<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 17, 1999
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------------
AMERICAN HOME PRODUCTS CORPORATION
(Exact name of Registrant as specified in its charter)
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DELAWARE 2834 13-2526821
(State or Other Jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>
------------------------------
FIVE GIRALDA FARMS
MADISON, NEW JERSEY 07940
(973) 660-5000
(Address, including zip code, and telephone number, including area code,
of Registrant's principal executive offices)
------------------------------
LOUIS L. HOYNES, JR., ESQ.
JEFFREY S. SHERMAN, ESQ.
AMERICAN HOME PRODUCTS CORPORATION
FIVE GIRALDA FARMS
MADISON, NEW JERSEY 07940
(973) 660-5000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------------
COPIES TO:
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CHARLES I. COGUT, ESQ. GREGORY L. JOHNSON, ESQ. LOU R. KLING, ESQ.
WILLIAM E. CURBOW, ESQ. WARNER-LAMBERT COMPANY EILEEN T. NUGENT, ESQ.
SIMPSON THACHER & BARTLETT 201 TABOR ROAD SKADDEN, ARPS, SLATE,
425 LEXINGTON AVENUE MORRIS PLAINS, NEW JERSEY 07950 MEAGHER & FLOM LLP
NEW YORK, NEW YORK 10017 (973) 385-2000 919 THIRD AVENUE
(212) 455-2000 NEW YORK, NEW YORK 10022
(212) 735-3000
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after the effectiveness of this registration statement.
If the securities being registered on this Form are to be offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
<TABLE>
<CAPTION>
PROPOSED PROPOSED
AMOUNT MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) PER UNIT OFFERING PRICE(2) FEE(2)
<S> <C> <C> <C> <C>
Common Stock, par value $0.33 1/3 per
share (and associated preferred share
purchase rights) 1,391,816,197 N/A $75,071,686,707.30 $19,818,926
</TABLE>
(1) Represents the maximum number of shares of common stock of American Home
Products Corporation, par value $0.33 1/3 per share, including the
associated preferred share purchase rights, issuable upon consummation of
the merger based on the exchange ratio of 1.4919 shares of AHP common stock
to be exchanged for each outstanding share of common stock of Warner-Lambert
Company, par value $1.00 per share (other than shares of Warner-Lambert
common stock owned by AHP or held by Warner-Lambert, which shall be
cancelled in the merger), and based on (a) the number of outstanding shares
of Warner-Lambert common stock plus (b) the number of shares of
Warner-Lambert common stock that could be issued prior to the effective time
of the merger. This registration statement also relates to an indeterminate
number of shares of AHP common stock (and associated preferred share
purchase rights) that may be issued upon stock splits, stock dividends or
similar transactions in accordance with Rule 416 under the Securities Act.
(2) Pursuant to Rules 457(f) and 457(c) under the Securities Act of 1933, as
amended, the registration fee was calculated based on the product of
(1) 932,915,207 shares of Warner-Lambert common stock on a fully diluted
basis and (2) $80.47 per share, the average of the high and low sale prices
for shares of Warner-Lambert common stock on the New York Stock Exchange on
December 14, 1999.
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
[PRELIMINARY DRAFT DATED DECEMBER 17, 1999--SUBJECT TO COMPLETION]
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[LOGO] [LOGO]
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MERGER PROPOSED--YOUR VOTE IS VERY IMPORTANT
The boards of directors of American Home Products Corporation and
Warner-Lambert Company have unanimously approved a merger of equals designed to
create the world's largest pharmaceutical and consumer health products company.
In addition to its leading global business in pharmaceuticals and consumer
health care products, the combined company will also have a powerful pipeline of
innovative products and strong biotechnology capabilities. The combined company
will be named AmericanWarner, Inc.
When the merger is completed, Warner-Lambert stockholders will receive
1.4919 shares of AmericanWarner common stock for each share of Warner-Lambert
common stock. AHP stockholders will continue to own their existing shares which
after the merger will automatically represent shares of AmericanWarner. We
estimate that AmericanWarner will issue approximately billion shares to
Warner-Lambert stockholders in the merger. Each company's stockholders as a
group will own approximately 50% of the combined company.
The shares of the combined company will be traded on the New York Stock
Exchange under the symbol "AWI."
We are asking the AHP stockholders to approve an amendment to AHP's
certificate of incorporation to increase the number of shares of common stock
that AHP is authorized to issue and to change the name of AHP to
AmericanWarner, Inc., to approve the issuance of shares of common stock to
Warner-Lambert stockholders in connection with the merger and to approve an
amendment to AHP's by-laws increasing the size of AHP's board of directors. We
are asking the Warner-Lambert stockholders to approve the merger and adopt the
merger agreement.
We cannot complete the merger unless the stockholders of Warner-Lambert
approve the merger and adopt the merger agreement and the stockholders of AHP
approve the amendment to AHP's certificate of incorporation and the issuance of
common stock in connection with the merger.
We have each scheduled a special meeting of our respective stockholders to
vote on these important matters.
The dates, times and places of the meetings are:
For AHP stockholders:
, 2000
[TIME]
[PLACE]
For WARNER-LAMBERT stockholders:
, 2000
[TIME]
[PLACE]
This document provides you with detailed information about the proposed
merger. It also contains information about our companies from documents that we
have filed with the Securities and Exchange Commission. We encourage you to read
this document carefully. IN PARTICULAR, YOU SHOULD READ THE "RISK FACTORS"
SECTION BEGINNING ON PAGE 19 FOR A DESCRIPTION OF THE VARIOUS RISKS YOU SHOULD
CONSIDER IN EVALUATING THE PROPOSED TRANSACTION.
We are very enthusiastic about this merger and the strength and capabilities
we expect from the combined company.
WE JOIN WITH ALL THE OTHER MEMBERS OF THE TWO COMPANIES' BOARDS OF DIRECTORS
IN RECOMMENDING THAT YOU VOTE IN FAVOR OF THE PROPOSALS.
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Very truly yours,
John R. Stafford Lodewijk J.R. de Vink
Chairman, President and Chairman, President and
Chief Executive Officer Chief Executive Officer
American Home Products Corporation Warner-Lambert Company
</TABLE>
NEITHER THE SEC NOR ANY STATE SECURITIES COMMISSION HAS APPROVED OR
DISAPPROVED THE SECURITIES TO BE ISSUED UNDER THIS DOCUMENT OR DETERMINED IF
THIS DOCUMENT IS ACCURATE OR ADEQUATE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
THIS JOINT PROXY STATEMENT/PROSPECTUS IS DATED , 2000 AND IS FIRST BEING
MAILED TO THE STOCKHOLDERS OF AHP AND WARNER-LAMBERT ON OR ABOUT , 2000.
<PAGE>
[LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
NOTICE IS HEREBY GIVEN that American Home Products Corporation will hold a
special meeting of its stockholders on , , 2000 at a.m.,
local time, at for the following purposes:
1. To consider and vote upon a proposal to amend AHP's restated certificate
of incorporation to change the name of AHP to "AmericanWarner, Inc." and
increase the total number of authorized shares of AHP common stock from
2,400,000,000 to .
2. To consider and vote on a proposal to approve the issuance of shares of
AHP common stock, $0.33 1/3 par value per share, pursuant to an Agreement
and Plan of Merger, dated as of November 3, 1999, among AHP, a subsidiary
of AHP and Warner-Lambert Company. A copy of the merger agreement is
attached as Appendix A to the joint proxy statement/prospectus
accompanying this notice.
3. To consider and vote upon a proposal to amend AHP's by-laws to increase
the maximum number of AHP directors from 15 to 24.
4. To transact such other business as may properly come before the special
meeting.
The board of directors of AHP has fixed the close of business on
, 2000 as the record date for the determination of stockholders
entitled to receive notice of and vote at the AHP special meeting or any
adjournment or postponement thereof. A list of the stockholders entitled to vote
at the AHP special meeting will be available for inspection by stockholders of
record during ordinary business hours at [meeting place/city of meeting place]
during the ten-day period prior to the date of the AHP special meeting, and will
also be available at the AHP special meeting.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE THE
PROPOSALS LISTED ABOVE, WHICH ARE DESCRIBED IN DETAIL IN THE ACCOMPANYING JOINT
PROXY STATEMENT/PROSPECTUS.
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By Order of the Board of Directors
Eileen M. Lach
SECRETARY
Madison, New Jersey
, 2000
</TABLE>
-- IMPORTANT --
Your vote is important and we urge you to complete, sign, date
and mail your proxy card as promptly as possible or use the toll-free
telephone number on the proxy card to submit your proxy by telephone by
following the instructions on the proxy card. In this way, if you are unable
to attend in person, your shares can nevertheless be voted at the AHP
special meeting. A return envelope is enclosed for your convenience.
Remember, your vote is important, so please act today!
<PAGE>
[LOGO]
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
A special meeting of stockholders of Warner-Lambert Company will be held at
a.m., local time, on , 2000 at , to consider and
vote on the following matters described in the accompanying joint proxy
statement/prospectus:
1. To approve and adopt an Agreement and Plan of Merger, dated as of
November 3, 1999, among American Home Products Corporation,
Warner-Lambert Company and a subsidiary of American Home Products
Corporation, and the merger contemplated by that agreement; and
2. To transact such other business as may properly come before the special
meeting.
The board of directors of Warner-Lambert Company has fixed the close of
business on , 2000 as the record date for the determination of
stockholders entitled to receive notice of and to vote at the meeting or any
adjournment or postponement thereof. A list of the stockholders entitled to vote
will be open to the examination of stockholders at Warner-Lambert Company, [35
Waterview Boulevard, Parsippany, New Jersey] during ordinary business hours from
, 2000 to the date of the meeting and will also be available at the
Warner-Lambert special meeting.
YOUR BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO APPROVE THE
MERGER AND ADOPT THE MERGER AGREEMENT, BOTH OF WHICH ARE DESCRIBED IN DETAIL IN
THE ACCOMPANYING JOINT PROXY STATEMENT/PROSPECTUS.
By Order of the Board of Directors
Rae G. Paltiel
SECRETARY
, 2000
Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
YOUR VOTE IS IMPORTANT
To be sure your shares are represented at the meeting,
please complete, date, sign and mail your proxy card
in the enclosed postage-paid envelope as soon as possible.
You may vote in person at the meeting even if you
send in your proxy card.
<PAGE>
TABLE OF CONTENTS
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QUESTIONS AND ANSWERS ABOUT THE
AHP/WARNER-LAMBERT MERGER............. 1
SUMMARY................................. 4
The Companies......................... 4
The Special Meetings.................. 4
Votes Required........................ 4
The Record Dates for Voting at the
Meetings............................ 5
Our Recommendations to our
Stockholders........................ 5
The Merger Agreement.................. 5
What You Will Receive in the Merger... 5
Board of Directors and Management of
AmericanWarner Following the
Merger.............................. 5
Interests of Certain Persons in the
Merger.............................. 6
Conditions to the Merger.............. 6
Termination........................... 6
Termination Fees...................... 7
Stock Option Agreements............... 8
Regulatory Approvals.................. 8
Accounting Treatment.................. 8
Opinions of Financial Advisors........ 8
Material United States Federal Income
Tax Consequences.................... 8
No Appraisal Rights................... 9
Listing of AmericanWarner Common
Stock............................... 9
The Certificate of Incorporation
Amendment........................... 9
The By-Law Amendment.................. 9
Selected Historical Financial
Information......................... 10
Significant Events Affecting Financial
Trends.............................. 11
Unaudited Pro Forma Combined Selected
Financial Information............... 14
Summary Unaudited Financial
Projections......................... 15
Comparative Per Share Information..... 16
Comparative Per Share Market Price and
Dividend Information................ 18
RISK FACTORS............................ 19
FORWARD-LOOKING STATEMENTS.............. 21
THE PROPOSED MERGER..................... 23
AHP Proposals......................... 23
Warner-Lambert Proposal............... 23
Background of the Merger.............. 23
Our Reasons for the Merger............ 38
Factors Considered by, and
Recommendation of, the Board of
Directors of Warner-Lambert......... 41
Factors Considered by, and
Recommendation of, the Board of
Directors of AHP.................... 45
Opinion of Financial Advisor to
Warner-Lambert...................... 47
Opinions of Financial Advisors to
AHP................................. 47
Accounting Treatment.................. 47
Material United States Federal Income
Tax Consequences.................... 47
Regulatory Approvals.................. 49
No Appraisal Rights................... 49
Certain Litigation.................... 49
THE COMPANIES........................... 51
American Home Products Corporation.... 51
Warner-Lambert Company................ 51
THE SPECIAL MEETINGS.................... 53
Date, Times and Places................ 53
Matters to be Considered at the
Special Meetings.................... 53
Record Date; Stock Entitled to Vote;
Quorum; Plan Participants........... 53
Votes Required........................ 54
Share Ownership of Management......... 54
Shares Held in Street Name; Voting of
Proxies............................. 55
UNAUDITED PRO FORMA COMBINED CONDENSED
FINANCIAL STATEMENTS.................. 57
INTERESTS OF CERTAIN PERSONS IN THE
MERGER................................ 67
AHP's Arrangements with Executive
Officers............................ 67
Warner-Lambert's Arrangements with
Executive Officers.................. 68
Board of Directors.................... 69
Ownership of Common Stock; Stock
Options............................. 69
Indemnification; Directors' and
Officers' Insurance................. 69
THE MERGER AGREEMENT.................... 71
General............................... 71
Closing Matters....................... 71
Consideration to be Received in the
Merger; Treatment of Stock
Options............................. 71
Exchange of Certificates in the
Merger.............................. 72
Fractional Shares..................... 73
Listing of AmericanWarner Stock....... 73
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i
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Name Change; Board of Directors;
Executive Officers; and Company
Headquarters........................ 73
Covenants............................. 74
Other Covenants and Agreements........ 77
Representations and Warranties........ 78
Conditions............................ 79
Termination of the Merger Agreement... 80
Amendments, Extensions and Waivers.... 83
STOCK OPTION AGREEMENTS................. 84
The Stock Options..................... 84
When the Stock Options May Be
Exercised........................... 84
Cash Election......................... 84
Limitation on Total Profit............ 85
Other Provisions...................... 85
Effect of Stock Option Agreements..... 86
BOARD OF DIRECTORS AND MANAGEMENT OF
AMERICANWARNER FOLLOWING THE MERGER... 87
Directors............................. 87
Committees of the Board of
Directors........................... 87
Compensation of Directors............. 87
Officers.............................. 88
Chief Executive Officer and
Chairman............................ 88
Other Senior Management............... 88
Executive Compensation................ 88
COMPARISON OF STOCKHOLDERS' RIGHTS...... 89
Authorized Capital.................... 89
Board of Directors.................... 89
Committee of Directors................ 90
Newly Created Directorships and
Vacancies........................... 90
Removal of Directors.................. 91
Classified Board...................... 91
Officers.............................. 91
Advance Notice of Stockholder-Proposed
Business at Annual Meetings......... 92
Amendments to Governing Documents..... 93
Rights Plans.......................... 94
DESCRIPTION OF AMERICANWARNER CAPITAL
STOCK................................. 95
AmericanWarner Common Stock........... 95
AmericanWarner Preferred Stock........ 95
AmericanWarner Rights Plan............ 96
Transfer Agent and Registrar.......... 97
LEGAL MATTERS........................... 98
EXPERTS................................. 98
FUTURE STOCKHOLDER PROPOSALS............ 98
WHERE YOU CAN FIND MORE INFORMATION..... 99
</TABLE>
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Appendix A Merger Agreement........ A-1
Appendix B Warner-Lambert Stock
Option Agreement........ B-1
Appendix C AHP Stock Option
Agreement............... C-1
Appendix D Opinion of Bear, Stearns
& Co. Inc............... D-1
Appendix E Opinion of Chase
Securities Inc.......... E-1
Appendix F Opinion of Morgan
Stanley & Co.
Incorporated............ F-1
</TABLE>
ii
<PAGE>
QUESTIONS AND ANSWERS
ABOUT THE AHP/WARNER-LAMBERT MERGER
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Q: WHY ARE THE TWO COMPANIES PROPOSING TO
MERGE?
A: The boards of directors of AHP and
Warner-Lambert believe that this merger
of equals will create the world's
largest pharmaceuticals and consumer
health care company, with the scientific
depth, global marketing strength and
financial resources to take greater
advantage of new opportunities and to
bring innovative new products to market
faster.
Q: WHAT WILL BE THE STRENGTHS OF THE
COMBINED COMPANY?
A: We expect the combined company to
benefit from:
- a strong diversified pipeline with
over 20 new products expected by 2002;
- leading products in major therapeutic
areas;
- its number one position in over-the-
counter products with a portfolio of
globally recognized brand names;
- complementary technologies and larger
R&D spending than any of our
competitors;
- a strong management team; and
- significant cost savings.
Q: WHAT WILL BE THE NAME OF THE COMBINED
COMPANY?
A: The combined company will be named
AmericanWarner, Inc. upon completion of
the merger.
Q: WHAT WILL WARNER-LAMBERT STOCKHOLDERS
RECEIVE FOR THEIR WARNER-LAMBERT SHARES?
A: Warner-Lambert stockholders will receive
1.4919 shares of AmericanWarner common
stock in exchange for each of their
shares of Warner-Lambert common stock.
AmericanWarner will not issue fractional
shares in the merger. As a result, the
total number of shares of AmericanWarner
common stock that Warner-Lambert
stockholders will receive in the merger
will be rounded down to the nearest
whole number, and Warner-Lambert
stockholders will receive a cash payment
for the value of the remaining fraction
of a share of AmericanWarner common
stock that they would otherwise receive,
if any.
EXAMPLE: IF YOU CURRENTLY OWN 200
SHARES OF WARNER-LAMBERT COMMON STOCK,
THEN AFTER THE MERGER YOU WILL BE
ENTITLED TO RECEIVE 298 SHARES OF
AMERICANWARNER COMMON STOCK AND A CHECK
FOR THE MARKET VALUE OF THE 0.38
FRACTIONAL SHARE.
Q: WILL AHP STOCKHOLDERS RECEIVE ANY SHARES
AS A RESULT OF THE MERGER?
A: No. AHP stockholders will continue to
hold the AHP shares they currently own.
After the merger, these shares will
automatically represent shares of
AmericanWarner.
Q: HOW IS THIS TRANSACTION BEING
STRUCTURED?
A: The transaction is a merger of equals.
Neither company is acquiring the other
and, following the merger,
AmericanWarner will operate as one
company.
Q: WHO WILL MANAGE AMERICANWARNER?
A: Lodewijk J.R. de Vink, the Chairman,
President and Chief Executive Officer of
Warner-Lambert, will be the Chief
Executive Officer and a member of the
board of directors of AmericanWarner and
will report to the board of directors of
AmericanWarner. John R. Stafford, the
Chairman, President and Chief Executive
Officer of AHP, will be the Chairman of
the board of directors of AmericanWarner
until 18 months following the completion
of the merger. Following Mr. Stafford's
retirement, Mr. de Vink will succeed him
as Chairman. AHP and Warner-Lambert will
each have equal representation on
AmericanWarner's board of directors, and
the employees of AmericanWarner will
work together to create a single new
business entity.
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1
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Q: WHEN DO YOU EXPECT THE MERGER TO BE
COMPLETED?
A: We are working to complete the merger in
the second quarter of 2000. However, it
is possible that delays in obtaining
regulatory approvals and other factors
outside the control of the parties could
require us to complete the merger at a
later time.
Q: WHAT HAPPENS TO MY FUTURE DIVIDENDS?
A: Although dividends are subject to future
approval and declaration by AHP's and
Warner-Lambert's respective boards of
directors, AHP and Warner-Lambert each
currently plan to continue to pay
regular quarterly dividends on their
common stock until the closing of the
merger. AHP's current quarterly dividend
is $0.23 per share of common stock, or
$0.92 per share on an annual basis.
Warner-Lambert's current quarterly
dividend is $0.20 per share of common
stock, or $0.80 per share on an annual
basis. The dividend policy of
AmericanWarner will be determined by its
board of directors following the merger.
In formulating this policy, we expect
that the AmericanWarner board of
directors will consider various factors,
including the earnings, financial
position, cash flows and growth
strategies of AmericanWarner.
Q: WHAT ARE THE TAX CONSEQUENCES OF THE
MERGER TO STOCKHOLDERS?
A: Warner-Lambert stockholders who exchange
their shares of Warner-Lambert common
stock solely for shares of
AmericanWarner common stock pursuant to
the merger will not recognize any gain
or loss on the exchange for United
States federal income tax purposes,
except with respect to the cash, if any,
received in lieu of fractional share
interests of AmericanWarner. The merger
will not have any tax consequences for
AHP stockholders. To review the tax
consequences to stockholders in greater
detail, see page 47.
Q: WHAT WILL WARNER-LAMBERT STOCKHOLDERS'
TAX BASIS BE IN THE AMERICANWARNER
COMMON STOCK THEY RECEIVE IN THE MERGER?
A: Each Warner-Lambert stockholder's tax
basis in his or her total shares of
AmericanWarner common stock will equal
the stockholder's current tax basis in
his or her Warner-Lambert common stock
reduced by the amount of basis allocable
to fractional shares for which the
stockholder receives a cash payment.
Q: WHAT DO I NEED TO DO NOW?
A: After you have carefully read this
document, indicate in your proxy card
how you want to vote and mail your
signed proxy card in the enclosed return
envelope as soon as possible, so that
your shares may be represented at your
company's special meeting. AHP
stockholders may also choose to use the
toll-free telephone number on the proxy
card to submit their proxy by telephone
by following the instructions on the
proxy card. The AHP and Warner-Lambert
special meetings will both take place on
, 2000.
Q: IF MY SHARES ARE HELD IN "STREET NAME"
BY MY BROKER, WILL MY BROKER VOTE MY
SHARES FOR ME?
A: No. Your broker will vote your shares on
proposals other than AHP's by-law
amendment only if you provide
instructions on how to vote. You should
instruct your broker how to vote your
shares, following the directions
provided by your broker. Your broker
will not be able to vote your shares on
proposals other than AHP's by-law
amendment without instructions from you.
Q: SHOULD I SEND IN MY STOCK CERTIFICATES
NOW?
A: No. After the merger is completed, we
will send Warner-Lambert stockholders
who hold stock certificates written
instructions for exchanging their share
certificates. If you are an AHP
stockholder and hold stock certificates
for your shares, you should retain your
certificates as the company's name
change will not require surrender of
your AHP stock certificates. AHP stock
certificates will automatically
represent shares of AmericanWarner after
the merger.
</TABLE>
2
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Q: CAN I CHANGE MY VOTE AFTER I HAVE MAILED
MY PROXY CARD?
A: Yes. You can change your vote at any
time before your proxy is voted at your
company's special meeting. You can do
this in one of three ways. First, you
can send a written notice to your
company's Corporate Secretary stating
that you would like to revoke your
proxy. Second, you can complete and
submit a new proxy card (or, AHP
stockholders may choose to use the
toll-free telephone number on the proxy
card to submit their new proxy by
telephone) by following the instructions
on the proxy card. Third, you can attend
your company's special meeting and vote
in person. If you have instructed a
broker to vote your shares, you must
follow directions received from your
broker to change those instructions.
Q: WHO CAN HELP ANSWER QUESTIONS?
A: If you have more questions about the
merger or need assistance in voting your
shares, please contact:
AHP STOCKHOLDERS:
D. F. KING & CO., INC.
77 Water Street
New York, New York 10005
1-800-628-8509
or
MACKENZIE PARTNERS, INC.
156 Fifth Avenue
New York, New York 10010
1-800-322-2885
WARNER-LAMBERT STOCKHOLDERS:
GEORGESON SHAREHOLDER
COMMUNICATIONS INC.
17 State Street
New York, New York 10004
1-800-223-2064
</TABLE>
3
<PAGE>
SUMMARY
THIS SUMMARY HIGHLIGHTS SELECTED INFORMATION FROM THIS DOCUMENT AND MAY NOT
CONTAIN ALL OF THE INFORMATION THAT IS IMPORTANT TO YOU. TO BETTER UNDERSTAND
THE MERGER AND FOR A MORE COMPLETE DESCRIPTION OF THE LEGAL TERMS OF THE MERGER,
YOU SHOULD READ CAREFULLY THIS ENTIRE DOCUMENT AND THE DOCUMENTS WE HAVE
REFERRED TO YOU. SEE "WHERE YOU CAN FIND MORE INFORMATION" ON PAGE 99.
THE COMPANIES (SEE PAGE 51)
AMERICAN HOME PRODUCTS CORPORATION
Five Giralda Farms
Madison, New Jersey 07940
(973) 660-5000
Internet address: http://www.ahp.com
AHP is one of the world's largest research-based pharmaceutical and health
care products companies and is a leader in the discovery, development,
manufacturing and marketing of prescription drugs (human and veterinary) and
vaccines, consumer health care, biotechnology and agricultural products.
WARNER-LAMBERT COMPANY
201 Tabor Road
Morris Plains, New Jersey 07950
(973) 385-2000
Internet address: http://www.warnerlambert.com
Warner-Lambert develops, manufactures and markets a widely diversified line
of health care and consumer products. Its principal industry segments are
pharmaceutical products, consisting principally of pharmaceuticals, biologicals
and empty hard-gelatin capsules; consumer health care products, consisting
principally of over-the-counter health care, shaving and pet care products; and
confectionery products, consisting principally of chewing gums and breath mints.
Warner-Lambert markets its pharmaceutical products throughout most of the world
under the Parke-Davis name.
THE SPECIAL MEETINGS (SEE PAGE 53)
AHP. The special meeting of stockholders of AHP will be held at
, , . At the AHP special meeting, we will ask
the AHP stockholders to approve:
Proposal 1--the amendment to the AHP certificate of incorporation increasing
the number of authorized shares of common stock and changing the name of AHP
to AmericanWarner, Inc.,
Proposal 2--the issuance of shares of AmericanWarner common stock to Warner-
Lambert stockholders, and
Proposal 3--the amendment to the AHP by-laws increasing the maximum number
of directors on the board of AHP from 15 to 24.
The merger will not be completed unless AHP's stockholders approve proposals
1 and 2. Approval of proposal 3, however, is not required to complete the
merger.
WARNER-LAMBERT. The special meeting of stockholders of Warner-Lambert will
be held at , , . At the Warner-Lambert special
meeting, we will ask the holders of shares of Warner-Lambert common stock to
approve the merger and adopt the merger agreement.
The merger will not be completed unless the Warner-Lambert stockholders
approve the merger and adopt the merger agreement.
VOTES REQUIRED (SEE PAGE 54)
AHP. Proposal 1 requires the affirmative vote of the holders of a majority
of all of the outstanding shares of AHP common stock and AHP preferred stock,
voting together as a single class, and the holders of a majority of the
outstanding shares of AHP common stock, voting separately as a single class.
Proposal 2 requires the affirmative vote of a majority of the votes cast on the
proposal by the holders of outstanding shares of AHP common stock and AHP
preferred stock, voting together as a single class. Proposal 3 requires the
affirmative vote of the holders of at least 80% of the voting power of the
outstanding shares of AHP common stock and AHP preferred stock, voting together
as a single class.
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WARNER-LAMBERT. The adoption of the merger agreement and approval of the
merger requires the affirmative vote of a majority of the outstanding shares of
Warner-Lambert common stock entitled to vote on the proposal.
THE RECORD DATES FOR VOTING AT THE MEETINGS (SEE PAGE 53)
AHP. The close of business on , 2000 is the record date for
determining which holders of AHP capital stock are entitled to vote at the AHP
special meeting. At the record date, there were shares of AHP common stock
and shares of AHP preferred stock entitled to vote at the AHP special
meeting.
WARNER-LAMBERT. The close of business on , 2000 is the record
date for determining which holders of Warner-Lambert common stock are entitled
to vote at the Warner-Lambert special meeting. At the record date, there were
shares of Warner-Lambert common stock entitled to vote at the
Warner-Lambert special meeting.
OUR RECOMMENDATIONS TO OUR STOCKHOLDERS (SEE PAGE 41)
AHP. AHP's board of directors believes that the merger agreement and the
merger are fair to and in the best interests of AHP and its stockholders and has
approved and declared advisable the merger agreement and the merger and each of
the AHP proposals. The AHP board recommends that AHP stockholders vote FOR each
of the AHP proposals.
WARNER-LAMBERT. Warner-Lambert's board of directors believes that the
merger agreement and the merger are fair to and in the best interests of
Warner-Lambert and its stockholders and has approved and declared advisable the
merger agreement and the merger. The Warner-Lambert board recommends that
Warner-Lambert stockholders vote FOR the proposal to adopt the merger agreement
and approve the merger.
COVENANT TO RECOMMEND. Each company's board of directors has agreed not to
alter its recommendation under the merger agreement but is permitted to withdraw
or change its recommendation if that company receives an acquisition proposal
from a third party which the board concludes is superior to the proposed merger
between AHP and Warner-Lambert or if a material adverse development occurs with
respect to the other party.
THE MERGER AGREEMENT (SEE PAGE 71)
The merger agreement is attached as Appendix A to this joint proxy
statement/ prospectus. We encourage you to read the merger agreement as it is
the legal document that governs the merger.
WHAT YOU WILL RECEIVE IN THE MERGER (SEE PAGE 71)
AHP STOCKHOLDERS. After the merger, each share of AHP common stock will
remain outstanding and will automatically represent one share of common stock of
AmericanWarner.
WARNER-LAMBERT STOCKHOLDERS. At the effective time of the merger, each
share of Warner-Lambert common stock will be converted into 1.4919 shares of
AmericanWarner common stock. AmericanWarner will not issue fractional shares in
the merger. As a result, the total number of shares of AmericanWarner common
stock that Warner-Lambert stockholders will receive in the merger will be
rounded down to the nearest whole number, and Warner-Lambert stockholders will
receive a cash payment for the value of the remaining fraction of a share of
AmericanWarner common stock that they would otherwise receive.
BOARD OF DIRECTORS AND MANAGEMENT OF AMERICANWARNER FOLLOWING THE MERGER (SEE
PAGE 73)
Upon completion of the merger, the board of directors of AmericanWarner will
consist of either 14 or 20 members, half selected by Warner-Lambert and half
selected by AHP. Whether the AmericanWarner board of directors will consist of
14 or 20 members will be determined prior to the effective time of the merger
and will depend upon whether the AHP stockholders approve the amendment to AHP's
by-laws at the AHP special meeting which would
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allow the AHP board of directors to increase its size beyond the current maximum
of 15 directors. If the AHP stockholders approve this amendment,
AmericanWarner's board of directors will consist of 20 members. If this
amendment is not approved, AmericanWarner's board of directors will consist of
14 members. Regardless of its size, the AmericanWarner board of directors will
consist of individuals who are directors or officers of AHP or Warner-Lambert.
AHP and Warner-Lambert will be represented equally on the board of
AmericanWarner.
Immediately after the merger, Lodewijk J. R. de Vink, Chairman, President
and Chief Executive Officer of Warner-Lambert, will be the Chief Executive
Officer of AmericanWarner, reporting to its board of directors, and John R.
Stafford, Chairman, President and Chief Executive Officer of AHP, will be
Chairman. Mr. Stafford will serve as Chairman for a period of 18 months
following the merger, at which time he will retire, and Mr. de Vink will assume
the duties of Chairman. The remainder of the senior management team of
AmericanWarner will be made up of individuals who currently hold senior
executive positions at AHP or Warner-Lambert.
INTERESTS OF CERTAIN PERSONS IN THE MERGER (SEE PAGE 67)
When AHP and Warner-Lambert stockholders consider their respective board of
directors' recommendations that they vote in favor of the AHP or Warner-Lambert
proposals, as the case may be, AHP and Warner-Lambert stockholders should be
aware that a number of AHP and Warner-Lambert officers and directors may have
interests in the merger that may be different from, or in addition to, their
interests.
CONDITIONS TO THE MERGER (SEE PAGE 79)
The completion of the merger depends upon the satisfaction of a number of
conditions, including the following:
- AHP stockholders' approval of the amendment to AHP's certificate of
incorporation and the issuance of common stock in the merger--but not the
approval of the by-law amendment;
- Warner-Lambert stockholders' adoption and approval of the merger agreement
and the merger;
- the material accuracy as of the closing of each party's representations
and warranties contained in the merger agreement;
- the performance by each party of its obligations under the merger
agreement;
- the clearance of the merger under antitrust laws and the receipt of other
required regulatory approvals;
- the absence of any injunction that prohibits the merger;
- the ability of AmericanWarner to account for the merger as a pooling of
interests;
- the occurrence, or in some cases the non-occurrence, of specified events
related to settlement of AHP's diet-drug litigation; and
- the receipt of legal opinions as to the tax-free nature of the merger.
TERMINATION (SEE PAGE 80)
We can agree to terminate the merger agreement without completing the
merger, and either party can terminate the merger agreement if any of the
following occurs:
- the merger is not completed by November 15, 2000;
- after taking a vote, the required approvals of either AHP or
Warner-Lambert stockholders are not received;
- a court or other governmental authority permanently prohibits the
transactions contemplated by the merger agreement;
- the board of directors of the other party withdraws, modifies or qualifies
in any adverse manner its approval or recommendation in favor of the
merger, or resolves to take such action; or
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- a third party acquires 15% or more of the other party's common stock.
In addition, Warner-Lambert may terminate the merger agreement:
- at any time during the ten business day period following the earlier of:
(1) June 30, 2000, if on or before that date the diet-drug litigation
settlement condition is not satisfied; or
(2) the date prior to June 30, 2000 on which the satisfaction of the
diet-drug litigation settlement condition is determined to be not
possible; or
- at any time during the ten business day period following the delivery to
Warner-Lambert of a fully executed settlement agreement relating to AHP's
diet-drug litigation if that settlement agreement is not substantially on
the same terms as the memorandum of understanding relating to the
diet-drug litigation, and the terms in the settlement agreement which are
not substantially the same as in the memorandum of understanding are, in
the aggregate, materially adverse to AHP.
TERMINATION FEES (SEE PAGE 81)
Either AHP or Warner-Lambert will be required to pay the other a fee of
$1.8 billion if:
(1) the other party terminates the merger agreement as a result of a third
party acquiring 15% or more of the non-terminating party's shares of
common stock; or
(2) the other party terminates the merger agreement because the
non-terminating party has changed its recommendation of the merger and
either:
(a) the recommendation change was by reason of a superior proposal or
(b) at or before the recommendation change there was a more favorable
business combination proposal outstanding; or
(3) the merger is not completed by November 15, 2000 and the merger
agreement is terminated in the following circumstances:
(a) on or before November 15, 2000 there is outstanding a business
combination proposal with respect to that party from a third party,
(b) following the business combination proposal and prior to termination
of the merger agreement, that party breaches any of its covenants,
which breach materially contributes to the failure of the merger to
be completed prior to November 15, 2000, and
(c) within 12 months of the termination of the merger agreement, that
party enters into an agreement with a third party regarding a
business combination or completes a business combination.
In the case of clause (3) above, if both clauses (a) and (c) apply, but not
clause (b), either AHP or Warner-Lambert will only be required to pay the other
a fee of $180 million.
Either AHP or Warner-Lambert will be required to pay the other a fee of
$900 million if it changes its recommendation of the merger, the other party
terminates the merger agreement, and at that time there is not a more favorable
business combination proposal from a third party outstanding. In addition, if
within 12 months the party paying this fee enters into an agreement regarding a
more favorable business combination or completes a more favorable business
combination, then that party will be required to pay an additional fee of
$1 billion, subject to a $100 million reduction if the stock option agreement is
exercisable.
Either AHP or Warner-Lambert will be required to pay the other a fee of
$900 million if it fails to obtain its required stockholder approval and at or
before that time there is a business combination proposal from a third party. In
addition, if within 12 months the party paying this fee enters into an agreement
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regarding a business combination or completes a business combination, then that
party will be required to pay an additional fee of $900 million.
STOCK OPTION AGREEMENTS (SEE PAGE 84)
In connection with the merger agreement, AHP and Warner-Lambert entered into
two stock option agreements under which AHP granted to Warner-Lambert an option
to purchase approximately 14.9% of AHP's outstanding common stock, at a price of
$56.00 per share, and Warner-Lambert granted to AHP an option to purchase
approximately 14.9% of Warner-Lambert's outstanding common stock, at a price of
$83.81 per share. These exercise prices represent our closing stock prices on
November 3, 1999, the last trading day prior to the public announcement of the
execution of the merger agreement. The option is exercisable under circumstances
in which AHP is required to pay Warner-Lambert or Warner-Lambert is required to
pay AHP, as applicable, aggregate termination fees in the amount of at least
$1.8 billion as described above.
The stock option agreements limit the amount of profit either party is
permitted to receive as a result of payment of the termination fee and the
exercise of the option to $2 billion in total. We have attached the stock option
agreements as Appendices B and C to this joint proxy statement/prospectus.
REGULATORY APPROVALS (SEE PAGE 49)
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
prohibits us from completing the merger until after we have filed the required
notification and report forms and furnished additional information and materials
to the Antitrust Division of the United States Department of Justice and the
United States Federal Trade Commission, if requested, and the required waiting
period has expired or terminated. AHP and Warner-Lambert each filed the required
notification and report forms with the Antitrust Division and the Federal Trade
Commission on .
AHP and Warner-Lambert each conduct business in countries that are members
of the European Union, and the merger requires the prior review of the European
Commission. AHP and Warner-Lambert intend to formally notify the European
Commission of the merger shortly.
AHP and Warner-Lambert each conduct business in foreign countries that are
not members of the European Union. The merger may require the review and
approval of regulatory bodies in some of these countries.
ACCOUNTING TREATMENT (SEE PAGE 47)
We expect the merger to qualify as a pooling of interests, which means that
we will treat our companies as if they had always been combined for accounting
and financial reporting purposes.
OPINIONS OF FINANCIAL ADVISORS (SEE PAGE 47)
In deciding to approve the merger, our boards of directors considered
opinions from our respective financial advisors to the effect that, as of the
date of the opinions and based upon and subject to various qualifications and
assumptions described in the opinions, the exchange ratio of 1.4919 shares of
AmericanWarner common stock for each share of Warner-Lambert common stock was
fair from a financial point of view to our respective stockholders.
Warner-Lambert received an opinion from its financial advisor, Bear, Stearns &
Co. Inc. and AHP received separate opinions from its two financial advisors,
Chase Securities Inc. and Morgan Stanley & Co. Incorporated. These opinions are
attached as Appendices D, E and F, respectively, to this joint proxy
statement/prospectus. We encourage you to read these opinions in their entirety.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES (SEE PAGE 47)
Neither AHP nor Warner-Lambert, nor their respective stockholders, will
recognize any gain or loss for United States federal income tax purposes as a
result of the merger, except for tax that may be payable by Warner-Lambert
stockholders because of cash received for fractional shares. We have conditioned
the
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merger on our receipt of legal opinions to this effect.
THE TAX CONSEQUENCES OF THE MERGER TO WARNER-LAMBERT STOCKHOLDERS WILL
DEPEND ON THE PARTICULAR FACTS OF EACH WARNER-LAMBERT STOCKHOLDER'S OWN
SITUATION. THEREFORE, WARNER-LAMBERT STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX
ADVISORS REGARDING THE MERGER'S SPECIFIC TAX CONSEQUENCES.
NO APPRAISAL RIGHTS (SEE PAGE 49)
Both of our companies are organized under Delaware law. Under Delaware law,
neither AHP nor Warner-Lambert stockholders are entitled to dissenters'
appraisal rights in connection with the merger.
LISTING OF AMERICANWARNER COMMON STOCK (SEE PAGE 73)
The shares of AmericanWarner common stock to be issued to Warner-Lambert
stockholders in the merger will be listed on the New York Stock Exchange and its
trading symbol will be "AWI."
THE CERTIFICATE OF INCORPORATION AMENDMENT
AHP stockholders are being asked to approve the amendment to the AHP
certificate of incorporation that would increase the number of authorized shares
of common stock from 2.4 billion to billion shares and change the name of
AHP to AmericanWarner, Inc.
After the merger, the AHP certificate of incorporation, as amended, will be
the certificate of incorporation of AmericanWarner.
THE BY-LAW AMENDMENT
AHP stockholders are also being asked to approve the amendment to AHP's
by-laws that would increase the maximum number of AHP directors from 15 to 24.
Pursuant to the merger agreement, the AHP board of directors will also make
amendments to the AHP by-laws to implement various governance arrangements
consistent with a merger of equals structure, such as board composition and
management of the combined company.
After the merger, the AHP by-laws, as amended, will be the by-laws of
AmericanWarner.
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SELECTED HISTORICAL FINANCIAL INFORMATION
We are providing the following financial information to assist you in your
analysis of the financial aspects of the merger. We derived the AHP information
from audited financial statements of AHP as of and for the years ended
December 31, 1994 through 1998 and unaudited financial statements as of and for
the nine months ended September 30, 1999 and 1998. We derived the Warner-Lambert
information from the audited statements of income for the years ended
December 31, 1996 through 1998, audited balance sheets as of December 31, 1998
and 1997, and unaudited financial statements as of and for all other periods
presented, all of which were restated to reflect the consummation of the
acquisition of Agouron Pharmaceuticals, Inc. in May 1999, which was accounted
for under the pooling of interests method of accounting. The information is only
a summary and should be read in conjunction with the historical financial
statements of AHP and Warner-Lambert and related notes contained in the annual
reports and other information that has been filed with the Securities and
Exchange Commission. See "Where You Can Find More Information" on page 99 for
information on where you can obtain copies of this other information.
AHP HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT FOR PER SHARE
AMOUNTS)
Net sales.......................... $10,083 $10,232 $13,463 $14,196 $14,088 $13,376 $8,966
Net (loss) income.................. (1,820) 2,125 2,474 2,043 1,883 1,680 1,528
Basic (loss) earnings per share.... (1.39) 1.62 1.88 1.58 1.48 1.36 1.24
Diluted (loss) earnings per share
(1).............................. (1.39) 1.59 1.85 1.56 1.46 1.34 1.24
Dividends per common share......... 0.675 0.645 0.87 0.83 0.7825 0.755 0.735
Book value per common share........ 4.31 7.10 7.33 6.29 5.44 4.42 3.48
Total assets....................... 23,743 21,038 21,079 20,825 20,785 21,363 21,675
Long-term debt..................... 3,622 3,923 3,859 5,032 6,021 7,809 9,973
</TABLE>
- ------------------------
(1) For the nine months ended September 30, 1999, the average number of common
shares outstanding used in calculating the diluted loss per share is the
same as the average number of common shares outstanding used in the
calculation of the basic loss per share since the inclusion of the common
stock equivalents in the diluted loss per share calculation would have an
antidilutive effect.
WARNER-LAMBERT HISTORICAL FINANCIAL INFORMATION
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED
SEPTEMBER 30, FOR THE YEARS ENDED DECEMBER 31,
------------------------- ----------------------------------------------------
1999 1998 1998 1997 1996 1995 1994
----------- ----------- -------- -------- -------- -------- --------
(UNAUDITED) (UNAUDITED) (1) (1) (1)
<S> <C> <C> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT FOR PER SHARE
AMOUNTS)
Net sales............................. $ 9,394 $7,708 $10,744 $8,408 $7,231 $7,040 $6,417
Net income............................ 1,246 925 1,273 862 747 724 687
Basic earnings per share.............. 1.46 1.09 1.50 1.03 0.89 0.88 0.84
Diluted earnings per share............ 1.41 1.05 1.45 0.99 0.88 0.87 0.83
Dividends per common share............ 0.60 0.48 0.64 0.51 0.46 0.43 0.41
Book value per common share........... 5.35 4.33 4.57 3.61 3.23 2.80 2.24
Total assets.......................... 10,538 8,858 9,520 8,352 7,339 6,216 5,569
Long-term debt........................ 1,281 1,289 1,267 1,836 1,721 635 536
</TABLE>
- ------------------------
(1) Warner-Lambert financial statements have been restated for the acquisition
of Agouron Pharmaceuticals, Inc. in May 1999. Restated amounts in 1995 and
1994 as well as the 1996 balance sheet amounts have been derived from
unaudited financial statements.
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SIGNIFICANT EVENTS AFFECTING FINANCIAL TRENDS
AHP and Warner-Lambert report quarterly and annual earnings results in their
SEC filings using methods required by U.S. generally accepted accounting
principles, or "GAAP." Sometimes the financial results reported in this way
include significant events and transactions which are not expected to occur
regularly in the future. Examples of these events and transactions include gains
or losses on the sales of businesses, the costs of completing major acquisitions
and other business development activities, the costs of business restructurings,
a significant litigation settlement and other unusual operating activities.
A description of significant events and transactions which help to review
and understand both companies' past performances are briefly described below.
See "--Selected Historical Financial Information."
SIGNIFICANT EVENTS AFFECTING AHP'S FINANCIAL TRENDS
NINE MONTHS ENDED SEPTEMBER 30, 1999
Net loss for the nine months ended September 30, 1999 included:
- an after-tax diet drug litigation charge of $3,287 million ($2.51 per
share--diluted) in connection with litigation brought against AHP by
people who used the antiobesity products REDUX (dexfenfluramine) or
PONDIMIN (fenfluramine). The charge provides for expected payments to
settlement funds contemplated by the nationwide, class action settlement,
other judgments and settlements including claims for primary pulmonary
hypertension and any opt outs, and future legal costs, net of available
insurance;
- an after-tax special charge of $53 million ($0.04 per share--diluted)
related to the suspension of shipments and administration, and trade
returns of ROTASHIELD, AHP's rotavirus vaccine;
- an after-tax special charge of $127 million ($0.10 per share--diluted) to
provide for the restructuring of AHP's Cyanamid Agricultural Products
("Cyanamid") business and the impairment of a Cyanamid manufacturing
facility; and
- an after-tax operating charge of $93 million ($0.07 per share--diluted)
for the Cyanamid U.S. inventory buyback program instituted as a result of
changes in the way Cyanamid will market and distribute its products and in
preparation for the launch of new U.S. soybean herbicide premixed products
containing glyphosate and Cyanamid's imidazolinone chemistry.
Excluding these charges, net income and diluted earnings per share for the
nine months ended September 30, 1999 were $1,740 million and $1.33,
respectively. The $1.33 diluted earnings per share calculation includes the
$0.02 per share benefit of excluding the dilutive impact of common stock
equivalents.
Total assets at September 30, 1999 increased compared to December 31, 1998
due primarily to increased deferred tax assets generated as a result of the diet
drug litigation charge previously discussed and the impact of marketable
securities purchased by Immunex Corporation, a majority-owned subsidiary of AHP,
from the proceeds of a $450 million convertible subordinated note issued to AHP
by Immunex.
Long-term debt for the same period reflected a decrease due primarily to
AHP's $1 billion 7.7% notes, due February 15, 2000, being classified as
short-term debt at September 30, 1999. This decrease was offset, in part, by an
increase in borrowings through the use of commercial paper to finance treasury
stock acquisitions as part of the AHP stock repurchase program and financing the
$450 million convertible subordinated note issued to AHP by Immunex Corporation,
as previously discussed.
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NINE MONTHS ENDED SEPTEMBER 30, 1998
Net income for the nine months ended September 30, 1998 included an
after-tax gain of $331 million ($0.25 per share-diluted) due to the sale of the
Sherwood-Davis & Geck medical devices business. Excluding the gain on sale, net
income and diluted earnings per share for the nine months ended September 30,
1998 were $1,794 million and $1.34, respectively.
Long-term debt at September 30, 1998 decreased compared to December 31, 1997
as the proceeds from the sale of the Sherwood-Davis & Geck medical devices
business were used primarily to reduce outstanding commercial paper.
1998
Net income for the year ended December 31, 1998 included:
- an after-tax gain of $331 million ($0.25 per share--diluted) due to the
sale of the Sherwood-Davis & Geck medical devices business; and
- an after-tax restructuring charge of $241 million ($0.18 per
share--diluted) related to the reorganization of the pharmaceutical and
nutritional supply chains (primarily in the Asian-Pacific and Latin
American regions), the reorganization of the U.S. pharmaceutical and
consumer health care distribution systems and a reduction in personnel
from the globalization of certain business units.
Excluding these items, net income and diluted earnings per share for 1998
were $2,384 million and $1.78, respectively.
Long-term debt at December 31, 1998 decreased compared to December 31, 1997
due primarily to the reduction of outstanding commercial paper from the proceeds
of the sale of the Sherwood-Davis & Geck medical devices business offset, in
part, by an increase in commercial paper used to finance the acquisition of the
vitamin and nutritional supplement products business of Solgar Vitamin and Herb
Company Inc., which was accounted for under the purchase method of accounting.
1997
Net income for the year ended December 31, 1997 included after-tax special
charges aggregating $117 million ($0.09 per share--diluted) to record the
one-time costs associated with the voluntary market withdrawal of the
antiobesity products REDUX and PONDIMIN. Excluding these charges, net income and
diluted earnings per share for 1997 were $2,160 million and $1.65, respectively.
Long-term debt at December 31, 1997 reflected a decrease compared to
December 31, 1996 due primarily to the pay-down of commercial paper and notes
payable with cash flows provided by operating activities offset, in part, by the
commercial paper used to finance the acquisition of the worldwide animal health
business of Solvay S.A., which was accounted for under the purchase method of
accounting.
1996
Net income for the year ended December 31, 1996 included:
- an after-tax gain of $706 million ($0.55 per share--diluted) from the sale
of a majority interest (80%) in the American Home Foods business, and
- after-tax special charges aggregating $698 million ($0.54 per
share--diluted) relating to the acquisition by AHP of the remaining equity
interest in Genetics Institute, Inc. In conjunction with the acquisition,
these after-tax special charges were recognized for the portion of the
purchase price allocated to acquired in-process research and development
($470 million) and for
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<PAGE>
the liquidation of Genetics Institute's outstanding stock options as of
December 31, 1996 ($228 million). Excluding these items, net income and
diluted earnings per share for 1996 were $1,875 million and $1.45,
respectively.
Total assets at December 31, 1996 decreased compared to December 31, 1995
due primarily to the sale of a majority interest in the American Home Foods
business as described above. Proceeds received from the sale were used primarily
to purchase the remaining equity interest in Genetics Institute. Long-term debt
decreased due primarily to the pay-down of commercial paper with cash flows
provided by operating activities.
1995
Net income for the year ended December 31, 1995 included:
- an after-tax gain of $624 million ($0.50 per share--diluted) due to the
sale of the South American oral health care business;
- after-tax special charges aggregating $308 million ($0.25 per
share--diluted) attributable to provisions for environmental liabilities
related to American Cyanamid Company due to changes in estimates and to
provisions for other special charges, including the shutdown and
discontinuance of the U.S. infant nutritional business and other
contingent liability adjustments;
- an after-tax restructuring charge of $117 million ($0.09 per share
diluted) to recognize the costs of implementing the integration plan for
the American Cyanamid acquisition related to AHP operations; and
- the effects of the acquisition of American Cyanamid Company in
November 1994. The acquisition was accounted for under the purchase method
of accounting.
Excluding the environmental and restructuring charges and the gain on sale,
net income and diluted earnings per share for 1995 were $1,481 million and
$1.18, respectively.
Long-term debt at December 31, 1995 reflected a significant decrease as
compared to December 31, 1994 due primarily to the pay-down of commercial paper
with cash flows provided by operating activities and proceeds from sales of
businesses and other assets.
1994
Net income for the year ended December 31, 1994 included an after-tax charge
of $113 million ($0.09 per share--diluted) for the cost of implementing two
restructuring programs related primarily to the U.S. pharmaceutical and consumer
health care businesses. These programs resulted in the elimination of excess
production capacity and associated workforce, primarily through the closure of a
manufacturing facility and further workforce reductions through various
organizational effectiveness initiatives. Excluding this charge, net income and
diluted earnings per share for 1994 were $1,641 million and $1.33, respectively.
SIGNIFICANT EVENTS AFFECTING WARNER-LAMBERT'S FINANCIAL TRENDS
The historical financial information for Warner-Lambert on page 59 reflects
steadily improving financial performance. A major contributor to this
performance was the launch of Warner-Lambert's cholesterol-lowering agent
LIPITOR in February 1997.
In May 1999, Warner-Lambert consummated the acquisition of Agouron
Pharmaceuticals, Inc., which was accounted for under the pooling of interests
method of accounting. Under the pooling of interests method of accounting, the
financial statements of both Warner-Lambert and Agouron were combined as if they
were always one company. Accordingly, Warner-Lambert restated its consolidated
balance sheets at December 31, 1998 and 1997, and the related consolidated
statements of income and comprehensive income and of cash flows for each of the
three years in the period ended December 31, 1998, in a Current Report on
Form 8-K filed on December 17, 1999.
13
<PAGE>
UNAUDITED PRO FORMA COMBINED SELECTED FINANCIAL INFORMATION
We expect that the merger will be accounted for under the pooling of
interests method of accounting, which means that for accounting and financial
reporting purposes we will treat our companies as if they had always been
combined. For a more detailed description of pooling of interests accounting,
see "The Proposed Merger--Accounting Treatment" on page 47.
The following unaudited pro forma combined selected financial information
has been derived from, and should be read in conjunction with, the "Unaudited
Pro Forma Combined Condensed Financial Statements" and related notes on
pages 57 through 66.
We have presented below unaudited pro forma combined selected financial
information that reflects the pooling of interests method of accounting and is
intended to give you a better picture of what our businesses might have looked
like had they always been combined, I.E., giving effect to the merger between
AHP and Warner-Lambert as if it had occurred on January 1, 1996, the first day
of the first period for which financial information is presented here. The
companies may have performed differently if they were combined. You should not
rely on the unaudited pro forma combined selected financial information as being
indicative of the historical results that would have occurred or the future
results that will result after the merger. You should also review the discussion
of the significant events affecting each company under "--Significant Events
Affecting Financial Trends" on page 11.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------- ------------------------------
1999 1998 1998 1997 1996
-------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
Net sales...................................... $19,477 $17,940 $24,207 $22,604 $21,319
Net (loss) income (1).......................... (574) 3,050 3,747 2,905 2,630
Basic (loss) earnings per share (1)............ (0.22) 1.18 1.45 1.14 1.05
Diluted (loss) earnings per share (1)(2)....... (0.22) 1.15 1.42 1.11 1.03
Dividends per common share (3)
Book value per common share.................... 3.95 5.04 5.23 4.39 3.82
Total assets................................... 34,281
Long-term debt................................. 4,903
</TABLE>
(1) Excluding the after-tax diet drug litigation charge of $3,287, the after-tax
ROTASHIELD special charge of $53, the after-tax Cyanamid special charge of
$127 and the after-tax impact of the Cyanamid U.S. inventory buyback program
of $93, net income was $2,986 and earnings per share-basic and diluted both
were $1.16 for the nine months ended September 30, 1999. For the nine months
ended September 30, 1999, the diluted earnings per share calculation
includes the $0.03 per share benefit of excluding the dilutive impact of
common stock equivalents.
(2) For the nine months ended September 30, 1999, the average number of common
shares outstanding used in calculating the diluted loss per share is the
same as the average number of common shares outstanding used in the
calculation of the basic loss per share since the inclusion of the common
stock equivalents in the diluted loss per share calculation would have an
antidilutive effect.
(3) AHP's current quarterly dividend is $0.23 per share of common stock ($0.92
per share annualized) and is subject to future approval and declaration by
the board of directors of AHP. Warner-Lambert's current quarterly dividend
is $0.20 per share of common stock ($0.80 per share annualized) and is
subject to future approval and declaration by the board of directors of
Warner-Lambert. The dividend policy of AmericanWarner will be determined by
its board of directors following the effective time of the merger. In
formulating such policy, it is expected that the board of directors will
consider various factors, including the earnings, financial position, cash
flows and growth strategies of AmericanWarner. The initial dividend rate, as
well as all future dividends declared by AmericanWarner, will be subject to
the discretion of the board of directors of AmericanWarner.
14
<PAGE>
SUMMARY UNAUDITED FINANCIAL PROJECTIONS
We expect AmericanWarner to have significant growth in the next few years
from its combined operations as follows:
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
-----------------------------------------
1999 2000 2001 2002
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS) -------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales............................................... $26,311 $29,674 $32,753 $36,121
Pharmaceuticals....................................... 17,244 19,749 22,007 24,477
Consumer health care.................................. 4,440 4,860 5,280 5,749
Net income (1).......................................... 3,923 4,759 5,736 6,818
Diluted earnings per share (1).......................... 1.48 1.79 2.15 2.55
</TABLE>
- ------------------------
(1) For the year ended December 31, 1999, this information excludes the AHP diet
drug litigation charge, the ROTASHIELD special charge, the Cyanamid special
charge and the anticipated AmericanWarner one-time costs of the merger
transaction.
We have based this information on management's estimate of the combined
operations of AmericanWarner as if the transaction had closed on January 1,
1999. The net income estimates include the gradual phase-in of $1.2 billion of
estimated annual pre-tax cost synergy savings starting mid-year 2000, which are
expected to be substantially achieved by the end of 2002.
We expect net sales to grow approximately 11%, on a compounded basis, while
net income and diluted earnings per share are expected to grow approximately 20%
on a compounded basis during the periods presented. This growth is expected to
be derived, in part, from over 20 anticipated pharmaceutical product launches
during the periods presented. There is also potential for additional revenue
synergies, which have not been factored into the projections. The annual cost
synergy savings estimate of $1.2 billion represents approximately 9% of the 1999
projected applicable base pre-merger operating expenses of the combined
pharmaceutical and consumer health care segments and corporate functions.
SINCE PROJECTIONS ARE INHERENTLY SPECULATIVE IN NATURE, YOU SHOULD EXPECT
THAT, IN ADDITION TO NEW INFORMATION DISCOVERED BY AMERICANWARNER SUBSEQUENT TO
THE DATE OF THEIR PREPARATION, ONE OR MORE OF THE ASSUMPTIONS USED IN THE
PROJECTIONS MAY NOT MATERIALIZE OR MAY VARY SIGNIFICANTLY FROM ACTUAL RESULTS.
THE LIKELIHOOD OF SUCH VARIANCES WILL INCREASE OVER TIME. ACCORDINGLY, ACTUAL
RESULTS ACHIEVED DURING THE PERIODS PRESENTED MAY VARY FROM THE PROJECTIONS, AND
THESE VARIATIONS MAY BE MATERIAL AND ADVERSE. IN PARTICULAR, THE PROJECTIONS
ASSUME THE CONSUMMATION OF CERTAIN INTEGRATION INITIATIVES THAT WILL PRODUCE THE
PROJECTED COST SYNERGY SAVINGS. IF SOME OR ALL OF THESE INITIATIVES DO NOT OCCUR
OR ARE MATERIALLY DELAYED, THE PROJECTIONS MAY NOT BE ACHIEVED. Furthermore, the
projections and cost synergy savings estimates were not prepared with a view
toward compliance with published guidelines of the SEC, the American Institute
of Certified Public Accountants or generally accepted accounting principles.
AHP's and Warner-Lambert's independent public accountants did not prepare,
examine or compile the projections and, accordingly, do not express an opinion
or any form of assurance with respect to the projections. Therefore, you should
not place undue reliance on the summary unaudited financial projections as
indicators of the future results of AmericanWarner. The independent public
accountants' reports incorporated by reference in this document relate to the
historical financial statements of AHP and Warner-Lambert. These reports do not
extend to the summary unaudited financial projections and should not be read to
do so.
15
<PAGE>
COMPARATIVE PER SHARE INFORMATION
The following table sets forth selected historical per share information of
AHP and Warner-Lambert and combined per share information on an unaudited pro
forma combined basis after giving effect to the merger between AHP and
Warner-Lambert as if it had occurred on January 1, 1996 under the pooling of
interests method of accounting assuming that 1.4919 shares of AmericanWarner
common stock had been issued in exchange for each outstanding share of
Warner-Lambert common stock. You should read this information in conjunction
with the selected historical audited and unaudited financial information,
included elsewhere in this document, and the historical audited and unaudited
financial statements of AHP and Warner-Lambert and related notes that are
incorporated in this document by reference. The pro forma per share information
combining AHP and Warner-Lambert is derived from, and should be read in
conjunction with, the unaudited pro forma combined condensed financial
statements and related notes included elsewhere in this document. Unaudited Pro
Forma Warner-Lambert Per Share Equivalents are calculated by multiplying the
Unaudited Pro Forma Combined per share amounts by 1.4919. The AHP historical per
share information is derived from audited financial statements of AHP as of and
for the years ended December 31, 1998, 1997 and 1996 and unaudited financial
statements of AHP as of and for the nine months ended September 30, 1999 and
1998. The Warner-Lambert historical per share information is derived from the
audited statements of income for the years ended December 31, 1998, 1997 and
1996, audited balance sheets as of December 31, 1998 and 1997 and unaudited
financial statements as of and for all other periods presented, all of which
were restated to reflect the consummation of the acquisition by Warner-Lambert
of Agouron Pharmaceuticals, Inc., in May 1999.
The unaudited pro forma combined comparative per share information does not
purport to represent what the actual financial position or results of operations
of AHP and Warner-Lambert would have been had the merger occurred on January 1,
1996 or to project AHP's and Warner-Lambert's financial position or results of
operations for any future date or period.
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED FOR THE YEARS ENDED
SEPTEMBER 30, DECEMBER 31,
------------------------- ------------------------------
1999 1998 1998 1997 1996
----------- ----------- -------- -------- --------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C> <C> <C>
UNAUDITED PRO FORMA COMBINED
Basic (loss) earnings per share (1)............ $(0.22) 1$.18 $1.45 $1.14 $1.05
Diluted (loss) earnings per share (1)(2)....... (0.22) 1.15 1.42 1.11 1.03
Dividends per common share (3).................
Book value per common share.................... 3.95 5.04 5.23 4.39 3.82
UNAUDITED PRO FORMA WARNER-LAMBERT PER SHARE
EQUIVALENTS
Basic (loss) earnings per share (1)............ (0.33) 1.76 2.16 1.70 1.57
Diluted (loss) earnings per share (1)(2)....... (0.33) 1.72 2.12 1.66 1.54
Dividends per common share (3).................
Book value per common share.................... 5.89 7.52 7.80 6.55 5.70
WARNER-LAMBERT--HISTORICAL
Basic earnings per share....................... 1.46 1.09 1.50 1.03 0.89
Diluted earnings per share..................... 1.41 1.05 1.45 0.99 0.88
Dividends per common share..................... 0.60 0.48 0.64 0.51 0.46
Book value per common share (4)................ 5.35 4.33 4.57 3.61 3.23
AMERICAN HOME PRODUCTS--HISTORICAL
Basic (loss) earnings per share (1)............ (1.39) 1.62 1.88 1.58 1.48
Diluted (loss) earnings per share (1)(2)....... (1.39) 1.59 1.85 1.56 1.46
Dividends per common share..................... 0.675 0.645 0.87 0.83 0.7825
Book value per common share.................... 4.31 7.10 7.33 6.29 5.44
</TABLE>
16
<PAGE>
- ------------------------
(1) Excluding the after-tax diet drug litigation charge, the after-tax
ROTASHIELD special charge, the after-tax Cyanamid special charge and the
after-tax impact of the Cyanamid U.S. inventory buyback program for the nine
months ended September 30, 1999, basic and diluted earnings per share would
both be $1.16 per share for Unaudited Pro Forma Combined, $1.73 per share
for Unaudited Pro Forma Warner-Lambert Per Share Equivalents and $1.33 per
share for AHP--Historical. For the nine months ended September 30, 1999, the
diluted earnings per share calculation for Unaudited Pro Forma Combined,
Unaudited Pro Forma Warner-Lambert Per Share Equivalents and AHP--Historical
includes the respective $0.03, $0.04, and $0.02 per share benefit of
excluding the dilutive impact of common stock equivalents.
(2) For the nine months ended September 30, 1999, the average number of common
shares outstanding used in calculating the diluted loss per share is the
same as the average number of common shares outstanding used in the
calculation of the basic loss per share since the inclusion of the common
stock equivalents in the diluted loss per share calculation would have an
antidilutive effect.
(3) AHP's current quarterly dividend is $0.23 per share of common stock ($0.92
per share annualized) and is subject to future approval and declaration by
the board of directors of AHP. Warner-Lambert's current quarterly dividend
is $0.20 per share of common stock ($0.80 per share annualized) and is
subject to future approval and declaration by the board of directors of
Warner-Lambert. The dividend policy of AmericanWarner will be determined by
its board of directors following the effective time of the merger. In
formulating such policy, it is expected that the board of directors will
consider various factors, including the earnings, financial position, cash
flows and growth strategies of AmericanWarner. The initial dividend rate, as
well as all future dividends declared by AmericanWarner, will be subject to
the discretion of the board of directors of AmericanWarner.
(4) Warner-Lambert--Historical financial information has been restated for the
acquisition of Agouron Pharmaceuticals, Inc. in May 1999. The restated 1996
balance sheet used to calculate Warner-Lambert--Historical 1996 book value
per common share has been derived from an unaudited balance sheet.
17
<PAGE>
COMPARATIVE PER SHARE MARKET PRICE AND DIVIDEND INFORMATION
AHP common stock is listed on the New York Stock Exchange under the symbol
"AHP." Warner-Lambert common stock is listed on the New York Stock Exchange
under the symbol "WLA" and is also listed on the Chicago, Pacific, London and
Zurich stock exchanges.
The table below sets forth, for the calendar quarters indicated, the
reported high and low sale prices of AHP common stock and Warner-Lambert common
stock as reported on the NYSE Composite Transaction Tape and the dividends
declared on such stock.
<TABLE>
<CAPTION>
AHP WARNER-LAMBERT
COMMON STOCK COMMON STOCK
------------------------------- -------------------------------
MARKET PRICE CASH MARKET PRICE CASH
------------------- DIVIDENDS ------------------- DIVIDENDS
HIGH LOW DECLARED HIGH LOW DECLARED
-------- -------- --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C> <C>
1997
First Quarter.................................. $34.44 $28.81 $0.205 $31.08 $23.17 $0.13
Second Quarter................................. 40.38 28.50 0.205 41.83 27.88 0.13
Third Quarter.................................. 42.44 34.19 0.205 49.08 41.44 0.13
Fourth Quarter................................. 39.41 33.72 0.215 50.88 36.17 0.13
1998
First Quarter.................................. $48.88 $37.75 $0.215 $56.88 $39.38 $0.16
Second Quarter................................. 54.25 43.75 0.215 71.56 55.00 0.16
Third Quarter.................................. 58.75 46.19 0.215 85.94 64.75 0.16
Fourth Quarter................................. 56.50 43.94 0.225 82.00 60.13 0.16
1999
First Quarter.................................. $68.19 $51.19 $0.225 $77.00 $63.50 $0.20
Second Quarter................................. 70.25 51.00 0.225 72.63 61.00 0.20
Third Quarter.................................. 58.44 38.50 0.225 73.50 60.81 0.20
</TABLE>
On November 2, 1999, the last full trading day on the NYSE before rumors of
the merger appeared in the marketplace, the AHP common stock closed at $50.38
per share and the Warner-Lambert common stock closed at $78.44 per share. On
November 3, 1999, the last full trading day on the NYSE prior to the public
announcement of the execution of the merger agreement, AHP common stock closed
at $56.00 per share and Warner-Lambert common stock closed at $83.81 per share.
On , 2000, the most recent practicable date prior to the printing of this
joint proxy statement/ prospectus, the closing price on the NYSE Composite
Transaction Tape was $ per share of AHP common stock and $ per share of
Warner-Lambert common stock. AHP and Warner-Lambert stockholders are urged to
obtain current market quotations for the shares of AHP common stock and
Warner-Lambert common stock prior to making any decision with respect to the
merger. The "equivalent per share price" of shares of Warner-Lambert common
stock in the table below represents the per share closing market price for AHP
common stock reported on the NYSE Composite Transaction Tape at such specified
date, multiplied by the exchange ratio of 1.4919.
<TABLE>
<CAPTION>
WARNER-
LAMBERT
WARNER-LAMBERT EQUIVALENT
AHP SHARE PRICE SHARE PRICE PER SHARE PRICE
--------------- -------------- ---------------
<S> <C> <C> <C>
November 2, 1999.................................. $50.38 $78.44 $75.16
November 3, 1999.................................. 56.00 83.81 83.55
, 2000..................................
</TABLE>
Following the consummation of the merger, shares of Warner-Lambert common
stock will cease to be traded on the NYSE and shares of AmericanWarner common
stock, including all shares of AHP previously traded on the NYSE under the
trading symbol "AHP," will be traded on the NYSE under the new trading symbol,
"AWI."
18
<PAGE>
RISK FACTORS
AHP AND WARNER-LAMBERT STOCKHOLDERS SHOULD CAREFULLY CONSIDER THE FOLLOWING
FACTORS, IN ADDITION TO THOSE FACTORS DISCUSSED IN THE DOCUMENTS THAT WE HAVE
FILED WITH THE SEC WHICH WE HAVE INCORPORATED BY REFERENCE INTO THIS DOCUMENT,
AND THE OTHER INFORMATION SET FORTH IN THIS JOINT PROXY STATEMENT/PROSPECTUS,
BEFORE VOTING ON THE PROPOSALS RELATING TO THE MERGER.
THE VALUE OF AMERICANWARNER SHARES TO BE RECEIVED IN THE MERGER WILL FLUCTUATE
The number of shares of AmericanWarner common stock to be received in the
merger for each share of Warner-Lambert common stock is fixed. However, the
market prices of AHP common stock and Warner-Lambert common stock when the
merger takes place may vary from their market prices at the date of this
document and at the date of the special meetings of the stockholders of AHP and
Warner-Lambert. For example, during the 12 month period ending on , the
most recent date prior to the mailing of this joint proxy statement/prospectus,
the closing price of AHP common stock varied from a low of $ to a high of
$ and ended that period at $ , and the closing price of Warner-Lambert
common stock varied from a low of $ to a high of $ and ended that
period at $ . See "Summary--Comparative Per Share Market Price and Dividend
Information" on page 18 for more detailed share price information.
These variations may be the result of various factors including:
- changes in the business, operations or prospects of AHP, Warner-Lambert or
AmericanWarner;
- litigation developments;
- market assessments as to whether and when the merger will be consummated;
- the timing of the merger;
- regulatory considerations; and
- general market and economic conditions.
The merger may not be completed until a significant period of time has
passed after the AHP and Warner-Lambert special meetings. Therefore, at the time
of their special meetings, AHP and Warner-Lambert stockholders will not know the
exact value of the AmericanWarner common stock that will be issued in connection
with the merger.
Stockholders of AHP and Warner-Lambert are urged to obtain current market
quotations for AHP and Warner-Lambert common stock.
WE MAY BE UNABLE TO SUCCESSFULLY INTEGRATE OUR OPERATIONS AND REALIZE THE FULL
COST SAVINGS WE ANTICIPATE
The merger involves the integration of two companies that have previously
operated independently. The difficulties of combining the companies' operations
include:
- the necessity of coordinating geographically separated organizations;
- integrating personnel with diverse business backgrounds; and
- combining different corporate cultures.
The process of integrating operations could cause an interruption of, or
loss of momentum in, the activities of one or more of the combined company's
businesses and the loss of key personnel. The diversion of management's
attention and any delays or difficulties encountered in connection with the
merger and the integration of the two companies' operations could have an
adverse effect on the business, results of operations or financial condition of
AmericanWarner.
Among the factors considered by the AHP and the Warner-Lambert boards of
directors in connection with their respective approvals of the merger agreement
were the opportunities for
19
<PAGE>
economies of scale and operating efficiencies that could result from the merger.
We cannot give any assurance that these savings will be realized within the time
periods contemplated or realized at all.
WE WILL INCUR SIGNIFICANT EXPENSES AND RESTRUCTURING CHARGES IN CONNECTION WITH
THE MERGER TRANSACTION
AHP and Warner-Lambert expect AmericanWarner to incur pre-tax charges to
operations, currently estimated to be between $1.5 and $2.1 billion, to reflect
costs associated with combining the operations of the two companies, transaction
fees and other costs incidental to the merger. The majority of these costs will
be recorded upon the consummation of the merger. This estimate includes an
anticipated one-time pre-tax charge of approximately $ million for direct
incremental merger-related transaction costs and between $ and $
billion of other related charges and restructuring expenses. These amounts are
preliminary estimates and are therefore subject to change. Additional
unanticipated expenses may be incurred in the integration of the businesses of
AHP and Warner-Lambert. Although AHP and Warner-Lambert expect that the
elimination of duplicative expenses as well as the realization of other
efficiencies related to the integration of the businesses may offset additional
expenses over time, we cannot give any assurance that this net benefit will be
achieved in the near term, or at all. See "Unaudited Pro Forma Combined
Condensed Financial Statements" on page 57 for more detail on the charges we
expect to incur in connection with the merger.
THE MERGER MAY CAUSE DILUTION TO HISTORICAL AHP EARNINGS
The merger and the transactions contemplated by the merger agreement have a
dilutive effect on historical earnings per share of AHP due to the additional
shares that will be issued in the merger. On a historical basis for AHP, diluted
earnings per share was $1.85 for the year ended December 31, 1998, as compared
to $1.42 on a pro forma basis for AmericanWarner. However, since AHP's results
of operations yielded a loss for the nine months ended September 30, 1999, the
merger and the transactions contemplated by the merger agreement do not have a
dilutive effect on historical loss per share of AHP for this period. The pro
forma amounts do not include synergies resulting from the merger. See "Unaudited
Pro Forma Combined Condensed Financial Statements" on page 57 for additional pro
forma financial information for AmericanWarner.
OBTAINING REQUIRED REGULATORY APPROVALS MAY DELAY CONSUMMATION OF THE MERGER
Consummation of the merger is conditioned upon the receipt of all material
governmental authorizations, consents, orders and approvals, including the
expiration or termination of the applicable waiting periods, and any extension
of the waiting periods, under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976. AHP and Warner-Lambert intend to vigorously pursue all required
regulatory approvals, including approval by the European Commission. No
assurance can be given, however, that these approvals will be obtained, or, if
they are obtained, as to the terms, conditions and timing of these approvals.
The requirement for these approvals could delay the consummation of the merger
for a significant period of time after AHP and Warner-Lambert stockholders have
approved the proposals relating to the merger at their respective special
meetings. See "The Merger Agreement--Conditions" on page 79 for a discussion of
the conditions to the consummation of the merger and "The Proposed
Merger--Regulatory Approvals" on page 49 for a description of the regulatory
approvals necessary in connection with the merger.
20
<PAGE>
FORWARD-LOOKING STATEMENTS
We have made forward-looking statements in this document, and in documents
that are incorporated by reference in this document, that are subject to risks
and uncertainties. These statements are based on the beliefs and assumptions of
each company's management. Generally, forward-looking statements include
information concerning possible or assumed future actions, events or results of
operations of AHP, Warner-Lambert and AmericanWarner. Forward-looking statements
include the information in this document, specifically, regarding:
<TABLE>
<S> <C>
- - projections - the combined company
- - efficiencies/cost avoidance - future economic performance
- - cost savings - the timetable for completing the merger
- - revenue synergies - future acquisitions
- - income and margins - management's plans
- - earnings per share - business portfolios
- - growth - merger and integration related expenses
- - economies of scale - product launches
- - combined operations
</TABLE>
These statements may be preceded by, followed by or include the words
"believes," "expects," "anticipates," "intends," "plans," "estimates" or similar
expressions.
With respect to all forward-looking statements, we claim the protection of
the safe harbor for forward-looking statements contained in the Private
Securities Litigation Reform Act of 1995.
Forward-looking statements are not guarantees of performance. You should
understand that the following important factors, in addition to those discussed
in "Risk Factors" above and elsewhere in this document and in the documents
which are incorporated by reference in this document, could affect the future
results of AHP and Warner-Lambert, and of AmericanWarner after the completion of
the merger, and could cause those results or other outcomes to differ materially
from those expressed or implied in our forward-looking statements:
COMPETITIVE FACTORS
- the impact of competitive products, including generic competition
- the timing of the introduction of new products
- the financial resources of competitors
- the ability to respond to price pressures imposed by managed care groups,
institutions and government agencies
- the ability to respond to technological advances attained by competitors
and patents granted to competitors
- the ability to manufacture products competitively and cost effectively
OPERATING FACTORS
- changes in the favorable market reaction to AHP's and Warner-Lambert's
significant pharmaceutical products
- the ability to identify new viable chemical compounds and technologies and
commercialize innovative and competitive products worldwide
21
<PAGE>
- the ability to successfully complete clinical trials and obtain and
maintain regulatory approval for new products in the United States and
other countries
- the ability to gain consumer acceptance for our new products and
technologies
- the ability to secure and defend intellectual property rights and, when
appropriate, license required technology
- the ability to generate cash flows or obtain financing to fund growth
- the ability to complete and integrate appropriate acquisitions, strategic
alliances and joint ventures
- the ability to respond to unexpected safety or efficacy concerns arising
with respect to marketed products, whether or not scientifically
justified, leading to product recalls, litigation, withdrawals or
declining sales
- the ability to complete successful remediation efforts related to the
calendar year 2000
ECONOMIC AND INDUSTRY CONDITIONS
- the effect of economic conditions, inflation and interest rates generally
- the effect of changes in currency exchange rates and political and
economic conditions worldwide
- the effect of changes in laws and regulations, including changes in
accounting standards, trade, tax, price controls and other regulatory
matters
- the calendar year 2000 causing a general economic downturn relating to
year 2000 failures in the U.S. and other countries, failures in global
banking systems and capital markets, or extended failures by public and
private utility companies or common carriers supplying services to AHP or
Warner-Lambert
22
<PAGE>
THE PROPOSED MERGER
We are furnishing this joint proxy statement/prospectus to stockholders of
AHP and Warner-Lambert in connection with the solicitation of proxies by the
boards of directors of AHP and Warner-Lambert for use at the special meetings of
their respective stockholders.
AHP PROPOSALS
At AHP's special meeting, stockholders will be asked to vote to approve:
(1) Proposal 1--the amendment of the certificate of incorporation of AHP
providing for:
- changing the name of AHP to AmericanWarner, Inc.; and
- increasing in the number of authorized shares of AHP common stock from
2,400,000,000 to .
(2) Proposal 2--the issuance of shares of AmericanWarner common stock in
connection with the merger.
(3) Proposal 3--the amendment of the by-laws of AHP to increase the maximum
number of directors on AHP's board of directors from 15 to 24.
THE MERGER WILL NOT BE COMPLETED UNLESS AHP'S STOCKHOLDERS APPROVE PROPOSALS
1 AND 2. APPROVAL OF PROPOSAL 3, HOWEVER, IS NOT NECESSARY TO COMPLETE THE
MERGER.
WARNER-LAMBERT PROPOSAL
At Warner-Lambert's special meeting, Warner-Lambert stockholders will be
asked to vote to adopt the merger agreement and approve the merger.
THE MERGER WILL NOT BE COMPLETED UNLESS WARNER-LAMBERT'S STOCKHOLDERS ADOPT
THE MERGER AGREEMENT AND APPROVE THE MERGER.
BACKGROUND OF THE MERGER
In recent years, AHP's management and board of directors have concluded that
the pharmaceutical and consumer healthcare businesses are in an era of
accelerating change that will have a significant impact on the future
competitive position of companies engaged in those businesses. As demand for
research and development increases and companies look for ways to speed the
development and marketing of breakthrough products in these fields, many
companies have sought and, AHP believes, will continue to seek opportunities
through consolidation to create efficiencies and growth and to become world
leaders in the most advanced science and technology. In this regard, in the
fourth quarter of 1997, representatives of AHP engaged in preliminary
discussions with representatives of SmithKline Beecham PLC regarding a possible
strategic merger between the two companies. On May 31, 1998, AHP and Monsanto
Company entered into a merger agreement contemplating a merger of equals
transaction between the two companies. Neither the SmithKline Beecham
discussions nor the Monsanto merger agreement resulted in completed business
combinations for AHP. From time to time thereafter, AHP continued to consider
the possibility of a business combination transaction with a large
pharmaceutical company, as well as other strategic alternatives, to enhance its
competitive position and stockholder value.
In June 1998, Warner-Lambert's management, with the assistance of
McKinsey & Company, began reviewing the growth initiatives available to
Warner-Lambert in preparation for assisting the Warner-Lambert board in its
determination of the company's strategic path.
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Notwithstanding Warner-Lambert's excellent performance and prospects, in
November 1998, the Warner-Lambert board, with the assistance of management and
outside advisors, commenced a review of Warner-Lambert's growth initiatives.
This review grew out of the Warner-Lambert board's belief that it needed to
maintain an ongoing proactive effort to address future value enhancement for the
benefit of Warner-Lambert's stockholders. Following the November 1998
Warner-Lambert board meeting, Warner-Lambert management, with McKinsey &
Company's assistance, continued this strategic review process for approximately
eight months. During this period, Warner-Lambert management evaluated
Warner-Lambert's long-term position in the pharmaceutical and consumer
healthcare industries in order to develop the company's strategic plan for the
future. Among the possible alternatives management and the Warner-Lambert board
examined were: pursuing an internal growth strategy only; engaging in a series
of acquisitions, joint ventures, alliances and licensing arrangements; and
engaging in a strategic business combination. This process culminated in the
June 27, 1999 board meeting described below.
Prior to the June 1999 Warner-Lambert board meeting, John R. Stafford,
chairman of the board, president and chief executive officer of AHP, telephoned
Lodewijk J.R. de Vink, chairman of the board, president and chief executive
officer of Warner-Lambert. During the course of the telephone conversation,
Mr. Stafford expressed his interest in exploring the possibility of a business
combination between the two companies. Mr. de Vink deferred any discussions
until after the June board meeting consideration of Warner-Lambert's strategic
alternatives.
On June 27, 1999, the Warner-Lambert board of directors met to review and
discuss, among other things, Warner-Lambert's strategic path. The Warner-Lambert
board reviewed management's evaluation and concluded that Warner-Lambert, with
its world class research facilities and staff and its future product pipeline,
had excellent capabilities and growth prospects. The Warner-Lambert board also
concluded that those strong capabilities and prospects could be better enhanced
for stockholders if Warner-Lambert engaged in a strategic merger, with a company
with complementary products and pipeline, that enhanced Warner-Lambert's already
strong position.
As part of that June board meeting review of Warner-Lambert's strategic
path, the Warner-Lambert board considered an analysis of industry participants
that might best satisfy the strategy favored by the board. AHP was at the top of
the list, and the clear first choice, based on a comparative assessment of a
number of criteria, including expansion and strengthening of therapeutic area
focus, building and strengthening of a technology platform, strengthening of the
overall pipeline (particularly near term), continued building of an OTC presence
and expected ease of integration. The Warner-Lambert board, in light of these
findings, discussed the contacts from Mr. Stafford and the possibility of
exploring a transaction with AHP. The Warner-Lambert board concluded that a
transaction with AHP would not only enhance Warner-Lambert's growth potential
based on Warner-Lambert's highly successful growth strategy, but would insure
that Warner-Lambert stockholders would have a very large participation in that
value creation. At the conclusion of the meeting, the Warner-Lambert board
authorized Mr. de Vink to explore whether a business combination with AHP could
be developed.
On July 7, 1999, Messrs. de Vink and Stafford met briefly and discussed the
concept of a strategic business combination of Warner-Lambert and AHP and agreed
to discuss the topic in more detail at a future date.
On July 12, July 16 and July 21, 1999, Messrs. de Vink and Stafford
discussed their views on the parameters of a business combination of
Warner-Lambert and AHP. During these conversations, Messrs. de Vink and Stafford
discussed the strategic benefits of a transaction, the potential for significant
cost savings, potential management structures of a combined company and the
issues involved in integrating both companies. Mr. Stafford also discussed with
Mr. de Vink that any such transaction should include both termination fees and
stock option agreements. In connection with these discussions, Warner-Lambert
and AHP signed a mutual confidentiality and standstill agreement on
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July 27, 1999 restricting the disclosure of confidential information and the
purchase of the other company's common stock.
Messrs. de Vink and Stafford met again on July 28, 1999 to further discuss a
number of aspects of a possible business combination of Warner-Lambert and AHP,
including the basis for an acceptable exchange ratio, the strategic benefits of
such a transaction, the potential areas for cost savings and issues involving
senior management positions in a combined company. Messrs. de Vink and Stafford
agreed that each would recommend to their respective boards of directors that a
strategic business combination of Warner-Lambert and AHP be structured as a
"merger of equals." On July 29, 1999, the Warner-Lambert board met and Mr. de
Vink reported on his conversations with Mr. Stafford. At the conclusion of the
meeting, the Warner-Lambert board authorized Mr. de Vink to pursue further
discussions with AHP. These discussions continued throughout August 1999.
On August 6, 1999, a jury in Texas awarded a significant verdict for the
plaintiff in one of a large number of personal injury diet drug lawsuits against
AHP. AHP's stock price declined following the announcement of this award. The
case was subsequently settled for less than 10% of the award.
On August 9, 1999, Mr. Stafford informed AHP board members of his
discussions with Warner-Lambert. On August 16, 1999, Mr. de Vink reported to the
Warner-Lambert board on the status of discussions with AHP, recent events
affecting AHP and its stock price and his plans to meet with Mr. Stafford later
that evening to discuss further developing a proposal for a strategic business
combination of Warner-Lambert and AHP. On the evening of August 16, 1999,
Messrs. de Vink and Stafford met again to discuss a possible transaction, at
which time they discussed, among other things, the recent jury verdict against
AHP involving diet drugs, the effect of recent events on AHP's stock price, the
basis for an acceptable exchange ratio in light of the recent decline in AHP's
stock price, the composition of the board, the succession of chief executive
officer and chairman of the board of a combined company, the name of the
combined company, and selections to certain senior management positions. In late
August, following the meeting with Mr. de Vink, Mr. Stafford again advised AHP
board members of his discussions with Mr. de Vink.
Because of the uncertainty surrounding AHP's diet drug litigation and its
impact on AHP's stock price, the parties were unable to reach agreement on the
basis for establishing an exchange ratio and on determining how to handle the
risks associated with the diet drug litigation. Accordingly, on August 31, 1999,
Messrs. de Vink and Stafford agreed that they would suspend discussions
regarding a business combination between the two companies for 30 days while AHP
pursued a settlement of the litigation and that during this period neither party
would talk to other merger candidates.
On September 3, 1999, and again on September 28, 1999, the Warner-Lambert
board met to discuss the status of discussions with AHP and the recent court
ruling which related to AHP. The Warner-Lambert board reviewed the strategic
benefits of a business combination of Warner-Lambert and AHP and discussed the
impact of recent events on discussions with AHP and the potential for
accomplishing a business combination with AHP.
On October 7, 1999, AHP announced that it had entered into a memorandum of
understanding regarding a comprehensive national settlement relating to its diet
drug litigation. In light of this development, strategic business combination
discussions between Warner-Lambert and AHP were revived.
On the evening of October 11, 1999, Messrs. de Vink and Stafford met to
continue to discuss the potential strategic business combination of
Warner-Lambert and AHP. At this meeting, they reviewed the recent proposed
settlement of the diet drug litigation, including its potential effect on AHP,
and the strategic benefits and synergies that could result from combining the
two companies in a merger of equals. At the meeting, Messrs. de Vink and
Stafford also discussed the potential basis for establishing an acceptable
exchange ratio. Messrs. de Vink and Stafford considered their respective roles
in a
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combined company, and agreed that Mr. Stafford should remain chairman of the
board of the combined company for 18 months following the merger and that
Mr. de Vink should be chief executive officer of the combined company reporting
to the board of directors following the merger and become chairman of the board
at the expiration of Mr. Stafford's 18-month term as chairman. They also
exchanged views with respect to the composition of the board and senior
management of the combined company.
On October 12, 1999, members of senior management of Warner-Lambert and AHP
met to discuss possible transaction structures, further due diligence that
Warner-Lambert and AHP expected to conduct, potential terms of a merger
transaction and a possible timetable for the transaction. Representatives of
Skadden, Arps, Slate, Meagher & Flom LLP, Warner-Lambert's special outside
counsel, and Simpson Thacher & Bartlett, AHP's special outside counsel, were
also present at the meeting. At the meeting, counsel to AHP indicated that as
had been previously stated by Mr. Stafford and in light of the fact that AHP had
had two prior potential transactions not close, AHP was unwilling to engage in a
transaction without the reciprocal termination fee provisions and stock option
agreements which were being discussed by the parties. At the conclusion of the
meeting, AHP's outside legal counsel provided Warner-Lambert and its outside
legal counsel with a draft merger agreement and, shortly thereafter, draft stock
option agreements.
On October 12, 1999, Warner-Lambert engaged Debevoise & Plimpton, special
outside counsel to Warner-Lambert, to undertake a due diligence examination of
AHP's diet drug litigation and an examination of the announced settlement to
resolve such litigation. Throughout the remainder of October, Debevoise &
Plimpton reported to Warner-Lambert's senior management on the results of its
examination of AHP's diet drug litigation and the announced settlement to
resolve such litigation.
At a meeting of the board of directors of Warner-Lambert held on
October 14, 1999, Mr. de Vink informed the board of directors of the recent
conversations with AHP and indicated that meetings with AHP's management were to
be held later in the week. The board reviewed the proposed business combination
with AHP, including the strategic rationale for the merger, recent events
affecting AHP, the basis discussed for establishing an acceptable exchange
ratio, the name of a combined company, succession of the chief executive officer
and chairman of the board of a combined company and the composition of the board
of directors of a combined company. Mr. de Vink informed the Warner-Lambert
board of directors that management intended, subject to the board of directors'
concurrence, to continue negotiations with AHP and, assuming these negotiations
were successful, to reconvene the board of directors in the near future, at
which time a more in-depth analysis and presentation would be made to the board
of directors regarding the proposed business combination.
From mid-October through November 3, 1999, representatives of Warner-Lambert
and AHP and their advisors participated in numerous telephone calls and meetings
to conduct continuing reciprocal legal, business, accounting and financial due
diligence. Commencing the week of October 18 representatives of Warner-Lambert
and Skadden, Arps and AHP and Simpson Thacher engaged in discussions regarding
the proposed merger agreement and related documents.
On October 21, 1999, the second trading day preceding the October 25(th)
letter from Pfizer discussed below, Mr. William C. Steere, Jr., chairman of the
board and chief executive officer of Pfizer and Dr. Henry A. McKinnell,
president and chief operating officer of Pfizer, sold 180,000 and 160,956 shares
of Pfizer, respectively, for aggregate proceeds of $7,255,800 and $6,488,136,
respectively. According to THE WALL STREET JOURNAL, a spokesman for Pfizer
stated that Messrs. Steere and McKinnell made their transactions on
October 21(st) "ahead of any knowledge of a merger combination."
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On October 25, 1999, without any prior indication to Warner-Lambert that he
might do so, and in violation of the standstill and confidentiality provisions
of the LIPITOR agreements discussed below, Mr. Steere of Pfizer delivered a
letter to Mr. de Vink "seek[ing]... permission to make a [business combination]
proposal along the lines we have in mind." The October 25(th) letter did not
elaborate on what was intended by a business combination and did not include any
economic terms. A copy of the October 25(th) letter follows:
October 25, 1999
Mr. Lodewijk de Vink
Chairman and CEO
Warner-Lambert Co.
201 Tabor Road
Morris Plains, NJ 07950
Dear Lodewijk:
As I am sure you are aware, there are "rumors on the street" that a
significant company, or companies, in our industry are considering a
business combination with your Company. As we have come to know the quality
of products, management and operations of Warner-Lambert over the last
several years, we expect you will attract substantial acquisition interest
over time. The need for more resources and to share science and technology
is more apparent every day and is evidenced by continued industry
consolidation. Our strategic relationship with you since 1996 is a good
example of the advantages obtainable through consolidation of our strengths,
and has convinced us of the value of exploring a business combination
between our Companies.
As you know, our respective Companies entered into a Confidentiality
Agreement as of March 4, 1996 with respect to the joint development and
marketing of LIPITOR. That Confidentiality Agreement contains a "standstill"
provision. If you have any interest in exploring a business combination, we
believe a transaction between our companies makes the most business sense,
and we should collectively consider expanding the relationship between our
companies beyond the initiative we recently both announced. We would like to
explore with you the merits of our interest and ideas. We believe that such
a business combination would provide substantial value both in the short and
long run to our shareholders, employees, customers and other constituents
that you serve. Because of our strategic relationship with your Company, we
represent the best opportunity to establish a combined business that will
provide your shareholders the highest possible value. The concept that we
have in mind would yield to them, on a tax-free basis, an investment in a
larger and stronger Company with more liquidity and combined growth
potential that would substantially enhance profitability. Our opportunities
for your employees and management would also be enhanced and the risk of an
undesirable suitor would be effectively eliminated. We believe strongly that
the combination of our Companies would provide the opportunity for the best
possible transaction in what could be the strongest, most creative
pharmaceutical company in the world. Our continuing business relationship
with Warner-Lambert is very important to us and we certainly would not take
any action that could jeopardize that relationship. Also, of course, the
March 4(th) Confidentiality Agreement requires us to seek your permission to
make a proposal along the lines we have in mind. Recognizing the significant
advantages to our respective shareholders, we would encourage you to grant
that permission so that you and your Board can review for yourselves the
value we place on our historical relationship with your Company, on your
talented management and employee pool, and on the positive effects that a
business combination between our Companies could have.
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We would be delighted to meet with you to discuss our thoughts at your
convenience.
Sincerely,
/s/ William C. Steere, Jr.
Warner-Lambert and Pfizer have had a business relationship since June 1996,
when Warner-Lambert had entered into a series of co-promotion and marketing
agreements with Pfizer regarding LIPITOR, a drug discovered and developed by
Warner-Lambert's research and development group for use in lowering cholesterol
levels. Because the drug was such a valuable asset of Warner-Lambert's,
Warner-Lambert specifically focused from the outset on the need for, and
negotiated for and obtained, Pfizer's agreement to various confidential
information use and standstill protections. These protections were designed to
prevent Pfizer, once it had access to confidential information concerning
LIPITOR, from influencing or controlling Warner-Lambert or its destiny for
Pfizer's own purposes. These provisions were intended to protect the value of
LIPITOR for Warner-Lambert stockholders, not Pfizer's. Pfizer agreed, among
other things, that:
- It would not use confidential information about LIPITOR other than in
performance of the LIPITOR arrangements.
- It would not offer or propose to acquire Warner-Lambert or its stock.
- It would not engage in any proxy contests or consent solicitations with
respect to Warner-Lambert.
- It would not seek to control or influence Warner-Lambert or its management
or board.
- It would not seek to change the standstill or request Warner-Lambert to
waive any of the standstill restrictions, including those listed above.
- Once a business combination involving Warner-Lambert was announced (if at
all), Pfizer would still not be released from the standstill restrictions,
unless the other party to the business combination was an "acquiring
person."
Warner-Lambert and Pfizer are currently in litigation regarding the LIPITOR
agreements, including the standstill arrangements described above. See "Certain
Litigation" on page 49 for a more complete description of the litigation.
Promptly after receiving the letter from Pfizer, Mr. de Vink called a
Warner-Lambert board meeting, which was convened on the morning of October 27,
1999. The Warner-Lambert board discussed the October 25(th) letter from Pfizer
and its implications for the pending transaction with AHP. The Warner-Lambert
board found the letter somewhat surprising, first, in light of prior public
statements by Pfizer that it was not interested in acquiring other
pharmaceutical businesses, but would grow internally, and, second, because the
letter plainly breached Pfizer's standstill agreement. Notwithstanding this,
Mr. de Vink recommended, and the Warner-Lambert board concurred, that he should
meet with Mr. Steere and advise Mr. Stafford of the letter and the proposed
meeting. Mr. de Vink telephoned Mr. Steere that day and indicated that he was
disappointed and surprised that, given the close business relationship between
the companies, Mr. Steere would without notice deliver a letter of that nature
rather than simply pick up the phone. Mr. de Vink further indicated, however,
that while Warner-Lambert was not waiving the standstill agreement, he wished to
meet with Mr. Steere as soon as possible to discuss the letter. On the afternoon
of October 27(th), Messrs. de Vink and Steere met at Pfizer's offices for
approximately 45 minutes to discuss Mr. Steere's October 25(th) letter.
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At the October 27(th) meeting, a number of matters were raised relating to
the letter, including the following:
- In direct response to the October 25(th) letter, Mr. de Vink inquired as
to what Mr. Steere had in mind with respect to the business combination
referred to in his letter;
- Mr. Steere responded that he had not really given a lot of thought to the
matter, and indicated that he did not have any specific terms of a
transaction in mind, that he had not discussed a business combination
transaction between Pfizer and Warner-Lambert with Pfizer's board
(although he personally believed Pfizer was the best partner for
Warner-Lambert), that management of the combined company could come from
both companies, that the boards could be combined and that dislocations in
achieving cost savings could be shared by both companies;
- Mr. Steere stated that if his means of communication had offended
Warner-Lambert, he would be willing to "tear up" his letter;
- Mr. Steere also said Pfizer was separately pursuing a sizable acquisition
and might not be capable of pursuing concurrently both that acquisition
and a Warner-Lambert transaction;
- Mr. Steere said that at a regularly scheduled Pfizer board meeting to be
held the next day he would mention his discussion and meeting with Mr. de
Vink to Pfizer's directors, who, according to Mr. Steere, at this time
were unaware of his letter; and
- Although Mr. Steere referred to a potential premium that Pfizer might
offer, he said that he viewed Warner-Lambert as already "expensive" to
acquire.
Mr. Steere made no inquiry in that meeting as to the status of any
transaction that Warner-Lambert might be pursuing. The meeting ended with
Mr. Steere asking if he could talk to Mr. de Vink in two weeks. Mr. de Vink said
that this did not fit his timetable and that he would call Mr. Steere the next
day following Pfizer's board meeting.
On October 27, 1999, Mr. de Vink telephoned Mr. Stafford and stated that, in
light of the Pfizer letter, it would not be possible for Warner-Lambert to
proceed with a merger transaction in which the exchange ratio would value the
AHP shares at any premium to market, as had been previously discussed by the
parties. The next day, Mr. Stafford telephoned Mr. de Vink to inform him that he
would be prepared to recommend to the AHP board an at-market exchange ratio.
On the morning of October 28, 1999, the Warner-Lambert board of directors
met to discuss the meeting between Messrs. de Vink and Steere and the
implications for the proposed AHP transaction of such meeting and the letter
that preceded it. The board discussed, among other things, the vagueness and
tentativeness of the thoughts expressed by Mr. Steere, including that he
indicated he did not have any specific terms in mind with respect to a business
combination involving Warner-Lambert, that he had not previously discussed the
possibility with his board and that, because of another transaction the Pfizer
board was actively considering, if any Warner-Lambert/Pfizer transaction might
develop, its timing might only be in the indefinite future.
At the October 28(th) board meeting, the Warner-Lambert board also discussed
the proposed strategic business combination with AHP, and the strategic
rationale for such combination. For a number of reasons, the board concluded
that it would not be in the best interests of Warner-Lambert's stockholders to
pursue what, effectively, would be a possibility of an acquisition of
Warner-Lambert by Pfizer. Among the Warner-Lambert board's reasons were:
- the board of Warner-Lambert recently reached a clear conclusion, after
extensive study, as to the best strategic path for Warner-Lambert. That
strategic path did not include being acquired at this time by a
significantly larger company which would result in Warner-Lambert's
carefully
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developed strategy for growth and value enhancement being abandoned and
replaced by that of the larger company;
- the board of Warner-Lambert's continuing belief (although no final
decision had been made) that the proposed strategic combination with AHP
represented a very valuable opportunity, both in absolute and relative
terms (especially considering the recent decline in the trading price of
the AHP shares as a result of the diet drug litigation and the recent
discussions between Mr. de Vink and Mr. Stafford relating to the exchange
ratio), for implementing the chosen strategic path for creating value for
Warner-Lambert stockholders; and
- the advanced stage and satisfactory nature of the discussions between
Warner-Lambert and AHP, and the significant risk of losing the AHP
transaction after months of discussions between the parties if
Warner-Lambert were to suddenly pursue a possible transaction with Pfizer
that clearly was still, at best, in the most preliminary stages of
consideration by Pfizer. In that regard, the Warner-Lambert board took
note of the fact that Mr. Steere had proposed no terms, that he had
referred to Warner-Lambert as "expensive" even at current levels, that he
said Pfizer was pursuing another transaction and was not sure that Pfizer
could pursue two at once. The Warner-Lambert board also understood that a
company in AHP's position would be expected to be very unwilling to play
the "stalking horse" by keeping its transaction available while Pfizer
made up its mind what it wanted to do. This was especially the case with
AHP, which recently had been involved in a publicly announced business
combination and a separate series of publicly announced discussions
regarding a business combination, neither of which had resulted in a
completed transaction.
On the afternoon of October 28, 1999, Messrs. de Vink and Steere spoke by
telephone during which Mr. de Vink informed Mr. Steere of the Warner-Lambert
board's conclusion that it did not wish to abandon Warner-Lambert's strategic
path to pursue a course involving an acquisition of Warner-Lambert by Pfizer.
Mr. de Vink advised Mr. Steere that Warner-Lambert was considering a strategic
business combination and that, were that to be accomplished, he would be open in
the future to talking again when the two companies could be of more comparable
size. Mr. de Vink assured Mr. Steere that the strategic combination being
considered by Warner-Lambert would not negatively affect Warner-Lambert's
LIPITOR arrangements with Pfizer and expressed hope that Pfizer would also act
in good faith. Mr. Steere expressed disappointment that Warner-Lambert did not
select Pfizer, but wished Mr. de Vink good luck and indicated that he was not
inclined at that time to take any action if Warner-Lambert were to announce a
transaction with another party. Also, during this conversation Messrs. de Vink
and Steere agreed to arrange a meeting between Dr. Anthony H. Wild, executive
vice president and president of the pharmaceutical sector of Warner-Lambert and
Dr. McKinnell to discuss outstanding issues on and finalize certain arrangements
relating to LIPITOR. At no time in the conversation did Mr. Steere make or
indicate a desire to make a specific offer with respect to a business
combination between Warner-Lambert and Pfizer, nor did he indicate that he had
made any progress in his own mind in formulating the terms of any such proposal.
Mr. Steere said nothing to indicate that the Pfizer board had even considered
the issue at its meeting earlier that day. Pfizer did not contact Warner-Lambert
again--and the parties had no further discussions concerning either a possible
transaction with Pfizer or the AHP transaction--until the meeting between Drs.
Wild and McKinnell, which was held on November 2, 1999, the day prior to
execution of the merger agreement between Warner-Lambert and AHP.
On October 30, 1999, Messrs. de Vink and Stafford met, together with
Messrs. Larini and Blount, Warner-Lambert's and AHP's chief financial officers,
and Messrs. Johnson and Hoynes, Warner-Lambert's and AHP's general counsels, to
discuss a number of the remaining issues.
On October 31, 1999, the board of directors of Warner-Lambert met for over
five hours to consider the proposed business combination with AHP and to review
the terms and conditions of the
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proposed merger agreement and related documents. Mr. de Vink reported on his
October 28(th) conversation with Mr. Steere. Warner-Lambert management once
again reviewed in detail the objectives and strategic benefits of a merger with
AHP, including cost savings and the fit between the two companies' products,
pipelines, complementary business strengths and research and development
projects, and reported on the business, financial and legal due diligence they
had conducted on AHP. Skadden Arps reviewed the fiduciary duties of the
Warner-Lambert directors, as well as the principal terms and conditions of the
proposed merger agreement and related documents. Debevoise & Plimpton gave a
detailed presentation concerning its examination of AHP's diet drug litigation
and the terms of the proposed settlement. A detailed discussion was held
concerning, and the Warner-Lambert board reviewed, with the participation of
Warner-Lambert's management and legal and financial advisors, among other
things:
- the strategic path that the Warner-Lambert board had selected;
- the attributes of Warner-Lambert and AHP, separately and on a combined
basis, in light of the chosen strategic path;
- the principal terms of the proposed merger agreement and the stock option
agreements, including:
- as they related generally to third party proposals that might be made
following their execution, and, in particular:
- the circumstances under which each company would be free to provide
information to, and negotiate with, a third party who made a
competing proposal,
- the circumstances in which termination fees would be payable,
- the fact that a third party making a competing proposal would be
precluded from consummating a transaction with Warner-Lambert, or
AHP, using the pooling of interests method of accounting and would
have to utilize purchase accounting (which would result in the
recognition of a significant amount of goodwill),
- the fact that both Warner-Lambert and AHP would be obligated under
the merger agreement to present the combination of Warner-Lambert
and AHP to their respective stockholders for approval
notwithstanding a competing proposal from a third party, even one
which the board that received such proposal recommended as superior
to the combination of Warner-Lambert and AHP, and that pending a
stockholder vote on the Warner-Lambert/AHP combination the parties'
rights plans (and rights thereunder) could not be amended or
redeemed,
- the provisions in the proposed merger agreement with respect to
AHP's diet drug litigation and liabilities, and
- the proposed timing of the stockholders' meetings, and the effect
of such timing;
- the financial terms of the proposed combination including their fairness
to the Warner-Lambert stockholders; and
- due diligence activities with respect to AHP including an extensive report
by counsel regarding AHP's diet drug litigation and proposed settlement.
The Warner-Lambert board discussed with its advisors the ability and
likelihood of third parties making competing proposals to Warner-Lambert if such
third parties were unable to utilize pooling accounting. It was noted that
non-U.S. companies generally do not utilize pooling accounting and that pooling
accounting would not likely be available, even in the United States, after 2000.
The Warner-
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Lambert board concluded that the merger of equals with AHP was a highly
desirable business opportunity for Warner-Lambert and that Pfizer's interest was
vague and tentative, and questionable as to whether it would ever be pursued.
The Warner-Lambert board also concluded that it would be unwise to delay and
jeopardize the highly desirable and deliberately conceived AHP transaction.
Warner-Lambert's board discussed with its advisors the remaining open issues in,
and the timing of, the proposed transaction with AHP. Thereafter,
Warner-Lambert's board instructed management to finalize merger negotiations
with AHP and complete the necessary transaction documents, with a view to having
a board meeting or meetings later during the week to review the results of
additional due diligence and consider and vote on a definitive transaction.
On November 1, 1999, a telephonic meeting of the AHP board of directors was
convened to review and consider the status of the discussions relating to the
proposed business combination transaction with Warner-Lambert. Mr. Stafford
reviewed for the AHP board the proposed principal terms of the transaction and
the strategic benefits of combining the two companies. Mr. Stafford also
informed the AHP board of Pfizer's October 25 letter to Warner-Lambert and
related developments. Representatives of Chase Securities Inc. and Morgan
Stanley & Co. Incorporated also gave financial presentations relating to the
proposed business combination.
On November 1, 1999, Messrs. Stafford and de Vink agreed in principle on an
exchange ratio, subject to approval by the boards of AHP and Warner-Lambert.
From November 1 through November 3, 1999, AHP, Warner-Lambert and their
respective counsel continued to negotiate and finalize the terms of the merger
agreement and related documents. During this period, Mr. Stafford and counsel to
AHP reiterated on several occasions the position that AHP was unwilling to
engage in the transaction with Warner-Lambert without the reciprocal termination
fee provisions and stock option agreements which had been discussed by the
parties since July of 1999.
On November 2, 1999, Dr. Wild of Warner-Lambert and Dr. McKinnell of Pfizer
had their previously scheduled meeting to discuss certain of the arrangements
between Warner-Lambert and Pfizer regarding LIPITOR. During the meeting
Dr. McKinnell expressed his regret that Warner-Lambert was not choosing to
engage in a business combination transaction with Pfizer and his concern as to
the effect on the LIPITOR arrangements if Warner-Lambert pursued a transaction
with a party of whom Pfizer did not approve. During the meeting Dr. McKinnell
inquired as to how close Warner-Lambert was to announcing a transaction with a
third party. Dr. Wild acknowledged that Warner-Lambert was involved in
discussions with another company with respect to such a transaction, but did not
indicate when such a transaction would be agreed to or announced. At no time
during the meeting did Dr. McKinnell make a specific offer or elaborate on the
intentions of Pfizer with respect to a business combination. As Mr. Steere had
to Mr. de Vink, Dr. McKinnell wished Dr. Wild good luck.
During the evening of November 2, reporters from THE WALL STREET JOURNAL
contacted both AHP and Warner-Lambert to inquire about a rumor to the effect
that the parties were about to agree to a business combination of the two
companies. As a result, the two companies decided to accelerate final
consideration of the proposed AHP/Warner-Lambert merger, and meetings of the
Warner-Lambert and AHP boards were scheduled for the evening of November 3. On
the morning of November 3, 1999, an article appeared in THE WALL STREET JOURNAL
and stories appeared in other media sources discussing a potential merger of AHP
and Warner-Lambert. Also that morning, representatives of AHP and Warner-Lambert
confirmed through media sources that the two parties were engaged in merger
discussions.
On November 3, 1999, following the appearance of the media stories,
Mr. Steere sent another letter to Mr. de Vink stating that Pfizer was interested
in a business combination with Warner-Lambert and that he would like to meet to
discuss his thoughts on the matter. This letter, again, did not
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elaborate on the meaning, or terms, of a business combination and made no
specific proposal. A copy of the November 3(rd) letter follows:
November 3, 1999
Mr. Lodewijk de Vink
Chairman and CEO
Warner-Lambert Co.
201 Tabor Road
Morris Plains, NJ 07950
Dear Lodewijk:
I was extremely surprised and disappointed to read in this morning's Wall
Street Journal that WL is about to enter into a business combination with
AHP in a so called "merger of equals" and without any premium to the
shareholders of WL. This is especially the case in light of my recent letter
to you and our meeting of October 27, in which I made clear Pfizer's
willingness to provide a vastly superior proposal to WL and its
shareholders. We are still anxious to have you and your Board's support for
our making an offer.
Having read the article on your pending merger with AHP, a company not only
substantially smaller than we are, but certainly not positioned in the key
pharmaceutical industry as we are, I feel compelled to use this opportunity
to reiterate what I believe are the advantages of a transaction with us.
They include:
- The best possible price for your Shareholders
- Substantial increase in market depth and liquidity
- The greatest synergies for the combined companies
- Complimentary technology and science
- Worldwide marketing exposure for your products, especially your number 1
product, LIPITOR, which is achieving its excellent market acceptance in
large part as a result of our world class marketing and sales
organizations working in conjunction with yours.
- Substantial expansion of opportunities for management and key employees
- Long term value for all our Shareholders
- Substantial new R&D, marketing, manufacturing and capital resources for WL
important projects
- Strengthening your participation in future industry growth and
consolidation--we would be putting together the two fastest growing
companies in the industry.
Because of our strategic relationship with your Company, we represent the
best opportunity to establish a combined business that will provide your
shareholders the highest possible value. We would like to discuss with you
the merits of our interest and ideas. We believe that a business combination
between our two companies would provide substantial value both in the short
and long term to your shareholders, employees, customers and other
constituents that you serve. The concept that we have in mind would yield to
them, on a tax-free basis, an investment in a larger and stronger Company
with more liquidity and combined growth potential that would substantially
enhance profitability. Our opportunities for your employees and management
would also be enhanced. We believe strongly that the combination of our
Companies would provide the
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opportunity for the best possible transaction with an attractive premium for
your shareholders in what could be the strongest, most creative
pharmaceutical company in the world.
We would be delighted to meet with you to discuss our thoughts. We would
urge that such a meeting take place at your earliest convenience.
Sincerely,
/s/ William C. Steere, Jr.
In addition, on November 3, 1999, M. Anthony Burns, a board member of
Pfizer, telephoned W.R. Howell, a Warner-Lambert board member, to inquire
whether the Warner-Lambert board was aware of the Pfizer interest, which
Mr. Howell confirmed. Mr. Burns also indicated that he had been aware, at or
about the time of Mr. Steere's first letter to Mr. de Vink, of Mr. Steere's
interest in pursuing an acquisition of Warner-Lambert. Also on November 3, Dana
G. Mead, also a board member of Pfizer, approached Robert N. Burt, a
Warner-Lambert board member, at a conference to note Pfizer's interest in
pursuing a transaction with Warner-Lambert. During this conversation, Mr. Mead,
when informed by Mr. Burt of his belief that Pfizer would not be able to use
pooling-of-interests accounting in an acquisition of Warner-Lambert, indicated
that Pfizer understood that and that it was not a problem. At no time during the
conversation did Mr. Burt (who had been present at the October 27(th), 28(th)
and 31(st) Warner-Lambert board meetings) indicate, as it has been subsequently
alleged by Pfizer, that he was unaware of Pfizer's interest in a transaction
with Warner-Lambert.
Later, on November 3, 1999, a special meeting of the board of directors of
Warner-Lambert was held, at which all of Warner-Lambert's directors were
present. At this meeting, Skadden Arps updated the board of directors on the
final terms of the merger and stock option agreements, including changes since
the prior meeting, and again reviewed with the board its fiduciary duties. Bear
Stearns delivered its fairness opinion. In light of Pfizer's expression of
interest, the Warner-Lambert board focused particularly on, and actively
discussed, among other things:
- the letters from Mr. Steere and contacts from the other Pfizer directors,
and the fact that still no specific proposal had been made by Pfizer;
- the board's continuing belief in the stockholder value opportunity
represented by the strategic path the board previously had chosen and the
unique implementation opportunity presented by the definitive transaction
terms with AHP;
- its concern that it would not be in the best interests of Warner-Lambert's
stockholders to pursue an indefinite expression of interest from Pfizer,
which if it materialized at all seemed to be months away, particularly if
pursuing such interest would put the AHP transaction at risk;
- AHP's position, as stated to Warner-Lambert and reported at the Board
meeting, that AHP would not continue discussions with Warner-Lambert or
remain willing to agree to a business combination with Warner-Lambert if
Warner-Lambert commenced negotiations with Pfizer;
- the board's specific resulting understanding that, in order to commence
negotiations with Pfizer at that time, Warner-Lambert effectively would be
abandoning the fully developed, extremely attractive transaction with AHP
that it had been working on for the prior four months;
- that AHP had not changed its position, which it had taken since the outset
of discussions in July, that its willingness to enter into a transaction
with Warner-Lambert was conditioned on including in the terms of the
transaction the termination fee and stock option grant to AHP which it had
been proposing, and the board's belief that such provisions were not
unusual in transactions of this type;
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- as to the termination fee, the view of Warner-Lambert's financial advisor,
Bear, Stearns & Co. Inc., as to the reasonableness of the fee in relation
to comparable transactions; and
- as to the stock option grant by Warner-Lambert to AHP, the accounting
impact that it might have on third parties if they were to intervene. The
Warner-Lambert board noted that some potential parties would not care
about pooling accounting--possibly including Pfizer, based on the Pfizer
director's comment--for reasons including that pooling accounting was not
available to non-U.S. companies and, even in the U.S., pooling accounting
would not likely be available after December 31, 2000.
In this regard, the Warner-Lambert board also took note of the fact that
Mr. de Vink had, notwithstanding the standstill obligations to which Pfizer was
subject, clearly asked Mr. Steere what Mr. Steere had in mind with respect to
the business combination suggested in his October 25(th) letter and that
Mr. Steere responded, as described above, that he had not thought about specific
terms or raised it with the Pfizer board. In fact, Mr. Steere never indicated to
Mr. de Vink in any conversation that Pfizer had in fact formulated a concrete or
specific offer but was not informing Warner-Lambert of that offer because of the
continuing restriction of the standstill. Thus it was felt that Mr. Steere's
failure at such time and thereafter to specify the terms of any transaction was
not a result of the standstill agreement--which Pfizer had disregarded on
several occasions--but rather because Pfizer had not formulated any terms for a
transaction. The Warner-Lambert board also considered that all of the provisions
in the proposed transaction documents with AHP which placed some constraint on
third party interest were mutual--that is, for example, AHP had granted
Warner-Lambert a reciprocal option on AHP shares and had agreed to a termination
fee. It was felt that the time and effort expended on, expense incurred in, and
potential opportunity cost of, agreeing to a large and complicated business
combination were considerable, especially so with a transaction expected to be
pending and open to third party intervention for over six months. Therefore, for
the benefit of Warner-Lambert stockholders, the Warner-Lambert board wanted to
obtain protection in the event that a third party intervened by bidding for AHP,
thus possibly depriving Warner-Lambert stockholders of the benefit of the
contemplated merger of equals with AHP. The Warner-Lambert board was aware of
rumors that AHP might be a target. It was felt that this protection for
Warner-Lambert could not be obtained without being willing to give AHP the same
protections that it was demanding. Following these presentations and further
discussion, the Warner-Lambert board of directors unanimously approved the
merger and stock option agreements and decided to recommend that the
Warner-Lambert stockholders approve and adopt the merger agreement and the
merger.
Also, on November 3, 1999, a special meeting of the board of directors of
AHP was held, at which all of AHP's directors were present. At this meeting,
Simpson Thacher & Bartlett reviewed for the AHP board of directors the final
terms of the merger agreement and the stock option agreements and the board's
fiduciary duties. AHP's senior management gave presentations, including with
respect to the businesses of Warner-Lambert and the financial impact of the
transaction. Chase Securities Inc. and Morgan Stanley & Co. Incorporated
delivered their fairness opinions and discussed the contents thereof. Following
these presentations and after discussion, the AHP directors unanimously approved
the merger agreement and the stock option agreements and decided to recommend
that the AHP stockholders approve each of the AHP proposals relating to the
merger.
On November 3, 1999, following the approval of AHP's and Warner-Lambert's
respective boards of directors, the parties executed the merger agreement and
the related documents. Prior to the commencement of trading on November 4, 1999,
Warner-Lambert and AHP issued a joint press release announcing the execution of
the merger agreement.
At 8:45 in the morning on November 4, 1999, Dr. Wild telephoned
Dr. McKinnell to inform him of the execution of the merger agreement and to
confirm Warner-Lambert's intention to move forward in finalizing the
arrangements the parties had been discussing on LIPITOR.
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Within hours of the announcement and an analyst meeting in the morning at
which Warner-Lambert and AHP described the transaction and summarized its
contemplated benefits, the prices of both companies' stock rose and by midday
reflected an aggregate market value increase of over $10.4 billion from their
combined market value prior to the media stories on the preceding day.
On November 4, 1999, Mr. Steere, in violation of Pfizer's standstill and
confidentiality obligations, sent a letter to Mr. de Vink and to the
Warner-Lambert board of directors containing a conditional offer to acquire
Warner-Lambert in a merger in which stockholders of Warner-Lambert would receive
2.5 shares of Pfizer common stock for each share of Warner-Lambert common stock.
Pfizer conditioned its offer on the elimination of the termination fee and stock
option grant, to which Warner-Lambert is contractually bound in its signed
agreements with AHP. Pfizer also started a lawsuit claiming these provisions to
be invalid. Pfizer also publicly announced such proposal and letter. A copy of
the November 4(th) letter follows:
November 4, 1999
Mr. Lodewijk de Vink
Chairman and CEO
Warner-Lambert Co.
201 Tabor Road
Morris Plains, NJ 07950
Dear Lodewijk:
As you know from our previous communications, my Board of Directors and I
believe firmly that Pfizer and Warner-Lambert Co., the two fastest-growing
companies in the industry, would represent a compelling combination and
excellent strategic fit, creating superior value for all our shareholders.
We have not made a definitive proposal prior to this time as a result of the
"standstill" provision in the confidentiality agreement we entered into on
March 4, 1996. Because of your announcement today relating to the agreement
with American Home Products and the resulting release from the standstill,
we are pleased to make the following proposal.
I want to reiterate that I have repeatedly tried over the past few weeks to
discuss with you the merits of a combination between Pfizer and
Warner-Lambert. Unfortunately, our efforts have been rejected--a response
that is particularly disappointing given the substantial success represented
by our partnership in developing and marketing LIPITOR, which both our
companies have publicly acknowledged. My letters dated November 3 and
October 25--as well as our conversation on October 27--clearly demonstrated
our desire to make the best possible proposal for your company and its
shareholders within the "standstill" framework we had agreed to.
Since the standstill agreement is no longer operative, we are now prepared
to offer a tax-free merger in which your shareholders would receive 2 1/2
shares of Pfizer common stock for each outstanding share of common stock of
Warner-Lambert. Customary and appropriate provisions will be made for
outstanding options and warrants. Based on yesterday's closing market price,
this offer represents a $96.40 per share purchase price for each
Warner-Lambert share, a premium of 30% over the last month's average closing
price of your shares. This $82.4 billion offer represents a very substantial
premium over the proposed AHP transaction as well. In addition, our proposal
envisions combining the Boards of both companies. Our offer is conditioned
solely on the elimination of the egregious $2 billion "break-up fee" and the
improper issuance of the stock option which would prevent us (but not AHP)
from utilizing a pooling of interest accounting for this transaction as well
as entering into the appropriate documentation.
The Pfizer Board has approved a transaction on the terms set forth above and
we are prepared to move expeditiously to definitive agreements.
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A transaction with us offers distinct advantages to Warner-Lambert and its
shareholders. Specific strengths of this combination include:
- The 30% premium for your shareholders over the average closing price of
your shares for the last month
- Enhanced, truly global scale--including $4 billion in combined R&D and
$28 billion in combined revenues
- Complementary and broadly-diversified therapeutic pipelines
- The opportunity to achieve at least $1.2 billion in cost savings and
efficiencies
- Complementary operations on which to build growth--including
Warner-Lambert's strong OTC platform and Pfizer's powerful global
marketing and sales infrastructure
- Opportunities to expand on our current highly successful relationship
- Greater growth opportunities for management and key employees
Given the demands of today's competitive environment, I hope that
Warner-Lambert would settle for nothing less than a combination with the
best possible peer: Pfizer.
Given what we could accomplish together for all our most important
constituencies, we remain surprised that you have not shown more interest in
joining forces. Nevertheless, we stand ready to meet at any time to discuss
any--or all--aspects of our proposed transaction.
On behalf of your shareholders, employees and all of your constituencies, we
urge you and Warner-Lambert's Board of Directors to recognize the immediate
and long-term superior value of this transaction.
Sincerely,
/s/ William C. Steere, Jr.
Chairman & CEO
cc: Warner-Lambert Board of Directors
On November 4, 1999, the Warner-Lambert board met to consider the
unsolicited conditional Pfizer proposal which had been publicly announced
earlier that day and to discuss the litigation commenced by Pfizer. Under the
merger agreement between AHP and Warner-Lambert, each party retained the right
to deal with acquisition proposals made to it by third parties after the
agreement was signed. Specifically, if a proposal were made to Warner-Lambert or
AHP which its board, in good faith, believes is, or is reasonably likely to
result in, a "superior proposal"--that is, a proposal that (1) is better for its
stockholders from a financial point of view than the Warner-Lambert/AHP
combination and (2) is reasonably capable of being completed--then such party
may enter into discussions and negotiations with respect to such proposal. See
"The Merger Agreement--Covenants--No Solicitation" for a discussion of each
company's obligations with respect to acquisition proposals.
Because Pfizer conditioned its proposal on the elimination of contractual
provisions in Warner-Lambert's agreement with AHP, which Warner-Lambert had no
ability by itself to remove and had no reason to believe that AHP will agree to
remove, and because the board did not believe that a legal challenge to such
provisions would prevail, Warner-Lambert's board was unable to conclude that
Pfizer's conditional proposal on its face was reasonably likely to be completed.
Accordingly, based on the facts then existing, the Warner-Lambert board
concluded on November 4, 1999 that the Pfizer conditional proposal did not meet
the capability of completion test, and that the board was not in a
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position at that time to take any action with respect to the Pfizer proposal.
Following the board meeting, Warner-Lambert issued a press-release to that
effect and that it supported the transaction with AHP.
On November 15, 1999, Warner-Lambert issued a press release announcing that
it was "reviewing Pfizer's actions and assessing the steps [Warner-Lambert]
should take in light of any breaches of the LIPITOR agreements determined to
have occurred as a result of such actions." Among the steps Warner-Lambert
announced it was considering was the termination of its LIPITOR agreements with
Pfizer. Warner-Lambert also announced that it was seeking to make public, for
the benefit of Warner-Lambert and Pfizer stockholders, the confidential terms of
the LIPITOR agreements between Warner-Lambert and Pfizer that Pfizer was "using
to its advantage in connection with its interest in acquiring Warner-Lambert."
On November 15, Pfizer agreed with Warner-Lambert's request to make public the
terms of the LIPITOR agreements, and, on the following day, Warner-Lambert made
public all of those agreements.
On November 23, 1999, Pfizer sued Warner-Lambert and AHP alleging, among
other things, that Pfizer is not in breach of the LIPITOR agreements. On
November 29, 1999, Warner-Lambert counterclaimed against Pfizer, alleging that
Pfizer is in breach of the LIPITOR agreements and seeking a declaratory judgment
that Warner-Lambert is entitled to terminate such agreements. See "Certain
Litigation" on page 49 for a discussion of the Pfizer litigation.
On November 30, in response to Warner-Lambert's filing of the counterclaim
against Pfizer, AHP informed Warner-Lambert that it was "prepared to work with
Warner-Lambert to provide a mechanism, consistent with [the AHP/Warner-Lambert]
merger agreement, for fairly allocating to Warner-Lambert's shareholders
additional value ultimately created by the recovery of the marketing rights to
LIPITOR."
OUR REASONS FOR THE MERGER
While each of AHP and Warner-Lambert has excellent growth potential and
prospects for its immediate and long term future as a stand-alone entity, we
believe that a combination of the two companies will create a leading global
pharmaceuticals and consumer healthcare company with greater diversity, breadth
and financial resources that will have the opportunity to enhance stockholder
value in ways that are unlikely to be achieved by AHP or Warner-Lambert on an
individual basis. Specifically, the combined company would be uniquely
positioned to:
- realize enhanced revenue potential;
- realize significant cost savings;
- realize the benefits of combining AHP's and Warner-Lambert's complementary
technology platforms;
- realize the benefits of having market leadership in multiple major
therapeutic categories; and
- realize the benefits of a strong management team drawn from both
companies.
ENHANCED REVENUE POTENTIAL. The combined company would be a substantially
larger enterprise with a broader and more diversified product line than either
AHP or Warner-Lambert on a stand-alone basis, with pro-forma estimated 1999
combined total sales of $26.3 billion. As competition intensifies in the
industries in which AHP and Warner-Lambert participate, we believe that a
combined company will benefit from an enhanced potential for revenue growth in
the following areas and for the following reasons:
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- PHARMACEUTICALS. The combined company will be the number one company in
pharmaceutical sales with pro-forma estimated combined total 1999 sales of
$17.2 billion, selling such leading products as LIPITOR, PREMARIN,
REZULIN, EFFEXOR, NEURONTIN, ACCUPRIL, VIRACEPT, ENBREL, ZOSYN/ TAZOCIN,
DILANTIN and several leading oral contraceptive products. We believe that
our enhanced market presence and sales penetration in key products,
coupled with our increased research and development capabilities which may
lead to the development of novel pharmaceutical products and our enhanced
capabilities to successfully bring such products to market, will lead to
enhanced potential for revenue growth.
- OVER THE COUNTER PRODUCTS. The combined company will be the number one
company in over the counter sales with pro-forma estimated combined total
1999 sales of $4.4 billion, selling such leading products with globally
recognized brand names as ADVIL, ANACIN, SUDAFED, BENADRYL, ROBITUSSIN,
DIMETAPP, ZANTAC 75, LUBRIDERM, CENTRUM, SOLGAR, LISTERINE, NEOSPORIN,
CALTRATE AND PREPARATION H. In addition, given the increased size of the
combined company's product portfolio, the combined company would have an
enhanced ability to switch prescription products to the over the counter
market. We believe that the combined company's strong global brand names,
including our strength in nutritionals, coupled with our relationships
with global retailers and our enhanced potential for over the counter
switches leads to enhanced potential for revenue growth.
- NEW PRODUCTS AND BROAD AND DIVERSIFIED PRODUCT LINE. The combination of
AHP's strong near term pipeline of new products with Warner-Lambert's
strong mid- to long-term pipeline of new products provides the combined
company with the potential for sustainable revenue growth for the future.
We estimate that by the end of 2002, the combined company will have
brought approximately 21 new products to market, which we believe will
lead to enhanced potential for sustainable revenue growth for the combined
company. In addition, the broader and diversified product line of the
combined company reduces the dependence on any one product and the risks
associated with such dependence. For example, sales of LIPITOR in 1999
will comprise approximately 47% of Warner-Lambert's estimated
pharmaceutical sales before giving effect to the merger. After giving
effect to the merger, sales of LIPITOR in 1999 will comprise approximately
21% of the pro-forma estimated pharmaceutical sales of the combined
company. We believe the new products in the combined company's pipeline
and a broader and more diversified product line will result in an enhanced
potential for sustainable revenue growth.
- INCREASED SCALE. Scale has importance in many areas, including financial
strength, research and development of new products, increased presence in
major international markets, a reduction in the need to partner with third
parties for major product launches, an increased ability to attract better
licensing partners, improved penetration and higher market shares in
certain key products, enhanced marketing and distribution capabilities, as
well as enhancement of existing competencies. We believe the increased
scale of the combined company, and the benefits in the areas mentioned
above, will result in an enhanced potential for revenue growth.
While we expect that we will be able to realize enhanced revenues, no
assurance can be given that we will actually be able to do so.
SIGNIFICANT COST SAVINGS: Based on our review of and assumptions about the
operations and infrastructure of the two companies, we expect that the combined
company will realize approximately $1.2 billion in annual pre-tax cost savings
within three years of the merger. We expect to realize the approximate
$1.2 billion in annual cost savings within three years of the merger as follows:
- $300 million by rationalizing corporate overhead and administration costs
through the elimination of redundant corporate functions and facilities;
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- $300 million by integrating and eliminating redundancies in sales forces
and functions of both companies to achieve sales efficiencies;
- $250 million by integrating and eliminating redundancies in the two
companies' research and development programs to achieve research and
development efficiencies;
- $150 million by integrating and eliminating redundancies in the two
companies' manufacturing functions and facilities to achieve a reduction
in cost of goods sold;
- $150 million by integrating and eliminating redundancies in the two
companies' marketing functions to achieve marketing efficiencies; and
- $50 million by integrating and eliminating redundancies in the
distribution functions of both companies to achieve distribution
efficiencies.
The estimated cost savings reflect the creation of cost reduction
opportunities and efficiencies through the ability to consolidate separate
stand-alone operations into a single entity. While we expect that we will be
able to realize these cost savings, no assurance can be given that we will
actually be able to do so.
COMBINATION OF COMPLEMENTARY TECHNOLOGY PLATFORMS. We expect the
combination of AHP's and Warner-Lambert's complementary technology platforms in
small molecules, structure based drug design, combinational chemistry, protein
therapeutics, vaccines and gene therapy will result in new opportunities for
innovation in bringing new products to market. While we expect that the
combination of our complementary technology platforms will result in new
opportunities for innovation in bringing new products to market, no assurance
can be given that we will be able to do so.
LEADERSHIP IN MAJOR THERAPEUTIC CATEGORIES. The combined company will have
leading products in the following major therapeutic categories:
- Cardiovascular, with such major products as LIPITOR, ACCUPRIL and
CORDARONE IV;
- Diabetes, with the major product REZULIN;
- Women's Health, with the major product PREMARIN;
- Central Nervous System, with such major products as EFFEXOR, NEURONTIN,
DILANTIN and SONATA;
- Virology, with the major product VIRACEPT;
- Pain and Arthritis, with the major product ENBREL; and
- Vaccines, with such major products as PREVNAR and MENINGITEC.
STRONG MANAGEMENT TEAM. A strong management team drawn from both companies
will manage the combined company. John R. Stafford, currently chairman,
president and chief executive officer of AHP, will be chairman of the combined
company for 18 months after the merger and Lodewijk J.R. de Vink, currently
chairman, president and chief executive officer of Warner-Lambert, will be chief
executive officer of the combined company will report to, and be a member of,
the board, and will become chairman of the combined company upon the expiration
of Mr. Stafford's 18-month term. Members of the remaining senior management of
the combined company will include key AHP and Warner-Lambert executives drawn
from both companies. Our immediate task, beginning prior to the completion of
the merger, is to plan the integration of our businesses and then successfully
and quickly complete the integration.
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FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE BOARD OF DIRECTORS OF
WARNER-LAMBERT
At its meeting on November 3, 1999, the Warner-Lambert board of directors
unanimously:
- determined that the merger agreement and the merger are advisable and fair
to, and in the best interests of, Warner-Lambert and its stockholders;
- directed that the proposed transaction be submitted for consideration by
the Warner-Lambert stockholders; and
- recommended that the Warner-Lambert stockholders vote FOR approval and
adoption of the merger and the merger agreement.
In the course of reaching its decision to adopt the merger agreement, the
Warner-Lambert board of directors consulted with Warner-Lambert's management, as
well as its outside legal counsel and its financial advisors, and considered the
following material factors:
(1) information concerning the financial performance and condition, results
of operations, asset quality, prospects and businesses of each of
Warner-Lambert and AHP as separate entities and on a combined basis,
including:
- the revenues of the companies, their complementary businesses and the
potential for cost savings and revenue enhancement;
- the recent and historical stock price performance of Warner-Lambert
common stock and AHP common stock (including the recent decline in the
trading price of the AHP shares as a result of the diet drug
litigation); and
- the percentage of the combined company Warner-Lambert's stockholders
would own following the merger;
(2) the strategic nature of the transaction, which combines AHP's and
Warner-Lambert's complementary businesses, and creates a broader company
with global reach and greater resources, enhanced future operating
flexibility and increased opportunity for growth;
(3) the potential benefits to be derived from a combination of the two
companies as described under "--Our Reasons for the Merger" on pages 38
to 40, including potential cost savings and efficiencies that would
result from the merger;
(4) the current industry, economic and market conditions and trends,
including the likelihood of continuing consolidation and increasing
competition in the pharmaceuticals and consumer healthcare industries
(and the corresponding decrease in the number of attractive acquisitions
and suitable merger partners);
(5) the nature and timing of new products of both companies in their
respective pipelines and the effect of combining such pipelines on the
growth and results of operations of the combined company;
(6) the nature of existing products to be sold by the combined company and
the fact that the customer base to be served will be broader and more
diverse;
(7) the broader and more diverse product line of the combined company,
including reduced dependence on LIPITOR;
(8) the merger will present the opportunity for the stockholders of
Warner-Lambert to participate in a larger company with a more diversified
product line and, as stockholders of the combined company, benefit from
future growth of the combined company;
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(9) the exchange ratio will enable Warner-Lambert stockholders to own
approximately 50% of the outstanding stock of the combined company;
(10) the analyses and presentations prepared by Bear Stearns, and Bear
Stearns' written opinion to the effect that, as of November 3, 1999, and
subject to the matters set out in its opinion, the exchange ratio was
fair from a financial point of view to Warner-Lambert's stockholders;
(11) the intended accounting of the merger as a pooling of interests which
results in combined financial statements prepared on a basis consistent
with the underlying view that stockholder interests in the two companies
have simply been combined;
(12) the ability to complete the merger as a reorganization for United
States federal income tax purposes in which Warner-Lambert stockholders
generally will not recognize any gain or loss, except for any gain or
loss recognized in connection with cash received for fractional shares of
the combined company's common stock;
(13) the ability to consummate the merger, including the conditions to the
merger requiring receipt of necessary regulatory approvals in accordance
with the terms of the merger agreement;
(14) the potential impact on AHP and the combined company of certain of
AHP's pending and threatened litigation, including the proposed
settlement of the diet drug litigation. The Warner-Lambert board received
a detailed report from its special counsel on these matters. Among the
risks and uncertainties considered by the Warner-Lambert board were the
following:
- the class action settlement of the diet drug litigation is subject to
court approval and appeal and it is difficult to predict the ultimate
outcome of such approval process;
- the possibility that there would be substantial opt outs from the
settlement, both during the initial opt out period and, thereafter,
subject to the terms and conditions of the settlement agreement;
- opt out claims and claims for primary pulmonary hypertension will be
pursued as individual actions and may result in substantial settlements
or judgments against AHP; and
- although AHP believes that the $4.75 billion pre-tax ($3.29 billion
after-tax) charge it took in the third quarter of 1999 is sufficient to
cover anticipated payments under the class action settlement, other
judgments and settlements involving opt out claims and claims for
primary pulmonary hypertension, and costs associated with the defense
of legal actions related to the diet drug litigation, such costs are
inherently difficult to predict, and the actual cost associated with
such litigation and claims may over the course of time exceed such
reserve.
The board concluded that the economic terms of the merger and the other
terms of the merger agreement appropriately took into account, and
adequately protected Warner-Lambert against, the risks described above.
(15) the terms of the merger and stock option agreement regarding third
party proposals, including (a) the potential payment to AHP of a
termination fee, (b) the grant to AHP of an option to purchase shares of
Warner-Lambert common stock, (c) that Warner-Lambert cannot terminate the
merger agreement in order to enter into a transaction with a third party
before the Warner-Lambert stockholders have had an opportunity to vote on
the proposed merger with AHP and the timing of such vote, and (d) that
the rights outstanding under the Warner-Lambert stockholder rights plans
cannot be redeemed during the term of the merger agreement, and the
potential effect of such provisions on possible efforts by other parties
to acquire or otherwise combine with Warner-Lambert;
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(16) the fact that the merger and stock option agreements contain reciprocal
provisions to those listed in (a) through (d) in item (15) immediately
above and that the Warner-Lambert board was aware of rumors that AHP
might be a target;
(17) the grant to AHP of an option to purchase shares of Warner-Lambert
common stock described in clause (15) above would generally prevent a
third party competing with AHP from using pooling-of-interests accounting
for a combination with Warner-Lambert; however the Warner-Lambert board
also took into account that non-U.S. companies generally do not utilize
pooling accounting, that pooling accounting would not likely be
available, even in the United States, after 2000 and that Pfizer would
not be prevented from proceeding with a transaction with Warner-Lambert
that would be accounted for on a purchase basis. The board also
considered the reciprocal effect of the grant to Warner-Lambert of the
AHP option;
(18) the importance of clarity of future leadership in ensuring achievement
of stockholder value opportunities resulting from the merger and the
Warner-Lambert board of directors' confidence in the abilities of
Lodewijk J.R. de Vink and other members of the senior management team of
Warner-Lambert, based on the board's familiarity with their record at
Warner-Lambert, and the facts that:
- Mr. de Vink will be the chief executive officer of the combined company
reporting to the board upon completion of the merger and will be the
chairman of the board of the combined company upon expiration of
Mr. Stafford's 18-month term as chairman;
- Dr. Wild will have overall responsibility for the human global
pharmaceutical business, and that the two pharmaceutical research heads
of the combined company--one of which will be drawn from each of AHP
and Warner-Lambert--will both report to him; and
- Mr. Larini will be the chief financial officer of the combined company;
(19) the terms of the merger agreement, including composition of the board
of directors, the management structure of the combined company and the
intent to manage the combined company on a merger of equals basis, led by
an integrated senior management team drawn from both companies;
(20) the ability to successfully integrate the two companies and the risks
associated therewith, including the impact of the merger on employees of
Warner-Lambert;
(21) the combined company will adopt the name "AmericanWarner, Inc.";
(22) the headquarters of the combined company will be in Madison, New
Jersey, the headquarters for the over the counter business will be in
Morris Plains, New Jersey and the headquarters for the pharmaceuticals
business will be in Radnor, Pennsylvania;
(23) the two letters from Pfizer, the discussions between the two chairman
of Warner-Lambert and Pfizer as well as other representatives of the two
companies;
(24) that pursuit of a transaction with Pfizer would very likely result in
the loss for the stockholders of Warner-Lambert of what the board
believes to be the highly desirable fully-developed AHP transaction which
Warner-Lambert had been working on for the prior four months, in favor of
the possibility of a transaction with Pfizer whose terms and timing, and
hence benefits to Warner-Lambert stockholders, had not been furnished to
Warner-Lambert despite Pfizer's having had an opportunity to present them
and which might never be proposed or
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consummated. In reaching this conclusion the following additional
factors, among others, relating to Pfizer and AHP were considered:
- the board's continuing belief in the stockholder value opportunity
represented by the strategic path the board had previously chosen and
the unique implementation opportunity presented by the definitive
transactions terms with AHP;
- that the board of Warner-Lambert had determined to pursue a strategic
path for Warner-Lambert that did not include it being acquired by a
significantly larger company which would result in Warner-Lambert's
strategy being replaced by the larger company's and the Warner-Lambert
stockholders having a greatly diminished share of Warner-Lambert's
growth potential;
- that Pfizer stated that it was not certain that it could accomplish a
transaction with Warner-Lambert in the near future given that it was
pursuing a significant transaction involving the acquisition of another
business and was not sure it could pursue the two transactions at once;
- that no specific proposal or economic terms of a proposal had been
offered by Pfizer, and the appearance that Pfizer had not given any
serious consideration to the terms of a transaction with
Warner-Lambert;
- the timing and vagueness of the second letter from Pfizer which was
sent to Warner-Lambert at a time when Warner-Lambert and AHP were on
the verge of executing the merger agreement; and
- AHP's positions, as stated to Warner-Lambert and reported at the board
meeting that (1) AHP was not willing to delay execution of the merger
agreement so as to permit Warner-Lambert to negotiate with Pfizer and
(2) AHP was not willing to enter into the merger agreement without the
termination fees and stock options previously discussed;
(25) the interests that certain executive officers and directors of
Warner-Lambert may have with respect to the merger in addition to their
interests as stockholders of Warner-Lambert generally. See "Interests of
Certain Persons in the Merger" on pages 67 to 70; and
(26) the opportunity for Warner-Lambert stockholders to vote on the proposed
merger of equals with AHP.
In view of the variety of factors and the amount of information considered,
the Warner-Lambert board of directors did not find it practicable to and did not
quantify, rank or otherwise assign relative weights to the specific factors it
considered in reaching its decision. The determination was made after
consideration of all of the factors as a whole. In addition, individual members
of the Warner-Lambert board of directors may have given different weights to
different factors.
The Warner-Lambert board of directors considered all these factors in
reaching the conclusions and recommendations described above. These factors
generally figured positively, as advantages or opportunities, with the following
exceptions:
- the factor described in clause (14) above, which figured negatively as a
risk, but which, as noted in such clause, the Warner-Lambert board felt
was manageable and reflected in the exchange ratio and the other terms of
the merger agreement;
- the factors described in clauses (15) and (17) above, which figured
negatively as a drawback, but which the Warner-Lambert board felt was
outweighed by the other benefits of the transaction, including the factor
discussed in clause (16) above and the countervailing considerations
discussed within factor (17) above;
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- the factor described in clause (20) above, which figured negatively as a
risk, although one which the Warner-Lambert board felt could be managed
successfully, particularly in light of the factor described in
clause (18) above and in the detailed management arrangements that had
already been agreed to between the parties;
- the contacts from Pfizer discussed in clauses (23) and (24) above, which
figured negatively, but which were not considered sufficient alone or in
the aggregate with other negative factors--including by reason of factors
discussed within clause (24)--to change the conclusion and recommendation
of the Warner-Lambert board of directors;
- the factor described in clause (25) above, which the Warner-Lambert board
of directors considered to be neutral in its evaluation.
For additional information concerning the matters discussed, and the
conclusions reached, at various meetings of Warner-Lambert's board held between
June 1998 and November 1999, see "Background of the Merger" on pages 23 to 38.
FACTORS CONSIDERED BY, AND RECOMMENDATION OF, THE BOARD OF DIRECTORS OF AHP
At its meeting on November 3, 1999, the AHP board of directors unanimously:
- determined that the merger agreement and the merger are fair to, and in
the best interests of, AHP and its stockholders;
- directed that the AHP proposals be submitted for consideration by the AHP
stockholders; and
- recommended that the AHP stockholders vote FOR the approval of the AHP
proposals.
In the course of reaching its decision to approve the merger agreement and
the AHP proposals, at its meetings of November 1 and November 3, the AHP board
of directors consulted with AHP's management, as well as its outside legal
counsel and its financial advisors, and considered the following material
factors:
(1) information concerning the financial performance and condition, business
operations, capital levels, asset quality and prospects of each company
as a separate entity and both companies on a combined basis;
(2) the current industry, economic and market conditions and trends,
including the likelihood of continuing consolidation and increasing
competition in the pharmaceutical industry;
(3) the importance of market position, significant scale and scope and
financial resources to a company's ability to compete effectively in the
changing environment in the global pharmaceutical market, and the fact
that the strategic combination of AHP's and Warner-Lambert's businesses
would create the world's largest pharmaceutical and consumer health
products company;
(4) the nature and timing of new products of both companies in their
respective pipelines and the effect of combining such pipelines on the
growth and results of operations of the combined company;
(5) the potential benefits to be derived from the combination of the two
companies as described under "--Our Reasons for the Merger" on pages 38
to 40, and the possibility that achieving cost savings, operating
efficiencies and synergies as a result of consummating the merger with
Warner-Lambert might not be available to AHP on its own;
(6) the current and historical market prices of the common stock of each
company;
(7) the dilutive impact of the merger on AHP earnings in the near term;
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(8) the analyses and presentation prepared by Chase and its written opinion
to the effect that, as of November 3, 1999 and subject to the matters set
out in the opinion, the exchange ratio was fair from a financial point of
view to AHP and its stockholders;
(9) the analyses and presentation prepared by Morgan Stanley and its oral
opinion (subsequently confirmed in writing) to the effect that, as of
November 3, 1999 and subject to the matters set out in the opinion, the
exchange ratio was fair from a financial point of view to AHP's
stockholders;
(10) that the merger would enable the AHP stockholders to participate in a
larger company with a more diversified product line and benefit, as
stockholders, from future growth of the combined company;
(11) that the exchange ratio would enable AHP stockholders to own
approximately 50% of the outstanding stock of the combined company;
(12) the composition of the AmericanWarner board of directors, the
management structure and the intent to manage the combined company on a
merger of equals basis, led by an integrated senior management team drawn
from both companies;
(13) the structure of the transaction as a reorganization for United States
federal income tax purposes;
(14) the intended accounting of the merger as a pooling of interests which
results in the combined company's financial statements being prepared on
a basis consistent with the underlying view that stockholder interests in
the two companies have simply been combined;
(15) the likelihood of obtaining regulatory approvals required to complete
the merger;
(16) the terms of the merger agreement and stock option agreements,
including (a) the potential payment to Warner-Lambert of a termination
fee, (b) the grant to Warner-Lambert of an option to purchase shares of
AHP common stock, (c) that AHP cannot terminate the merger agreement in
order to enter into a transaction with a third party before the AHP
stockholders have had an opportunity to vote on the AHP proposals and the
timing of such vote, and (d) that the rights outstanding under the AHP
stockholder rights plan cannot be redeemed during the term of the merger
agreement, and the potential effect of such provisions on possible
efforts by other parties to acquire or otherwise combine with AHP
(including the fact that the option grant would generally prevent a third
party competing with Warner-Lambert from using pooling of interests
treatment in effecting a combination with AHP);
(17) that the merger and stock option agreements contain reciprocal
provisions to those listed in item 16 above and that the AHP board was
aware of the Pfizer contacts and letters;
(18) contacts by Pfizer with Warner-Lambert and reports of the conversations
between Messrs. Steere and de Vink in which Mr. Steere indicated that
Pfizer was not inclined at that time to take any action if Warner-Lambert
were to announce a transaction with another party;
(19) the challenges of combining the businesses of two major corporations
and the attendant risks of diverting management resources for an extended
period of time;
(20) the impact of the merger on the customers and employees of AHP;
(21) that the combined company will adopt the name "AmericanWarner, Inc.";
(22) that the headquarters of the combined company will be in Madison, New
Jersey, the headquarters for the over the counter business will be in
Morris Plains, New Jersey and the headquarters for the pharmaceutical
business will be in Radnor, Pennsylvania;
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(23) the interests that certain executive officers and directors of AHP may
have with respect to the merger in addition to their interests as
stockholders of AHP generally. See "Interests of Certain Persons in the
Merger" on pages 67 to 70; and
(24) the opportunity for AHP stockholders to vote on the proposed merger of
equals with Warner-Lambert.
In reaching its decision to approve the merger and the AHP proposals and to
recommend the approval of the AHP proposals to the AHP stockholders, the AHP
board did not assign any relative or specific weight to the various factors
considered and individual directors may have given differing weights to
different factors.
OPINION OF FINANCIAL ADVISOR TO WARNER-LAMBERT
OPINIONS OF FINANCIAL ADVISORS TO AHP
ACCOUNTING TREATMENT
It is a condition to the consummation of the merger that:
- AHP receives and delivers to Warner-Lambert letters from AHP's independent
public accountants dated as of the date of this joint proxy
statement/prospectus and as of the closing of the merger stating that
accounting for the merger as a pooling of interests under Opinion No. 16
of the Accounting Principles Board of the American Institute of Certified
Public Accountants and applicable SEC rules and regulations is
appropriate; and
- Warner-Lambert receives and delivers to AHP and AHP's independent public
accountants letters from Warner-Lambert's independent public accountants,
dated as of the date of this joint proxy statement/prospectus and as of
the closing of the merger, stating that they concur with Warner-Lambert's
conclusion that 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.
Under the pooling of interests method of accounting, the assets and
liabilities of AHP and Warner-Lambert will be carried forward to AmericanWarner
at their historical recorded amounts. Results of operations of AmericanWarner
will include the results of both AHP and Warner-Lambert for the entire fiscal
year in which the merger occurs. The reported balance sheet amounts and results
of operations of the separate corporations for prior periods will be combined,
reclassified and conformed, as appropriate, to reflect the combined financial
position and results of operations for AmericanWarner. See "Unaudited Pro Forma
Combined Condensed Financial Statements" for these combined financial
statements.
MATERIAL UNITED STATES FEDERAL INCOME TAX CONSEQUENCES
The following general discussion summarizes the material United States
federal income tax consequences of the merger and is based on the Internal
Revenue Code of 1986, the regulations promulgated under the Internal Revenue
Code, existing administrative interpretations and court decisions, all as of the
date of this document. Future legislation, regulations, administrative
interpretations or court decisions could significantly change these authorities
either prospectively or retroactively. We do not address all aspects of United
States federal income taxation that may be important to a stockholder in light
of that stockholder's particular circumstances, or to stockholders subject to
special rules, such as stockholders who are not citizens or residents of the
United States, financial institutions, tax-exempt organizations, insurance
companies, dealers in securities or
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stockholders who acquired their shares of Warner-Lambert common stock through
the exercise of options or similar derivative securities or otherwise as
compensation. This discussion assumes that Warner-Lambert stockholders hold
their respective shares of stock as capital assets within the meaning of
Section 1221 of the Internal Revenue Code.
It is a condition to the obligations of our companies under the merger
agreement to consummate the merger that AHP receive an opinion from Simpson
Thacher & Bartlett and Warner-Lambert receive an opinion from Skadden, Arps,
Slate, Meagher & Flom LLP, on or before the date of this joint proxy
statement/prospectus and, subsequently, on the closing date of the merger, to
the effect that for United States federal income tax purposes the merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code and that each of AHP, Warner-Lambert and a wholly-owned subsidiary
of AHP will be a party to the reorganization within the meaning of
Section 368(b) of the Internal Revenue Code. These opinions of counsel will be
based upon assumptions, representations and covenants, including those contained
in certificates of officers of AHP, Warner-Lambert and others, which counsel
will assume to be true, correct and complete. Based upon these opinions, the
merger will have the United States federal income tax consequences discussed
below.
TAX IMPLICATIONS TO AHP STOCKHOLDERS. No gain or loss will be recognized
for United States federal income tax purposes by holders of AHP common stock as
a result of the merger.
TAX IMPLICATIONS TO WARNER-LAMBERT STOCKHOLDERS.
- No gain or loss will be recognized for United States federal income tax
purposes by holders of Warner-Lambert common stock who exchange their
Warner-Lambert common stock solely for AmericanWarner common stock
pursuant to the merger except to the extent of cash, if any, received by
such Warner-Lambert stockholders in lieu of the fractional share interests
in AmericanWarner common stock deemed to have been received by such
Warner-Lambert stockholders.
- The adjusted tax basis of AmericanWarner common stock received in the
merger by a Warner-Lambert stockholder, including the adjusted tax basis
of any fractional share interest in AmericanWarner common stock deemed to
have been received by such stockholder, will be the same as the adjusted
tax basis of the shares of Warner-Lambert common stock exchanged for
shares of AmericanWarner common stock.
- The holding period of the AmericanWarner common stock received in the
merger by a Warner-Lambert stockholder, including the holding period of
any fractional share interest deemed to have been received by such
stockholder, will include the holding period of the shares of Warner-
Lambert common stock surrendered by such Warner-Lambert stockholder in
exchange for AmericanWarner common stock, provided that such shares of
Warner-Lambert common stock were held as a capital asset by such
Warner-Lambert stockholder at the effective time of the merger.
- Cash received by a holder of Warner-Lambert common stock in lieu of a
fractional share interest in AmericanWarner common stock will result in
the recognition of gain or loss for United States federal income tax
purposes, measured by the difference between the amount of cash received
and the portion of the tax basis of the share of Warner-Lambert common
stock allocable to this fractional share interest. This gain or loss will
be capital gain or loss and will be long-term capital gain or loss if the
holding period for such share of Warner-Lambert common stock is more than
one year at the effective time of the merger and such share was held as a
capital asset.
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TAX IMPLICATIONS TO AHP AND WARNER-LAMBERT. No gain or loss will be
recognized for United States federal income tax purposes by AHP and
Warner-Lambert solely as a result of the merger.
TAX MATTERS ARE VERY COMPLICATED, AND THE TAX CONSEQUENCES OF THE MERGER FOR
EACH WARNER-LAMBERT STOCKHOLDER WILL DEPEND ON THE FACTS OF THAT STOCKHOLDER'S
SITUATION. WE HAVE PRESENTED ABOVE ONLY A GENERAL SUMMARY OF TAX CONSEQUENCES.
WARNER-LAMBERT STOCKHOLDERS ARE ENCOURAGED TO CONSULT WITH THEIR OWN TAX
ADVISORS REGARDING THE SPECIFIC TAX CONSEQUENCES OF THE MERGER.
REGULATORY APPROVALS
The Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended,
prohibits us from completing the merger until after we have filed the required
notification and report forms and furnished additional information and materials
to the Antitrust Division of the United States Department of Justice and the
United States Federal Trade Commission, if requested, and the required waiting
period has expired or terminated. AHP and Warner-Lambert filed notification and
report forms under the HSR Act with the FTC and the Antitrust Division on
. There can be no assurance that a challenge to the merger on
antitrust grounds will not be made or, if a challenge is made, that it would not
be successful. A challenge could be brought by governmental or private parties,
and could seek to enjoin consummation of the merger or to compel the divestiture
of businesses conducted by Warner-Lambert or AHP.
Both Warner-Lambert and AHP conduct business in member states of the
European Union. European Union Council Regulation No. 4064/89 and accompanying
regulations require notification of and approval by the European Commission of
specific mergers or acquisitions involving parties with worldwide sales and
individual European Union sales exceeding specified thresholds before these
mergers and acquisitions can be implemented. Warner-Lambert and AHP intend to
formally notify the European Commission of the merger shortly. Completing the
review and gaining approval under the European Commission merger regulation is a
condition to completing the merger.
AHP and Warner-Lambert each conducts business in foreign countries that are
not members of the European Union. The merger will require the review and
approval of regulatory bodies in some of these countries.
NO APPRAISAL RIGHTS
Holders of Warner-Lambert common stock are not entitled to dissenters'
appraisal rights under Delaware law that would give them the right to obtain the
payment of cash in exchange for their Warner-Lambert common stock as a result of
the merger. Holders of AHP common stock are also not entitled to dissenters'
appraisal rights under Delaware law in connection with the merger.
CERTAIN LITIGATION
Following the announcement of the proposed merger, on November 4, 1999, an
action was filed by Pfizer Inc. in the Delaware Court of Chancery in and for New
Castle County against Warner-Lambert, the members of the Warner-Lambert board of
directors and AHP. The complaint was amended on November 15, 1999. The amended
complaint, among other things, alleges that the provisions of the merger
agreement which provide for a termination fee and the granting of the stock
option to AHP under the Warner-Lambert stock option agreement are invalid, and
seeks relief to enjoin the implementation of those provisions. The complaint
further alleges that the provisions of the merger agreement which purportedly
restrict Warner-Lambert's board of directors from amending its stockholder
rights plan and from terminating the merger agreement under certain
circumstances are also invalid, and seeks to enjoin those provisions as well.
The complaint also alleges that the members of Warner-Lambert's board of
directors have breached their fiduciary duties by entering into the
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merger agreement and, in particular, the provisions referred to above, and that
AHP has aided and abetted such breaches. Moreover, the complaint asserts that
Warner-Lambert and its directors breached their fiduciary duties to
Warner-Lambert stockholders by allegedly declining to waive the terms of a
standstill agreement between Warner-Lambert and Pfizer. The complaint claims
that Warner-Lambert's board of directors was motivated in these alleged breaches
by a desire to retain their positions. The complaint alleges that entering into
the merger agreement constituted a breach of fiduciary duty by Warner-Lambert's
directors in that it purportedly "chills" Pfizer's consent solicitation and
seeks an injunction against any action to eliminate or hinder Pfizer's consent
solicitation. The complaint seeks declaratory relief and incidental damages.
Warner-Lambert, its board of directors and AHP believe that this Pfizer action
is without merit and intend to vigorously defend against it. On November 17,
1999, Pfizer moved to preliminarily enjoin the merger. The parties agreed to an
expedited discovery and briefing schedule and the hearing on the motion for
preliminary injunction has been set for January 31, 2000. On December 3, 1999,
Warner-Lambert and AHP filed answers to the amended complaint denying its
substantive allegations.
On November 23, 1999, Pfizer filed an additional complaint against
Warner-Lambert and AHP alleging that Warner-Lambert breached the standstill
agreement between Pfizer and Warner-Lambert. The complaint also alleges that AHP
wrongfully interfered with Pfizer's contractual relationship with Warner-Lambert
by inducing Warner-Lambert's alleged breach. The complaint seeks to enjoin the
proposed merger between Warner-Lambert and AHP and to prevent AHP from receiving
any benefits from its actions. The complaint also seeks a declaratory judgment
that Pfizer has not breached the terms of the standstill agreement or any of the
agreements between Warner-Lambert and Pfizer governing the co-promotion and
marketing of Warner-Lambert's drug LIPITOR. Warner-Lambert and AHP believe that
this Pfizer action is without merit and intend to vigorously defend against it.
On November 29, 1999, Warner-Lambert filed an answer and counterclaims
against Pfizer, asserting that Pfizer has itself breached the standstill
agreement and the LIPITOR agreements. Warner-Lambert is seeking a declaratory
judgment from the court that Warner-Lambert is entitled to terminate the LIPITOR
agreements. On December 8, 1999, AHP filed an answer to Pfizer's LIPITOR
complaint denying all of its substantive allegations. Upon motion by
Warner-Lambert, the Court has scheduled a trial on the allegations of the
LIPITOR complaint and counterclaims for April 10, 2000.
In addition, approximately thirty-six lawsuits purporting to be class or
derivative actions have been filed in the Court of Chancery of the State of
Delaware. The Delaware class actions have been consolidated by order of the
Chancery Court. One lawsuit purporting to be a class action has been filed in
the Superior Court of New Jersey, Morris County. Two lawsuits, one purporting to
be a class action and the other a derivative action, have been filed in the
United States District Court for the District of New Jersey. The consolidated
Delaware action and the New Jersey actions name as defendants Warner-Lambert,
some of its officers and directors and AHP. These actions assert claims for
breach of fiduciary duty based on allegations substantially identical to those
in the lawsuit filed by Pfizer. These actions also assert claims against AHP for
aiding and abetting the purported breaches of fiduciary duty by Warner-Lambert
and its officers and directors. The actions seek an injunction of
Warner-Lambert's merger with AHP, an injunction of the termination fee and the
option granted to AHP and rescission or rescissory damages. On December 9, 1999,
Warner-Lambert and AHP filed a motion to dismiss or stay the New Jersey state
court action. Warner-Lambert, its officers and board of directors and AHP
believe that these actions are without merit and intend to vigorously defend
against them.
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THE COMPANIES
AMERICAN HOME PRODUCTS CORPORATION
AHP, a Delaware corporation founded in 1926, is one of the world's largest
research-based pharmaceutical and health care products companies. AHP is
currently engaged in the discovery, development, manufacture, distribution and
sale of a diversified line of products in three primary business segments:
pharmaceuticals, consumer health care and agricultural products.
PHARMACEUTICAL PRODUCTS. AHP's pharmaceuticals segment manufactures,
distributes and sells branded and generic ethical pharmaceuticals, biologicals,
nutritionals and animal biologicals and pharmaceuticals. Principal products for
human use include women's health care products including PREMARIN, PREMPRO,
PREMPHASE, LO/OVRAL (marketed as MIN-OVRAL internationally), NORDETTE and
TRIPHASIL (marketed as TRINORDIOL internationally); cardiovascular products
including CORDARONE and ZIAC; neuroscience therapies including ATIVAN, EFFEXOR
and EFFEXOR XR; anti-inflammatory and gastroenterology drugs including LODINE
and ZOTON (international markets only); anti-infectives including MINOCIN and
ZOSYN (marketed as TAZOCIN internationally); vaccines; biopharmaceuticals
including BENEFIX Coagulation Factor IX (Recombinant) and recombinant Factor
VIII and; oncology therapies and infant nutritionals. ENBREL, for the treatment
of rheumatoid arthritis, is jointly marketed by AHP and Immunex Corporation, an
AHP majority-owned subsidiary. Principal animal health products include
vaccines, pharmaceuticals (including anthelmintics), endectocides including
CYDECTIN, and growth implants.
CONSUMER HEALTH CARE PRODUCTS. The consumer health care segment
manufactures, distributes and sells over-the-counter products such as analgesics
including ADVIL; cough/cold/allergy remedies including ROBITUSSIN and DIMETAPP;
nutritional supplements including CENTRUM, CENTRUM SILVER, CENTRUM herbals,
CALTRATE and SOLGAR vitamins and herbal products; and hemorrhoidal, antacid and
asthma relief products.
AGRICULTURAL PRODUCTS. The agricultural products segment manufactures,
distributes and sells crop protection and pest control products such as
herbicides including PURSUIT (marketed as PIVOT internationally), PROWL
(marketed as STOMP internationally) and RAPTOR; insecticides including COUNTER;
fungicides and plant growth regulators.
WARNER-LAMBERT COMPANY
Warner-Lambert develops, manufactures and markets a widely diversified line
of pharmaceuticals, health care and consumer products. Its principal industry
segments are pharmaceutical products, consumer health care products, and
confectionery products, consisting principally of chewing gums and breath mints.
PHARMACEUTICAL PRODUCTS. Warner-Lambert markets its pharmaceutical products
throughout most of the world under the Parke-Davis name. Its products address a
broad spectrum of medical needs and include the lipid regulators LIPITOR and
LOPID; cardiovascular products such as ACCUPRIL and NITROSTAT; pain relievers
such as VALORON-N and PONSTEL; NEURONTIN, DILANTIN and CEREBYX anticonvulsants;
REZULIN for type-2 diabetes; the oral contraceptives ESTROSTEP and LOESTRIN; and
VIRACEPT for HIV infection.
Warner-Lambert's pharmaceutical products segment also includes CAPSUGEL, the
world's largest producer of two-piece hard gelatin capsules for use in
prescription and over-the-counter medication.
CONSUMER HEALTH CARE PRODUCTS. Warner-Lambert's consumer health care
products segment produces and markets over-the-counter health care products,
shaving products and pet care products. Its extensive line of over-the-counter
pharmaceuticals and health care products include LUBRIDERM dermatological
products; NEOSPORIN and POLYSPORIN topical antibiotic ointments; cold and sinus
preparations such as SUDAFED, SINUTAB and ACTIFED; BENADRYL cold and allergy
products; BENYLIN cough syrup; MYADEC vitamins; NIX headlice treatments;
LISTERINE mouthwashes and EFFERDENT denture cleaning
51
<PAGE>
products; ANUSOL and TUCKS hemorrhoidal products; ZANTAC 75 heartburn treatment;
ROLAIDS antacids; QUANTERRA herbal supplements; and E.P.T. home pregnancy tests.
Warner-Lambert markets its shaving products under the SCHICK and WILKINSON
SWORD and other trademarks. The consumer health care products segment also
manufactures and sells products for fish, reptiles and other small pets under
the TETRA, SECOND NATURE and WHISPER trademarks.
CONFECTIONERY PRODUCTS. Warner-Lambert's confectionery products segment
manufactures, markets and sells chewing gums under such trademarks as TRIDENT,
DENTYNE, CINN*A*BURST, MINT*A*BURST, CLORETS and CHICLETS; bubble gums under the
BUBBLICIOUS and BUBBALOO trademarks; breath mints under the CERTS and CLORETS
trademarks; and cough tablets and throat lozenges under the HALLS trademarks.
RECENT ACQUISITION BY WARNER-LAMBERT. On May 17, 1999, Warner-Lambert
consummated the acquisition of Agouron Pharmaceuticals, Inc., a California
corporation. Under the terms of the merger agreement which governed the
acquisition, each share of Agouron common stock was converted into 0.8934 shares
of Warner-Lambert common stock. The value of the Warner-Lambert shares issued at
the time of the consummation of the acquisition was approximately $2.1 billion.
The Agouron transaction was accounted for using the pooling of interests method
of accounting. Warner-Lambert has, consistent with this method of accounting and
in accordance with GAAP, filed restated historical consolidated financial
statements as of and for the three years ended December 31, 1998 in a Current
Report on Form 8-K dated December 17, 1999, reflecting the consummation of the
Agouron transaction.
Except as described in this paragraph, all product names appearing in
italics in this joint proxy statement/prospectus are trademarks of AHP,
Warner-Lambert, their respective affiliates, related companies or licensors.
ZANTAC 75 is a registered trademark of Glaxo Wellcome plc.
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<PAGE>
THE SPECIAL MEETINGS
We are furnishing this joint proxy statement/prospectus to stockholders of
AHP and Warner-Lambert in connection with the solicitation by the boards of
directors of AHP and Warner-Lambert for use at the special meetings for their
respective stockholders.
DATE, TIMES AND PLACES
AHP. AHP's special meeting will be held at , at local time, on
, 2000.
WARNER-LAMBERT. Warner-Lambert's special meeting will be held at , at
, local time, on , 2000.
MATTERS TO BE CONSIDERED AT THE SPECIAL MEETINGS
See "The Proposed Merger--AHP Proposals" and "--Warner-Lambert Proposal" for
a discussion of the proposals to be voted upon at the special meetings.
RECORD DATE; STOCK ENTITLED TO VOTE; QUORUM; PLAN PARTICIPANTS
AHP. Owners of record of shares of AHP common stock or AHP preferred stock
at the close of business on , 2000, the record date for AHP's special
meeting, are entitled to receive notice of and to vote at AHP's special meeting.
AHP common stock and AHP preferred stock constitute the only outstanding classes
of voting securities of AHP. On the record date, approximately shares of
AHP common stock and shares of AHP preferred stock were issued and
outstanding and were held by approximately and holders of record,
respectively.
Owners of record of shares of AHP common stock on the record date are each
entitled to one vote per share and owners of AHP preferred stock on the record
date are each entitled to 36 votes per share, on each matter to be considered at
AHP's special meeting.
A quorum of AHP stockholders is necessary to have a valid meeting of
stockholders. A majority of the shares of AHP stock issued and outstanding and
entitled to vote on the record date must be represented in person or by proxy at
AHP's special meeting in order for a quorum to be established. Shares held by
AHP in its treasury or held by any majority-owned subsidiary of AHP do not count
toward a quorum. Abstentions and broker "non-votes" count as present for
establishing a quorum. A broker non-vote occurs on an item when a broker is not
permitted to vote on that item without instruction from the beneficial owner of
the shares and no instruction is given. In the event that a quorum is not
present at AHP's special meeting, we expect that the meeting will be adjourned
or postponed to solicit additional proxies.
WARNER-LAMBERT. Owners of record of shares of Warner-Lambert common stock
at the close of business on , 2000, the record date for Warner-Lambert's
special meeting, are entitled to receive notice of and to vote at
Warner-Lambert's special meeting. Warner-Lambert common stock is the only class
of voting securities of Warner-Lambert. On the record date, approximately
shares of Warner-Lambert common stock were issued and outstanding and were held
by approximately holders of record.
Owners of record of shares of Warner-Lambert common stock on the record date
are each entitled to one vote per share on the approval and adoption of the
merger agreement and the merger.
A quorum of Warner-Lambert stockholders is necessary to have a valid meeting
of stockholders. A majority of the shares of Warner-Lambert common stock issued
and outstanding and entitled to vote on the record date must be represented in
person or by proxy at Warner-Lambert's special meeting in order for a quorum to
be established. Shares held by Warner-Lambert in its treasury or held by any
majority-owned subsidiary of Warner-Lambert do not count toward a quorum.
Abstentions and broker
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<PAGE>
"non-votes" count as present for establishing a quorum. A broker non-vote occurs
on an item when a broker is not permitted to vote on that item without
instructions from the beneficial owner of the shares and no instruction is
given. In the event that a quorum is not present at Warner-Lambert's special
meeting, we expect that the meeting will be adjourned or postponed to solicit
additional proxies.
AHP PLAN PARTICIPANTS. If you own AHP shares as a participant in the AHP
Master Investment Plan, a proxy to vote AHP shares registered in your name will
serve as instructions on how to vote shares held in custody for you pursuant to
the plan. No further action from you is required to vote the shares in the plan.
Accordingly, as transfer agent for AHP common stock, ChaseMellon Shareholder
Services, L.L.C. will cause shares held in the name of its nominee for the
account of plan participants to be voted in the same way as those stockholders
vote shares registered in their name. If you do not submit a proxy to vote
shares held in your name, the shares held for your account in the plan will not
be voted.
WARNER-LAMBERT PLAN PARTICIPANTS. If you own Warner-Lambert shares as a
participant in the Warner-Lambert Savings and Stock Plan, you will receive a
proxy card covering those shares. If you also own additional shares of
Warner-Lambert common stock outside of those shares, you will receive two
separate proxy cards: one proxy card that covers shares credited to your plan
account and another proxy card relating to those shares of common stock that you
own of record. Proxies properly voted will serve as voting instructions to T.
Rowe Price, the trustee for the plan. Under the terms of the plan, if you do not
submit a proxy for the shares held in custody for you under the plan, those
shares will be voted by the trustee in accordance with the recommendation of
Warner-Lambert's management.
VOTES REQUIRED
AHP. The approval of the proposed amendment to AHP's certificate of
incorporation requires the affirmative vote of the holders of a majority of all
of the outstanding shares of AHP common stock and AHP preferred stock, voting
together as a single class, and the holders of a majority of the outstanding
shares of AHP common stock, voting separately as a single class. An abstention
or a broker "non-vote" will have the same effect as a vote against the proposal.
The approval of the issuance of shares of AHP common stock in connection
with the merger requires the affirmative vote of a majority of the votes cast by
the holders of outstanding shares of AHP common stock and AHP preferred stock,
voting together as a single class. An abstention or a broker "non-vote" will
have no effect on the vote.
The approval of the proposed amendment to AHP's by-laws requires the
affirmative vote of at least 80% of the voting power of the outstanding shares
of AHP common stock and AHP preferred stock, voting together as a single class.
An abstention or a broker "non-vote" will have the same effect as a vote against
the proposal.
WARNER-LAMBERT. The approval and adoption of the merger agreement and the
merger requires the affirmative vote of a majority of the outstanding shares of
Warner-Lambert common stock. An abstention or a broker "non-vote" will have the
same effect as a vote against the proposal.
SHARE OWNERSHIP OF MANAGEMENT
AHP. At the close of business on the record date, directors and executive
officers of AHP and their affiliates beneficially owned and were entitled to
vote approximately shares of AHP common stock and no shares of AHP
preferred stock, which represented approximately % of the shares of AHP common
stock outstanding on that date. Each of those directors and executive officers
has indicated his or her present intention to vote, or cause to be voted, the
shares of AHP common stock owned by him or her FOR each of the AHP proposals.
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WARNER-LAMBERT. At the close of business on the record date, directors and
executive officers of Warner-Lambert and their affiliates beneficially owned and
were entitled to vote approximately shares of Warner-Lambert common stock,
which represented approximately % of the shares of Warner-Lambert common stock
outstanding on that date. Each of those directors and executive officers has
indicated his or her present intention to vote, or cause to be voted, the shares
of Warner-Lambert common stock owned by him or her FOR the approval and adoption
of the merger and the merger agreement.
SHARES HELD IN STREET NAME; VOTING OF PROXIES
SHARES HELD IN "STREET NAME." Under the applicable rules of the NYSE,
brokers who hold shares in street name for customers who are the beneficial
owners of those shares are prohibited from giving a proxy to vote those
customers' shares with respect to the proposals to be voted on at the special
meetings other than AHP's by-law amendment in the absence of specific
instructions from the customer. Brokers will have discretion to vote on the AHP
by-law amendment in the absence of specific instruction from the customer.
Broker "non-votes" are those shares held by a broker which are not voted because
the customer has not provided instructions to the broker.
SUBMITTING PROXIES. AHP and Warner-Lambert stockholders may vote their
shares by attending their respective special meeting and voting their shares in
person at the meetings, or by completing the enclosed proxy card, signing,
dating and mailing it in the enclosed postage pre-paid envelope. If a proxy card
is signed by a stockholder and returned without specific voting instructions,
the shares represented by the proxy will be voted FOR each of the proposals
presented at AHP's special meeting or FOR the proposal presented at
Warner-Lambert's special meeting, as applicable.
Abstentions may be specified with respect to the approval of any of the
proposals by properly marking the abstain box on the proxy for that proposal or,
for AHP stockholders, by so indicating in a telephone vote pursuant to the
instructions on the card.
AHP stockholders may also submit their proxies by telephone. The telephone
voting procedures are designed to authenticate stockholders' voting by use of a
personal identification number. These procedures allow stockholders to appoint a
proxy to vote their shares and to confirm that their instructions have been
properly recorded. Instructions for voting by telephone are printed on the proxy
card for stockholders of record of AHP.
AHP and Warner-Lambert stockholders whose shares are held in "street name"
(I.E., in the name of a broker, bank or other record holder) must either direct
the record holder of their shares as to how to vote their shares or obtain a
proxy from the record holder to vote at their respective special meeting.
REVOKING PROXIES. AHP and Warner-Lambert stockholders of record may revoke
their proxies at any time prior to the time their proxies are voted at their
special meeting. Proxies may be revoked by written notice, including by telegram
or telecopy, to the Corporate Secretary of AHP or Warner-Lambert, as applicable,
by a later-dated proxy signed and returned by mail or by attending the special
meeting and voting in person. Attendance at the special meeting will not in and
of itself constitute a revocation of a proxy. AHP stockholders of record may
also revoke proxies by a later-dated proxy using the telephone voting
procedures. Any written notice of a revocation of a proxy must be sent so as to
be delivered before the taking of the vote at the applicable special meeting as
follows:
FOR AHP STOCKHOLDERS, TO:
American Home Products Corporation
Five Giralda Farms
Madison, NJ 07940
Telecopy: (973) 660-7156
Attention: Corporate Secretary
55
<PAGE>
FOR WARNER-LAMBERT STOCKHOLDERS, TO:
Warner-Lambert Company
201 Tabor Road
Morris Plains, NJ 07950
Telecopy: (973) 385-3927
Attention: Corporate Secretary
AHP stockholders who require assistance in changing or revoking a proxy
should call D. F. King & Co., Inc. at 1-800-628-8509 or MacKenzie
Partners, Inc. at 1-800-322-2885 the agents retained by AHP to assist in its
solicitation of proxies.
Warner-Lambert stockholders who require assistance in changing or revoking a
proxy should call Georgeson Shareholder Communications Inc., the agent retained
by Warner-Lambert to assist in its solicitation of proxies, at 1-800-223-2064.
OTHER BUSINESS; ADJOURNMENTS. We are not aware of any other business to be
acted upon at either special meeting. If, however, other matters are properly
brought before either meeting, or any adjourned meeting, your proxies will have
discretion to act on those matters or to adjourn the meeting, according to their
best judgment.
Adjournments of the special meeting may be made for the purpose of, among
other things, soliciting additional proxies. Neither company currently intends
to seek an adjournment of its special meeting.
PROXY SOLICITATION. We have agreed to share equally the cost of printing
and mailing this joint proxy statement/prospectus. The cost of solicitation of
proxies will be paid by AHP for solicitation of proxies from AHP stockholders
and by Warner-Lambert for solicitation of proxies from Warner-Lambert
stockholders. In addition to solicitation by mail, the directors, officers and
employees of AHP and Warner-Lambert may also solicit proxies from stockholders
by telephone, telecopy, telegram or other electronic means or in person. We will
also make arrangements with brokerage houses and other custodians, nominees and
fiduciaries to send the proxy materials to beneficial owners. Upon request, we
will reimburse those brokerage houses and custodians for their reasonable
expenses in so doing.
AHP has retained D. F. King & Co., Inc. and MacKenzie Partners, Inc. to aid
in the solicitation of proxies. As compensation for their services, D. F.
King & Co., Inc. will receive a fee of $ and MacKenzie Partners, Inc.
will receive a fee of $ . AHP has also agreed to reimburse D. F. King &
Co., Inc. and MacKenzie Partners, Inc. for their out of pocket expenses and
indemnify them against certain liabilities arising out of or in connection with
their engagement.
Warner-Lambert has retained Georgeson Shareholder Communications Inc. to aid
in the solicitation of proxies. Georgeson Shareholder Communications Inc. will
receive a fee of $ as compensation for its services and reimbursement for
its related out-of-pocket expenses. Warner-Lambert has also agreed to indemnify
Georgeson Shareholders Communications Inc. against certain liabilities arising
out of or in connection with its engagement.
DO NOT SEND IN ANY STOCK CERTIFICATES WITH YOUR PROXY CARDS. THE EXCHANGE
AGENT WILL SEND TRANSMITTAL FORMS WITH INSTRUCTIONS FOR THE SURRENDER OF
CERTIFICATES REPRESENTING SHARES OF WARNER-LAMBERT COMMON STOCK TO FORMER
WARNER-LAMBERT STOCKHOLDERS SHORTLY AFTER THE MERGER IS COMPLETED.
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<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
The following unaudited pro forma combined condensed financial statements
give effect to the merger under the pooling of interests method of accounting,
after giving effect to the pro forma adjustments described in the accompanying
notes. Under this method of accounting, AHP and Warner-Lambert are treated as if
they had always been combined for accounting and financial reporting purposes.
We are providing the following information to aid in your analysis of the
financial aspects of the merger. We derived this information from:
- the audited financial statements of AHP as of and for the years ended
December 31, 1996 through 1998 and the unaudited financial statements as
of and for the nine months ended September 30, 1998 and 1999; and
- the audited statements of income of Warner-Lambert for the years ended
December 31, 1996 through 1998, audited balance sheets as of December 31,
1998 and 1997 and unaudited financial statements as of and for all other
periods presented, all of which were restated to reflect the consummation
of the acquisition of Agouron Pharmaceuticals, Inc. in May 1999, which was
accounted for under the pooling of interests method of accounting.
The pro forma financial information presented below should be read in
conjunction with the historical financial information referred to above, all of
which is included in, or incorporated by reference into this joint proxy
statement/prospectus. To obtain copies of this information, see "Where You Can
Find More Information" on page 99. The unaudited pro forma combined condensed
financial statements are presented for illustrative purposes only and are not
necessarily indicative of the operating results or financial position that would
have occurred had the merger been consummated at the dates indicated, nor is it
necessarily indicative of the future operating results or financial position of
the combined company.
The Unaudited Pro Forma Combined Condensed Balance Sheet gives effect to the
merger as if it had occurred on September 30, 1999, combining the balance sheets
of AHP and Warner-Lambert at September 30, 1999. The Unaudited Pro Forma
Combined Condensed Statements of Income give effect to the merger as if it had
occurred on January 1, 1996, combining the results of AHP and Warner-Lambert for
each year in the three-year period ended December 31, 1998 and for the
nine-month periods ended September 30, 1999 and 1998.
As a result of the merger, AHP and Warner-Lambert expect AmericanWarner to
incur pre-tax charges to operations, currently estimated to be between $1.5 and
$2.1 billion. This estimate includes an anticipated one-time pre-tax charge of
approximately $ million for direct incremental merger-related transaction
costs which will be substantially recorded upon consummation of the merger. The
pre-tax charges also include various transition costs, currently estimated to be
between $ and $ billion in connection with integrating the operations of AHP
and Warner-Lambert. These transition costs include non-cash costs estimated to
be between $ and $ million. The transition costs consist principally of
costs associated with the elimination and consolidation of duplicate facilities,
employee severance and other costs resulting from the merger. The exact timing,
nature and amount of these transition costs are subject to change; however, the
companies expect that the majority of these transition costs will be recorded
upon consummation of the merger. These transition costs have not been reflected
in the unaudited pro forma combined condensed financial statements.
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<PAGE>
The unaudited pro forma combined condensed financial statements do not
reflect any of the recurring cost savings and synergies, or future cost
avoidance expected to result from the merger. Based on preliminary estimates by
the managements of AHP and Warner-Lambert, AmericanWarner is expected to realize
approximately $1.2 billion in annual pre-tax cost synergy savings within three
years from the closing of the merger through the elimination of duplicate
corporate and administrative programs, the creation of greater efficiencies in
research and development and business processes, improved use of existing
marketing resources and the combination of two workforces. The estimated cost
synergy savings reflect the creation of cost reduction or cost avoidance
opportunities through the ability to consolidate operations into a single
entity. There can, however, be no assurance that any specific levels of cost
savings or other synergies will be achieved within the time periods contemplated
or will be achieved at all. For a discussion of the risks associated with our
cost-savings assumptions, see "Risk Factors--We may be unable to successfully
integrate our operations and realize the full cost savings we anticipate" on
page 19.
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<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
AS OF SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
AHP (1) WARNER-LAMBERT (1) ADJUSTMENTS COMBINED
(IN MILLIONS) ---------- ------------------ ----------- ---------
<S> <C> <C> <C> <C>
ASSETS
Cash......................................... $ 2,146 $ 1,013 $ -- $ 3,159
Short-term investments....................... 437 587 -- 1,024
Accounts receivable, less allowances......... 3,240 1,778 -- 5,018
Inventories.................................. 2,236 1,023 -- 3,259
Prepaid expenses and other current assets
including deferred taxes................... 1,537 648 -- 2,185
------- ------- ----- -------
TOTAL CURRENT ASSETS....................... 9,596 5,049 -- 14,645
Property, plant and equipment................ 6,960 4,922 -- 11,882
Less accumulated depreciation.............. 2,586 1,772 -- 4,358
------- ------- ----- -------
4,374 3,150 -- 7,524
Goodwill and other intangibles, net of
accumulated amortization................... 7,806 1,628 -- 9,434
Investments and other assets including
deferred taxes............................. 1,967 711 -- 2,678
------- ------- ----- -------
TOTAL ASSETS............................... $23,743 $10,538 $ -- $34,281
======= ======= ===== =======
LIABILITIES
Short-term debt.............................. $ 1,951 $ 233 $ -- $ 2,184
Accounts payable, trade...................... 972 501 -- 1,473
Other current liabilities.................... 4,097 2,418 -- 6,515
Federal, state and foreign income taxes...... 529 226 -- 755
------- ------- ----- -------
TOTAL CURRENT LIABILITIES.................. 7,549 3,378 -- 10,927
Long-term debt............................... 3,622 1,281 -- 4,903
Accrued postretirement benefit obligations
other than pensions........................ 890 160 -- 1,050
Other noncurrent liabilities................. 6,057 1,137 -- 7,194
STOCKHOLDERS' EQUITY
Preferred stock.............................. -- -- -- --
Common stock................................. 435 856 (430)(3b) 861
Capital in excess of par value............... 3,266 708 430 (3b) 4,404
Retained earnings............................ 2,508 3,640 -- 6,148
Accumulated other comprehensive loss......... (584) (622) -- (1,206)
------- ------- ----- -------
TOTAL STOCKHOLDERS' EQUITY................. 5,625 4,582 -- 10,207
------- ------- ----- -------
TOTAL LIABILITIES AND STOCKHOLDERS'
EQUITY................................... $23,743 $10,538 $ -- $34,281
======= ======= ===== =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
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<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME (LOSS)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1999
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
AHP (1) WARNER-LAMBERT (1) ADJUSTMENTS COMBINED
---------- ------------------ ----------- ---------
<S> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
NET SALES.................................... $10,083 $9,394 $ -- $19,477
------- ------ ----- -------
Cost of goods sold........................... 2,832 2,243 -- 5,075
Selling, general and administrative
expenses................................... 3,738 4,351 -- 8,089
Research and development expenses............ 1,293 902 -- 2,195
Interest expense, net........................ 171 19 -- 190
Other (income) expense, net.................. (256) 124 -- (132)
Litigation settlement........................ 4,750 -- -- 4,750
Special charges.............................. 277 -- -- 277
------- ------ ----- -------
Income (loss) before income taxes............ (2,722) 1,755 -- (967)
Provision (benefit) for taxes................ (902) 509 -- (393)
------- ------ ----- -------
NET INCOME (LOSS)............................ $(1,820) $1,246 $ -- $ (574)
======= ====== ===== =======
BASIC EARNINGS (LOSS) PER SHARE.............. $ (1.39) $ 1.46 $ -- $ (0.22)
======= ====== ===== =======
DILUTED EARNINGS (LOSS) PER SHARE (2)........ $ (1.39) $ 1.41 $ -- $ (0.22)
======= ====== ===== =======
Average number of common shares outstanding
during the period--basic................... 1,310 853 419 (2) 2,582
======= ====== ===== =======
Average number of common shares outstanding
during the period--diluted (2)............. 1,310 883 389 (2) 2,582
======= ====== ===== =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
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<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1998
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
AHP (1) WARNER-LAMBERT (1) ADJUSTMENTS COMBINED
---------- ------------------ ----------- ---------
<S> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
NET SALES.................................... $10,232 $7,708 $ -- $17,940
------- ------ ----- -------
Cost of goods sold........................... 2,778 2,064 -- 4,842
Selling, general and administrative
expenses................................... 3,710 3,474 -- 7,184
Research and development expenses............ 1,245 725 -- 1,970
Interest expense, net........................ 170 47 -- 217
Other (income) expense, net.................. (226) 70 -- (156)
Gains on sales of businesses................. (592) (67) -- (659)
Restructuring charge......................... -- 93 -- 93
------- ------ ----- -------
Income before income taxes................... 3,147 1,302 -- 4,449
Provision for taxes.......................... 1,022 377 -- 1,399
------- ------ ----- -------
NET INCOME................................... $ 2,125 $ 925 $ -- $ 3,050
======= ====== ===== =======
BASIC EARNINGS PER SHARE..................... $ 1.62 $ 1.09 $ -- $ 1.18
======= ====== ===== =======
DILUTED EARNINGS PER SHARE................... $ 1.59 $ 1.05 $ -- $ 1.15
======= ====== ===== =======
Average number of common shares outstanding
during the period--basic................... 1,314 847 416 (2) 2,577
======= ====== ===== =======
Average number of common shares outstanding
during the period--diluted................. 1,336 878 432 (2) 2,646
======= ====== ===== =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
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<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1998
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
AHP (1) WARNER-LAMBERT (1) ADJUSTMENTS COMBINED
---------- ------------------ ----------- ---------
<S> <C> <C> <C> <C>
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
NET SALES.................................... $13,463 $10,744 $ -- $24,207
------- ------- ----- -------
Cost of goods sold........................... 3,681 2,860 -- 6,541
Selling, general and administrative
expenses................................... 4,884 4,912 -- 9,796
Research and development expenses............ 1,655 1,026 -- 2,681
Interest expense, net........................ 207 58 -- 265
Other (income) expense, net.................. (342) 71 -- (271)
Gains on sales of businesses................. (592) (67) -- (659)
Restructuring charges........................ 344 93 -- 437
------- ------- ----- -------
Income before income taxes................... 3,626 1,791 -- 5,417
Provision for taxes.......................... 1,152 518 -- 1,670
------- ------- ----- -------
NET INCOME................................... $ 2,474 $ 1,273 $ -- $ 3,747
======= ======= ===== =======
BASIC EARNINGS PER SHARE..................... $ 1.88 $ 1.50 $ -- $ 1.45
======= ======= ===== =======
DILUTED EARNINGS PER SHARE................... $ 1.85 $ 1.45 $ -- $ 1.42
======= ======= ===== =======
Average number of common shares outstanding
during the period--basic................... 1,315 848 416 (2) 2,579
======= ======= ===== =======
Average number of common shares outstanding
during the period--diluted................. 1,337 879 432 (2) 2,648
======= ======= ===== =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
62
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
AHP (1) WARNER-LAMBERT (1) ADJUSTMENTS COMBINED
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS) ---------- ------------------ ----------- ---------
<S> <C> <C> <C> <C>
NET SALES.................................... $14,196 $8,408 $ -- $22,604
------- ------ ---- -------
Cost of goods sold........................... 4,166 2,503 -- 6,669
Selling, general and administrative
expenses................................... 5,249 3,783 -- 9,032
Research and development expenses............ 1,558 731 -- 2,289
Interest expense, net........................ 371 120 -- 491
Other (income) expense, net.................. (186) 82 -- (104)
Special charges.............................. 180 -- -- 180
------- ------ ---- -------
Income before income taxes................... 2,858 1,189 -- 4,047
Provision for taxes.......................... 815 327 -- 1,142
------- ------ ---- -------
NET INCOME................................... $ 2,043 $ 862 $ -- $ 2,905
======= ====== ==== =======
BASIC EARNINGS PER SHARE..................... $ 1.58 $ 1.03 $ -- $ 1.14
======= ====== ==== =======
DILUTED EARNINGS PER SHARE................... $ 1.56 $ 0.99 $ -- $ 1.11
======= ====== ==== =======
Average number of common shares outstanding
during the period--basic................... 1,294 841 414 (2) 2,549
======= ====== ==== =======
Average number of common shares outstanding
during the period--diluted................. 1,313 868 427 (2) 2,608
======= ====== ==== =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
63
<PAGE>
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 1996
<TABLE>
<CAPTION>
HISTORICAL HISTORICAL PRO FORMA PRO FORMA
AHP (1) WARNER-LAMBERT (1) ADJUSTMENTS COMBINED
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS) ---------- ------------------ ----------- ---------
<S> <C> <C> <C> <C>
NET SALES........................................ $14,088 $ 7,231 $ -- $21,319
------- ------- ------ -------
Cost of goods sold............................... 4,489 2,347 -- 6,836
Selling, general and administrative expenses..... 5,185 3,163 -- 8,348
Research and development expenses................ 1,429 599 -- 2,028
Interest expense, net............................ 433 85 -- 518
Other (income) expense, net...................... (135) 43 -- (92)
Gains on sales of businesses..................... (814) (75) -- (889)
Special charges.................................. 698 -- -- 698
------- ------- ------ -------
Income before income taxes....................... 2,803 1,069 -- 3,872
Provision for taxes.............................. 920 322 -- 1,242
------- ------- ------ -------
NET INCOME....................................... $ 1,883 $ 747 $ -- $ 2,630
======= ======= ====== =======
BASIC EARNINGS PER SHARE......................... $ 1.48 $ 0.89 $ -- $ 1.05
======= ======= ====== =======
DILUTED EARNINGS PER SHARE....................... $ 1.46 $ 0.88 $ -- $ 1.03
======= ======= ====== =======
Average number of common shares outstanding
during the period--basic....................... 1,271 835 410 (2) 2,516
======= ======= ====== =======
Average number of common shares outstanding
during the period--diluted..................... 1,288 850 418 (2) 2,556
======= ======= ====== =======
</TABLE>
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
64
<PAGE>
NOTES TO UNAUDITED PRO FORMA COMBINED
CONDENSED FINANCIAL STATEMENTS
(IN MILLIONS, EXCEPT FOR PER SHARE AMOUNTS)
NOTE 1--RECLASSIFICATIONS
Various reclassifications have been made to the historical financial
statements to conform to the presentation expected to be used by AmericanWarner
following the merger. For the September 30, 1999 Unaudited Pro Forma Combined
Condensed Balance Sheet, Warner-Lambert treasury stock was reclassified to
common stock ($106) and retained earnings ($1,143); accrued postretirement
benefit obligations other than pensions ($160) were reclassified from other
noncurrent liabilities and shown separately; accrued compensation ($259) was
reclassified to other current liabilities; and accrued rebates and selling
expenses ($1,217) were reclassified from accounts payable to other current
liabilities. In addition, AHP state income taxes payable ($7) were reclassified
from other current liabilities to federal, state and foreign income taxes; and
minority interests ($262) were reclassified to other noncurrent liabilities.
For the year ended December 31, 1998 Unaudited Pro Forma Combined Condensed
Statement of Income, Warner-Lambert amortization of intangible assets ($60) was
reclassified from other (income) expense, net to selling, general and
administrative expenses; interest expense, net ($58) was reclassified from other
(income) expense, net and shown separately; a gain on sale of business ($67) was
reclassified from other (income) expense, net and shown separately; and a
restructuring charge ($93) was reclassified from other (income) expense, net and
shown separately. AHP state income taxes ($41) were reclassified from selling,
general and administrative expenses to provision for taxes; royalty income ($66)
was reclassified from cost of goods sold to other (income) expense, net; and
minority interest expense ($2) was reclassified from cost of goods sold to other
(income) expense, net. Comparable reclassifications, where applicable, were made
to the Unaudited Pro Forma Combined Condensed Statements of Income for the years
ended December 31, 1997 and 1996 and for the nine months ended September 30,
1999 and 1998. In addition, Warner-Lambert minority interest expense ($69) was
reclassified to other (income) expense, net for the year ended December 31,
1996. There were no significant transactions between AHP and Warner-Lambert to
eliminate.
NOTE 2--EXCHANGE RATIO
Under the merger agreement, each outstanding share of Warner-Lambert common
stock will be converted into 1.4919 shares of AmericanWarner common stock. The
exchange ratio was used in computing share amounts in the accompanying unaudited
pro forma combined condensed financial statements.
For the nine months ended September 30, 1999, the average number of common
shares outstanding used in calculating the diluted loss per share is the same as
the average number of common shares outstanding used in the calculation of the
basic loss per share for both Historical AHP and Unaudited Pro Forma Combined
since the inclusion of common stock equivalents in the diluted loss per share
calculation would have an antidilutive effect.
65
<PAGE>
NOTE 3--PRO FORMA ADJUSTMENTS
Pro forma adjustments were made to the Unaudited Pro Forma Combined
Condensed Balance Sheet to reflect the following:
(a) A one-time charge for direct incremental merger-related transaction
costs which will be substantially recorded upon consummation of the merger.
The direct incremental merger-related transaction costs consist principally
of charges related to stock compensation arrangements and professional
services, registration and other regulatory costs . The charge for
stock compensation relates to the acceleration of the vesting terms of
certain restricted stock awards of both AHP and Warner-Lambert upon
consummation of the merger.
(b) To adjust the par value of Warner-Lambert common stock from $1.00
per share to the par value of AmericanWarner common stock of $0.33 1/3 per
share ($570) offset by the issuance of incremental shares utilizing the
exchange ratio of 1.4919 ($140).
66
<PAGE>
INTERESTS OF CERTAIN PERSONS IN THE MERGER
In considering the recommendations of the AHP board of directors and the
Warner-Lambert board of directors with respect to the merger, stockholders
should be aware that some officers of AHP and Warner-Lambert, including some
officers who are also directors, have some interests in the merger that may be
different from, or in addition to, the interests of stockholders of AHP and
Warner-Lambert. The boards of directors of AHP and Warner-Lambert were aware of
these interests and considered them, among other matters, in making their
recommendation.
AHP'S ARRANGEMENTS WITH EXECUTIVE OFFICERS
CHANGE IN CONTROL SEVERANCE AGREEMENTS. AHP has change in control severance
agreements with its executive officers. Each change in control severance
agreement provides that if, after a "change in control," the executive's
employment is terminated by AHP without "cause" or if the executive terminates
his or her own employment for "good reason," each as defined in the agreement,
the executive is entitled to a lump sum severance payment equal to
- three times the sum of (1) his or her annual base salary and (2) the
highest bonus awarded to the executive in the prior three years, plus
- the stock option value (defined as the value at the time of grant by AHP
of stock options to the executives at any one time in any of the three
years prior to the change in control) or, if greater, the highest value,
on a Black-Scholes basis, of any stock option grant and restricted stock
grant made to the executive in the year prior to the change in control or
thereafter.
The executives are also entitled to receive enhanced pension benefits (the
calculation of which includes an additional three years for purposes of benefit
accrual), as well as three years of additional welfare benefit continuation and
retiree medical and life insurance benefits. In addition, each of these
executives is entitled to receive the foregoing severance benefits if he or she
voluntarily terminates his or her own employment for any reason during the
90-day period beginning on the first anniversary of any change in control.
Finally, the executives are entitled to an additional payment, if necessary, to
make them whole as a result of any excise tax imposed by the Internal Revenue
Code on certain payments made in connection with a change in control. For
purposes of the change in control severance agreements, consummation of the
merger will constitute a "change in control."
If the employment of the executive officers who are parties to change in
control severance agreements and are named as the five most highly compensated
executive officers of AHP in its 1999 annual meeting proxy statement is
terminated following the merger under circumstances entitling them to benefits
under the change in control severance agreements, the approximate total cash
amount that would be paid under such agreements (not including payments that may
be made with respect to any excise tax) would be as follows:
<TABLE>
<CAPTION>
AHP NAMED OFFICER AMOUNT
- ----------------- -----------
<S> <C>
John R. Stafford............................................ $34,920,000
Robert G. Blount............................................ $16,522,800
Robert Essner............................................... $12,727,500
Robert I. Levy.............................................. $11,350,500
David M. Olivier............................................ $ 7,425,000
All other AHP executive officers as a group (7 persons)..... $40,150,680
</TABLE>
EQUITY-BASED AWARDS. Pursuant to the terms of AHP's equity-based
compensation plans, almost all of the unvested stock options held by AHP
executive officers and directors outstanding will become vested and exercisable
at the effective time of the merger. In addition, restrictions will lapse on
almost all units representing restricted AHP common stock held by AHP executive
officers and directors and
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<PAGE>
such units will convert to fully vested shares and no longer be subject to
forfeiture. The number of unvested options and shares of restricted stock held
by executive officers of AHP that will become vested in this manner is as
follows:
<TABLE>
<CAPTION>
NUMBER
OF SHARES
WEIGHTED AVG. OF
NUMBER OF EXERCISE RESTRICTED
AHP NAMED OFFICER UNVESTED OPTIONS PRICE STOCK
- ----------------- ---------------- ------------- ----------
<S> <C> <C> <C>
John R. Stafford....................................... 999,641 $54.5011 46,900
Robert G. Blount....................................... 503,802 $53.6020 24,500
Robert Essner.......................................... 355,535 $54.3315 16,700
Robert I. Levy......................................... 314,002 $54.1002 15,050
David M. Olivier....................................... 177,068 $55.2633 8,000
All other AHP executive officers as a group (7
persons)............................................. 1,033,743 $53.5516 66,700
</TABLE>
WARNER-LAMBERT'S ARRANGEMENTS WITH EXECUTIVE OFFICERS
Of the Warner-Lambert executive officers named in this joint proxy
statement/prospectus, Mr. Goodes has retired and is thus not eligible for the
benefits described below.
EXECUTIVE SEVERANCE PLAN. Messrs. de Vink, Larini, Wild and other key
executives are participants in Warner-Lambert's Executive Severance Plan, which
provides certain benefits in the event of a change in control of Warner-Lambert.
Stockholder approval of the merger will constitute a "change in control" under
the Executive Severance Plan.
Under the terms of the Executive Severance Plan, if after a change in
control an executive's employment terminates for any reason other than death or
for cause by Warner-Lambert during the three-year period following a change in
control, the executive will receive severance benefits of 36 months of salary
and bonus. The executive must be provided with six months notice of such
termination of employment. The executive will also be eligible to receive
36 months of welfare benefit continuation, certain outplacement services, and
will receive credit for 36 additional months of service under Warner-Lambert's
pension plan and savings and stock plan. The Executive Severance Plan also
provides special payments to participants to reimburse them, if necessary, for
any federal excise tax or similar state or local tax that may be imposed on
payments following a change in control.
The approximate value of the cash payments due under the plan to each
executive upon a qualifying termination of employment following a change in
control, not including any payments that may be made with respect to any excise
tax, would be as follows:
<TABLE>
<CAPTION>
WARNER-LAMBERT NAMED OFFICER AMOUNT
- ---------------------------- -----------
<S> <C>
Lodewijk J. R. de Vink...................................... $ 5,859,000
Anthony H. Wild............................................. $ 2,769,300
Ernest J. Larini............................................ $ 2,782,500
All other Warner-Lambert executive officers as a group
(14 persons).............................................. $25,151,547
</TABLE>
EQUITY-BASED AWARDS. Pursuant to the terms of Warner-Lambert's equity-based
compensation plans, all unvested options to purchase Warner-Lambert stock held
by Warner-Lambert's executive officers and directors will become vested and
exercisable upon completion of the merger, and restrictions will lapse on that
date with respect to shares of restricted stock issued under those plans.
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<PAGE>
The number of unvested options and shares of restricted stock held by executive
officers and directors of Warner-Lambert that will become vested in this manner
is as follows:
<TABLE>
<CAPTION>
NUMBER OF
SHARES OF
NUMBER OF WEIGHTED AVG. RESTRICTED
WARNER-LAMBERT NAMED OFFICER UNVESTED OPTIONS EXERCISE PRICE STOCK
- ---------------------------- ---------------- -------------- ----------
<S> <C> <C> <C>
Lodewijk J. R. de Vink................................. 633,750 $43.6571 --
Anthony H. Wild........................................ 318,089 $45.8667 --
Ernest J. Larini....................................... 277,814 $42.4104 --
All other Warner-Lambert executive officers
as a group (14 persons).............................. 1,929,332 $44.1888 42,600
Warner-Lambert outside directors as a group............ -- -- 108,000
</TABLE>
EXCESS SAVINGS PLAN. Upon a "change in control," each participant in
Warner-Lambert's Excess Savings Plan will become fully vested in such
participant's account and will receive full payment of such account upon
termination of employment. The unvested balance in such plan for each executive
officer as of October 31, 1999 is as follows:
<TABLE>
<CAPTION>
UNVESTED
WARNER-LAMBERT NAMED OFFICER BALANCE
- ---------------------------- --------
<S> <C>
Anthony H. Wild............................................. $21,689
All other Warner-Lambert executive officers as a group (2
persons).................................................. $15,712
</TABLE>
BOARD OF DIRECTORS
The AmericanWarner board of directors will consist of either 14 or 20
members, half selected by AHP and half selected by Warner-Lambert. Whether the
AmericanWarner board of directors will consist of 14 or 20 members will be
determined prior to the effective time of the merger and will depend upon
whether the AHP stockholders approve the AHP by-law amendment at the AHP special
meeting which would allow AHP to increase the size of the AHP board of directors
beyond the current maximum size of 15 directors. If the AHP stockholders approve
the by-law amendment, AmericanWarner's board of directors will consist of 20
members. If the by-law amendment is not approved, the AmericanWarner board of
directors will consist of 14 members. Regardless of its size, the AmericanWarner
board of directors will consist of individuals who are directors of AHP and
individuals who are directors or officers of Warner-Lambert.
OWNERSHIP OF COMMON STOCK; STOCK OPTIONS
As of October 31, 1999, directors and executive officers of AHP beneficially
owned an aggregate of 6,289,807 shares of AHP common stock, including options to
purchase 5,025,569 shares of AHP common stock exercisable within 60 days, and no
shares of AHP preferred stock.
As of October 31, 1999, directors and executive officers of Warner-Lambert
beneficially owned an aggregate of 14,943,874 shares of Warner-Lambert common
stock, including options to purchase 14,234,777 shares of Warner-Lambert common
stock exercisable within 60 days.
INDEMNIFICATION; DIRECTORS' AND OFFICERS' INSURANCE
The merger agreement requires the combined company to indemnify, to the
fullest extent permitted by law, each individual who is or was an officer,
director or employee of Warner-Lambert or any of its subsidiaries for all
actions taken by them in their capacities as such prior to the completion of the
merger and to honor all indemnification obligations of Warner-Lambert to those
persons,
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<PAGE>
whether pursuant to Warner-Lambert's certificate of incorporation, by-laws or an
indemnification agreement.
For six years after the completion of the merger, AmericanWarner will also
provide officers' and directors' liability insurance in respect of acts or
omissions prior to the completion of the merger for each individual covered
under the comparable Warner-Lambert policy as of the date of the merger
agreement. AmericanWarner will not be required to pay, in total, an annual
premium for the insurance described in this paragraph in excess of 200% of the
current annual premium paid by Warner-Lambert for its existing coverage prior to
the merger. However, if the annual premiums of that insurance coverage exceed
that amount, AmericanWarner will be obligated to provide the greatest coverage
available at a cost equal to 200% of the current annual premium.
70
<PAGE>
THE MERGER AGREEMENT
THE FOLLOWING IS A DESCRIPTION OF THE MATERIAL TERMS OF THE MERGER AGREEMENT
BUT DOES NOT PURPORT TO DESCRIBE ALL THE TERMS OF THE MERGER AGREEMENT. THE
FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO THE COMPLETE
MERGER AGREEMENT WHICH IS ATTACHED AS APPENDIX A TO THIS JOINT PROXY STATEMENT/
PROSPECTUS AND INCORPORATED HEREIN BY REFERENCE. ALL STOCKHOLDERS OF AHP AND
WARNER-LAMBERT ARE URGED TO READ THE MERGER AGREEMENT IN ITS ENTIRETY.
GENERAL
Under the merger agreement, a wholly-owned subsidiary of AHP will merge with
and into Warner-Lambert, with Warner-Lambert continuing as the surviving
corporation. In connection with the merger, AHP will change its name to
AmericanWarner, Inc. Following the merger, AmericanWarner will operate as one
company, led by an integrated management team drawn from AHP and Warner-
Lambert.
CLOSING MATTERS
CLOSING. Unless the parties agree otherwise, the closing of the merger will
take place on the first business day after all closing conditions have been
satisfied or waived, unless the merger agreement has been terminated or another
time or date is agreed to in writing by the parties. See "--Conditions" below
for a more complete description of the conditions that must be satisfied prior
to closing.
EFFECTIVE TIME. As soon as practicable after the satisfaction of the
conditions to the merger, AHP and Warner-Lambert will file a certificate of
merger with the Delaware Secretary of State in accordance with the relevant
provisions of the Delaware General Corporation Law and make all other filings or
recordings required thereunder. The merger will become effective when the
certificate of merger is duly filed or at such later time as AHP and
Warner-Lambert agree and specify in the certificate of merger.
CONSIDERATION TO BE RECEIVED IN THE MERGER; TREATMENT OF STOCK OPTIONS
The merger agreement provides that, at the effective time of the merger:
- each share of Warner-Lambert stock issued and outstanding immediately
prior to the effective time of the merger, together with the associated
rights issued under the Warner-Lambert stockholder rights plan, will be
converted into 1.4919 shares of AmericanWarner common stock and associated
rights;
- each outstanding and unexercised option or right to purchase shares of
Warner-Lambert common stock granted under the Warner-Lambert stock plans
will be assumed by AmericanWarner and converted into an option or a right
to purchase shares of AmericanWarner common stock under the same terms and
conditions as were applicable to the options as granted under the
Warner-Lambert stock plans, taking into account provisions providing for
full vesting under those stock plans. The number of shares of
AmericanWarner common stock that the converted options will be exercisable
for, and the exercise price of the option, will be adjusted to reflect the
exchange ratio;
- each restricted share of Warner-Lambert stock granted under the
Warner-Lambert stock plans that are outstanding immediately prior to the
effective time of the merger will become fully vested and free of
restrictions, and will be converted into shares of AmericanWarner common
stock at the exchange ratio; and
- all Warner-Lambert stock credits in accounts governed by the
Warner-Lambert 1996 Stock Plan will be converted into a number of
AmericanWarner stock credits at the exchange ratio, but will
71
<PAGE>
otherwise continue to be subject to the same terms and conditions as were
applicable to the stock credits under the Warner-Lambert 1996 Stock Plan.
In addition, any shares of Warner-Lambert common stock owned by AHP, held by
Warner-Lambert as treasury stock or owned by any of their respective
subsidiaries will be automatically canceled, and we will not exchange those
shares for any shares of AmericanWarner common stock or other consideration.
Each share of AHP common stock will remain outstanding following the merger
and will automatically represent one share of AmericanWarner common stock.
As soon as practicable after the effective time of the merger,
AmericanWarner will deliver notices to the holders of Warner-Lambert stock
options. Those notices will set forth each holder's rights under the
Warner-Lambert stock plans, including that, in connection with the merger and
pursuant to the terms of the Warner-Lambert stock plans, the agreements
evidencing the grants of the Warner-Lambert stock options will continue in
effect on the same terms and conditions, taking into account provisions
providing for full vesting of those options. To the extent permitted by law,
AmericanWarner will comply with the terms of the Warner-Lambert stock plans and
will take reasonable steps to ensure that the stock options which qualified as
incentive stock options prior to the effective time of the merger continue to
qualify as incentive stock options of AmericanWarner after the merger.
For a further discussion of the treatment of Warner-Lambert stock options
and other employee benefit plans under the merger agreement, see
"--Covenants--Employee Matters" on page 77 and "Interests of Certain Persons in
the Merger" on page 67.
EXCHANGE OF CERTIFICATES IN THE MERGER
Before the closing of the merger, we will appoint an exchange agent to
handle the exchange of Warner-Lambert stock certificates for stock certificates
of AmericanWarner and the payment of cash for fractional shares. Soon after the
closing of the merger, the exchange agent will send a letter of transmittal,
which is to be used to exchange Warner-Lambert stock certificates for stock
certificates of AmericanWarner, to each former Warner-Lambert stockholder. The
letter of transmittal will contain instructions explaining the procedure for
surrendering Warner-Lambert stock certificates. You should not return
certificates with the enclosed proxy card.
Warner-Lambert stockholders who surrender their stock certificates, together
with a properly completed letter of transmittal, will receive stock certificates
representing the shares of AmericanWarner common stock into which the shares of
Warner-Lambert common stock were converted in the merger.
After the merger, each certificate that previously represented shares of
Warner-Lambert stock will only represent the right to receive the shares of
AmericanWarner common stock into which those shares of Warner-Lambert common
stock have been converted.
AmericanWarner will not pay dividends to holders of any Warner-Lambert stock
certificates until the Warner-Lambert stock certificates are surrendered to the
exchange agent. However, once those certificates are surrendered, AmericanWarner
will pay to the holder, without interest, any dividends that have been declared
after the effective date of the merger on the shares into which those Warner-
Lambert shares have been converted.
After the effective time of the merger, Warner-Lambert will not register any
transfers of the shares of Warner-Lambert common stock.
Stockholders of AHP will not be required to exchange their AHP certificates.
After the merger, these certificates will automatically represent shares in
AmericanWarner.
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<PAGE>
FRACTIONAL SHARES
No fractional shares of AmericanWarner common stock will be issued in the
merger. Instead, the exchange agent will pay each of those stockholders who
would have otherwise been entitled to a fractional share of AmericanWarner
common stock an amount in cash determined by multiplying the fractional share
interest by the closing price for a share of AHP stock on the NYSE Composite
Transaction Tape on the date of the effective time of the merger or, if such
date is not a business day, on the business day immediately following the date
on which the effective time of the merger occurs.
LISTING OF AMERICANWARNER STOCK
AHP has agreed to use its reasonable best efforts to prepare and submit to
the NYSE a listing application covering the shares of AmericanWarner common
stock to be issued in the merger and it will use its reasonable best efforts to
cause such shares to be approved for listing on the NYSE, subject to official
notice of issuance, prior to the effective time of the merger. The symbol "AWI"
has been reserved for AmericanWarner and will be used assuming the listing
application is approved. Approval for listing on the NYSE of the shares of
AmericanWarner common stock issuable to the Warner-Lambert stockholders in the
merger, subject only to official notice of issuance, is a condition to the
obligations of AHP, Wolverine Sub and Warner-Lambert to complete the merger.
NAME CHANGE; BOARD OF DIRECTORS; EXECUTIVE OFFICERS; AND COMPANY HEADQUARTERS
AHP NAME CHANGE. Immediately prior to the effective time of the merger, AHP
will change its name so that the name of the combined company will be
AmericanWarner, Inc.
AMERICANWARNER BOARD OF DIRECTORS. At the effective time of the merger, the
board of directors of AmericanWarner will consist of an equal number of
directors from AHP and Warner-Lambert prior to the merger. The board of
directors will consist of either 14 or 20 members as follows:
- If the AHP stockholders approve the amendment to the by-laws, the board of
directors of AmericanWarner will consist of 20 members.
- If the AHP stockholders do not approve the amendment to the by-laws, the
board of directors of AmericanWarner will consist of 14 members.
CHIEF EXECUTIVE OFFICER; CHAIRMAN OF THE BOARD OF DIRECTORS. The merger
agreement provides that, as of the effective time of the merger, Lodewijk J.R.
de Vink, Chairman, President and Chief Executive Officer of Warner-Lambert, will
serve as the Chief Executive Officer of AmericanWarner and report to the board
of directors. John R. Stafford, Chairman, President and Chief Executive Officer
of AHP, will serve as Chairman of the Board of Directors of AmericanWarner. Mr.
Stafford will serve as Chairman for 18 months following the effective time of
the merger, when he will be succeeded by Mr. de Vink.
EXECUTIVE OFFICERS. The merger agreement also provides that, as of the
effective time of the merger, the other executive officers for AmericanWarner
will be chosen from the current management of AHP and Warner-Lambert, selecting
the best person for each position to be filled, with a balancing so that both
AHP and Warner-Lambert will be fairly represented in the management of the
combined company.
AMERICANWARNER HEADQUARTERS. After the completion of the merger, the
headquarters of AmericanWarner will be located in Madison, New Jersey, AHP's
current headquarters. The headquarters of the over-the-counter division of
AmericanWarner will be in Morris Plains, New Jersey, the current location of
Warner-Lambert's headquarters. The headquarters of the pharmaceutical division
of AmericanWarner will be in Radnor, Pennsylvania, the current location of AHP's
pharmaceutical division operations.
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<PAGE>
COVENANTS
We have each undertaken certain covenants in the merger agreement. The
following summarizes the more significant of these covenants:
NO SOLICITATION. We have each agreed that we, or any of our subsidiaries,
officers or directors, will not, and will use reasonable best efforts to ensure
that our respective employees, agents or representatives do not:
(1) 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 third party "acquisition proposal" of the type
described below;
(2) have any discussion with or provide any confidential information or
data to any person relating to an acquisition proposal;
(3) engage in negotiations concerning an acquisition proposal;
(4) knowingly facilitate any effort or attempt to make or implement an
acquisition proposal; or
(5) accept an acquisition proposal.
However, each of us is permitted, as is contemplated under the federal
securities laws, to take and disclose to our stockholders our position with
respect to any acquisition proposal.
In addition, each of AHP and Warner-Lambert is permitted to engage in
discussions and negotiations with, and provide information to, any person in
response to an unsolicited acquisition proposal, if:
(1) its special meeting of stockholders shall not have occurred;
(2) its board of directors concludes in good faith that there is a
reasonable likelihood that the acquisition proposal could result in a
"superior proposal" of the type described below;
(3) prior to providing any information or data to any person in
connection with an acquisition proposal, the proposing party first signs a
confidentiality agreement with terms, including standstill provisions, at
least as stringent as the terms contained in the confidentiality agreement
entered into between AHP and Warner-Lambert before we signed the merger
agreement; and
(4) it keeps the other party informed of the status and terms of the
acquisition proposal and any discussions or negotiations relating to the
acquisition proposal.
However, unless the merger agreement is terminated, neither company may
present to its stockholders for consideration any other transaction relating to
another acquisition proposal, superior or otherwise. See "--Termination of the
Merger Agreement" for a discussion of each party's ability to terminate the
merger agreement.
An "ACQUISITION PROPOSAL" for AHP or Warner-Lambert, as applicable, is any
proposal or offer with respect to:
(1) a merger, reorganization, share exchange, consolidation, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving the party;
(2) any purchase or sale of the consolidated assets of the party and its
subsidiaries, taken as a whole, having an aggregate value equal to 10% or
more of the market capitalization of that party; or
(3) any purchase or sale of, or tender offer or exchange offer for, 10%
or more of the equity securities of such party.
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A "SUPERIOR PROPOSAL" for AHP or Warner-Lambert, as applicable, is a written
proposal made by a person other than either such party for:
(1) a merger, reorganization, consolidation, share exchange, business
combination, recapitalization, liquidation, dissolution or similar
transaction involving AHP or Warner-Lambert, as the case may be, as a result
of which either:
(A) such party's stockholders before the 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 of the surviving
entity; or
(B) the individuals comprising the board of directors of such party
before the transaction do not constitute a majority of the board of
directors of the ultimate parent entity;
(2) a sale, lease, exchange, transfer or other disposition of at least
40% of the assets of either AHP or Warner-Lambert, as the case may be, and
its subsidiaries, taken as a whole, in a single transaction or a series of
related transactions; or
(3) the acquisition, directly or indirectly, by a person of beneficial
ownership of 40% or more of the common stock of either AHP or
Warner-Lambert, as the case may be, 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;
which in any case is otherwise on terms which the board of directors of such
party in good faith concludes:
(1) is reasonably capable of being completed; and
(2) after consultation with its financial advisors and outside counsel,
and taking into account, among other things, all legal, financial,
regulatory and other aspects of the proposal and the person making the
proposal, that the proposal would, if consummated, result in a transaction
that is more favorable to its stockholders, from a financial point of view
than the merger between AHP and Warner-Lambert.
BOARD OF DIRECTORS' COVENANT TO RECOMMEND. Our respective boards of
directors have agreed to recommend the approval of the merger to their
respective stockholders. However, each board is not permitted to make or to
withdraw or to modify in a manner adverse to the other company this
recommendation, including by endorsing an alternative transaction to the merger
between AHP and Warner-Lambert, before its special meeting if either:
(1) it acquires knowledge of facts or circumstances that it determines
in good faith, after taking into account information contained in the other
party's filings with the SEC, would constitute a material adverse
development with respect to the other party, and, based upon the advice of
its legal counsel, there would be a substantial probability that the board
would be breaching its fiduciary duties to its stockholders if it did not
change its recommendation; or
(2) it has received an acquisition proposal that its board concludes in
good faith is a superior proposal.
Even if the board of either company changes, withholds or modifies its
recommendation of the merger, that company is still required to present the
merger and related proposals to its stockholders for consideration at the
special meeting, unless the merger agreement is otherwise terminated. See
"--Termination of the Merger Agreement" for a discussion of each party's ability
to terminate the merger agreement.
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OPERATIONS OF AHP AND WARNER-LAMBERT PENDING CLOSING. We have each
undertaken a separate covenant that places restrictions on ourselves and our
respective subsidiaries until either the effective time of the merger or the
termination of the merger agreement. In general, we and our respective
subsidiaries are required to conduct our business in the usual, regular and
ordinary course in all material respects substantially in the same manner as
previously conducted and to use our reasonable efforts to preserve intact our
present lines of business and relationships with third parties. Each of us has
agreed to some specific restrictions that prohibit us and our respective
subsidiaries from:
- entering into any new material lines of business or incurring or
committing to any capital expenditures or obligations or liabilities in
connection with such capital expenditures beyond specified amounts;
- declaring or paying dividends in excess of specified limits or making
other distributions in respect of our capital stock;
- making changes in our share capital, including, among other things, stock
splits, combinations, or reclassifications;
- repurchasing or redeeming our capital stock;
- issuing, delivering or selling any shares of our capital stock or other
equity interests, other than in connection with our benefit plans or in
connection with the exercise of options or other stock awards or stock
option agreements;
- amending our certificate of incorporation, by-laws or other governing
documents;
- making acquisitions of, or investments in, other entities beyond specified
amounts (other than pursuant to the stock option agreements);
- disposing of assets, other than inventory, beyond specified amounts;
- incurring debt, other than in the ordinary course consistent with past
practice;
- making loans, advances, capital contributions or investments in any other
person other than in the ordinary course and consistent with past
practice;
- taking actions that would prevent or impede the merger from qualifying as
a pooling of interests for accounting purposes and as a reorganization for
tax purposes;
- increasing the compensation of directors and executive officers or
increasing employee benefits other than in the ordinary course and
consistent with past practice;
- changing our accounting methods or fiscal year;
- amending our respective stockholder rights plans to make them inapplicable
to any transaction other than the merger, or redeeming the rights issued
under those plans;
- making any material tax election other than in the ordinary course
consistent with past practice; and
- entering into any agreement or arrangement that would limit or restrict us
or AmericanWarner from competing in any line of business or geographic
area if that resulting restriction would have a material adverse effect on
the combined company after the merger.
REASONABLE BEST EFFORTS COVENANT. We have agreed to cooperate with each
other and to use our reasonable best efforts to take all actions and do all
things advisable or necessary under the merger agreement and applicable laws to
complete the merger and the other transactions contemplated by the merger
agreement. This cooperation may include selling, holding separate or disposing
of assets in response to the requirements imposed by antitrust authorities.
Neither of us will be required for any
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reason to sell, hold separate or otherwise dispose of assets, or to conduct our
business in a specified manner, if such action is not a condition to closing or
would reasonably be expected to have a material adverse effect on the combined
company.
EMPLOYEE MATTERS. In the merger agreement, we have agreed that, following
the merger, AmericanWarner will:
- honor all Warner-Lambert benefit plans and related funding arrangements in
accordance with their terms. For at least one year after the completion of
the merger, AmericanWarner will provide compensation and employee benefits
under benefit plans to the employees of AmericanWarner that are in the
aggregate no less favorable in any material respects to those provided to
such persons under existing benefit plans at AHP or Warner-Lambert;
- with certain exceptions, grant to AHP or Warner-Lambert employees who
continue employment with AmericanWarner full credit for eligibility,
benefit accrual and determination of their level of benefits for their AHP
or Warner-Lambert service under the employee benefit plans of
AmericanWarner in which they participate following the merger to the
extent AHP or Warner-Lambert recognized their service for these purposes
before the merger; and
- create a task force comprised of key executives from AHP and
Warner-Lambert to review the benefit plans of each company and recommend
appropriate plans for the combined entity.
PAYMENT OF DIVIDENDS PENDING THE MERGER. We have agreed to coordinate
declaring dividends and the related record dates and payment dates so that AHP
and Warner-Lambert stockholders do not receive two dividends, or fail to receive
one dividend, for any single calendar quarter.
OTHER COVENANTS AND AGREEMENTS
SPECIAL MEETING OF STOCKHOLDERS. The merger agreement contains a covenant
that we will each convene a special meeting of our stockholders to consider and
vote upon the merger and related transactions. AHP and Warner-Lambert have
agreed that the special meetings will not be held until the later of May 15,
2000 and the date which is ten days after the date on which AHP commits not to
exercise its "walkaway" rights under the settlement agreement relating to its
diet drug litigation.
INSURANCE AND INDEMNIFICATION. AmericanWarner is obligated, for six years
after the merger, to maintain in effect Warner-Lambert's current directors' and
officers' liability insurance covering acts or omissions occurring prior to the
effective time of the merger. AmericanWarner will not be required to pay, in
total, an annual premium for the insurance described in this paragraph in excess
of 200% of the current annual premium paid by Warner-Lambert for its existing
coverage prior to the merger. However, if the annual premiums of that insurance
coverage exceed that amount, AmericanWarner will be required to provide the
greatest coverage available for a cost equal to 200% of the current annual
premium.
AmericanWarner is obligated, to the fullest extent permitted by law, to
indemnify and hold harmless, and provide advancement of expenses to, each person
who is or has been an officer or director of Warner-Lambert or any of its
subsidiaries with respect to acts or omissions by them in their capacities as
officers, directors or employees of Warner-Lambert or any of its subsidiaries or
taken at the request of Warner-Lambert or any of its subsidiaries at any time on
or prior to the effective time of the merger, including for acts and omissions
occurring in connection with the approval of the merger and the merger
agreement. AmericanWarner will also cause the surviving corporation in the
merger to maintain in its certificate of incorporation or by-laws the current
provisions regarding indemnification of officers, directors and employees.
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EXPENSES. We have each agreed to pay our own costs and expenses incurred in
connection with the merger and the merger agreement. We will, however, share
equally the expenses incurred in connection with the filing with the SEC of this
joint proxy statement/prospectus and the related registration statement and the
costs associated with the printing and mailing of this joint proxy
statement/prospectus.
NEW YORK STOCK EXCHANGE LISTING. AHP is obligated to use its reasonable
best efforts to cause the shares of its common stock to be issued in the merger
to be approved for listing on the NYSE, subject to official notice of issuance.
ACCOUNTANTS' LETTERS. We have each agreed to use our reasonable best
efforts to deliver to each other copies of comfort letters from our independent
public accountants in form reasonably satisfactory to the other party and
customary in scope for comfort letters delivered by independent accountants.
AHP has also agreed to use its reasonable best efforts to deliver a copy of
a letter from its independent public accountant to Warner-Lambert stating that
the merger should qualify as a "pooling of interests" for accounting purposes.
Warner-Lambert has also agreed to use its reasonable best efforts to deliver
a copy of a letter from its independent public accountant to AHP and AHP's
independent public accountants stating that they concur with Warner-Lambert's
conclusion that, as of the date of their report, no conditions exist which would
preclude Warner-Lambert's ability to be a party to a business combination to be
accounted for as a "pooling of interests."
REPORTS ON LITIGATION MATTERS. We have each agreed to advise the other
party of any material developments known to us that might be relevant to the
other party in assessing potential liability exposure under certain specified
litigation matters.
OTHER COVENANTS. The merger agreement contains covenants relating to the
cooperation between AHP and Warner-Lambert in the preparation of this joint
proxy statement/prospectus and other governmental filings. The merger agreement
also contains additional agreements relating to, among other things, public
announcements, mutual notice of certain matters and access to information.
REPRESENTATIONS AND WARRANTIES
The merger agreement contains substantially reciprocal representations and
warranties made by each of us to the other. The representations and warranties
relate to:
- corporate existence, qualification to conduct business and corporate
standing and power;
- ownership of subsidiaries;
- capital structure;
- corporate authority to enter into, and carry out the obligations under,
the merger agreement and enforceability of the merger agreement;
- absence of a breach of the certificate of incorporation, by-laws, law or
material agreements as a result of the merger;
- filings with the SEC;
- financial statements;
- information supplied for use in this joint proxy statement/prospectus;
- board of directors approval;
- votes required for approval;
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- litigation;
- compliance with laws;
- absence of certain changes or events;
- environmental matters;
- intellectual property matters;
- payment of fees to finders or brokers in connection with the merger
agreement;
- opinions of financial advisors;
- accounting matters;
- tax matters; and
- restrictive contracts.
In addition, the parties also represent to one another that their
stockholder rights plans are not applicable to the merger, the merger agreement
and the stock option agreements granted by each party.
The merger agreement also contains certain representations and warranties of
AHP and Wolverine Sub with respect to Wolverine Sub, including due organization,
corporate authorization, non-contravention and no prior business activities.
The representations and warranties contained in the merger agreement do not
survive the effective time of the merger.
CONDITIONS
Our respective obligations to complete the merger are subject to the
satisfaction or, to the extent legally permissible, the waiver of various
conditions which include, in addition to other customary closing conditions:
- the adoption and approval of the merger agreement and the merger by the
Warner-Lambert stockholders, and the approval of the share issuance and
amendment to the AHP certificate of incorporation by the AHP stockholders;
- the absence of any law, order or injunction prohibiting completion of the
merger;
- the expiration or termination of the applicable waiting periods under the
Hart-Scott-Rodino Antitrust Improvements Act;
- the approval of the merger by the European Commission;
- the approval for listing by the NYSE of the AmericanWarner stock to be
issued in the merger, subject to official notice of issuance;
- the receipt of all other governmental and regulatory consents, approvals
and authorizations necessary for the merger, unless not obtaining those
consents or approvals would not reasonably be expected to have a material
adverse effect on AmericanWarner and its subsidiaries, taken as a whole;
- the SEC having declared effective the AHP registration statement, of which
this joint proxy statement/prospectus forms a part; and
- the receipt of letters from the independent accountants of AHP, one dated
as of the date of this joint proxy statement/prospectus and one dated as
of the closing date, confirming that they
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concur with AHP's management that pooling of interests accounting
treatment is appropriate, and letters from the independent public
accountants of Warner-Lambert, one dated as of the date of this joint
proxy statement/prospectus and one dated as of the closing date,
confirming that they concur with Warner-Lambert's management that
Warner-Lambert is eligible to participate in a transaction to be accounted
for as a pooling of interests.
In addition, individually, our respective obligations to effect the merger
are subject to the satisfaction or, to the extent legally permissible, the
waiver of the following additional conditions:
- the representations and warranties of the other company contained in the
merger agreement being true and correct in all material respects on the
closing date of the merger as if they were made on that date, unless they
were by their express provisions made as of another particular date, in
which case the statement must be true and correct in all material respects
as of that date;
- the other party having performed or complied in all material respects with
its obligations and covenants contained in the merger agreement;
- the receipt of an opinion of each company's counsel to the effect that the
merger will qualify as a reorganization under the Internal Revenue Code
and that each of AHP, Warner-Lambert and a wholly-owned subsidiary of AHP
will be a party to the reorganization; and
- no event having occurred which would trigger a distribution under the
other company's stockholder rights plan.
Additionally, Warner-Lambert's obligation to effect the merger and the other
transactions contemplated by the merger agreement is conditioned upon:
- AHP having taken all actions necessary to amend its certificate of
incorporation and by-laws not later than the effective time of the merger,
in accordance with the merger agreement; and
- AHP having entered into the settlement agreement with respect to its diet
drug litigation, and having committed not to exercise its "walkaway"
rights under that settlement agreement.
TERMINATION OF THE MERGER AGREEMENT
RIGHT TO TERMINATE. The merger agreement may be terminated at any time
prior to the effective time in any of the following ways:
(1) by our mutual written consent;
(2) by either one of us:
(a) if the merger has not been completed by November 15, 2000, except
that a party may not terminate the agreement if the cause of the merger
not being completed by that date is that party's failure to fulfill its
obligations under this agreement;
(b) if a governmental authority or a court order permanently
prohibits the completion of the merger;
(c) if either the AHP stockholders fail to approve both the issuance
of shares of stock in connection with the merger and the amendment to
AHP's certificate of incorporation, or the Warner-Lambert stockholders
fail to adopt and approve the merger agreement and the merger; or
(d) a third party acquires 15% or more of the stock of the other
party.
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(3) By AHP, if Warner-Lambert's board of directors either fails to
recommend the merger to its stockholders, changes its recommendation, or
fails to call the Warner-Lambert special meeting to vote on the merger;
(4) By Warner-Lambert:
(a) if AHP's board of directors either fails to recommend the merger
to its stockholders, changes its recommendation, or fails to call the AHP
special meeting to vote on the share issuance and amendments to its
certificate of incorporation and by-laws;
(b) during the ten day period following the earlier to occur of:
- June 30, 2000, if on or before that date AHP has not satisfied its
closing conditions relating to the diet drug litigation settlement;
or
- the date on which it becomes impossible for AHP to satisfy its
closing conditions relating to the diet drug litigation settlement
on or before June 30, 2000;
(c) during the ten day period following AHP's signing of the
definitive settlement agreement relating to the diet drug litigation
settlement, if
- the settlement is not on substantially the same terms as the
memorandum of understanding delivered to Warner-Lambert before
execution of the merger agreement; and
- Warner-Lambert's board of directors determines that those differing
terms are, in the aggregate, materially adverse to AHP.
TERMINATION FEES PAYABLE BY AHP. AHP has agreed to pay Warner-Lambert a
termination fee of:
- $1.8 billion, if Warner-Lambert terminates the merger agreement because a
third party has acquired 15% or more of AHP's stock;
- $1.8 billion, if Warner-Lambert terminates the merger agreement because
AHP's board of directors has changed its recommendation of the merger and
either:
- the recommendation change was by reason of a superior proposal or
- at any time at or before the recommendation change a more favorable
business combination proposal that is reasonably capable of being
completed has been publicly announced or communicated to the AHP board
of directors and has not been irrevocably withdrawn prior to the
recommendation change;
- $900 million, if Warner-Lambert terminates the merger agreement because
AHP's board of directors has changed its recommendation of the merger in
circumstances where the immediately preceding paragraph does not apply. An
additional $1.0 billion is payable in this case if, within 12 months of
the termination of the merger agreement, AHP enters into another agreement
regarding a more favorable business combination or completes a more
favorable business combination, provided the $1.0 billion fee is reduced
to $900 million if the stock option agreement becomes exercisable;
- $1.8 billion, if the merger is not completed by November 15, 2000 and all
of the following conditions are satisfied:
- on or before that date, a business combination proposal from a third
party with respect to AHP has been publicly announced or communicated
to the AHP board of directors;
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- following the existence of that business combination proposal and prior
to the termination of the merger agreement, AHP has breached any of its
covenants, and AHP's breach materially contributed to the failure of
the merger being completed by that date; and
- within 12 months of the termination of the merger agreement, AHP enters
into another agreement regarding a business combination or completes
another business combination;
- $900 million, if either party terminates the merger agreement because
AHP's stockholders failed to approve the share issuance and the amendment
to AHP's certificate of incorporation, and at or before the time of the
stockholder vote there was another business combination proposal from a
third party publicly announced or communicated to the AHP board of
directors. An additional $900 million fee is payable if, within 12 months
of the termination of the merger agreement, AHP enters into another
agreement regarding a business combination or completes another business
combination; or
- $180 million, if the merger is not completed by November 15, 2000 and at
or before that date, a business combination proposal from a third party
with respect to AHP has been publicly announced or communicated to the AHP
board of directors, AHP has not breached any of its covenants prior to the
termination of the merger agreement and, within 12 months of the
termination of the merger agreement, AHP enters into another agreement
regarding a business combination or completes another business
combination.
TERMINATION FEES PAYABLE BY WARNER-LAMBERT. Warner-Lambert has agreed to
pay AHP a termination fee of:
- $1.8 billion, if AHP terminates the merger agreement because a third party
has acquired 15% or more of Warner-Lambert's stock;
- $1.8 billion, if AHP terminates the merger agreement because
Warner-Lambert's board of directors has changed its recommendation of the
merger and either:
- the recommendation change was by reason of a superior proposal or
- at any time at or before the recommendation change a more favorable
business combination proposal that is reasonably capable of being
completed has been publicly announced or communicated to the
Warner-Lambert board of directors and has not been irrevocably
withdrawn prior to the recommendation change;
- $900 million, if AHP terminates the merger agreement because
Warner-Lambert's board of directors has changed its recommendation of the
merger in circumstances where the immediately preceding paragraph does not
apply. An additional $1.0 billion is payable in this case if, within 12
months of the termination of the merger agreement, Warner-Lambert enters
into another agreement regarding a more favorable business combination or
completes a more favorable business combination, provided the $1.0 billion
fee is reduced to $900 million if the stock option agreement becomes
exercisable;
- $1.8 billion, if the merger is not completed by November 15, 2000 and all
of the following conditions are satisfied:
- on or before that date, a business combination proposal from a third
party with respect to Warner-Lambert has been publicly announced or
communicated to the Warner-Lambert board of directors;
- following the existence of that business combination proposal and prior
to the termination of the merger agreement, Warner-Lambert has breached
any of its covenants, and that breach materially contributed to the
failure of the merger being completed by that date; and
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- within 12 months of the termination of the merger agreement,
Warner-Lambert enters into another agreement regarding a business
combination or completes another business combination;
- $900 million, if either party terminates the merger agreement because
Warner-Lambert's stockholders failed to approve the merger, and at or
before the time of the stockholder vote there was another business
combination proposal from a third party publicly announced or communicated
to the Warner-Lambert board of directors. An additional $900 million fee
is payable if, within 12 months of the termination of the merger
agreement, Warner-Lambert enters into another agreement regarding a
business combination or completes another business combination; or
- $180 million, if the merger is not completed by November 15, 2000 and at
or before that date, a business combination proposal from a third party
with respect to Warner-Lambert has been publicly announced or communicated
to the Warner-Lambert board of directors. Warner-Lambert has not breached
any of its covenants prior to the termination of the merger agreement and,
within 12 months of the termination of the merger agreement,
Warner-Lambert enters into another agreement regarding a business
combination or completes another business combination.
AMENDMENTS, EXTENSIONS AND WAIVERS
The merger agreement may be amended by the parties at any time prior to the
special meetings. All amendments to the merger agreement must be in a writing
signed by each party.
At any time prior to the effective time of the merger, any party to the
merger agreement may, to the extent legally allowed:
- extend the time for the performance of any of the obligations or other
acts of the other parties to the merger agreement;
- waive any inaccuracies in the representations and warranties of the other
parties contained in the merger agreement; and
- waive compliance by the other parties with any of the agreements or
conditions contained in the merger agreement.
All extensions and waivers must be in writing and signed by the party against
whom the waiver is to be effective.
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STOCK OPTION AGREEMENTS
THE FOLLOWING SUMMARY OF THE STOCK OPTION AGREEMENTS IS QUALIFIED BY
REFERENCE TO THE COMPLETE TEXT OF THE STOCK OPTION AGREEMENTS, WHICH ARE
INCORPORATED BY REFERENCE AND ATTACHED AS APPENDICES B AND C TO THIS DOCUMENT.
WE URGE YOU TO READ THE FULL TEXT OF THE STOCK OPTION AGREEMENTS.
THE STOCK OPTIONS
At the same time we entered into the merger agreement, we also entered into
reciprocal stock option agreements. Under the terms of the stock option granted
by AHP to Warner-Lambert, Warner-Lambert may purchase up to 194,551,963 shares
of AHP common stock (representing approximately 14.9% of the outstanding AHP
common stock as of the date of the AHP stock option agreement) at an exercise
price of $56.00 per share. Under the terms of the stock option granted by
Warner-Lambert to AHP, AHP may purchase up to 127,940,538 shares of
Warner-Lambert common stock (representing approximately 14.9% of the outstanding
Warner-Lambert common stock as of the date of the Warner-Lambert stock option
agreement) at an exercise price of $83.81 per share. These exercise prices
represent our closing stock prices on November 3, 1999, the last trading day
prior to the execution of the merger agreement and the stock option agreements.
The terms of these stock option agreements are substantially identical and are
summarized below.
WHEN THE STOCK OPTIONS MAY BE EXERCISED
Each of us can exercise the option granted to it, in whole or in part, at
any time after the occurrence of the events which would entitle it to receive a
full termination fee of at least $1.8 billion under the merger agreement and
prior to termination of the option. See "The Merger Agreement--Termination of
the Merger Agreement."
The right to exercise the option terminates if we complete the merger. The
right to exercise the option also terminates upon the earliest to occur of the
following four other circumstances:
- six months after the option first becomes exercisable;
- termination of the merger agreement under circumstances which cannot
result in the grantee party becoming entitled to receive termination fees
of $1.8 billion or more from the issuing party;
- 12 months after termination of the merger agreement under circumstances
which would result in the grantee party becoming entitled to receive a
termination fee of less than $1.8 billion on termination and which could
entitle the grantee to receive thereafter an additional fee upon the
occurrence of a subsequent event which, when added to the fee originally
received, would be at least $1.8 billion; and
- 90 days after termination of the merger agreement under circumstances
where:
- at termination, the grantee party has the right to terminate the merger
agreement due to the issuing party's board changing its recommendation
of the merger;
- at termination, a more favorable alternative business combination
proposal has not been made to the issuing party; and
- the issuing party does not enter into a more favorable business
combination during the 90 day period.
CASH ELECTION
If a stock option becomes exercisable, the party holding the option may, as
to all or part of the option shares subject to the option, elect to receive a
cash payment. This cash payment would
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terminate the electing party's right to purchase those option shares upon the
exercise of the option of common stock. The cash to be paid per share would be
equal to the difference between the exercise price of the option and the higher
of:
- the highest price per share proposed to be paid by any other person in
connection with an acquisition proposal; or
- the average closing price of the stock for the ten days preceding the
election to receive cash.
If a stock option becomes exercisable, the party issuing the option may, as
to up to two-thirds of the shares subject to the option, elect to repurchase up
to that portion of the option for a cash payment. This cash payment would
terminate the grantee party's right to purchase those option shares upon the
exercise of the option of common stock. The cash to be paid per share would be
equal to the difference between the exercise price of the option and the higher
of:
- the highest price per share proposed to be paid by any other person in
connection with an acquisition proposal; or
- the average closing price of the stock for the ten days preceding the
election to repurchase.
LIMITATION ON TOTAL PROFIT
Each of the stock option agreements provides that, notwithstanding the other
provisions of that agreement or the merger agreement, the total profit, as
defined below, that a party is permitted to receive cannot exceed $2 billion in
the aggregate.
Total profit, as used in the option agreements, means the total amount,
before taxes, of the following:
- any termination fee received by the grantee party under the merger
agreement; plus
- the net cash amounts received by the grantee party from the sale of option
shares, less the purchase price for those option shares; plus
- any amounts received by the grantee party from the repurchase of the
option by the issuing party or by the cashless exercise of the option.
If the total profit of either of us would otherwise exceed $2 billion, the
party whose total profit would exceed that amount may, at its discretion, do any
one or combination of the following so that the actual realized total profit
does not exceed that amount:
- reduce the number of shares subject to the option;
- deliver to the other party for cancellation option shares previously
acquired; and
- pay cash to the other party.
OTHER PROVISIONS
LISTING AND REGISTRATION RIGHTS. We have each agreed that if either party's
option becomes exercisable, the party which granted the exercisable option will
apply to list the option shares subject to that option on the NYSE and will use
reasonable best efforts to have those shares listed as soon as practicable.
We also granted each other customary rights to require registration of
option shares purchased under an option to permit the resale of those shares
under the securities laws.
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ADJUSTMENTS. The type and number of option shares will be adjusted
appropriately for any changes in the issuing party's stock, including changes
that may occur because of reclassifications, recapitalizations, stock dividends
or splits, combinations, exchanges or similar events.
RESTRICTION ON TRANSFER. We have each agreed the option may not be
transferred without the issuing party's consent.
EFFECT OF STOCK OPTION AGREEMENTS
The option agreements may have the effect of making an acquisition or other
business combination of either company by or with a third party more costly
because of the need in any transaction to acquire the shares held pursuant to
the option agreement. Moreover, following consultation with our respective
independent public accountants, we believe that, if the option granted by AHP or
Warner-Lambert becomes exercisable, it is likely to hinder other parties from
attaining the pooling-of-interests accounting treatment in any merger or
business combination transaction with that company for the following two years.
Non-U.S. companies do not utilize pooling-of-interests accounting. In addition,
pooling-of-interests accounting is unlikely to be available in the United States
after the year 2000.
The option agreements may therefore discourage certain third parties from
proposing another transaction, including one that might be more favorable from a
financial point of view to the stockholders of AHP or Warner-Lambert, as the
case may be, than the merger.
The boards of directors of the companies considered the impact of the option
agreements on potential third party-acquirors in their approval of the merger
agreement and the option agreements; see "Background of the Merger" on page 23
and "Our Reasons for the Merger" on page 38, for a more complete description of
the factors considered by each board.
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BOARD OF DIRECTORS AND MANAGEMENT OF AMERICANWARNER
FOLLOWING THE MERGER
DIRECTORS
The merger agreement provides that the number of members on the
AmericanWarner board will be either 14 or 20, depending on the outcome of the
vote of the AHP stockholders to approve the adoption of an amendment to AHP's
by-laws to increase the maximum size of its board to 24 members.
- If the AHP by-law amendment is adopted by the AHP stockholders,
immediately following the completion of the merger, the board of directors
of AmericanWarner will consist of 20 individuals, ten of whom will be
designated by AHP and ten of whom will be designated by Warner-Lambert.
- If the AHP by-law amendment is not adopted by AHP stockholders, the board
of directors of AmericanWarner will consist of 14 individuals, seven of
whom will be designated by AHP and seven of whom will be designated by
Warner-Lambert.
COMMITTEES OF THE BOARD OF DIRECTORS
Pursuant to the merger agreement, each committee of the board of directors
of AmericanWarner will have a chairperson who previously served as a director of
either AHP or Warner-Lambert, and a vice-chairperson from the other company.
AHP and Warner-Lambert have agreed to use their reasonable best efforts to
appoint the following individuals as Chairman or Vice-Chairman, as the case may
be, to the committees indicated below:
- Audit Committee
<TABLE>
<S> <C>
William R. Howell................................... Chairman
John D. Feerick..................................... Vice-Chairman
</TABLE>
- Compensation Committee
<TABLE>
<S> <C>
Frank A. Bennack, Jr. ............................. Chairman
Alex J. Mandl....................................... Vice-Chairman
</TABLE>
- Nominating and Governance Committee
<TABLE>
<S> <C>
Michael I. Sovern................................... Chairman
Ivan G. Seidenberg.................................. Vice-Chairman
</TABLE>
- Public Policy Committee
<TABLE>
<S> <C>
Clifford L. Alexander, Jr. ........................ Chairman
LaSalle D. Leffall, Jr., M.D. ..................... Vice-Chairman
</TABLE>
COMPENSATION OF DIRECTORS
Directors who are employees of AmericanWarner will not receive any
compensation for service on the AmericanWarner board of directors. The specific
terms of the compensation to be paid to non-employee directors of AmericanWarner
have not yet been determined.
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OFFICERS
The merger agreement provides that the senior management team for
AmericanWarner following the merger will include the following individuals from
Warner-Lambert and AHP:
CHIEF EXECUTIVE OFFICER AND CHAIRMAN
<TABLE>
<S> <C>
Lodewijk J.R. de Vink President and Chief Executive Officer
John R. Stafford Chairman of the Board of Directors
</TABLE>
The merger agreement provides that Mr. de Vink will serve as President and
Chief Executive Officer and report to the board of directors following
completion of the merger and, until December 31, 2002, may only be removed by a
vote of 75% of the entire board.
Mr. Stafford will serve as Chairman until 18 months following the completion
of the merger, unless he is removed prior to such time by a vote of 75% of the
entire board of AmericanWarner. Mr. de Vink will succeed Mr. Stafford as
Chairman following such 18-month period and, until December 31, 2002, may only
be removed by a vote of 75% of the entire board of AmericanWarner.
OTHER SENIOR MANAGEMENT
<TABLE>
<CAPTION>
POSITION IN AMERICANWARNER PRE-MERGER POSITION
----------------------------- -----------------------------
<S> <C> <C>
Ernest J. Larini Chief Financial Officer Chief Financial Officer and
Executive Vice President,
Administration of Warner-
Lambert
Anthony H. Wild, Ph.D. [Title--Human Global Executive Vice President of
Pharmaceuticals] Warner-Lambert and President,
Pharmaceutical Sector of
Warner-Lambert
Robert Essner [Title] Executive Vice President of
AHP
Bernard Poussot [Title--Human Global President--Wyeth-Ayerst
Pharmaceuticals] Global Pharmaceuticals
Division of AHP
Robert I. Levy, M.D. Chief Science and Technology Senior Vice
Officer President--Science and
Technology of AHP
Louis L. Hoynes, Jr. General Counsel Senior Vice President and
General Counsel of AHP
Rene R. Lewin [Title--Human Resources] Vice President--Human
Resources of AHP
David M. Olivier [Title--OTC] Senior Vice President of AHP
J. Frank Lazo [Title--Confectionery Senior Vice President of
business] Warner-Lambert and President,
Adams division of Warner-
Lambert
William J. Murray [Title--Agricultural Senior Vice President of AHP
business]
</TABLE>
EXECUTIVE COMPENSATION
The AmericanWarner board will rely on a compensation committee, composed of
non-employee directors to recommend the form and amount of compensation to be
paid to AmericanWarner executive officers.
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COMPARISON OF STOCKHOLDERS' RIGHTS
The rights of AHP stockholders are currently governed by the Delaware
General Corporation Law and the certificate of incorporation and by-laws of AHP.
The rights of Warner-Lambert stockholders are currently governed by the Delaware
General Corporation Law and the certificate of incorporation and by-laws of
Warner-Lambert. Upon consummation of the merger, the rights of AmericanWarner
stockholders will be governed by the Delaware General Corporation Law and the
AmericanWarner certificate of incorporation and the by-laws of AmericanWarner.
The following are summaries of the material differences between the current
rights of AHP and Warner-Lambert stockholders and those of AmericanWarner
stockholders following the merger.
The following comparison of stockholders' rights is necessarily a summary
thereof, is not intended to be complete or to identify all differences that may,
under given situations, be material to stockholders and is subject in all
respects, and is qualified by reference, to the Delaware General Corporation
Law, the AHP certificate of incorporation, the AHP by-laws, the Warner-Lambert
certificate of incorporation, the Warner-Lambert by-laws, the AmericanWarner
certificate of incorporation and the AmericanWarner by-laws. Copies of the AHP
certificate of incorporation, the AHP by-laws, the Warner-Lambert certificate of
incorporation and the Warner-Lambert by-laws are incorporated by reference
herein and will be sent to holders of shares of AHP common stock, AHP preferred
stock and Warner-Lambert common stock upon request.
AUTHORIZED CAPITAL
WARNER-LAMBERT. The total number of authorized shares of capital stock of
Warner-Lambert is 1,200,000,000 shares of Warner-Lambert common stock, par value
$1.00 per share, and 5,000,000 shares of preferred stock, par value $1.00 per
share. No shares of preferred stock are outstanding and the holders of
Warner-Lambert common stock do not have any preemptive rights.
AHP. The total number of authorized shares of capital stock of AHP is
2,400,000,000 shares of AHP common stock, par value $0.33 1/3, and 5,000,000
shares of AHP preferred stock, par value $2.50 per share. The holders of
outstanding shares of AHP common stock and the holders of outstanding shares of
AHP preferred stock do not have any preemptive rights.
AMERICANWARNER. If the AHP certificate amendment is approved, following the
merger, the total number of authorized shares of capital stock will be shares
of AmericanWarner common stock and 5,000,000 shares of AmericanWarner preferred
stock. The holders of outstanding shares of AmericanWarner common stock and the
holders of outstanding shares of AmericanWarner preferred stock will not have
preemptive rights.
BOARD OF DIRECTORS
WARNER-LAMBERT. Pursuant to the Warner-Lambert by-laws, the number of
directors of Warner-Lambert shall not be less than 10 nor more than 15, with the
exact number determined by a majority of the Warner-Lambert board.
Warner-Lambert's board currently consists of 10 directors. Under the
Warner-Lambert by-laws, the presence of one-third of the total number of
directors (but not less than two) is necessary to constitute a quorum at any
meeting.
AHP. Pursuant to the AHP certificate of incorporation, the number of
directors of AHP shall be fixed and may be altered from time to time as provided
in the AHP by-laws. The AHP by-laws provide that the AHP board shall consist of
not less than eight nor more than 15 directors, with the precise number
determined by the AHP board. AHP's board currently consists of 10 directors. A
quorum at any meeting of the AHP board consists of a majority of the total
number of directors or half, if the total number of directors is an even number.
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AMERICANWARNER. If the AHP by-law amendment is approved, the maximum number
of directors shall be 24 directors, and the AmericanWarner board will consist of
20 directors. If the by-law amendment is not approved, the AmericanWarner board
will consist of 14 directors. Each AmericanWarner director will stand for
election annually. Pursuant to the AmericanWarner by-laws, until December 31,
2002, the number of directors designated by AHP and the number of directors
designated by Warner-Lambert must be equal after giving effect to any increase
or decrease in the total number of directors on the AmericanWarner board. Under
the AmericanWarner by-laws, the presence of a majority of the entire
AmericanWarner board will constitute a quorum. Until December 31, 2002, the
unanimous affirmative vote of the entire AmericanWarner board will be required
to amend any of the foregoing provisions of the AmericanWarner by-laws. For
purposes of the AmericanWarner by-laws, the term "entire AmericanWarner board"
means the total number of directors which AmericanWarner would have if there
were no vacancies.
COMMITTEE OF DIRECTORS
WARNER-LAMBERT. Pursuant to the Warner-Lambert certificate of incorporation
and the Warner-Lambert by-laws, the Warner-Lambert board, may, by a resolution
passed by a majority of the whole board, designate an executive committee and
one or more additional committees, each committee to consist of two or more
directors.
AHP. Pursuant to the AHP by-laws, there shall be an audit committee
consisting of not less than three directors appointed by the AHP board. In
addition, pursuant to the AHP certificate of incorporation and AHP by-laws, the
AHP board may by vote of a majority of all the directors to appoint three or
more directors to constitute an executive committee and three or more directors,
officers or employees of AHP to constitute a finance committee and the AHP board
may, from time to time, appoint one or more other standing or special
committees.
AMERICANWARNER. Upon completion of the merger, the provisions of the AHP
certificate of incorporation and AHP by-laws described above will be the
provisions of the AmericanWarner certificate of incorporation and the
AmericanWarner by-laws.
NEWLY CREATED DIRECTORSHIPS AND VACANCIES
WARNER-LAMBERT. Pursuant to the Warner-Lambert by-laws, vacancies occurring
in any Warner-Lambert directorship and newly created directorships shall be
filled by the affirmative vote of a majority of the remaining directors.
AHP. Pursuant to the AHP by-laws, subject to rights granted to holders of
preferred stock under the AHP certificate of incorporation, vacancies occurring
in any AHP directorship and newly created directorships shall be filled by the
affirmative vote of a majority of the remaining directors even if less than a
quorum.
AMERICANWARNER. Upon completion of the merger, the provisions of the AHP
by-laws described above will be the provisions of the AmericanWarner by-laws,
except that no reduction in the number of directors comprising the entire board
shall affect the term of any existing director, and until December 31, 2002 the
AmericanWarner board may be increased or decreased only by the vote of 75% of
the entire board. Until December 31, 2002, the unanimous affirmative vote of the
entire AmericanWarner board will be required to amend any of the foregoing
provisions of the AmericanWarner by-laws.
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<PAGE>
REMOVAL OF DIRECTORS
WARNER-LAMBERT. Under the Warner-Lambert by-laws, a director can be removed
by the affirmative vote of the holders of a majority of the voting power of the
then outstanding Warner-Lambert common stock.
AHP. Under the AHP certificate of incorporation, a director, other than a
director elected separately by the holders of AHP preferred stock, may be
removed either by a majority vote of the entire AHP board for any cause deemed
by them sufficient or by the affirmative vote of the holders of 80% of the
combined voting power of the then outstanding shares of capital stock entitled
to vote generally in the election of directors, voting together as a single
class.
AMERICANWARNER. The above provisions of the AHP certificate of
incorporation will be the provisions of the AmericanWarner certificate of
incorporation upon completion of the merger.
CLASSIFIED BOARD
WARNER-LAMBERT. Under the Warner-Lambert certificate of incorporation and
Warner-Lambert by-laws, the Warner-Lambert board is not divided into separate
classes and all directors are elected at each annual meeting of stockholders and
serve until the next annual meeting of stockholders.
AHP. Under the AHP certificate of incorporation and AHP by-laws, the AHP
board is not divided into separate classes and all directors are elected at each
annual meeting of stockholders and serve only until the next succeeding annual
meeting of stockholders.
AMERICANWARNER. Upon completion of the merger, the provisions of the AHP
certificate of incorporation and AHP by-laws described above will be the
provisions of the AmericanWarner certificate of incorporation and AmericanWarner
by-laws.
OFFICERS
WARNER-LAMBERT. Pursuant to the Warner-Lambert by-laws, officers may be
elected by the board at any regular or special meeting of the board, provided
that the removal of an officer requires the affirmative vote of a majority of
the board.
AHP. Pursuant to the AHP by-laws, principal officers are chosen annually by
the board and the AHP board may appoint other officers for such terms as
determined by the AHP board, provided that the removal of a principal officer
requires the affirmative vote of a majority of the entire AHP board.
AMERICANWARNER. Pursuant to the AmericanWarner by-laws, the officers of
AmericanWarner will include a Chairman and a Chief Executive Officer. The
Chairman will have the power to chair and conduct all meetings of the
AmericanWarner board. The Chief Executive Officer will supervise, coordinate and
manage all aspects of AmericanWarner's business and activities, will coordinate
and manage the operating expenses and capital allocation of AmericanWarner,
shall have general and active supervision of AmericanWarner's property and
business, will have general authority to exercise all the powers necessary for a
Chief Executive Officer and will have the power to perform such other duties and
have such other powers as may be prescribed by the AmericanWarner board or the
AmericanWarner by-laws, all in accordance with the basic policies established
by, and subject to, the oversight of the AmericanWarner board. Mr. Stafford will
be the Chairman following completion of the merger until 18 months after the
consummation of the merger, unless removed prior to such time by the affirmative
vote of 75% of the entire AmericanWarner board. From that date, Mr. de Vink will
become Chairman, unless his appointment is opposed by the affirmative vote of
75% of the entire AmericanWarner board. After that appointment and until
December 31, 2002, Mr. de Vink may only be removed as chairman by the
affirmative vote of 75% of the entire AmericanWarner board.
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<PAGE>
Following completion of the merger, Mr. de Vink will be the Chief Executive
Officer of AmericanWarner and report to the board of directors. Until December
31, 2002, Mr. de Vink may only be removed as Chief Executive Officer by the
affirmative vote of 75% of the entire AmericanWarner board.
ADVANCE NOTICE OF STOCKHOLDER-PROPOSED BUSINESS AT ANNUAL MEETINGS
WARNER-LAMBERT. The Warner-Lambert by-laws provide that for business to be
brought before an annual meeting by a stockholder, written notice must be
delivered or mailed to the Secretary of Warner-Lambert and received at least 120
days prior to the first anniversary of the preceding year's annual meeting or
not later than ten days after notice or public disclosure of the date of the
annual meeting shall be given or made to stockholders, whichever date shall be
earlier. The Warner-Lambert by-laws provide that the stockholder's notice must
set forth as to each matter the stockholder proposes to bring before the annual
meeting the following:
- a description of the business to be brought before the annual meeting and
the reasons for conducting such business at such meeting;
- the name and address of the stockholder proposing such business;
- the class and number of shares of Warner-Lambert's stock which are held of
record, held beneficially and represented by proxy by that stockholder and
a representation that the stockholder intends to appear in person or by
proxy at the meeting to make the proposal; and
- any material interest of the stockholder in such business.
In addition, the Warner-Lambert by-laws provide that for a stockholder to
properly nominate a director at a meeting of stockholders, the stockholder must
give notice in writing, delivered or mailed to the Secretary of Warner-Lambert
and received:
- in the case of an annual meeting, 120 days prior to the first anniversary
of the preceding year's annual meeting; or
- in the case of a special meeting at which directors are to be elected, the
close of business on the seventh day following the date on which notice of
the meeting is first made.
The stockholder's notice must set forth:
- as to the stockholder giving the notice, the name and address of such
stockholder and the class and number of shares of Warner-Lambert common
stock which are held by record, held beneficially and represented by proxy
by that stockholder and a representation that the stockholder intends to
appear in person or by proxy at the meeting to make the proposal;
- a description of all arrangements or understandings between the
stockholder and each nominee and any other person or persons (naming that
person or persons) pursuant to which the nomination or nominations are to
be made by the stockholder;
- other information regarding each nominee proposed by the stockholder as
would have been required to be included in a proxy statement filed
pursuant to the proxy rules of the SEC had each nominee been nominated, or
intended to be nominated, by the board of directors; and
- the consent in writing of each nominee to serve as a director if so
elected.
AHP. The AHP certificate of incorporation and the AHP by-laws do not
include a provision which requires that advance notice be given to AHP of
stockholder-proposed business to be conducted at annual meetings. The AHP
by-laws do, however, require that any stockholder entitled to vote in the
election of directors generally may nominate one or more individuals for
election as directors only if written notice of such stockholder's intent to
make such nomination or nominations has been given,
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<PAGE>
either by personal delivery or by United States mail, postage prepaid, to the
Secretary of AHP not later than:
- with respect to an election to be held at an annual meeting of
stockholders, 90 days prior to the anniversary date of the immediately
preceding annual meeting; and
- with respect to an election to be held at a special meeting of
stockholders for the election of directors, the close of business on the
tenth day following the date on which notice of that meeting is first
given to stockholders.
Each notice shall set forth:
- the name and address of the stockholder who intends to make the nomination
and of the individual or individuals to be nominated;
- a representation that the stockholder is a holder of record of stock of
AHP entitled to vote at the meeting and intends to appear in person or by
proxy at the meeting to nominate the individual or individuals specified
in the notice;
- a description of all arrangements or understandings between the
stockholder and each nominee and any other individual or individuals
(naming such individual or individuals) pursuant to which the nomination
or nominations are to be made by the stockholder;
- other information regarding each nominee proposed by the stockholder as
would have been required to be included in a proxy statement filed
pursuant to the proxy rules of the SEC; and
- the consent of each nominee to serve as a director of AHP if so elected.
AMERICANWARNER. Upon completion of the merger, the provisions of the
AmericanWarner certificate of incorporation and the AmericanWarner by-laws
regarding advance notice of stockholder proposals will be the same as the
provisions of the AHP certificate of incorporation and the AHP by-laws described
above.
AMENDMENTS TO GOVERNING DOCUMENTS
WARNER-LAMBERT. Pursuant to the Delaware General Corporation Law, the
Warner-Lambert certificate of incorporation may generally be amended by the
affirmative vote of the holders of a majority of the voting power of the
outstanding stock. The Warner-Lambert certificate of incorporation and the
Warner-Lambert by-laws further provide that the Warner-Lambert board may, by the
affirmative vote of a majority of the entire Warner-Lambert board, amend the
Warner-Lambert by-laws, subject to the power of the stockholders to amend the
Warner-Lambert by-laws.
AHP. Pursuant to the Delaware General Corporation Law, the AHP certificate
of incorporation may generally be amended by the affirmative vote of the holders
of a majority of the voting power of the outstanding stock, provided that the
affirmative vote of the holders of at least 80% of the combined voting power of
the then outstanding shares of stock entitled to vote generally in the election
of directors, voting together as a single class, is required to amend the
provisions of the AHP certificate of incorporation and the AHP by-laws relating
to special meetings, the power, number, election, term and vacancies of the AHP
board and the ability of stockholders to remove directors. Subject to the
supermajority voting requirements listed above, the AHP by-laws may be amended
by the affirmative vote of the holders of a majority of the voting power of the
outstanding stock of AHP. All of the provisions of the AHP by-laws, other than
those requiring supermajority stockholder approval listed above, may also be
amended by the AHP board by vote of a majority of all the directors, subject to
the right of the stockholders to alter or repeal such amendments of the AHP
by-laws adopted by the AHP board as described above.
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AMERICANWARNER. Upon completion of the merger, the provisions of the
AmericanWarner certificate of incorporation regarding amendments to the
governing documents will be the same as those provisions in the AHP certificate
of incorporation. Pursuant to the AmericanWarner by-laws, the unanimous
affirmative vote of the entire AmericanWarner board will be required, until
December 31, 2002, to amend the provisions pertaining to the composition and the
powers of the Chairman and Chief Executive Officer, the removal of the Chairman
and Chief Executive Officer, the necessary quorum for meetings of the
AmericanWarner board, and representation of AHP and Warner-Lambert designees on
the AmericanWarner board. Otherwise, except as required pursuant to the Delaware
General Corporation Law or the AmericanWarner certificate of incorporation, the
AmericanWarner by-laws may generally be amended by the affirmative vote of the
holders of a majority of the voting power of the outstanding AmericanWarner
stock or by the AmericanWarner board by a vote of a majority of all of the
directors.
RIGHTS PLANS
WARNER-LAMBERT. Warner-Lambert has adopted a stockholder rights plan that
provides that, after a person or group acquires 15% or more of the outstanding
Warner-Lambert common stock, the holder of a share of Warner-Lambert common
stock, other than the acquiring person, is entitled to purchase, at the exercise
price of $400, additional Warner-Lambert shares having a current market value of
two times the exercise price. In addition, if Warner-Lambert is acquired in a
merger or other business combination, each right will entitle the holder to
purchase, at the exercise price, common stock of the acquiror having a current
market value of two times the exercise price. Prior to there being an acquiring
person, the Warner-Lambert board may redeem the rights issued under the rights
agreement for $0.003 per right or amend the rights agreement in any manner
without the consent of the holders of the rights. In connection with the merger
agreement and as approved by the Warner-Lambert board of directors,
Warner-Lambert amended its rights agreement to provide that none of AHP or any
of its affiliates will become an acquiring person by reason of the approval,
execution or delivery of the merger agreement or the consummation of the
transactions contemplated by the merger agreement.
AHP. AHP has adopted a stockholder rights plan that provides that, after a
person or group acquires 15% or more of the outstanding AHP common stock, the
holder of a share of AHP common stock, other than the acquiring person, is
entitled to purchase, at the exercise price of $225, additional AHP shares
having a current market value of two times the exercise price. In addition, if
AHP is acquired in a merger or other business combination, each right will
entitle the holder to purchase, at the exercise price, common stock of the
acquiror having a current market value of two times the exercise price. Prior to
there being an acquiring person, the AHP board may redeem the rights issued
under the rights agreement for $0.01 per right or amend the rights agreement in
any manner without the consent of the holders of the rights. In connection with
the merger agreement and as approved by the AHP board of directors, AHP amended
its rights agreement to provide that none of Warner-Lambert or any of its
affiliates will become an acquiring person and that no shares acquisition date
or distribution date will occur by reason of the approval, execution or delivery
of the merger agreement or the consummation of the transactions contemplated by
the merger agreement.
AMERICANWARNER. Upon the completion of the merger, AHP's stockholder rights
plan will become AmericanWarner's stockholder rights plan.
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DESCRIPTION OF AMERICANWARNER CAPITAL STOCK
THE FOLLOWING DESCRIPTION OF CERTAIN TERMS OF THE CAPITAL STOCK OF
AMERICANWARNER DOES NOT PURPORT TO BE COMPLETE AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO THE AHP CERTIFICATE OF INCORPORATION AND THE PROPOSED AMENDMENTS
TO THE AHP CERTIFICATE OF INCORPORATION. FOR MORE INFORMATION AS TO HOW YOU CAN
OBTAIN THE AHP CERTIFICATE OF INCORPORATION, WHICH WILL BECOME THE
AMERICANWARNER CERTIFICATE OF INCORPORATION UPON THE MERGER, SEE "WHERE YOU CAN
FIND MORE INFORMATION."
AMERICANWARNER COMMON STOCK
The AmericanWarner certificate of incorporation will authorize
AmericanWarner to issue up to shares of AmericanWarner common stock, par
value $0.33 1/3 per share. Each share of AmericanWarner common stock will be
entitled to one vote, in person or by proxy, at any and all meetings of the
holders of common stock on all proposals before such meetings and on all
elections of directors by holders of common stock. The AmericanWarner
certificate of incorporation will not provide for cumulative voting in the
election of directors. Subject to any preferential rights of any outstanding
series of AmericanWarner preferred stock created by the board from time to time,
the holders of AmericanWarner common stock will be entitled to dividends only
if, when and as declared by the AmericanWarner board and as may be permitted by
law and, upon liquidation, will be entitled to receive PRO RATA all assets of
AmericanWarner available for distribution to such holders. For a description of
voting requirements and change of control restrictions, see "Comparison of
Stockholders' Rights."
AMERICANWARNER PREFERRED STOCK
As a result of the name change, each share of AHP's preferred stock
outstanding at the effective time of the merger will become an outstanding share
of AmericanWarner preferred stock. Holders of outstanding AmericanWarner
preferred stock will be entitled to receive dividends in cash at the rate of
$0.50 per share per calendar quarter. The AmericanWarner preferred stock will be
convertible at the option of the holder into thirty-six shares of AmericanWarner
common stock. If the average price of the AmericanWarner common stock over a
five consecutive business day period is at least $80 per share, the
AmericanWarner preferred stock will be redeemable at a price of $60 per share
plus an amount equal to all accrued but unpaid dividends thereon to the
redemption date. The AmericanWarner preferred stock will have a preference of
$60 per share in the event of voluntary liquidation, dissolution or winding up
of AmericanWarner and $52.50 per share in the event of involuntary liquidation,
dissolution or winding up of AmericanWarner, plus, in either case, an amount
equal to all accrued but unpaid dividends to the date of such liquidation,
dissolution or winding up of AmericanWarner. The holders of the AmericanWarner
preferred stock will be entitled to thirty-six votes per share when voting with
the shares of common stock at any annual or special meeting of stockholders for
the election of directors and upon any other matter coming before such meeting.
In connection with its stockholder rights plan, AmericanWarner will also be
authorized to issue up to 2,500,000 shares of Series A junior participating
preferred stock.
AmericanWarner will also be authorized to issue up to additional
shares of preferred stock, par value $2.50 per share, from time to time in one
or more additional series and with such designation for each such series as
determined by the AmericanWarner board. The AmericanWarner board may, without
further action by the AmericanWarner stockholders, issue additional series of
AmericanWarner preferred stock and state and fix the rights and preferences of
those shares, including:
- the voting powers, if any, of the shares of stock of such series;
- the number of shares to constitute each series and the distinctive
description of each series;
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<PAGE>
- the rate per annum and the times at and conditions upon which the holders
of stock of such series will be entitled to receive dividends, and whether
such dividends will be cumulative or noncumulative and, if cumulative, the
terms upon which such dividends will be cumulative;
- whether or not the shares will be redeemable and the price or prices and
the time or times and the manner in which the stock of such series will be
redeemable;
- the right and preferences, if any, to which the holders of the shares of
stock of such series shall be entitled upon any voluntary or involuntary
dissolution of or distribution of assets of AmericanWarner;
- whether or not the shares of such series shall be subject to the
operations of retirement or sinking funds to be applied to the purchase or
redemption of such shares for retirement and, if such retirement or
sinking funds are established, the annual amount and terms and provisions
relating to the operation of such retirement or sinking fund;
- the terms, if any, upon which shares of stock of such series shall be
convertible into, or exchangeable for, shares of stock of any other class
or classes or of any other series of the same or any other class or
classes, including the price or prices or the rate or rates of conversion
or exchange and the terms of adjustment, if any; and
- any other special rights and protective provisions as the AmericanWarner
board may deem advisable;
AMERICANWARNER RIGHTS PLAN
On October 7, 1999, the AHP board authorized the issuance of, and on
October 13, 1999 declared, a dividend distributing one preferred share purchase
right for each outstanding share of AHP common stock, pursuant to a rights
agreement between AHP and ChaseMellon Shareholder Services, L.L.C., as Rights
Agent. As of the effective time of the merger, the AHP rights plan will become
the AmericanWarner rights plan. Each right entitles the registered holder to
purchase one one-thousandth of a share of series A junior participating
preferred stock at an exercise price of $225 per one one-thousandth of a share
of series A junior participating preferred stock, subject to adjustment. The
rights become exercisable on the earlier of:
- the tenth day after a public announcement that a person or group of
affiliated or associated persons has acquired or obtained the right to
acquire 15% or more of the outstanding shares of common stock (thereby
becoming an "acquiring person"); and
- the tenth business day after the commencement, or announcement of an
intention to commence, a tender offer or exchange offer by a person who
would, upon completion of the offer, become an acquiring person.
The rights expire on October 7, 2009 unless earlier redeemed or extended by
the AmericanWarner board of directors as described below.
If a person or group becomes an acquiring person, each holder of a right
(except those held by the acquiring person and its affiliates and associates)
will have the right to purchase, upon exercise, shares of AmericanWarner common
stock having a market value equal to two times the exercise price of the right.
In addition, in the event that, at any time after a person becomes an acquiring
person, AmericanWarner is involved in a merger or other business combination or
50% or more of AmericanWarner's consolidated assets or earning power are sold,
provisions will be made so that each right--other than rights that are or were
owned by the acquiring person and its affiliates and associates, which will
thereafter be void--will thereafter have the right to receive, upon exercise,
the number of shares of common stock of the acquiring company having a market
value of two times the exercise price of the right. In addition, at any time
after any person or group becomes an acquiring person and
96
<PAGE>
before any person or group acquires 50% or more of the outstanding shares of
AmericanWarner common stock, the AmericanWarner board of directors may exchange
the rights (other than rights owned by the acquiring person which will have
become void), in whole or in part, at an exchange ratio of one share of
AmericanWarner common stock per right (subject to adjustment).
The AmericanWarner board of directors may redeem all but not less than all
rights at a redemption price of $.01 per right at any time prior to the time
that a person or group has become an acquiring person. Immediately upon
redemption, the right to exercise will terminate, and the only right of holders
will be to receive the redemption price. As long as the rights are redeemable,
the terms of the rights may be amended by the AmericanWarner board of directors
in its discretion without the consent of the rights holders. After a person
becomes an acquiring person, no amendment may adversely affect the interests of
the rights holder (other than the acquiring person).
The rights will not prevent a takeover of AmericanWarner. The rights,
however, may have certain anti-takeover effects. The rights may cause
substantial dilution to a person or group that attempts to acquire
AmericanWarner on terms not approved by the AmericanWarner board of directors or
make the acquisition of AmericanWarner substantially more costly, unless the
AmericanWarner board of directors redeems the rights prior to the person
becoming an acquiring person. The rights should not interfere with any merger or
other business combination approved by the AmericanWarner board because of the
board's ability to redeem the rights or amend the AmericanWarner rights plan. A
description of the rights plan specifying the terms of the rights and the series
A junior participating preferred stock has been included in reports filed by AHP
with the SEC. See "Where You Can Find More Information." This summary
description is qualified in its entirety by reference to the rights plan.
Each share of AmericanWarner common stock issued in the merger will have a
corresponding right attached to it.
TRANSFER AGENT AND REGISTRAR
ChaseMellon Shareholder Services, L.L.C. will be the transfer agent and
registrar for the AmericanWarner common stock.
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LEGAL MATTERS
The validity of the AmericanWarner common stock to be issued in connection
with the merger will be passed on by Louis L. Hoynes, Jr., Esq., Senior Vice
President and General Counsel of AHP. In addition, Simpson Thacher & Bartlett,
counsel for AHP, and Skadden, Arps, Slate, Meagher & Flom LLP, counsel for
Warner-Lambert, have delivered opinions to their respective clients concerning
certain federal income tax consequences of the merger. See "The Proposed
Merger--Material United States Federal Income Tax Consequences."
EXPERTS
The audited consolidated financial statements and schedule of AHP at
December 31, 1998 and 1997 and for each of the three years in the period ended
December 31, 1998 incorporated by reference in this joint proxy
statement/prospectus from AHP's Annual Report on Form 10-K for the year ended
December 31, 1998, have been audited by Arthur Andersen LLP, independent public
accountants, as indicated in their reports with respect thereto and are
incorporated herein by reference, and have been so incorporated in reliance upon
the reports of said firm given upon the authority of said firm as experts in
accounting and auditing.
The financial statements of Warner-Lambert incorporated in this joint proxy
statement/prospectus by reference to the Annual Report on Form 10-K, as amended,
of Warner-Lambert for the year ended December 31, 1998 (such financial
statements have not been restated to give effect to the pooling of interests
business combination consummated with Agouron Pharmaceuticals, Inc. on May 17,
1999) and the audited historical financial statements included in
Warner-Lambert's Form 8-K dated December 17, 1999 have been so incorporated in
reliance on the reports of PricewaterhouseCoopers LLP, independent public
accountants, given on the authority of said firm as experts in accounting and
auditing.
Representatives of PricewaterhouseCoopers LLP are expected to be present at
the Warner-Lambert special meeting and representatives of Arthur Andersen LLP
are expected to be present at the AHP special meeting, where they will have the
opportunity to make a statement if they desire to do so and will be available to
respond to appropriate questions.
FUTURE STOCKHOLDER PROPOSALS
SEC rules set forth standards as to what stockholder proposals are required
to be included in a proxy statement. The deadline for submission of stockholder
proposals for inclusion in the proxy materials for the 2000 annual meeting of
AHP (or, if the merger closes prior to that date, the 2000 annual meeting of
AmericanWarner) as disclosed in the AHP proxy statement for the 1999 annual
meeting of stockholders was November 19, 1999. In addition, the AHP by-laws
provide that any stockholder wishing to make a nomination for director at the
2000 annual meeting of AHP must give notice by January 23, 2000, subject to
certain exceptions, and that notice must meet certain other requirements set
forth in the AHP by-laws. A copy of the AHP by-laws may be obtained from the
Secretary of AHP. See "Comparison of Stockholders' Rights--Advance Notice of
Stockholder-Proposed Business at Annual Meetings." Under rules adopted by the
SEC, if a stockholder notifies AHP of such stockholder's intent to present a
proposal for consideration at AHP's 2000 annual meeting after February 2, 2000,
AHP, acting through the persons named as proxies in the proxy materials for such
meeting, may exercise discretionary voting authority with respect to such
proposal without including information regarding such proposal in its proxy
materials.
Warner-Lambert expects to hold an annual meeting of stockholders in the
second quarter of 2000 unless the merger is completed prior to that meeting. Any
Warner-Lambert stockholder who intended to present a proposal at such meeting
and sought to have the proposal included in the proxy materials for the 2000
meeting, pursuant to Rule 14a-8 of the Securities Exchange Act of 1934, must
have
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<PAGE>
submitted the proposal to the Secretary of Warner-Lambert no later than the
close of business on November 9, 1999. Warner-Lambert's by-laws provide that,
subject to certain exceptions, if a stockholder wishes to make a nomination for
director at the 2000 annual meeting or present any other matter that is outside
of the processes of Rule 14a-8, notice must be given to Warner-Lambert by
December 29, 1999. Such notice must meet certain other requirements set forth in
the Warner-Lambert by-laws. After that date, the proposal will be considered
untimely and Warner-Lambert's proxies will have discretionary voting authority
with respect to such matter. Any proposals, as well as any related questions,
should be directed to the Secretary of Warner-Lambert.
WHERE YOU CAN FIND MORE INFORMATION
AHP and Warner-Lambert file annual, quarterly and special reports, proxy
statements and other information with the SEC. You may read and copy any
reports, statements or other information we file at the SEC's public reference
rooms in Washington, D.C., New York, New York and Chicago, Illinois. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference rooms.
Our SEC filings are also available to the public from commercial document
retrieval services and at the world wide web site maintained by the SEC at
"http://www.sec.gov."
AHP has filed a Form S-4 to register with the SEC the AmericanWarner common
stock to be issued to Warner-Lambert stockholders in the merger. This document
is a part of the Form S-4 and constitutes a prospectus of AHP in addition to
being a proxy statement of AHP and Warner-Lambert for the AHP special meeting
and the Warner-Lambert special meeting, respectively. As allowed by SEC rules,
this document does not contain all the information you can find in the Form S-4
or the exhibits to the Form S-4.
The SEC allows us to "incorporate by reference" information into this
document, which means that we can disclose important information to you by
referring you to another document filed separately with the SEC. The information
incorporated by reference is deemed to be part of this document, except for any
information superseded by information in this document. This document
incorporates by reference the documents set forth below that we have previously
filed with the SEC. These documents contain important information about our
companies and their finances.
<TABLE>
<CAPTION>
AHP SEC FILINGS (FILE NO. 1-1225) PERIOD
- --------------------------------- ---------------------------------------------
<S> <C>
Annual Report on Form 10-K Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999, June 30, 1999
and September 30, 1999
Current Reports on Form 8-K Filed on June 2, 1999, October 8, 1999,
October 14, 1999, November 8, 1999, November
9, 1999, November 18, 1999, November 19,
1999, November 22, 1999 and November 24, 1999
Registration Statements on Form 8-A Filed on August 27, 1992 and October 14, 1999
(as amended on November 18, 1999)
</TABLE>
99
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<TABLE>
<CAPTION>
WARNER-LAMBERT SEC FILINGS (FILE NO. 1-3608) PERIOD
- -------------------------------------------- ---------------------------------------------
<S> <C>
Annual Report on Form 10-K/A Year ended December 31, 1998
Quarterly Reports on Form 10-Q Quarters ended March 31, 1999, June 30, 1999,
and September 30, 1999
Current Reports on Form 8-K Filed on January 28, 1999, May 18, 1999,
November 8, 1999, November 9, 1999, November
12, 1999, November 16, 1999, November 22,
1999, November 30, 1999, December 2, 1999 and
December 17, 1999, which restates Warner-
Lambert's historical financial statements to
reflect the acquisition of Agouron
Pharmaceuticals, Inc.
Registration Statement on Form 8-A March 27, 1997 (as amended on November 12,
1999)
</TABLE>
We are also incorporating by reference additional documents that we file
with the SEC after the date of this document and prior to the termination of the
offering of AmericanWarner common stock to which this document relates.
AHP has supplied all information contained or incorporated by reference in
this document about AHP and all information about Warner-Lambert has been
supplied by Warner-Lambert.
If you are a stockholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us or the SEC.
Documents incorporated by reference are available from us without charge,
excluding all exhibits unless we have specifically incorporated by reference an
exhibit in this document. Stockholders of AHP and Warner-Lambert may obtain
documents incorporated by reference in this document by requesting them in
writing or by telephone from the appropriate party at the following addresses:
<TABLE>
<S> <C>
AMERICAN HOME PRODUCTS CORPORATION WARNER-LAMBERT COMPANY
Five Giralda Farms 201 Tabor Road
Madison, New Jersey 07940 Morris Plains, New Jersey 07950
Attention: Eileen M. Lach, Attention: Rae G. Paltiel,
Corporate Secretary Corporate Secretary
(973) 660-6073 (973) 385-4593
</TABLE>
If you would like to request documents from us, please do so by ,
2000 to receive them prior to the special meetings.
YOU SHOULD RELY ONLY ON THE INFORMATION CONTAINED OR INCORPORATED BY
REFERENCE IN THIS DOCUMENT TO VOTE ON THE PROPOSALS INCLUDED IN THIS DOCUMENT.
WE HAVE NOT AUTHORIZED ANYONE TO PROVIDE YOU WITH INFORMATION THAT IS DIFFERENT
FROM WHAT IS CONTAINED IN THIS DOCUMENT. THIS DOCUMENT IS DATED , 2000.
YOU SHOULD NOT ASSUME THAT THE INFORMATION CONTAINED IN THIS DOCUMENT IS
ACCURATE AS OF ANY DATE OTHER THAN SUCH DATE, AND NEITHER THE MAILING OF THIS
DOCUMENT TO STOCKHOLDERS OF AHP AND WARNER-LAMBERT NOR THE ISSUANCE OF
AMERICANWARNER COMMON STOCK IN THE MERGER SHALL CREATE ANY IMPLICATION TO THE
CONTRARY.
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APPENDIX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AGREEMENT AND PLAN OF MERGER
DATED AS OF NOVEMBER 3, 1999
AMONG
AMERICAN HOME PRODUCTS CORPORATION,
WOLVERINE SUB CORP.
AND
WARNER-LAMBERT COMPANY
- ---------------------------------------------------------
- ---------------------------------------------------------
A-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C> <C>
ARTICLE I
</TABLE>
<TABLE>
<S> <C>
THE MERGER; CERTAIN RELATED MATTERS......................... A-6
</TABLE>
<TABLE>
<C> <S> <C> <C>
1.1 THE MERGER....................................................... A-6
1.2 CLOSING.......................................................... A-7
1.3 EFFECTIVE TIME................................................... A-7
1.4 EFFECTS OF THE MERGER............................................ A-7
1.5 CERTIFICATE OF INCORPORATION..................................... A-7
1.6 BYLAWS........................................................... A-7
1.7 OFFICERS AND DIRECTORS OF SURVIVING CORPORATION AND NEWCO........ A-7
1.8 EFFECT ON CAPITAL STOCK.......................................... A-8
1.9 WARNER-LAMBERT STOCK OPTIONS AND OTHER EQUITY-BASED AWARDS....... A-8
1.10 CERTAIN ADJUSTMENTS.............................................. A-9
1.11 ASSOCIATED RIGHTS................................................ A-10
ARTICLE II
</TABLE>
<TABLE>
<S> <C>
EXCHANGE OF CERTIFICATES.................................... A-10
</TABLE>
<TABLE>
<C> <S> <C> <C>
2.1 EXCHANGE FUND.................................................... A-10
2.2 EXCHANGE PROCEDURES.............................................. A-10
2.3 DISTRIBUTIONS WITH RESPECT TO UNEXCHANGED SHARES................. A-11
2.4 NO FURTHER OWNERSHIP RIGHTS IN WARNER-LAMBERT COMMON STOCK....... A-11
2.5 NO FRACTIONAL SHARES OF AHP COMMON STOCK......................... A-11
2.6 TERMINATION OF EXCHANGE FUND..................................... A-11
2.7 NO LIABILITY..................................................... A-12
2.8 INVESTMENT OF THE EXCHANGE FUND.................................. A-12
2.9 LOST CERTIFICATES................................................ A-12
2.10 WITHHOLDING RIGHTS............................................... A-12
2.11 FURTHER ASSURANCES............................................... A-12
2.12 STOCK TRANSFER BOOKS............................................. A-12
2.13 AFFILIATES....................................................... A-12
ARTICLE III
</TABLE>
<TABLE>
<S> <C>
REPRESENTATIONS AND WARRANTIES.............................. A-13
</TABLE>
<TABLE>
<C> <S> <C> <C>
3.1 REPRESENTATIONS AND WARRANTIES OF AHP............................ A-13
A-13
(a) ORGANIZATION, STANDING AND POWER; SUBSIDIARIES..............
A-13
(b) CAPITAL STRUCTURE...........................................
A-14
(c) AUTHORITY; NO CONFLICTS.....................................
A-15
(d) REPORTS AND FINANCIAL STATEMENTS............................
A-16
(e) INFORMATION SUPPLIED........................................
A-16
(f) BOARD APPROVAL..............................................
A-17
(g) VOTE REQUIRED...............................................
A-17
(h) LITIGATION; COMPLIANCE WITH LAWS............................
A-17
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS........................
A-18
(j) ENVIRONMENTAL MATTERS.......................................
A-19
(k) INTELLECTUAL PROPERTY.......................................
A-19
(l) BROKERS OR FINDERS..........................................
A-19
(m) OPINIONS OF AHP FINANCIAL ADVISORS..........................
A-19
(n) ACCOUNTING MATTERS..........................................
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C> <C>
A-19
(o) TAXES.......................................................
A-20
(p) CERTAIN CONTRACTS...........................................
A-20
(q) AHP STOCKHOLDER RIGHTS PLAN.................................
3.2 REPRESENTATIONS AND WARRANTIES OF WARNER-LAMBERT................. A-20
A-20
(a) ORGANIZATION, STANDING AND POWER; SUBSIDIARIES..............
A-21
(b) CAPITAL STRUCTURE...........................................
A-22
(c) AUTHORITY; NO CONFLICTS.....................................
A-23
(d) REPORTS AND FINANCIAL STATEMENTS............................
A-23
(e) INFORMATION SUPPLIED........................................
A-23
(f) BOARD APPROVAL..............................................
A-24
(g) VOTE REQUIRED...............................................
A-24
(h) LITIGATION; COMPLIANCE WITH LAWS............................
A-24
(i) ABSENCE OF CERTAIN CHANGES OR EVENTS........................
A-25
(j) ENVIRONMENTAL MATTERS.......................................
A-25
(k) INTELLECTUAL PROPERTY.......................................
A-25
(l) BROKERS OR FINDERS..........................................
A-26
(m) OPINION OF WARNER-LAMBERT FINANCIAL ADVISOR.................
A-26
(n) ACCOUNTING MATTERS..........................................
A-26
(o) TAXES.......................................................
A-26
(p) CERTAIN CONTRACTS...........................................
A-26
(q) WARNER-LAMBERT STOCKHOLDER RIGHTS PLAN......................
3.3 REPRESENTATIONS AND WARRANTIES OF AHP AND MERGER SUB............. A-26
A-26
(a) ORGANIZATION................................................
A-26
(b) CORPORATE AUTHORIZATION.....................................
A-27
(c) NON-CONTRAVENTION...........................................
A-27
(d) NO BUSINESS ACTIVITIES......................................
ARTICLE IV
</TABLE>
<TABLE>
<S> <C>
COVENANTS RELATING TO CONDUCT OF BUSINESS................... A-27
</TABLE>
<TABLE>
<C> <S> <C> <C>
4.1 COVENANTS OF AHP................................................. A-27
A-27
(a) ORDINARY COURSE.............................................
A-27
(b) DIVIDENDS; CHANGES IN SHARE CAPITAL.........................
A-28
(c) ISSUANCE OF SECURITIES......................................
A-28
(d) GOVERNING DOCUMENTS.........................................
A-28
(e) NO ACQUISITIONS.............................................
A-28
(f) NO DISPOSITIONS.............................................
A-28
(g) INVESTMENTS; INDEBTEDNESS...................................
A-29
(h) POOLING; TAX-FREE QUALIFICATION.............................
A-29
(i) COMPENSATION................................................
A-29
(j) ACCOUNTING METHODS; INCOME TAX ELECTIONS....................
A-29
(k) CERTAIN AGREEMENTS..........................................
A-29
(l) NO CHANGE OR AMENDMENT TO RIGHTS AGREEMENT..................
A-29
(m) NO RELATED ACTIONS..........................................
4.2 COVENANTS OF WARNER-LAMBERT...................................... A-29
A-30
(a) ORDINARY COURSE.............................................
A-30
(b) DIVIDENDS; CHANGES IN SHARE CAPITAL.........................
A-30
(c) ISSUANCE OF SECURITIES......................................
A-31
(d) GOVERNING DOCUMENTS.........................................
A-31
(e) NO ACQUISITIONS.............................................
A-31
(f) NO DISPOSITIONS.............................................
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C> <C>
A-31
(g) INVESTMENTS; INDEBTEDNESS...................................
A-32
(h) POOLING; TAX-FREE QUALIFICATION.............................
A-32
(i) COMPENSATION................................................
A-32
(j) ACCOUNTING METHODS; INCOME TAX ELECTIONS....................
A-32
(k) CERTAIN AGREEMENTS..........................................
A-32
(l) NO CHANGE OR AMENDMENT TO RIGHTS AGREEMENT..................
A-32
(m) NO RELATED ACTIONS..........................................
4.3 GOVERNMENTAL FILINGS............................................. A-32
4.4 CONTROL OF OTHER PARTY'S BUSINESS................................ A-32
ARTICLE V
</TABLE>
<TABLE>
<S> <C>
ADDITIONAL AGREEMENTS....................................... A-33
</TABLE>
<TABLE>
<C> <S> <C> <C>
5.1 PREPARATION OF PROXY STATEMENT; STOCKHOLDERS MEETINGS............ A-33
5.2 NEWCO BOARD OF DIRECTORS; EXECUTIVE OFFICERS; NAME; A-35
HEADQUARTERS.....................................................
5.3 ACCESS TO INFORMATION............................................ A-36
5.4 REASONABLE BEST EFFORTS.......................................... A-36
5.5 ACQUISITION PROPOSALS............................................ A-38
5.6 EMPLOYEE BENEFITS MATTERS........................................ A-39
5.7 FEES AND EXPENSES................................................ A-40
5.8 DIRECTORS' AND OFFICERS' INDEMNIFICATION AND INSURANCE........... A-40
5.9 PUBLIC ANNOUNCEMENTS............................................. A-40
5.10 ACCOUNTANT'S LETTERS............................................. A-41
5.11 LISTING OF SHARES OF AHP COMMON STOCK............................ A-41
5.12 DIVIDENDS........................................................ A-41
5.13 AFFILIATES....................................................... A-42
5.14 SECTION 16 MATTERS............................................... A-42
5.15 SPECIFIED LITIGATION............................................. A-42
ARTICLE VI
</TABLE>
<TABLE>
<S> <C>
CONDITIONS PRECEDENT........................................ A-43
</TABLE>
<TABLE>
<C> <S> <C> <C>
6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER....... A-43
A-43
(a) STOCKHOLDER APPROVAL........................................
A-43
(b) NO INJUNCTIONS OR RESTRAINTS, ILLEGALITY....................
A-43
(c) HSR ACT; EC MERGER REGULATION...............................
A-43
(d) GOVERNMENTAL AND REGULATORY APPROVALS.......................
A-43
(e) NYSE LISTING................................................
A-43
(f) EFFECTIVENESS OF THE FORM S-4...............................
A-43
(g) POOLING.....................................................
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF AHP AND MERGER SUB....... A-44
A-44
(a) REPRESENTATIONS AND WARRANTIES..............................
A-44
(b) PERFORMANCE OF OBLIGATIONS OF WARNER-LAMBERT................
A-44
(c) TAX OPINION.................................................
A-44
(d) WARNER-LAMBERT RIGHTS AGREEMENT.............................
6.3 ADDITIONAL CONDITIONS TO OBLIGATIONS OF WARNER-LAMBERT........... A-44
A-44
(a) REPRESENTATIONS AND WARRANTIES..............................
A-44
(b) PERFORMANCE OF OBLIGATIONS OF AHP...........................
A-45
(c) TAX OPINION.................................................
A-45
(d) AHP RIGHTS AGREEMENT........................................
A-45
(e) AMENDMENTS..................................................
A-45
(f) SETTLEMENT AGREEMENT........................................
</TABLE>
A-4
<PAGE>
<TABLE>
<CAPTION>
PAGE
--------
<C> <S> <C> <C>
ARTICLE VII
</TABLE>
<TABLE>
<S> <C>
TERMINATION AND AMENDMENT................................... A-45
</TABLE>
<TABLE>
<C> <S> <C> <C>
7.1 TERMINATION...................................................... A-45
7.2 EFFECT OF TERMINATION............................................ A-47
7.3 AMENDMENT........................................................ A-51
7.4 EXTENSION; WAIVER................................................ A-51
ARTICLE VIII
</TABLE>
<TABLE>
<S> <C>
GENERAL PROVISIONS.......................................... A-51
</TABLE>
<TABLE>
<C> <S> <C> <C>
8.1 NON-SURVIVAL OF REPRESENTATIONS, WARRANTIES AND AGREEMENTS....... A-51
8.2 NOTICES.......................................................... A-51
8.3 INTERPRETATION................................................... A-52
8.4 COUNTERPARTS..................................................... A-52
8.5 ENTIRE AGREEMENT; NO THIRD PARTY BENEFICIARIES................... A-52
8.6 GOVERNING LAW.................................................... A-52
8.7 SEVERABILITY..................................................... A-52
8.8 ASSIGNMENT....................................................... A-53
8.9 SUBMISSION TO JURISDICTION; WAIVERS.............................. A-53
8.10 ENFORCEMENT...................................................... A-53
8.11 DEFINITIONS...................................................... A-53
</TABLE>
A-5
<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").
WITNESSETH:
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;
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
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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 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 directors of the Surviving Corporation until the
earlier of their resignation or removal or otherwise ceasing to be a
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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.
(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
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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 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 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
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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 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.
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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 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 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
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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 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
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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.
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 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
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$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 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 (collectively, the "AHP STOCKHOLDER APPROVAL"). The execution and
delivery of this Agreement and
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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 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
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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 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.
(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
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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.
(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,
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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 (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 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.
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(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 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.
(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"
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(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 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
Significant
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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, 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
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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 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 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.
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(d) REPORTS AND FINANCIAL STATEMENTS.
(i) Warner-Lambert has filed all required registration statements,
prospectuses, reports, schedules, forms, statements and other documents
required to be filed by it with the SEC since January 1, 1998 (collectively,
including all exhibits thereto, the "WARNER-LAMBERT SEC REPORTS"). 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 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 that this
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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-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
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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 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 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.
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(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 (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).
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(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 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.
(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.
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(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.
(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.
(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
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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 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
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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
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 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
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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
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
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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 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.
(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
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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 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
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Warner-Lambert and the holders of Warner-Lambert Common Stock as may be
reasonably requested in 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 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
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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 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
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officers of Newco as of the Effective Time in 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.
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
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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 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 Agreement pursuant to
Article VII; provided that the foregoing is subject in all respects to the last
sentence of Section 5.4(a).
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(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 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
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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.
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
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
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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 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
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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 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 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.
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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.
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.
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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.
(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 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
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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 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
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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 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 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
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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);
(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.
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"SETTLEMENT AGREEMENT" shall have the meaning set forth in the
Memorandum of Understanding.
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 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,
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(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 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
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of Directors, (B) AHP shall terminate this Agreement pursuant to
Section 7.1(h), (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
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,
(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
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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 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).
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(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.
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.
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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.
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
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nevertheless remain in full force and effect so long as the economic or legal
substance of the transactions contemplated hereby is not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties hereto
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in an acceptable manner in
order that the transactions contemplated hereby are consummated as originally
contemplated to the greatest extent possible.
8.8 ASSIGNMENT. Neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto, in whole
or in part (whether by operation of law or otherwise), without the prior written
consent of the other party, and any attempt to make any such assignment without
such consent shall be null and void, except that Merger Sub may assign, in its
sole discretion, any or all of its rights, interests and obligations under this
Agreement to any direct wholly owned Subsidiary of 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 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.
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(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.
(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 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
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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.
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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.
<TABLE>
<S> <C> <C>
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ JOHN R. STAFFORD
-----------------------------------------
Name: John R. Stafford
Title: Chairman, President and
Chief Executive Officer
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, President and
Chief Executive Officer
</TABLE>
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APPENDIX B
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 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)
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of the Merger Agreement are not applicable, and (y) prior to the 90(th) 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 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.
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It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act and
(ii) the reference to restrictions pursuant to this Agreement in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions of
this Agreement under circumstances that do not require the retention of such
reference.
4. AUTHORIZED STOCK. Issuer hereby represents and warrants to Grantee that
Issuer has taken all necessary corporate and other action to authorize and
reserve and to permit it to issue, 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 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
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<PAGE>
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 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.
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(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 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 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.
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(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.
(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).
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(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 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.
(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.
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(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 Confidentiality Agreement to
the extent necessary to permit Grantee to exercise the Option and purchase the
Option Shares as herein provided.
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.
<TABLE>
<S> <C> <C>
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ JOHN R. STAFFORD
-----------------------------------------
Name: John R. Stafford
Title: Chairman, President and
Chief Executive Officer
WARNER-LAMBERT COMPANY
By: /s/ LODEWIJK J.R. DE VINK
-----------------------------------------
Name: Lodewijk J.R. de Vink
Title: Chairman, President and
Chief Executive Officer
</TABLE>
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APPENDIX C
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 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)
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of the Merger Agreement are not applicable, and (y) prior to the 90(th) 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 (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.
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It is understood and agreed that (i) the reference to restrictions arising under
the Securities Act in the above legend shall be removed by delivery of
substitute certificate(s) without such reference if Grantee shall have delivered
to Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel
in form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act and
(ii) the reference to restrictions pursuant to this Agreement in the above
legend shall be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions of
this Agreement under circumstances that do not require the retention of such
reference.
4. AUTHORIZED STOCK. Issuer hereby represents and warrants to Grantee that
Issuer has taken all necessary corporate and other action to authorize and
reserve and to permit it to issue, 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 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
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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 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.
C-4
<PAGE>
(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 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 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-5
<PAGE>
(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.
(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).
C-6
<PAGE>
(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 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.
(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.
C-7
<PAGE>
(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.
(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.
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.
<TABLE>
<S> <C> <C>
WARNER-LAMBERT COMPANY
By: /s/ LODEWIJK J.R. DE VINK
-----------------------------------------
Name: Lodewijk J.R. de Vink
Title: Chairman, President and
Chief Executive Officer
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ JOHN R. STAFFORD
-----------------------------------------
Name: John R. Stafford
Title: Chairman, President and
Chief Executive Officer
</TABLE>
C-8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Under Delaware law, the directors and officers of AHP are entitled, under
certain circumstances, to be indemnified by AHP against all expenses and
liabilities incurred or imposed upon them as a result of suits brought against
them as such directors or officers, if they act in good faith and in a manner
they reasonably believe to be in or not opposed to the best interests of AHP,
and, with respect to any criminal action or proceeding, have no reasonable cause
to believe their conduct was unlawful, except that no indemnification shall be
made against expenses in respect of any claim, issue or matter as to which they
shall have been adjudged to be liable to AHP, unless and only to the extent that
the court in which such action or suit was brought shall determine upon
application that, despite the adjudication of liability but in view of all the
circumstances of the case, they are fairly and reasonably entitled to be
indemnified for such expenses which such court shall deem proper. Any such
indemnification may be made by AHP only as authorized in each specified case
upon a determination by the stockholders or disinterested directors or a
committee of such directors designated by a majority of such directors that
indemnification is proper in the circumstances because the indemnitee has met
the applicable statutory standard of conduct. Expenses incurred by a director or
an officer of AHP in a suit or proceeding may be paid by AHP in advance of the
final disposition of such suit or proceeding upon receipt of an undertaking by
or on behalf of such director or officer to repay such amount if it shall
ultimately be determined that such person is not entitled to be indemnified by
AHP.
Article Ninth of the AHP certificate of incorporation provides that a
director shall not be liable to AHP or its stockholders for monetary damages for
any breach of fiduciary duty by such a director as a director, except for
liability (i) for breach of the director's duty of loyalty to AHP or its
stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under the Delaware
statutory provisions making directors personally liable for unlawful dividends
or unlawful stock repurchases or redemptions, or (iv) for any transaction from
which the director derived an improper personal benefit.
The by-laws of AHP provide that the officers and directors of AHP and
certain others shall be indemnified substantially to the same extent permitted
by Delaware law.
AHP maintains a standard policy of officers' and directors' liability
insurance.
ITEM 21(A). EXHIBITS
See Exhibit Index
ITEM 22. UNDERTAKINGS
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933, as amended;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high end of the estimated
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<PAGE>
maximum offering range may be reflected in the form of prospectus filed
with the SEC pursuant to Rule 424(b) if, in the aggregate, the changes in
volume and price represent no more than a 20 percent change in the
maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective registration statement;
(iii) To include any material information with respect to the plan
of distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement;
PROVIDED, HOWEVER, that paragraphs (a)(1)(i) and (a)(1)(ii) do not apply if the
registration statement is on Form S-3, Form S-8 or Form F-3, and the information
required to be included in a post-effective amendment by those paragraphs is
contained in periodic reports filed with or furnished to the SEC by the
registrant pursuant to Section 13 or 15(d) of the Securities Exchange Act of
1934 that are incorporated by reference in the registration statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, as amended, each such post-effective amendment shall
be deemed to be a new registration statement relating to the securities
offered therein, and the offering of such securities at that time shall be
deemed to be the initial BONA FIDE offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(b) The undersigned registrant hereby undertakes that, for the purpose of
determining any liability under the Securities Act of 1933, as amended, each
filing of the Registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 (and, where applicable, each filing
of an employee benefit plan's annual report pursuant to Section 15(d) of the
Securities Exchange Act of 1934, as amended) that is incorporated by reference
in the registration statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(c) The undersigned registrant hereby undertakes as follows: that prior to
any public reoffering of the securities registered hereunder through use of a
prospectus which is a part of this registration statement, by any person or
party who is deemed to be an underwriter within the meaning of Rule 145(c), the
issuer undertakes that such reoffering prospectus will contain the information
called for by the applicable registration form with respect to reofferings by
persons who may be deemed underwriters in addition to the information called for
by the other items of the applicable form.
(d) The registrant undertakes that every prospectus: (i) that is filed
pursuant to paragraph (c) immediately preceding, or (ii) that purports to meet
the requirements of Section 10(a)(3) of the Securites Act of 1933, as amended
and is used in connection with an offering of securities subject to Rule 415,
will be filed as a part of an amendment to the registration statement and will
not be used until such an amendment is effective, and that, for purposes of
determining any liability under the Securities Act of 1933, as amended, each
such post-effective amendment shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial BONA FIDE offering thereof.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933, as amended may be permitted to directors, officers and controlling
persons of the registrant pursuant to the foregoing provisions, or otherwise,
the registrant has been advised that in the opinion of the SEC such
indemnification is against public policy as expressed in the Securites Act of
1933, as amended and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
registrant of expenses incurred or paid by a director, officer or controlling
person of the registrant in the successful defense of any action, suit or
proceeding) is asserted by such
II-2
<PAGE>
director, officer or controlling person in connection with the securities being
registered, the registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securites Act of 1933, as amended, and will be
governed by the final adjudication of such issue.
(f) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this Form, within one business day of receipt of
such request, and to send the incorporated documents by first class mail or
other equally or more prompt means. This includes information contained in
documents filed subsequent to the effective date of the registration statement
through the date of responding to the request.
(g) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the registrant has duly
caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the city of Madison, state of New
Jersey, on December 17, 1999.
<TABLE>
<S> <C> <C>
AMERICAN HOME PRODUCTS CORPORATION
By: /s/ JOHN R. STAFFORD
-----------------------------------------
Name: John R. Stafford
Title: Chairman, President and
Chief Executive Officer
</TABLE>
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Robert G. Blount, Louis L. Hoynes, Jr. and Eileen
M. Lach and each of them, his or her true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution, for him or her and
in his or her name, place and stead, in any and all capacities, to sign any and
all amendments (including pre-effective and post-effective amendments) to this
Registration Statement, and to file the same, with all exhibits thereto, and all
documents in connection therewith, with the Securities and Exchange Commission,
granting unto said attorneys-in-fact and agents, and each of them, full power
and authority to do and perform each and every act and thing requisite and
necessary to be done, in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact, and each of them, and agents or
their substitutes may lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed by the following persons in the
capacities indicated as of December 17, 1999.
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
Principal Executive Officer:
/s/ JOHN R. STAFFORD Chairman, President and Chief Executive
------------------------------------------- Officer
John R. Stafford
Principal Financial Officer:
/s/ ROBERT G. BLOUNT Senior Executive Vice President and Director
-------------------------------------------
Robert G. Blount
Principal Accounting Officer:
/s/ PAUL J. JONES Vice President and Comptroller
-------------------------------------------
Paul J. Jones
Directors:
/s/ CLIFFORD L. ALEXANDER, JR. Director
-------------------------------------------
Clifford L. Alexander, Jr.
</TABLE>
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<PAGE>
<TABLE>
<CAPTION>
SIGNATURES TITLE
---------- -----
<C> <S>
/s/ FRANK A. BENNACK, JR. Director
-------------------------------------------
Frank A. Bennack, Jr.
/s/ ROBERT ESSNER Director
-------------------------------------------
Robert Essner
/s/ JOHN D. FEERICK Director
-------------------------------------------
John D. Feerick
/s/ JOHN P. MASCOTTE Director
-------------------------------------------
John P. Mascotte
/s/ MARY LAKE POLAN, M.D., PH.D. Director
-------------------------------------------
Mary Lake Polan, M.D., Ph.D.
/s/ IVAN G. SEIDENBERG Director
-------------------------------------------
Ivan G. Seidenberg
/s/ JOHN R. TORELL III Director
-------------------------------------------
John R. Torell III
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<C> <S>
2.1 Agreement and Plan of Merger, dated as of November 3, 1999
among American Home Products Corporation ("AHP"), Wolverine
Sub Corp. and Warner-Lambert Company ("Warner-Lambert"),
attached as Appendix A to the Joint Proxy
Statement/Prospectus contained in this Registration
Statement.
3.1 AHP Restated Certificate of Incorporation, as amended
through April 23, 1998, is incorporated herein by reference
to Exhibit 3.1 of AHP's Form 10-A, dated May 4, 1998.
3.2 AHP's By-Laws, as amended through April 23, 1998, are
incorporated by reference to Exhibit 3.2 of AHP's Form 10-A,
dated May 4, 1998.
4.1 Indenture, dated as of April 10, 1992, between AHP and The
Chase Manhattan Bank (successor to Chemical Bank), as
Trustee, is incorporated by reference to Exhibit 2 of AHP's
Form 8-A, dated August 25, 1992 (File Number 1-1225).
4.2 Supplemental Indenture, dated October 13, 1992, between AHP
and The Chase Manhattan Bank (successor to Chemical Bank),
as Trustee, is incorporated by reference to AHP's Form 10-Q
for the quarter ended September 30, 1992 (File Number
1-1225).
4.3 Rights Agreement, dated as of October 13, 1999, by and
between AHP and ChaseMellon Shareholder Services, L.L.C., as
Rights Agent, is incorporated herein by reference to Exhibit
4.1 of AHP's Form 8-A, dated October 14, 1999.
4.4 Amendment to Rights Agreement, dated as of November 3, 1999,
between AHP and ChaseMellon Shareholder Services L.L.C., as
Rights Agent, is incorporated by reference to Exhibit 4.3 of
AHP's Form 8-A/A dated November 18, 1999.
4.5 Certificate of Designation of Series A Junior Participating
Preferred Stock of AHP is incorporated herein by reference
to Exhibit 4.2 of AHP's Form 8-A, dated October 14, 1999.
5.1* Validity Opinion of Louis L. Hoynes, Jr., Esq.
8.1* Tax Opinion of Simpson Thacher & Bartlett.
8.2* Tax Opinion of Skadden, Arps, Slate, Meagher & Flom LLP.
10.1 B Credit Agreement, dated as of September 9, 1994, among
AHP, American Home Food Products, Inc., Sherwood Medical
Company, A.H. Robins Company, Incorporated, the several
banks and other financial institutions from time to time
parties thereto and The Chase Manhattan Bank (successor to
Chemical Bank), as agent for the lenders thereunder, filed
as Exhibit 11(b)(3) to Amendment No. 7 to the Schedule
14D-1, dated September 22, 1994 (File Number 1-1225) is
hereby incorporated herein by reference.
10.2 First Amendment to B Credit Agreement, dated as of August 4,
1995, among AHP, American Home Food Products, Inc., Sherwood
Medical Company, A.H. Robins Company, Incorporated, the
several banks and other financial institutions from time to
time parties thereto and The Chase Manhattan Bank (successor
to Chemical Bank), as agent for the lenders thereunder is
incorporated by reference to Exhibit 10.4 of AHP's Annual
Report on Form 10-K for the year ended December 31, 1995.
10.3 Second Amendment to B Credit Agreement, dated as of August
2, 1996, among AHP, American Home Food Products, Inc.,
Sherwood Medical Company, A.H. Robins Company, Incorporated,
the several banks and other financial institutions from time
to time parties thereto and The Chase Manhattan Bank, as
agent for the lenders thereunder, is incorporated by
reference to Exhibit 10.6 of AHP's Annual Report on Form
10-K for the year ended December 31, 1996.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.4 Third Amendment to B Credit Agreement, dated as of July 31,
1997, among AHP, Sherwood Medical Company, A.H. Robins
Company, Incorporated, AC Acquisition Holding Company, the
several banks and other financial institutions from time to
time parties thereto and The Chase Manhattan Bank, as agent
for the lenders thereunder, is incorporated by reference to
Exhibit 10.8 of AHP's Annual Report on Form 10-K for the
year ended December 31, 1997.
10.5 Letter, dated March 26, 1998, terminating the $2,500,000,000
A Credit Agreement and amending the $2,500,000,000 B Credit
Agreement, each among American Home Products Corporation, AC
Acquisition Holding Company, A.H. Robins Company,
Incorporated, the lender parties thereto and The Chase
Manhattan Bank, as agent, each dated as of September 9, 1994
and as amended is incorporated by reference to Exhibit 10.1
of AHP's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1998.
10.6 1980 Stock Option Plan, as amended is incorporated by
reference to Exhibit 10.3 of AHP's Annual Report on Form
10-K for the year ended December 31, 1991 (File Number
1-1225).
10.7 Amendment to the 1980 Stock Option Plan is incorporated by
reference to Exhibit 10.7 of AHP's Annual Report on Form
10-K for the year ended December 31, 1995.
10.8 1985 Stock Option Plan, as amended is incorporated by
reference to Exhibit 10.4 of AHP's Annual Report on Form
10-K for the year ended December 31, 1991 (File Number
1-1225).
10.9 Amendment to the 1985 Stock Option Plan is incorporated by
reference to Exhibit 10.9 of AHP's Annual Report on Form
10-K for the year ended December 31, 1995.
10.10 Amendment to the 1985 Stock Option Plan is incorporated by
reference to Exhibit 10.12 of AHP's Annual Report on Form
10-K for the year ended December 31, 1996.
10.11 1990 Stock Incentive Plan is incorporated by reference to
Exhibit 28 of AHP's Form S-8 Registration Statement File No.
33-41434 under the Securities and Exchange Act of 1933,
filed June 28, 1991 (File Number 1-1225).
10.12 Amendment to the 1990 Stock Incentive Plan is incorporated
by reference to Exhibit 10.13 of AHP's Annual Report on Form
10-K for the year ended December 31, 1995.
10.13 Amendment to the 1990 Stock Incentive Plan is incorporated
by reference to Exhibit 10.21 of AHP's Annual Report on Form
10-K for the year ended December 31, 1996.
10.14 1993 Stock Incentive Plan, as amended to date, is
incorporated by reference to Appendix III of AHP's
definitive Proxy Statement filed March 18, 1999.
10.15 1996 Stock Incentive Plan, as amended to date, is
incorporated by reference to Appendix II of AHP's definitive
Proxy Statement filed March 18, 1999.
10.16 1999 Stock Incentive Plan is incorporated by reference to
Appendix I of AHP's definitive Proxy Statement filed March
18, 1999.
10.17 Form of Stock Option Agreement (phased vesting) is
incorporated by reference to AHP's Annual Report on Form
10-K for the year ended December 31, 1998.
10.18 Form of Special Stock Option Agreement (phased vesting) is
incorporated by reference to Exhibit 10.27 of AHP's Annual
Report on Form 10-K for the year ended December 31, 1995.
10.19 Form of Special Stock Option Agreement (three-year vesting)
is incorporated by reference to Exhibit 10.28 of AHP's
Annual Report on Form 10-K for the year ended December 31,
1995.
10.20 Amendment to Special Stock Option Agreement is incorporated
by reference to Exhibit 10.30 of AHP's Annual Report on Form
10-K for the year ended December 31, 1996.
10.21 Form of Stock Option Agreement (transferable options) is
incorporated by reference to AHP's Annual Report on Form
10-K for the year ended December 31, 1998.
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.22 Form of Restricted Stock Performance Award Agreement under
the 1990 Stock Incentive Plan, 1993 Stock Incentive Plan and
1996 Stock Incentive Plan for a three year period is
incorporated by reference to AHP's Annual Report on Form
10-K for the year ended December 31, 1998.
10.23 Form of Restricted Stock Performance Award Agreement under
the 1990 Stock Incentive Plan, 1993 Stock Incentive Plan and
1996 Stock Incentive Plan for a two year period is
incorporated by reference to AHP's Annual Report on Form
10-K for the year ended December 31, 1998.
10.24 Special Restricted Stock Performance Award Agreement under
the 1996 Stock Incentive Plan for William J. Murray is
incorporated by reference to AHP's Annual Report on Form
10-K for the year ended December 31, 1998.
10.25 Restricted Stock Trust Agreement under the 1993 Stock
Incentive Plan is incorporated by reference to Exhibit 10.23
of AHP's Annual Report on Form 10-K for the year ended
December 31, 1995.
10.26 Management Incentive Plan, as amended to date, is
incorporated by reference to AHP's Annual Report on Form
10-K for the year ended December 31, 1998.
10.27 1994 Restricted Stock Plan for Non-Employee Directors, as
amended to date, is incorporated by reference to AHP's
Annual Report on Form 10-K for the year ended December 31,
1998.
10.28 Stock Option Plan for Non-Employee Directors is incorporated
by reference to AHP's Annual Report on Form 10-K for the
year ended December 31, 1998.
10.29 Savings Plan, as amended, is incorporated by reference to
Exhibit 99 of AHP's Form S-8 Registration Statement File No.
33-50149 under the Securities and Exchange Act of 1933,
filed September 1, 1993 (File Number 1-1225).
10.30 Retirement Plan for Outside Directors, as amended on January
27, 1994, is incorporated by reference to Exhibit 10.12 of
AHP's Annual Report on Form 10-K for the year ended December
31, 1993.
10.31 Directors' Deferral Plan is incorporated by reference to
Exhibit 10.37 of AHP's Annual Report on Form 10-K for the
year ended December 31, 1996.
10.32 Deferred Compensation Plan, as amended to date, is
incorporated by reference to AHP's Annual Report on Form
10-K for the year ended December 31, 1998.
10.33 Executive Retirement Plan is incorporated by reference to
Exhibit 10.2 of AHP's Quarterly Report on Form 10-Q for the
quarter ended September 30, 1997.
10.34 Supplemental Employee Savings Plan is incorporated by
reference to Exhibit 10.42 of AHP's Annual Report on Form
10-K for the year ended December 31, 1997.
10.35 Supplemental Executive Retirement Plan is incorporated by
reference to Exhibit 10.6 of AHP's Annual Report on Form
10-K for the year ended December 31, 1990 (File Number
1-1225).
10.36 American Cyanamid Company's Supplemental Executive
Retirement Plan is incorporated by reference to Exhibit 10K
of American Cyanamid Company's Annual Report on Form 10-K
for the year ended December 31, 1998 (File Number 1-3426).
10.37 American Cyanamid Company's Supplemental Employees
Retirement Plan Trust Agreement, dated September 19, 1989,
between American Cyanamid Company and Morgan Guaranty Trust
Company of New York is incorporated by reference to Exhibit
10K of American Cyanamid Company's Annual Report on Form
10-K for the year ended December 31, 1989 (File Number
1-3426).
10.38 American Cyanamid Company's ERISA Excess Retirement Plan is
incorporated by reference to Exhibit 10N of American
Cyanamid Company's Annual Report on Form 10-K for the year
ended December 31, 1988 (File Number 1-3426).
</TABLE>
<PAGE>
<TABLE>
<C> <S>
10.39 American Cyanamid Company's Excess Retirement Plan Trust
Agreement, dated September 19, 1989, between American
Cyanamid Company and Morgan Guaranty Trust Company of New
York is incorporated by reference to Exhibit 10M of American
Cyanamid Company's Annual Report on Form 10-K for the year
ended December 31, 1989 (File Number 1-3426).
10.40 Form of Severance Agreement entered into between AHP and the
executive officers specified therein is incorporated by
reference to Exhibit 10.43 of AHP's Annual Report on Form
10-K for the year ended December 31, 1997.
10.41 Form of Severance Agreement entered into between AHP and the
executive officers specified therein is incorporated by
reference to Exhibit 10.1 of AHP's Quarterly Report on Form
10-Q for the quarter ended June 30, 1998.
12 Computation of Ratio of Earnings to Fixed Charges is
incorporated by reference to Exhibit 12 of AHP's Annual
Report on Form 10-K for the year ended December 31, 1998.
13 1998 AHP Annual Report to Shareholders is incorporated by
reference to Exhibit 13 to the AHP Annual Report on
Form 10-K for the year ended December 31, 1998. Such report,
except for those portions thereof which are expressly
incorporated by reference herein, is furnished solely for
the information of the Commission and is not to be deemed
"filed" as part of this filing.
21 Subsidiaries of AHP is incorporated by reference to
Exhibit 21 of AHP's Annual Report on Form 10-K for the year
ended December 31, 1998.
23.1 Consent of Independent Public Accountants relating to their
report dated January 26, 1999, consenting to the
incorporation thereof in the Registration Statements on Form
S-3 (File Nos. 33-45324, and 33-57339) and on Form S-8 (File
Nos. 2-96127, 33-24068, 33-41434, 33-53733, 33-55449,
33-45970, 33-14458, 33-50149, 33-55456 and 333-15509) by
reference to the Annual Report on Form 10-K of AHP filed for
the year ended December 31, 1998.
23.2 Consent of Independent Public Accountants relating to their
report, dated April 22, 1999, consenting to the
incorporation thereof in the Registration Statement on Form
S-8 (File No. 333-76939) by reference.
23.3 Consent of Arthur Andersen LLP.
23.4 Consent of PricewaterhouseCoopers LLP.
23.5* Consent of Simpson Thacher & Bartlett (included in Exhibit
8.1).
23.6* Consent of Skadden, Arps, Slate, Meagher & Flom LLP
(included in Exhibit 8.2).
23.7* Consent of Louis L. Hoynes, Jr., Esq. (included in Exhibit
5.1).
23.8* Consent of Bear, Stearns & Co. Inc.
23.9* Consent of Morgan Stanley & Co. Incorporated.
23.10* Consent of Chase Securities Inc.
24.1 Power of Attorney (included in Signature Page).
99.1 Form of AHP Proxy Card.
99.2 Form of Warner-Lambert Proxy Card.
99.3* Consent of to being named as a director of the
Registrant upon consummation of the Merger Agreement.
99.4 Stock Option Agreement, dated as of November 3, 1999,
between Warner-Lambert, as Issuer, and AHP, as Grantee,
attached as Appendix B to the Joint Proxy
Statement/Prospectus contained in this Registration
Statement.
99.5 Stock Option Agreement, dated as of November 3, 1999,
between AHP, as Issuer, and Warner-Lambert, as Grantee,
attached as Appendix C to the Joint Proxy
Statement/Prospectus contained in this Registration
Statement.
</TABLE>
* To be filed by amendment
<PAGE>
EXHIBIT 23.3
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference in this Joint Proxy Statement/Prospectus of our reports dated January
26, 1999 included or incorporated by reference in American Home Products
Corporation's Form 10-K for the year ended December 31, 1998 and to all
references to our Firm included in this Joint Proxy Statement/Prospectus.
ARTHUR ANDERSEN LLP
New York, New York
December 16, 1999
<PAGE>
EXHIBIT 23.4
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in this Joint Proxy
Statement/Prospectus constituting part of this Registration Statement on
Form S-4 of American Home Products Company of our report dated January 25, 1999,
except for Note 1, as to which the date is December 17, 1999, relating to the
financial statements of Warner-Lambert Company, which appears in the Current
Report on Form 8-K of Warner-Lambert Company dated December 17, 1999. We also
consent to the incorporation by reference our report dated January 25, 1999
relating to the financial statements, which appears in Warner-Lambert Company's
Annual Report to Shareholders of Warner-Lambert Company, which is incorporated
by reference in Warner-Lambert Company's Annual Report on Form 10-K, as amended,
for the year ended December 31, 1998 (such financial statements have not been
restated to give effect to the pooling of interests business combination
consummated with Agouron Pharmaceuticals, Inc. on May 17, 1999). We also consent
to the incorporation by reference of our report dated January 25, 1999 relating
to the Financial Statement Schedule, which appears in such Annual Report on
Form 10-K, as amended (such financial statement schedule has not been restated
to give effect to the pooling of interests business combination consummated with
Agouron Pharmaceuticals, Inc. on May 17, 1999). We also consent to the reference
to us under the heading "Experts" in such Prospectus.
PricewaterhouseCoopers LLP
400 Campus Drive
Florham Park, New Jersey
December 17, 1999
<PAGE>
FORM OF PROXY CARD
AMERICAN HOME PRODUCTS CORPORATION
FIVE GIRALDA FARMS
MADISON, NEW JERSEY 07940
PROXY
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS AND MANAGEMENT.
The undersigned hereby appoints, JOHN R. STAFFORD, LOUIS L. HOYNES, JR. and
EILEEN M. LACH and each of them proxies with power of substitution, to
represent and to vote, as designated below, on behalf of the undersigned at
the Special Meeting of Stockholders of the Corporation to be held on
____________ __, 2000 and at any adjournment thereof on each of the following
matters, as set forth in the Joint Proxy Statement/Prospectus, and upon such
other matters properly coming before the meeting.
(CONTINUED AND TO BE SIGNED IF VOTING BY MAIL ON THE REVERSE SIDE OR FOLLOW THE
INSTRUCTIONS TO VOTE BY TELEPHONE)
YOU CAN VOTE YOUR SHARES IN ONE OF TWO WAYS
VOTE BY TELEPHONE
AVAILABLE TO STOCKHOLDERS IN THE UNITED STATES,
CANADA AND PUERTO RICO. ALL OTHER STOCKHOLDERS
MUST VOTE BY RETURNING THEIR PROXY CARDS.
1. This proxy when properly executed will be voted in the manner
directed by the stockholder. If no direction is given, this proxy will be
voted FOR Items 1, 2 and 3.
OR
2. CALL TOLL FREE [1-800-840-1208] 24 hours a day, 7 days a week
on a Touch Tone telephone and follow the instructions.
PLEASE VOTE
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
Please mark your votes as indicated in this example /X/
Optional Secret Proxy
THE BOARD OF DIRECTORS AND MANAGEMENT RECOMMEND YOU VOTE "FOR" ITEMS 1, 2 AND 3.
ITEM 1 - AMENDMENT TO RESTATED CERTIFICATE OF INCORPORATION
APPROVAL OF AMENDMENT TO AHP'S RESTATED CERTIFICATE OF INCORPORATION TO
INCREASE THE NUMBER OF AUTHORIZED SHARES OF COMMON STOCK AND TO CHANGE THE
NAME OF AHP TO AMERICANWARNER, INC.
ITEM 2 - APPROVAL OF SHARE ISSUANCE
APPROVAL OF ISSUANCE OF SHARES OF AMERICAN HOME PRODUCTS CORPORATION ("AHP")
COMMON STOCK, $.331/3 PAR VALUE PER SHARE ("COMMON STOCK"), TO STOCKHOLDERS
OF WARNER-LAMBERT COMPANY PURSUANT TO THE AGREEMENT AND PLAN OF MERGER AMONG
AHP, WOLVERINE SUB CORP. AND WARNER-LAMBERT COMPANY, DATED AS OF NOVEMBER 3,
1999.
ITEM 3 - AMENDMENT TO BY-LAWS
APPROVAL OF AMENDMENT TO AHP'S BY-LAWS TO INCREASE THE MAXIMUM NUMBER OF
DIRECTORS OF THE AHP BOARD OF DIRECTORS TO 24 MEMBERS.
FOR against abstain
/ / / / / /
/ / / / / /
/ / / / / /
NOTE: Please sign exactly as the name appears above. When shares are held by
joint owners, both should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give full title as such. If a
corporation, please sign full corporate name by President or other authorized
officer. If a partnership, please sign in partnership name by authorized
person.
Signature(s)_______________________________________ Dated____________, 1997
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
[LOGO] VOTE BY TELEPHONE [LOGO]
AVAILABLE TO STOCKHOLDERS IN THE UNITED STATES,
CANADA AND PUERTO RICO. ALL OTHER STOCKHOLDERS
MUST VOTE BY RETURNING THEIR PROXY CARDS.
YOUR VOTE IS IMPORTANT! - YOU CAN VOTE IN ONE OF TWO WAYS:
1. TO VOTE BY PHONE: Call toll-free [1-800-840-1206] on a touch tone telephone
24 hours a day-7 days a week
There is NO CHARGE to you for this call. - Have your proxy card in hand
You will be asked to enter a Control Number, which is located in the box in
the lower right hand corner of this form.
OPTION #1: TO VOTE AS THE BOARD OF DIRECTORS RECOMMENDS ON
ALL PROPOSALS, PRESS 1.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
OPTION #2: IF YOU CHOOSE TO VOTE ON EACH PROPOSAL SEPARATELY, PRESS 0.
YOU WILL HEAR THESE INSTRUCTIONS:
Proposal 1: To have your shares voted FOR, press 1; AGAINST, press 9; ABSTAIN,
press 0.
Proposal 2: To have your shares voted FOR, press 1; AGAINST, press 9; ABSTAIN,
press 0.
Proposal 3: To have your shares voted FOR, press 1; AGAINST, press 9; ABSTAIN,
press 0.
WHEN ASKED, PLEASE CONFIRM YOUR VOTE BY PRESSING 1.
OR
2. VOTE BY PROXY: Mark, sign and date your proxy card and return promptly
in the enclosed envelope.
NOTE: If you vote by telephone, THERE IS NO NEED TO MAIL BACK your Proxy Card.
THANK YOU FOR VOTING.
<PAGE>
FORM OF PROXY CARD
WARNER-LAMBERT COMPANY
PROXY
PROXY FOR THE SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD AT [TIME] ON [DATE] AT [PLACE]
LODEWIJK J.R. DE VINK, ERNEST J. LARINI and GREGORY L. JOHNSON and
each of them, with full power of substitution, are hereby authorized to
represent and to vote and act with respect to all stock of the undersigned at
the Special Meeting of Stockholders of Warner-Lambert Company on ___________
_________, 2000 and any adjournment or adjournments thereof, as designated
herein upon the proposal set forth herein, as set forth in the Joint Proxy
Statement/Prospectus, and, in their discretion, upon such other matters as
may be properly brought before the meeting.
Change of Address
___________________
___________________
___________________
- --------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
<PAGE>
PLEASE MARK YOUR VOTES AS INDICATED IN THIS EXAMPLE /X/
PLEASE VOTE BY RETURNING THE ATTACHED PROXY CARD
THE BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS A VOTE FOR PROPOSAL (1), THE
APPROVAL OF THE MERGER AND ADOPTION OF THE MERGER AGREEMENT.
1. Adoption of the Agreement and Plan of Merger,
dated as of November 3, 1999, among Warner-Lambert Company, American Home
Products Corporation and Wolverine Sub Corp. and the approval of the merger
contemplated thereby.
FOR AGAINST ABSTAIN
/ / / / / /
/ / PLEASE SEND AN ADMITTANCE CARD
IF YOU PLAN TO ATTEND THE SPECIAL MEETING IN PERSON, PLEASE CHECK THE BOX
ABOVE AND AN ADMITTANCE CARD WILL BE MAILED TO YOU.
Vote, sign and date this Proxy and return it promptly in the enclosed
envelope. No postage is required if mailed in the United States.
/ / CHANGE OF ADDRESS ON REVERSE SIDE
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF WARNER-LAMBERT COMPANY.
WHEN PROPERLY EXECUTED IT WILL BE VOTED AS DIRECTED BY THE STOCKHOLDER BUT,
UNLESS OTHERWISE SPECIFIED, IT WILL BE VOTED FOR PROPOSAL (1), THE ADOPTION
AND APPROVAL OF THE MERGER AGREEMENT.
VOTE, SIGN AND DATE THIS PROXY AND RETURN IT PROMPTLY IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
Signature __________________________________ Dated_______________
NOTE: Please sign exactly as name appears hereon. Joint owners should each
sign. When signing as attorney, executor, administrator, trustee or
guardian, please give full title as such.
- -------------------------------------------------------------------------------
TRIANGLE FOLD AND DETACH HERE TRIANGLE
