AGREEMENT  dated as of March 6, 2001 by and between  AMERICAN HOME PRODUCTS
CORPORATION,  a Delaware corporation,  having its principal place of business at
Five  Giralda  Farms,  Madison,  New Jersey  07940 (the  "Company")  and JOHN R.
STAFFORD (the "Executive").

                                   BACKGROUND

                  The Executive has been employed by the Company since June 1970
and has served as the Company's Chairman and Chief Executive Officer since 1986.
   The Executive and the Company have determined that the parties shall make
provision for the Executive to step down as Chief Executive Officer of the
Company, to continue to serve as Chairman of the Company until December 31,
2002, and, thereafter, to continue rendering services to the Company as a
consultant during a specified consulting period. The Company and the Executive
have therefore entered into this Agreement on the terms and conditions set forth
herein.

1.  Employment.

     The  Executive  shall  continue  to serve as Chairman  and Chief  Executive
Officer of the Company until May 1, 2001.  Thereafter,  the Executive will serve
as Chairman of the Company until December 31, 2002 (the "Transition  Date"),  at
which time,  the  Executive  shall (a) cease to be Chairman of the Company;  (b)
cease to be a member of the Board of Directors of the Company (the  "Board") and
its affiliated companies,  unless otherwise determined by the Board and the then
Chairman of the Company;  and (c) commence rendering  consulting services to the
Company during the "Consulting  Period" as set forth in Section 4 hereof. All of
the foregoing employment and consulting terms are subject to earlier termination
in accordance with Sections 6, 7 and 8 hereof.

2.  Duties and Responsibilities as Chairman and Chief Executive Officer.

     The Executive's titles, duties and responsibilities  shall remain unchanged
until May 1, 2001.  Thereafter,  the Executive's duties and  responsibilities as
Chairman  shall be as the  Board  and the then  Chief  Executive  Officer  shall
reasonably request; provided, however, that for so long as the Executive remains
Chairman of the Company,  the Executive shall continue to be the chairman of the
Board, the chairman of the Executive Committee of the Board, and the chairman of
all meetings of the Company's  shareholders  that will occur while the Executive
remains Chairman.

3.  Compensation and Benefits until the Transition Date.

          (a) Salary; Short-Term and Long-Term Incentive Compensation.  From the
     date hereof until the  Transition  Date,  the Company shall continue to pay
     the Executive his annual base salary and short-term and long-term incentive
     compensation awards (including,  without limitation, all annual bonuses and
     equity  grants),  in each case at a level that is not less than the highest
     level paid or granted to the Executive in any of the three  calendar  years
     immediately  preceding  the date  hereof  during  which the  Executive  was
     employed as the Chief Executive Officer of the Company, which amounts shall
     be paid through the Transition  Date in accordance  with the Company's past
     practice of paying compensation to senior executives.

          (b) Fringe  Benefits.  Through the Transition  Date, the Company shall
     continue to provide the Executive all fringe benefits and support  services
     to which the Executive is entitled and enjoys as of the date hereof.

          (c) Welfare Benefit Plans.  Through the Transition Date, the Executive
     shall  continue to  participate  in and receive  benefits  under all of the
     Company's  medical and other  welfare  benefit  plans,  including,  without
     limitation,  the Company's life insurance and disability  insurance benefit
     plans, at the same levels as other senior executives (and their dependants)
     of the Company are entitled to  participate  in and receive  benefits under
     such plans.

          (d) Retirement Plans. Through the Transition Date, the Executive shall
     continue to participate in and/or receive  benefits under all qualified and
     nonqualified  pension plans (including,  without limitation,  the Company's
     Supplemental  Executive  Retirement  Plan,  Executive  Retirement  Plan and
     Deferred   Compensation   Plan).  Except  as  otherwise  provided  in  this
     Agreement,   any  such  participation  shall  be  in  accordance  with  the
     provisions  of such  plans  and  nothing  contained  in this  Agreement  is
     intended to, or shall be deemed to,  affect  adversely  any of  Executive's
     rights as a participant under any such plans.

          (e) Other Benefit Plans.  Through the Transition Date, Executive shall
     continue to participate in or receive benefits under any other benefit plan
     generally  made  available by the Company to senior  executives.  Except as
     otherwise provided in this Agreement,  any such  participation  shall be in
     accordance with the provisions of such plans and nothing  contained in this
     Agreement is intended to, or shall be deemed to,  affect  adversely  any of
     Executive's rights as a participant under any such plans.

          (f) Expense  Reimbursement.  Through the Transition  Date, the Company
     shall reimburse  Executive for the ordinary and necessary business expenses
     reasonably  incurred by  Executive in the  performance  of his duties under
     this  Agreement  in  accordance  with  the  Company's  customary  practices
     applicable to senior executives.

4.  Consulting Period.

     The  Executive  shall be employed by the Company as a consultant  to render
advice  to the  Company  on an "as  needed"  basis  (but in no event  more  than
twenty-five  (25)  business days in any given  calendar  year) during the period
beginning on the day  following the  Transition  Date and ending on December 31,
2007 (the "Consulting  Period").  During the Consulting  Period, the Executive's
duties shall be as requested by the Company's  then Chief  Executive  Officer or
the Board but shall in all events be consistent  with the duties to be performed
by a  person  of the  Executive's  experience  and  stature  as a  former  Chief
Executive  Officer and Chairman of the Company,  shall be subject to  reasonable
advance  notice to the  Executive,  and shall be  designed  to  accommodate  the
Executive's  reasonable  scheduling needs. Subject to the covenants set forth in
Section 10 hereof,  nothing  contained  herein shall preclude the Executive from
devoting  substantial  time and attention to his own personal  investments or to
pursuing  other  business  or  investment  opportunities  during the  Consulting
Period.

5.  Compensation and Benefits During and After the Consulting Period.


          (a) Consulting  Fee. During the Consulting  Period,  the Company shall
     pay  the  Executive  an  annual  consulting  fee of  $250,000,  payable  in
     quarterly installments.

          (b) Fringe Benefits.  During the Consulting  Period, the Company shall
     provide the  Executive  with  substantially  the same benefits set forth in
     Section 3(b) above,  subject to such  modifications  as the Company and the
     Executive may otherwise agree from time to time. All of the fringe benefits
     provided  hereunder shall be provided to the Executive (and his spouse,  as
     applicable),  at no cost  to the  Executive  or his  spouse.  The  benefits
     described  in this  Section  5(b) shall  hereinafter  be referred to as the
     "Consulting Fringe Benefits".

          (c) Welfare,  Retirement and other Benefit Plans. During and after the
     Consulting  Period,  the Executive (and his spouse,  as  applicable)  shall
     continue to participate in or receive benefits under all pension,  medical,
     welfare and other benefit plans  generally made available by the Company to
     retired senior  executives and their spouses,  at levels that are in effect
     for other retired senior executives and their spouses as of the date hereof
     (or, if more favorable, at any time hereafter), for the Executive's and his
     spouse's  respective  lifetimes.  Except  as  otherwise  provided  in  this
     Agreement,   any  such  participation  shall  be  in  accordance  with  the
     provisions  of such  plans  and  nothing  contained  in this  Agreement  is
     intended to, or shall be deemed to,  affect  adversely  any of  Executive's
     rights as a  participant  under any such plans.  The benefits  described in
     this  Section  5(c)  shall  hereinafter  be  referred  to as  the  "Retiree
     Benefits".

          (d)  Replacement  Benefits.   Notwithstanding  anything  contained  in
     Section 3 or this Section 5 to the contrary,  in the event that  applicable
     law or the terms of any Company  benefit plan prohibit the provision of any
     of the benefits set forth in subsections 3(a), (b), (c), (d) or (e) of this
     Agreement,  or in subsections 5 (b) or (c) above, the Company shall provide
     such benefits to the Executive (and his spouse,  as applicable)  outside of
     any such Company  benefit plan,  which benefits shall be at the same levels
     and  shall be  economically  equivalent  to the  prohibited  benefits  (the
     "Replacement Benefits").  The Replacement Benefits shall be provided to the
     Executive (and his spouse,  as  applicable),  at no additional  cost to the
     Executive or his spouse.

6.  Termination of Employment on Account of Executive's Death or Disability.


          (a) Termination.  Executive's employment under this Agreement (whether
     prior  to the  Transition  Date or  during  the  Consulting  Period)  shall
     terminate  upon  Executive's  death  or  Disability.  In  the  event  of  a
     termination as a result of the Executive's  Disability,  either the Company
     or the Executive (or the Executive's representative) shall give thirty (30)
     days'  advance  written  notice of such  termination.  For purposes of this
     Agreement,  "Disability" shall mean permanent and total disability, as such
     term is defined  under  Section  22(e)(3) of the  Internal  Revenue Code of
     1986,  as amended (the  "Code").  Any  question as to the  existence of the
     Executive's  Disability  upon which the  Company and the  Executive  cannot
     agree shall be determined by a qualified  independent physician selected by
     the Executive (or, if the Executive is unable to make such selection,  such
     selection  shall be made by any adult member of the  Executive's  immediate
     family  or the  Executive's  legal  representative),  and  approved  by the
     Company,   which  approval  shall  not  be   unreasonably   withheld.   The
     determination of such physician shall be made in writing to the Company and
     to the Executive and shall be final and conclusive for all purposes of this
     Agreement.

          (b)  Compensation  Due by Reason of Death or  Disability.  Subject  to
     Section 10 of this Agreement,  in the event that Executive's  employment is
     terminated by reason of Executive's  death or Disability  (whether prior to
     the  Transition  Date or during the Consulting  Period),  the Company shall
     provide the  following  payments  and  benefits to the  Executive  (and his
     spouse,  as  applicable)  (or in the  case  of  death,  to the  Executive's
     beneficiary or estate):

               (i) Earned But Unpaid  Compensation.  (A) Any  accrued but unpaid
          compensation for services rendered to the date of termination, (B) any
          accrued  but unpaid  expenses  required  to be  reimbursed  under this
          Agreement  and (C) any  vacation  accrued  to the date of  termination
          (such  compensation  in (A), (B) and (C),  collectively,  the "Accrued
          Compensation").

               (ii) Severance Payment.  An amount equal to the cash compensation
          for  services  that would have been  payable to the  Executive  if the
          Executive had continued in employment  through the Transition Date (if
          applicable) and had continued to provide  consulting  services through
          the end of the Consulting Period. This amount will be paid in a single
          lump  sum  within  thirty  (30)  days  after  the  date  of  death  or
          Disability,  or, at the Company's option,  can be paid in installments
          through the Transition Date (if applicable) and through the end of the
          Consulting  Period,  at the same time as payments would otherwise have
          been made to the Executive.

               (iii)  Benefits.  The Consulting  Fringe Benefits (other than the
          provision of office space and support staff) and the Retiree  Benefits
          to which the Executive (or his spouse,  as applicable) may be entitled
          pursuant to Sections 5(b) and (c) of this Agreement.

7.  Termination for Cause by the Company; Without Good Reason by the Executive.


          (a) Notice of  Termination.  The Company may terminate the Executive's
     employment  and  provision  of  consulting  services  for  Cause,  and  the
     Executive  may  terminate  the  Executive's  employment  and  provision  of
     consulting services without Good Reason (other than as a result of death or
     Disability),  at any  time  after  the  date  hereof  until  the end of the
     Consulting  Period after written notice of such termination is given to the
     other party.

          (b)  Compensation and Benefits in the Event of a Termination for Cause
     by the Company or Without Good Reason by the Executive.  Subject to Section
     10 of this  Agreement,  in the event  that the  Executive's  employment  is
     terminated for Cause by the Company or by the Executive without Good Reason
     (other than as a result of death or  Disability),  in either  case  whether
     prior to the Transition Date or during the Consulting Period),  the Company
     shall provide the Executive with the Accrued  Compensation  and the Retiree
     Benefits.

          (c) Definitions.  For purposes of this Agreement,  the following terms
     shall have the following meanings:

          "Cause" shall mean:

               (i) On or  prior  to the  Transition  Date,  (A) the  Executive's
          conviction  of, or plea of guilty or nolo  contendere  to, a felony or
          (B) the  Executive  willfully  engages in gross  misconduct,  which is
          materially and demonstrably injurious to the Company.

               (ii) After the Transition Date through the Consulting Period, (x)
          the  Executive's  conviction of, or plea of guilty or nolo  contendere
          to,  a  felony  or  (y)  the  Executive's   consistent,   willful  and
          unreasonable  refusal to provide the services as reasonably  requested
          pursuant to Section 4 above,  after the Board  provides the  Executive
          with  written  demand  for  substantial   performance  and  reasonable
          opportunity to perform such duties.

         Notwithstanding the foregoing, the Executive shall not be deemed to
         have been terminated for Cause unless and until there shall have been
         delivered to the Executive a copy of a resolution duly adopted by the
         affirmative vote of not less than three-quarters (3/4) of the Incumbent
         Directors (as hereinafter defined) of the Board at a meeting of the
         Board called and held for such purpose (after reasonable notice to the
         Executive and an opportunity for the Executive, together with the
         Executive's counsel, to be heard before the Board), finding that, in
         the good faith opinion of the Board, Executive was guilty of conduct
         set forth above in this Section 7(c) and specifying the particulars
         thereof in detail. For purposes hereof, "Incumbent Directors" shall
         mean the persons who were members of the Board prior to the date
         hereof, or their successors (if their successors were approved by at
         least a majority of such persons who were members of the Board prior to
         the date hereof).

                  "Change in Control" shall have the same meaning as such term
         is defined in the Severance Agreement dated as of July 31, 1998 by and
         between the Company and the Executive (the "Change in Control
         Agreement").

                  "Good Reason" shall mean, without the Executive's express
         written consent, the Company's breach of any material term of this
         Agreement, including, without limitation, the terms contained in
         Sections 1 through 5 and Sections 9, 12, and 15(a) of this Agreement;
         provided, however, that in the case of a breach, if the Company fully
         corrects such breach prior to the date specified as the date of
         termination in the written notice of termination delivered by the
         Executive to the Company given in respect thereof, the Executive shall
         not have Good Reason to terminate his employment (or consulting
         services, as applicable). The Company expressly acknowledges that the
         Executive's continued employment or provision of consulting services
         under this Agreement shall not constitute consent to, or a waiver of
         rights with respect to, any circumstances constituting Good Reason.

8.  Termination  Without  Cause by the  Company  or for Good  Reason by the
Executive.  The  Company  may  terminate  this  Agreement  and  the  Executive's
employment and provision of consulting services without Cause, and the Executive
may terminate  this  Agreement and the  Executive's  employment and provision of
consulting services for Good Reason, at any time after the date hereof until the
end of the Consulting  Period after thirty (30) days' advance  written notice of
termination  is  delivered  to the other  party.  Subject  to Section 10 of this
Agreement,  in the event that the Executive's  employment is terminated  without
Cause by the Company or by the Executive for Good Reason (in either case whether
prior to the Transition Date or during the Consulting Period), the Company shall
provide the Executive with the following payments and benefits:

          (a) Severance  Payments.  An amount equal to the Accrued  Compensation
     plus the  compensation  for  services  which would have been payable to the
     Executive  if  the  Executive  had  continued  in  employment  through  the
     Transition  Date (if  applicable)  and had continued to provide  consulting
     services through the end of the Consulting Period. This amount will be paid
     in installments through the Transition Date (if applicable) and through the
     end of the Consulting  Period, at the same time as payments would otherwise
     have been made to the Executive.

          (b) Other Benefits. All benefits as provided in Sections 5(b) and (c),
     above,  to which the Executive (and his spouse,  as applicable)  would have
     been entitled if the  Executive  had  continued in  employment  through the
     Transition  Date (if  applicable)  and had continued to provide  consulting
     services  through  the end of the  Consulting  Period,  and  thereafter  as
     provided in Sections 5(b) and (c), above.

9.  Occurrence of a Change in Control.  In the event of a Change in Control:

          (a) If a Change in Control occurs on or prior to the Transition  Date,
     (i) the Executive shall be entitled to continue to receive the compensation
     and benefits provided for in Sections 3 and 5 of this Agreement and (ii) in
     addition to the payments and benefits  provided for under Sections 6, 7, or
     8, as  applicable,  the Executive  shall be entitled to exercise his rights
     pursuant to the Change in Control Agreement and to receive the compensation
     and benefits provided for in such Change in Control Agreement; or

          (b) If a Change in Control  occurs during the Consulting  Period,  (i)
     the Company may not terminate this Agreement other than for Cause, (ii) the
     Executive shall continue to receive all compensation and benefits  provided
     for in Section 5 of this Agreement and (iii) effective as of the Transition
     Date,  the Change in  Control  Agreement  shall be of no further  force and
     effect, and Executive shall have no rights thereunder.

10.  Restrictive Covenants.

          (a)   Confidential   Information.   The   Executive   recognizes   and
     acknowledges  that  he  has  had  access  to  confidential  or  proprietary
     information concerning the Company and entities affiliated with the Company
     (collectively,   the  "Protected  Information").  The  Executive  therefore
     covenants  and  agrees  that the  Executive  shall not,  without  the prior
     written consent of the Company,  use, divulge,  disclose or make accessible
     to any other person,  firm,  partnership,  corporation  or other entity any
     Confidential  Information  pertaining to the business of the Company or any
     of its  affiliates,  except  (i)  while  employed  by the  Company,  in the
     business of and for the benefit of the Company, or (ii) when required to do
     so by a court of competent jurisdiction,  by any governmental agency having
     supervisory  authority  over  the  business  of  the  Company,  or  by  any
     administrative  body or legislative  body  (including a committee  thereof)
     with  jurisdiction  to order the  Executive  to  divulge,  disclose or make
     accessible such information. For purposes of this Section 10, "Confidential
     Information"  shall mean any trade secret or other  non-public  information
     concerning  the  financial  data,   strategic   business   plans,   product
     development (or other proprietary product data), customer lists,  marketing
     plans and other non-public, proprietary and confidential information of the
     Company or its affiliates, that, in any case, is not otherwise available to
     the public  (other than by the  Executive's  breach of the terms hereof) or
     known to persons in the industry generally.

          (b) Competitive  Activity.  The Executive covenants and agrees that at
     all times  during  his period of  employment  with the  Company,  including
     during the Consulting  Period, he will not, directly or indirectly,  engage
     in, or have any active  interest  or  involvement  whether as an  employee,
     agent,  consultant,  officer, or director, in any person, firm, or business
     entity  which is  engaged  in,  the same  business  as that  conducted  and
     principally  carried  on by the  Company  without  the  Company's  specific
     written  consent to do so, all of the foregoing in any  geographic  area in
     which the Company does business.

          (c)  Non-solicitation.  The Executive covenants and agrees that at all
     times during his period of employment  with the Company,  including  during
     the Consulting  Period,  he will not,  without the Company's  prior written
     consent,  directly or indirectly,  offer, solicit or encourage to leave the
     employment or other service of the Company,  or any of its affiliates,  any
     employee of the Company or its affiliates or any person who was so employed
     within the six months prior to such offer or solicitation.

11.  Enforcement of Covenants.

          (a) Right to Injunction.  The Executive  acknowledges that a breach of
     the covenants set forth in Section 10 hereof will cause irreparable  damage
     to the  Company  with  respect  to which  the  Company's  remedy at law for
     damages  will be  inadequate.  Therefore,  in the  event of a breach  or an
     anticipatory  breach  of the  covenants  set forth in this  section  by the
     Executive,  the  Executive  and the Company agree that the Company shall be
     entitled to cease making any cash  payments due hereunder and shall also be
     entitled  to the  following  particular  forms of relief,  in  addition  to
     remedies  otherwise  available  to it at law or equity:  injunctions,  both
     preliminary   and  permanent,   enjoining  or  retraining  such  breach  or
     anticipatory  breach and the  Executive  hereby  consents  to the  issuance
     thereof forthwith and without bond by any court of competent  jurisdiction;
     provided,  however,  that the Company shall only be entitled to take any of
     the foregoing  actions after  providing the Executive  with (i)  reasonable
     notice  of  its  intention  to  take  such  action,   (ii)  the  reasonable
     opportunity  to cure the  behavior  or  conduct in  question  and (iii) the
     opportunity to meet with the Board (after  consultation with legal counsel)
     to be heard in defense of such behavior or conduct.

          (b) Separability of Covenants.  The covenants  contained in Section 10
     hereof constitute a series of separate  covenants,  one for each county and
     city  included  within each State in the United  States and the District of
     Columbia,  and one for each  applicable  foreign city or province  included
     within each foreign country. If in any judicial  proceeding,  a court shall
     hold that any of the  covenants  set forth in  Section  10 exceed the time,
     geographic,  or occupational  limitations permitted by applicable laws, the
     Executive  and the  Company  agree  that such  provisions  shall and hereby
     reformed to the  maximum  time,  geographic,  or  occupational  limitations
     permitted  by  such  laws.  Further,  in  the  event  a  court  shall  hold
     unenforceable  any of the separate  covenants deemed included herein,  then
     such  unenforceable  covenant or covenants shall be deemed  eliminated from
     the provisions of this Agreement for the purpose of such  proceeding to the
     extent necessary to permit the remaining  separate covenants to be enforced
     in such proceedings.

12.  Withholding; Tax Gross-Up.

          (a)   Withholding   Taxes.   The  Company  shall   withhold  from  any
     compensation  and benefits  payable  under this  Agreement  all  applicable
     federal, state, local or other taxes.

          (b) Benefits Tax Gross-Up.  In the event that the Company's  provision
     of the  Replacement  Benefits  pursuant  to Section  5(d) and/or the fringe
     benefits to the  Executive  (and his  spouse,  as  applicable)  pursuant to
     Sections 3(b) and 5(b) results in the Executive  incurring  income or other
     employment  tax  liability on such  benefits,  the Company shall pay to the
     Executive an  additional  amount such that after  payment of all such taxes
     (and including the payment of any taxes imposed on such additional amount),
     the Executive shall have received the  Replacement  Benefits and the fringe
     benefits at no cost to the Executive (or his spouse, as applicable)  (other
     than as may be otherwise required pursuant to Section 5(b) above).

          (c)  Excise  Taxes.  (i) In the  event  that any  payment  or  benefit
     received or to be received by the  Executive  pursuant to the terms of this
     Agreement (the "Contract  Payments") or in connection  with the Executive's
     termination  of  employment  or  contingent  upon a change in  ownership or
     control of the Company (as defined in Section 280G of the Code) pursuant to
     any  plan or  arrangement  or other  agreement  with  the  Company  (or any
     affiliate  thereof)  ("Other  Payments"  and,  together  with the  Contract
     Payments,  the "Payments")  would be subject to the excise tax (the "Excise
     Tax") imposed by Section 4999 of the Code, as determined as provided below,
     the  Company  shall pay to  Executive,  at the time  specified  in  Section
     12(c)(ii)  below, an additional  amount (the "Gross-Up  Payment") such that
     the net amount retained by Executive,  after deduction of the Excise Tax on
     Contract  Payments  and Other  Payments  and any  federal,  state and local
     income or other tax and Excise Tax upon the  payment  provided  for by this
     Section 12(c)(i),  and any interest,  penalties or additions to tax payable
     by the Executive with respect thereto,  shall be equal to the total present
     value of the Contract Payments and Other Payments at the time such Payments
     are to be made.  For  purposes of  determining  whether any of the Payments
     will be subject to the Excise Tax and the amounts of such  Excise Tax,  (1)
     the total amount of the Payments  shall be treated as "parachute  payments"
     within the  meaning  of Section  280G(b)(2)  of the Code,  and all  "excess
     parachute  payments"  within the meaning of Section  280G(b)(1) of the Code
     shall be treated as subject to the Excise Tax,  except to the extent  that,
     in the  opinion  of  independent  tax  counsel  selected  by the  Company's
     independent  auditors and  reasonably  acceptable  to the  Executive  ("Tax
     Counsel"), a Payment (in whole or in part) does not constitute a "parachute
     payment"  within the  meaning of Section  280G(b)(2)  of the Code,  or such
     "excess  parachute  payments"  (in whole or in part) are not subject to the
     Excise Tax, (2) the amount of the Payments that shall be treated as subject
     to the Excise  Tax shall be equal to the lesser of (A) the total  amount of
     the Payments or (B) the amount of "excess  parachute  payments"  within the
     meaning  of  Section  280G(b)(1)  of the Code  (after  applying  clause (1)
     hereof),  and (3) the value of any noncash benefits or any deferred payment
     or  benefit  shall be  determined  by Tax  Counsel in  accordance  with the
     principles  of Sections  280G(d)(3)  and (4) of the Code.  For  purposes of
     determining  the amount of the Gross-Up  Payment,  the  Executive  shall be
     deemed to pay federal  income tax at the highest  marginal rates of federal
     income taxation applicable to individuals in the calendar year in which the
     Gross-Up  Payment  is to be made and state and  local  income  taxes at the
     highest  effective  rates of taxation  applicable to  individuals as are in
     effect  in the state  and  locality  of the  Executive's  residence  in the
     calendar  year in which  the  Gross-Up  Payment  is to be made,  net of the
     maximum  reduction  in  federal  income  taxes  that can be  obtained  from
     deduction  of  such  state  and  local  taxes,   taking  into  account  any
     limitations  applicable to individuals subject to federal income tax at the
     highest marginal rates.

               (ii) The  Gross-Up  Payments  provided  for in  Section  12(c)(i)
          hereof  shall  be made  upon the  earlier  of (x) the  payment  to the
          Executive  of any  Contract  Payment  or  Other  Payment  or  (y)  the
          imposition  upon the  Executive  or  payment by the  Executive  of any
          Excise Tax.

               (iii) The  Executive  shall  notify the Company in writing of any
          claim by the Internal  Revenue  Service  that,  if  successful,  would
          require  the  payment  by the  Company  of a  Gross-Up  Payment.  Such
          notification  shall be given as soon as practicable  but no later than
          10 business  days after the  Executive  is informed in writing of such
          claim and shall  apprise  the  Company of the nature of such claim and
          the date on which such claim is  requested to be paid.  The  Executive
          shall not pay such claim prior to the  expiration of the 30-day period
          following  the date on which the  Executive  gives such  notice to the
          Company (or such shorter period ending on the date that any payment of
          taxes with respect to such claim is due). If the Company  notifies the
          Executive in writing  prior to the  expiration  of such period that it
          desires to contest such claim, the Executive shall:

               1) give the Company any information  reasonably  requested by the
          Company relating to such claim;

               2) take such action in connection  with  contesting such claim as
          the Company  shall  reasonably  request in writing  from time to time,
          including,  without  limitation,  accepting legal  representation with
          respect  to such  claim  by an  attorney  reasonably  selected  by the
          Company and reasonably satisfactory to the Executive;

               3)  cooperate  with  the  Company  in  good  faith  in  order  to
          effectively contest such claim; and

               4) permit the Company to participate in any proceedings  relating
          to such claim;

               provided,  however,  that the Company shall bear and pay directly
          all costs and  expenses  (including,  but not limited  to,  additional
          interest and penalties and related legal,  consulting or other similar
          fees) incurred in connection with such contest and shall indemnify and
          hold the Executive harmless, on an after-tax basis, for any Excise Tax
          or other tax (including  interest and penalties with respect  thereto)
          imposed as a result of such  representation  and  payment of costs and
          expenses.

               (iv)  The  Company  shall  control  all   proceedings   taken  in
          connection  with such contest  and, at its sole option,  may pursue or
          forego any and all administrative appeals,  proceedings,  hearings and
          conferences  with the  taxing  authority  in respect of such claim and
          may, at its sole option,  either  direct the  Executive to pay the tax
          claimed and sue for a refund or contest  the claim in any  permissible
          manner,  and the  Executive  agrees to  prosecute  such  contest  to a
          determination  before  any  administrative  tribunal,  in a  court  of
          initial  jurisdiction  and in one or  more  appellate  courts,  as the
          Company  shall  determine;  provided,  however,  that  if the  Company
          directs  the  Executive  to pay such  claim and sue for a refund,  the
          Company  shall  advance the amount of such payment to the Executive on
          an  interest-free  basis,  and shall  indemnify and hold the Executive
          harmless,  on an  after-tax  basis,  from any  Excise Tax or other tax
          (including  interest or penalties with respect  thereto)  imposed with
          respect to such  advance or with  respect to any  imputed  income with
          respect to such advance; and provided,  further, that if the Executive
          is required to extend the statute of limitations to enable the Company
          to contest such claim,  the Executive may limit this extension  solely
          to such contested  amount.  The Company's control of the contest shall
          be limited to issues with respect to which a Gross-Up Payment would be
          payable  hereunder  and the  Executive  shall be entitled to settle or
          contest,  as the case may be, any other issue  raised by the  Internal
          Revenue  Service  or any  other  taxing  authority.  In  addition,  no
          position  may be taken  nor any final  resolution  be agreed to by the
          Company without the Executive's consent if such position or resolution
          could  reasonably  be  expected  to  adversely  affect  the  Executive
          (including  any other tax position of the  Executive  unrelated to the
          matters covered hereby).

               (v) As a result of the  uncertainty in the application of Section
          4999 of the  Code  at the  time of the  initial  determination  by the
          Company or the Tax Counsel  hereunder,  it is possible  that  Gross-Up
          Payments,  which will not have been made by the  Company,  should have
          been made ("Underpayment"),  consistent with the calculations required
          to be made  hereunder.  In the event  that the  Company  exhausts  its
          remedies  and  the  Executive  thereafter  is  required  to pay to the
          Internal Revenue Service an additional amount in respect of any Excise
          Tax, the Company or the Tax Counsel shall  determine the amount of the
          Underpayment  that  has  occurred  and  any  such  Underpayment  shall
          promptly  be  paid  by  the  Company  to or  for  the  benefit  of the
          Executive.

               (vi) If, after the receipt by  Executive of the Gross-Up  Payment
          or an amount advanced by the Company in connection with the contest of
          an Excise Tax claim,  the  Executive  becomes  entitled to receive any
          refund with respect to such claim, the Executive shall promptly pay to
          the Company the amount of such refund (together with any interest paid
          or credited  thereon after taxes  applicable  thereto).  If, after the
          receipt  by the  Executive  of an amount  advanced  by the  Company in
          connection  with an Excise Tax  claim,  a  determination  is made that
          Executive  shall not be entitled  to any refund  with  respect to such
          claim and the Company does not notify the  Executive in writing of its
          intent to contest the denial of such refund prior to the expiration of
          30 days after such  determination,  such advance shall be forgiven and
          shall not be required to be repaid.

13.  Source of Payments; Indemnification.

               (a)  Source  of  Payments.   All  payments  provided  under  this
          Agreement,  other than payments made pursuant to a plan which provides
          otherwise, shall be paid from the general funds of the Company, and no
          special or separate fund shall be required to be  established,  and no
          other  segregation  of assets shall be required to be made,  to assure
          payment;  provided,  however,  that nothing  herein  shall  prevent or
          preclude the Company from  establishing any trust or other arrangement
          which it deems  necessary  or  desirable  to provide for the  payments
          required hereunder.

               (b) Indemnification and Insurance Coverage.  The Company shall at
          all times maintain in full force and effect all agreements, provisions
          and  insurance   coverage   necessary  to  provide  to  the  Executive
          indemnification  in respect of all positions  held by the Executive at
          the Company (or any of its affiliates) to the fullest extent permitted
          by state law and the articles of incorporation  and the by-laws of the
          Company as in effect on the date hereof,  or, if more favorable to the
          Executive, as in effect at any time thereafter.

14.  Facility of Payment; Entire Agreement; No Mitigation; Further Action.

               (a) Facility of Payment.  In the event of the  Executive's  legal
          incapacity, the Company may make any payments due under this Agreement
          to his legal  representative.  In the event of Executive's  death, the
          Company may make any payment due under this Agreement to his surviving
          spouse or, if none,  to the  Executive's  estate,  subject to Sections
          15(b) and (c) hereof.

               (b) Entire Agreement. Except for the Change in Control Agreement,
          no  agreements  or  representations,  oral or  otherwise,  express  or
          implied,  with respect to the subject  matter hereof have been made by
          either  party  which are not  expressly  set forth in this  Agreement.
          Except for the Change in Control Agreement, this Agreement constitutes
          the entire  understanding  between  the  parties  with  respect to the
          Executive's  severance  pay  in  the  event  of a  termination  of the
          Executive's employment with the Company, superseding all negotiations,
          prior  discussions  and  preliminary  agreements,   written  or  oral,
          concerning said severance pay. Further,  notwithstanding any provision
          of this Agreement: (i) the Executive shall not be required to mitigate
          the amount of any payment  provided by this Agreement by seeking other
          employment  or  otherwise,  nor shall the  amount  of any  payment  or
          benefit  provided  by this  Agreement  be reduced by any  compensation
          earned  by the  Executive  as the  result  of  employment  by  another
          employer  or by  retirement  benefits  received  after  the  date  the
          Executive ceases to perform services hereunder or otherwise,  and (ii)
          except as otherwise provided in this Agreement, the obligations of the
          Company to make payments to the Executive and to make the arrangements
          provided  for herein are  absolute  and  unconditional  and may not be
          reduced  by  any  circumstances,   including  without  limitation  any
          set-off,  counterclaim,  recoupment,  defense or other right which the
          Company may have against the Executive or any third party at any time.

               (c) Further  Action.  The Company  shall take any further  action
          necessary or desirable to implement the  provisions of this  Agreement
          or perform its obligations hereunder  (including,  without limitation,
          amending the Company's  Supplemental  Executive  Retirement  Plan, the
          Employee Retirement Plan, any stock option or stock bonus plan, or any
          other  applicable  plan,  program  or  arrangement  or  obtaining  any
          necessary consents or approvals in connection therewith).

15.  Successors Assignment.

               (a) Company  Successor.  The Company will  require any  successor
          (whether direct or indirect,  by purchase,  merger,  consolidation  or
          otherwise) to all or  substantially  all of the business and/or assets
          of the Company to expressly assume and agree to perform this Agreement
          in the same manner and to the same extent that the Company is required
          to perform  it. As used in this  Agreement,  "Company"  shall mean the
          Company as  hereinbefore  defined and any  successor  to its  business
          and/or  assets as aforesaid  which  assumes and agrees to perform this
          Agreement by operation of law, or otherwise.

               (b)  Executive's  Successor.  The  payments  and  benefits  to be
          provided to the Executive (or his spouse) under this  Agreement  shall
          inure  to the  benefit  of,  and the  right of the  Executive  (or his
          spouse) to receive any  payments  and/or  benefits to which  either of
          them  becomes  entitled  shall  be  enforceable  by,  the  Executive's
          personal   or  legal   representatives,   executors,   administrators,
          successors,  heirs,  distributees,   devisees  and  legatees.  If  the
          Executive  should die while any amount  would  still be payable to the
          Executive  hereunder if  Executive  had  continued  to live,  all such
          amounts, unless otherwise provided herein, shall be paid in accordance
          with the terms of this Agreement to the Executive's  devisee,  legatee
          or other designee or, if there is no such designee, to the Executive's
          estate.

               (c)  Assignment.  Nothing in this  Section 15 shall  preclude the
          Executive from  designating a beneficiary or  beneficiaries to receive
          any  benefit  payable  on his  death or from  transferring  any of his
          rights and benefits  hereunder to (i) his  executors,  administrators,
          testamentary trustees, legatees or beneficiaries,  (ii) the executors,
          administrators,  testamentary  trustees,  legatees or beneficiaries of
          any  of  the  persons  in  clause  (i)  above  or  (iii)  a  trust  or
          custodianship,  the beneficiaries of which include only the Executive,
          his spouse or his lineal descendants by blood or adoption.

16.  Governing Law; Jurisdiction.

               (a)  Governing  Law.  This  Agreement  shall be  governed  by and
          construed  in  accordance  with  the laws of the  State of New  Jersey
          applicable  to  agreements  made and to be  performed  in that  State,
          without regard to its conflict of laws provisions.

               (b) Jurisdiction;  Venue. Any suit, action or proceeding  against
          the Executive or the Company,  with respect to this Agreement,  or any
          judgment  entered by any court in respect of any thereof,  may only be
          brought  in any court of  competent  jurisdiction  in the State of New
          Jersey,  and the Company and the Executive  each hereby submits to the
          exclusive  jurisdiction  of such  courts  for the  purpose of any such
          suit,  action,  proceeding or judgment.  The Company and the Executive
          hereby  irrevocably  waive any objections which either of them may now
          or  hereafter  have to the laying of the venue of any suit,  action or
          proceeding arising out of or relating to this Agreement brought in any
          court of competent jurisdiction in the State of New Jersey, and hereby
          further  irrevocably  waive any claim  that any such  suit,  action or
          proceeding  brought  in  any  such  court  has  been  brought  in  any
          inconvenient  forum.  Each of the  Company  and the  Executive  hereto
          hereby  irrevocably  and  unconditionally  waives trial by jury in any
          legal action or proceeding  in relation to this  Agreement and for any
          counterclaim therein.

17.  Notices.

     Any  notice,  consent,  request  or  other  communication  made or given in
connection  with this Agreement  shall be in writing and shall be deemed to have
been duly given when delivered or mailed by registered or certified mail, return
receipt requested, or by facsimile or by hand delivery, to those listed below at
their  following  respective  addresses  or at such  other  address  as each may
specify by notice to the others:

                  To the Company:

                           American Home Products Corporation
                           Five Giralda Farms
                           Madison, New Jersey 07940
                           Attention: General Counsel
                           Fax:  (973) 660-7050

                  With a copy to:

                           Simpson Thacher & Bartlett
                           425 Lexington Avenue
                           New York, New York 10017-3954
                           Attention:  Alvin H. Brown, Esq.
                           Fax:  (212) 455-2000

                  To Executive:

                           At the most recent address set forth in the personnel
                           records of the Company.


18.  Miscellaneous.

               (a)  Waiver.  The  failure  of a  party  to  insist  upon  strict
          adherence to any term of this  Agreement on any occasion  shall not be
          considered  a waiver  thereof  or  deprive  that  party  of the  right
          thereafter  to insist upon strict  adherence to that term or any other
          terms of this Agreement.

               (b)  Amendment.  No provision of this  Agreement may be modified,
          waived or discharged unless such waiver,  modification or discharge is
          agreed to in writing and signed by the  Executive  and such officer as
          may be specifically designated by the Board. No waiver by either party
          hereto  at any time of any  breach by the other  party  hereto  of, or
          compliance  with,  any conditions or provision of this Agreement to be
          performed  by such other  party shall be deemed a waiver of similar or
          dissimilar  provisions  or  conditions  at the same or at any prior or
          subsequent time.

               (c)  Separability.  If any term or provision of this Agreement is
          declared   illegal  or   unenforceable   by  any  court  of  competent
          jurisdiction  and cannot be modified to be  enforceable,  such term or
          provision  shall  immediately   become  null  and  void,  leaving  the
          remainder of this Agreement in full force and effect.

               (d) Headings. Section headings are used herein for convenience of
          reference  only and shall not affect the meaning of any  provision  of
          this Agreement.

               (e) Rules of Construction.  Whenever the context so requires, the
          use of the  singular  shall be deemed to  include  the plural and vice
          versa.

               (f)  Counterparts.  This  Agreement  may be  executed  in several
          counterparts,  each of which shall be deemed to be an original but all
          of which together will constitute one and the same instrument.

                            [Continued on next page.]



<PAGE>


                  IN WITNESS WHEREOF, the parties hereto have duly executed this
Agreement as of the day and year set forth below.

                                          AMERICAN HOME PRODUCTS CORPORATION:



                                           By:  /s/ Louis L. Hoynes, Jr.
                                           Name: Louis L. Hoynes, Jr.
                                           Title: Executive Vice President
                                                  and General Counsel



EXECUTIVE:

/s/ John R. Stafford
------------------------
John R. Stafford