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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2000 Commission file number 1-1225
AMERICAN HOME PRODUCTS CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 13-2526821
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
Five Giralda Farms, Madison, N.J. 07940
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (973) 660-5000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock outstanding as of the close of business on
April 28, 2000:
Number of
Class Shares Outstanding
Common Stock, $0.33-1/3 par value 1,304,197,776
=====================================================================
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
INDEX
Page No.
Part I - Financial Information 2
Item 1. Financial Statements:
Consolidated Condensed Balance Sheets -
March 31, 2000 and December 31, 1999 3
Consolidated Condensed Statements of Income -
Three Months Ended March 31, 2000 and 1999 4
Consolidated Condensed Statements of Changes in Stockholders'
Equity - Three Months Ended March 31, 2000 and 1999 5
Consolidated Condensed Statements of Cash Flows -
Three Months Ended March 31, 2000 and 1999 6
Notes to Consolidated Condensed Financial Statements 7-11
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 12-18
Part II - Other Information 19
Item 1. Legal Proceedings 19
Item 6. Exhibits and Reports on Form 8-K 20
Signature 21
Exhibit Index EX-1
1
<PAGE>
Part I - Financial Information
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
The consolidated condensed financial statements included herein have been
prepared by American Home Products Corporation (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally included in financial
statements prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and regulations; however,
the Company believes that the disclosures are adequate to make the information
presented not misleading. In the opinion of management, the financial
statements include all adjustments necessary to present fairly the financial
position of the Company as of March 31, 2000 and December 31, 1999, and the
results of its operations, cash flows and changes in stockholders' equity for
the three months ended March 31, 2000 and 1999. It is suggested that these
financial statements and management's discussion and analysis of financial
condition and results of operations be read in conjunction with the financial
statements and the notes thereto included in the Company's 1999 Annual Report
on Form 10-K.
2
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED BALANCE SHEETS
(In Thousands Except Per Share Amounts)
March 31, December 31,
2000 1999
------------ ------------
ASSETS
Cash and cash equivalents $2,143,239 $1,892,715
Marketable securities 561,402 520,587
Accounts receivable less allowances 2,245,381 2,389,863
Inventories:
Finished goods 781,227 753,831
Work in progress 522,599 471,327
Materials and supplies 410,953 382,802
------------ ------------
1,714,779 1,607,960
Other current assets including deferred
taxes 1,885,091 1,781,307
Net Assets - Discontinued business held
for sale 4,257,000 4,192,346
------------ ------------
Total Current Assets 12,806,892 12,384,778
Property, plant and equipment 6,681,722 6,392,948
Less accumulated depreciation 2,380,413 2,274,771
------------ ------------
4,301,309 4,118,177
Goodwill and other intangibles, net of
accumulated amortization 4,783,583 4,823,309
Other assets including deferred taxes 1,588,641 1,797,492
------------ ------------
Total Assets $23,480,425 $23,123,756
============ ============
LIABILITIES
Loans payable $859,840 $1,880,816
Trade accounts payable 611,848 562,679
Accrued expenses 4,141,528 3,809,525
Accrued federal and foreign taxes 1,511,585 227,363
------------ ------------
Total Current Liabilities 7,124,801 6,480,383
Long-term debt 3,634,109 3,606,423
Other noncurrent liabilities 5,587,370 5,925,313
Postretirement benefit obligations other
than pensions 881,760 896,890
STOCKHOLDERS' EQUITY
$2 convertible preferred stock, par value
$2.50 per share 59 61
Common stock, par value $0.33-1/3 per
share 434,518 434,639
Additional paid-in capital 3,436,442 3,392,705
Retained earnings 2,860,777 3,000,827
Accumulated other comprehensive loss (479,411) (613,485)
------------ ------------
Total Stockholders' Equity 6,252,385 6,214,747
------------ ------------
Total Liabilities and Stockholders'
Equity $23,480,425 $23,123,756
============ ============
The accompanying notes are an integral part of these consolidated condensed
balance sheets.
3
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF OPERATIONS
(In Thousands Except Per Share Amounts)
Three Months
Ended March 31,
2000 1999
----------- -----------
Net Sales $3,336,495 $2,858,049
----------- -----------
Cost of goods sold 826,573 700,306
Selling, general and administrative expenses 1,213,262 1,061,202
Research and development expenses 442,925 369,967
Interest expense, net 43,141 56,331
Other income, net (52,401) (80,055)
Termination fee, net of related expenses (1,709,380) -
---------- ----------
Income from continuing operations before
federal and foreign taxes 2,572,375 750,298
Provision for federal and foreign taxes 826,366 212,158
---------- ----------
Income from continuing operations 1,746,009 538,140
---------- ----------
Discontinued Operations:
Income from operations of discontinued
agricultural products business (net of
federal and foreign taxes of $57,289
and $47,421 for 2000 and 1999) 103,346 116,778
Loss on disposal of agricultural products
business (including federal and foreign tax
charges of $855,248) (1,572,993) -
---------- ----------
Income (loss) from discontinued operations (1,469,647) 116,778
---------- ----------
Net income $276,362 $654,918
========== ==========
Basic Earnings Per Share from Continuing Operations $1.34 $0.41
Basic Earnings (Loss) Per Share from Discontinued
Operations (1.13) 0.09
---------- ----------
Basic Earnings Per Share $0.21 $0.50
========== ==========
Diluted Earnings Per Share from Continuing
Operations $1.32 $0.40
Diluted Earnings (Loss) Per Share from
Discontinued Operations (1.11) 0.09
---------- ----------
Diluted Earnings Per Share $0.21 $0.49
========== ==========
Dividends per share of common stock $0.230 $0.225
========== ==========
The accompanying notes are an integral part of these consolidated condensed
financial statements.
4
<PAGE>
<TABLE>
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(In Thousands)
Three Months Ended March 31, 2000:
<CAPTION>
$2 Accumulated
Convertible Additional Other Total
Preferred Common Paid-in Retained Comprehensive Stockholders'
Stock Stock Capital Earnings Loss Equity
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 1, 2000 $61 $434,639 $3,392,705 $3,000,827 ($613,485) $6,214,747
Net income 276,362 276,362
Currency translation
adjustments 119,388 119,388
Unrealized gain on marketable
securities 14,686 14,686
------------
Comprehensive income 410,436
------------
Cash dividends declared (300,084) (300,084)
Treasury stock acquired (817) (5,310) (114,232) (120,359)
Common stock issued 620 40,781 41,401
Conversion of preferred stock
and other exchanges (2) 76 8,266 (2,096) 6,244
------------ ------------ ------------ ------------ ------------ ------------
Balance at March 31, 2000 $59 $434,518 $3,436,442 $2,860,777 ($479,411) $6,252,385
============ ============ ============ ============ ============ ============
Three Months Ended March 31, 1999:
$2 Accumulated
Convertible Additional Other Total
Preferred Common Paid-in Retained Comprehensive Stockholders'
Stock Stock Capital Earnings Loss Equity
------------ ------------ ------------ ------------ ------------ ------------
Balance at January 1, 1999 $64 $437,466 $3,072,874 $6,432,729 ($328,337) $9,614,796
Net income 654,918 654,918
Currency translation
adjustments (222,887) (222,887)
Unrealized loss on marketable
securities (52) (52)
------------
Comprehensive income 431,979
------------
Cash dividends declared (294,943) (294,943)
Treasury stock acquired (2,511) (32,492) (399,688) (434,691)
Common stock issued 1,816 116,485 118,301
Conversion of preferred stock
and other exchanges (1) 103 18,655 (4,296) 14,461
------------ ------------ ------------ ------------ ------------ ------------
Balance at March 31, 1999 $63 $436,874 $3,175,522 $6,388,720 ($551,276) $9,449,903
============ ============ ============ ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these consolidated condensed
financial statements.
5
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(In Thousands)
Three Months Ended
March 31,
Operating Activities 2000 1999
------------ -----------
Income from continuing operations $1,746,009 $538,140
Adjustments to reconcile income from
continuing operations to net cash
provided from operating activities:
Gains on sales of other assets (48,941) (67,746)
Depreciation and amortization 142,643 137,766
Deferred income taxes 184,613 34,145
Changes in working capital, net 717,664 22,827
Diet drug litigation payments (639,639) -
Other items, net 61,779 44,196
------------ -----------
Net cash provided from continuing operations 2,164,128 709,328
Net cash used for discontinued operations (260,680) (243,853)
------------ -----------
Net cash provided from operating activities 1,903,448 465,475
------------ -----------
Investing Activities
Purchases of property, plant and equipment (256,462) (154,489)
Proceeds from sales of other assets 65,515 132,604
Proceeds from sales and maturities of
marketable securities 236,614 66,367
Purchases of marketable securities (278,632) (78,116)
------------ -----------
Net cash used for investing activities (232,965) (33,634)
------------ -----------
Financing Activities
Net proceeds from/(repayments of) debt (1,036,295) 348,086
Dividends paid (300,084) (294,943)
Exercises of stock options 41,401 118,301
Purchases of treasury stock (120,359) (434,691)
------------ -----------
Net cash used for financing activities (1,415,337) (263,247)
------------ -----------
Effects of exchange rates on cash balances (4,622) (20,304)
------------ -----------
Increase in cash and cash equivalents 250,524 148,290
Cash and cash equivalents, beginning of
period 1,892,715 1,182,319
------------ -----------
Cash and cash equivalents, end of period $2,143,239 $1,330,609
============ ===========
Supplemental Information
Interest payments $161,581 $108,914
Income tax payments, net of refunds 133,226 193,198
The accompanying notes are an integral part of these consolidated condensed
financial statements.
6
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 1. Discontinued Operations
In March 2000, the Company announced that it signed a definitive
agreement with BASF Aktiengesellschaft (BASF) for the sale of the
agricultural products business. The agricultural products business
manufactures, distributes and sells crop protection and pest control
products, such as herbicides, insecticides and fungicides. Under the
terms of the agreement, which is subject to certain customary
conditions, including regulatory approval, BASF will pay the Company
$3.8 billion in cash and will assume certain debt. As a result, the
Company recorded an estimated after-tax loss on the sale of this
business of $1,572,993,000 or $1.19 per share-diluted and has
reflected this business as a discontinued operation in the 2000 first
quarter. The loss on the sale included anticipated closing costs,
which were more than offset by estimated after-tax operating income of
the agricultural products business of $86,035,000 from April 1, 2000
through June 30, 2000, the anticipated disposal period. The loss on
the sale was due primarily to a difference in the basis of the net
assets being sold for financial reporting purposes compared to that
for tax purposes. This difference related, for the most part, to
goodwill which is not recognized for tax purposes in the proposed
sale. As a result, the transaction will generate a taxable gain,
requiring the recording of a tax provision, in addition to requiring
a write-off of the net assets in excess of the selling price. The
Consolidated Condensed Financial Statements at December 31, 1999 and
March 31, 1999 have been restated to reflect the agricultural
products business as a discontinued operation. The difference between
the net assets - discontinued business held for sale at March 31,
2000 and the $3.8 billion in anticipated proceeds from the sale
represents seasonal assets, primarily accounts receivable, that is
anticipated to convert to cash prior to the closing of this
transaction. Operating results of discontinued operations were as
follows:
Three Months
(In thousands except per share amounts) Ended March 31,
---------------------
2000 1999
---------- ----------
Net Sales $546,790 $584,303
---------- ----------
Income before federal and foreign taxes 160,635 164,199
Provisions for federal and foreign taxes 57,289 47,421
---------- ----------
Income from operations of discontinued
agricultural products business 103,346 116,778
Loss on disposal of agricultural products
business (including federal and
foreign tax charges of $855,248) (1,572,993) -
---------- ----------
Income (Loss) from Discontinued
Operations ($1,469,647) $116,778
========== ==========
Diluted Earnings (Loss) per Share
from Discontinued Operations ($1.11) $0.09
========== ==========
7
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 2. Warner-Lambert Termination Fee
During the 2000 first quarter, the Company and Warner-Lambert Company
terminated their merger agreement. The Company recorded income of
$1,709,380,000 ($1,111,097,000 after-tax or $0.84 per share-diluted)
in income from continuing operations resulting from the receipt of a
$1.8 billion termination fee provided for under the merger agreement
offset, in part, by certain related expenses.
Note 3. Contingencies and Litigation Settlement
The Company is involved in various legal proceedings, including
product liability and environmental matters of a nature considered
normal to its business. It is the Company's policy to accrue for
amounts related to these legal matters if it is probable that a
liability has been incurred and an amount is reasonably estimable.
On April 13, 2000, the Company announced that it will proceed with
the comprehensive, nationwide diet drug settlement to resolve
litigation brought against the Company regarding the use of REDUX
(dexfenfluramine) or PONDIMIN (fenfluramine). The comprehensive,
nationwide settlement is subject to judicial approval (and resolution
of appeals, if any) following a fairness hearing in the U.S. District
Court for the Eastern District of Pennsylvania, which took place on May
2-11, 2000. Of the estimated 5.8 million diet drug users,
approximately 200,000 individuals had registered for the settlement and
approximately 45,000 opted out during the four-month initial opt-out
period ended March 30, 2000. A majority of those who registered have
elected the settlement's Accelerated Implementation Option, which
provides for prompt benefits and resolves the claims of those class
members.
As of March 31, 2000, there was $3,992,780,000 of the REDUX and
PONDIMIN litigation accrual remaining, which reflected individual
settlement payments, legal fees and other items in the 2000 first
quarter totaling $639,639,000. The Company believes that this accrual
is adequate based upon, among other things, the assumption that the
comprehensive, nationwide settlement will receive final judicial
approval. However, the Company will continue to review and analyze
all diet drug matters, including the number and nature of
registrations within the nationwide settlement, opt-out claims and
other matters.
In the opinion of the Company, although the outcome of any legal
proceedings cannot be predicted with certainty, the ultimate
liability of the Company in connection with its legal proceedings
will not have a material adverse effect on the Company's financial
position but could be material to the results of operations in any
one accounting period.
8
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 4. Restructuring Programs
1999 Agricultural Products Restructuring Charge and Asset Impairments
During the 1999 third quarter, the Company recorded a charge of
$113,000,000 to provide for the restructuring of the Company's
agricultural products business. The restructuring will result in the
elimination of approximately 700 positions worldwide. Since the end
of 1999, the Company discontinued its agricultural products business
(see Note 1). Certain restructuring accruals will be assumed by BASF,
which are reflected in net assets - discontinued business held for
sale in the Consolidated Condensed Balance Sheets. In the 2000 first
quarter, the Company continued its personnel reductions and completed
the closure of one research facility. At March 31, 2000, approximately
500 positions have been eliminated under this program. Activity in the
agricultural products restructuring accruals was as follows:
Other
Personnel Closure/
(In thousands) Costs Exit Costs Total
------------------------- ----------- ----------- -----------
Restructuring accruals at $69,888 $10,000 $79,888
December 31, 1999
Cash expenditures (16,140) (2,077) (18,217)
----------- ----------- -----------
Restructuring accruals at
March 31, 2000 $53,748 $7,923 $61,671
=========== =========== ===========
1998 Restructuring Charge and Related Asset Impairments
In December 1998, the Company recorded a special charge for
restructuring and related asset impairments of $343,600,000 to
recognize costs of the reorganization of its worldwide supply chains
and U.S. distribution systems, and the globalization of certain
business units. The restructuring will result in the reduction of
4,100 positions worldwide offset, in part, by 1,000 newly created
positions in the same functions at other locations. Since the end of
1999, the Company has continued its personnel reductions and has
completed the closure of the third and final distribution center. The
manufacturing plants are continuing their phase-out period, and the
Company will begin the disposal process in late 2000. At March 31,
2000, approximately 2,700 positions had been eliminated. The activity
in the restructuring accruals was as follows:
Other
Personnel Closure/
(In thousands) Costs Exit Costs Total
------------------------- ----------- ----------- -----------
Restructuring accruals at $54,753 $79,261 $134,014
December 31, 1999
Cash expenditures (18,705) (2,044) (20,749)
----------- ----------- -----------
Restructuring accruals at
March 31, 2000 $36,048 $77,217 $113,265
=========== =========== ===========
9
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 5. Consolidation of Certain Subsidiaries
Effective January 1, 2000, the financial results of certain
pharmaceutical subsidiaries in Japan and India, which were previously
included on an equity basis, were consolidated in the results of the
Company due to changes in the Company's ability to exercise control
over the operations of these affiliates. The consolidation of the
subsidiaries resulted in higher net sales of 3%; however, it had no
impact on income from continuing operations.
Note 6. Company Data by Operating Segment
The Company has three reportable segments: Pharmaceuticals, Consumer
Health Care, and Corporate and All Other.
Income from Continuing
Operations before Federal
Net Sales and Foreign Taxes (1)
--------------------- ------------------------
Three Months Three Months
(In millions) Ended March 31, Ended March 31,
--------------------- ------------------------
Operating Segment 2000 1999 2000 1999
- --------------------- -------- -------- ---------- --------
Pharmaceuticals $2,740.6 $2,295.8 $754.2 $700.2
Consumer Health Care 595.9 562.2 126.3 123.6
-------- -------- ---------- --------
3,336.5 2,858.0 880.5 823.8
Corporate and All Other (2) - - 1,691.9 (73.5)
-------- -------- ---------- --------
Total $3,336.5 $2,858.0 $2,572.4 $750.3
======== ======== ========== ========
(1) Includes goodwill amortization for 2000 and 1999 as follows:
Pharmaceuticals - $40.2 and $38.5, and Consumer Health Care -
$3.8 and $4.0, respectively.
(2) Corporate and All Other for the 2000 first quarter included
income of $1,709.4 resulting from the receipt of a $1,800.0
termination fee provided for under the merger agreement with
Warner-Lambert Company offset, in part, by certain related
expenses.
10
<PAGE>
AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
Note 7. Earnings per Share
The following table sets forth the computations of Basic Earnings per
Share and Diluted Earnings per Share:
Three Months
Ended March 31,
------------------
(In thousands except per share amounts) 2000 1999
---------------------------------------- ------------- -------------
Income from continuing operations less
preferred dividends $1,745,997 $538,127
Income (loss) from discontinued
operations (1,469,647) 116,778
------------- -------------
Net income less preferred dividends $276,350 $654,905
Denominator:
Average number of common shares
outstanding 1,305,213 1,311,965
------------- -------------
Basic Earnings per Share from Continuing
Operations $1.34 $0.41
Basic Earnings (Loss) per Share from
Discontinued Operations (1.13) 0.09
------------- -------------
Basic Earnings per Share $0.21 $0.50
============= =============
Income from continuing operations $1,746,009 $538,140
Income (loss) from discontinued
operations (1,469,647) 116,778
------------- -------------
Net income $276,362 $654,918
Denominator:
Average number of common shares
outstanding 1,305,213 1,311,965
Common share equivalents of outstanding
stock options and deferred contingent
common stock awards 14,459 22,953
------------- -------------
Total shares 1,319,672 1,334,918
------------- -------------
Diluted Earnings per Share from
Continuing Operations $1.32 $0.40
Diluted Earnings (Loss) per Share from
Discontinued Operations (1.11) 0.09
------------- -------------
Diluted Earnings per Share $0.21 $0.49
============= =============
11
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2000
Results of Operations
Management's discussion and analysis of results of operations for the 2000 first
quarter has been presented on an as-reported basis, except for sales variation
explanations which are presented on an as-reported and pro forma basis.
Effective January 1, 2000, certain pharmaceutical subsidiaries in Japan and
India, which were previously included on an equity basis, were consolidated in
the results of the Company. Pro forma sales results reflect the consolidation
of these subsidiaries as of January 1, 1999. The consolidation of the
subsidiaries had no impact on income from continuing operations.
On an as-reported basis, worldwide net sales for the 2000 first quarter were 17%
higher compared with prior year levels. On a pro forma basis, worldwide net
sales were 14% higher compared with prior year levels. The increase in pro
forma worldwide net sales for the 2000 first quarter was due primarily to higher
worldwide sales of pharmaceuticals and consumer health care products. Excluding
the negative impact of foreign exchange, pro forma worldwide net sales increased
16% for the 2000 first quarter.
The following table sets forth worldwide net sales results by operating segment
together with the percentage changes in "As-Reported" and "Pro Forma" worldwide
net sales from the comparable period in the prior year:
Net Sales
--------------------
Three Months
($ in millions) Ended March 31,
-------------------- As-Reported Pro Forma
Operating Segment 2000 1999 % Increase % Increase
- --------------------- ---------- ---------- ----------- ----------
Pharmaceuticals $2,740.6 $2,295.8 19% 16%
Consumer Health Care 595.9 562.2 6% 6%
---------- ---------- ----------- ----------
Total Net Sales $3,336.5 $2,858.0 17% 14%
========== ========== =========== ==========
The following sales variation explanations are presented on an as-reported and
pro forma basis:
On an as-reported basis, worldwide pharmaceutical sales increased 19% for
the 2000 first quarter. On a pro forma basis, worldwide pharmaceutical
sales increased 16% for the 2000 first quarter due primarily to higher
sales of MENINGITEC (introduced in the United Kingdom in the 1999 fourth
quarter), EFFEXOR XR (due primarily to expanded indications), ENBREL,
PREMARIN products, PREVNAR (introduced in the 2000 first quarter), REFACTO
(introduced in Europe in the 1999 second quarter) and ZOSYN offset, in
part, by lower sales of LODINE products (due to generic competition).
Excluding the negative impact of foreign exchange, pro forma worldwide
pharmaceutical sales increased 18% for the 2000 first quarter.
12
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2000
On an as-reported and pro forma basis, worldwide consumer health care
sales increased 6% for the 2000 first quarter due primarily to higher
sales of nutritional supplements, principally CENTRUM products and
CALTRATE, as well as higher sales of ADVIL. Excluding the negative impact
of foreign exchange, pro forma worldwide consumer health care sales
increased 7% for the 2000 first quarter.
The following table sets forth, on a pro forma basis, the percentage changes in
worldwide net sales by operating and geographic segment compared to the prior
year, including the effect volume, price and foreign exchange had on these
percentage changes:
% Increase (Decrease)
Three Months Ended March 31, 2000
----------------------------------------
Foreign Total
Volume Price Exchange Net Sales
--------- --------- --------- ---------
Pharmaceuticals
- --------------------
U.S. 9% 8% - 17%
International 18% 1% (5%) 14%
----------------------------------------
Total 13% 5% (2%) 16%
========================================
Consumer Health Care
- --------------------
U.S. 4% 1% - 5%
International 10% 2% (4%) 8%
----------------------------------------
Total 5% 2% (1%) 6%
========================================
Total
- --------------------
U.S. 8% 7% - 15%
International 17% 1% (5%) 13%
----------------------------------------
Total 12% 4% (2%) 14%
========================================
Cost of goods sold, as a percentage of net sales, increased slightly to 24.8%
for the 2000 first quarter compared with 24.5% for the 1999 first quarter due
primarily to an unfavorable product mix in the pharmaceuticals segment.
Selling, general and administrative expenses increased 14% for the 2000 first
quarter. Higher selling, general and administrative expenses were due primarily
to higher selling expenses, including increased headcount, related to recent
pharmaceutical product launches and consumer health care product line
expansions, pre-launch marketing costs for certain pharmaceutical products
expected to be launched in the near future and direct-to-consumer promotional
costs for significant established pharmaceutical products.
13
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2000
Research and development expenses increased 20% for the 2000 first quarter due
primarily to higher pharmaceutical research and development expenditures as a
result of payments for existing licensing agreements and costs for ongoing
clinical trials.
Interest expense, net decreased 23% for the 2000 first quarter due primarily to
higher interest income as a result of higher marketable securities offset, in
part, by increased borrowings to finance operations and an increase in interest
rates. Weighted average long-term debt outstanding during the 2000 and 1999
first quarters were $4,843.3 million and $4,190.5 million, respectively.
Other income, net decreased 35% for the 2000 first quarter due primarily to a
payment for access to an Alzheimer's vaccine collaboration, unfavorable foreign
exchange results and lower gains on the sales of non-strategic assets, including
certain non-core product rights, offset, in part, by an insurance recovery of
environmental costs and lower Year 2000 conversion costs.
During the 2000 first quarter, the Company and Warner-Lambert Company terminated
their merger agreement. The Company recorded income of $1,709.4 million
($1,111.1 million after-tax or $0.84 per share - diluted) in income from
continuing operations resulting from the receipt of a $1.8 billion termination
fee provided for under the merger agreement offset, in part, by certain related
expenses.
The following table sets forth worldwide income from continuing operations
before federal and foreign taxes by operating segment together with the
percentage changes from the comparable period in the prior year:
Income from Continuing
Operations before Federal
and Foreign Taxes (1)
-------------------------
Three Months
($ in millions) Ended March 31,
-------------------------
Operating Segment 2000 1999 % Increase
- -------------------------- ---------- ----------- ----------
Pharmaceuticals $754.2 $700.2 8%
Consumer Health Care 126.3 123.6 2%
---------- ----------- ----------
880.5 823.8 7%
Corporate and All Other (2) 1,691.9 (73.5) -
---------- ----------- ----------
Total (3) $2,572.4 $750.3 -
========== =========== ==========
14
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2000
(1) Includes goodwill amortization for 2000 and 1999 as follows: Pharmaceuticals
- $40.2 and $38.5, and Consumer Health Care - $3.8 and $4.0, respectively.
(2) Corporate and All Other for the 2000 first quarter included income of
$1,709.4 resulting from the receipt of a $1,800.0 termination fee provided
for under the merger agreement with Warner-Lambert Company offset, in part,
by certain related expenses. Excluding the Warner-Lambert termination fee,
Corporate and All Other expenses, net decreased 76% for the 2000 first
quarter.
(3) Excluding the Warner-Lambert termination fee, total income from continuing
operations before federal and foreign taxes increased 15% for the 2000 first
quarter.
Worldwide pharmaceutical income from continuing operations before federal and
foreign taxes increased 8% for the 2000 first quarter due primarily to increased
worldwide sales offset, in part, by higher selling, general and administrative
expenses, higher research and development expenses, and lower other income, net.
Lower gains on the sales of non-strategic assets, a payment for access to an
Alzheimer's vaccine collaboration, unfavorable foreign exchange offset, in part,
by lower Year 2000 conversion costs were the causes for lower other income, net.
Worldwide consumer health care income from continuing operations before taxes
increased 2% for the 2000 first quarter due primarily to increased worldwide
sales offset, in part, by higher selling, general and administrative expenses.
Corporate and all other expenses, net, excluding the Warner-Lambert termination
fee, decreased for the 2000 first quarter due primarily to an insurance recovery
of environmental costs and lower interest expense in the 2000 first quarter.
The effective tax rate of continuing operations, excluding the effect of the
Warner-Lambert termination fee, decreased to 26.4% for the 2000 first quarter
compared with 28.3% for the 1999 first quarter due primarily to higher research
tax credits in the 2000 first quarter.
In March 2000, the Company announced that it signed a definitive agreement with
BASF for the sale of the agricultural products business. Under the terms of the
agreement, which is subject to certain customary conditions, including
regulatory approval, BASF will pay the Company $3.8 billion in cash and will
assume certain debt. As a result, the Company recorded an estimated after-tax
loss on the sale of this business of $1,573.0 million or $1.19 per share-diluted
and has reflected this business as a discontinued operation in the 2000 first
quarter. The loss on the sale included anticipated closing costs, which were
more than offset by estimated after-tax operating income of the agricultural
products business of $86.0 million from April 1, 2000 through June 30, 2000, the
anticipated disposal period. The loss on the sale was due primarily to a
difference in the basis of the net assets being sold for financial reporting
purposes compared to that for tax purposes. This difference related, for the
most part, to goodwill, which is not recognized for tax purposes in the proposed
sale. As a result, the transaction will generate a taxable gain, requiring the
recording of a tax provision, in addition to requiring a write-off of the net
assets in excess of the selling price. The agricultural products business had
income and diluted earnings per share from discontinued operations of $103.3
million and $0.08 for the 2000 first quarter compared to $116.8 million and
15
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2000
$0.09 for the same period last year, respectively. Including the anticipated
loss on sale, the total loss and diluted loss per share from discontinued
operations were $1,469.6 million and $1.11, respectively, for the 2000 first
quarter.
Net income and diluted earnings per share for the 2000 first quarter were $276.4
million and $0.21 compared to $654.9 million and $0.49, respectively, for the
1999 first quarter. Excluding the after-tax loss from discontinued operations
of $1,469.6 million and $1.11, and the after-tax Warner-Lambert termination fee
of $1,111.1 and $0.84, respectively, income and diluted earnings per share from
continuing operations for the 2000 first quarter were $634.9 million and $0.48,
an increase of 18% and 20%, respectively, compared to income from continuing
operations in the 1999 first quarter. These increases were due primarily to
increased worldwide sales results offset, in part, by higher research and
development expenses.
Euro Currency
On January 1, 1999, 11 of the 15 member countries of the European Union adopted
the Euro as a new common legal currency. However, the legacy currencies of the
member countries are scheduled to remain legal tender as sub-denominations of
the Euro between January 1, 1999 and January 1, 2002 (the transition period).
Critical areas impacted by the conversion to the Euro have been identified and
appropriate strategies developed, which are currently being implemented to
facilitate the adoption of the Euro and to facilitate business transactions
during the transition period. The costs related to the Euro conversion and
transition period will not have a material adverse effect on the Company's
financial position or results of operations. However, the Euro conversion may
have competitive implications on the Company's pricing and marketing strategies,
the total impact of which is not known at this time.
Competition
The Company operates in the highly competitive pharmaceutical, consumer health
care and agrochemical industries. The Company is not dependent on any one
patent-protected product or line of products for a substantial portion of its
sales or results of operations. PREMARIN, the Company's principal conjugated
estrogens product manufactured from pregnant mare's urine, and related products
PREMPRO and PREMPHASE (which are single tablet combinations of the
conjugated estrogens in PREMARIN and the progestin medroxyprogesterone acetate),
are the leaders in their categories and contribute significantly to sales and
results of operations. PREMARIN's natural composition is not subject to patent
protection (although PREMPRO and PREMPHASE are subject to various patents). The
principal uses of PREMARIN, PREMPRO and PREMPHASE are to manage the symptoms of
menopause and to prevent osteoporosis, a condition involving a loss of bone mass
in postmenopausal women. Estrogen-containing products manufactured by other
companies have been marketed for many years for the treatment of menopausal
symptoms, and some of these products also have an approved indication for the
prevention of osteoporosis. During the past several years, other manufacturers
have introduced alternative products for the treatment and/or prevention of
osteoporosis. New products containing different estrogens than those found in
PREMPRO and PREMPHASE and having many of the same indications have also been
introduced. Some companies have attempted to obtain approval for generic
versions of PREMARIN. These products, if approved, would be routinely
substitutable for PREMARIN and related products under many state laws and third-
party insurance payer plans. In May 1997, the U.S. Food and Drug Administration
(FDA) announced that it would not approve certain synthetic estrogen products
16
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2000
as generic equivalents of PREMARIN given known compositional differences between
the active ingredient of these products and PREMARIN. Although the FDA has not
approved any generic equivalent to PREMARIN to date, PREMARIN will continue to
be subject to competition from existing and new competing estrogen and other
products for its approved indications and may be subject to generic competition
from either synthetic or natural conjugated estrogens products in the future.
At least one other company has announced that it is in the process of developing
a generic version of PREMARIN from the same natural source, and the Company
currently cannot predict the timing or outcome of these or any other efforts.
Liquidity, Financial Condition and Capital Resources
Cash and cash equivalents increased $250.5 million in the 2000 first quarter to
$2,143.2 million. Cash flows from operating activities of $1,903.4 million
(which included a termination fee, net of related expenses, received from
Warner-Lambert Company of $1,709.4 million, and payments related to the REDUX
and PONDIMIN litigation of $639.6 million), proceeds from the sales and
maturities of marketable securities of $236.6 million, proceeds from sales of
other assets of $65.5 million and proceeds from the exercises of stock options
of $41.4 million were used principally for net repayments of debt of $1,036.3
million, dividend payments of $300.1 million, purchases of marketable securities
of $278.6 million, capital expenditures of $256.5 million and purchases of
treasury stock of $120.4 million. Capital expenditures included strategic
investments in manufacturing and distribution facilities worldwide and expansion
of the Company's research and development facilities.
Payments of $639.6 million were made in the 2000 first quarter pertaining to the
REDUX and PONDIMIN litigation. The litigation payments in the 2000 first
quarter may not be indicative of payments expected in future periods.
The Company's $1.0 billion of 7.70% notes, which matured on February 15, 2000,
were classified as current at December 31, 1999. In addition, $797.9 million
and $841.6 million of outstanding commercial paper at March 31, 2000 and
December 31, 1999, respectively, were classified as current, representing the
amount of the outstanding commercial paper borrowings in excess of the Company's
$2.0 billion credit facility that supports the commercial paper program. The
Company used a portion of the proceeds from the $1.8 billion termination fee
received as a result of the termination of the merger agreement with
Warner-Lambert to payoff the $1.0 billion of 7.70% notes on February 15, 2000.
At March 31, 2000, the fair value of the Company's outstanding debt was $4,508.8
million. If interest rates were to increase or decrease by one percentage
point, the fair value of the long-term debt would decrease or increase by
approximately $77.6 million.
The Company has established programs to protect against adverse changes in
exchange rates due to foreign currency volatility. At March 31, 2000, the fair
value of the $1,213.5 million notional amount of foreign currency contracts was
a net payable of $12.1 million. The foreign currency contracts consisted of
17
<PAGE>
Management's Discussion and Analysis of Financial Condition
and Results of Operations
Three Months Ended March 31, 2000
purchased foreign exchange forward contracts and put options. If the
value of the U.S. dollar were to increase or decrease by 10% in relation to all
hedged foreign currencies, the net payable would increase or decrease by
approximately $90.6 million.
The notional amount related to the purchase of forward contracts designed to
protect balance sheet exposures totaled $707.8 million. As foreign exchange
rates change from period to period, the fluctuations in the fair value of the
foreign exchange forward contracts are offset by fluctuations in the fair value
of the underlying hedged transactions.
The notional amount related to the purchase of local currency put options
designed to protect future translation exposure totaled $505.7 million, $233.4
million of which were considered speculative and were marked to market and
recorded at fair value.
Year 2000
The Company successfully completed the Year 2000 rollover with no business
interruptions. There has been no material change in total costs since the last
estimate, and all costs have been substantially incurred at March 31, 2000. The
Company has not experienced any detrimental effects of the Year 2000 rollover in
the 2000 first quarter. The Company is not aware of any material problems
resulting from Year 2000 issues, either with the Company's products, internal
systems, or the Company's products and services of third parties. The Company
will continue to monitor mission critical computer applications and those of the
Company's suppliers and vendors throughout 2000 to ensure that any latent Year
2000 matters that may arise are addressed promptly.
Cautionary Statements for Forward Looking Information
This Form 10-Q, including management's discussion and analysis set forth above,
contains certain forward-looking statements, including, among other things,
statements regarding the Company's results of operations, Euro currency,
competition, liquidity, financial condition and capital resources, and the
comprehensive, national settlement relating to REDUX and PONDIMIN. These
forward-looking statements are based on current expectations. Certain factors
which could cause the Company's actual results to differ materially from
expected and historical results have been identified by the Company in its other
periodic reports filed with the Securities and Exchange Commission including the
Company's 1999 Annual Report on Form 10-K and Exhibit 99 to such report, which
exhibit is incorporated herein by reference.
18
<PAGE>
Part II - Other Information
Item 1. Legal Proceedings
The Company and its subsidiaries are parties to numerous lawsuits and
claims arising out of the conduct of its business, including product
liability and other tort claims, the most significant of which are
described in the Company's Annual Report on Form 10-K for the year
ended December 31, 1999.
As of May 8, 2000, the Company has been served or is aware that it has
been named as a defendant in 9,871 suits as the manufacturer of
PONDIMIN and/or the distributor of REDUX. Of the 9,871 lawsuits
naming the Company as a defendant, 119 are actions that seek
certification of a class, some on a national and others on a
statewide basis. Of these 119 lawsuits, 50 are pending in various
federal district courts and 69 are pending in various state courts. A
number of the actions brought in state courts have been removed to
federal courts. Individual plaintiffs have filed the remaining
lawsuits: 1,820 such lawsuits are pending in various federal district
courts and 7,932 such lawsuits are pending in various state courts.
The 9,871 lawsuits contain a total of 20,381 plaintiffs (not including
spouse or consortium claims).
On April 13, 2000, the Company announced that it would proceed with
its comprehensive, nationwide diet drug settlement, which is subject
to judicial approval (and resolution of appeals, if any) following a
fairness hearing in the United States District Court for the Eastern
District of Pennsylvania, which took place on May 2-11, 2000. The
Company also announced that, although a final report has not yet been
submitted by the Interim Claims Administrators appointed by the Court,
approximately 200,000 individuals had registered for the settlement
and approximately 45,000 opted out during the 4-month opt-out period
that ended on March 30, 2000. A majority of those who registered have
elected the settlement's Accelerated Implementation Option, which
provides for prompt benefits and resolves the claims of those class
members.
In early May 2000, the Company received a grand jury subpoena from the
office of the United States Attorney for the District of Maryland
seeking documents regarding the Company's adverse event reporting
system and the reporting of adverse events related to REDUX and
PONDIMIN. The Company is in the process of responding to the subpoena
and continues to believe that its conduct with respect to the diet
drugs has at all times been lawful and appropriate.
In the opinion of the Company, although the outcome of any legal
proceedings cannot be predicted with certainty, the ultimate liability
of the Company in connection with its legal proceedings will not have a
material adverse effect on the Company's financial position but could
be material to the results of operations in any one accounting period.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
Exhibit No. Description
(10.1) Purchase Agreement, by and among American Cyanamid
Company, American Home Products Corporation and BASF
Aktiengesellschaft, dated as of March 20, 2000
(Confidential Treatment Requested).
19
<PAGE>
(12) Computation of Ratio of Earnings to Fixed Charges
(27.1) Financial Data Schedule - Period Ended March 31, 2000
(27.2) Restated Financial Data Schedule - Period Ended
March 31, 1999
(27.3) Restated Financial Data Schedule - Period Ended
December 31, 1999
(b) Reports on Form 8-K
On February 7, 2000, the Company filed a Current Report on Form 8-K
(including disclosure under Items 5 and 7) relating to the
termination of the proposed merger with Warner-Lambert Company.
20
<PAGE>
Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
AMERICAN HOME PRODUCTS CORPORATION
(Registrant)
By /s/ Paul J. Jones
Paul J. Jones
Vice President and Comptroller
(Duly Authorized Signatory
and Chief Accounting Officer)
Date: May 15, 2000
21
<PAGE>
Exhibit Index
Exhibit No. Description
(10.1) Purchase Agreement, by and among American Cyanamid Company,
American Home Products Corporation and BASF Aktiengesellschaft,
dated as of March 20, 2000 (Confidential Treatment Requested).
(12) Computation of Ratio of Earnings to Fixed Charges
(27.1) Financial Data Schedule - Period Ended March 31, 2000
(27.2) Restated Financial Data Schedule - Period Ended March 31, 1999
(27.3) Restated Financial Data Schedule - Period Ended December 31, 1999
EX-1
PURCHASE AGREEMENT
by and among
AMERICAN CYANAMID COMPANY
AMERICAN HOME PRODUCTS CORPORATION
and
BASF AKTIENGESELLSCHAFT
<PAGE>
-iii-
TABLE OF CONTENTS
Page
ARTICLE 1 DEFINITIONS...................................................1
ARTICLE 2 THE ACQUISITION...............................................11
2.1 PURCHASE AND SALE............................................11
2.2 ASSUMPTION OF LIABILITIES....................................11
ARTICLE 3 CLOSING; PURCHASE PRICE ADJUSTMENT............................11
3.1 THE CLOSING..................................................12
3.2 DELIVERIES BY BUYER..........................................12
3.3 DELIVERIES BY SELLERS........................................13
3.4 FURTHER ASSURANCES AND OTHER JOINT VENTURE INTERESTS.........14
3.5 CLOSING STATEMENT............................................16
3.6 ADJUSTMENT OF PURCHASE PRICE.................................17
3.7 XXXXXX ADJUSTMENT............................................18
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLERS.....................18
4.1 ORGANIZATION, GOOD STANDING, POWER, ETC......................18
4.2 CAPITALIZATION OF THE COMPANIES..............................19
4.3 EFFECT OF AGREEMENT..........................................20
4.4 FINANCIAL STATEMENTS AND NET ASSET VALUE.....................20
4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS.........................21
4.6 TAXES........................................................22
4.7 REAL PROPERTY................................................23
4.8 GOOD TITLE TO AND CONDITION OF ASSETS........................23
4.9 CONTRACTS....................................................23
4.10 INTELLECTUAL PROPERTY RIGHTS.................................25
4.11 LITIGATION AND CLAIMS........................................26
4.12 COMPLIANCE WITH LAW; APPLICABLE PERMITS......................26
4.13 ENVIRONMENTAL MATTERS........................................26
4.14 REGULATORY MATTERS...........................................27
4.15 LABOR MATTERS................................................28
4.16 BROKER'S FEES................................................28
4.17 INTERCOMPANY AGREEMENTS......................................28
4.18 NO OTHER REPRESENTATIONS OR WARRANTIES; DISCLOSURE...........28
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER.......................29
5.1 CORPORATE ORGANIZATION.......................................29
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT.........................29
5.3 BROKER'S FEES................................................29
5.4 CONSENTS AND APPROVALS; NO VIOLATIONS........................30
5.5 FINANCIAL CAPABILITY.........................................30
5.6 SECURITIES ACT...............................................30
5.7 NO OTHER REPRESENTATIONS OR WARRANTIES.......................30
ARTICLE 6 CONDUCT OF BUSINESS PENDING THE CLOSING.......................30
6.1 CONDUCT OF BUSINESS PENDING THE CLOSING......................30
6.2 PERMITTED ACTIONS............................................32
6.3 CHANGE OF NAME...............................................33
ARTICLE 7 ADDITIONAL AGREEMENTS..........................................33
7.1 EXPENSES.....................................................33
7.2 ADDITIONAL AGREEMENTS........................................34
7.3 ACCESS TO INFORMATION........................................34
7.4 FILINGS AND AUTHORIZATIONS...................................34
7.5 TAX MATTERS..................................................35
7.6 USE OF CERTAIN NAMES.........................................39
7.7 REMOVAL OF INTERNATIONAL ASSETS..............................39
7.8 ACCESS TO RECORDS AFTER CLOSING..............................39
7.9 REPLACEMENT OF GUARANTY OBLIGATIONS..........................40
7.10 NON-SOLICITATION.............................................40
7.11 TERMINATION OF INTERCOMPANY AGREEMENTS/ ARRANGEMENTS.........40
7.12 CERTAIN CONTRACTS............................................40
ARTICLE 8 CONDITIONS....................................................40
8.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT THE TRANSACTIONS
CONTEMPLATED BY THIS AGREEMENT.....................................40
8.2 CONDITIONS TO THE OBLIGATION OF SELLERS......................41
8.3 CONDITIONS TO THE OBLIGATION OF BUYER........................41
ARTICLE 9 AGREEMENTS WITH RESPECT TO EMPLOYEES AND EMPLOYEE BENEFITS....42
9.1 U.S. EMPLOYEE PLANS..........................................42
9.2 INTERNATIONAL PLANS..........................................43
9.3 BUYER'S OBLIGATIONS TO EMPLOYEES.............................44
9.4 TREATMENT OF SELLERS' AND BUYER'S U.S. EMPLOYEE PLANS
AND U.S. BENEFIT ARRANGEMENTS.....................................46
9.5 INTERNATIONAL EMPLOYEES OF THE EUROPEAN UNION ("EU").........48
9.6 TREATMENT OF SELLERS' INTERNATIONAL PLANS....................49
9.7 STOCK OPTIONS................................................51
9.8 NO THIRD PARTY BENEFICIARIES.................................51
ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER.............................51
10.1 TERMINATION..................................................51
10.2 EFFECT OF TERMINATION........................................52
ARTICLE 11 INDEMNIFICATION...............................................52
11.1 INDEMNIFICATION..............................................52
11.2 PROCEDURES...................................................56
11.3 LIMITATIONS..................................................58
11.4 INDEMNIFICATION AS SOLE REMEDY...............................58
ARTICLE 12 GENERAL PROVISIONS............................................58
12.1 PUBLIC STATEMENTS............................................58
12.2 NOTICES......................................................59
12.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES...................60
12.4 AMENDMENT....................................................60
12.6 PARTIES IN INTEREST..........................................60
12.7 SELLERS' KNOWLEDGE...........................................60
12.8 GOVERNING LAW; MISCELLANEOUS.................................61
12.9 DISCLOSURE SCHEDULE..........................................62
<PAGE>
PURCHASE AGREEMENT
This PURCHASE AGREEMENT dated as of March 20, 2000 (the
"Agreement") by and among AMERICAN CYANAMID COMPANY, a Maine corporation
("Cyanamid"), AMERICAN HOME PRODUCTS CORPORATION, a Delaware corporation ("AHP";
and AHP together with Cyanamid, being, "Sellers"), and BASF Aktiengesellschaft,
a corporation organized under the laws of Germany ("Buyer").
W I T N E S S E T H:
WHEREAS, Sellers desire to sell to Buyer, and Buyer desires to
acquire from Sellers, certain assets, and to assume certain liabilities, in each
case relating to Sellers' crop protection business, which the parties agree will
be achieved pursuant to the purchase and sale of the Assets (as defined herein)
and the Shares (as defined herein), all on the terms and subject to the
conditions set forth herein;
WHEREAS, the Assets included in the purchase and sale are
owned by Sellers and the Asset Transferor Entities (as defined herein) and
Sellers desire to sell to Buyer, and Buyer desires to purchase from Sellers and
the Asset Transferor Entities, the Assets;
WHEREAS, the Shares included in the purchase and sale are
owned by the Share Transferor Entities (as defined herein) and Sellers desire to
sell to Buyer, and desire that such Share Transferor Entities sell to Buyer, and
Buyer desires to purchase from Sellers and such Share Transferor Entities, the
Shares; and
WHEREAS, in connection with such purchase and sale, Buyer is
willing to assume certain liabilities of Sellers and its Affiliates (as defined
herein) and to assume certain obligations regarding the employment of those
employees of Sellers and such Affiliates primarily engaged in the conduct of the
Business (as defined herein), all on the terms and conditions herein set forth.
NOW, THEREFORE, in consideration of the foregoing premises and
the representations, warranties, covenants and agreements herein contained, the
parties hereto, intending to be legally bound, agree as follows:
ARTICLE 1 DEFINITIONS
Whenever used in this Agreement, the terms defined below shall
have the indicated meanings:
<PAGE>
2
1.1 "Access Agreement" shall mean the access agreement to be executed between
a Seller and Buyer, substantially in the form of Exhibit D.
1.2 "Accountant" shall have the meaning set forth in Section 3.5(c).
1.3 "Affiliate" shall mean, with respect to any Person, any Person which
directly or indirectly through stock ownership or through other arrangements
either controls, or is controlled by or is under common control with, such
Person, provided, however, for purposes of this Agreement the term "Affiliate"
shall not include (i) subsidiaries or other entities in which a Person owns a
majority of the ordinary voting power to elect the majority of the board of
directors or other governing board but is restricted from electing such majority
by contract or otherwise, until such time as such restrictions are no longer in
effect and (ii) the Joint Venture Entities
1.4 "Agreement" shall mean this Agreement and any supplements, amendments,
exhibits and schedules hereto.
1.5 "Aggrieved Party" shall have the meaning set forth in Section 11.2(a).
1.6 "Animal Health Business" shall mean the business of Sellers and their
Affiliates relating to the discovery, research, development, manufacturing,
formulation, licensing, marketing, distribution and sale of products, including,
without limitation, pharmaceuticals, nutritionals, pesticides and biologicals
(including vaccines, antibodies, interleukins, somatotropins, large molecule
therapeutics, proteins and peptides) as each of the foregoing is used or held
for use for the treatment, prevention, correction, amelioration or diagnosis of
disease, illness, injury or any other condition in non-human animals.
1.7 "Applicable Laws" shall mean all laws, statutes, regulations and ordinances
of any Governmental Authority having jurisdiction over the Companies or the
Assets or the Business, as may be in effect on or prior to the Closing.
1.8 "Applicable Permits" shall mean any waiver, exemption, variance, permit,
authorization, license or similar approval, required to be obtained or
maintained under Applicable Laws in connection with the Companies, the Assets or
the Business.
1.9 "Asset Transferor Entities" shall mean each Affiliate of AHP
transferring Assets pursuant to this Agreement. The Asset Transferor
Entities are listed in Exhibit A.
1.10 "Assets" shall mean, collectively, all assets of any kind, nature and
description owned by Sellers or the Asset Transferor Entities and used primarily
in the Business, but shall not include the Shares, the Other Joint Venture
Interests, the XXXXX Agreements and the Excluded Assets.
1.11 "Assumed Contracts" shall mean the Contracts, other than the XXXXX
Agreements, which are included in the Assets and are being conveyed by the Asset
Transferor Entities.
1.12 "Assumed Liabilities" shall mean any and all liabilities of Sellers or the
Asset Transferor Entities arising out of the conduct of the Business which exist
on or after the Closing Date, including without limitation, (i) the obligations
of Sellers or the Asset Transferor Entities under the Assumed Contracts, (ii)
the XXXXX Obligations, and (iii) any and all liabilities to the Employees except
to the extent any such liability is retained by Sellers or their Affiliates
pursuant to Article 9, in each case other than Excluded Liabilities. For
purposes of clarity, it is understood that Assumed Liabilities shall relate only
to the purchase and sale of the Assets and that, by operation of law, the
liabilities of the Companies shall remain with the Companies, subject to (x)
allocation of Taxes set forth in Section 7.5, (y) employee matters set forth in
Article 9, and (z) the indemnification provisions set forth herein.
1.13 "Base Net Asset Value" shall have the meaning set forth in Section 3.6.
1.14 "Books and Records" shall mean the books and records of (i) Sellers and the
Asset Transferor Entities, to the extent related primarily to the Business, and
(ii) the Companies.
1.15 "Business" shall mean the business of the Companies together with the
business conducted by the Asset Transferor Entities existing on the date hereof
related primarily to (x) the discovery, research, development, manufacture,
formulation, licensing, marketing and/or selling of (i) pesticides (such as
herbicides, insecticides, acaricides, nematicides, fungicides and rodenticides);
(ii) plant regulators; (iii) oils, crop oils and surfactants; (iv) plant
varieties, lines, hybrids and inbreds, including mutants, derivatives and parts
thereof and genetic material relating thereto; and (v) biological materials and
systems and those biologically derived or biologically synthesized; as each of
the foregoing is used in agriculture (other than animals), aquaculture,
horticulture, forestry (including for protection during transport or storage of
harvested agricultural (other than animals), aquacultural, horticultural and/or
forestry products), turf management and vegetation control for home and garden,
consumer, industrial, commercial and public health applications, and (y) the
research, development and formulation of biotechnological processes primarily
directed to crop protection and seeds, but in each case specifically excluding
(i) the Excluded Assets, and (ii) the Excluded Liabilities. Pesticides and plant
regulators as are defined in 7 U.S.C. ss. 136.
1.16 "Closing" shall have the meaning set forth in Section 3.1.
1.17 "Closing Date" shall have the meaning set forth in Section 3.1.
1.18 "Closing Net Asset Value" shall have the meaning set forth in
Section 3.5(a).
1.19 "Closing Statement" shall have the meaning set forth in Section 3.5(a).
1.20 "Code" shall mean the U.S. Internal Revenue Code of 1986, as amended.
1.21 "Companies" shall mean those entities that are directly or indirectly
wholly-owned by Sellers or their Affiliates that are or will be at Closing
engaged exclusively in the conduct of the Business (or engaged exclusively in
the conduct of the Business and providing services to other businesses of
Sellers or their Affiliates as provided for in this Agreement), each of which is
listed in Exhibit A.
1.22 "Competition Laws" shall mean all Applicable Laws that are designed or
intended to prohibit, restrict or regulate actions having the purpose or effect
of monopolization or restraint of trade.
1.23 "Constituent Documents" shall mean, with respect to any company, such
company's articles of incorporation and by-laws, or other similar documents
prescribed by the Applicable Laws of such company's jurisdiction of
incorporation.
1.24 "Contracts" shall mean all leases, subleases, rental agreements, insurance
policies, sales orders, licenses, agreements, purchase orders, instruments of
indebtedness, guarantees and any and all other contracts or binding arrangements
of the Sellers, the Asset Transferor Entities and the Companies, in each case,
relating primarily to the Business, but shall not include any contracts or other
binding arrangements related primarily to the Excluded Assets or Excluded
Liabilities.
1.25 "Cyanamid Companies" shall mean Sellers, the Share Transferor Entities
and the Asset Transferor Entities.
1.26 "Costs" shall have the meanings set forth in Section 11.1(a).
1.27 "Delayed Closings" shall have the meaning set forth in Section 3.4(e).
1.28 "Disclosure Schedule" shall mean that certain schedule identified as such
and delivered by Sellers to Buyer pursuant to the Agreement, as Section 4.10(a)
of the Disclosure Schedule may be supplemented and updated from time to time;
provided, however, that any such supplement shall not materially change the
information previously set forth therein.
1.29 "Employees" shall mean the U.S. Employees and the Ex-U.S. Employees.
1.30 "Encumbrances" shall mean all claims, security interests, liens, pledges,
charges, escrows, options, proxies, rights of first refusal, preemptive rights,
mortgages, hypothecations, prior assignments, title retention agreements,
indentures, security agreements or any other encumbrances of any kind.
1.31 "Environmental Laws" shall mean all Applicable Laws, including any judicial
or administrative order, consent decree or judgment to which order, decree or
judgment one or more of the Companies is a party or which relates to any of the
Assets or the Business, relating to the protection or pollution of the
environment, exposure of persons to hazardous materials or substances, or
natural resources, including the Comprehensive Environmental Response
Compensation and Liability Act, as amended (42 U.S.C. ss.9601 et seq.)
("CERCLA"), the Federal Solid Waste Disposal Act, as amended by the Resource
Conservation and Recovery Act and the Hazardous and Solid Waste Amendments
thereto, the Clean Air Act, the Clean Water Act, the Toxic Substances Control
Act, the Safe Drinking Water Act, and any similar or analogous statutes, or
regulations of any Governmental Authority, as each of the foregoing exists on
the Closing Date.
1.32 "Environmental Reports" shall mean the reports listed in Section 4.13 of
the Disclosure Schedule, including the Phase I and Phase II Environmental Site
Assessments prepared in connection with the transactions contemplated by this
Agreement.
1.33 "ERISA" means the Employee Retirement Income Security Act of 1974,
as amended.
1.34 "ERISA Affiliate" of any entity means any other entity which, together with
such entity, would be treated as a single employer under Section 414 of the
Code.
1.35 "Ex-U.S. Employees" shall mean all (i) individuals who, on the Closing
Date, are actively employed outside of the United States and Puerto Rico by
Sellers and their Affiliates and whose employment and responsibilities relate
primarily to the Business (either directly or indirectly by providing back
office or host support to the Business); and (ii) individuals outside of the
United States and Puerto Rico who would have been included in subsection (i)
above, if they were actively employed on the Closing Date but who are on
short-term (not more than 180 days) disability leave, authorized leave of
absence or military service or lay-off with recall rights from Sellers or their
Affiliates as of the Closing Date; provided that such individuals return to work
within the 180 day period following the Closing, or within such longer period as
the individual has statutory re-employment rights.
1.36 "Excluded Assets" shall mean the assets of Sellers and certain of their
Affiliates (all of which are expressly excluded from the purchase and sale
contemplated hereby) set forth on Exhibit B.
1.37 "Excluded Liabilities" shall mean the following liabilities of Sellers and
the Asset Transferor Entities (all of which are expressly excluded from the
purchase and sale contemplated hereby):
(i) Tax Liabilities;
<PAGE>
(ii) intercompany liabilities (other than (x) accounts payable
of the Companies arising from transactions among the Companies and (y)
liabilities and obligations of the Business arising under the Contracts
listed in Section 6.2 of the Disclosure Schedule;
(iii) liabilities retained by Sellers and their Affiliates
pursuant to the provisions of Article 9; and
(iv) liabilities relating to the Excluded Assets. For the
purposes of clarity, it is understood that Excluded Liabilities shall
relate only to the purchase and sale of the Assets and that, by
operation of law, the liabilities of the Companies shall remain with
the Companies, subject to (x) Allocation of Taxes set forth in Section
7.5, (y) employee and employee benefit matters set forth in Article 9,
and (z) the indemnity provisions set forth herein.
1.38 "Final Net Asset Value" shall have the meaning set forth in Section 3.5(c).
1.39 "Financial Statements" shall have the meaning set forth in Section 4.4(a).
1.40 "GAAP" shall mean United States generally accepted accounting principles.
1.41 "Governmental Authority" shall mean any governmental department,
commission, board, bureau, agency, court or other instrumentality of the United
States or any other country, jurisdiction, municipality or other political
subdivision thereof or any other supranational organization of sovereign states,
where any of the Companies is now operating or has operated or where any of the
Assets are located.
1.42 "HSR Act" shall have the meaning set forth in Section 7.4.
1.43 "Hazardous Substance" shall mean any hazardous substance as that term is
defined in CERCLA and any other substance, material or waste regulated by any
Environmental Law, and shall include, but not be limited to, petroleum,
including crude oil or any fraction thereof, asbestos and chlorinated organic
compounds.
1.44 "Indemnifying Party" shall have the meaning set forth in Section 11.2(a).
1.45 "Intellectual Property" shall mean (i) Patents, (ii) Know-how, (iii)
Trademarks and (iv) copyrights, copyright registrations and applications for
registration, inventions and all other intellectual property rights whether
registered or not, in the case of subsection (iv) which are licensed to or owned
by (x) Sellers or the Asset Transferor Entities and used primarily in the
Business or (y) any of the Companies, in each case other than the Excluded
Assets.
1.46 "International Plans" shall have the meaning set forth in Section 9.2(a).
1.47 "Joint Venture Entities" shall mean the entities listed in Section (c) of
Exhibit A in which Sellers or their Affiliates hold less than all of the
outstanding equity interest, which entities have certain assets primarily
related to the Business.
1.48 "Joint Venture Interests" shall mean (a) the equity interests of the
Sellers or their Affiliates in the Joint Venture Entities as defined and listed
in Section (d) of Exhibit A that are not owned by one of the Companies (the
"Transferable Joint Venture Interests") and (b) the equity interests of the
Sellers or their Affiliates in the Joint Venture Entities as defined and listed
in Section (e) of Exhibit A (the "Other Joint Venture Interests").
1.49 "Know-how" shall mean all product specifications, processes, product
designs, plans, ideas, concepts, manufacturing, engineering and other manuals
and drawings, technical information, trade secrets, data, research records, all
promotional literature, customer and supplier lists and similar data and
information, and all other confidential or proprietary technical and business
information licensed to or owned by (x) Sellers or the Asset Transferor Entities
and used primarily in the Business or (y) any of the Companies, in each case
other than the Excluded Assets.
1.50 "Leased Real Property" shall mean all real property, including any
buildings, structures, fixtures and improvements thereon or appurtenances
thereto leased by (x) Sellers or the Asset Transferor Entities and used
primarily in the Business or (y) any of the Companies, in each case other than
Excluded Assets.
1.51 [Intentionally Deleted.]
1.52 "Material Adverse Effect" shall mean any event, change, circumstance or
effect that is materially adverse to the business, assets, operations, results
of operations or financial condition of the Business, taken as a whole, other
than any event, change, circumstance or effect relating (x) to the economy in
general, (y) in general to the industries in which the Business operates and not
specifically relating to the Business; provided that the Business, taken as a
whole, is not materially disproportionately affected as compared to other
Persons engaged in such industry by such event, change, circumstance or effect
or (z) changes, circumstances and effects relating to the announcement of the
transactions contemplated by this Agreement.
1.53 "Minimum Loss" shall have the meaning set forth in Section 11.3.
1.54 "Multiemployer Plan" means each U.S. Employee Plan that is a
multiemployer plan, as defined in Section 3(37) of ERISA.
1.55 "Net Assets" shall mean the (i) sum of (a) the book value of the Assets and
(b) the book value of the Sellers' interest in the total assets of the Companies
(excluding the Excluded Assets) and the Joint Venture Entities, to the extent
related to the Business, (ii) minus the sum of the book value of the Assumed
Liabilities and the book value of the Sellers' interest in the total liabilities
of the Companies (excluding the Excluded Liabilities) and the Joint Venture
Entities, to the extent related to the Business, all calculated in accordance
with GAAP applied in a manner consistent with the preparation of the Financial
Statements.
1.56 "Notice of Disagreement" shall have the meaning set forth in Section
3.5(b).
1.57 "Operating Profit" shall mean the amount calculated from the line items set
forth on the Statements of Operating Profit of the Business included in the
Financial Statements as follows: Net Sales less the sum of the following: Cost
of Goods Sold (including royalty payments); Marketing; Selling; Storage,
Packaging & Shipping; Administrative; Research & Development; and General
Expense.
1.58 "Owned Real Property" shall mean all real property, including any
buildings, structures and improvements thereon or appurtenances thereto owned by
(x) Sellers or the Asset Transferor Entities and used primarily in the Business,
or (y) any of the Companies, in each case other than the Excluded Assets.
1.59 "Patents" shall mean all patents, and patent applications,(including,
without limitation, all reissues, divisions, continuations,
continuations-in-part, renewals and extensions of the foregoing) licensed to or
owned by (x) Sellers or the Asset Transferor Entities and used primarily in the
Business or (y) any of the Companies, in each case other than the Excluded
Assets.
1.60 "Patent and Data Rights Agreement" shall mean the Agreement to be executed
between Sellers or their Affiliates and Buyer, substantially in the form of
Exhibit C, pursuant to which Sellers or their Affiliates convey rights to the
Buyer with respect to the Business related to the Shell Agreements and pursuant
to which the Buyer assumes the XXXXX Obligations.
1.61 "Pension Plan" or "Pension Plans" means an employee pension benefit plan
(as such term is defined in Section 3(2) of ERISA) that is intended to qualify
under Section 401(a) of the Code, is subject to the funding requirements of
Section 412 of the Code and is maintained by Sellers or an ERISA Affiliate.
1.62 "Permitted Encumbrances" shall mean each of the following as to which no
enforcement, collection, execution or foreclosure proceeding shall have been
commenced: (i) any Encumbrances specifically disclosed in the Financial
Statements; (ii) liens for Taxes, assessments and other governmental charges not
yet due and payable; (iii) immaterial mechanics', workmen's, repairmen's,
warehousemen's, carriers' or other like liens arising or incurred in the
ordinary course of business or other Encumbrances that are a matter of public
record; (iv) with respect to Real Property, (A) easements, quasi-easements,
licenses, covenants, rights-of-way, and other similar restrictions, including
without limitation any other agreements, conditions or restrictions, in each
case, which are a matter of public record and which would not, individually or
in the aggregate, materially adversely affect the use of such property in the
manner currently being utilized by the Business, (B) any conditions that would
be shown by a current survey or physical inspection and (C) zoning, building and
other similar restrictions pursuant to Applicable Laws; and (v) other
Encumbrances which, individually or in the aggregate with such other
Encumbrances, are not material and would not be required to be disclosed or
reflected on a combined balance sheet of the Business prepared in accordance
with GAAP and which would not, individually or in the aggregate, materially
adversely affect the use of such property in the manner currently being utilized
by the Business.
1.63 "Person" shall mean an individual, a corporation, limited liability
company, a partnership, an association, a trust or other entity or organization,
including a government or political subdivision or an agency or instrumentality
thereof.
1.64 "Purchase Price" shall have the meaning set forth in Section 2.1.
1.65 "Real Property" shall mean the Owned Real Property and the Leased
Real Property.
1.66 "Release" shall mean any release, spill, emission, leaking, pumping,
injection, deposit, disposal, discharge, dispersal or leaching of Hazardous
Substances into the environment.
1.67 "XXXXXX Agreement" shall mean that certain Amended and Restated XXXXXX
XXXXXXXXXXXXXXXXXX Agreement, dated XXXXXXXXXXXXX, between XXXXXXXX and XXXXXXXX
XXXXXXXXXXXX.
1.68 "Section 3.5(a) Documents" shall have the meaning set forth in
Section 3.5(a).
1.69 "Securities Act" shall mean the Securities Act of 1933, as amended.
1.70 "Shares" shall mean the outstanding equity interests in the Companies and
the Transferable Joint Venture Interests, in each case outstanding as of the
Closing Date.
1.71 "Share Transferor Entities" shall mean each Affiliate of AHP transferring
Shares pursuant to this Agreement as listed in Exhibit A.
1.72 "XXXXX Agreements" shall mean the XXXXXXXXX Agreement, dated XXXXXXXXXX
XXXX, between XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX and XXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
1.73 "XXXXX Obligations" shall mean the obligations of XXXXXXXX and its
Affiliates related to the Business, the Assets and/or the Companies under the
XXXXXXXXXXXXXXXX, as such obligations exist under such agreements, taking into
account all provisions thereof including, without limitation, governing law and
dispute resolution.
1.74 "Straddle Period" shall mean any taxable year or period beginning before
and ending after the Closing Date.
1.75 "Subsidiary" shall mean, as to any Person, any corporation, partnership,
limited liability company or joint venture, of which (or in which) such Person,
together with one or more of its subsidiaries, owns 100% of the interest in the
capital or profits of such corporation, limited liability company, partnership
or joint venture.
1.76 "Tax Affiliate" of a Person shall mean any Affiliate (determined without
regard to the proviso of Section 1.3 hereof) of said Person which was included,
or includable, in a Tax Return in which such Person was included as a member.
1.77 "Tax Assets" shall mean all assets comprising receivables or refunds or
prepayments for Taxes relating to the Assets or the Business for taxable periods
or portions thereof ending on or before the Closing Date; provided, however,
that for purposes of determining Net Assets hereunder, Tax Assets shall include
deferred Tax Assets and shall exclude value added taxes and payroll and
employment taxes (including all contributions or premiums pursuant to industry
or governmental social security laws or pursuant to other tax laws or
regulations).
1.78 "Tax Liabilities" shall mean all liabilities for Taxes imposed on Sellers
and their Affiliates or relating to the Assets or the Business for taxable
periods or portions thereof ending on or before the Closing Date; provided,
however, that for purposes of determining Net Assets hereunder, Tax Liabilities
shall exclude value added taxes and payroll and employment taxes (including all
contributions or premiums pursuant to industry or governmental social security
laws or pursuant to other tax laws or regulations).
1.79 "Tax Returns" shall mean all reports, returns, schedules and any other
documents required to be filed with respect to Taxes and all claims for refunds
of Taxes.
1.80 "Tax Sharing Arrangement" shall mean any written or unwritten agreement or
arrangement for the allocation or payment of Tax Liabilities or payment for Tax
benefits with respect to a consolidated, combined or unitary Tax Return which
Tax Return includes any of the Companies.
1.81 "Taxes" (and with correlative meanings, "Tax" and "Taxable") shall mean all
taxes of any kind imposed by a federal, state, local or foreign Governmental
Authority, and any payments made to another party pursuant to a Tax Sharing
Arrangement, indemnity or other similar arrangement, including but not limited
to those on, or measured by or referred to as income, gross receipts, financial
operation, sales, use, ad valorem, value added, franchise, profits, license,
withholding, payroll (including all contributions or premiums pursuant to
industry or governmental social security laws or pursuant to other tax laws and
regulations), employment, excise, severance, stamp, occupation, premium,
property, transfer or windfall profits taxes, customs, duties or similar fees,
assessments or charges of any kind whatsoever, together with any interest and
any penalties, additions to tax or additional amounts imposed by such
Governmental Authority with respect to such amounts.
1.82 "Trademarks" shall mean (i) trademarks, service marks, trade names, trade
dress, domain names, labels, logos and all other names and slogans associated
with any products or services of the Business, or embodying associated goodwill
of the Business related to such products or services, whether or not registered,
and any applications or registrations therefor; and (ii) any associated goodwill
incident thereto; in each case owned by or licensed to (x) Sellers and the Asset
Transferor Entities and used primarily in the Business or (y) the Companies; and
further in each case other than (A) the Excluded Assets and (B) the trademarks,
service marks, trade names, domain names and associated trade dress, packaging,
logos, and labels containing "American Home", "AHP", "Wyeth", "Fort Dodge" and
"Lederle" or any derivative or anything imitative thereof or which resembles or
is confusingly similar thereto.
1.83 "Transition Services Agreements" shall mean the transition services
agreements to be entered into between Sellers or their Affiliates and Buyer, its
Affiliates or the Companies in a form to be agreed to in good faith by Buyer and
a Seller and which shall include without limitation the services described on
Section 7.10 (B) of the Disclosure Schedule.
1.84 "U.S. Benefit Arrangements" shall have the meaning set forth in
Section 9.1(d).
1.85 "U.S. Employee Plans" shall have the meaning set forth in Section 9.1(a).
1.86 "U.S. Employees" shall mean (i) all individuals who, on the Closing Date,
are actively employed in the United States, including Puerto Rico, by Sellers or
their Affiliates and whose employment and responsibilities relate primarily to
the Business (except for any employee listed on Section 7.10 (A) of the
Disclosure Schedule who does not accept an offer of employment from Buyer); and
(ii) all individuals who would have been included in subsection (i) above, if
they were actively employed on the Closing Date, but who are on short-term (not
more than 180 days) disability leave, authorized leave of absence or military
service or lay-off with recall rights from Sellers or their Affiliates as of the
Closing Date; provided that such individuals return to work within the 180 day
period following the Closing, or within such longer period as the individual has
statutory re-employment rights.
Additional definitions are set forth in Article 9.
<PAGE>
ARTICLE 2 THE ACQUISITION
2.1 PURCHASE AND SALE.
Upon the terms and subject to the conditions of this
Agreement, (x) Sellers shall (and shall cause the Share Transferor Entities and
the Asset Transferor Entities to) sell, assign, transfer and deliver to Buyer or
one or more of its wholly-owned subsidiaries designated in writing by Buyer
(unless such designation would lead to further required approvals of third
parties or Governmental Authorities) the Shares and the Assets, and (y) Buyer or
one or more of its wholly-owned subsidiaries designated in writing by Buyer
(unless such designation would lead to further required approvals of third
parties or Governmental Authorities), shall purchase and accept the Shares and
the Assets from Sellers and such Share Transferor Entities and Asset Transferor
Entities, subject to the Assumed Liabilities, for an aggregate purchase price of
$3,800,000,000 (Three Billion Eight Hundred Million Dollars), payable at
Closing, subject to adjustment as provided in Section 3.6 (the price as so
adjusted is herein called the "Purchase Price").
2.2 ASSUMPTION OF LIABILITIES.
With respect to the purchase and sale of the Assets, in
addition to payment of the Purchase Price and pursuant to assumption agreements
to be executed and delivered in accordance with Section 3.2(e), Buyer will
assume at the Closing and subsequently, in due course, pay, honor and discharge
all of the Assumed Liabilities.
ARTICLE 3 CLOSING; PURCHASE PRICE ADJUSTMENT
3.1 THE CLOSING.
Unless this Agreement shall have been terminated, on the terms
and subject to the conditions of this Agreement, the closing of the sale and
purchase of the Shares and the Assets and the consummation of the other
transactions contemplated hereby (the "Closing") shall take place at the offices
of American Home Products Corporation, Five Giralda Farms, Madison, New Jersey
07940 on the fifth business day after the date on which the last to be fulfilled
or waived of the conditions set forth in Article 8 shall be fulfilled or waived
in accordance with this Agreement or at such other time, date or place as the
parties may mutually agree upon in writing (the "Closing Date"). At the Closing,
the parties to this Agreement will exchange funds, certificates and other
documents specified in this Agreement. For purposes of this Agreement, the
Closing will be treated as if it occurred at the open of business at each
location of the Business on the Closing Date.
3.2 DELIVERIES BY BUYER.
At the Closing, Buyer shall deliver, or cause to be delivered,
to Sellers the following:
(a) the amount of the Purchase Price specified in Section 2.1
to be paid at Closing, payable by wire transfer in immediately available funds
on the Closing Date to an account specified in writing by Sellers, with such
notice to be delivered no less than two business days prior to the Closing Date;
(b) the certificate by an officer of Buyer required to
be delivered pursuant to Section 8.2(c);
(c) a certificate, signed by an authorized officer of Buyer,
certifying (i) the due organization and good standing of Buyer, (ii) the
corporate resolutions of Buyer authorizing the transactions contemplated by this
Agreement, and (iii) the incumbency of officers of Buyer executing this
Agreement and the other agreements, instruments or certificates delivered upon
the Closing;
(d) the Transition Services Agreements, duly executed
by Buyer or its Affiliates;
(e) the Patent and Data Rights Agreement, duly executed
by Buyer;
(f) such instruments of assumption and other certificates,
instruments or documents, in form and substance reasonably acceptable to
Sellers, as may be necessary to effect Buyer's assumption under Applicable Laws
of the Assumed Liabilities;
(g) the Access Agreement, duly executed by Buyer; and
(h) such other instruments and documents, in form and
substance reasonably acceptable to Sellers and Buyer, as may be reasonably
necessary to effect the Closing.
3.3 DELIVERIES BY SELLERS.
At the Closing, Sellers shall deliver, or cause to be
delivered by their Affiliates, to Buyer the following:
(a) certificates representing the Shares duly endorsed for
transfer to Buyer or accompanied by stock powers duly executed in blank, or, in
the case of Shares of non-U.S. companies, evidence of the transfer of such
Shares in accordance with the Applicable Laws of the jurisdictions in which such
non-U.S. companies are organized;
<PAGE>
(b) the certificate by officers of Sellers required to
be delivered pursuant to Section 8.3(c);
(c) a certificate, signed by an authorized officer of each of
Sellers, certifying (i) the due organization and good standing of Sellers, (ii)
the corporate resolutions of Sellers authorizing the transactions contemplated
by this Agreement, and (iii) the incumbency of officers of the Sellers executing
this Agreement and the other agreements, instruments or certificates delivered
upon the Closing;
(d) the stock books, stock ledgers, minute books and
corporate seals of each of theCompanies;
(e) the Transition Services Agreements, duly executed
by AHP or one of its Affiliates;
(f) bills of sale, deeds and any other appropriate instruments
of sale and conveyance, in form and substance reasonably acceptable to Buyer,
transferring under Applicable Laws all real property or tangible personal
property included in the Assets to Buyer or its Affiliates;
(g) the Patent and Data Rights Agreement, duly
executed by AHP;
(h) bills of sale, assignments and any other appropriate
instruments of sale and conveyance, in form and substance reasonably acceptable
to Buyer, transferring under Applicable Laws all Intellectual Property to Buyer
or its Affiliates (it being understood and agreed that Buyer, at its own expense
shall prepare any and all individual assignment documents required in the
respective countries and record them in Buyer's discretion, to the extent not
required by Applicable Law, in the national patent and trademark and other
government offices, as applicable);
(i) assignments or, where necessary, subleases, in form and
substance reasonably acceptable to Buyer, assigning or subleasing to Buyer or
its Affiliates under Applicable Laws all Assumed Contracts;
(j) except with respect to any loans extended to XXXXXXXXXX,
such instruments of cancellation and other appropriate documents, in form and
substance reasonably acceptable to Buyer, cancelling all loans or other
obligations for borrowed money owed by any of the Companies to Sellers or any of
their Affiliates (other than the Companies), duly executed by Sellers or such
Affiliates, as the case may be;
(k) such other instruments and documents, in form and
substance reasonably acceptable to Buyer and Sellers, as may be reasonably
necessary to effect the Closing; and
<PAGE>
(l) letters of resignation executed by the directors
of each of the Companies and such letters executed by officers of the
Companies as shall be requested by Buyer;
(m) a receipt for the Purchase Price; and
(n) the Access Agreement, duly executed by Seller.
3.4 FURTHER ASSURANCES AND OTHER JOINT VENTURE INTERESTS.
(a) From time to time, at Buyer's or Sellers' request, and in
accordance with Section 7.2, whether at or after the Closing Date, Buyer or
Sellers, as the case may be, shall, and shall cause their respective Affiliates
to, execute and deliver such further instruments of conveyance, transfer and
assignment, cooperate and assist in providing information for making and
completing regulatory filings, and take such other actions as Buyer or Sellers,
as the case may be, may reasonably require of the other to more effectively
assign, convey and transfer to such party the Shares, the Assets and, subject to
subparagraph (e) below, the interests of Sellers and their Affiliates in the
Business relating to the Other Joint Venture Entities (to the extent related to
the Business), and to assume the Assumed Liabilities, as contemplated by this
Agreement.
(b) To the extent that the assignment of any Assumed Contract
to Buyer hereunder shall require the consent of the other party thereto, this
Agreement shall not constitute an agreement to assign the same if an attempted
assignment would constitute a breach thereof. Sellers will use their diligent
efforts to obtain the consent of the other parties to such Assumed Contracts for
the assignment thereof to Buyer, provided, however, that Sellers shall not be
obligated to make any payment or take any other commercially unreasonable action
to obtain any such consent. If any such consent is not obtained, Sellers shall,
and shall cause their Affiliates to, cooperate with Buyer in any arrangement
reasonably requested by Buyer to provide for Buyer the benefits under any such
Contract, including the enforcement at the cost of and for the benefit of Buyer
of any and all rights thereunder of Sellers or their respective Affiliates
against the other party thereto.
(c) (i) To the extent that any of the Assets or the assets of
the Companies transferred to Buyer as contemplated herein include rights or
assets that (x) are necessary for the operation of any business (other than the
Business) of Sellers or their Affiliates and (y) were used by Sellers or any of
their Affiliates prior to Closing, Buyer agrees, to the extent possible, to
transfer, convey, assign, license, sublicense or enter into another arrangement
with respect to such rights or assets so that Sellers and their Affiliates have
substantially similar benefits (subject to the burdens) of such rights and
assets for such other business as they had prior to the Closing; provided that
the foregoing shall not require Buyer (A) to permit Sellers or their Affiliates
to use such rights or assets in the Business or (B) to transfer, convey, assign,
license, sublicense or enter into such other arrangement if such action
precludes Buyer from using such rights or assets in the Business.
<PAGE>
(ii) To the extent that the Assets and the assets of the
Companies transferred to Buyer as contemplated herein do not include any right
or asset, other than Excluded Assets, that (x) was owned by or licensed to
Sellers or their Affiliates at Closing, (y) is necessary for the operation of
the Business and (z) was used by Sellers or their Affiliates in the Business
prior to Closing, Sellers agree, to the extent possible, to transfer, convey,
assign, license, sublicense or enter into another arrangement with respect to
such right or asset so that Buyer has substantially similar benefits (subject to
the burdens) of such right or asset for the Business as did Sellers or their
Affiliates in conducting the Business prior to Closing; provided that the
foregoing shall not require Sellers or their Affiliates (A) to permit Buyer to
use such right or asset in any business other than the Business or (B) to
transfer, convey, assign, license, sublicense or enter into such other
arrangement if such action precludes Sellers or their Affiliates from using such
right or asset in their businesses (other than the Business).
(d) It is the intention of the parties hereto for Sellers to
convey to Buyer at or, subject to subsection (e) below, as soon as practicable
after the Closing, the Other Joint Venture Interests or other interests
equivalent thereto as more fully described in Section 3.4(d) of the Disclosure
Schedule.
<PAGE>
(e) Notwithstanding anything to the contrary contained in this
Agreement, to the extent that the sale, assignment, transfer or delivery or
attempted sale, assignment, transfer or delivery to Buyer or its designated
Affiliates of any Asset, Shares or Other Joint Venture Interests is prohibited
by any Applicable Law or would require any governmental or third-party
authorizations, approvals, consents or waivers and such authorizations,
approvals, consents or waivers shall not have been obtained prior to the
Closing, this Agreement shall not constitute a sale, assignment, transfer or
delivery, or any attempted sale, assignment, transfer or delivery thereof.
Following the Closing, the parties shall use all reasonable efforts, and
cooperate with each other, to obtain promptly such authorizations, approvals,
consents or waivers; provided, however, that neither Sellers nor Buyer nor any
Affiliates thereof shall be required to pay any consideration therefor, other
than filing, recordation or similar fees payable to any Governmental Entity,
which fees shall be shared equally by Buyer, on the one hand, and Sellers, on
the other (unless specifically treated otherwise herein). Pending such
authorization, approval, consent or waiver, the parties shall cooperate with
each other in any reasonable and lawful arrangements designed to provide to
Buyer the profits and other benefits and liabilities of use or ownership of such
Asset (and related Assumed Liabilities), Shares or Other Joint Venture Interests
(as the case may be) (including liabilities for Taxes relating to such use or
ownership or the profits to Buyer therefrom). Once such authorization, approval,
consent or waiver for the sale, assignment, transfer or delivery of any such
Asset, Shares or Other Joint Venture Interests is obtained, Sellers shall cause
the applicable Share Transferor Entities or Asset Transferor Entities to
promptly sell, assign, transfer and deliver such Asset (and related Assumed
Liabilities), Shares or Joint Venture Interests to Buyer or its designated
Affiliates for no additional consideration at a closing to be held on the
seventh business day after receipt of all such authorizations, approvals,
consents or waivers, or such other time as the Buyer, Sellers may mutually agree
(a "Delayed Closing"). To the extent that Buyer is unable to obtain the benefits
and liabilities of the use or ownership of any Assets, Shares or Joint Venture
Interests, as contemplated by this Section 3.4(e) prior to a Delayed Closing,
Sellers and their Affiliates shall be responsible for all Taxes relating to such
Assets, Shares or Joint Venture Interests for Taxable periods or portion thereof
ending on or prior to the date of the Delayed Closing.
(f) Buyer shall pay the full Purchase Price at the Closing
notwithstanding any requirement for a Delayed Closing pursuant to Section
3.4(e); provided, however, that if any Delayed Closing pursuant to Section
3.4(e) shall not occur within thirty-six (36) months after the Closing either
Sellers or Buyer may by notice in writing to the other party elect to terminate
the parties' obligation to buy and sell the assets of the Business subject to
such Delayed Closing in which case Sellers shall pay to Buyer, no later than
five business days after the date of such notice, in immediately available
funds, the portion of the Purchase Price allocable with respect to the assets of
the Business not transferred at a Delayed Closing and, from and after the
effective date of such payment the arrangement of the parties with respect to
the benefits and liabilities of such assets shall also terminate.
3.5 CLOSING STATEMENT.
(a) As promptly as practicable, but no later than 90 days
after the Closing Date, Sellers will cause to be prepared in accordance with
GAAP and delivered to Buyer a draft combined adjusted statement, together with
notes thereto, of the Net Assets (which shall include any cash, cash equivalents
and marketable securities remaining in any of the Companies at the Closing which
are not otherwise transferred pursuant to Section 6.2(a)) as of the close of
business on the Closing Date (the "Closing Statement") including a schedule
based on such Closing Statement setting forth Sellers' calculation of the value
of the Net Assets as of the Closing Date (the "Closing Net Asset Value"). The
Closing Statement shall include line items and notes substantially consistent
with those of the statement of Net Assets as of December 31, 1999 included in
the Financial Statements. Buyer, at its own expense, shall cause the Companies
and Buyer's Affiliates and their respective employees to assist Sellers in the
preparation of the Closing Statement and shall provide Sellers and their
independent auditors, Arthur Andersen LLP ("Andersen"), access at all reasonable
times to the personnel, properties and Books and Records relating to the
Business for such purpose. The Closing Statement shall be accompanied by a draft
audit report from Andersen stating that in its opinion the Closing Statement
presents fairly, in all material respects, the Net Assets as of the Closing Date
in conformity with GAAP, consistently applied, and pursuant to the terms of this
Agreement. The Closing Statement and the accompanying audit report are
collectively referred to as the "Section 3.5(a) Documents".
<PAGE>
(b) If Buyer disagrees with Sellers' calculation of Closing
Net Asset Value contained in the Section 3.5(a) Documents, Buyer may, within 45
days after delivery of the Section 3.5(a) Documents, deliver a notice to Sellers
disagreeing with such calculation and setting forth Buyer's calculation of such
amount ("Notice of Disagreement"). Any such Notice of Disagreement shall specify
those items or amounts as to which Buyer disagrees, and Buyer shall be deemed to
have agreed with all other items and amounts contained in the Section 3.5(a)
Documents. If Buyer does not disagree with Sellers' calculation of Closing Net
Asset Value contained in the Section 3.5(a) Documents within said 45 days, then
Sellers shall cause Andersen to issue the draft audit report referred to in
Section 3.5(a) in final form. In connection with its review of the Closing
Statement, Sellers will provide Buyer with reasonable access to the work papers
of Sellers' auditors, subject to execution of customary releases among the
Sellers and Buyer.
(c) If a Notice of Disagreement shall be duly and timely
delivered pursuant to Section 3.5(b), the parties shall, during the 15 days
following such delivery, use their diligent efforts to reach agreement on the
disputed items or amounts in order to determine, as may be required, the amount
of Closing Net Asset Value, which amount shall not be more than the amount
thereof shown in the Section 3.5(a) Documents nor less than the amount thereof
shown in the Notice of Disagreement. If, during such period, the parties are
unable to reach agreement, they shall promptly thereafter cause a mutually
acceptable firm of nationally recognized independent public accountants (the
"Accountant") promptly to review this Agreement, the appropriate Books and
Records and the disputed items or amounts for the purpose of calculating Closing
Net Asset Value. In making such determination, the Accountant shall consider
only those items or amounts in the Closing Statement or Sellers' calculation of
Closing Net Asset Value as to which Buyer has disagreed. The Accountant shall
deliver to Sellers and Buyer, as promptly as practicable, a report setting forth
such determination. Such report shall be final and binding upon the parties
hereto. The cost of such review and report shall be borne (i) by the party whose
calculation or calculations, taken together, were furthest from that of the
Accountant, or (ii) otherwise equally by Sellers and Buyer. "Final Net Asset
Value" means (A) Closing Net Asset Value as shown in the Sellers' calculation
delivered pursuant to Section 3.5(a) if no Notice of Disagreement with respect
thereto is duly and timely delivered, (B) the amount agreed upon by the parties
pursuant to this Section 3.5(c) or (C) in the absence of such agreement, the
amount as shown in the Accountant's calculation delivered pursuant to this
Section 3.5(c); provided that Final Net Asset Value shall not in any event be
more than Sellers' calculation delivered pursuant to Section 3.5(a) or less than
Buyer's calculation pursuant to Section 3.5(b).
3.6 ADJUSTMENT OF PURCHASE PRICE.
(a) If the amount XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXX) ("Base Net Asset Value") exceeds the Final Net Asset
Value, Sellers shall pay to Buyer, as an adjustment to the Purchase Price, in
the manner and with interest as provided in Section 3.6(b), the amount of such
excess. If the Final Net Asset Value exceeds Base Net Asset Value, Buyer shall
pay to Sellers, as an adjustment to the Purchase Price, in the manner and with
interest as provided in Section 3.6(b), the amount of such excess. Any such
payment pursuant to this Section 3.6(a) shall be made (i) within 45 days after
Sellers' delivery of the Section 3.5(a) Documents if no Notice of Disagreement
with respect to Closing Net Asset Value is duly and timely delivered pursuant to
Section 3.5(b) or (ii) if a Notice of Disagreement with respect to Closing Net
Asset Value is duly and timely delivered pursuant to Section 3.5(b), then within
10 days after the earlier of (A) agreement between the parties pursuant to
Section 3.5(c) with respect to Closing Net Asset Value or (B) delivery of the
Accountant's calculation of Final Net Asset Value pursuant to Section 3.5(c).
<PAGE>
(b) Any payment made pursuant to this Section 3.6 shall be
made by wire transfer or by delivery to the payee of the required amount in
immediately available funds. Payee shall have designated its preferred method of
payment (and wire instructions, if appropriate) for such purpose at least two
(2) days prior to the date of the required payment (or, if not so designated, by
certified or official bank check payable in immediately available funds to the
order of the payee in such amount). The amount to be paid under this Section
shall bear interest from and including the Closing Date to the date one day
prior to payment at a rate per annum equal to the rate publicly announced by The
Chase Manhattan Bank in New York, New York as its 30-day LIBOR rate in effect on
the Closing Date plus 25 basis points. Interest shall be calculated daily on the
basis of a year of 365 days and the actual number of days for which interest is
due.
3.7 XXXXXX ADJUSTMENT.
(a) In the event Cyanamid is required to sell its interest in
XXXXXXXXX to XXXXXXXXXXXX pursuant to the terms of the XXXXXXXXXXXXXXXX, Sellers
shall promptly deliver to Buyer the consideration received in respect of its
Joint Venture Interest in lieu of conveying such interest to Buyer.
(b) In the event Cyanamid is required to purchase
XXXXXXXXXXXXXX interest in XXXXXX, such interest shall be conveyed to Buyer, and
Buyer shall be required to promptly deliver to either Sellers or XXXXXXXXXXXXX,
as applicable, the consideration for the purchase of such interest.
(c) Any adjustments required pursuant to this Section 3.7
shall be considered an adjustment to Purchase Price. Any payments required shall
be wired to the appropriate entity within seven business days of receipt of wire
transfer instructions.
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLERS
Sellers hereby jointly and severally represent and warrant to
Buyer as follows:
4.1 ORGANIZATION, GOOD STANDING, POWER, ETC.
<PAGE>
(a) Each of the Companies is a corporation duly organized,
validly existing and in good standing under the laws of the jurisdiction in
which it is incorporated. Each of the Companies has the requisite corporate
power and authority to own, operate or lease the properties that it purports to
own, operate or lease and to carry on its business as it is now being conducted
and is duly licensed or qualified as a foreign corporation in each domestic or
foreign jurisdiction in which the nature of the business conducted by it or the
character or location of the properties owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so licensed
or qualified would not, individually or in the aggregate, reasonably be expected
to have a Material Adverse Effect. Copies of the Constituent Documents of each
of the Companies heretofore delivered, furnished or made available to Buyer or
its representatives by Sellers, are, as of the date hereof, true and complete in
all material respects and in full force and effect, and none of the Companies is
in violation or breach of any of the provisions of its respective Constituent
Documents in any material respect.
(b) Each of the Cyanamid Companies is a corporation duly
organized and validly existing under the laws of the jurisdiction in which it is
incorporated. Each Seller has the requisite corporate power and authority to
execute and deliver this Agreement and the other agreements contemplated hereby,
and, except as set forth in Section 4.1(b) of the Disclosure Schedule, Sellers,
the Asset Transferor Entities and the Share Transferor Entities have all
requisite corporate power and authority to consummate the transactions
contemplated hereby and thereby. Except as set forth in Section 4.1(b) of the
Disclosure Schedule, the execution and delivery of this Agreement by Sellers and
the execution and delivery by the Cyanamid Companies of the other agreements
contemplated hereby, and the consummation by Sellers, the Asset Transferor
Entities and the Share Transferor Entities of the transactions contemplated
hereby and thereby have been duly authorized by all necessary corporate action
on the part of such entities and no other or further corporate proceedings will
be necessary for the execution and delivery of such agreements by Sellers, the
Asset Transferor Entities and the Share Transferor Entities, the performance by
Sellers, the Asset Transferor Entities and the Share Transferor Entities of
their obligations hereunder and thereunder and the consummation by such entities
of the transactions contemplated hereby and thereby. This Agreement has been
duly executed and delivered by each of the Sellers and constitutes a legal,
valid and binding obligation of each of the Sellers enforceable against Sellers
in accordance with its terms, except as the same may be limited by bankruptcy,
insolvency, moratorium, reorganization or other laws of general applicability
relating to or affecting the enforcement of creditors' rights and general
principles of equity.
4.2 CAPITALIZATION OF THE COMPANIES.
(a) As of the date of this Agreement, the authorized and
issued capital stock of each of the Companies is as set forth in Section 4.2(a)
of the Disclosure Schedule and all shares of such capital stock are validly
issued, outstanding, fully paid and non-assessable. None of the Shares have been
issued in violation of any preemptive rights. Except as set forth in Section
4.2(a) of the Disclosure Schedule, none of the Companies owns any interest in
any corporation, partnership, joint venture or similar entity, including
Affiliates of Sellers. Except as set forth in Section 4.2(a) of the Disclosure
Schedule, there are no options, warrants or other rights, agreements,
arrangements or commitments of any character obligating any of the Companies or
the Cyanamid Companies to issue or sell any shares of capital stock of or other
equity interests in any of the Companies, or any securities or obligations
convertible into or exchangeable for any shares of capital stock of any of the
Companies or other equity interests in any of the Companies obligating any of
the Companies or the Cyanamid Companies to grant, extend, or enter into any such
right, agreement, arrangement or commitment.
<PAGE>
(b) Except as set forth in Section 4.2(b) of the Disclosure
Schedule, there are no outstanding contractual obligations of any of the
Companies to repurchase, redeem or otherwise acquire any outstanding shares of
capital stock of, or other ownership interests in, any of the Companies, or to
make any investment (in the form of a loan, capital contribution or otherwise)
in any other entity.
(c) Except as set forth in Section 4.2(c) of the Disclosure
Schedule, Sellers or their Affiliates are the holders of record of and have
good, valid and marketable title to all of the Shares, free and clear of any
Encumbrances and any preemptive or subscription rights of any Person. Except as
set forth in Section 4.2(c) of the Disclosure Schedule, there are no material
restrictions with respect to the transferability of the Shares except under
Applicable Law.
4.3 EFFECT OF AGREEMENT.
The execution, delivery and performance by Sellers of this
Agreement and the other agreements contemplated hereby and the consummation by
Sellers and their Affiliates of the transactions contemplated hereby and thereby
will not require any notice to, filing with, or the consent, approval or
authorization of, any Person or Governmental Authority, except as contemplated
in Section 7.4 hereof or as set forth in Section 4.3 of the Disclosure Schedule,
other than where the failure to obtain such consent, approval or authorization,
or to give or make any such notice or filing, would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect. Except as
contemplated in Section 7.4 hereof or as set forth in Section 4.3 of the
Disclosure Schedule, neither the execution and delivery of this Agreement or of
the other agreements contemplated hereby nor the consummation of the
transactions contemplated hereby or thereby will (i) violate or result in a
breach or result in the acceleration or termination of, or require any consent
under, or the creation in any third party of the right to accelerate, terminate,
modify or cancel, any indenture, contract, lease, sublease, loan agreement, note
or other obligation or liability to which any of the Companies or the Business
is a party or is bound or to which any of the assets of the Companies or the
Assets are subject, except for such violation, breach, acceleration or
termination which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, (ii) conflict with, violate or
result in a breach of any provision of the Constituent Documents of the Sellers
or any of the Companies in any material respect, or (iii) conflict with or
violate any Applicable Laws or court orders in any material respect.
4.4 FINANCIAL STATEMENTS AND NET ASSET VALUE.
(a) Sellers have delivered to Buyer or its representatives the
following (the "Financial Statements"): an audited combined adjusted statement
of Net Revenues and Expenses for the year ended December 31, 1999 and a combined
statement of adjusted Net Assets as of December 31, 1999 (including notes
thereto) which combined adjusted financial statements contain a report from
Andersen reporting thereon.
<PAGE>
(b) The audited combined adjusted statement of adjusted Net
Assets included in the Financial Statements fairly presents, in all material
respects, the Net Assets as of its date and the audited combined adjusted
statement of adjusted Net Revenues and Expenses included in the Financial
Statements fairly presents, in all material respects, the Operating Profit for
the period set forth therein, in each case in accordance with GAAP, except in
each case as set forth in the Notes therein.
(c) To Sellers' knowledge, there exist no liabilities or
obligations of the Companies, the Business or the Cyanamid Companies (with
respect to the Business) whether accrued, absolute, contingent or threatened,
which are required to be reflected, reserved for or disclosed under GAAP in
financial statements of the Business as of and for the period ended on the date
of this representation and warranty, other than (i) liabilities or obligations
which are adequately reflected, reserved for or disclosed in the Financial
Statements or (ii) liabilities or obligations incurred since December 31, 1999
which would not, individually or in the aggregate, reasonably be expected to
have a Material Adverse Effect.
4.5 ABSENCE OF CERTAIN CHANGES OR EVENTS.
Except (x) to the extent arising out of or relating to the
transactions contemplated by this Agreement or as otherwise permitted by the
terms of this Agreement (including with respect to the Excluded Assets), (y) for
Contracts entered into since December 31, 1999, that are included in the
Contracts listed on Section 4.9(i) of the Disclosure Schedule, and (z) for
matters listed on Section 4.5 of the Disclosure Schedule, since December 31,
1999, (i) the Business has been operated in the ordinary course in a manner
substantially consistent with past practice and (ii) there has not been, and
there is not reasonably expected to be, any Material Adverse Effect. As
amplification and not limitation of the foregoing, with respect to the Business
and except as disclosed on Section 4.5 of the Disclosure Schedule, since
December 31, 1999, none of the Cyanamid Companies has:
(i) sold, transferred, leased, subleased, licensed or
otherwise disposed of, to a third party, any property or asset, real,
personal or mixed (including, without limitation, leasehold interests
and intangible property), which in each case is, individually or in the
aggregate, material to the Business, other than the sale of inventories
and obsolete equipment and licensing, in each case in the ordinary
course of the Business consistent with past practice;
(ii) merged with, entered into a consolidation with or
acquired an interest of 5% or more in any Person or acquired a
substantial portion of the assets or business of any Person or any
division or line of business thereof, which in any case is,
individually or in the aggregate, material to the Business, other than
in the ordinary course of the Business consistent with past practice;
<PAGE>
(iii) made any capital expenditure or commitment for any
capital expenditure in excess of U.S.$5,000,000 in the aggregate, other
than as set forth on the capital expenditure budget for the Business
attached hereto as Exhibit 4.5(iii);
(iv) incurred any interest bearing indebtedness or
assumed any capital lease obligation in excess of U.S.$ 30,000,000 in
the aggregate;
(v) except in the ordinary course of the Business consistent
with past practice (A) granted any increase, or announced any increase,
in the wages, salaries, compensation, bonuses, incentives, pension or
other benefits payable to any of its employees with annual cash
compensation in excess of $75,000, including, without limitation, any
increase or change pursuant to any benefit plan, or (B) established or
increased or promised to increase any benefits under any benefit plan,
in either case except as required by Applicable Law, any benefit plan
identified in Section 9.1(a) or 9.2(a) of the Disclosure Schedules or
any collective bargaining agreement;
(vi) agreed, whether in writing or otherwise, to take any of
the actions specified in this Section 4.5 or granted any options to
purchase, rights of first refusal, rights of first offer or any other
similar rights with respect to any of the actions specified in this
Section 4.5, except as expressly contemplated by this Agreement.
4.6 TAXES.
<PAGE>
(a) Except as disclosed on Section 4.6 of the Disclosure
Schedule, (i) except where failure to file would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, the
Companies have filed or been included in on or before the date hereof (or will
timely file) or be included in) all Tax Returns required to be filed for tax
years or periods ending on or before the Closing Date; (ii) except where the
failure to pay would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect, all such Tax Returns are (or will
be) complete and accurate and disclose (or will disclose) all Taxes required to
be paid by or with respect to the Companies for the periods covered thereby and
all Taxes shown to be due on such Tax Returns have been (or will be) timely
paid; (iii) except where the failure to pay would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect, all Taxes
(whether or not shown on any Tax Return) owed by the Companies or in respect of
the Assets or the Business and required to be paid with respect to tax years or
periods ending on or before the Closing Date have been (or will be) timely paid
or are being presently contested in good faith; (iv) none of the Companies or
any of their Tax Affiliates have waived or to Sellers' knowledge been requested
to waive any statute of limitations in respect of Taxes; (v) there is no action,
suit, investigation, audit, claim or assessment pending or proposed or to
Sellers' knowledge threatened with respect to Taxes of the Companies or in
respect of the Assets or the Business; (vi) all deficiencies asserted or
assessments made as a result of any examination of the Tax Returns referred to
in clause (i) have been paid in full; (vii) all Tax Sharing Arrangements and Tax
indemnity arrangements will terminate on or prior to the Closing Date and the
Companies will have no liability thereunder on or after the Closing Date; (viii)
there are no liens for Taxes upon any of the assets of the Companies or the
Assets except liens relating to current Taxes not yet due or for which adequate
reserves are not reflected in the books and records of the business; (ix) no
intercompany obligation of the Companies or any Tax Affiliate will remain
outstanding following the Closing; (x) the Companies have no corporate
acquisition indebtedness, as described in Section 279(b) of the Code; (xi) no
consent under section 341(f) of the Code has been filed with respect to any of
the Companies and (xii) none of the Companies has any material amount of income
reportable for a taxable period ending after the Closing Date but attributable
to a transaction occurring in, or a change in accounting method for, a taxable
period ending on or prior to the Closing Date.
(b) As a result of the transactions contemplated by this
Agreement, none of the Companies nor the Buyer will be obligated to make a
payment to an individual that would be an "excess parachute payment" to a
"disqualified individual" as those terms are defined in Section 280G of the
Code.
4.7 REAL PROPERTY.
(a) Section 4.7 of the Disclosure Schedule sets forth a list
of all Owned Real Property. Except as set forth on Section 4.7(a) of the
Disclosure Schedule and, except for Permitted Encumbrances, (i) one of the
Companies, Sellers or the Asset Transferor Entities, as the case may be, has
good, valid and marketable fee simple title to each parcel of Owned Real
Property and (ii) none of the Owned Real Property is subject to any lease.
(b) Section 4.7(b) of the Disclosure Schedule sets forth a
list of all Leased Real Property that is material to the Business. One of the
Companies, Sellers or the Asset Transferor Entities, as the case may be, has a
valid leasehold interest in each parcel of Leased Real Property and each of such
leases is in full force and effect in accordance with its terms and there exists
no material breach or default thereunder on the part of any of the Companies,
Sellers or the Asset Transferor Entities or, to the knowledge of Sellers, any
other party thereto other than those breaches or defaults which would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
4.8 GOOD TITLE TO AND CONDITION OF ASSETS.
<PAGE>
(a) The Companies have good title to, or a valid and binding
leasehold interest in, the assets of the Companies, and Sellers and the Asset
Transferor Entities have good title to, or a valid and binding leasehold
interest in, the Assets (other than Real Property and Intellectual Property
which are addressed in Sections 4.7 and 4.10, respectively), in each case free
and clear of all Encumbrances, except (i) as set forth in Section 4.8(a) of the
Disclosure Schedule, or (ii) Permitted Encumbrances. Except (i) as set forth in
Section 4.8 of the Disclosure Schedule and (ii) for the Excluded Assets, the
assets of the Companies and the Assets, together with the rights granted to
Buyer pursuant to this Agreement, the other agreements to be entered into
pursuant hereto and the agreements set forth in Section 6.2 of the Disclosure
Schedule, constitute, and on the Closing Date will constitute, substantially all
of the assets, properties and rights used in or necessary to the conduct of the
Business as currently conducted.
(b) Except as reflected in the Financial Statements or as set
forth in Section 4.8(b) of the Disclosure Schedule, the physical assets of the
Companies and the Assets, taken as a whole, are in good and serviceable
condition (subject to normal wear and tear and immaterial impairments of value
and damage) and are generally suitable for the uses for which they are intended.
4.9 CONTRACTS.
(a) Section 4.9(i) of the Disclosure Schedule sets forth a
list, as of the date hereof, of the following Contracts primarily relating to
the Business (other than (a) purchase orders in the usual and ordinary course of
business, and (b) any Contract terminable by any of the Companies, Sellers or
the Asset Transferor Entities without material penalty upon not more than 90
days' notice):
(i) each Contract for the purchase of inventory, other
materials or personal property with any supplier or for the furnishing
of services to the Business under the terms of which a Company, Seller
or Asset Transferor Entity is obligated to pay or otherwise give
consideration of more than U.S. $500,000 in the aggregate during the
calendar year ended December 31, 2000;
(ii) each Contract for the sale of inventory or other
personal property or for the furnishing of services by the Business
which is likely to involve consideration of more than U.S.$500,000 in
the aggregate during the calendar year ended December 31, 2000;
(iii) all material (as relates to the amount of sales)
distributor, dealer, agency, sales promotion Contracts to which a
Company, Seller or Asset Transferor Entity is a party;
(iv) all material Contracts relating to any interest
bearing indebtedness of the Business;
(v) all material Contracts with any Governmental
Authority to which a Company or Seller or Asset Transferor Entity
is a party;
(vi) all Contracts (it being understood that this is not
intended to include those Contracts relating to Intellectual Property
which contain only customary limitations on rights to use Intellectual
Property) that limit or purport to limit the ability of the Companies
or the Business in any material respect to compete in any line of
business or with any Person or in any geographic area or during any
period of time;
<PAGE>
(vii) all Contracts between or among Sellers or any of their
Affiliates (other than the Companies), on the one hand, and a Company
or the Business, on the other hand; and
(viii) all other Contracts, whether or not made in the
ordinary course of the Business, which are material to the conduct of
the Business, or the absence of which would have a Material Adverse
Effect.
(b) Except as set forth in Section 4.9(ii) of the Disclosure
Schedule, each Contract listed in Section 4.9(i) of the Disclosure Schedule or
Section 4.10(a) of the Disclosure Schedule is a valid and binding agreement and
is in full force and effect. Except as otherwise provided in Section 4.9(iii) of
the Disclosure Schedule, Sellers have no knowledge of any default under any
Contract listed in Section 4.9(i) of the Disclosure Schedule which default has
not been cured or waived, except for such defaults as would not, individually or
in the aggregate, reasonably be expected to have a Material Adverse Effect.
Except as described in Section 4.9(iv) of the Disclosure Schedule, to Sellers'
knowledge, there is no event or circumstance which, with the passage of time or
the giving of notice or both, would constitute a material default or breach by
any of the Companies, the Asset Transferor Entities or Sellers that is a party
thereto under any of the Contracts listed in Section 4.9(i) of the Disclosure
Schedule or would give rise to any right of termination or acceleration
thereunder except for such default, breach, termination or acceleration as would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. To Sellers' knowledge, there is no assertion by any third party
of any claim of material default or breach under any of the Contracts, except
for such claim as would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.10 INTELLECTUAL PROPERTY RIGHTS.
(a) Section 4.10(a) of the Disclosure Schedule sets forth a
listing of (i) all Patents, registered Trademarks and applications therefor,
registered copyrights and applications for copyright registration, industrial
and utility model registrations and applications therefor, and design
registrations and applications therefor, included in the Intellectual Property,
(ii) all Contracts under which any of the Companies, the Asset Transferor
Entities or Sellers is licensed or otherwise uses or is permitted to use
Intellectual Property which has been previously used by Sellers or the Asset
Transferor Entities in the ordinary course of the Business or which is material
to the Business and (iii) all Contracts under which the Companies, the Asset
Transferor Entities or Sellers license or otherwise permit any party to use
Intellectual Property; provided, however, that except as set forth in Section
7.6, the right to use the trademarks, trade names, domain names and associated
trade dress, packaging, logos and labels containing "American Home", "AHP",
"Wyeth", "Fort Dodge", or "Lederle" or any derivative or anything imitative
thereof or which resembles or is confusingly similar thereto by Buyer is
prohibited and such rights are expressly excluded from the purchase and sale
hereunder.
<PAGE>
(b) To the knowledge of Sellers, since January 1, 1997, except
as set forth in Section 4.10(b) of the Disclosure Schedule, no Person has
asserted or claimed that the conduct of the Business as currently conducted, or
asserted or claimed that the use of the Intellectual Property in connection
therewith, infringes on or otherwise violates the intellectual property rights
of any other Person and (ii) except as set forth on Section 4.10(b) of the
Disclosure Schedule, no Person is challenging the validity or enforceability of
the Intellectual Property, and (iii) except as set forth on Section 4.10(b) of
the Disclosure Schedule, to the knowledge of Sellers, no Person is infringing or
otherwise violating the Intellectual Property, except, in each case, for
challenges, infringements or violations that would not, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
(c) Except as disclosed on Section 4.10(c) of the Disclosure
Schedule, one or more of the Companies, Sellers or the Asset Transferor Entities
either (i) owns the entire right, title and interest in and to the Intellectual
Property free and clear of any Encumbrances; or (ii) has or have the right to
use the same as currently used in the conduct of the Business.
(d) Except as disclosed on Section 4.10(d) of the Disclosure
Schedule, none of the Companies, the Asset Transferor Entities or Sellers are in
breach of or default under any material provision of any material agreement,
commitment, contractual understanding, license, sublicense, assignment or
indemnification which relates to any of the Intellectual Property and they have
not taken any action which would, individually or in the aggregate, reasonably
be expected to have a Material Adverse Effect on their rights in any of the
Intellectual Property.
4.11 LITIGATION AND CLAIMS.
(a) Except as set forth in Section 4.11(a) of the Disclosure
Schedule, and except for matters under Environmental Laws or relating to the
environmental condition of the Real Property (as to which no representation or
warranty is being made except as set forth in Section 4.13) and except for
regulatory matters (as to which no representation and warranty is being made
except as set forth in Section 4.14), there is no civil, criminal or
administrative action, suit, hearing, proceeding or investigation pending or, to
the knowledge of Sellers, threatened against the Companies, the Asset Transferor
Entities or Sellers (to the extent related to the conduct of the Business),
other than those that would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
(b) Except as set forth in Section 4.11(b) of the Disclosure
Schedule, and except for matters under Environmental Laws or relating to the
environmental condition of the Real Property (as to which no representation or
warranty is being made except as set forth in Section 4.13) and except for
regulatory matters (as to which no representation and warranty is being made
except as set forth in Section 4.14), none of the Sellers, the Companies nor
Asset Transferor Entities is subject to any order, writ, judgment, award,
injunction, or decree of any court or Governmental Authority or any arbitrator
or arbitrators related to the conduct of the Business other than those that
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
4.12 COMPLIANCE WITH LAW; APPLICABLE PERMITS.
Except as set forth in Section 4.11 of the Disclosure Schedule
or Section 4.12 of the Disclosure Schedule, and except for matters relating to
Taxes which are addressed in Section 4.6, and except for matters under
Environmental Laws or relating to the environmental condition of the Real
Property (as to which no representation or warranty is made except as set forth
in Section 4.13), and except for regulatory matters (as to which no
representation and warranty is being made except as set forth in Section 4.14),
the Business has been since December 31, 1998, and is being, conducted in
compliance with all Applicable Laws, except where the failure to have complied,
or to comply, would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. The Companies, the Asset Transferor
Entities and Sellers have all Applicable Permits necessary to conduct the
Business as currently conducted, other than those the absence of which would
not, individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect. There are no proceedings pending or, to the knowledge of
Sellers, threatened which may result in the revocation, cancellation or
suspension of any such Applicable Permits, except those the absence of which
would not, individually or in the aggregate, reasonably be expected to have a
Material Adverse Effect.
4.13 ENVIRONMENTAL MATTERS.
Except as disclosed in Section 4.13 of the Disclosure
Schedule:
(a) the Companies, the Asset Transferor Entities and/or
Sellers have obtained those material environmental permits, licenses or
approvals required by law and necessary for the conduct of the Business and are
in compliance with such permits, licenses and approvals and other requirements
of applicable Environmental Laws, except where the failure to comply with any of
the foregoing would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect;
(b) none of the Companies, or, to the extent related to the
Business, the Asset Transferor Entities, nor Sellers has received any written
notice from any Governmental Authority or other third party of violation of or
any liability under any Environmental Laws which has not been complied with or
satisfied without remaining obligation, cost or liability, except where the
failure to so comply or satisfy would not, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect;
(c) the Real Property does not contain and, to the knowledge
of the Sellers, has never contained, any underground storage tanks, surface
impoundments, pits, sumps, septic tanks or lagoons containing any Hazardous
Substance, the presence of which would, individually or in the aggregate,
reasonably be expected to have a Material Adverse Effect;
<PAGE>
(d) none of the Companies, or, to the extent related to the
Business, the Asset Transferor Entities or Sellers has received any written
notice, claim, or request for information relating to any third-party location
or waste disposal site alleging that any of them is or may be liable to any
Person or Governmental Authority in connection with such location or site;
(e) to the knowledge of Sellers, except as would not,
individually or in the aggregate, reasonably be expected to have a Material
Adverse Effect, no Hazardous Substance has been released at any of the Real
Property or, during the period of any of their ownership or operation thereof,
at any property formerly owned or operated by the Companies or, to the extent
related to the Business, the Asset Transferor Entities or Sellers;
(f) To the knowledge of Sellers, no Governmental Authority has
proposed any modification of any permit, license or approval issued pursuant to
any Environmental Law, related to the Business that would, individually or in
the aggregate, reasonably be expected to have a Material Adverse Effect; and
(g) Neither the execution of this Agreement nor the
consummation of the transactions contemplated herein will require any
investigation, remediation or other action related to Hazardous Substance, or
any notice to or consent of Governmental Authorities or third parties, pursuant
to any applicable Environmental Law or permit, license or approval related
thereto, other than the New Jersey Industrial Site Recovery Act.
4.14 REGULATORY MATTERS.
Except as set forth on Section 4.14 of the Disclosure
Schedule, there are no products included in the assets of the Companies or the
Assets being manufactured or sold by the Companies or Sellers or any Subsidiary
of Sellers which at the date hereof would require any approval of the U.S.
Environmental Protection Agency or any other Governmental Authority for the
purpose for which they are being manufactured or sold (i) for which such
approval has not been obtained, or (ii) for which such approval has been
withdrawn or is no longer in full force and effect, except where the failure to
have such approval would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect. Except as set forth in Section 4.14
of the Disclosure Schedule, the registrations relating to the products
manufactured or sold primarily relating to the Business are valid and in full
force and effect and no proceeding is pending or to the knowledge of Sellers
threatened looking towards the revocation or limitation of any such Registration
and, to the knowledge of Sellers, there is no basis or ground for any such
revocation or limitation in each such case except for such failures, revocations
or limitations which would not, individually or in the aggregate, reasonably be
expected to have a Material Adverse Effect.
4.15 LABOR MATTERS.
<PAGE>
Except as disclosed in Section 4.15 of the Disclosure
Schedule, none of the Companies or, to the extent related to the Business, the
Asset Transferor Entities or Sellers is a party to any collective bargaining
agreement and there are no unfair labor practice proceedings pending between any
of the Companies or, to the extent related to the Business, the Asset Transferor
Entities or Sellers and any of their Employees or any labor or other collective
bargaining unit representing any Employee that would, individually or in the
aggregate, reasonably be expected to have a Material Adverse Effect.
4.16 BROKER'S FEES.
Except for the retention of Morgan Stanley & Co. Incorporated,
the fees and expenses of which will be paid by Sellers in accordance with
Section 7.1, Sellers and their Affiliates have not employed any broker, finder
or investment banker or incurred any liability for any brokerage, finder's or
other fee or commission in connection with the transactions contemplated by this
Agreement.
4.17 INTERCOMPANY AGREEMENTS.
For a period of three years from Closing, each of the
agreements set forth on Section 4.17 of the Disclosure Schedule are on economic
terms generally consistent with the revenue and cost assumptions for the items
covered thereby contained in the forecast relating to the Business previously
delivered to Buyer.
4.18 NO OTHER REPRESENTATIONS OR WARRANTIES; DISCLOSURE.
Except for the representations and warranties of Sellers
expressly set forth in this Agreement, neither Sellers nor any other Person
makes any other express or implied representation or warranty on behalf of
Sellers or otherwise in respect of the Business. Disclosure in a particular
Section of the Disclosure Schedule shall be deemed to be a disclosure in all
other Sections thereof to the extent that the disclosure in such particular
Section on its face would be reasonably relevant in light of the disclosure
made.
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents and warrants to Sellers as follows:
5.1 CORPORATE ORGANIZATION.
<PAGE>
Buyer is a corporation duly organized, validly existing and in
good standing under the laws of Germany. Buyer has the requisite corporate power
and authority to own, operate or lease the properties that it purports to own,
operate or lease and to carry on its business as it is now being conducted and
is duly licensed or qualified as a foreign corporation in each domestic or
foreign jurisdiction in which the nature of the business conducted by it or the
character or location of the properties owned or leased by it makes such
licensing or qualification necessary, except where the failure to be so licensed
or qualified would not reasonably be expected to have a material adverse effect
on the business, operations or financial condition of Buyer and its
subsidiaries, taken as a whole or on the ability of Buyer to consummate the
transactions contemplated herein.
5.2 AUTHORITY RELATIVE TO THIS AGREEMENT.
Buyer has the requisite corporate power and authority to
execute and deliver this Agreement and the other agreements contemplated hereby
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by Buyer of this Agreement and the other agreements
contemplated hereby and the consummation by Buyer of the transactions
contemplated hereby and thereby have been duly authorized by all necessary
corporate action on the part of Buyer and no other corporate proceeding is
necessary for the execution and delivery of this Agreement or such other
agreements by Buyer, the performance by Buyer of its obligations hereunder or
thereunder and the consummation by Buyer of the transactions contemplated hereby
and thereby. This Agreement has been duly executed and delivered by Buyer and
constitutes a legal, valid and binding obligation of Buyer, enforceable against
Buyer in accordance with its terms, except as the same may be limited by
bankruptcy, insolvency, moratorium, reorganization or other laws of general
applicability relating to or affecting the enforcement of creditors' rights and
general principles of equity.
5.3 BROKER'S FEES.
Except for the retention of Wasserstein Perella & Co., the
fees and expenses of which will be paid by Buyer pursuant to Section 7.1, none
of Buyer or any of its Affiliates has employed any broker, finder or investment
banker or incurred any liability for any brokerage, finder's or other fee or
commission in connection with the transactions contemplated by this Agreement.
5.4 CONSENTS AND APPROVALS; NO VIOLATIONS.
Except as contemplated by Section 7.4 hereof, no material
filing with, and no material permit, authorization, consent or approval of, any
public body or authority is necessary for the consummation by Buyer of the
transactions contemplated by this Agreement or the other agreements which Buyer
will execute pursuant to the terms of this Agreement. The execution and delivery
of this Agreement and such other agreements and the consummation of the
transactions contemplated hereby and thereby will not (x) conflict with or
result in a breach of any of the provisions of the Certificate of Incorporation
or by-laws or other Constituent Documents of Buyer, or (y) be subject to the
making of the filings and the obtaining of the governmental and other consents
referred to herein, contravene in any material respect any law, rule or
regulation of any state, the United States or any foreign country or any order,
writ, judgment, injunction, decree, determination or award currently in effect
that is binding upon Buyer or any of its subsidiaries or any of their respective
properties.
<PAGE>
5.5 FINANCIAL CAPABILITY.
Buyer has sufficient funds to purchase the Assets and the
Shares and to perform its obligations under the Assumed Contracts and Assumed
Liabilities on the terms and subject to the conditions contemplated by this
Agreement.
5.6 SECURITIES ACT.
Buyer is acquiring the Shares solely for the purpose of
investment and not with a view to, or for sale in connection with, any
distribution thereof in violation of the Securities Act. Buyer acknowledges the
Shares are not registered under the Securities Act or any applicable state
securities law or other Applicable Laws, and that such Shares may not be
transferred or sold except pursuant to the registration provisions of such
Securities Act or pursuant to an applicable exemption therefrom and pursuant to
state securities laws and regulations as applicable.
5.7 NO OTHER REPRESENTATIONS OR WARRANTIES.
Except for the representations and warranties of Buyer
expressly set forth in this Agreement, neither Buyer nor any other Person makes
any other express or implied representation or warranty on behalf of Buyer.
ARTICLE 6 CONDUCT OF BUSINESS PENDING THE CLOSING
6.1 CONDUCT OF BUSINESS PENDING THE CLOSING.
Except as disclosed in Section 6.1 of the Disclosure Schedule,
Sellers and Buyer agree that, prior to the Closing, unless Buyer shall otherwise
consent in writing (which consent Buyer shall not unreasonably withhold) or as
otherwise contemplated by this Agreement (including with respect to the Excluded
Assets) the following provisions shall apply:
<PAGE>
(a) The Business shall be conducted only in the ordinary
course of business and consistent with past practices. Without limiting the
generality of the foregoing, except as described in Section 6.1 of the
Disclosure Schedule, Sellers will (with respect to the Business), and will cause
the Companies, the Asset Transferor Entities and the Share Transferor Entities
(with respect to the Business) to, (i) continue its advertising and promotional
activities, and purchasing policies, in the ordinary course of business; (ii)
not shorten or lengthen the customary payment cycles for any of its payables or
receivables except in the ordinary course of business; (iii) use diligent
efforts to (A) preserve intact its business organization and the business
organization of the Business, (B) keep available to Buyer the services of the
employees of the Business, and (C) continue in full force and effect without
material modification all existing policies or binders of insurance currently
maintained in respect of the Business;
(b) Except as described in Section 6.1 of the Disclosure
Schedule, Sellers covenant and agree that, prior to the Closing, without the
prior written consent of Buyer, and to the extent not otherwise contemplated by
this Section 6.1, none of the Cyanamid Companies, nor the Companies will do any
of the things enumerated in the second sentence of Section 4.5 (including,
without limitation, clauses (i) through (vii) thereof);
(c) The Companies, Sellers and the Asset Transferor Entities
shall not pledge, dispose of or encumber any of the Assets or assets of the
Companies (other than Excluded Assets) other than in the ordinary course of
business and consistent with past practice;
(d) Sellers shall cause (x) the Companies and (y) the Asset
Transferor Entities, only to the extent related to or affecting the Business,
not to do any of the following: (i) authorize for issuance, issue, sell, pledge,
deliver, or agree or commit to issue, sell, pledge or deliver (whether through
the issuance or grant of options, warrants, commitments, subscriptions, rights
to purchase or otherwise) any capital stock of the Companies or securities or
rights convertible into or exchangeable for, shares of capital stock or
securities convertible into or exchangeable for such shares; (ii) amend or
propose to amend their Constituent Documents; (iii) split, combine or reclassify
any shares of their capital stock; (iv) redeem, purchase or otherwise acquire or
offer to redeem, purchase or otherwise acquire any capital stock; or (v)
authorize or propose any of the foregoing or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing; provided, however,
notwithstanding anything to the contrary contained in this Agreement, that
Sellers and their Affiliates shall continue to have the right to, at their own
expense, withdraw cash from the Companies, either in the form of a dividend or
in the form of a cash advance, and, correspondingly, to provide cash to the
Companies, either in the form of a contribution to capital or an intercompany
loan, in a manner consistent with their past practice and the cash management
programs which they have in place, generally, for their Affiliates. Buyer
acknowledges that Sellers may transfer by way of a dividend or otherwise cash,
cash equivalents, marketable securities and other financial instruments as well
as any other Excluded Assets out of the Companies prior to Closing and, it is
intended that to the extent practicable, the Excluded Assets relating to the
Companies will be transferred out of the Companies by way of dividend or
otherwise prior to Closing as contemplated by Section 6.2(a);
<PAGE>
(e) Sellers shall cause the Companies and, as it relates to
the Business, with respect to clauses (ii) and (iii) below, the Asset Transferor
Entities not to (i) acquire (by merger, consolidation or acquisition of stock or
assets) any corporation, partnership or other business organization or division
thereof or make any investment either by purchase of stock or securities of any
other individual or entity; (ii) acquire any assets for an aggregate value in
excess of $5,000,000 other than pursuant to the current capital expenditure
budget (a copy of which is attached hereto as Exhibit 4.5(iii)) of the Business
and other than purchases in the ordinary course of business; (iii) dispose of
any assets, other than Excluded Assets, with an aggregate value in excess of
$5,000,000 other than sales of inventory in the ordinary course of business;
(iv) incur any indebtedness for borrowed money or issue any debt securities or
assume or guarantee the obligations of any other Person or make any loans or
advances or enter into any other transaction, except the occurrence of
intercompany loans or the making of intercompany advances in the ordinary course
of business consistent with past practice and except for advances to Employees
for expenses in the ordinary course of business and consistent with past
practice; (v) authorize, recommend or propose any change in its capitalization;
or (vi) insofar as relates to the Business, make, change or revoke any material
Tax election (unless expressly contemplated hereby or regularly made in
connection with the Business) or method of Tax accounting, or settle or
compromise any material Tax deficiency or assessment; or (viii) authorize or
propose any of the foregoing or enter into or modify any contract, agreement, or
commitment or arrangement with respect to any of the foregoing;
(f) Except as otherwise contemplated by this Agreement, the
Companies and, to the extent related to the Business, the Asset Transferor
Entities and Sellers shall not adopt or amend any U.S. Employee Plan, U.S.
Benefit Arrangement or International Plan or increase or pay any benefit not
required by any existing U.S. Employee Plan, U.S. Benefit Arrangement or
International Plan (as defined in Article 9), or increase any salaries or wages
of Employees, other than in the ordinary course of business consistent with past
practice or as may be required by a Governmental Authority, by Applicable Law or
collective bargaining or other agreements or as previously agreed in writing by
Buyer;
(g) None of the Companies, the Asset Transferor Entities or
Sellers shall waive, release, grant or transfer any rights with respect to any
Intellectual Property, or abandon or allow to lapse any Intellectual Property
material to the Business, or modify or change in any material respect any
existing material license, distribution agreement, lease, or other document used
in the Business, in each case, other than in the ordinary course of business in
a manner consistent with past practice; and
(h) Sellers, the Companies and the Asset Transferor Entities
shall not, except as disclosed in Section 6.1(h) of the Disclosure Schedule,
grant any bonuses, commissions, prizes or similar forms of remuneration to any
Employee, any general increase in the rates of salaries or compensation or any
specific increase to any Employee or enter into any employment agreement, except
such as are (i) in accordance with regularly scheduled periodic increases or
existing bonus plans, policies or programs, (ii) required under Applicable Law
or collective bargaining or labor agreements, or (iii) previously agreed to in
writing by Buyer.
6.2 PERMITTED ACTIONS.
<PAGE>
(a) Notwithstanding any other provisions herein to the
contrary, prior to the Closing, Sellers and their Affiliates shall (A) use
diligent efforts to (i) cause each of the Companies to transfer by way of
dividend or otherwise to Sellers or any of their Affiliates, as the case may be,
all Excluded Assets including, but not limited to, any cash, cash equivalents or
marketable securities held by such Company from time to time up to and including
the Closing Date, and (ii) except to the extent otherwise agreed between Sellers
and Buyer including the Contracts set forth in Section 6.2 of the Disclosure
Schedule, settle all intercompany receivables and intercompany payables
(including without limitation all intercompany Tax and equity accounts) and (B)
be permitted but not required to repay obligations for borrowed money, whether
pursuant to the issuance of commercial paper or otherwise. All Taxes arising
from transactions contemplated by this Section 6.2 shall be borne by the
Sellers.
(b) To the extent not completed by Closing, Buyer will
cooperate with Sellers and their Affiliates to transfer to Sellers or their
Affiliates any Excluded Assets and assets of the Companies not used primarily in
the Business remaining in any of the Companies (at Sellers' expense).
6.3 CHANGE OF NAME.
(a) Prior to Closing, (i) Cyanamid shall change its corporate
name and shall omit therefrom the word "Cyanamid" and (ii) Sellers shall be
permitted to change the corporate name of any of the Companies to delete any
reference to "AHP", "American Home Products", "Fort Dodge", "Wyeth", "Lederle"
or any similar name.
(b) Sellers acknowledge that from and after the Closing, the
name "Cyanamid" and all confusingly similar names, marks and logos (all of such
names, marks and logos being the "Cyanamid Names") shall be owned by Buyer, and
that, subject to the (i) Trademark and License Agreement between the Crop
Protection Division of Cyanamid and the Human Health Division of Cyanamid, dated
February 1, 2000 and (ii) Trademark License Agreement between the Crop
Protection Division of Cyanamid and the Animal Health Division of Cyanamid dated
February 1, 2000, none of Sellers nor any of their Affiliates shall have any
rights in the Cyanamid Names, and that none of Sellers nor any of their
Affiliates will contest the ownership or validity of any rights of Buyer in or
to the Cyanamid Names.
ARTICLE 7 ADDITIONAL AGREEMENTS
7.1 EXPENSES.
Except as otherwise provided in Section 3.5(c), all expenses,
including the fees of any attorneys, accountants, investment bankers or others
engaged by a party, incurred in connection with this Agreement and the
transactions contemplated hereby, shall be paid by the party incurring such
expenses whether or not the transactions contemplated by this Agreement are
consummated.
<PAGE>
7.2 ADDITIONAL AGREEMENTS.
Subject to the terms and conditions herein provided, each of
the parties hereto agrees (i) to use all reasonable efforts to do, or cause to
be done, all things necessary, proper or advisable to consummate the
transactions contemplated by this Agreement and to cooperate with each other in
connection with the foregoing, (ii) to defend all lawsuits or other legal
proceedings challenging this Agreement or the consummation of the transactions
contemplated hereby, (iii) to use all reasonable efforts to lift or rescind any
injunction or restraining order or other order adversely affecting the ability
of the parties to consummate the transactions contemplated hereby, and (iv) to
use all reasonable efforts to effect all necessary registrations and filings and
submissions of information required or requested by Governmental Authorities
with respect to the transactions contemplated hereby.
7.3 ACCESS TO INFORMATION.
Prior to the Closing, Sellers shall, and shall cause their
Affiliates to, afford the officers, employees and agents of Buyer reasonable
access to the facilities and employees of Business and the records of the
Sellers and their Affiliates relating to the Business (but not including
confidential personnel records) during normal business hours and in a manner
that will not unreasonably disrupt the operation of the Business. In connection
therewith, the parties will comply with the terms of the Confidentiality
Agreement, dated September 22, 1999, between Buyer and AHP, which agreement
shall survive the termination of this Agreement.
7.4 FILINGS AND AUTHORIZATIONS.
<PAGE>
Sellers and Buyer have filed or supplied or will, as promptly
as practicable, file or supply, or cause to be filed or supplied, all
notifications and information required to be filed or supplied pursuant to any
merger control or Competition Laws including, without limitation, the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
and, if necessary, any other Competition Laws, in connection with the
transactions contemplated by this Agreement. As promptly as practicable, (a)
Sellers and Buyer will make, or cause to be made, all such other filings and
submissions under laws, rules and regulations applicable to them, or to their
Subsidiaries and Affiliates, as may be reasonably required for them to
consummate the transactions contemplated hereby in accordance with the terms of
this Agreement, and (b) Buyer will use reasonable best efforts to obtain, or
cause to be obtained, as promptly as practicable all authorizations, approvals,
consents and waivers from all Governmental Authorities necessary to be obtained
by them, or their Affiliates, in order for them so to consummate such
transactions.
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXX. Each of the Buyer and the Sellers agrees that it will
inform the other regarding its communications with Governmental Authorities and
permit the other to participate fully in any investigation by Governmental
Authorities, including providing the other with notice of and an opportunity
to attend all meetings between Buyer or the Sellers and any Governmental
Authority. XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
7.5 TAX MATTERS.
(a) Liability for Taxes.
-------------------
(i) Except as provided in Section 7.5(iv) or for Taxes
included in the Final Net Asset Value, Sellers shall be liable for, and
shall indemnify Buyer against, all (A) Taxes imposed on any of Sellers
or their Tax Affiliates (other than the Companies) for any taxable year
or period that ends on or before the Closing Date, (B) Taxes imposed on
or with respect to the Companies, the Assets or the Business or for
which the Companies, or the Business may otherwise be liable for any
taxable year or period that ends on or before the Closing Date and,
with respect to any Straddle Period, the portion of such Straddle
Period ending on and including the Closing Date (including, without
limitation, any obligation to contribute to the payment of a Tax
determined on a consolidated, combined or unitary basis with respect to
the Companies and any of Sellers' Tax Affiliates) and (C) Taxes
relating to the Companies, the Assets or the Business attributable to
any breach of warranty or misrepresentation under clauses (vii), (ix),
(x), (xi) and (xii) of paragraph (a), and paragraph (b), of Section 4.6
hereof.
(ii) Buyer shall be liable for, and shall indemnify Sellers
against, Taxes imposed on or with respect to the Companies, the Assets,
the Business or Buyer for any taxable year or period that begins after
the Closing Date and with respect to any Straddle Period, the portion
of such Straddle Period beginning after the Closing Date (including,
without limitation, any obligation to contribute to the payment of a
Tax determined on a consolidated, combined or unitary basis with
respect to Buyer and its Tax Affiliates).
<PAGE>
(iii) For purposes of paragraphs (a)(i) and (a)(ii) above,
whenever it is necessary to determine the liability for Taxes relating
to the Companies, the Assets or the Business for a Straddle Period, the
determination of the Taxes relating to the Companies, the Assets or the
Business for the portion of the Straddle Period ending on, and the
portion of the Straddle Period beginning after, the Closing Date shall
be determined by assuming that the Straddle Period consisted of two
taxable years or periods, one which ended on the Closing Date and the
other which began at the beginning of the day following the Closing
Date, and items relating to the Companies, the Assets or the Business
for the Straddle Period shall be allocated between such two taxable
years or periods on a "closing of the books basis" by assuming that the
books of the Companies and the Business were closed at the close of
business on the Closing Date, provided, however, that Taxes imposed on
a periodic basis with respect to the assets of the Companies or the
Assets (or otherwise measured by the level of any item), and any
exemptions, allowances or deductions that are calculated on an annual
basis, such as the deduction for depreciation, shall be apportioned
between such two taxable years or periods on a daily basis.
(iv) Any and all real property transfer or real property
transfer gains Tax, sales Tax, use Tax, stamp Tax, stock transfer Tax,
or other similar Tax imposed on the sale to Buyer of the Shares and the
Assets hereunder shall be paid 50% by Buyer and 50% by Sellers;
provided that any such liability relating to value added taxes shall be
paid by Buyer to the extent Buyer is entitled to recovery thereof.
(v) Buyer shall pay to Seller the amounts of any refund,
abatement or credit of Taxes received related to the Business which are
attributable to (A) any taxable period that ends on or before the
Closing Date, (B) in the case of any taxable period that begins before
and ends after the Closing Date, to the extent such amounts do not
exceed the amount of the refund, abatement or credit of Taxes that
would have been made had the taxable period ended on the Closing Date,
or (C) Taxes for which Seller has previously indemnified Buyer.
Notwithstanding the foregoing, Buyer shall not be obligated to pay
Seller the amount of any refund, abatement or credit of Taxes that was
reflected as an asset on the Closing Statement.
<PAGE>
(b) For taxable years or periods ending on or before the
Closing Date, Buyer shall unless otherwise requested by Sellers prepare and file
when due all non-U.S. Tax Returns with respect to the Companies and Sellers
shall reimburse Buyer for costs of any outside services for such preparations
and filings. Buyer shall remit (or cause to be remitted) to the appropriate
Governmental Authority any taxes due in respect of such Tax Returns. Buyer shall
file or cause to be filed when due all non-U.S. Tax Returns that are required to
be filed by or with respect to the Companies for any Straddle Period taxable
years or periods ending after the Closing Date and Buyer shall remit (or cause
to be remitted) to the appropriate Governmental Authority any Taxes due in
respect of such Tax Returns. At Sellers' request, Buyer shall submit to Sellers
the non-U.S. Tax Returns that have been prepared for filing as required above no
less than thirty (30) days prior to their respective due dates for Sellers'
review and approval (which approval shall not be unreasonably withheld). Sellers
shall prepare and file all U.S. Tax Returns for the Companies for taxable
periods ending on or before the Closing Date. Sellers or Buyer shall reimburse
the other party the Taxes for which Sellers or Buyer is liable pursuant to
paragraph (a) of this Section 7.5 but which are payable with any Tax Return to
be filed by the other party pursuant to this paragraph (b) upon written request
of the party entitled to reimbursement setting forth in detail the computation
of the amount owed by Sellers or Buyer, as the case may be. All Tax Returns
which Sellers are required to file or cause to be filed in accordance with this
paragraph (b) shall be prepared and filed in a manner consistent with past
practice in preparing and filing similar Tax Returns and shall not thereafter
amend any Tax Return to take positions inconsistent with such past practice. The
Buyer agrees that no tax election will be made by Buyer which will affect Taxes
of a year or period ending on or prior to Closing Date unless made with the
prior written consent of Seller. Seller reserves the right to elect (on an
election filed and effective prior to the Closing) the provisions of Reg.
301.7701(4) for certain eligible foreign companies (copies of any such elections
shall be furnished to Buyer).
(c) Contest Provisions. Buyer shall notify Sellers in writing
upon receipt by Buyer or any of its Tax Affiliates of notice of proposed audit,
or any assessment or claim in any Tax audit or any administrative or judicial
proceeding which may materially affect the Tax liabilities of the Companies for
which Sellers would be required to indemnify Buyer pursuant to paragraph (a) of
this Section 7.5; provided, however, that a failure to give such notice will not
affect Buyer's right to indemnification under this Section 7.5 except to the
extent that Sellers have been actually prejudiced as a result of such failure.
In the case of a proposed Tax assessment or claim that relates to taxable
periods ending on or before the Closing Date, (A) both Buyer and Sellers may
participate in the conduct of the audit or administrative or judicial proceeding
involving such assessment or claim (at their own expense) and (B) provided that
Sellers have acknowledged in writing their liability to indemnify Buyer against
the full amount of any adjustment which may be made as a result of such audit or
proceeding, Sellers may elect to control (at their expense) the conduct of such
audit or proceeding (but only to the extent that such audit or proceeding
relates solely to a potential adjustment for which Sellers have acknowledged
their liability and the issue underlying the proposed adjustment does not recur
for any taxable period ending after the Closing Date). With respect to a
proposed tax assessment or claim for which either Sellers (as evidenced by their
acknowledgment hereunder) and any Buyer, the Companies or their Affiliates could
be liable, or which involves an issue that recurs for any period ending after
the Closing Date (whether or not the subject of audit at such time), (A) both
Buyer and the Sellers may participate in the audit, administrative or judicial
proceeding involving such assessment or claim (at their own expense), and (B)
the audit or proceeding shall be controlled by that party which would bear the
burden of the greater portion of the sum of the assessment or claim and any
corresponding adjustments that may reasonably be anticipated for future taxable
periods. In the case of any Tax audit or administrative or judicial proceeding
governed by this paragraph (c), the controlling party shall have the authority
to settle or compromise any proposed Tax claim or assessment, provided however
that neither Buyer nor Sellers shall enter into any compromise or agree to
settle any claim or assessment pursuant to any Tax audit or administrative or
judicial proceeding which would adversely affect the other party without the
written consent of the other party, which consent may not be unreasonably
withheld.
(d) Cooperation.
-----------
<PAGE>
(i) Buyer and Sellers agree to cooperate and share all
required information on a timely basis in order to timely file all Tax
Returns and for the preparation of any audit, and for the prosecution
or defense of any claim, suit or proceeding relating to any proposed
adjustment. Buyer and Sellers agree to retain or cause to be retained
all books and records pertinent to the Companies until the applicable
period for assessment under applicable law (giving effect to any and
all extensions or waivers) has expired, and to abide by or cause the
abidance with all record retention agreements entered into with any
Governmental Authority. After the Closing, Buyer will give Sellers
reasonable notice prior to transferring, discarding or destroying any
such books and records relating to Tax matters and, if Sellers so
request and at Sellers' expense, Buyer will allow Sellers to take
possession of such books and records. Buyer and Sellers shall cooperate
with each other in the conduct of any audit or other proceedings
involving the Companies for any Tax purpose and each shall execute and
deliver such powers of attorney and other documents as are necessary
and appropriate to carry out the intent of this subsection.
(ii) Sellers shall provide Buyer with such forms or
certificates as Buyer may reasonably request for purposes of complying
with any withholding tax requirements under Applicable Law, including
under Section 1445 of the Code.
(iii) Prior to Closing, Sellers and Buyer shall meet and
mutually agree to an allocation of the sum of the Purchase Price and
Assumed Liabilities to determine the agreed fair market value of each
item of the Shares and of the Assets to be sold by Sellers and acquired
by Buyer pursuant to this Agreement. A schedule of such allocation
shall be prepared ("Allocation") and Sellers and Buyer agree to file
all Tax Returns in accordance with the Allocation and not to take or
cause to be taken any action that would be inconsistent with or
prejudicial to such Allocation. Sellers and Buyer shall cooperate in
the preparation and filing of Form 8594 (and similar forms) on a
consistent basis.
(e) Straddle Period Adjustment. In the case of any straddle
period, to the extent that Buyer takes any action outside the ordinary course of
business that gives rise to losses, credits or other Tax items generated in the
portion of the Straddle Period that begins on the day after the Closing Date,
and such losses, credits or other tax items are utilized to reduce an amount of
Tax that would have otherwise been owed had the Straddle Period ended on the
Closing Date, Buyer shall pay Seller 50% of the amount of such reduction in Tax.
If the amount of such losses, credits or other Tax items is reduced or increased
as a result of subsequent events (e.g., an adjustment by a taxing authority),
the amount of such reduction in Tax shall be redetermined and Seller shall make
to Buyer or Buyer shall make to Seller, a payment to the extent 50% of the
redetermined amount is less than, or greater than, 50% of the amount as
originally determined.
(f) Adjustment to Purchase Price. Any payment by Buyer or
Sellers under this Section 7.5 or under Section 11.1 hereof will be deemed an
adjustment to the Purchase Price to the fullest extent permitted by applicable
laws, and otherwise such payment shall be made on an after-Tax basis, except to
the extent that a Tax benefit is not available to Sellers in respect of such
payment after reasonable efforts.
(g) Survival of Obligations. Notwithstanding anything to the
contrary in this Agreement, and notwithstanding Section 12.3 of this Agreement,
the obligations of the parties set forth in this Section 7.5
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
<PAGE>
7.6 USE OF CERTAIN NAMES.
Within 180 days after the Closing, Buyer shall cause the
Companies to revise product literature and labeling (including by way of
stickering), change packaging and stationery, and otherwise discontinue use of
the names or trademarks, service marks trade names, domain names, and associated
trade dress, packaging, logos, and labels "American Home Products," "AHP",
"Lederle", "Wyeth", "Fort Dodge" and or any derivative or anything imitative
thereof or which resembles or is confusingly similar thereto (collectively,
"Names"). In no event shall Buyer or the Companies use any Names after the
Closing in any manner or for any purpose different from the use of such Names by
the Companies during the 90 day period preceding the Closing. With respect to
product inventory manufactured by the Companies or their Affiliates prior to the
Closing, Buyer and the Companies may continue to sell such inventory,
notwithstanding that it bears one or more of the Names, for a reasonable period
of time after the Closing (not to exceed eighteen months).
7.7 REMOVAL OF INTERNATIONAL ASSETS.
As soon as reasonably practicable after the Closing, but in no
event later than 180 days, Buyer shall arrange to have the Assets held by the
Asset Transferor Entities set forth in Section 7.7 of the Disclosure Schedule
removed from the premises of the Asset Transferor Entities holding such Assets,
and the legal ownership transferred to Buyer at Buyer's sole cost.
7.8 ACCESS TO RECORDS AFTER CLOSING.
(a) For a period of six years after the Closing, Sellers and
their representatives shall have reasonable access to all of the books and
records of the Business with respect to periods prior to the Closing Date to the
extent that such access may reasonably be required by such Persons in connection
with matters relating to or affected by the operations of the Business prior to
the Closing Date (including integrated records of other business of Sellers or
their Affiliates). Buyer shall afford such access upon receipt of reasonable
advance notice and during normal business hours, and Sellers shall be solely
responsible for any costs or expenses incurred by them pursuant to this Section
7.8. If Buyer or its Affiliates shall desire to dispose of any of such books and
records prior to the expiration of such six-year period, Buyer shall, prior to
such disposition, give Sellers a reasonable opportunity, at Sellers' expense, to
segregate and remove such books and records as Sellers may elect.
<PAGE>
(b) For a period of six years after the Closing Date, Buyer
and its Affiliates and their respective representatives shall have reasonable
access to all of the books and records relating to the Business which Sellers or
any of their Affiliates may retain after the Closing Date. Such access shall be
afforded by Sellers and their Affiliates upon receipt of reasonable advance
notice and during normal business hours. Buyer or its Affiliates, as the case
may be, shall be solely responsible for any costs and expenses incurred by it
pursuant to this Section 7.8. If Sellers or any of their Affiliates shall desire
to dispose of any of such books and records prior to the expiration of such
six-year period, Sellers shall, prior to such disposition, give Buyer a
reasonable opportunity, at Buyer's expense, to segregate and remove such books
and records as Buyer may elect.
7.9 REPLACEMENT OF GUARANTY OBLIGATIONS.
Buyer agrees to use diligent efforts in cooperation with
Sellers to substitute the bonds, guaranties, letters of credit and comfort
letters of Buyer for Sellers' or their Affiliates' bonds, guaranties, letters of
credit and comfort letters under the agreements set forth in Section 7.9 of the
Disclosure Schedule.
7.10 NON-SOLICITATION.
Except for those Employees set forth in Section 7.10 of the
Disclosure Schedule, Sellers will not, and will not permit any of their
Affiliates to, directly or indirectly, solicit the employment of, attempt to
employ, or employ any transferred Employee during the period commencing on the
Closing Date and ending ten months thereafter; provided, however, that the
forgoing will not prohibit hiring pursuant to a general solicitation to the
public or general advertising; provided, further, that the foregoing will also
not prohibit Sellers or one of its Affiliates from employing any transferred
Employee that is terminated by Buyer or one of its Affiliates without cause
following the Closing Date.
7.11 TERMINATION OF INTERCOMPANY AGREEMENTS/ ARRANGEMENTS.
Prior to the Closing Date, except for those Contracts listed
in Section 6.2 of the Disclosure Schedule, Sellers shall, upon the written
request of Buyer, cause the termination of any contracts, arrangements or
agreements between or among the Companies or a Seller (with respect to the
Business), on the one hand, and Sellers or any of their Affiliates (other than a
Company) on the other hand, including any intercompany agreements entered into
in the ordinary course of business.
7.12 CERTAIN CONTRACTS.
In the event any of the Contracts set forth in Section 7.12 of
the Disclosure Schedule terminate by operation of law as a result of the
transactions contemplated herein, Buyer agrees to offer the third party(ies) to
such Contracts new agreements on identical terms and conditions.
<PAGE>
ARTICLE 8 CONDITIONS
8.1 CONDITIONS TO OBLIGATION OF EACH PARTY TO EFFECT
THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT.
The obligation of each party to effect the transactions
contemplated by this Agreement shall be subject to the fulfillment at or prior
to the Closing Date of the following conditions:
(a) any waiting period (and any extension thereof) applicable
to the consummation of the Agreement under the HSR Act or under Competition Laws
of the European Union or member states of the European Union shall have expired
or been terminated; and
(b) no preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
Governmental Authority nor any Applicable Law shall be in effect that would
prevent the consummation of the transactions contemplated by this Agreement in
the United States of America or the European Union.
8.2 CONDITIONS TO THE OBLIGATION OF SELLERS.
The obligation of Sellers to effect the transactions
contemplated by this Agreement is subject to the fulfillment at or prior to the
Closing Date of the following conditions:
(a) Buyer shall have performed in all material respects each
obligation and agreement and complied in all material respects with each
covenant to be performed and complied with by it hereunder at or prior to the
Closing Date;
(b) the representations and warranties of Buyer in this
Agreement shall be true and correct in all material respects as of the Closing
Date with the same force and effect as though made at such time; and
(c) Buyer shall have furnished to Sellers a certificate, dated
as of the Closing Date, signed by a duly authorized officer of Buyer to the
effect that all conditions set forth in Sections 8.2(a) and (b) have been
satisfied.
8.3 CONDITIONS TO THE OBLIGATION OF BUYER.
The obligation of Buyer to effect the transactions
contemplated by this Agreement is subject to the fulfillment at or prior to the
Closing Date of the following conditions:
<PAGE>
(a) Sellers and their Affiliates shall have performed in all
material respects each obligation and agreement and complied in all material
respects with each covenant to be performed and complied with by them hereunder
at or prior to the Closing Date;
(b) the representations and warranties of the Cyanamid
Companies in this Agreement shall be true and correct in all material respects
as of the Closing Date with the same force and effect as though made at such
time;
(c) Sellers shall have furnished to Buyer a certificate, dated
as of the Closing Date, signed by a duly authorized officer of each Seller to
the effect that all conditions set forth in Sections 8.3(a) and (b) have been
satisfied.
ARTICLE 9 AGREEMENTS WITH RESPECT TO EMPLOYEES AND
EMPLOYEE BENEFITS
9.1 U.S. EMPLOYEE PLANS.
The Sellers hereby represent and warrant to Buyer that:
(a) Section 9.1(a) of the Disclosure Schedule lists each
employee benefit plan, as such term is defined in Section 3(3) of ERISA, which
(i) is subject to any provision of ERISA, (ii) is maintained by or contributed
to by the Companies, the Asset Transferor Entities or Sellers, and (iii) covers
U.S. Employees (hereinafter referred to collectively as the "U.S. Employee
Plans"). With respect to each U.S. Employee Plan, Sellers have made available to
Buyer a true and complete copy of the applicable plan document or summary plan
description and the most recently filed IRS Form 5500.
(b) Except as disclosed in Section 9.1(b) of the Disclosure
Schedule, neither Sellers nor any of the Companies nor any of their ERISA
Affiliates has incurred any liability under Title IV of ERISA that could become,
after the Closing Date, an obligation of Buyer or any of its Affiliates. No
Pension Plan has incurred any accumulated funding deficiency (within the meaning
of Section 412 of the Code), whether or not waived, and neither the Companies
nor any ERISA Affiliate has failed to make a required installment or any other
payment required under Section 412 of the Code before the applicable due date.
All contributions payable to each defined contribution pension plan, as defined
in Section 3(34) of ERISA, for all benefits earned and other liabilities arising
through the Closing Date, determined in accordance with the terms and provisions
of such plan, ERISA, and the Code, have been paid or otherwise provided for, and
to the extent unpaid are reflected in the books or financial statements of
Sellers.
<PAGE>
(c) Each U.S. Employee Plan that is intended to satisfy
Section 401(a) of the Code has received a determination letter from the Internal
Revenue Service and to the knowledge of Sellers nothing has occurred since the
issuance of each such letter which could reasonably affect its qualification.
(d) Section 9.1(d) of the Disclosure Schedule includes a list
of (x) each management, employment, consulting, or other contract with any
individual providing for the retention of personal services involving the
payment of $100,000 or more, per individual, per annum and (y) each plan or
arrangement providing for vacation benefits, supplemental nonqualified benefits,
severance benefits, bonuses, stock options, stock appreciation or other forms of
incentive compensation or post retirement insurance (including retiree life and
medical benefits), compensation or benefits which (i) is not a U.S. Employee
Plan, (ii) is entered into, maintained or contributed to, as the case may be, by
any of the Companies or Sellers, and (iii) covers U.S. Employees, and dependents
or beneficiaries thereof. Such contracts, plans and arrangements as are
described above, copies or descriptions of all of which have been made available
to Buyer, are hereinafter referred to collectively as the "U.S. Benefit
Arrangements".
(e) Except as set forth on Section 9.1(e)(i) of the Disclosure
Schedule, to the knowledge of Sellers, there is no pending or threatened
material claim in respect of any of the U.S. Employee Plans and U.S. Benefit
Arrangements other than routine claims for benefits. Each of the U.S. Employee
Plans and U.S. Benefit Arrangements (i) has been administered in accordance with
its terms in all material respects, and (ii) complies in form, and has been
administered in accordance with the requirements of ERISA and, where applicable,
the Code, in all material respects. Except as disclosed in Section 9.1(e)(ii) of
the Disclosure Schedule, no investigation, audit or dispute relating to any U.S.
Employee Plan is pending or, to the Sellers' or the Companies' knowledge,
threatened before any governmental agency.
(f) Neither Sellers nor any of the Companies nor, to the
knowledge of Sellers, any other "disqualified person" (within the meaning of
Section 4975 of the Code) or "party in interest" (within the meaning of Section
3(14) of ERISA) has taken any action with respect to any of the U.S. Employee
Plans which could subject any such plan (or its related trust) or any of the
Companies or any officer, director or employee of any of the foregoing to any
material penalty or tax under Section 502(i) of ERISA or Section 4975 of the
Code.
(g) Except as disclosed in Section 9.1(g) of the Disclosure
Schedule, none of Sellers (with respect to the U.S. Employees) nor any of the
Companies has been required, or has any obligation, to contribute to a
multiemployer plan, as defined in Section 3(37) of ERISA, or has or expects to
have any withdrawal liability assessed against it with respect to any such
multiemployer plan.
(h) Except as disclosed in Section 9.1(h) of the Disclosure
Schedule or as may be triggered by Buyer's failure to fulfill any of its
obligations to Employees under Sections 9.3 and 9.4, neither Sellers nor any of
the Companies have by reason of the transaction contemplated hereby, any
obligation to make any payment to any U.S. Employee pursuant to any plan or
existing contract or arrangement.
<PAGE>
(i) To the knowledge of Sellers, all filings required by ERISA
and the Code as to each U.S. Employee Plan and U.S. Benefit arrangement have
been timely filed and all notices and disclosures to participants required by
either ERISA or the Code have been timely provided.
(j) Sellers have paid all amounts due to the PBGC
pursuant to ERISA section 4007.
9.2 INTERNATIONAL PLANS.
The Sellers hereby represent and warrant to Buyer that:
(a) Section 9.2(a) of the Disclosure Schedule lists each
material employee benefit plan, program, policy or practice maintained or
contributed to by any of the Companies or Asset Transferor Entities for the
Ex-U.S. Employees (other than Governmental Authority mandated plans or funds
maintained or contributed to by Companies and Asset Transferor Entities pursuant
to Applicable Laws), including, without limitation, vacation, severance,
disability, medical, dental, hospitalization, life insurance and incentive
bonus, savings and retirement plans, employment anniversary awards and deferred
compensation plans ("International Plans"). Summary descriptions of each
International Plan have been or will be made available to Buyer by Sellers.
(b) To the knowledge of Sellers, all International Plans are
in compliance with, and have been administered in compliance with Applicable
Laws, in all material respects and contributions required to be made to each
such plan under the terms of the plan or any contract or labor or collective
bargaining agreement or Applicable Law have been made or reserved.
9.3 BUYER'S OBLIGATIONS TO EMPLOYEES.
(a) Buyer shall be obligated to continue the employment
of the Employees or offer employment to Employees on the following basis:
(i) Buyer shall cause the Companies to continue the
employment of all Employees;
(ii) With respect to Employees employed by the Asset
Transferor Entities, except as set forth in subsection (iii) below,
Buyer shall offer or cause an Affiliate of Buyer to offer to hire each
such Employee on the Closing Date, in a comparable position, at the
same or greater base salary than that enjoyed by such Employee
immediately prior to the Closing Date; and
<PAGE>
(iii) Buyer agrees to offer employment to all union, work
council or labor represented Employees and agrees to assume the terms
and conditions of any union, work council or collective bargaining
agreements as in effect as the Closing Date with respect to (i) ex-U.S.
Employees of a Share Transferor Entity and (ii) ex-U.S. Employees of an
Asset Transferor Entity if required by Applicable Law.
(b) Buyer shall make the following payments or provide the
following notification to Employees whom it terminates after the Closing Date:
(i) After the Closing Date, the Companies or the Buyer, as the
case may be, will have sole responsibility for any obligations or
liabilities to U.S. Employees at all locations under the Worker
Adjustment and Retraining Notification Act or similar Applicable Laws
of any jurisdiction relating to any plant closing or mass layoff or as
otherwise required by any such Applicable Law;
<PAGE>
(ii) Except to the extent Buyer has assumed the Contracts
relating to individual severance obligations set forth in Section
9.3(b)(ii) of the Disclosure Schedule to which such respective
agreements shall apply, Buyer shall make or cause the Companies to make
a lump sum severance payment to each U.S. Employee (other than a U.S.
Employee who is a member of a collective bargaining unit) whose
employment is terminated by the Buyer or the Companies because of a
termination without Cause (as defined herein) or reduction in the
workforce or job elimination at any time within the 24-month period
following the Closing Date pursuant to the terms of the Severance
Policy currently in effect, as described in Section 9.3(b)(ii) of the
Disclosure Schedule, and the severance payments will be in accordance
with the formula set forth therein. No such severance payments shall be
made if an Employee is terminated for "Cause" which for purposes of
this Section shall be defined as (i) fraud or embezzlement against the
Buyer or its Affiliates, falsification of records or similar acts; (ii)
gross neglect of or a gross failure to perform substantial job duties,
(iii) commission of a felony crime, or (iv) demonstrated substance
abuse. Buyer shall or shall cause the Companies to make severance
payments if a U.S. Employee resigns from employment with the Buyer, its
Affiliates or a Company within 24 months after the Closing Date because
(w) there is a reduction in his or her salary (other than for Cause);
(x) there is a substantial diminution in the nature or status of the
Employee's responsibilities excluding a change in title or reporting
relationship; (y) there is a material reduction in employee benefits
made available under Buyer's Plans from and after the Closing; or (z) a
condition of continued employment is a relocation of principal work
place of greater than 100 miles (provided, however, that any relocation
of greater than 25 miles, but less than or equal to 100 miles, will
still constitute Constructive Termination (as defined below) unless the
Employee is provided with relocation benefits that are no less
favorable in the aggregate than those that would have been available
under the AHP Corporate Relocation Policy when AHP relocated its
corporate headquarters from New York City to Madison, New Jersey)
(collectively "Constructive Termination"). Buyer shall also provide
outplacement services as follows: (a) for non-exempt employees, up to
$1,000 per person; (b) for exempt employees earning up to $75,000, up
to $5,000 per person; and (c) for exempt employees earning more than
$75,000, up to 12% of base salary to a maximum of $15,000 per person.
Notwithstanding the foregoing, field sales representatives will receive
outplacement services from Manchester Fast Track Outplacement at a cost
of $1,000 per person;
(iii) In the event the Buyer or its Affiliates terminates or
fails to offer to hire a U.S. Employee who is covered by a collective
bargaining agreement on the Closing Date and such Employee becomes
entitled to severance as a result, Buyer shall be obligated to pay, or
to reimburse Sellers for paying the amount of severance equal to that
which would be required under the terms of such agreements; and
(iv) For a period equal to six months following the
termination of employment of a U.S. Employee (other than a U.S.
Employee who is a member of a collective bargaining unit) which
triggers a severance payment under subsection (ii) or (iii) above;
Buyer will also extend, or cause its Affiliate to extend coverage under
its basic life insurance, medical, dental and prescription drug plans
to such terminated U.S. Employees and will extend or cause its
Affiliates to extend coverage under its educational assistance plan to
those terminated U.S. Employees who participated in an educational
assistance plan as of their date of termination each as set forth in
the policy described in Section 9.3(b)(ii) of the Disclosure Schedule.
(v) Buyer shall, or shall cause the Companies or an Affiliate
of Buyer as the case may be, to make a lump-sum severance payment to
each Ex-U.S. Employee whose employment is terminated within the
24-month period following the Closing Date, or whose employment is
terminated or deemed to be terminated by operation of law as a result
of the transactions contemplated herein, in an amount equal to the
greater of (i) the severance payment due in accordance with the
applicable International Plan as set forth in Section 9.3(b)(v) of the
Disclosure Schedule relating to severance payments and (ii) any greater
or additional severance payments due in accordance with Applicable
Laws. In addition, Buyer shall, or shall cause an Affiliate to make a
severance payment if an Ex-U.S. Employee resigns because of a
Constructive Termination event. Buyer shall promptly reimburse Sellers
for any payments in the nature of severance payments required to be
made by an Asset Transferor Entity to an Ex-U.S. Employee who becomes
an Employee of Buyer or its Affiliates as a result of the transactions
contemplated herein.
9.4 TREATMENT OF SELLERS' AND BUYER'S U.S. EMPLOYEE
PLANS AND U.S. BENEFIT ARRANGEMENTS.
(a)(i) No assets of any defined benefit Pension Plan (except
as may be otherwise provided in this Article 9 or as determined by Sellers),
U.S. Employee Plan or U.S. Benefit Arrangement shall be transferred to Buyer or
any of its Affiliates or to any plan of Buyer or any of its Affiliates and,
except as set forth in this Article 9, the Buyer and its Affiliates shall assume
no liability or obligation of Sellers or any of its Affiliates under any of the
U.S. Employee Plans, the U.S. Benefit Arrangements or the Pension Plans where
assets are not transferred.
<PAGE>
(ii) After the Closing Date, Buyer shall provide U.S.
Employees with benefit plans, policies and programs which are the same
as those offered to similarly situated employees of Buyer.
(iii) Buyer or its Affiliates shall recognize each applicable
union as the exclusive designated bargaining representative for those
bargaining-unit represented Employees who become employed by the Buyer
or its Affiliates hereunder, but shall not assume any of the collective
bargaining agreements or the terms or provisions thereof. Buyer and its
Affiliates agree to bargain in good faith with the relevant collective
bargaining representatives of such Employees to establish new
bargaining agreements which are mutually acceptable to Buyer and its
Affiliates and to the applicable unions.
(iv) Buyer and the Companies shall assume all U.S. Employees'
compensation, bonus and vacation liabilities, regardless of whether
such liabilities relate to events which occurred on or prior to the
Closing Date or to actions taken by Sellers or one of the Sellers'
Affiliates or Buyer or one of its Affiliates, or to consequences which
are deemed to have occurred by operation of law as a result of the
transactions contemplated herein.
(b) Sellers shall amend their Pension Plans in the United
States to provide that all service completed by the U.S. Employees for Buyer or
its Affiliates after the Closing Date shall be recognized for purposes of
vesting and satisfying any requirements for early retirement subsidies for
benefits accrued as of the Closing Date under Sellers' Pension Plans (but not
for benefit accrual purposes); provided, however, that if the cessation of
accruals for the U.S. Employees under any of the Sellers' Pension Plans results
in a partial termination of that Pension Plan, Sellers shall fully vest the
affected U.S. Employees in that Pension Plan. Buyer maintains a Pension Plan for
its employees in the United States ("Buyer's U.S. Pension Plan(s)") Buyer shall
recognize U.S. Employees' service with Sellers or their Affiliates for purposes
of determining retirement plan eligibility to participate, vesting of benefits,
service requirements for disability, subsidized early retirement and
pre-retirement death benefits under the Buyer's U.S. Pension Plan(s), but Buyer
shall not be required to take such service into account for benefit accrual
purposes under such plan or plans.
<PAGE>
(c) Sellers shall amend the American Home Products Corporation
Savings Plan - U.S., the American Home Products Corporation Savings Plan-Puerto
Rico and the American Home Products Corporation Union Savings Plan (the
"Sellers' U.S. Savings Plans") to provide that all U.S. Employees are fully
vested in their account balances under the Sellers' U.S. Savings Plans as of the
Closing Date. Buyer maintains a qualified savings plan or plans for the benefit
of its employees (Buyer's U.S. Savings Plan(s)"). Buyer shall recognize U.S.
Employees' service with Sellers or their Affiliates for purposes of determining
eligibility to participate and vesting of benefits in Buyer's U.S. Savings
Plan(s). Sellers shall transfer the assets (in cash) and liabilities
attributable to the U.S. Employees from the AHP Savings Plan-U.S. and the AHP
Savings Plan-Puerto Rico to Buyer's U.S. Savings Plan(s) which meet the
requirements of Section 401(a) of the Code or Section 165 of the Puerto Rico Tax
Act, whichever being applicable, as soon as practicable following the Closing
Date. There shall be no such transfer of assets and liabilities from the AHP
Union Savings Plan to any Buyer plan.
(d) With respect to the U.S. Employees, Sellers shall retain
liability under any group life, accident, worker's compensation, medical,
hospitalization, prescription drug, dental, spending account or short-term or
long-term disability plan, whether or not insured, for any claims incurred on or
prior to the Closing Date, and Buyer shall assume all liability for claims
arising after the Closing Date under its group life, accident, worker's
compensation, medical, hospitalization, prescription drug, dental, spending
account or short-term or long-term disability plans (Buyer's U.S. Welfare
Plans"). For purposes of this Section 9.4(d) claims shall be deemed to have
arisen:
(i) With respect to all death or dismemberment claims,
on the actual date of death or dismemberment;
(ii) With respect to disability or salary continuance
claims, on the day the claimant became disabled or otherwise entitled
to salary continuation;
(iii) With respect to all hospital, medical, drug or dental
claims, on the date the service or supply was purchased or received by
the claimant; and
(iv) With respect to worker's compensation claims which are
single-accident specific, on the date of the occurrence, and with
respect to all other worker's compensation claims, on the date the
award is made.
(e) As of the Closing Date, all U.S. Employees shall be
eligible to participate in Buyer's U.S. Welfare Plans in accordance with the
terms of such plans, and employment with Sellers or their Affiliates will be
taken into account for purposes of determining eligibility to participate and
benefits under Buyer's U.S. Welfare Plans; provided, however, that
(i) U.S. Employees shall participate under Buyer's U.S.
Welfare Plans as of the day after the Closing Date without any waiting
periods, without evidence of insurability, and without application of
any pre-existing physical or mental condition limitations except to the
extent applicable under similar plans maintained by Sellers; and
(ii) Buyer shall count claims arising during the calendar year
on or prior to the Closing Date for purposes of satisfying deductibles,
out-of pocket maximums, and all other similar limitations.
<PAGE>
(f) Sellers maintain a program of medical and life insurance
benefits for certain retired employees ("AHP U.S. Retiree Welfare Plans"). All
U.S. Employees who satisfy the eligibility criteria for benefits under the AHP
U.S. Retiree Welfare Plans as of the Closing Date shall receive such benefits
from the AHP U.S. Retiree Welfare Plans following their termination from Buyer
or its Affiliates in accordance with the terms of the AHP U.S. Retiree Welfare
Plans as of such date. However, U.S. Employees who are eligible for medical
coverage under Buyer's medical plan shall receive primary coverage under such
Buyer's medical plan with the AHP U.S. Retiree Welfare Plans being responsible
for secondary coverage. U.S. Employees shall be eligible to participate in
Buyer's U.S. retiree welfare plans ("Buyer's U.S. Retiree Welfare Plans") in
accordance with the terms of such plans and Buyer shall recognize service with
Sellers or their Affiliates for purposes of determining eligibility to
participate and for benefits.
(g) Buyer shall be responsible for any legally mandated
continuation of health care coverage for all U.S. Employees and/or their covered
dependents who have a loss of health care coverage due to a qualifying event (as
defined in Section 4980B of the Code) that occurs after the Closing Date.
9.5 INTERNATIONAL EMPLOYEES OF THE EUROPEAN UNION ("EU").
(a) Notwithstanding Section 9.3(a)(ii), Sellers and Buyer
accept and agree that the transfer of employment of the Ex-U.S. Employees in the
EU countries (hereinafter referred to as "European Employees") will be effected
and governed by the Transfer Provisions (defined below) and accordingly the
contract of employment of each European Employee shall be assumed by Buyer or
its Affiliate with effect from the Closing Date which shall be the time of
transfer under the Transfer Provisions.
(b) Buyer shall ensure that its Affiliates (where necessary)
comply with their respective obligations under the Transfer Provisions and upon
request provide Sellers or the relevant Sellers' Affiliate with such information
as will enable either Sellers or its Affiliate as the case may be to carry out
its duties under the Transfer Provisions concerning measures to effectuate the
transfer of the European Employees to Buyer.
(c) "Transfer Provisions" means any legislation implementing
the provisions of Directive 77/187/EEC commonly called the Acquired Rights
Directive or Transfer of Undertakings Directive.
9.6 TREATMENT OF SELLERS' INTERNATIONAL PLANS.
(a) Buyer shall provide, or cause its Affiliates to provide
the Ex-U.S. Employees with plans, programs and benefits which are the same as
those provided to similarly situated employees of Buyer. If Buyer does not
currently have other employees in a particular country, Buyer shall provide
benefit plans, policies or arrangements which are reasonably comparable in the
aggregate to those provided to Ex-U.S. Employees By Seller immediately prior to
the Closing Date.
<PAGE>
(b) Except as expressly set forth in this Section 9.6(b), and
as required by Applicable Law or determined by Sellers, no assets of any
International Plan, which is a defined benefit pension plan, shall be
transferred to Buyer or any of its Affiliates or to any plan of Buyer or any of
its Affiliates. Buyer shall assume, or cause its Affiliates to assume through an
appropriate form of plan or trust, the assets and corresponding liabilities of
any defined contribution plan, individual account plan, or fully insured plan
without potential for reversion (fully insured shall mean benefits accrued to
date are purchased and insured by an insurance carrier) maintained by Sellers,
the Companies or any of their Affiliates for the benefit of the Ex-U.S.
Employees, to the extent that any liabilities so assumed are funded and
supported by a transfer of assets or insurance to the appropriate Buyer plan or
trust. The value of fully insured plans shall be determined as of the Closing
Date based on the assumption that the plans will be maintained by Buyer or its
affiliates for the benefit of Ex-U.S. Employees and will not be terminated.
(c) With respect to any defined benefit plan which is required
under Applicable Law to transfer assets and liabilities to the Buyer and with
respect to the International Plans set forth in Section 9.6(b) of the Disclosure
Schedule, the assets and liabilities to be transferred shall be based on
reasonable actuarial assumptions and generally accepted valuation methods as
determined by Sellers' actuary subject to the review of the Buyer's actuary. In
the event the actuaries are unable to agree on the valuation of the assets and
liabilities, an expert shall be appointed by the Institute of Actuaries in
London. The parties shall share the cost arising from the appointment of such
independent third party expert. The calculation of the assets and liabilities by
such appointed actuary as expert shall be final and binding on both parties in
the absence of manifest error.
(d) Sellers shall take whatever action is reasonably required
to ensure that such plans and arrangements and all related plan assets or
reserves are maintained by, and subject to the control of, the Companies on or
prior to the Closing Date.
(e) Sellers shall, and shall cause its Affiliates, to fully
vest the Ex-U.S. Employees in any accounts maintained under any International
Plans as of the Closing Date which are defined contribution in nature. Buyer
shall recognize each Ex-U.S. Employee's service with Sellers and Sellers'
Affiliates for purposes of determining retirement and savings plan eligibility
for participation, vesting of benefits, and service requirements for disability,
subsidized early retirement and preretirement death benefits under the
appropriate Buyer's International Retirement and Savings Plans, but not benefit
accrual purposes under the appropriate Buyer's International Retirement Plan.
(f) With respect to all Ex-U.S. Employees, Sellers shall
retain liability under any group life, accident, worker's compensation, medical,
hospitalization, prescription drug, dental or short-term or long-term disability
plan, whether or not insured, for any claims incurred on or prior to the Closing
Date and Buyer shall assume all liability for claims arising after the Closing
Date under any group life, accident, worker's compensation, medical,
hospitalization, prescription drug, dental or short-term or long-term disability
plan ("Buyer's International Welfare Plans"). For purposes of this Section
9.6(f), claims shall be deemed to have arisen:
<PAGE>
(i) with respect to all death or dismemberment claims,
on the actual date of death or dismemberment;
(ii) with respect to disability or salary continuance
claims, on the day the claimant became disabled or otherwise entitled
to salary continuation;
(iii) with respect to all hospital, medical, drug or dental
claims, on the date the service or supply was purchased or received by
the claimant; and
(iv) with respect to worker's compensation claims which are
single accident specific, on the date of the occurrence, and with
respect to all other worker's compensation claims, on the date the
award is made.
(g) As of the Closing Date, all Ex-U.S. Employees shall be
eligible to participate in the appropriate Buyer's International Welfare Plans
in accordance with the terms of such plans, and employment with Sellers and
its Affiliates shall be taken into account for purposes of determining
eligibility for participation and benefits under Buyer's International Welfare
Plans; provided, however, that (i) Ex-U.S. Employees shall participate under
Buyer's International Welfare Plans as of the day immediately after the Closing
Date without any waiting periods, without any evidence of insurability, and
without application of any pre-existing physical or mental condition
limitations, except to the extent not permitted under Buyer's International
Plans; provided, however, that Buyer shall make reasonable efforts to adopt
any necessary amendments to such plans to permit participation as described
above and (ii) Buyer shall count claims arising on or prior to the Closing Date
for purposes of satisfying deductibles, out-of-pocket maximums, and other
similar limitations in Buyer's International Welfare Plans.
(h) Buyer and the Companies shall assume all Ex-U.S.
Employees' compensation, bonus and vacation liabilities, regardless of whether
such liabilities relate to events which occurred on or prior to the Closing
Date, or to actions taken by Sellers or its Affiliates, or Buyer or its
Affiliates, or to consequences which are deemed to occur by operation of law
as a result of the transactions contemplated herein.
<PAGE>
9.7 STOCK OPTIONS.
AHP shall be responsible for and incur any and all costs of
stock option compensation for all Employees with stock options from AHP. This
includes payments, if any, that may be made to Employees in Sellers sole
discretion relating to "in-the-money" non-exercisable stock options as of the
Closing Date. AHP shall be liable for any payments, withholding obligations and
reporting obligations that arise on or after the Closing Date under any
applicable AHP Stock Option or Stock Incentive Plan.
9.8 NO THIRD PARTY BENEFICIARIES.
No provision of this Agreement shall create any third party
beneficiary or other rights in any Employee (including any beneficiary or
dependent thereof) or any persons in respect of continued employment with any of
the Companies, with Sellers, or with any of their Affiliates and no provision of
this Agreement shall create any such rights in any such persons in respect of
any benefits that may be provided, directly or indirectly, under any U.S.
Employee Plan or U.S. Benefit Arrangement, any International Plan or any plan or
arrangement which may be established by Buyer or any of its Affiliates. No
provision of this Agreement shall constitute a limitation on the right of Buyer,
any of the Companies or any Affiliates of Buyer to terminate any Employee at
will.
ARTICLE 10 TERMINATION, AMENDMENT AND WAIVER
10.1 TERMINATION.
This Agreement may be terminated at any time prior to the
Closing Date:
(a) by mutual consent of Buyer and Sellers;
(b) by Buyer or Sellers if the Closing shall not have occurred
on or prior to December 31, 2000, provided, however, that the right to terminate
under this Section 10.1(b) shall not be available to any party whose failure to
fulfill any obligation under this Agreement has been the cause of, or resulted
in, the failure of the Closing to occur on or before such date of any liability
of such party to the other party hereunder for such failure; or
(c) subject to Section 7.4, by Buyer or Sellers if a court of
competent jurisdiction or governmental, regulatory or administrative agency or
commission of the United States or political subdivision thereof or European
Union or member state thereof shall have issued an order, decree or ruling or
taken any other action, in each case 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.
<PAGE>
The date on which this Agreement is terminated pursuant to any
of the foregoing subsections of this Section 10.1 is herein referred to as the
"Termination Date."
10.2 EFFECT OF TERMINATION.
(a) Except as set forth in Sections 7.1, 7.3 and 10.2(b), upon
the termination of this Agreement pursuant to Section 10.1, all further
obligations of the parties under this Agreement shall terminate without further
liability of any party to the others, except that nothing herein shall relieve
any party from liability for breach of any provision of, or for any
misrepresentation under this Agreement, or be deemed to constitute a waiver of
any available remedy for any such breach or misrepresentation.
(b) If (i) Buyer shall not have agreed to nor effected all
divestitures, holding separate of businesses or assets or other actions
necessary to obtain, or caused to be obtained, as promptly as practicable all
authorizations, approvals, consents and waivers from Governmental Authorities
necessary to be obtained by Buyer or its Affiliates in order to consummate the
transactions contemplated hereby and (ii) this Agreement shall have been
terminated pursuant to Section 10.1(b) or (c),
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
ARTICLE 11 INDEMNIFICATION
11.1 INDEMNIFICATION.
(a) Except with respect to any claim related to Taxes, for
which Section 7.5 of this Agreement shall provide the sole and exclusive remedy,
and any claim or liability related to Environmental Law or environmental matters
or the breach of Section 4.13 of this Agreement, for which Sections 11.1(d)
through (h), inclusive, shall provide the sole and exclusive remedy of Buyer,
and subject to Section 11.3, Sellers shall indemnify, defend and hold harmless
Buyer and its Affiliates, officers, directors, employees and controlling Persons
from any liability, damage, deficiency, loss, judgments, assessments, cost or
expense, including reasonable attorneys' fees and costs of investigating and
defending against lawsuits, complaints, actions or other pending or threatened
litigation (being hereafter referred to in this Article 11 as "Costs"), arising
from or attributable to:
(i) the breach of any representation or warranty made by the
Sellers in this Agreement (it being understood that, for the purposes
of this Article XI, such representations and warranties (other than the
representations and warranties set forth in Sections 4.4, 4.5, 4.6 and
4.13) will be interpreted without giving effect to any qualifications
or limitations as to "Material Adverse Effect");
<PAGE>
(ii) any failure of Sellers or their Affiliates to
perform or observe any covenant or agreement to be performed or
observed by such entities pursuant to this Agreement;
(iii) the Excluded Liabilities;
(iv) product liabilities arising out of products shipped
by the Business prior to the Closing Date;
(v) the actions in litigation against the Sellers and/or their
Affiliates listed under the caption "Antitrust Matters" in Section
4.11(a) of the Disclosure Schedule (or actions claiming violation of
antitrust laws arising out of activities substantially similar to those
alleged in such litigation) and any other litigation claiming violation
by the Business of antitrust or competition laws pending or, to the
knowledge of Sellers, threatened as of the Closing Date;
(vi) the actions in litigation against the Sellers and/or
their Affiliates listed under the caption "Employee Matters" in Section
4.11(a) of the Disclosure Schedule and any other litigation on behalf
of employees or former employees of the Business pending or, to the
knowledge of Sellers, threatened as of the Closing Date; provided,
however, that, notwithstanding anything to the contrary herein, the
Sellers shall be responsible for all Costs attributable to periods up
to the Closing Date and the Buyer shall be responsible for all Costs
attributable to periods thereafter;
(vii) the actions in litigation against the Sellers and/or
their Affiliates listed under the caption "Intellectual Property
Litigation" in Section 4.11(a) of the Disclosure Schedule claiming
infringement of third party intellectual property rights and Cheapfleet
and Sharp libel actions set forth in Section 4.11 of the Disclosure
Schedule and any other litigation claiming infringement by the Business
of third party intellectual property rights pending or, to the
knowledge of Sellers, threatened as of the Closing Date; provided,
however, that, notwithstanding anything to the contrary herein, the
Sellers shall be responsible for all Costs attributable to sales of
products up to the Closing Date and the Sellers and, subject to Section
11.2(d), the Buyer shall share equally all Costs attributable to sales
of products thereafter;
(viii) any claim or cause of action of any third party (other
than product liability claims and causes of action and any claims and
causes of action subject to indemnification under the foregoing clauses
(v), (vi) and (vii)) to the extent arising out of, any action, inaction
or event of the Companies, the Asset Transferor Entities, the Sellers
(with respect to the Business) or the Business occurring prior to the
Closing except to the extent arising out of any action, inaction or
event of the Buyer and its Affiliates (including the Companies)
occurring after the Closing.
<PAGE>
(b) Except with respect to any claim related to Taxes for
which Section 7.5 of this Agreement shall be the sole and exclusive remedy of
Sellers, Buyer shall indemnify and hold harmless Sellers, their officers,
directors, employees and Affiliates from Costs arising from or attributable to:
(i) the breach of any representation or warranty made
by Buyer in this Agreement;
(ii) any failure of Buyer duly to perform or observe any
covenant or agreement to be performed or observed by Buyer pursuant
to this Agreement;
(iii) the Assumed Liabilities;
(iv) except for the matters for which Sellers would be
obligated to indemnify Buyer under Section 11.1(a) and 7.6, all
liabilities of the Companies arising out of the conduct of the Business
after the Closing;
(v) Sellers' or their Affiliates' obligations under
the guaranties, letters of credit and comfort letters described in
Section 7.10 of the Disclosure Schedule; and
(vi) any violation of Environmental Laws arising out of or
relating to any of the Real Property or any premises owned or leased by
Buyer or its Affiliates or at which the Business has been conducted by
the Buyer or its Affiliates, or any Release or threatened Release of
any Hazardous Substance at, on, beneath or from any of the Real
Property or any premises owned or leased by Buyer or its Affiliates or
at which the Business has been conducted by the Buyer or its
Affiliates, or Release or threatened Release of any Hazardous Substance
at, on or beneath any third-party waste disposal site to which any
Hazardous Substance has been sent by the Companies, or to the extent
related to the Business, the Buyer or its Affiliates (or any successor
to the Business) on or after the Closing Date, and for which, in the
case of the foregoing, only to the extent that Buyer is not entitled to
indemnification pursuant to Sections 11.1(d) through 11.1(h),
inclusive.
(vii) any failure of Buyer to assume the union, work
council or collective bargaining agreements as in effect on the
Closing Date applicable to Ex-U.S. Employees of an Asset Transferor
Entity.
(c) Sellers and Buyer shall indemnify each other for
all Taxes for the periods and in the manner described in Section 7.5.
<PAGE>
(d) Other than with respect to the Real Property located in
Paulinia, Brazil and Genay, France, which are addressed in paragraph 11.1(h),
notwithstanding any time or dollar limitations placed upon Sellers'
indemnification obligations elsewhere in this Agreement, which shall not apply
to this subparagraph (d), Sellers shall indemnify, defend and hold harmless
Buyer, the Companies and their Affiliates, officers, directors, employees and
controlling persons against any and all Costs arising from or attributable to:
(i) any pre-Closing Date violation of Environmental Laws by
the Sellers, the Asset Transferor Entities or the Companies arising out
of or relating to any of the Real Property or any premises at which the
Business has been conducted of which Sellers have knowledge, including
without limitation, those matters disclosed in Section 4.13 of the
Disclosure Schedule or (ii) any investigation and remediation, if any,
required by applicable Environmental Law, to the standard required by
applicable Environmental Law, of those matters disclosed in the
Environmental Reports contained in Section 4.13 of the Disclosure
Schedule or (iii) any Release or threatened Release at, on or beneath
any third-party waste disposal site to which any Hazardous Substance of
which Sellers have knowledge generated prior to the Closing by the
Companies or, to the extent related to the Business, Sellers or the
Asset Transferor Entities has been sent prior to Closing, including,
without limitation, those matters disclosed in Section 4.13 of the
Disclosure Schedule or (iv) any breach of Section 4.13 of this
Agreement
(e) Other than with respect to the Real Property located in
Paulinia, Brazil and Genay, France, which are addressed in paragraph 11.1(h),
Sellers shall indemnify, defend and hold harmless Buyer, the Companies and their
Affiliates, officers, directors, employees and controlling persons against any
and all Costs, arising from or attributable to: (A) any pre-Closing Date
violation of Environmental Laws by Sellers, the Asset Transferor Entities or the
Companies arising out of or relating to any of the Real Property or any premises
at which the Business has been conducted of which Sellers have no knowledge, or
(B) any pre-Closing Date Release or threatened Release of any Hazardous
Substance at, on, beneath or from any of the Real Property or any premises at
which the Business has been conducted of which Sellers have no knowledge; or (C)
any Release or threatened Release at, on or beneath any third-party waste
disposal site to which any Hazardous Substance of which Sellers have no
knowledge generated prior to the Closing Date by the Companies or, to the extent
related to the Business, the Sellers or the Asset Transferor Entities has been
sent prior to Closing.
(f) Sellers indemnification obligations contained in Section
11.1(e) shall only apply to claims made by Buyer which are tendered to Sellers
within XXXXXXXXXXXXXX of the Closing Date; provided, however, that any claim
pursuant to Section 11.1(e) for which notice is tendered to Sellers within such
XXXXXXXXXXXXXXXXXXXX shall be indemnified by Sellers to full completion or
satisfaction. In addition, Buyer, the Companies and their Affiliates, officers,
directors, employees and controlling persons shall not be entitled to receive
any Costs for any individual claim under Section 11.1(e) until
XXXXXXXXXXXXXXXXXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
For purposes of this section, Costs arising out of or resulting from the same
event or series of related events shall constitute an individual claim.
<PAGE>
(g) Notwithstanding any other provisions contained in Section
11.1, (A) Sellers shall have the power and right to direct, manage and control,
and take such actions as are reasonably necessary in connection with, any
defense, remediation, or other resolution of any claim, event or condition
subject to indemnification under Sections 11.1(d) and 11.1(e), and Buyer shall
provide Sellers with access to any Real Property reasonably necessary for
Sellers to exercise their rights under this Section 11.1(g) provided, in the
case of each of the foregoing, that Sellers shall have first notified and
consulted with Buyer with respect thereto; and provided, further, that to the
extent any claim, event or condition subject to indemnification involves or
requires work to be performed at any of the Real Property, Sellers shall (i)
comply with all applicable laws (including, without limitation, Environmental
Laws); (ii) use the Real Property in a manner that will not unreasonably
interfere with the operations or business thereon or compromise the safety of
the Real Property; (iii) make all reasonable efforts to restore the Real
Property to its condition immediately prior to the commencement of Sellers'
work; and (iv) furnish or cause to be furnished to Buyer certificates of
insurance evidencing coverage maintained by Sellers' agents, employees,
independent contractors, subcontractors, suppliers or environmental consultants
("Sellers' Representatives") who are performing the work at the Real Property,
which coverage shall be reasonable and customary for the type of work being
performed at the Real Property. With respect to the Resende, Brazil facility,
Sellers have elected to exercise their rights under this Section 11.1(g)(A), and
Buyer agrees to enter into an access agreement at the Closing in the form
attached hereto as Exhibit D. (B) Buyer agrees that, in exercising its rights
under Sections 11.1(d) and 11.1(e), no environmental audit or other assessment
will be undertaken for the purpose of discovering any conditions that might
result in Costs with respect to which Sellers would be required to provide
indemnification pursuant to Sections 11.1(d) or 11.1(e) unless required to do so
by a demand, complaint, order or directive of a Governmental Authority acting
within the scope of its jurisdiction or authority or by a prospective purchaser,
lessee, financial institution or other similar party as part of a sale, lease,
financing or other commercial transaction, except that Buyer may conduct
reasonable environmental inspections and compliance audits and assessments of
the Business and its assets and properties in the ordinary course as part of a
compliance program so long as any inspection or audit is performed in a manner
consistent with the manner in which Buyer generally conducts such inspections or
audits for its other facilities.
(h) With respect to the Real Property and facilities located
at XXXXXXXXXXXXX and XXXXXXXXXXXXXXXX, Sellers shall indemnify, defend and hold
harmless Buyer and its Affiliates, officers, directors, employees and
controlling persons for Costs arising out of or related to indemnification
obligations of Sellers and their Affiliates under the XXXXXXXXXXXXXXXXXX subject
to the same limitations, terms and conditions stated in such agreements.
11.2 PROCEDURES.
<PAGE>
(a) Promptly after the receipt by any Person that may be
entitled to indemnity hereunder of notice or otherwise becoming aware of (a) any
claim or (b) the commencement of any action or proceeding which may give rise to
a claim for indemnification hereunder, such Person (the "Aggrieved Party") will,
if a claim with respect thereto is to be made against the party or parties
obligated to provide indemnification pursuant to this Article 11 (the
"Indemnifying Party"), give such Indemnifying Party written notice of such claim
or the commencement of such action or proceeding and, shall permit the
Indemnifying Party to assume, at its own expense, the defense of any such claim,
action or proceeding, or any litigation resulting from such claim, and, upon
such assumption, shall cooperate fully with the Indemnifying Party in the
conduct of such defense. This duty on the part of the Aggrieved Party to
cooperate in such defense shall include, but not be limited to, (i) providing
assistance in compiling and verifying responses to discovery requests, (ii)
providing reasonable access to its employees for purposes of consulting,
performing laboratory testing, providing deposition and trial testimony and
providing expert opinions at depositions and trials and (iii) making available
to the Indemnifying Party all books and records as may have relevance to the
defense. Failure by the Indemnifying Party to notify the Aggrieved Party of its
election to defend any such action within 15 days after notice thereof shall
have been given to the Indemnifying Party, shall be deemed a waiver by the
Indemnifying Party of its right to defend such action. If the Indemnifying Party
assumes the defense of any such claim or litigation resulting therefrom, the
obligations of the Indemnifying Party as to such claim or litigation shall be
limited to taking all steps reasonably deemed necessary in the defense or
settlement of such claim or litigation resulting therefrom and to holding the
Aggrieved Party harmless from and against any and all Costs caused by or arising
out of any settlement approved by the Indemnifying Party or any judgment in
connection with such claim or litigation resulting therefrom (subject to Section
11.3). The Aggrieved Party may participate, at its expense, in the defense of
such claim or litigation, provided that the Indemnifying Party shall direct and
control the defense of such claim or litigation; provided, further, that if
there exists or is reasonably likely to exist a conflict of interest that would
make it inappropriate in the reasonable judgement of the Aggrieved Party for the
same counsel to represent both the Indemnifying Party and the Aggrieved Party,
then the Aggrieved Party shall be entitled to retain its own counsel, in each
jurisdiction for which the Aggrieved Party determines counsel is required, at
the Indemnifying Party's expense. Subject to Section 11.3, the Indemnifying
Party shall not, in the defense of such claim or any litigation resulting
therefrom, consent to entry of any judgment, except with the written consent of
the Aggrieved Party, or enter into any settlement, except with the written
consent of the Aggrieved Party which, in either case, may not be unreasonably
withheld, which does not include as an unconditional term thereof the giving by
the claimant or the plaintiff to the Aggrieved Party of a full and complete
release from any and all liability in respect of such claim or litigation, and
which judgement or settlement shall not impose any on-going obligations on the
Aggrieved Party.
<PAGE>
(b) If the Indemnifying Party shall not assume the defense of
any such claim or litigation resulting therefrom, the Aggrieved Party may defend
against such claim or litigation in such manner as it may deem appropriate and
the Aggrieved Party may settle such claim or litigation on such terms as it may
deem appropriate, and the Indemnifying Party shall promptly reimburse the
Aggrieved Party for the amount of all Costs incurred by the Aggrieved Party in
connection with the defense against or settlement of such claim or litigation,
subject to Section 11.3. If no settlement of such claim or litigation is made,
the Indemnifying Party shall promptly reimburse the Aggrieved Party for the
amount of any Costs incurred by the Aggrieved Party in the defense against such
claim or litigation, subject to Section 11.3.
(c) If there shall be any conflicts between the provisions of
this Section 11.2 and Section 7.6(c) (relating to Tax contests), the provisions
of Section 7.6(c) shall control with respect to Tax contests.
(d) In the event Seller and Buyer are unable to agree on the
terms of settlement of an infringement claim subject to Section 11.1(a) (vii),
any additional Costs that Seller or Buyer incurs and/or pays to such third party
at a later date based on a Court decision or a settlement above and beyond the
proposed earlier settlement with respect to post closing infringing activities,
which earlier settlement either the Seller or Buyer had rejected, shall be for
the sole account and obligation of the rejecting party if such other party had
advised the rejecting party that it was prepared to accept such earlier
settlement terms.
11.3 LIMITATIONS.
Notwithstanding anything to the contrary contained herein,
with respect to each and every claim for indemnification under
XXXXXXXXXXXXXXXXXXXXXXXXXXX, the Aggrieved Party shall not be entitled to seek
indemnification unless and until XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
(in which event, subject to the other provisions of this Section 11.3, the
Aggrieved Party shall be entitled to seek indemnification for the entire amount
of such claim) (it being understood and agreed that only the Costs arising out
of a single event or series of related events shall constitute an individual
claim). An Aggrieved Party shall not be entitled to recover any Costs under
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXX (the "Minimum Loss"), at which time the indemnification provided under
Section 11.1 shall apply to all Costs in excess of the Minimum Loss and the
maximum liability under XXXXXXX XXXXXXXXXXXXXXXXXXXXXXXXXXX for an Indemnifying
Party shall not exceed XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX in the aggregate.
Notwithstanding anything to the contrary contained herein, a party shall not be
entitled to indemnification under Article 11 with respect to any particular
matter if and to the extent a Purchase Price adjustment has been made with
respect to such specific matter pursuant to Section 3.6 or Section 7.6(f). It is
understood that this Section 11.3 shall not apply to the environmental
indemnification provisions set forth in Sections 11.1(d) through (h), inclusive.
11.4 INDEMNIFICATION AS SOLE REMEDY.
Absent fraud, the indemnification provided in this Article 11
and Article 7, subject to the limitations set forth herein, shall be the
exclusive post-Closing remedy for damages available to any Aggrieved Party
arising out of or relating to this Agreement and the purchase and sale of the
Business hereunder.
<PAGE>
ARTICLE 12 GENERAL PROVISIONS
12.1 PUBLIC STATEMENTS.
Prior to the Closing, or afterward, so long as this Agreement
is in effect, none of the parties hereto shall issue or cause the publication of
any press release or other announcement with respect to this Agreement or the
transactions contemplated hereby without consulting with and obtaining the
consent of the other party, which shall not be unreasonably withheld; provided,
however, that such consent shall not be required where such release or
announcement is required by applicable law.
12.2 NOTICES.
All notices and other communications hereunder shall be in
writing and shall be deemed to have been duly given if delivered personally,
mailed by reputable overnight courier or certified mail (return receipt
requested) or sent by telecopier (confirmed thereafter by such certified mail)
to the parties at the following addresses or at such other addresses as shall be
specified by the parties by like notice:
(a) if to Sellers:
c/o American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: Chief Financial Officer
Telecopier Number: (973) 660-7156
with a copy to:
American Home Products Corporation
Five Giralda Farms
Madison, New Jersey 07940
Attention: General Counsel
Telecopier Number: (973) 660-6030
(b) if to Buyer:
Crop Protection Products Division
BASF Aktiengesellschaft
Carl-Bosch-Strasse 67
67114 Limburgerhof
Germany
<PAGE>
Telecopier Number: 011-49-621-60-27144
Attn.: President Crop Protection Division
(AP)
with a copy to:
BASF Aktiengesellschaft
Carl-Bosch-Strasse 38
67056 Ludwigshafen
Germany
Telecopier Number: 011-49-621-60-41789
Attn.: Central Legal Department (ZRR)
Notice so given shall (in the case of notice so given by mail)
be deemed received on the third calendar day after mailing or when received if
sent by a reputable overnight courier and (in the case of notice so given by
telecopier or personal delivery) on the date of actual transmission or (as the
case may be) personal delivery.
12.3 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
The respective representations and warranties of the parties
hereto shall survive the Closing and shall remain in full force and effect,
provided, however, that (a) the representations and warranties in Section 4.6
with respect to any Taxes shall survive until the applicable statute of
limitations has run for such Taxes, (b) XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX
XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX.
If written notice of a claim has been given prior to the expiration of the
applicable representations and warranties by an Aggrieved Party to the
Indemnifying Party, then the relevant representations and warranties shall
survive as to such claim until the claim has been finally resolved.
12.4 AMENDMENT.
This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
12.5 WAIVER.
<PAGE>
At any time prior to the Closing, any term, provision or
condition of this Agreement may be waived in writing (or the time for
performance of any of the obligations or other acts of the parties hereto may be
extended) by the party that is entitled to the benefits thereof. Failure by a
party hereto on one or more occasions to avail itself of a right conferred by
this Agreement shall in no event be construed as a waiver of such party's right
to enforce said right or any other right in the future.
12.6 PARTIES IN INTEREST.
This Agreement may not be assigned by a party without the
prior written consent of the other parties hereto, except that Buyer may assign
all or any portion of its rights and obligations hereunder to any Affiliate of
Buyer; provided, however, that no such assignment shall relieve Buyer of its
obligations hereunder. This Agreement shall not run to the benefit of or be
enforceable by any Person other than a party to this Agreement and, subject to
the first sentence of this Section, its successors and assigns.
12.7 SELLERS' KNOWLEDGE.
When "to the knowledge of Sellers" or similar phrase is used
herein it shall refer to the actual knowledge of the President, Executive Vice
President, Sr. Vice President and Vice Presidents of the Global Agricultural
Products Division and the Global Agricultural Products Research Division, in
each case, after due inquiry.
12.8 GOVERNING LAW; MISCELLANEOUS.
This Agreement (including the documents and instruments
referred to herein) constitutes the entire agreement and supersedes all other
prior agreements and undertakings, both written and oral, among the parties, or
any of them, with respect to the subject matter hereof; is not intended to
confer upon any other Person any rights or remedies hereunder; and shall be
governed in all respects, including validity, interpretation and effect, by the
internal laws of the State of New York. The parties hereto agree that the U.S.
District Court for the Southern District of New York shall have exclusive
jurisdiction over any dispute or controversy arising out of or in relation to
this Agreement and any judgment, determination, arbitration award, finding or
conclusion reached or rendered in any other jurisdiction shall be null and void
between the parties hereto. Each of the parties waives any defense of
inconvenient forum to the maintenance of any action or proceeding so brought and
waives any bond, surety, or other security that might be required of any other
party with respect thereto.
This Agreement may be executed in one or more counterparts
which together shall constitute a single agreement. If any provisions of this
Agreement shall be held to be illegal, invalid or unenforceable under any
applicable law, then such contravention or invalidity shall not invalidate the
entire Agreement. Such provision shall be deemed to be modified to the extent
necessary to render it legal, valid and enforceable, and if no such modification
shall render it legal, valid and enforceable, then this Agreement shall be
construed as if not containing the provision held to be invalid, and the rights
and obligations of the parties shall be construed and enforced accordingly.
<PAGE>
12.9 DISCLOSURE SCHEDULE.
The disclosure of any matter in the Disclosure Schedule shall
expressly not be deemed to constitute an admission by Sellers or Buyer of its
requirement to be disclosed or to otherwise imply that any such matter is
material for the purposes of this Agreement.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed as of the date first written above.
AMERICAN CYANAMID COMPANY
By:______________________________
Name:
Title:
AMERICAN HOME PRODUCTS CORPORATION
By:______________________________
Name:
Title:
BASF AKTIENGESELLSCHAFT
By:______________________________
Name:
Title:
BASF AKTIENGESELLSCHAFT
By:______________________________
Name:
Title:
<TABLE>
EXHIBIT 12
American Home Products Corporation
Computation of Ratio of Earnings To Fixed Charges (3)
(Thousands of dollars, except ratio amounts)
<CAPTION>
Three Months Ended Years Ended December 31,
-------------------------------------------------------------------------------------------
Earnings: March 31, 2000 1999 1998 1997 1996 1995
-------------------------- ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
Income (loss) from continuing
operations before federal
and foreign taxes (4) $2,572,375 ($1,907,299) $3,089,936 $2,364,753 $2,398,866 $2,148,208
Add:
Fixed charges 102,915 403,328 371,844 513,860 601,927 701,781
Minority interests 23,666 30,301 620 2,421 13,677 4,085
Distributed equity income 0 0 771 0 0 0
Amortization of capitalized
interest 529 1,803 1,487 1,057 5,621 768
Less:
Equity income 102 2,122 473 9,777 8,448 6,584
Capitalized interest 5,583 15,375 9,497 12,898 0 7,681
------------------ ------------ ------------ ------------ ------------ ------------
Total earnings (loss) as $2,693,800 ($1,489,364) $3,454,688 $2,859,416 $3,011,643 $2,840,577
defined ================== ============ ============ ============ ============ ============
Fixed Charges:
Interest and amortization of
debt expense $86,825 $343,271 $322,970 $461,370 $571,414 $665,021
Capitalized interest 5,583 15,375 9,497 12,898 0 7,681
Interest factor of rental
expense (1) 10,507 44,682 39,377 39,592 30,513 29,079
------------------ ------------ ------------ ------------ ------------ ------------
Total fixed charges as defined $102,915 $403,328 $371,844 $513,860 $601,927 $701,781
================== ============ ============ ============ ============ ============
Ratio of earnings to fixed
charges (2) (4) 26.2 - 9.3 5.6 5.0 4.0
(1) A 1/3 factor was used to compute the portion of rental expenses deemed representative
of the interest factor.
(2) The results of operations for the year ended December 31, 1999 are inadequate to cover
total fixed charges as defined. The coverage deficiency for the year ended December 31,
1999 is $403,328. Excluding the charge for the REDUX and PONDIMIN litigation settlement
of $4,750,000, the pro forma ratio of earnings to fixed charges would be 8.1 for the year
ended December 31, 1999.
(3) Amounts have been restated to reflect the agricultural products business as a discontinued
operation.
(4) The income from continuing operations before federal and foreign taxes for the three
months ended March 31, 2000 included the Warner-Lambert termination fee of $1,709.4.
Excluding the termination fee, the ratio of earnings to fixed charges would be 9.6 for
the three months ended March 31, 2000.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM
THE AMERICAN HOME PRODUCTS CORPORATION AND SUBSIDIARIES CONSOLIDATED
CONDENSED BALANCE SHEET AS OF MARCH 31, 2000 AND CONSOLIDATED
CONDENSED STATEMENT OF OPERATIONS FOR THE THREE MONTHS ENDED MARCH
31, 2000, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-END> MAR-31-2000
<CASH> 2,143,239
<SECURITIES> 561,402
<RECEIVABLES> 2,245,381
<ALLOWANCES> 0
<INVENTORY> 1,714,779
<CURRENT-ASSETS> 12,806,892
<PP&E> 6,681,722
<DEPRECIATION> 2,380,413
<TOTAL-ASSETS> 23,480,425
<CURRENT-LIABILITIES> 7,124,801
<BONDS> 3,634,109
0
59
<COMMON> 434,518
<OTHER-SE> 5,817,808
<TOTAL-LIABILITY-AND-EQUITY> 23,480,425
<SALES> 3,336,495
<TOTAL-REVENUES> 3,336,495
<CGS> 826,573
<TOTAL-COSTS> 826,573
<OTHER-EXPENSES> 442,925
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 43,141
<INCOME-PRETAX> 2,572,375
<INCOME-TAX> 826,366
<INCOME-CONTINUING> 1,746,009
<DISCONTINUED> (1,469,647)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 276,362
<EPS-BASIC> 0.21
<EPS-DILUTED> 0.21
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE AMERICAN HOME PRODUCTS CORPORATION AND
SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET AS OF MARCH
31, 1999 AND CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE
THREE MONTHS ENDED MARCH 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS. <F1>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 1,330,609
<SECURITIES> 130,789
<RECEIVABLES> 2,263,400
<ALLOWANCES> 0
<INVENTORY> 1,599,384
<CURRENT-ASSETS> 10,873,504
<PP&E> 5,912,302
<DEPRECIATION> 2,230,777
<TOTAL-ASSETS> 20,259,120
<CURRENT-LIABILITIES> 3,317,468
<BONDS> 4,186,904
0
63
<COMMON> 436,874
<OTHER-SE> 9,012,966
<TOTAL-LIABILITY-AND-EQUITY> 20,259,120
<SALES> 2,858,049
<TOTAL-REVENUES> 2,858,049
<CGS> 700,306
<TOTAL-COSTS> 700,306
<OTHER-EXPENSES> 369,967
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 56,331
<INCOME-PRETAX> 750,298
<INCOME-TAX> 212,158
<INCOME-CONTINUING> 538,140
<DISCONTINUED> 116,778
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 654,918
<EPS-BASIC> 0.50
<EPS-DILUTED> 0.49
<FN>
<F1> Financial data schedule for the three months ended March 31, 1999 was
restated to reflect the agricultural products business as a discontinued
operation.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND> THIS RESTATED SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE AMERICAN HOME PRODUCTS CORPORATION AND
SUBSIDIARIES CONSOLIDATED CONDENSED BALANCE SHEET AS OF DECEMBER
31, 1999 AND CONSOLIDATED CONDENSED STATEMENT OF OPERATIONS FOR THE
YEAR ENDED DECEMBER 31, 1999, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.<F1>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,892,715
<SECURITIES> 520,587
<RECEIVABLES> 2,389,863
<ALLOWANCES> 0
<INVENTORY> 1,607,960
<CURRENT-ASSETS> 12,384,778
<PP&E> 6,392,948
<DEPRECIATION> 2,274,771
<TOTAL-ASSETS> 23,123,756
<CURRENT-LIABILITIES> 6,480,383
<BONDS> 3,606,423
0
61
<COMMON> 434,639
<OTHER-SE> 5,780,047
<TOTAL-LIABILITY-AND-EQUITY> 23,123,756
<SALES> 11,881,196
<TOTAL-REVENUES> 11,881,196
<CGS> 3,022,556
<TOTAL-COSTS> 3,022,556
<OTHER-EXPENSES> 1,587,505
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 213,866
<INCOME-PRETAX> (1,907,299)
<INCOME-TAX> (700,056)
<INCOME-CONTINUING> (1,207,243)
<DISCONTINUED> (19,878)
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,227,121)
<EPS-BASIC> (0.94)
<EPS-DILUTED> (0.94)
<FN>
<F1> Financial data schedule for the year ended December 31, 1999 restated to
reflect the agricultural products business as a discontinued operation.
</FN>
</TABLE>
