation would create a substantial probability of violating
the fiduciary duties of the Warner-Lambert Board of Directors under
applicable law. Notwithstanding any Change in the Warner-Lambert
Recommendation, this Agreement shall be submitted to the stockholders of
Warner-Lambert at the Warner-Lambert Stockholders Meeting for the purpose of
adopting the Agreement and approving the Merger and nothing contained herein
shall be deemed to relieve Warner-Lambert of such obligation.
(c) AHP shall duly take (subject to compliance
with the provisions of Section 3.2(e) and Section 3.1(e) (provided that AHP
shall have used reasonable best efforts to ensure that such representation is
true and correct) all lawful action to call, give notice of, convene and hold
a meeting of its stockholders on a date determined in accordance with the
mutual agreement of AHP and Warner-Lambert (the "AHP Stockholders Meeting")
for the purpose of obtaining the AHP Stockholder Approval and the Bylaw
Amendment Vote and shall take all lawful action to solicit the approval of
the AHP Bylaw Amendment, the Share Issuance and the adoption of the
Certificate Amendment; and the Board of Directors of AHP shall recommend
approval of the Share Issuance, the AHP Bylaw Amendment and the adoption of
the Certificate Amendment by the stockholders of AHP to the effect as set
forth in Section 3.1(f) (the "AHP Recommendation"), and shall not withdraw,
modify or qualify (or propose to withdraw, modify or qualify) in any manner
adverse to Warner-Lambert such recommendation or take any action or make any
statement in connection with the AHP Stockholders Meeting inconsistent with
such recommendation (collectively, a "Change in the AHP Recommendation");
provided the foregoing shall not prohibit accurate disclosure (and such
disclosure shall not be deemed to be a Change in the AHP Recommendation) of
factual information regarding the business, financial condition or operations
of AHP or Warner-Lambert or the fact that an Acquisition Proposal has been
made, the identity of the party making such proposal or the material terms of
such proposal (provided, that the Board of Directors of AHP does not
47
<PAGE>
withdraw, modify or qualify (or propose to withdraw, modify or qualify) in
any manner adverse to Warner-Lambert its recommendation) in the Form S-4 or
the Joint Proxy Statement/Prospectus, to the extent such information, facts,
identity or terms is required to be disclosed therein under applicable law;
and, provided further, that the Board of Directors of AHP may make a Change
in the AHP Recommendation (x) pursuant to Section 5.5 hereof or (y) prior to
the AHP Stockholders Meeting if (i) after the date of this Agreement, AHP
acquires knowledge of facts or circumstances that the Board of Directors of
AHP determines in good faith, after taking into account those facts and
circumstances concerning Warner-Lambert that are disclosed in the Warner-
Lambert SEC Reports filed prior to the date of this Agreement (or that AHP
otherwise has knowledge of as of the date of this Agreement), constitute a
material adverse development with respect to Warner-Lambert and (ii) the
Board of Directors of AHP determines in good faith that, by reason of its
determination in clause (i) and based upon the advice of outside counsel to
AHP, the failure to effect such Change in the AHP Recommendation would create
a substantial probability of violating the fiduciary duties of the AHP Board
of Directors under applicable law. Notwithstanding any Change in the AHP
Recommendation, a proposal to approve the Share Issuance, a proposal to
approve the AHP Bylaw Amendment and a proposal to adopt the Certificate
Amendment shall be submitted to the stockholders of AHP at the AHP
Stockholders Meeting for the purpose of obtaining the AHP Stockholder
Approval and nothing contained herein shall be deemed to relieve AHP of such
obligation.
(d) For purposes of this Agreement, a Change in
the Warner-Lambert Recommendation shall be deemed to include, without
limitation, a recommendation by the Warner-Lambert Board of Directors of a
third party Acquisition Proposal with respect to Warner-Lambert and a Change
in the AHP Recommendation shall be deemed to include, without limitation, a
recommendation by the AHP Board of Directors of a third party Acquisition
Proposal with respect to AHP.
5.2 Newco Board of Directors; Executive
Officers; Name; Headquarters.
(a) At or prior to the Effective Time, AHP will
take all action necessary to (i) reconstitute the Board of Directors of Newco
as of the Effective Time in accordance with Exhibit 5.2(a) hereto and the
amendment to the AHP By-Laws provided for in Section 1.6 of this Agreement,
(ii) cause John R. Stafford to be appointed as Chairman of the Board and
Lodewijk J.R. de Vink to be appointed as Chief Executive Officer of Newco;
each to be effective as of the Effective Time in accordance with Exhibit
5.2(a) hereto, (iii) cause the other individuals listed in Exhibit 5.2(a)
hereto to be appointed as officers of Newco as of the Effective Time in
48
<PAGE>
accordance with Exhibit 5.2(a) hereto and (iv) adopt a retirement policy
which contains the terms set forth on Exhibit 5.2(a) hereto.
(b) AHP shall change its name as of the
Effective Time to "AmericanWarner, Inc." as set forth on Exhibit 1.5(b).
(c) Following the Effective Time, (i) Newco
shall continue to maintain its principal corporate offices in Madison, New
Jersey, (ii) Newco shall maintain the headquarters of its over-the-counter
division in Morris Plains, New Jersey and (iii) Newco shall maintain the
headquarters of its pharmaceutical division in Radnor, Pennsylvania.
5.3 Access to Information. Upon reasonable
notice, each party shall (and shall cause its Subsidiaries to) afford to the
officers, employees, accountants, counsel, financial advisors and other
representatives of the other party reasonable access during normal business
hours, during the period prior to the Effective Time, to all its properties,
books, contracts, commitments, records, officers and employees and, during
such period, such party shall (and shall cause its Subsidiaries to) furnish
promptly to the other party (a) a copy of each report, schedule, registration
statement and other document filed, published, announced or received by it
during such period pursuant to the requirements of Federal or state
securities laws, as applicable (other than documents which such party is not
permitted to disclose under applicable law), and (b) all other information
concerning it and its business, properties and personnel as such other party
may reasonably request (including consultation on a regular basis with
respect to litigation matters); provided, however, that either party may
restrict the foregoing access to the extent that (i) any law, treaty, rule or
regulation of any Governmental Entity applicable to such party requires such
party or its Subsidiaries to restrict or prohibit access to any such
properties or information or (ii) the information is subject to
confidentiality obligations to a third party. The parties will hold any such
information obtained pursuant to this Section 5.3 in confidence in accordance
with, and shall otherwise be subject to, the provisions of the Mutual
Confidentiality Agreement letter dated July 27, 1999, between Warner-Lambert
and AHP (the "Confidentiality Agreement"), as if such Confidentiality
Agreement were in full force and effect; provided, that nothing in Section 13
thereof shall prohibit or otherwise restrict a party from making an
acquisition proposal to the other party or from engaging in or becoming a
participant in a proxy contest or a solicitation of proxies with respect to
the Merger or the other transactions contemplated hereby (including the Share
Issuance, the Certificate Amendment and the AHP Bylaw Amendment). Any
investigation by AHP or Warner-Lambert shall not affect the representations
and warranties of Warner-Lambert or AHP, as the case may be.
49
<PAGE>
5.4 Reasonable Best Efforts.
(a) Subject to the terms and conditions of this
Agreement, each party will use its reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under this Agreement and applicable laws and
regulations to consummate the Merger and the other transactions contemplated
by this Agreement as soon as practicable after the date hereof, including (i)
preparing and filing as promptly as practicable all documentation to effect
all necessary applications, notices, petitions, filings, tax ruling requests
and other documents and to obtain as promptly as practicable all consents,
waivers, licenses, orders, registrations, approvals, permits, tax rulings and
authorizations necessary or advisable to be obtained from any third party
and/or any Governmental Entity in order to consummate the Merger or any of
the other transactions contemplated by this Agreement and (ii) taking all
reasonable steps as may be necessary to obtain all such material consents,
waivers, licenses, registrations, permits, authorizations, tax rulings,
orders and approvals. In furtherance and not in limitation of the foregoing,
each party hereto agrees to make an appropriate filing of a Notification and
Report Form pursuant to the HSR Act and any other Regulatory Law (as defined
below) with respect to the transactions contemplated hereby as promptly as
practicable after the date hereof and to supply as promptly as practicable
any additional information and documentary material that may be requested
pursuant to the HSR Act and any other Regulatory Law and to take all other
actions necessary to cause the expiration or termination of the applicable
waiting periods under the HSR Act as soon as practicable. Nothing in this
Agreement shall require any of AHP and its Subsidiaries or Warner-Lambert and
its Subsidiaries to sell, hold separate or otherwise dispose of or conduct
their business in a specified manner, or agree to sell, hold separate or
otherwise dispose of or conduct their business in a specified manner, or
permit the sale, holding separate or other disposition of, any assets of AHP,
Warner-Lambert or their respective Subsidiaries or the conduct of their
business in a specified manner, whether as a condition to obtaining any
approval from a Governmental Entity or any other Person or for any other
reason, if such sale, holding separate or other disposition or the conduct of
their business in a specified manner is not conditioned on the Closing or, in
the aggregate, would reasonably be expected to have a Material Adverse Effect
on Newco and its Subsidiaries (including the Surviving Corporation and its
Subsidiaries), taken together, after giving effect to the Merger.
(b) Each of AHP and Warner-Lambert shall, in
connection with the efforts referenced in Section 5.4(a) to obtain all
requisite material approvals and authorizations for the transactions
contemplated by this Agreement under the HSR Act or any other Regulatory Law,
use its reasonable best efforts to (i) cooperate in all respects with each
50
<PAGE>
other in connection with any filing or submission and in connection with any
investigation or other inquiry, including any proceeding initiated by a
private party, (ii) promptly inform the other party of any communication
received by such party from, or given by such party to, the Antitrust
Division of the Department of Justice (the "DOJ"), the Federal Trade
Commission (the "FTC") or any other Governmental Entity and of any material
communication received or given in connection with any proceeding by a
private party, in each case regarding any of the transactions contemplated
hereby, and (iii) permit the other party to review any communication given by
it to, and consult with each other in advance of any meeting or conference
with, the DOJ, the FTC or any such other Governmental Entity or, in
connection with any proceeding by a private party, with any other Person, and
to the extent appropriate or permitted by the DOJ, the FTC or such other
applicable Governmental Entity or other Person, give the other party the
opportunity to attend and participate in such meetings and conferences. For
purposes of this Agreement, "Regulatory Law" means the Sherman Act, as
amended, Council Regulation No. 4064/89 of the European Community, as amended
(the "EC Merger Regulation") the Clayton Act, as amended, the HSR Act, the
Federal Trade Commission Act, as amended, and all other federal, state and
foreign, if any, statutes, rules, regulations, orders, decrees,
administrative and judicial doctrines and other laws that are designed or
intended to prohibit, restrict or regulate (i) foreign investment or (ii)
actions having the purpose or effect of monopolization or restraint of trade
or lessening of competition.
(c) Subject to the terms and conditions of this
Agreement, in furtherance and not in limitation of the covenants of the
parties contained in Sections 5.4(a) and 5.4(b), if any administrative or
judicial action or proceeding, including any proceeding by a private party,
is instituted (or threatened to be instituted) challenging any transaction
contemplated by this Agreement as violative of any Regulatory Law, each of
AHP and Warner-Lambert shall cooperate in all respects with each other and
use its respective reasonable best efforts , including without limitation,
selling, holding separate or otherwise disposing of or conducting their
business in a specified manner, or agreeing to sell, hold separate or
otherwise dispose of or conduct their business in a specified manner or
permitting the sale, holding separate or other disposition of, any assets of
AHP, Warner-Lambert or their respective Subsidiaries or the conducting of
their business in a specified manner, in order to contest and resist any such
action or proceeding and to have vacated, lifted, reversed or overturned any
decree, judgment, injunction or other order, whether temporary, preliminary
or permanent, that is in effect and that prohibits, prevents or restricts
consummation of the transactions contemplated by this Agreement.
Notwithstanding the foregoing or any other provision of this Agreement,
nothing in this Section 5.4 shall limit a party's right to terminate this
51
<PAGE>
Agreement pursuant to Article VII; provided that the foregoing is subject in
all respects to the last sentence of Section 5.4(a).
(d) If any objections are asserted with respect
to the transactions contemplated hereby under any Regulatory Law or if any
suit is instituted by any Governmental Entity or any private party
challenging any of the transactions contemplated hereby as violative of any
Regulatory Law, each of AHP and Warner-Lambert shall use its reasonable best
efforts to resolve any such objections or challenge as such Governmental
Entity or private party may have to such transactions under such Regulatory
Law so as to permit consummation of the transactions contemplated by this
Agreement.
5.5 Acquisition Proposals.
Without limitation on any of such party's other
obligations under this Agreement (including under Article IV hereof), each of
AHP and Warner-Lambert agrees that neither it nor any of its Subsidiaries nor
any of the officers and directors of it or its Subsidiaries shall, and that
it shall use its reasonable best efforts to cause its and its Subsidiaries'
employees, agents and representatives (including any investment banker,
attorney or accountant retained by it or any of its Subsidiaries) not to,
directly or indirectly, initiate, solicit, encourage or knowingly facilitate
(including by way of furnishing information) any inquiries or the making of
any proposal or offer with respect to a merger, reorganization, share
exchange, consolidation, business combination, recapitalization, liquidation,
dissolution or similar transaction involving it, or any purchase or sale of
the consolidated assets (including without limitation stock of Subsidiaries
and Majority Owned Restricted Affiliates) of such party and its Subsidiaries,
taken as a whole, having an aggregate value equal to 10% or more of the
market capitalization of such party, or any purchase or sale of, or tender or
exchange offer for, 10% or more of the equity securities of such party (any
such proposal or offer (other than a proposal or offer made by the other
party or an affiliate thereof) being hereinafter referred to as an
"Acquisition Proposal"). Each of AHP and Warner-Lambert further agrees that
neither it nor any of its Subsidiaries nor any of the officers and directors
of it or its Subsidiaries shall, and that it shall use its reasonable best
efforts to cause its and its Subsidiaries' employees, agents and
representatives (including any investment banker, attorney or accountant
retained by it or any of its Subsidiaries) not to, directly or indirectly,
have any discussion with or provide any confidential information or data to
any Person relating to an Acquisition Proposal, or engage in any negotiations
concerning an Acquisition Proposal, or knowingly facilitate any effort or
attempt to make or implement an Acquisition Proposal or accept an Acquisition
Proposal. Notwithstanding anything in this Agreement to the contrary, each
52
<PAGE>
of AHP and Warner-Lambert or its respective Board of Directors shall be
permitted to (A) to the extent applicable, comply with Rule 14d-9 and Rule
14e-2 promulgated under the Exchange Act with regard to an Acquisition
Proposal, (B) effect a Change in the AHP or Warner-Lambert Recommendation, as
the case may be, or (C) engage in any discussions or negotiations with, or
provide any information to, any Person in response to an unsolicited bona
fide written Acquisition Proposal by any such Person, if and only to the
extent that, in any such case as is referred to in clause (B) or (C), (i) its
Stockholders Meeting shall not have occurred, (ii) (x) in the case of clause
(B) above such change is permitted by clause (y) of the second proviso of the
first sentence of Section 5.1(b) or Section 5.1(c), as the case may be, or it
has received an unsolicited bona fide written Acquisition Proposal from a
third party and its Board of Directors conclude in good faith that such
Acquisition Proposal constitutes a Superior Proposal (as defined in Section
8.11) and (y) in the case of clause (C) above, its Board of Directors
concludes in good faith that there is a reasonable likelihood that such
Acquisition Proposal could result in a Superior Proposal, (iii) prior to
providing any information or data to any Person in connection with an
Acquisition Proposal by any such Person, its Board of Directors receives from
such Person an executed confidentiality agreement containing terms at least
as stringent as those contained in the Confidentiality Agreement (including
Section 13 thereof) and (iv) prior to providing any information or data to
any Person or entering into discussions or negotiations with any Person, such
party notifies the other party promptly of such inquiries, proposals or
offers received by, any such information requested from, or any such
discussions or negotiations sought to be initiated or continued with, any of
its representatives indicating, in connection with such notice, the name of
such Person and the material terms and conditions of any inquiries, proposals
or offers. Each of AHP and Warner-Lambert agrees that it will promptly keep
the other party informed of the status and terms of any such proposals or
offers and the status and terms of any such discussions or negotiations.
Each of AHP and Warner-Lambert agrees that it will, and will cause its
officers, directors and representatives to, immediately cease and cause to be
terminated any activities, discussions or negotiations existing as of the
date of this Agreement with any parties conducted heretofore with respect to
any Acquisition Proposal. Each of AHP and Warner-Lambert agrees that it will
use reasonable best efforts to promptly inform its directors, officers, key
employees, agents and representatives of the obligations undertaken in this
Section 5.5. Nothing in this Section 5.5 shall (x) permit AHP or Warner-
Lambert to terminate this Agreement (except as specifically provided in
Article VII hereof) or (y) affect any other obligation of AHP or Warner-
Lambert under this Agreement. Neither AHP nor Warner-Lambert shall submit to
the vote of its stockholders any Acquisition Proposal other than the Merger.
53
<PAGE>
5.6 Employee Benefits Matters.
(a) Continuation and Comparability of Benefits.
Following the Effective Time, Newco shall honor, cause the Surviving
Corporation to honor, all Warner-Lambert Benefit Plans and related funding
arrangements in accordance with their respective terms. From the Effective
Time until such later date to be agreed by the Task Force (which date shall
not be earlier than the first anniversary of the Effective Time), Newco shall
provide compensation and employee benefits under Benefit Plans (as defined in
Section 8.11) to the employees and former employees of AHP and Warner-Lambert
and their respective Subsidiaries (the "Newco Employees") that are, in the
aggregate, no less favorable in any material respects than those provided to
such persons pursuant to the Benefit Plans in effect on the date hereof,
except to the extent their equity and equity based compensation shall be
dealt with in accordance with Section 5.6(c). Nothing herein shall require
Newco to continue any particular Benefit Plan or prevent the amendment or
termination thereof (subject to the maintenance, in the aggregate, of the
benefits as provided in the preceding sentence); provided, however, that
Newco shall not take any action (by way of amendment, termination or
otherwise) which is in violation of the terms of any Benefit Plan or
applicable law.
(b) Pre-Existing Limitations; Deductibles;
Service Credit. With respect to any Benefit Plans in which any Newco
Employees first become eligible to participate, on or after the Effective
Time, and in which are plans that the Newco Employees did not participate
prior to the Effective Time (the "New Newco Plans"), Newco shall: (A) waive
all pre-existing conditions exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Newco Employees
under any New Newco Plans in which such employees may be eligible to
participate after the Effective Time; (B) provide each Newco Employee with
credit for any co-payments and deductibles paid prior to the Effective Time
(to the same extent such credit was given under the analogous Benefit Plan
prior to the Effective Time) in satisfying any applicable deductible or out-
of-pocket requirements under any New Newco Plans in which such employees may
be eligible to participate after the Effective Time, and (C) recognize all
service of the Newco Employees with AHP and Warner-Lambert, respectively, for
all purposes (including, without limitation, purposes of eligibility to
participate, vesting credit, entitlement to benefits, and benefit accrual) in
any New Newco Plan in which such employees may be eligible to participate
after the Effective Time, to the extent such service is taken into account
under the applicable New Newco Plan; provided, that the foregoing shall not
apply to the extent it would result in duplication of benefits, under
multiple plans or would result in benefit accruals under multiple defined
54
<PAGE>
benefit pension plans with respect to the same period of service without
offset for benefits accrued under a predecessor defined benefit pension plan.
(c) Treatment of Equity and Equity - Based
Benefit Plans. AHP and Warner-Lambert shall, as soon as reasonably
practicable after the date hereof, create a task force comprised of key
executive officers and other employees of each of AHP and Warner-Lambert
(half of whom shall be employed by AHP and half of whom shall be employed by
Warner-Lambert) (the "Task Force") which shall review all Benefit Plans of
AHP and Warner-Lambert including those which related to, or were based upon
the equity of AHP or Warner-Lambert and recommend appropriate Benefit Plans
for Newco on and after the Effective Time, including how to deal with the use
of equity and equity based compensation for employees of Newco. In so doing,
the Task Force shall fully and fairly take into account the past practices of
both AHP and Warner-Lambert, shall comply with the provisions of paragraph
(a) of this Section 5.6 and shall in good faith consider appropriate methods
by which Newco Employees may be fairly compensated through the use of Benefit
Plans.
5.7 Fees and Expenses. Whether or not the
Merger is consummated, all Expenses incurred in connection with this
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such Expenses, except (a) if the Merger is consummated, the
Surviving Corporation shall pay, or cause to be paid, any and all property or
transfer taxes imposed on Warner-Lambert or its Subsidiaries and (b) Expenses
incurred in connection with the filing, printing and mailing of the Joint
Proxy Statement/Prospectus, which shall be shared equally by AHP and Warner-
Lambert. As used in this Agreement, "Expenses" includes all out-of-pocket
expenses (including, without limitation, all fees and expenses of counsel,
accountants, investment bankers, experts and consultants to a party hereto
and its affiliates) incurred by a party or on its behalf in connection with
or related to the authorization, preparation, negotiation, execution and
performance of this Agreement and the transactions contemplated hereby,
including the preparation, printing, filing and mailing of the Joint Proxy
Statement/Prospectus and the solicitation of stockholder approvals and all
other matters related to the transactions contemplated hereby.
5.8 Directors' and Officers' Indemnification and
Insurance. The Surviving Corporation shall, and Newco shall cause the
Surviving Corporation to, (i) indemnify and hold harmless, and provide
advancement of expenses to, all past and present directors, officers and
employees of Warner-Lambert and its Subsidiaries (in all of their capacities)
(a) to the same extent such persons are indemnified or have the right to
advancement of expenses as of the date of this Agreement by Warner-Lambert
pursuant to Warner-Lambert's certificate of incorporation, bylaws and
55
<PAGE>
indemnification agreements, if any, in existence on the date hereof with any
directors, officers and employees of Warner-Lambert and its Subsidiaries and
(b) without limitation to clause (a), to the fullest extent permitted by law,
in each case for acts or omissions occurring at or prior to the Effective
Time (including for acts or omissions occurring in connection with the
approval of this Agreement and the consummation of the transactions
contemplated hereby), (ii) include and cause to be maintained in effect in
the Surviving Corporation's (or any successor's) certificate of incorporation
and bylaws for a period of six years after the Effective Time, the current
provisions regarding elimination of liability of directors, indemnification
of officers, directors and employees and advancement of expenses contained in
the certificate of incorporation and bylaws of Warner-Lambert and (iii) cause
to be maintained for a period of six years after the Effective Time the
current policies of directors' and officers' liability insurance and
fiduciary liability insurance maintained by Warner-Lambert (provided that the
Surviving Corporation (or any successor) may substitute therefor policies of
at least the same coverage and amounts containing terms and conditions which
are, in the aggregate, no less advantageous to the insured) with respect to
claims arising from facts or events that occurred on or before the Effective
Time; provided, however, that in no event shall the Surviving Corporation be
required to expend in any one year an amount in excess of 200% of the annual
premiums currently paid by Warner-Lambert for such insurance; and, provided,
further, that if the annual premiums of such insurance coverage exceed such
amount, the Surviving Corporation shall be obligated to obtain a policy with
the greatest coverage available for a cost not exceeding such amount. The
obligations of the Surviving Corporation under this Section 5.8 shall not be
terminated or modified in such a manner as to adversely affect any indemnitee
to whom this Section 5.8 applies without the consent of such affected
indemnitee (it being expressly agreed that the indemnitees to whom this
Section 5.8 applies shall be third party beneficiaries of this Section 5.8).
5.9 Public Announcements. AHP and Warner-
Lambert shall use reasonable best efforts to develop a joint communications
plan and each party shall use reasonable best efforts (i) to ensure that all
press releases and other public statements with respect to the transactions
contemplated hereby shall be consistent with such joint communications plan,
and (ii) unless otherwise required by applicable law or by obligations
pursuant to any listing agreement with or rules of any securities exchange,
to consult with each other before issuing any press release or, to the extent
practical, otherwise making any public statement with respect to this
Agreement or the transactions contemplated hereby. In addition to the
foregoing, except to the extent disclosed in or consistent with the Joint
Proxy Statement/Prospectus in accordance with the provisions of Section 5.1,
neither AHP nor Warner-Lambert shall issue any press release or otherwise
make any public statement or disclosure concerning the other party or the
56
<PAGE>
other party's business, financial condition or results of operations without
the consent of the other party, which consent shall not be unreasonably
withheld or delayed.
5.10 Accountant's Letters. (a) AHP shall use
reasonable best efforts to cause to be delivered to Warner-Lambert two
letters from AHP's independent public accountants, one dated approximately
the date on which the Form S-4 shall become effective and one dated the
Closing Date, each addressed to AHP and Warner-Lambert, in form reasonably
satisfactory to Warner-Lambert and customary in scope for comfort letters
delivered by independent public accountants in connection with registration
statements similar to the Form S-4. AHP shall use reasonable best efforts to
cause to be delivered to Warner-Lambert a copy of a letter from AHP's
independent accountants dated approximately the date the Form S-4 is declared
effective and as of the Closing Date, stating that accounting for the Merger
as a pooling of interests under Opinion 16 of the Accounting Principles Board
and applicable SEC rules and regulations is appropriate if the Merger is
closed and consummated as contemplated by this Agreement.
(b) Warner-Lambert shall use reasonable best
efforts to cause to be delivered to AHP two letters from Warner-Lambert's
independent public accountants, one dated approximately the date on which the
Form S-4 shall become effective and one dated the Closing Date, each
addressed to Warner-Lambert and AHP, in form reasonably satisfactory to AHP
and customary in scope for comfort letters delivered by independent public
accountants in connection with registration statements similar to the Form S-
4. Warner-Lambert shall use reasonable best efforts to cause to be delivered
to AHP a copy of a letter from Warner-Lambert's independent public
accountants, addressed to Warner-Lambert, dated approximately the date the
Form S-4 is declared effective and as of the Closing Date, stating that they
concur with Warner-Lambert's conclusion that, as of the date of their report,
no conditions exist that would preclude Warner-Lambert's ability to be a
party in a business combination to be accounted for as a pooling of
interests.
(c) Each of AHP and Warner-Lambert shall use
reasonable best efforts to cause the transactions contemplated by this
Agreement, including the Merger, to be accounted for as a pooling of
interests under Opinion 16 of the Accounting Principles Board and applicable
SEC rules and regulations, and such accounting treatment to be accepted by
the SEC.
5.11 Listing of Shares of AHP Common Stock. AHP
shall use its reasonable best efforts to cause the shares of AHP Common Stock
to be issued in the Merger and the shares of AHP Common Stock to be reserved
57
<PAGE>
for issuance upon exercise of the Warner-Lambert Stock Options to be approved
for listing on the NYSE, subject to official notice of issuance, prior to the
Closing Date.
5.12 Dividends. After the date of this
Agreement, each of AHP and Warner-Lambert shall coordinate with the other the
payment of dividends with respect to the AHP Common Stock and Warner-Lambert
Common Stock and the record dates and payment dates relating thereto, it
being the intention of the parties hereto that holders of AHP Common Stock
and Warner-Lambert Common Stock shall not receive two dividends, or fail to
receive one dividend, for any single calendar quarter with respect to their
shares of AHP Common Stock and/or Warner-Lambert Common Stock or any shares
of AHP Common Stock that any such holder receives in exchange for such shares
of Warner-Lambert Common Stock in the Merger.
5.13 Affiliates. (a) Not less than 45 days
prior to the Effective Time, Warner-Lambert shall deliver to AHP a letter
identifying all persons who, in the judgment of Warner-Lambert, may be deemed
at the time this Agreement is submitted for adoption by the stockholders of
Warner-Lambert, "affiliates" of Warner-Lambert for purposes of Rule 145 under
the Securities Act or for purposes of qualifying the Merger for pooling of
interests accounting treatment under Opinion 16 of the Accounting Principles
Board and applicable SEC rules and regulations, and such list shall be
updated as necessary to reflect changes from the date thereof. Warner-
Lambert shall use reasonable best efforts to cause each person identified on
such list to deliver to AHP not less than 30 days prior to the Effective
Time, a written agreement substantially in the form attached as Exhibit 5.13
hereto (an "Affiliate Agreement"). Not less than 45 days prior to the
Effective Time, AHP shall deliver to Warner-Lambert a letter identifying all
persons who, in the judgment of AHP, may be deemed "affiliates" of AHP for
purposes of qualifying the Merger for pooling of interests accounting
treatment under Opinion 16 of the Accounting Principles Board and applicable
SEC rules and regulations, and such list shall be updated as necessary to
reflect changes from the date hereof. AHP shall use reasonable best efforts
to cause each person identified on such list to deliver to Warner-Lambert not
less than 30 days prior to the Effective Time, a written agreement including
the substance of paragraphs (C), (D) and (E) of Exhibit 5.13 hereto.
(b) Newco shall use its reasonable best efforts to
publish no later than 90 days after the end of the first month after the
Effective Time in which there are at least 30 days of post-Merger combined
operations (which month may be the month in which the Effective Time occurs),
combined sales and net income figures as contemplated by and in accordance
with the terms of SEC Accounting Series Release No. 135.
58
<PAGE>
5.14 Section 16 Matters. Prior to the Effective
Time, AHP and Warner-Lambert shall take all such steps as may be required to
cause any dispositions of Warner-Lambert Common Stock (including derivative
securities with respect to Warner-Lambert Common Stock) or acquisitions of
AHP Common Stock (including derivative securities with respect to AHP Common
Stock) resulting from the transactions contemplated by Article I or Article
II of this Agreement by each individual who is subject to the reporting
requirements of Section 16(a) of the Exchange Act with respect to Warner-
Lambert, to be exempt under Rule 16b-3 promulgated under the Exchange Act,
such steps to be taken in accordance with the No-Action Letter dated January
12, 1999, issued by the SEC to Skadden, Arps, Slate, Meagher & Flom LLP.
5.15 Specified Litigation. (a) From the date
hereof to the Closing Date, AHP shall promptly advise Warner-Lambert of all
developments, and provide Warner-Lambert all additional information not
otherwise provided pursuant to Section 3.1(h) (iii), known to AHP which could
reasonably be expected to be relevant and material to an assessment of the
liability exposure of AHP and its Subsidiaries with respect to AHP Specified
Litigation Matters.
(b) From the date hereof to the Closing Date,
Warner-Lambert shall promptly advise AHP of all developments, and provide AHP
all additional information not otherwise provided pursuant to Section 3.2(h)
(iii), known to Warner-Lambert which could reasonably be expected to be
relevant and material to an assessment of the liability exposure of Warner-
Lambert and its Subsidiaries with respect to Warner-Lambert Specified
Litigation Matters.
ARTICLE VI
CONDITIONS PRECEDENT
6.1 Conditions to Each Party's Obligation to
Effect the Merger. The respective obligations of Warner-Lambert, AHP and
Merger Sub to effect the Merger are subject to the satisfaction or waiver on
or prior to the Closing Date of the following conditions:
(a) Stockholder Approval. (i) Warner-Lambert
shall have obtained the Required Warner-Lambert Vote in connection with the
adoption of this Agreement by the stockholders of Warner-Lambert and (ii) AHP
shall have obtained the AHP Stockholder Approval in connection with the
approval of the Share Issuance and the Certificate Amendment by the
stockholders of AHP.
59
<PAGE>
(b) No Injunctions or Restraints, Illegality.
No Laws shall have been adopted or promulgated, and no temporary restraining
order, preliminary or permanent injunction or other order issued by a court
or other Governmental Entity of competent jurisdiction shall be in effect,
(i) having the effect of making the Merger illegal or otherwise prohibiting
consummation of the Merger or (ii) which otherwise, individually or in the
aggregate, would reasonably be expected to have a Material Adverse Effect on
Newco and its Subsidiaries (including the Surviving Corporation and its
Subsidiaries), taken together after giving effect to the Merger.
(c) HSR Act; EC Merger Regulation. The waiting
period (and any extension thereof) applicable to the Merger under the HSR Act
shall have been terminated or shall have expired and approval of the Merger
of the European Commission shall have been obtained pursuant to the EC Merger
Regulation.
(d) Governmental and Regulatory Approvals.
Other than the filing provided for under Section 1.3 and filings pursuant to
the HSR Act and EC Merger Regulation (which are addressed in Section 6.1(c)),
all consents, approvals and actions of, filings with and notices to any
Governmental Entity required of AHP, Warner-Lambert or any of their
Subsidiaries to consummate the Merger, the Share Issuance and the other
transactions contemplated hereby, the failure of which to be obtained or
taken, individually or in the aggregate, would reasonably be expected to have
a Material Adverse Effect on Newco and its Subsidiaries (including the
Surviving Corporation and its Subsidiaries), taken together after giving
effect to the Merger, shall have been obtained; provided however, that the
provisions of this Section 6.1(d) shall not be available to any party whose
failure to fulfill its obligations pursuant to Section 5.4 shall have been
the cause of, or shall have resulted in, the failure to obtain such consent
or approval.
(e) NYSE Listing. The shares of AHP Common
Stock to be issued in the Merger and such other shares to be reserved for
issuance in connection with the Merger shall have been approved for listing
on the NYSE, subject to official notice of issuance.
(f) Effectiveness of the Form S-4. The Form S-4
shall have been declared effective by the SEC under the Securities Act. No
stop order suspending the effectiveness of the Form S-4 shall have been
issued by the SEC and no proceedings for that purpose shall have been
initiated or threatened by the SEC.
(g) Pooling. Warner-Lambert shall have received
and delivered to AHP and AHP's independent public accountants, a letter from
60
<PAGE>
its independent public accountants, dated approximately the date the Form S-4
is declared effective and as of the Closing Date, stating that they concur
with Warner-Lambert's conclusions that, as of the date of their letter, no
conditions exist that would preclude Warner-Lambert's ability to be a party
in a business combination to be accounted for as a pooling of interests. AHP
shall have received and delivered to Warner-Lambert, a letter from its
independent public accountants, dated approximately the date the Form S-4 is
declared effective and as of the Closing Date, stating that accounting for
the Merger as a pooling of interests under Opinion 16 of the Accounting
Principles Board and applicable SEC rules and regulations is appropriate if
the Merger is closed and consummated as contemplated by this Agreement.
6.2 Additional Conditions to Obligations of AHP
and Merger Sub. The obligations of AHP and Merger Sub to effect the Merger
are subject to the satisfaction of, or waiver by AHP, on or prior to the
Closing Date of the following conditions:
(a) Representations and Warranties. Each of the
representations and warranties of Warner-Lambert set forth in this Agreement
that is qualified as to Material Adverse Effect shall be true and correct,
and each of the representations and warranties of Warner-Lambert set forth in
this Agreement that is not so qualified shall be true and correct in all
material respects, in each case as of the date of this Agreement and as of
the Closing Date as though made on and as of the Closing Date (except to the
extent in either case that such representations and warranties speak as of
another date); and AHP shall have received a certificate of the chief
executive officer and the chief financial officer of Warner-Lambert to such
effect.
(b) Performance of Obligations of Warner-
Lambert. Warner-Lambert shall have performed or complied with all agreements
and covenants required to be performed by it under this Agreement at or prior
to the Closing Date that are qualified as to Material Adverse Effect and
shall have performed or complied in all material respects with all other
agreements and covenants required to be performed by it under this Agreement
at or prior to the Closing Date that are not so qualified, and AHP shall have
received a certificate of the chief executive officer and the chief financial
officer of Warner-Lambert to such effect.
(c) Tax Opinion. AHP shall have received from
Simpson Thacher & Bartlett, counsel to AHP, on or before the date the Form S-
4 shall become effective and, subsequently, on the Closing Date, a written
opinion dated as of such dates to the effect that for federal income tax
purposes the Merger will constitute a reorganization within the meaning of
section 368(a) of the Code and that each of AHP, Warner-Lambert and Merger
61
<PAGE>
Sub will be a party to the reorganization within the meaning of section
368(b) of the Code. In rendering such opinion, counsel to AHP shall be
entitled to rely upon information, representations and assumptions provided
by AHP and Warner-Lambert substantially in the form of Exhibits 6.2(c)(1) and
6.2(c)(2) (allowing for such amendments to the representations as counsel to
AHP deems reasonably necessary).
(d) Warner-Lambert Rights Agreement. No Stock
Acquisition Date or Distribution Date (as such terms are defined in the
Warner-Lambert Rights Agreement) shall have occurred pursuant to the Warner-
Lambert Rights Agreement.
6.3 Additional Conditions to Obligations of
Warner-Lambert. The obligations of Warner-Lambert to effect the Merger are
subject to the satisfaction of, or waiver by Warner-Lambert, on or prior to
the Closing Date of the following additional conditions:
(a) Representations and Warranties. Each of the
representations and warranties of AHP set forth in this Agreement that is
qualified as to Material Adverse Effect shall be true and correct, and each
of the representations and warranties of AHP set forth in this Agreement that
is not so qualified shall be true and correct in all material respects, in
each case as of the date of this Agreement and as of the Closing Date as
though made on and as of the Closing Date (except to the extent in either
case that such representations and warranties speak as of another date) ; and
Warner-Lambert shall have received a certificate of the chief executive
officer and the chief financial officer of AHP to such effect.
(b) Performance of Obligations of AHP. AHP
shall have performed or complied with all agreements and covenants required
to be performed by it under this Agreement at or prior to the Closing Date
that are qualified as to Material Adverse Effect and shall have performed or
complied in all material respects with all other agreements and covenants
required to be performed by it under this Agreement at or prior to the
Closing Date that are not so qualified, and Warner-Lambert shall have
received a certificate of the chief executive officer and the chief financial
officer of AHP to such effect.
(c) Tax Opinion. Warner-Lambert shall have
received from Skadden, Arps, Slate, Meagher & Flom LLP, counsel to Warner-
Lambert, on or before the date the Form S-4 shall become effective and,
subsequently, on the Closing Date, a written opinion dated as of such dates
to the effect that for federal income tax purposes the Merger will constitute
a reorganization within the meaning of section 368(a) of the Code and that
each of AHP, Warner-Lambert and Merger Sub will be a party to the
62
<PAGE>
reorganization within the meaning of section 368(b) of the Code. In
rendering such opinion, counsel to Warner-Lambert shall be entitled to rely
upon information, representations and assumptions provided by AHP and Warner-
Lambert substantially in the form of Exhibits 6.2(c)(1) and 6.2(c)(2)
(allowing for such amendments to the representations as counsel to Warner-
Lambert deems reasonably necessary).
(d) AHP Rights Agreement. No Shares Acquisition
Date or Distribution Date (as such terms are defined in the AHP Rights
Agreement) shall have occurred pursuant to the AHP Rights Agreement.
(e) Amendments. AHP shall have taken all such
actions as shall be necessary so that (i) the amendment to the bylaws of AHP
required by Section 1.6(b) and (ii) the Certificate Amendment shall become
effective not later than the Effective Time.
(f) Settlement Agreement. AHP shall have
entered into the Settlement Agreement (as defined below) and such Settlement
Agreement shall be in full force and effect, the Preliminary Approval (as
defined below) shall have been obtained and shall be in full force and
effect, the Initial Opt Out Period (as defined below) shall have expired and
AHP (i) shall not have exercised (or publicly announced or notified Warner-
Lambert of its intention to exercise) and (ii) shall have irrevocably
notified the other parties thereto that it will not exercise, its "walkaway"
rights set forth in Section III.5 of the Memorandum of Understanding (as
defined below) (or corresponding provision of the Settlement Agreement).
ARTICLE VII
TERMINATION AND AMENDMENT
7.1 Termination. This Agreement may be
terminated at any time prior to the Effective Time, by action taken or
authorized by the Board of Directors of the terminating party or parties, and
except as provided below, whether before or after approval of the matters
presented in connection with the Merger by the stockholders of Warner-Lambert
or AHP:
(a) By mutual written consent of AHP and Warner-
Lambert;
(b) By either Warner-Lambert or AHP, if the
Effective Time shall not have occurred on or before November 15, 2000 (the
"Termination Date"); provided, however, that the right to terminate this
63
<PAGE>
Agreement under this Section 7.1(b) shall not be available to any party whose
failure to fulfill any obligation under this Agreement (including without
limitation such party's obligations set forth in Section 5.4) has been the
cause of, or resulted in, the failure of the Effective Time to occur on or
before the Termination Date;
(c) By either Warner-Lambert or AHP, if any
Governmental Entity (i) shall have issued an order, decree or ruling or taken
any other action (which the parties shall have used their reasonable best
efforts to resist, resolve or lift, as applicable, in accordance with Section
5.4) permanently restraining, enjoining or otherwise prohibiting the
transactions contemplated by this Agreement, and such order, decree, ruling
or other action shall have become final and nonappealable or (ii) shall have
failed to issue an order, decree or ruling or to take any other action (which
order, decree, ruling or other action the parties shall have used their
reasonable best efforts to obtain, in accordance with Section 5.4), in the
case of each of (i) and (ii) which is necessary to fulfill the conditions set
forth in subsections 6.1(c) and (d), as applicable, and such denial of a
request to issue such order, decree, ruling or take such other action shall
have become final and nonappealable; provided, however, that the right to
terminate this Agreement under this Section 7.1(c) shall not be available to
any party whose failure to comply with Section 5.4 has been the cause of such
action or inaction;
(d) By either Warner-Lambert or AHP, if the
approvals of the stockholders of either AHP or Warner-Lambert contemplated by
this Agreement (other than the AHP Bylaw Amendment) shall not have been
obtained by reason of the failure to obtain the required vote at a duly held
meeting of stockholders or of any adjournment thereof at which the vote was
taken;
(e) By AHP, if Warner-Lambert shall have failed
to make the Warner-Lambert Recommendation or effected a Change in the Warner-
Lambert Recommendation (or resolved to take any such action), whether or not
permitted by the terms hereof, or shall have materially breached its
obligations under this Agreement by reason of a failure to call the Warner-
Lambert Stockholders Meeting in accordance with Section 5.1(b);
(f) By Warner-Lambert, if AHP shall have failed
to make the AHP Recommendation or effected a Change in the AHP Recommendation
(or resolved to take any such action), whether or not permitted by the terms
hereof, or shall have materially breached its obligations under this
Agreement by reason of a failure to call the AHP Stockholders Meeting in
accordance with Section 5.1(c);
64
<PAGE>
(g) By Warner-Lambert, if a Shares Acquisition
Date (as such term is defined in the AHP Rights Agreement) shall have
occurred pursuant to the AHP Rights Agreement; or
(h) By AHP, if a Stock Acquisition Date (as such
term is defined in the Warner-Lambert Rights Agreement) shall have occurred
pursuant to the Warner-Lambert Rights Agreement.
(i) By Warner-Lambert at any time during the 10
Business Day period following the earlier of (i) June 30, 2000, if on or
before such date the condition set forth in Section 6.3(f) is not satisfied,
and (ii) the date on which the satisfaction on or before June 30, 2000 of the
condition set forth in Section 6.3(f) is not possible.
(j) By Warner-Lambert at any time during the 10
Business Day period following the delivery by AHP to Warner-Lambert of a
fully executed Settlement Agreement, if (i) such Settlement Agreement is not
on substantially the same terms as set forth in the Memorandum of
Understanding and (ii) the terms set forth in the Settlement Agreement which
are not substantially the same as the terms set forth in the Memorandum of
Understanding are in the aggregate, in the reasonable judgment of Warner-
Lambert, materially adverse to AHP.
For purposes of this Article VII and Section 6.3(f),
the following terms shall have the following meanings:
"Memorandum of Understanding" shall mean the
Memorandum of Understanding Concerning Settlement of Diet Drug
Litigation, dated October 7, 1999, between AHP and the other parties
thereto.
"Initial Opt Out Period" shall have the meaning set
forth in the Memorandum of Understanding.
"Preliminary Approval" shall mean the granting, by
order of the United States District Court for the Eastern District of
Pennsylvania, of the preliminary approval of the Settlement Agreement
as contemplated by Section IV.3 of the Memorandum of Understanding
and the approval of the notice to the Settlement Class (as defined in
the Memorandum of Understanding) and authorization of the issuance of
such notice.
"Settlement Agreement" shall have the meaning set
forth in the Memorandum of Understanding.
65
<PAGE>
7.2 Effect of Termination.
(a) In the event of termination of this
Agreement by either Warner-Lambert or AHP as provided in Section 7.1, this
Agreement shall forthwith become void and there shall be no liability or
obligation on the part of AHP or Warner-Lambert or their respective officers
or directors except with respect to Section 3.1(l), Section 3.2(l), the
second sentence of Section 5.3, Section 5.7, this Section 7.2 and Article
VIII, which provisions shall survive such termination, and except that,
notwithstanding anything to the contrary contained in this Agreement, neither
AHP nor Warner-Lambert shall be relieved or released from any liabilities or
damages arising out of its willful material breach of this Agreement.
(b) If (A) (I) either party shall terminate this
Agreement pursuant to Section 7.1(d) (provided that the basis for such
termination is the failure of AHP's stockholders to approve the Share
Issuance or adopt the Certificate Amendment) and (II) at any time after the
date of this Agreement and at or before the date of the AHP Stockholders
Meeting a Business Combination (as defined in Section 7.2(d)) proposal with
respect to AHP shall have been publicly announced or otherwise communicated
to the AHP Board of Directors, (B) Warner-Lambert shall terminate this
Agreement pursuant to Section 7.1(g), (C) (I) either party shall terminate
this Agreement pursuant to Section 7.1(b), (II) at any time after the date of
this Agreement and at or before the Termination Date a Business Combination
proposal with respect to AHP shall have been publicly announced or
communicated to the AHP Board of Directors, (III) following the existence of
such Business Combination proposal and prior to any such termination, AHP
shall have breached (and not cured after notice thereof) any of its covenants
or agreements set forth in this Agreement in any material respect, which
breach shall have materially contributed to the failure of the Effective Time
to occur on or before the Termination Date and (IV) within twelve months of
any such termination of this Agreement, AHP shall enter into a definitive
agreement with any third party with respect to a Business Combination or a
Business Combination with respect to AHP is consummated, (D) (I) either party
shall terminate this Agreement pursuant to Section 7.1(b), (II) at any time
after the date of this Agreement and at or before the Termination Date a
Business Combination proposal with respect to AHP shall have been publicly
announced or communicated to the AHP Board of Directors, (III) within twelve
months of any such termination of this Agreement, AHP shall enter into a
definitive agreement with any third party with respect to a Business
Combination or a Business Combination with respect to AHP is consummated and
(IV) Section 7.2(b)(C)(III) is not applicable, (E)(I) Warner-Lambert shall
terminate this Agreement pursuant to Section 7.1(f) and (II) either AHP's
Board of Directors shall have, prior to termination, failed to make the AHP
Recommendation or effected a change in the AHP Recommendation, in either
66
<PAGE>
case by reason of a Superior Proposal, or at any time after the date of this
Agreement and at or before the event giving rise to the right of termination
a Business Combination proposal which satisfies the provisions of subclauses
(i) and (ii) of clause (II) (but not the language preceding subclause (i) in
clause (II)) in the definition of Superior Proposal with respect to AHP shall
have been publicly announced or communicated to the AHP Board of Directors
and shall have not been irrevocably withdrawn prior to the event giving rise
to the right of termination, or (F) Warner-Lambert shall terminate this
Agreement pursuant to Section 7.1(f) in circumstances where the immediately
preceding clause (E) (II) is not applicable;
then:
(i) in the case of clauses (B), (C) or (E), AHP
shall pay to Warner-Lambert (in the case of clauses (B) and (E) not later
than two Business Days after the date of termination of this Agreement and
in the case of clause (C) not later than two Business Days after the earlier
of the date such agreement is entered into or such Business Combination is
consummated) an amount equal to $1.8 billion,
(ii) in the case of clause (A), (i) AHP shall pay
Warner-Lambert, not later than two Business Days after the date of
termination of this Agreement, an amount equal to $900 million, and (ii) if
within twelve months of termination of this Agreement, AHP enters into a
definitive agreement with any third party with respect to a Business
Combination or any Business Combination with respect to AHP is consummated,
then AHP shall pay to Warner-Lambert, not later than two Business Days after
the earlier of the date such agreement is entered into or such Business
Combination is consummated, an additional amount equal to $900 million,
(iii) in the case of clause (D), AHP shall pay to
Warner-Lambert, not later than two Business Days after the earlier of the
date such agreement is entered into or such Business Combination is
consummated, an amount equal to $180 million,
(iv) in the case of clause (F), (i) AHP shall pay
to Warner-Lambert, not later than two Business Days after the date of
termination of this Agreement, an amount equal to $900 million, and (ii) if
within twelve months of termination of this Agreement, AHP enters into a
definitive agreement with any third party with respect to a Business
Combination or any Business Combination with respect to AHP is consummated,
provided in each case such Business Combination is more favorable to AHP
stockholders (in their capacities as such) from a financial point of view
than the Merger, then AHP shall pay to Warner-Lambert, not later than two
Business Days after the earlier of the date such agreement is entered into or
67
<PAGE>
such Business Combination is consummated, an additional amount equal to $1
billion, unless the option granted pursuant to the AHP Stock Option Agreement
has become exercisable in which case, such amount shall be $900 million. For
purposes of the foregoing, a Business Combination shall be deemed to be more
favorable to AHP stockholders from a financial point of view if the AHP
Applicable Price exceeds the AHP Reference Price. The "AHP Applicable
Price" means the average of the closing prices of the AHP Common Stock (as
reported on the NYSE Composite Transactions Reporting System (as reported in
The Wall Street Journal or, if not reported therein, in another authoritative
source)) during the five trading day period commencing on the first full
trading day following the initial public announcement (or other public
disclosure) of the earlier to occur of (i) the date on which AHP enters into
a definitive agreement with respect to such Business Combination and (ii) the
date such Business Combination is consummated. The "AHP Reference Price"
means the average of the closing prices of the AHP Common Stock (as reported
on the NYSE Composite Transactions Reporting System (as reported in The Wall
Street Journal or, if not reported therein, in another authoritative source))
during the five trading day period ending on the last trading day prior to
the initial public announcement (or other public disclosure) of the earliest
to occur of the following: (i) termination of this Agreement, (ii) AHP's
decision to consider effecting the change in the AHP Recommendation giving
use to such right of termination and (iii) the development with respect to
Warner-Lambert upon which such change in the AHP Recommendation is based.
Notwithstanding the foregoing, in the event of
termination pursuant to Section 7.1(d) in circumstances where Warner-Lambert
has the right to terminate this Agreement pursuant to Section 7.1(f): (i)
under circumstances where Section 7.2(b)(E)(II) applies, then AHP shall pay
to Warner-Lambert, not later than two Business Days after the date of
termination of this Agreement, an amount equal to $1.8 billion and no further
fee shall be payable under this Section 7.2(b), and (ii) under circumstances
where Section 7.2(b)(E)(II) does not apply, then AHP shall pay Warner-Lambert
upon termination of this Agreement, as the obligation to pay fees under this
Section 7.2, the fees payable under Section 7.2(b)(iv) as, when and to the
extent payable under such Section.
(c) If (A) (I) either party shall terminate
this Agreement pursuant to Section 7.1(d) (provided that the basis for such
termination is the failure of Warner-Lambert's stockholders to adopt this
Agreement or approve the Merger) and (II) at any time after the date of this
Agreement and at or before the date of the Warner-Lambert Stockholders
Meeting a Business Combination proposal with respect to Warner-Lambert shall
have been publicly announced or otherwise communicated to the Warner-Lambert
Board of Directors, (B) AHP shall terminate this Agreement pursuant to
Section 7.1(h), (C) (I) either party shall terminate this Agreement pursuant
68
<PAGE>
to Section 7.1(b), (II) at any time after the date of this Agreement and at
or before the Termination Date a Business Combination proposal with respect
to Warner-Lambert shall have been publicly announced or communicated to the
Warner-Lambert Board of Directors, (III) following the existence of such a
Business Combination proposal and prior to any such termination, Warner-
Lambert shall have breached (and not cured after notice thereof) any of its
covenants or agreements set forth in this Agreement in any material respect,
which breach shall have materially contributed to the failure of the
Effective Time to occur on or before the Termination Date and (IV) within
twelve months of any such termination of this Agreement, Warner-Lambert shall
enter into a definitive agreement with any third party with respect to a
Business Combination or a Business Combination with respect to Warner-
Lambert is consummated, (D) (I) either party shall terminate this Agreement
pursuant to Section 7.1(b), (II) at any time after the date of this Agreement
and at or before the Termination Date a Business Combination proposal with
respect to Warner-Lambert shall have been publicly announced or communicated
to the Warner-Lambert Board of Directors, (III) within twelve months of any
such termination of this Agreement, Warner-Lambert shall enter into a
definitive agreement with any third party with respect to a Business
Combination or a Business Combination with respect to Warner-Lambert is
consummated and (IV) Section 7.2(c)(C)(III) is not applicable, (E)(I) AHP
shall terminate this Agreement pursuant to Section 7.1(e) and (II) either
Warner-Lambert's Board of Directors shall have, prior to termination, failed
to make the Warner-Lambert Recommendation or effected a change in the Warner-
Lambert Recommendation, in either case by reason of a Superior Proposal, or
at any time after the date of this Agreement and at or before the event
giving rise to the right of termination a Business Combination proposal which
satisfies the provisions of subclauses (i) and (ii) of clause (II) (but not
the language preceding subclause (i) in clause (II)) in the definition of
Superior Proposal with respect to Warner-Lambert shall have been publicly
announced or communicated to the Warner-Lambert Board of Directors and shall
have not been irrevocably withdrawn prior to the event giving rise to the
right of termination, or (F) AHP shall terminate this Agreement pursuant to
Section 7.1(e) in circumstances where the immediately preceding clause
(E)(II) is not applicable;
then:
(i) in the case of clauses (B), (C) or (E),
Warner-Lambert shall pay to AHP (in the case of clauses (B) and (E) not later
then two Business Days after the date of termination of this Agreement and
in the case of clause (C) not later than two Business Days after the earlier
of the date such agreement is entered into or such Business Combination is
consummated) an amount equal to $1.8 billion,
69
<PAGE>
(ii) in the case of clause (A), (i) Warner-
Lambert shall pay AHP, not later than two Business Days after the date of
termination of this Agreement, an amount equal to $900 million, and (ii) if
within twelve months of termination of this Agreement, Warner-Lambert enters
into a definitive agreement with any third party with respect to a Business
Combination or any Business Combination with respect to Warner-Lambert is
consummated, then Warner-Lambert shall pay to AHP, not later than two
Business Days after the earlier of the date such agreement is entered into or
such Business Combination is consummated, an additional amount equal to $900
million,
(iii) in the case of clause (D), Warner-Lambert
shall pay to AHP, not later than two Business Days after the earlier of the
date such agreement is entered into or such Business Combination is
consummated, an amount equal to $180 million,
(iv) in the case of clause (F), (i) Warner-
Lambert shall pay to AHP, not later then two Business Days after the date of
termination of this Agreement, an amount equal to $900 million, and (ii) if
within twelve months of termination of this Agreement, Warner-Lambert enters
into a definitive agreement with any third party with respect to a Business
Combination or any Business Combination with respect to Warner-Lambert is
consummated, provided in each case such Business Combination is more
favorable to Warner-Lambert stockholders (in their capacities as such) from a
financial point of view than the Merger, then Warner-Lambert shall pay to
AHP, not later than two Business Days after the earlier of the date such
agreement is entered into or such Business Combination is consummated, an
additional amount equal to $1 billion, unless the option granted pursuant to
the Warner-Lambert Stock Option Agreement has become exercisable, in which
case, such amount shall be $900 million. For purposes of the foregoing, a
Business Combination shall be deemed to be more favorable to Warner-Lambert
stockholders from a financial point of view if the Warner-Lambert Applicable
Price exceeds the Warner-Lambert Reference Price. The "Warner-Lambert
Applicable Price" means the average of the closing prices of the Warner-
Lambert Common Stock (as reported on the NYSE Composite Transactions
Reporting System (as reported in The Wall Street Journal or, if not reported
therein, in another authoritative source)) during the five trading day period
commencing on the first full trading day following the initial public
announcement (or other public disclosure) of the earlier to occur of (i) the
date on which Warner-Lambert enters into a definitive agreement with respect
to such Business Combination and (ii) the date such Business Combination is
consummated. The "Warner-Lambert Reference Price" means the average of the
closing prices of the Warner-Lambert Common Stock (as reported on the NYSE
Composite Transactions Reporting System (as reported in The Wall Street
Journal or, if not reported therein, in another authoritative source)) during
70
<PAGE>
the five trading day period ending on the last trading day prior to the
initial public announcement (or other public disclosure) of the earliest to
occur of the following: (i) termination of this Agreement, (ii) Warner-
Lambert's decision to consider effecting the Change in the Warner-Lambert
Recommendation giving rise to such right of termination and (iii) the
development with respect to AHP upon which such Change in the Warner-Lambert
Recommendation is based.
Notwithstanding the foregoing, in the event of
termination pursuant to Section 7.1(d) in circumstances where AHP has the
right to terminate this Agreement pursuant to Section 7.1(e): (i) under
circumstances where Section 7.2(c)(E)(II) applies, then Warner-Lambert shall
pay to AHP, not later than two Business Days after the date of termination of
this Agreement, an amount equal to $1.8 billion and no further fee shall be
payable under this Section 7.2(c); and (ii) under circumstances where Section
7.2(c)(E)(II) does not apply, then Warner-Lambert shall pay AHP upon
termination of this Agreement, as the obligation to pay fees under this
Section 7.2, the fees payable under Section 7.2(c)(iv) as, when and to the
extent payable under such section.
(d) For the purposes of this Section 7.2,
"Business Combination" means with respect to AHP or Warner-Lambert, as the
case may be, (i) a merger, reorganization, consolidation, share exchange,
business combination, recapitalization, liquidation, dissolution or similar
transaction involving such party as a result of which either (A) such party's
stockholders prior to such transaction (by virtue of their ownership of such
party's shares) in the aggregate cease to own at least 60% of the voting
securities of the entity surviving or resulting from such transaction (or the
ultimate parent entity thereof) or, regardless of the percentage of voting
securities held by such stockholders, if any Person shall beneficially own,
directly or indirectly, at least 40% of the voting securities of such
ultimate parent entity, or (B) the individuals comprising the board of
directors of such party prior to such transaction do not constitute a
majority of the board of directors of such ultimate parent entity, (ii) a
sale, lease, exchange, transfer or other disposition of at least 40% of the
assets of such party and its Subsidiaries, taken as a whole, in a single
transaction or a series of related transactions, or (iii) the acquisition,
directly or indirectly, by a Person of beneficial ownership of 40% or more of
the common stock of such party whether by merger, consolidation, share
exchange, business combination, tender or exchange offer or otherwise (other
than a merger, reorganization, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar
transaction upon the consummation of which such party's stockholders would in
the aggregate beneficially own greater than 60% of the voting securities of
such Person).
71
<PAGE>
(e) In no event shall AHP or Warner-Lambert be
required to pay more than $1.8 billion (or, as provided in Section 7.2(b)(iv)
and 7.2(c)(iv), $1.9 billion) pursuant to Section 7.2(b) or 7.2(c), as
applicable. All payments under this Section 7.2 shall be made by wire
transfer of immediately available funds to an account designated by the party
entitled to receive payment.
7.3 Amendment. This Agreement may be amended by
the parties hereto, by action taken or authorized by their respective Boards
of Directors, at any time before or after approval of the matters presented
in connection with the Merger by the stockholders of Warner-Lambert and AHP,
but, after any such approval, no amendment shall be made which by law or in
accordance with the rules of any relevant stock exchange requires further
approval by such stockholders without such further approval. This Agreement
may not be amended except by an instrument in writing signed on behalf of
each of the parties hereto.
7.4 Extension; Waiver. At any time prior to the
Effective Time, the parties hereto, by action taken or authorized by their
respective Boards of Directors, may, to the extent legally allowed, (i)
extend the time for the performance of any of the obligations or other acts
of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to
any such extension or waiver shall be valid only if set forth in a written
instrument signed on behalf of such party. The failure of any party to this
Agreement to assert any of its rights under this Agreement or otherwise shall
not constitute a waiver of those rights.
ARTICLE VIII
GENERAL PROVISIONS
8.1 Non-Survival of Representations, Warranties
and Agreements. None of the representations, warranties, covenants and other
agreements in this Agreement or in any instrument delivered pursuant to this
Agreement, including any rights arising out of any breach of such
representations, warranties, covenants and other agreements, shall survive
the Effective Time, except for those covenants and agreements contained
herein and therein (including Section 5.8) that by their terms apply or are
to be performed in whole or in part after the Effective Time and this Article
VIII.
72
<PAGE>
8.2 Notices. All notices and other
communications hereunder shall be in writing and shall be deemed duly given
(a) on the date of delivery if delivered personally, or by telecopy or
telefacsimile, upon confirmation of receipt, (b) on the first Business Day
following the date of dispatch if delivered by a recognized next-day courier
service, or (c) on the tenth Business Day following the date of mailing if
delivered by registered or certified mail, return receipt requested, postage
prepaid. All notices hereunder shall be delivered as set forth below, or
pursuant to such other instructions as may be designated in writing by the
party to receive such notice:
(a) if to AHP or Merger Sub, to:
American Home Products Corporation
5 Giralda Farms
Madison, New Jersey 07940
Fax: (973) 660-7156
Attention: Louis L. Hoynes, Jr.
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Fax: (212) 455-2502
Attention: Charles I. Cogut, Esq.
Robert E. Spatt, Esq.
William E. Curbow, Esq.
(b) if to Warner-Lambert to:
Warner-Lambert Company
201 Tabor Road
Morris Plains, New Jersey 07950
Fax: (973) 631-7704
Attention: Gregory L. Johnson, Esq.
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Fax: (212) 735-2000
Attention: Lou R. Kling, Esq.
Eileen Nugent Simon, Esq.
73
<PAGE>
8.3 Interpretation. When a reference is made in
this Agreement to Sections, Exhibits or Schedules, such reference shall be to
a Section of or Exhibit or Schedule to this Agreement unless otherwise
indicated. The table of contents and headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. Whenever the words "include",
"includes" or "including" are used in this Agreement, they shall be deemed to
be followed by the words "without limitation".
8.4 Counterparts. This Agreement may be
executed in one or more counterparts, all of which shall be considered one
and the same agreement and shall become effective when one or more
counterparts have been signed by each of the parties and delivered to the
other party, it being understood that both parties need not sign the same
counterpart.
8.5 Entire Agreement; No Third Party
Beneficiaries.
(a) This Agreement, the Stock Option Agreements,
the Confidentiality Agreement and the other agreements of the parties
referred to herein constitute the entire agreement and supersede all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof.
(b) This Agreement shall be binding upon and
inure solely to the benefit of each party hereto, and nothing in this
Agreement, express or implied, is intended to or shall confer upon any other
Person any right, benefit or remedy of any nature whatsoever under or by
reason of this Agreement, other than Section 5.8 (which is intended to be for
the benefit of the Persons covered thereby and may be enforced by such
Persons).
8.6 Governing Law. This Agreement shall be
governed and construed in accordance with the laws of the State of Delaware
(without giving effect to choice of law principles thereof).
8.7 Severability. If any term or other
provision of this Agreement is invalid, illegal or incapable of being
enforced by any law or public policy, all other terms and provisions of this
Agreement shall nevertheless remain in full force and effect so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such
determination that any term or other provision is invalid, illegal or
incapable of being enforced, the parties hereto shall negotiate in good faith
74
<PAGE>
to modify this Agreement so as to effect the original intent of the parties
as closely as possible in an acceptable manner in order that the transactions
contemplated hereby are consummated as originally contemplated to the
greatest extent possible.
8.8 Assignment. Neither this Agreement nor any
of the rights, interests or obligations hereunder shall be assigned by any of
the parties hereto, in whole or in part (whether by operation of law or
otherwise), without the prior written consent of the other party, and any
attempt to make any such assignment without such consent shall be null and
void, except that Merger Sub may assign, in its sole discretion, any or all
of its rights, interests and obligations under this Agreement to any direct
wholly owned Subsidiary of AHP without the consent of Warner-Lambert, but no
such assignment shall relieve Merger Sub of any of its obligations under this
Agreement. Subject to the preceding sentence, this Agreement will be binding
upon, inure to the benefit of and be enforceable by the parties and their
respective successors and assigns.
8.9 Submission to Jurisdiction; Waivers. Each
of AHP and Warner-Lambert irrevocably agrees that any legal action or
proceeding with respect to this Agreement or for recognition and enforcement
of any judgment in respect hereof brought by the other party hereto or its
successors or assigns may be brought and determined in the Chancery or other
Courts of the State of Delaware, and each of AHP and Warner-Lambert hereby
irrevocably submits with regard to any such action or proceeding for itself
and in respect to its property, generally and unconditionally, to the
nonexclusive jurisdiction of the aforesaid courts. Each of AHP and Warner-
Lambert hereby irrevocably waives, and agrees not to assert, by way of
motion, as a defense, counterclaim or otherwise, in any action or proceeding
with respect to this Agreement, (a) any claim that it is not personally
subject to the jurisdiction of the above-named courts for any reason other
than the failure to lawfully serve process (b) that it or its property is
exempt or immune from jurisdiction of any such court or from any legal
process commenced in such courts (whether through service of notice,
attachment prior to judgment, attachment in aid of execution of judgment,
execution of judgment or otherwise), and (c) to the fullest extent permitted
by applicable law, that (i) the suit, action or proceeding in any such court
is brought in an inconvenient forum, (ii) the venue of such suit, action or
proceeding is improper and (iii) this Agreement, or the subject matter
hereof, may not be enforced in or by such courts.
8.10 Enforcement. The parties agree that
irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms.
It is accordingly agreed that the parties shall be entitled to specific
75
<PAGE>
performance of the terms hereof, this being in addition to any other remedy
to which they are entitled at law or in equity.
8.11 Definitions. As used in this Agreement:
(a) "beneficial ownership" or "beneficially own"
shall have the meaning under Section 13(d) of the Exchange Act and the rules
and regulations thereunder.
(b) "Benefit Plans" means, with respect to any
Person, each employee benefit plan, program, arrangement and contract
(including, without limitation, any "employee benefit plan," as defined in
Section 3(3) of the Employee Retirement Income Security Act of 1974, as
amended ("ERISA") and any bonus, deferred compensation, stock bonus, stock
purchase, restricted stock, stock option, employment, termination, stay
agreement or bonus, change in control and severance plan, program,
arrangement and contract) in effect on the date of this Agreement or
disclosed on the Warner-Lambert Disclosure Schedule or the AHP Disclosure
Schedule, as the case may be, to which such Person or its Subsidiary is a
party, which is maintained or contributed to by such Person, or with respect
to which such Person could incur material liability under Section 4069, 4201
or 4212(c) of ERISA.
(c) "Board of Directors" means the Board of
Directors of any specified Person and any committees thereof.
(d) "Business Day" means any day on which banks
are not required or authorized to close in the City of New York.
(e) "known or "knowledge" means, with respect to
any party, the knowledge of such party's executive officers after reasonable
inquiry.
(f) "Majority Owned Restricted Affiliate" when
used with respect to any party means any corporation or other organization,
whether incorporated or unincorporated, at least a majority of the securities
or other interests of which having by their terms ordinary voting power to
elect a majority of the Board of Directors or others performing similar
functions with respect to such corporation or other organization, is directly
or indirectly owned or controlled by such party or by any one or more of its
Subsidiaries, or by such party and one or more of its Subsidiaries, and with
respect to which such party is restricted from having the ability to, by
virtue of contractual limitations or limitations imposed in organizational
documents, from electing a majority of the Board of Directors or others
performing similar functions.
76
<PAGE>
(g) "Material Adverse Effect" means, with
respect to any entity any event, change, circumstance or effect that is or is
reasonably likely to be materially adverse to (i) the business, financial
condition or results of operations of such entity and its Subsidiaries taken
as a whole, other than any event, change, circumstance or effect relating (x)
to the economy or financial markets in general or (y) in general to the
industries in which such entity operates and not specifically relating to (or
having the effect of specifically relating to or having a materially
disproportionate effect (relative to most other industry participants) on)
such entity or (ii) the ability of such entity to consummate the transactions
contemplated by this Agreement; provided, however, that for purposes of
Section 3.1 (other than 3.1(i) if, and only if, the succeeding proviso is
applicable and Section 3.1(h)(iii)) only, "Material Adverse Effect" shall
also exclude any event, change, circumstance or effect relating in any way to
(I) any pending, proposed, threatened or potential litigation against AHP
involving dexfenfluramine or fenfluramine or any settlement or proposed
settlement of such litigation or (II) any other liabilities, whether known or
unknown and whether contingent or not, relating in any way to AHP's
production, sale or marketing of dexfenfluramine or fenfluramine; provided
further however, that the exception to the exclusion set forth in the
preceding proviso with respect to Section 3.1(i) shall apply if, and only if,
following the date of the Warner-Lambert Stockholders Meeting, any events,
changes, circumstances or effects occur, or Warner-Lambert becomes aware of
any events, changes, circumstances or effects, relating to the matters
referred to in the preceding clauses (I) and (II) which in Warner-Lambert's
good faith judgment has had or has a reasonable likelihood of having
material adverse significance with respect to such matters. All references
to Material Adverse Effect on AHP or its Subsidiaries contained in this
Agreement shall be deemed to refer solely to AHP and its Subsidiaries without
including its ownership of Warner-Lambert and its Subsidiaries after the
Merger.
(h) "the other party" means, with respect to
Warner-Lambert, AHP and means, with respect to AHP, Warner-Lambert.
(i) "Person" means an individual, corporation,
limited liability company, partnership, association, trust, unincorporated
organization, other entity or group (as defined in the Exchange Act).
(j) "Subsidiary" when used with respect to any
party means any corporation or other organization, whether incorporated or
unincorporated, (i) of which such party or any other Subsidiary of such party
is a general partner (excluding partnerships, the general partnership
interests of which held by such party or any Subsidiary of such party do not
have a majority of the voting interests in such partnership) or (ii) at least
77
<PAGE>
a majority of the securities or other interests of which having by their
terms ordinary voting power to elect a majority of the Board of Directors or
others performing similar functions with respect to such corporation or other
organization is directly or indirectly owned or controlled by such party or
by any one or more of its Subsidiaries, or by such party and one or more of
its Subsidiaries, except for any Majority Owned Restricted Affiliates.
(k) "Superior Proposal" means with respect to
AHP or Warner-Lambert, as the case may be, a written proposal made by a
Person other than either such party which is for (I) (i) a merger,
reorganization, consolidation, share exchange, business combination,
recapitalization, liquidation, dissolution or similar transaction involving
such party as a result of which either (A) such party's stockholders prior to
such transaction (by virtue of their ownership of such party's shares) in the
aggregate cease to own at least 60% of the voting securities of the entity
surviving or resulting from such transaction (or the ultimate parent entity
thereof) or (B) the individuals comprising the board of directors of such
party prior to such transaction do not constitute a majority of the board of
directors of such ultimate parent entity, (ii) a sale, lease, exchange,
transfer or other disposition of at least 40% of the assets of such party and
its Subsidiaries, taken as a whole, in a single transaction or a series of
related transactions, or (iii) the acquisition, directly or indirectly, by a
Person of beneficial ownership of 40% or more of the common stock of such
party whether by merger, consolidation, share exchange, business combination,
tender or exchange offer or otherwise (other than a merger, consolidation,
share exchange, business combination, tender or exchange offer or other
transaction upon the consummation of which such party's stockholders would in
the aggregate beneficially own greater than 60% of the voting securities of
such Person), and which is (II) otherwise on terms which the Board of
Directors of such party in good faith concludes (after consultation with its
financial advisors and outside counsel), taking into account, among other
things, all legal, financial, regulatory and other aspects of the proposal
and the Person making the proposal, (i) would, if consummated, result in a
transaction that is more favorable to its stockholders (in their capacities
as stockholders), from a financial point of view, than the transactions
contemplated by this Agreement and (ii) is reasonably capable of being
completed.
78
<PAGE>
IN WITNESS WHEREOF, AHP, Merger Sub and Warner-
Lambert have caused this Agreement to be signed by their respective officers
thereunto duly authorized, all as of the date first written above.
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ John R. Stafford
-----------------------------
Name: John R. Stafford
Title: Chairman, Chief Executive
Officer and President
WOLVERINE SUB CORP.
By: /s/ Jeffrey S. Sherman
-----------------------------
Name: Jeffrey S. Sherman
Title: Vice President and
Assistant Secretary
WARNER-LAMBERT COMPANY
By: /s/ Lodewijk J.R. de Vink
-----------------------------
Name: Lodewijk J.R. de Vink
Title: Chairman, Chief Executive
Officer and President
79
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of November 3, 1999 (the "Agreement"),
by and between American Home Products Corporation, a Delaware corporation
("Issuer"), and Warner-Lambert Company, a Delaware corporation ("Grantee").
WHEREAS, Issuer, Grantee and Wolverine Sub Corp., a Delaware corporation
("Sub"), which is a direct wholly owned subsidiary of Issuer, propose to
enter into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"; capitalized terms used but not defined herein shall have
the meanings set forth in the Merger Agreement), providing for, among other
things, a merger (the "Merger") of Sub with and into Grantee;
WHEREAS, as a condition and inducement to Grantee's willingness to enter
into the Merger Agreement and the Warner-Lambert Stock Option Agreement,
Grantee has requested that Issuer agree, and Issuer has agreed, to grant
Grantee the Option (as defined below); and
WHEREAS, as a condition and inducement to Issuer's willingness to enter
into the Merger Agreement and this Agreement, Issuer has requested that
Grantee agree, and Grantee has agreed, to grant Issuer an option to purchase
shares of Grantee's common stock under the Warner-Lambert Stock Option
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, Issuer and Grantee agree as follows:
1. Grant of Options. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option")
to purchase up to 194,551,963 shares (the "Option Shares") of common stock,
par value $0.33 1/3 per share, of Issuer (the "Shares") (being 14.9% of the
number of Shares outstanding on October 31, 1999 before such issuance),
together with the associated purchase rights (the "Rights") under the Rights
Agreement, dated as of October 13, 1999, between Issuer and ChaseMellon
Shareholder Services L.L.C., as Rights Agent (references to the Option Shares
shall be deemed to include the associated Rights), at a purchase price of
$56.00 per Option Share (such price, as adjusted if applicable, the "Purchase
Price"). The number of Option Shares that may be received upon the exercise
of the Option and the Purchase Price are subject to adjustment as set forth
herein.
2. Exercise of Option. (a) Grantee may exercise the Option, in whole
or in part, at any time or from time to time following the occurrence of a
Purchase Event (as defined below); provided that, except as otherwise
provided herein, the Option shall terminate and be of no further force and
effect upon the earliest to occur of (i) the Effective Time, (ii) 6 months
after the first occurrence of a Purchase Event (or if, at the expiration of
<PAGE>
such 6-months after the first occurrence of a Purchase Event, the Option
cannot be exercised by reason of any applicable judgment, decree, order, law
or regulation, 10 business days after such impediment to exercise shall have
been removed, but in no event under this clause (ii) later than the first
anniversary of the Purchase Event), (iii) termination of the Merger Agreement
under circumstances which do not and cannot result in Grantee's becoming
entitled to receive termination fees from Issuer pursuant to Section 7.2(b)
of the Merger Agreement of $1.8 billion or more; and (iv) 12 months after the
termination of the Merger Agreement under circumstances which could result in
Grantee's becoming entitled to receive termination fees from Issuer pursuant
to Section 7.2(b)(ii)(ii) or 7.2(b)(C), unless during such 12-month period, a
Purchase Event shall occur. Notwithstanding the foregoing, the Option shall
terminate and not be exercisable if (x) at the time the Merger Agreement is
terminated, Grantee has the right to terminate the Merger Agreement pursuant
to Section 7.1(f) thereof and the circumstances referred to in Section
7.2(b)(E)(II) of the Merger Agreement are not applicable, and (y) prior to
the 90th day following termination of the Merger Agreement, Issuer does not
(i) enter into a definitive agreement with any third party with respect to a
Business Combination or (ii) consummate any Business Combination with respect
to Issuer, which in each case is more favorable to Issuer's stockholders (in
their capacities as such) from a financial point of view than the Merger,
such determination of whether such Business Combination is more favorable
than the Merger shall be made in accordance with the terms of Section
7.2(b)(iv) of the Merger Agreement. The termination of the Option shall not
affect any rights hereunder which by their terms extend beyond the date of
such termination.
(b) As used herein, a "Purchase Event" means an event the result
of which is that the total fee or fees required to be paid by Issuer to
Grantee pursuant to Section 7.2(b) of the Merger Agreement equals or exceeds
$1.8 billion.
(c) In the event Grantee wishes to exercise the Option, it shall
send to Issuer a written notice (the "Exercise Notice"; the date of which
being herein referred to as the "Notice Date") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor later than 10
business days from such Notice Date for the closing of such purchase (a
"Closing"; and the date of such Closing, a "Closing Date"); provided that
such closing shall be held only if (A) such purchase would not otherwise
violate or cause the violation of applicable law (including the HSR Act), (B)
no law, rule or regulation shall have been adopted or promulgated, and no
temporary restraining order, preliminary or permanent injunction or other
order, decree or ruling issued by a court or other governmental authority of
competent jurisdiction shall be in effect, which prohibits delivery of such
Option Shares (and the parties hereto shall use their reasonable best efforts
to have any such order, injunction, decree or ruling vacated or reversed) and
-2-
<PAGE>
(C) any prior notification to or approval of any other regulatory authority
in the United States or elsewhere required in connection with such purchase
shall have been made or obtained, other than those which if not made or
obtained would not reasonably be expected to result in a significant
detriment to the Grantee and its Subsidiaries taken as a whole or the Issuer
and its Subsidiaries taken as a whole. If the Closing cannot be consummated
by reason of a restriction set forth in clause (A), (B) or (C) above,
notwithstanding the provisions of Section 2(a), the Closing shall be held
within 5 business days following the elimination of such restriction.
3. Payment and Delivery of Certificates. On each Closing Date,
Grantee shall pay to Issuer in immediately available funds by wire transfer
to a bank account designated by Issuer an amount equal to the Purchase Price
multiplied by the Option Shares to be purchased on such Closing Date.
(b) At each Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Issuer shall deliver
to Grantee a certificate or certificates representing the Option Shares to be
purchased at such closing, which Option Shares shall be free and clear of all
liens, charges or encumbrances ("Liens"), and Grantee shall deliver to Issuer
a letter agreeing that Grantee shall not offer to sell or otherwise dispose
of such Option Shares in violation of applicable law or the provisions of
this Agreement.
(c) Certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF NOVEMBER
3, 1999. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have
delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer
and its counsel, to the effect that such legend is not required for purposes
of the Securities Act and (ii) the reference to restrictions pursuant to this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Option Shares evidenced by
certificate(s) containing such reference have been sold or transferred in
compliance with the provisions of this Agreement under circumstances that do
not require the retention of such reference.
-3-
<PAGE>
4. Authorized Stock. Issuer hereby represents and warrants to Grantee
that Issuer has taken all necessary corporate and other action to authorize
and reserve and to permit it to issue, at all times from the date hereof
until the obligation to deliver Shares upon the exercise of the Option
terminates, will have reserved for issuance, upon exercise of the Option,
Shares necessary for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional Shares or other securities which may be issued pursuant to Section
6 upon exercise of the Option. The Shares to be issued upon due exercise of
the Option, including all additional Shares or other securities which may be
issuable upon exercise of the Option pursuant to Section 6, upon issuance
pursuant hereto, shall be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all Liens, including
any preemptive rights of any stockholder of Issuer.
5. Purchase Not for Distribution. Grantee hereby represents and
warrants to Issuer that any Option Shares or other securities acquired by
Grantee upon exercise of the Option will not be taken with a view to the
public distribution thereof and will not be transferred or otherwise disposed
of except in a transaction registered or exempt from registration under the
Securities Act.
6. Adjustment upon Changes in Capitalization, etc. (a) In the event
of any change in Shares by reason of reclassification, recapitalization,
stock split, split-up, combination, exchange of shares, stock dividend,
dividend, dividend payable in any other securities, or any similar event, the
type and number of Shares or securities subject to the Option, and the
Purchase Price therefor (including for purposes of repurchase thereof
pursuant to Section 7), shall be adjusted appropriately, and proper
provisions shall be made in the agreements governing such transaction, so
that Grantee shall receive upon exercise of the Option the number and class
of shares or other securities or property that Grantee would have received in
respect of Shares if the Option had been exercised immediately prior to such
event or the record date therefor, as applicable. If any additional Shares
are issued after the date of this Agreement (other than pursuant to an event
described in the immediately preceding sentence), the number of Shares
subject to the Option shall be adjusted so that immediately prior to such
issuance, it equals 14.9% of the number of Shares then issued and
outstanding. In no event shall the number of Shares subject to the Option
exceed 14.9% of the number of Shares issued and outstanding at the time of
exercise (without giving effect to any shares subject or issued pursuant to
the Option).
(b) Without limiting the foregoing, whenever the number of Option
Shares purchasable upon exercise of the Option is adjusted as provided in
this Section 6, the Purchase Price per Option Share shall be adjusted by
multiplying the Purchase Price by a fraction, the numerator of which is equal
-4-
<PAGE>
to the number of Option Shares purchasable prior to the adjustment and the
denominator of which is equal to the number of Option Shares purchasable
after the adjustment.
(c) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that Issuer enters into an agreement
(i) to consolidate with or merge into any person, other than Grantee or one
of its Subsidiaries, and Issuer will not be the continuing or surviving
corporation in such consolidation or merger, (ii) to permit any Person, other
than Grantee or one of its Subsidiaries, to merge into Issuer and Issuer will
be the continuing or surviving corporation, but in connection with such merger,
the shares of Common Stock outstanding immediately prior to the consummation
of such merger will be changed into or exchanged for stock or other
securities of Issuer or any other Person or cash or any other property, or
(iii) to sell or otherwise transfer all or substantially all of its assets to
any Person, other than Grantee or one of its Subsidiaries, then, and in each
such case, the agreement governing such transaction will make proper
provision so that the Option will, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option with identical terms appropriately adjusted
to acquire the number and class of shares or other securities or property
that Grantee would have received in respect of Option Shares had the Option
been exercised immediately prior to such consolidation, merger, sale or
transfer or the record date therefor, as applicable. Issuer shall take such
steps in connection with such consolidation, merger, liquidation or other
such transaction as may be reasonably necessary to assure that the provisions
hereof shall thereafter apply as nearly as possible to any securities or
property thereafter deliverable upon exercise of the Option.
7. Repurchase of Option. (a) Notwithstanding the provisions of
Section 2(a), at any time commencing upon the first occurrence of a Purchase
Event and ending upon termination of this Option in accordance with Section
2, Issuer (or any successor entity thereof) shall at the request of Grantee
(any such request, a "Cash Exercise Notice"), repurchase from Grantee the
Option or a portion thereof (if and to the extent not previously exercised or
terminated) at a price which, subject to Section 10 below, is equal to the
excess, if any, of (x) the Applicable Price (as defined below) as of the
Section 7 Request Date (as defined below) for a Share over (y) the Purchase
Price (subject to adjustment pursuant to Section 6), multiplied by all or
such portion of the Option Shares subject to the Option as the Grantee shall
specify in the Cash Exercise Notice (the "Option Repurchase Price").
(b) Notwithstanding the provisions of Section 2(a), at any time
following the occurrence of a Purchase Event, Issuer (or any successor entity
thereof) may, at its election, repurchase the Option (if and to the extent
not previously exercised or terminated) at the Option Repurchase Price;
provided that the aggregate number of Option Shares as to which the Option
-5-
<PAGE>
may be repurchased shall not exceed 129,701,373. For purposes of this
Agreement, an exercise of the Option shall be deemed to occur on the Closing
Date and not on the Notice Date relating thereto.
(c) In connection with any exercise of rights under this Section
7, Issuer shall, within 5 business days after the Section 7 Request Date, pay
the Option Repurchase Price in immediately available funds, and Grantee or
such owner, as the case may be, shall surrender to Issuer the Option. Upon
receipt by the Grantee of the Option Repurchase price, the obligations of the
Issuer to deliver Option Shares pursuant to Section 3 of this Agreement shall
be terminated with respect to the number of Option Shares specified in the
Cash Exercise Notice or the number of Option Shares as to which the Option is
repurchased under Section 7(b).
(d) For purposes of this Agreement, the following terms have the
following meanings:
(i) "Applicable Price", as of any date, means the highest of (A)
the highest price per Share paid or proposed to be paid by any third
party for Shares or the consideration per Share received or to be
received by holders of Shares, in each case pursuant to any Acquisition
Proposal for or with Issuer made on or prior to such date or (B) the
average closing price per Share as reported on the New York Stock
Exchange, Inc. ("NYSE") Composite Tape or if the Shares are not listed
on the NYSE, the highest bid price per Share as quoted on the National
Association of Securities Dealers Automated Quotation System or, if the
Shares are not quoted thereon, on the principal trading market on which
such Shares are traded as reported by a recognized source during the 10
trading days preceding such date. If the consideration to be offered,
paid or received pursuant to the foregoing clause (A) shall be other
than in cash, the value of such consideration shall be determined in
good faith by an independent nationally recognized investment banking
firm selected by Grantee and reasonably acceptable to Issuer.
(ii) "Section 7 Request Date" means the date on which Issuer or
Grantee, as the case may be, exercises its rights under this Section.
8. Registration Rights. Issuer shall, if requested by Grantee or any
Subsidiary of the Grantee which is the owner of Option Shares (collectively
with Grantee, the "Owners") at any time and from time to time within two
years of the first exercise of the Option, as expeditiously as possible
prepare and file up to two registration statements under the Securities Act
if such registration is necessary in order to permit the sale or other
disposition of any or all shares of securities that have been acquired by or
are issuable to such Owners upon exercise of the Option in accordance with
the intended method of sale or other disposition stated by such Owners,
including a "shelf" registration statement under Rule 415 under the
-6-
<PAGE>
Securities Act or any successor provision, and Issuer shall use all
reasonable efforts to qualify such shares or other securities under any
applicable state securities laws. Issuer shall use all reasonable efforts to
cause each such registration statement to become effective, to obtain all
consents or waivers of other parties which are required therefor and to keep
such registration statement effective for such period at least 90 days from
the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The
obligations of Issuer hereunder to file a registration statement and to
maintain its effectiveness may be suspended for a period of time not
exceeding 90 days in the aggregate if the Board of Directors of Issuer shall
have determined in good faith that the filing of such registration statement
or the maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect Issuer (but in no
event shall Issuer exercise such postponement right more than once in any 12-
month period). Any registration statement prepared and filed under this
Section 8, and any sale covered thereby, shall be at Issuer's expense except
for underwriting discounts or commissions, brokers' fees and the reasonable
fees and disbursements of Owners' counsel related thereto. The Owners shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If during the time period
referred to in the first sentence of this Section 8 Issuer effects a
registration under the Securities Act of Shares for its own account or for
any other stockholders of Issuer (other than on Form S-4 or Form S-8, or any
successor form), it shall allow the Owners the right to participate in such
registration, and such participation shall not affect the obligation of
Issuer to effect two registration statements for the Owners under this
Section 8; provided that, if the managing underwriters of such offering
advise Issuer in writing that in their opinion the number of Shares requested
to be included in such registration exceeds the number which can be sold in
such offering without adversely affecting the offering price, Issuer and the
Owners shall each reduce on a pro rata basis the Shares to be included
therein on their respective behalf. In connection with any registration
pursuant to this Section 8, Issuer and the Owners shall provide each other
and any underwriter of the offering with customary representations,
warranties, covenants, indemnification and contribution in connection with
such registration.
9. Additional Covenants of Issuer. (a) If Shares or any other
securities to be acquired upon exercise of the Option are then listed on the
NYSE or any other securities exchange or market, Issuer, upon the request of
any Owner, will promptly file an application to list the Shares or other
securities to be acquired upon exercise of the Options on the NYSE or such
other securities exchange or market and will use its reasonable best efforts
to obtain approval of such listing as soon as practicable.
-7-
<PAGE>
(b) Issuer will use its reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
necessary, proper or advisable under applicable laws and regulations to
permit the exercise of the Option in accordance with the terms and conditions
hereof, as soon as practicable after the date hereof, including making any
appropriate filing pursuant to the HSR Act and any other applicable law,
supplying as promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR Act and any
other applicable law, and taking all other actions necessary to cause the
expiration or termination of the applicable waiting periods under the HSR Act
as soon as practicable.
(c) Issuer agrees not to avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger, issuance
of rights, dissolution or sale of assets, or by any other voluntary act) the
observance or performance of any of the covenants, agreements or conditions
to be observed or performed hereunder by it.
(d) Issuer shall take all such steps as may be required to cause
any acquisitions or dispositions by Grantee (or any affiliate who may become
subject to the reporting requirements of Section 16(a) of the Exchange Act)
of any Shares acquired in connection with this Agreement (through conversion
or exercise of the Option or otherwise) to be exempt under Rule 16b-3
promulgated under the Exchange Act.
10. Limitation of Grantee Profit. (a) Notwithstanding any other
provision in this Agreement, in no event shall Grantee's Total Profit (as
defined below) exceed $2 billion (the "Maximum Profit") and, if it otherwise
would exceed such amount, Grantee, at its sole discretion, shall either (i)
reduce the number of Shares subject to the Option, (ii) deliver to Issuer for
cancellation Shares (or other securities into which such Option Shares are
converted or exchanged) previously purchased by Grantee, (iii) pay cash to
Issuer, or (iv) any combination of the foregoing, so that Grantee's actually
realized Total Profit shall not exceed the Maximum Profit after taking into
account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of Option Shares as would, as of any
Notice Date, result in a Notional Total Profit (as defined below) of more
than the Maximum Amount and, if exercise of the Option otherwise would result
in the Notional Total Profit exceeding such amount, Grantee, at its
discretion, may (in addition to any of the actions specified in Section 10(a)
above) (i) reduce the number of Shares subject to the Option or (ii) increase
the Purchase Price for that number of Option Shares set forth in the Exercise
Notice so that the Notional Total Profit shall not exceed the Maximum Profit;
provided that nothing in this sentence shall restrict any exercise of the
-8-
<PAGE>
Option permitted hereby on any subsequent date at the Purchase Price set
forth in Section 1 hereof.
(c) For purposes of this Agreement, "Total Profit" shall mean:
(i) the aggregate amount (before taxes) of (A) any excess of (x) the net cash
amounts or fair market value of any property received by Grantee pursuant to
a sale of Option Shares (or securities into which such shares are converted
or exchanged) over (y) the Grantee's aggregate purchase price for such Option
Shares (or other securities), plus (B) any amounts received by Grantee on the
repurchase of the Option by Issuer pursuant to Section 7, plus (C) any
termination fee paid by Issuer and received by Grantee pursuant to Section
7.2(b) of the Merger Agreement, minus (ii) the amounts of any cash previously
paid by Grantee to Issuer pursuant to this Section 10 plus the value of the
Option Shares (or other securities) previously delivered by Grantee to Issuer
for cancellation pursuant to this Section 10.
(d) For purposes of this Agreement, "Notional Total Profit" with
respect to any number of Option Shares as to which Grantee may propose to
exercise the Option shall mean the Total Profit determined as of the Notice
Date assuming that the Stock Option was exercised on such date for such
number of Option Shares and assuming that such Option Shares, together with
all other Option Shares previously acquired upon exercise of the Option and
held by Grantee as of such date, were sold for cash at the closing price per
Share on the NYSE as of the close of business on the preceding trading day
(less customary brokerage commissions).
(e) Notwithstanding any other provision of this Agreement, nothing
in this Agreement shall affect the ability of Grantee to receive, nor relieve
Issuer's obligation to pay, any termination fee provided for in Section
7.2(b) of the Merger Agreement; provided that if and to the extent the Total
Profit received by Grantee would exceed the Maximum Profit following receipt
of such payment, Grantee shall be obligated to promptly comply with the terms
of Section 10(a).
(f) For purposes of Section 10(a) and clause (ii) of Section
10(c), the value of any Option Shares delivered by Grantee to Issuer shall be
the Applicable Price of such Option Shares.
11. Loss, Theft, Etc. of Agreement. This Agreement (and the Option
granted hereby) is exchangeable, without expense, at the option of Grantee,
upon presentation and surrender of this Agreement at the principal office of
Issuer for other Agreements providing for Options of different denominations
entitling the holder thereof to purchase in the aggregate the same number of
Shares purchasable hereunder. The terms "Agreement" and "Option" as used
herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
-9-
<PAGE>
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, Issuer will
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9 hereof or
in the Merger Agreement, each of the parties hereto shall bear and pay all
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability.
Except as otherwise set forth in the Merger Agreement, this Agreement,
together with the Merger Agreement and the Warner-Lambert Stock Option
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and (b) is not intended to confer
upon any person other than the parties hereto any rights or remedies
hereunder. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or a federal or state regulatory
agency to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to acquire, or does not require Issuer to repurchase,
the full number of Shares as provided in Sections 2 and 7, as adjusted
pursuant to Section 6, it is the express intention of Issuer to allow Grantee
to acquire or to require Issuer to repurchase such lesser number of Shares as
may be permissible without any amendment or modification hereof.
(d) Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT
TO CHOICE OF LAW PRINCIPLES).
-10-
<PAGE>
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
(f) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given as set forth in Section 8.2 of the
Merger Agreement.
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterpart.
(h) Assignment. Grantee may not, without the prior written
consent of Issuer (which shall not be unreasonably withheld), assign this
Agreement or the Option to any other person. This Agreement shall not be
assignable by Issuer except by operation of law. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and assigns.
(i) Representations and Warranties. The representations and
warranties contained in Sections 3.1(a)(i) and 3.2(a)(i) of the Merger
Agreement, and, to the extent they relate to this Stock Option Agreement, in
Sections 3.1(b), (c), (f), (g) and (q) and Section 3.2(c) of the Merger
Agreement, are incorporated herein by reference.
(j) Further Assurances. In the event of any exercise of the
Option by Grantee, Issuer and Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(k) Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed
that the parties shall be entitled to specific performance of the terms
hereof, this being in addition to any other remedy to which they are entitled
at law or in equity. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any
other rights that the parties hereto may have for any failure to perform this
Agreement.
(l) Captions. The Article, Section and paragraph captions herein
are for convenience only, do not constitute part of this Agreement and shall
not be deemed to limit or otherwise affect any of the provisions hereof.
-11-
<PAGE>
(m) Confidentiality Agreement. Issuer hereby waives the
restrictions on Grantee's acquisition of Shares contained in the
Confidentiality Agreement to the extent necessary to permit Grantee to
exercise the Option and purchase the Option Shares as herein provided.
-12-
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of November 3, 1999.
WARNER-LAMBERT COMPANY
By: /s/ Lodewijk J.R. de Vink
-------------------------------------
Name: Lodewijk J.R. de Vink
Title: Chairman, Chief Executive
Officer and President
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ John R. Stafford
-------------------------------------
Name: John R. Stafford
Title: Chairman, Chief Executive
Officer and President
-13-
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of November 3, 1999 (the "Agreement"),
by and between Warner-Lambert Company, a Delaware corporation ("Issuer"), and
American Home Products Corporation, a Delaware corporation ("Grantee").
WHEREAS, Issuer, Grantee and Wolverine Sub Corp., a Delaware corporation
("Sub"), which is a direct wholly owned subsidiary of Grantee, propose to
enter into an Agreement and Plan of Merger, dated as of the date hereof (the
"Merger Agreement"; capitalized terms used but not defined herein shall have
the meanings set forth in the Merger Agreement), providing for, among other
things, a merger (the "Merger") of Sub with and into Issuer;
WHEREAS, as a condition and inducement to Grantee's willingness to enter
into the Merger Agreement and the AHP Stock Option Agreement, Grantee has
requested that Issuer agree, and Issuer has agreed, to grant Grantee the
Option (as defined below); and
WHEREAS, as a condition and inducement to Issuer's willingness to enter
into the Merger Agreement and this Agreement, Issuer has requested that
Grantee agree, and Grantee has agreed, to grant Issuer an option to purchase
shares of Grantee's common stock under the AHP Stock Option Agreement.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Merger Agreement, Issuer and Grantee agree as follows:
1. Grant of Options. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the "Option")
to purchase up to 127,940,538 shares (the "Option Shares") of common stock,
par value $1.00 per share, of Issuer (the "Shares") (being 14.9% of the
number of Shares outstanding on October 31, 1999 before such issuance),
together with the associated purchase rights (the "Rights") under the Amended
and Restated Rights Agreement, dated as of March 25, 1997, between Issuer and
First Chicago Trust Company of New York, as Rights Agent (references to the
Option Shares shall be deemed to include the associated Rights), at a
purchase price of $83.81 per Option Share (such price, as adjusted if
applicable, the "Purchase Price"). The number of Option Shares that may be
received upon the exercise of the Option and the Purchase Price are subject
to adjustment as set forth herein.
2. Exercise of Option. (a) Grantee may exercise the Option, in whole
or in part, at any time or from time to time following the occurrence of a
Purchase Event (as defined below); provided that, except as otherwise
provided herein, the Option shall terminate and be of no further force and
effect upon the earliest to occur of (i) the Effective Time, (ii) 6 months
after the first occurrence of a Purchase Event (or if, at the expiration of
such 6-months after the first occurrence of a Purchase Event, the Option
cannot be exercised by reason of any applicable judgment, decree, order, law
<PAGE>
or regulation, 10 business days after such impediment to exercise shall have
been removed, but in no event under this clause (ii) later than the first
anniversary of the Purchase Event), (iii) termination of the Merger Agreement
under circumstances which do not and cannot result in Grantee's becoming
entitled to receive termination fees from Issuer pursuant to Section 7.2(c)
of the Merger Agreement of $1.8 billion or more; and (iv) 12 months after the
termination of the Merger Agreement under circumstances which could result in
Grantee's becoming entitled to receive termination fees from Issuer pursuant
to Section 7.2(c)(ii)(ii) or 7.2(c)(C), unless during such 12-month period, a
Purchase Event shall occur. Notwithstanding the foregoing, the Option shall
terminate and not be exercisable if (x) at the time the Merger Agreement is
terminated, Grantee has the right to terminate the Merger Agreement pursuant
to Section 7.1(e) thereof and the circumstances referred to in Section
7.2(c)(E)(II) of the Merger Agreement are not applicable, and (y) prior to
the 90th day following termination of the Merger Agreement, Issuer does not
(i) enter into a definitive agreement with any third party with respect to a
Business Combination or (ii) consummate any Business Combination with respect
to Grantee, which in each case is more favorable to Issuer's stockholders (in
their capacities as such) from a financial point of view than the Merger,
such determination of whether such Business Combination is more favorable
than the Merger shall be made in accordance with the terms of Section
7.2(c)(iv) of the Merger Agreement. The termination of the Option shall not
affect any rights hereunder which by their terms extend beyond the date of
such termination.
(b) As used herein, a "Purchase Event" means an event the result
of which is that the total fee or fees required to be paid by Issuer to
Grantee pursuant to Section 7.2(c) of the Merger Agreement equals or exceeds
$1.8 billion.
(c) In the event Grantee wishes to exercise the Option, it shall
send to Issuer a written notice (the "Exercise Notice"; the date of which
being herein referred to as the "Notice Date") specifying (i) the total
number of Option Shares it intends to purchase pursuant to such exercise and
(ii) a place and date not earlier than three business days nor later than 10
business days from such Notice Date for the closing of such purchase (a
"Closing"; and the date of such Closing, a "Closing Date"); provided that
such closing shall be held only if (A) such purchase would not otherwise
violate or cause the violation of applicable law (including the HSR Act), (B)
no law, rule or regulation shall have been adopted or promulgated, and no
temporary restraining order, preliminary or permanent injunction or other
order, decree or ruling issued by a court or other governmental authority of
competent jurisdiction shall be in effect, which prohibits delivery of such
Option Shares (and the parties hereto shall use their reasonable best efforts
to have any such order, injunction, decree or ruling vacated or reversed) and
(C) any prior notification to or approval of any other regulatory authority
in the United States or elsewhere required in connection with such purchase
-2-
<PAGE>
shall have been made or obtained, other than those which if not made or
obtained would not reasonably be expected to result in a significant
detriment to the Grantee and its Subsidiaries taken as a whole or the Issuer
and its Subsidiaries taken as a whole. If the Closing cannot be consummated
by reason of a restriction set forth in clause (A), (B) or (C) above,
notwithstanding the provisions of Section 2(a), the Closing shall be held
within 5 business days following the elimination of such restriction.
3. Payment and Delivery of Certificates. On each Closing Date,
Grantee shall pay to Issuer in immediately available funds by wire transfer
to a bank account designated by Issuer an amount equal to the Purchase Price
multiplied by the Option Shares to be purchased on such Closing Date.
(b) At each Closing, simultaneously with the delivery of
immediately available funds as provided in Section 3(a), Issuer shall deliver
to Grantee a certificate or certificates representing the Option Shares to be
purchased at such closing, which Option Shares shall be free and clear of all
liens, charges or encumbrances ("Liens"), and Grantee shall deliver to Issuer
a letter agreeing that Grantee shall not offer to sell or otherwise dispose
of such Option Shares in violation of applicable law or the provisions of
this Agreement.
(c) Certificates for the Option Shares delivered at each Closing
shall be endorsed with a restrictive legend which shall read substantially as
follows:
THE TRANSFER OF THE STOCK REPRESENTED BY THIS CERTIFICATE IS SUBJECT TO
RESTRICTIONS ARISING UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
PURSUANT TO THE TERMS OF A STOCK OPTION AGREEMENT DATED AS OF NOVEMBER
3, 1999. A COPY OF SUCH AGREEMENT WILL BE PROVIDED TO THE HOLDER HEREOF
WITHOUT CHARGE UPON RECEIPT BY THE ISSUER OF A WRITTEN REQUEST THEREFOR.
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have
delivered to Issuer a copy of a letter from the staff of the SEC, or an
opinion of counsel in form and substance reasonably satisfactory to Issuer
and its counsel, to the effect that such legend is not required for purposes
of the Securities Act and (ii) the reference to restrictions pursuant to this
Agreement in the above legend shall be removed by delivery of substitute
certificate(s) without such reference if the Option Shares evidenced by
certificate(s) containing such reference have been sold or transferred in
compliance with the provisions of this Agreement under circumstances that do
not require the retention of such reference.
4. Authorized Stock. Issuer hereby represents and warrants to Grantee
that Issuer has taken all necessary corporate and other action to authorize
-3-
<PAGE>
and reserve and to permit it to issue, at all times from the date hereof
until the obligation to deliver Shares upon the exercise of the Option
terminates, will have reserved for issuance, upon exercise of the Option,
Shares necessary for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional Shares or other securities which may be issued pursuant to Section
6 upon exercise of the Option. The Shares to be issued upon due exercise of
the Option, including all additional Shares or other securities which may be
issuable upon exercise of the Option pursuant to Section 6, upon issuance
pursuant hereto, shall be duly and validly issued, fully paid and
nonassessable, and shall be delivered free and clear of all Liens, including
any preemptive rights of any stockholder of Issuer.
5. Purchase Not for Distribution. Grantee hereby represents and
warrants to Issuer that any Option Shares or other securities acquired by
Grantee upon exercise of the Option will not be taken with a view to the
public distribution thereof and will not be transferred or otherwise disposed
of except in a transaction registered or exempt from registration under the
Securities Act.
6. Adjustment upon Changes in Capitalization, etc. (a) In the event
of any change in Shares by reason of reclassification, recapitalization,
stock split, split-up, combination, exchange of shares, stock dividend,
dividend, dividend payable in any other securities, or any similar event, the
type and number of Shares or securities subject to the Option, and the
Purchase Price therefor (including for purposes of repurchase thereof
pursuant to Section 7), shall be adjusted appropriately, and proper
provisions shall be made in the agreements governing such transaction, so
that Grantee shall receive upon exercise of the Option the number and class
of shares or other securities or property that Grantee would have received in
respect of Shares if the Option had been exercised immediately prior to such
event or the record date therefor, as applicable. If any additional Shares
are issued after the date of this Agreement (other than pursuant to an event
described in the immediately preceding sentence), the number of Shares
subject to the Option shall be adjusted so that immediately prior to such
issuance, it equals 14.9% of the number of Shares then issued and
outstanding. In no event shall the number of Shares subject to the Option
exceed 14.9% of the number of Shares issued and outstanding at the time of
exercise (without giving effect to any shares subject or issued pursuant to
the Option).
(b) Without limiting the foregoing, whenever the number of Option
Shares purchasable upon exercise of the Option is adjusted as provided in
this Section 6, the Purchase Price per Option Share shall be adjusted by
multiplying the Purchase Price by a fraction, the numerator of which is equal
to the number of Option Shares purchasable prior to the adjustment and the
-4-
<PAGE>
denominator of which is equal to the number of Option Shares purchasable
after the adjustment.
(c) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that Issuer enters into an agreement
(i) to consolidate with or merge into any person, other than Grantee or one
of its Subsidiaries, and Issuer will not be the continuing or surviving
corporation in such consolidation or merger, (ii) to permit any Person, other
than Grantee or one of its Subsidiaries, to merge into Issuer and Issuer will
be the continuing or surviving corporation, but in connection with such merger,
the shares of Common Stock outstanding immediately prior to the consummation
of such merger will be changed into or exchanged for stock or other
securities of Issuer or any other Person or cash or any other property, or
(iii) to sell or otherwise transfer all or substantially all of its assets to
any Person, other than Grantee or one of its Subsidiaries, then, and in each
such case, the agreement governing such transaction will make proper
provision so that the Option will, upon the consummation of any such
transaction and upon the terms and conditions set forth herein, be converted
into, or exchanged for, an option with identical terms appropriately adjusted
to acquire the number and class of shares or other securities or property
that Grantee would have received in respect of Option Shares had the Option
been exercised immediately prior to such consolidation, merger, sale or
transfer or the record date therefor, as applicable. Issuer shall take such
steps in connection with such consolidation, merger, liquidation or other
such transaction as may be reasonably necessary to assure that the provisions
hereof shall thereafter apply as nearly as possible to any securities or
property thereafter deliverable upon exercise of the Option.
7. Repurchase of Option. (a) Notwithstanding the provisions of
Section 2(a), at any time commencing upon the first occurrence of a Purchase
Event and ending upon termination of this Option in accordance with Section
2, Issuer (or any successor entity thereof) shall at the request of Grantee
(any such request, a "Cash Exercise Notice"), repurchase from Grantee the
Option or a portion thereof (if and to the extent not previously exercised or
terminated) at a price which, subject to Section 10 below, is equal to the
excess, if any, of (x) the Applicable Price (as defined below) as of the
Section 7 Request Date (as defined below) for a Share over (y) the Purchase
Price (subject to adjustment pursuant to Section 6), multiplied by all or
such portion of the Option Shares subject to the Option as the Grantee shall
specify in the Cash Exercise Notice (the "Option Repurchase Price").
(b) Notwithstanding the provisions of Section 2(a), at any time
following the occurrence of a Purchase Event, Issuer (or any successor entity
thereof) may, at its election, repurchase the Option (if and to the extent
not previously exercised or terminated) at the Option Repurchase Price;
provided that the aggregate number of Option Shares as to which the Option
may be repurchased shall not exceed 85,294,118. For purposes of this
-5-
<PAGE>
Agreement, an exercise of the Option shall be deemed to occur on the Closing
Date and not on the Notice Date relating thereto.
(c) In connection with any exercise of rights under this Section
7, Issuer shall, within 5 business days after the Section 7 Request Date, pay
the Option Repurchase Price in immediately available funds, and Grantee or
such owner, as the case may be, shall surrender to Issuer the Option. Upon
receipt by the Grantee of the Option Repurchase price, the obligations of the
Issuer to deliver Option Shares pursuant to Section 3 of this Agreement shall
be terminated with respect to the number of Option Shares specified in the
Cash Exercise Notice or the number of Option Shares as to which the Option is
repurchased under Section 7(b).
(d) For purposes of this Agreement, the following terms have the
following meanings:
(i) "Applicable Price", as of any date, means the highest of (A)
the highest price per Share paid or proposed to be paid by any third
party for Shares or the consideration per Share received or to be
received by holders of Shares, in each case pursuant to any Acquisition
Proposal for or with Issuer made on or prior to such date or (B) the
average closing price per Share as reported on the New York Stock
Exchange, Inc. ("NYSE") Composite Tape or if the Shares are not listed
on the NYSE, the highest bid price per Share as quoted on the National
Association of Securities Dealers Automated Quotation System or, if the
Shares are not quoted thereon, on the principal trading market on which
such Shares are traded as reported by a recognized source during the 10
trading days preceding such date. If the consideration to be offered,
paid or received pursuant to the foregoing clause (A) shall be other
than in cash, the value of such consideration shall be determined in
good faith by an independent nationally recognized investment banking
firm selected by Grantee and reasonably acceptable to Issuer.
(ii) "Section 7 Request Date" means the date on which Issuer or
Grantee, as the case may be, exercises its rights under this Section.
8. Registration Rights. Issuer shall, if requested by Grantee or any
Subsidiary of the Grantee which is the owner of Option Shares (collectively
with Grantee, the "Owners") at any time and from time to time within two
years of the first exercise of the Option, as expeditiously as possible
prepare and file up to two registration statements under the Securities Act
if such registration is necessary in order to permit the sale or other
disposition of any or all shares of securities that have been acquired by or
are issuable to such Owners upon exercise of the Option in accordance with
the intended method of sale or other disposition stated by such Owners,
including a "shelf" registration statement under Rule 415 under the
Securities Act or any successor provision, and Issuer shall use all
-6-
<PAGE>
reasonable efforts to qualify such shares or other securities under any
applicable state securities laws. Issuer shall use all reasonable efforts to
cause each such registration statement to become effective, to obtain all
consents or waivers of other parties which are required therefor and to keep
such registration statement effective for such period at least 90 days from
the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. The
obligations of Issuer hereunder to file a registration statement and to
maintain its effectiveness may be suspended for a period of time not
exceeding 90 days in the aggregate if the Board of Directors of Issuer shall
have determined in good faith that the filing of such registration statement
or the maintenance of its effectiveness would require disclosure of nonpublic
information that would materially and adversely affect Issuer (but in no
event shall Issuer exercise such postponement right more than once in any 12-
month period). Any registration statement prepared and filed under this
Section 8, and any sale covered thereby, shall be at Issuer's expense except
for underwriting discounts or commissions, brokers' fees and the reasonable
fees and disbursements of Owners' counsel related thereto. The Owners shall
provide all information reasonably requested by Issuer for inclusion in any
registration statement to be filed hereunder. If during the time period
referred to in the first sentence of this Section 8 Issuer effects a
registration under the Securities Act of Shares for its own account or for
any other stockholders of Issuer (other than on Form S-4 or Form S-8, or any
successor form), it shall allow the Owners the right to participate in such
registration, and such participation shall not affect the obligation of
Issuer to effect two registration statements for the Owners under this
Section 8; provided that, if the managing underwriters of such offering
advise Issuer in writing that in their opinion the number of Shares requested
to be included in such registration exceeds the number which can be sold in
such offering without adversely affecting the offering price, Issuer and the
Owners shall each reduce on a pro rata basis the Shares to be included
therein on their respective behalf. In connection with any registration
pursuant to this Section 8, Issuer and the Owners shall provide each other
and any underwriter of the offering with customary representations,
warranties, covenants, indemnification and contribution in connection with
such registration.
9. Additional Covenants of Issuer. (a) If Shares or any other
securities to be acquired upon exercise of the Option are then listed on the
NYSE or any other securities exchange or market, Issuer, upon the request of
any Owner, will promptly file an application to list the Shares or other
securities to be acquired upon exercise of the Options on the NYSE or such
other securities exchange or market and will use its reasonable best efforts
to obtain approval of such listing as soon as practicable.
(b) Issuer will use its reasonable best efforts to take, or cause
to be taken, all actions and to do, or cause to be done, all things
-7-
<PAGE>
necessary, proper or advisable under applicable laws and regulations to
permit the exercise of the Option in accordance with the terms and conditions
hereof, as soon as practicable after the date hereof, including making any
appropriate filing pursuant to the HSR Act and any other applicable law,
supplying as promptly as practicable any additional information and
documentary material that may be requested pursuant to the HSR Act and any
other applicable law, and taking all other actions necessary to cause the
expiration or termination of the applicable waiting periods under the HSR Act
as soon as practicable.
(c) Issuer agrees not to avoid or seek to avoid (whether by
charter amendment or through reorganization, consolidation, merger, issuance
of rights, dissolution or sale of assets, or by any other voluntary act) the
observance or performance of any of the covenants, agreements or conditions
to be observed or performed hereunder by it.
(d) Issuer shall take all such steps as may be required to cause
any acquisitions or dispositions by Grantee (or any affiliate who may become
subject to the reporting requirements of Section 16(a) of the Exchange Act)
of any Shares acquired in connection with this Agreement (through conversion
or exercise of the Option or otherwise) to be exempt under Rule 16b-3
promulgated under the Exchange Act.
10. Limitation of Grantee Profit. (a) Notwithstanding any other
provision in this Agreement, in no event shall Grantee's Total Profit (as
defined below) exceed $2 billion (the "Maximum Profit") and, if it otherwise
would exceed such amount, Grantee, at its sole discretion, shall either (i)
reduce the number of Shares subject to the Option, (ii) deliver to Issuer for
cancellation Shares (or other securities into which such Option Shares are
converted or exchanged) previously purchased by Grantee, (iii) pay cash to
Issuer, or (iv) any combination of the foregoing, so that Grantee's actually
realized Total Profit shall not exceed the Maximum Profit after taking into
account the foregoing actions.
(b) Notwithstanding any other provision of this Agreement, the
Option may not be exercised for a number of Option Shares as would, as of any
Notice Date, result in a Notional Total Profit (as defined below) of more
than the Maximum Amount and, if exercise of the Option otherwise would result
in the Notional Total Profit exceeding such amount, Grantee, at its
discretion, may (in addition to any of the actions specified in Section 10(a)
above) (i) reduce the number of Shares subject to the Option or (ii) increase
the Purchase Price for that number of Option Shares set forth in the Exercise
Notice so that the Notional Total Profit shall not exceed the Maximum Profit;
provided that nothing in this sentence shall restrict any exercise of the
Option permitted hereby on any subsequent date at the Purchase Price set
forth in Section 1 hereof.
-8-
<PAGE>
(c) For purposes of this Agreement, "Total Profit" shall mean:
(i) the aggregate amount (before taxes) of (A) any excess of (x) the net cash
amounts or fair market value of any property received by Grantee pursuant to
a sale of Option Shares (or securities into which such shares are converted
or exchanged) over (y) the Grantee's aggregate purchase price for such Option
Shares (or other securities), plus (B) any amounts received by Grantee on the
repurchase of the Option by Issuer pursuant to Section 7, plus (C) any
termination fee paid by Issuer and received by Grantee pursuant to Section
7.2(c) of the Merger Agreement, minus (ii) the amounts of any cash previously
paid by Grantee to Issuer pursuant to this Section 10 plus the value of the
Option Shares (or other securities) previously delivered by Grantee to Issuer
for cancellation pursuant to this Section 10.
(d) For purposes of this Agreement, "Notional Total Profit" with
respect to any number of Option Shares as to which Grantee may propose to
exercise the Option shall mean the Total Profit determined as of the Notice
Date assuming that the Stock Option was exercised on such date for such
number of Option Shares and assuming that such Option Shares, together with
all other Option Shares previously acquired upon exercise of the Option and
held by Grantee as of such date, were sold for cash at the closing price per
Share on the NYSE as of the close of business on the preceding trading day
(less customary brokerage commissions).
(e) Notwithstanding any other provision of this Agreement, nothing
in this Agreement shall affect the ability of Grantee to receive, nor relieve
Issuer's obligation to pay, any termination fee provided for in Section
7.2(c) of the Merger Agreement; provided that if and to the extent the Total
Profit received by Grantee would exceed the Maximum Profit following receipt
of such payment, Grantee shall be obligated to promptly comply with the terms
of Section 10(a).
(f) For purposes of Section 10(a) and clause (ii) of Section
10(c), the value of any Option Shares delivered by Grantee to Issuer shall be
the Applicable Price of such Option Shares.
11. Loss, Theft, Etc. of Agreement. This Agreement (and the Option
granted hereby) is exchangeable, without expense, at the option of Grantee,
upon presentation and surrender of this Agreement at the principal office of
Issuer for other Agreements providing for Options of different denominations
entitling the holder thereof to purchase in the aggregate the same number of
Shares purchasable hereunder. The terms "Agreement" and "Option" as used
herein include any other Agreements and related Options for which this
Agreement (and the Option granted hereby) may be exchanged. Upon receipt by
Issuer of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Agreement, and (in the case of loss, theft
or destruction) of reasonably satisfactory indemnification, and upon
surrender and cancellation of this Agreement, if mutilated, Issuer will
-9-
<PAGE>
execute and deliver a new Agreement of like tenor and date. Any such new
Agreement executed and delivered shall constitute an additional contractual
obligation on the part of Issuer, whether or not the Agreement so lost,
stolen, destroyed or mutilated shall at any time be enforceable by anyone.
12. Miscellaneous.
(a) Expenses. Except as otherwise provided in Section 9 hereof or
in the Merger Agreement, each of the parties hereto shall bear and pay all
expenses incurred by it or on its behalf in connection with the transactions
contemplated hereunder, including fees and expenses of its own financial
consultants, investment bankers, accountants and counsel.
(b) Waiver and Amendment. Any provision of this Agreement may be
waived at any time by the party that is entitled to the benefits of such
provision. This Agreement may not be modified, amended, altered or
supplemented except upon the execution and delivery of a written agreement
executed by the parties hereto.
(c) Entire Agreement; No Third-Party Beneficiary; Severability.
Except as otherwise set forth in the Merger Agreement, this Agreement,
together with the Merger Agreement and the Warner-Lambert Stock Option
Agreement (a) constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties
with respect to the subject matter hereof and (b) is not intended to confer
upon any person other than the parties hereto any rights or remedies
hereunder. If any term, provision, covenant or restriction of this Agreement
is held by a court of competent jurisdiction or a federal or state regulatory
agency to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated.
If for any reason such court or regulatory agency determines that the Option
does not permit Grantee to acquire, or does not require Issuer to repurchase,
the full number of Shares as provided in Sections 2 and 7, as adjusted
pursuant to Section 6, it is the express intention of Issuer to allow Grantee
to acquire or to require Issuer to repurchase such lesser number of Shares as
may be permissible without any amendment or modification hereof.
(d) Governing Law. THIS AGREEMENT SHALL BE GOVERNED AND CONSTRUED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF DELAWARE (WITHOUT GIVING EFFECT
TO CHOICE OF LAW PRINCIPLES).
(e) Descriptive Headings. The descriptive headings contained
herein are for convenience of reference only and shall not affect in any way
the meaning or interpretation of this Agreement.
-10-
<PAGE>
(f) Notices. All notices and other communications hereunder shall
be in writing and shall be deemed given as set forth in Section 8.2 of the
Merger Agreement.
(g) Counterparts. This Agreement and any amendments hereto may be
executed in two counterparts, each of which shall be considered one and the
same agreement and shall become effective when both counterparts have been
signed by each of the parties and delivered to the other party, it being
understood that both parties need not sign the same counterpart.
(h) Assignment. Grantee may not, without the prior written
consent of Issuer (which shall not be unreasonably withheld), assign this
Agreement or the Option to any other person. This Agreement shall not be
assignable by Issuer except by operation of law. Subject to the preceding
sentence, this Agreement shall be binding upon, inure to the benefit of and
be enforceable by the parties and their respective successors and assigns.
(i) Representations and Warranties. The representations and
warranties contained in Sections 3.1(a)(i) and 3.2(a)(i) of the Merger
Agreement, and, to the extent they relate to this Stock Option Agreement, in
Sections 3.2(b), (c), (f), (g) and (q) and Section 3.1(c) of the Merger
Agreement, are incorporated herein by reference.
(j) Further Assurances. In the event of any exercise of the
Option by Grantee, Issuer and Grantee shall execute and deliver all other
documents and instruments and take all other action that may be reasonably
necessary in order to consummate the transactions provided for by such
exercise.
(k) Enforcement. The parties agree that irreparable damage would
occur in the event that any of the provisions of this Agreement were not
performed in accordance with their specific terms. It is accordingly agreed
that the parties shall be entitled to specific performance of the terms
hereof, this being in addition to any other remedy to which they are entitled
at law or in equity. Both parties further agree to waive any requirement for
the securing or posting of any bond in connection with the obtaining of any
such equitable relief and that this provision is without prejudice to any
other rights that the parties hereto may have for any failure to perform this
Agreement.
(l) Captions. The Article, Section and paragraph captions herein
are for convenience only, do not constitute part of this Agreement and shall
not be deemed to limit or otherwise affect any of the provisions hereof.
(m) Confidentiality Agreement. Issuer hereby waives the
restrictions on Grantee's acquisition of Shares contained in the
-11-
<PAGE>
Confidentiality Agreement to the extent necessary to permit Grantee to
exercise the Option and purchase the Option Shares as herein provided.
-12-
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Stock
Option Agreement to be signed by their respective officers thereunto duly
authorized, all as of November 3, 1999.
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ John R. Stafford
------------------------
Name: John R. Stafford
Title: Chairman, Chief Executive
Officer and President
WARNER-LAMBERT COMPANY
By: /s/ Lodewijk J.R. de Vink
------------------------
Name: Lodewijk J.R. de Vink
Title: Chairman, Chief Executive
Officer and President
-13-
Warner-Lambert and American Home Products to
Merge, Creating World's No. 1 Pharmaceutical and
Consumer Health Products Company
Combination Has $26 Billion in Sales, $145 Billion Market Cap,
Complementary Products, Powerful Pharma Pipeline, $3 Billion R&D
Budget and World Class Consumer Brands
MADISON, N.J. and MORRIS PLAINS, N.J., Nov. 4,1999 -- American Home
Products (NYSE: AHP) and the Warner-Lambert Company (NYSE: WLA) today
announced a definitive merger agreement that will create the world's
largest pharmaceutical and consumer health products company. The combined
company will have pro forma sales of $26 billion, a market capitalization
of approximately $145 billion, complementary products in many therapeutic
categories, a powerful pipeline of innovative future drugs, strong
biotech capabilities and one of the industry's largest R&D budgets at
nearly $3 billion.
The new company's blockbuster pharmaceutical products include Lipitor, a
$3.6 billion anti-cholesterol drug; Premarin, a $1.8 billion hormonal
therapy for menopausal women; Neurontin, a $875 million epilepsy
treatment; Effexor, a $740 million antidepressant; and four other drugs
each with over $500 million in annual sales. The new company, which will
be called AmericanWarner Inc., has an impressive array of innovative new
products and a robust pipeline in such areas as insomnia, cholesterol
reduction, organ transplant rejection, hemophilia, cancer and invasive
pneumococcal disease. In biotechnology, AmericanWarner, Inc. will benefit
from Warner-Lambert's ownership of Agouron and AHP's ownership of
Genetics Institute and its majority stake in Immunex.
AmericanWarner, Inc. will also have some of the world's best known
consumer health brands including Advil, Listerine, Centrum, Halls,
Robitussin, Benadryl, Sudafed, Zantac 75, Rolaids, Dimetapp, Chapstik,
Lubriderm, Neosporin and Preparation H.
On a pro forma basis, AmericanWarner, Inc.'s $26 billion of estimated
1999 sales will be approximately 66% from pharmaceuticals, 17% from
consumer health care products and 17% from other non-health care
businesses including agricultural and confectionery products.
Under the terms of the merger-of-equals transaction, which has been
unanimously approved by both boards of directors, Warner-Lambert's
shareholders will receive 1.4919 shares of AmericanWarner, Inc. for each
Warner-Lambert share.
American Home Products shareholders will receive AmericanWarner shares on
a one-for-one basis. Both companies' shareholders will own approximately
50 percent of the combined company. The transaction will be accounted for
as a pooling of interests and will be tax free to the shareholders of
both companies.
<PAGE>
AmericanWarner, Inc. is expected to achieve higher earnings growth than
either company could expect to achieve on its own. AmericanWarner, Inc.
plans to achieve annual cost savings of approximately $1.2 billion to be
fully phased in by the third year after closing.
AmericanWarner's board of directors will consist of 20 members, 10 each
from Warner-Lambert and AHP. John R. Stafford, AHP's Chairman, President
and Chief Executive Officer, will serve as Chairman for 18 months after
closing and chair the Board's Executive Committee. Lodewijk J.R. de Vink,
Warner-Lambert's Chairman, President and Chief Executive Officer, will
serve as CEO of AmericanWarner, Inc. and will become Chairman upon Mr.
Stafford's retirement as Chairman. Mr. Stafford will continue as chairman
of the Executive Committee and remain on the board until age 65.
"This merger is an ideal strategic combination that will create
exceptional long-term growth and value for the shareholders, customers
and employees of both companies," said Mr. Stafford. "With one strong
leadership team, we will move quickly to integrate these two
complementary companies to achieve cost synergies and take full advantage
of our extraordinary growth potential on a global scale."
Said Mr. de Vink, "We are bringing together two strong and compatible
companies in the pharmaceutical industry to create an outstanding new
company with the potential to achieve clear global leadership in both
pharmaceutical and over-the-counter products. Our combined resources will
enable us to accelerate the discovery, development and availability of
many innovative and medically important new therapies. We are committed
to leveraging our knowledge and our investments in biotechnology to
improve the lives of patients. We also have a tremendous opportunity to
significantly improve shareholder value."
The transaction is expected to close in the second quarter of year 2000,
subject to antitrust clearance, approval by both companies' shareholders
and other customary conditions. The companies have granted each other
customary cross options and have agreed to reciprocal fees upon
termination of the agreement of up to $2 billion in certain
circumstances.
The corporate headquarters for the new company will be located in
Madison, New Jersey. The pharmaceutical business will be headquartered in
Radnor, Pennsylvania. The consumer health and nutrition business will be
in Morris Plains, New Jersey. Present plans are that other divisions
will remain in their current locations.
Anthony H. Wild Ph.D., Warner-Lambert President, Pharmaceutical Sector,
will head the pharmaceutical business, and Robert A. Essner, AHP's
Executive Vice President, will lead all other businesses including
consumer health care and nutrition, confectionery, agricultural and
animal health. Ernest J. Larini, currently Warner-Lambert's Executive
Vice President and Chief Financial Officer, will be CFO. Louis L. Hoynes,
Jr. currently AHP's Senior Vice President and General Counsel, will be
General Counsel.
-2-
<PAGE>
American Home Products is one of the world's largest research-based
pharmaceutical and health care products companies. It is a leader in the
discovery, development, manufacturing, and marketing of prescription
drugs and over-the-counter medications. It is also a global leader in
vaccines, biotechnology, agricultural products and animal health care. In
1999, its revenues are expected to approach $14 billion and the company
will invest $1.8 billion in research and development. It employs 52,000
people worldwide.
Warner-Lambert is a global company devoted to discovering, developing,
manufacturing and marketing quality pharmaceutical, consumer health care,
and confectionery products. Its central research focus is on heart
disease, diabetes, infectious diseases, disorders of the central nervous
system and women's health care. In 1999, its revenues are expected to
exceed $12 billion and the company will invest more than $1.2 billion in
research and development. It employs more than 43,000 people worldwide.
Statements made in this press release that state "we will," "we expect,"
or otherwise state the companies' predictions for the future are
forward-looking statements. Actual results might differ materially from
those projected in the forward-looking statements. Additional information
concerning factors that could cause actual results to materially differ
from those in the forward-looking statements is contained in each
Company's annual report on Form 10K-A for the year ended December 31,
1998 filed with the U.S. Securities and Exchange Commission. For a copy
of these filings, call the media contacts listed on this press release.
CONTACTS:
American Home Products Warner-Lambert
Investor Contact: Investor Contact:
Tom Cavanagh George Shields
(973) 660-5706 (973) 540-6916
email email
Media Contact: Media Contact:
Lowell Weiner Carol Goodrich
(973) 660-5013 (973) 540-3620
email email
-3-
