Document:

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                                                                    EXHIBIT 10.2

                                  CONFIDENTIAL

                            ASSET PURCHASE AGREEMENT

                                     Between

                       AMERICAN HOME PRODUCTS CORPORATION

                                       And

                           KING PHARMACEUTICALS, INC.

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                            ASSET PURCHASE AGREEMENT

         This ASSET PURCHASE AGREEMENT dated as of June 22, 2000 (the
"Agreement") by and between AMERICAN HOME PRODUCTS CORPORATION, a Delaware
corporation ("AHP" or "Seller") and King Pharmaceuticals, Inc., a Tennessee
corporation ("Buyer"). Seller and Buyer may each be referred to herein
individually as a "Party" and collectively as the "Parties".

                              W I T N E S S E T H:

         WHEREAS, Seller, through its Wyeth-Ayerst Laboratories Division, is
engaged in, among other things, the marketing and sale of certain products for
human use marketed under the Bicillin(R), Wycillin(R) and Nordette(R) brand
names (the "Brands"); and

         WHEREAS, Buyer desires to purchase certain assets of Seller relating to
the Brands in the Territory (as defined below), and Seller desires to sell such
assets to Buyer, upon the terms and subject to the conditions hereinafter 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, unless otherwise clearly indicated by
the context, the terms defined below shall have the indicated meanings:

         1.1 "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 subsidiaries in which a Person owns a majority of
the ordinary voting power to elect a majority of the board of directors but is
restricted from electing such majority by contract or otherwise, until such time
as such restrictions are no longer in effect.

         1.2 "Aggrieved Party" shall have the meaning set forth in Section 8.2.

         1.3 "Allocation Statement" shall have the meaning set forth on Section
2.6.

         1.4 "Applicable Laws" shall mean, with respect to the Purchased Assets
in the Territory, all laws, treaties, statutes, ordinances, judgments, decrees,
rules, injunctions, writs, regulations, binding arbitration rulings, orders,
judicial or administrative interpretations of, any

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Governmental Authority having jurisdiction over the Purchased Assets in the
Territory, as may be in effect prior to the Closing Date.

         1.5 "Applicable Permits" shall mean any waiver, exemption, variance,
permit, authorization, license or similar approval, required to be obtained
under Applicable Laws in connection with the Purchased Assets.

         1.6 "Assumed Liabilities" shall mean (i) all future obligations
relating exclusively to the Products that are required to be performed and
fulfilled after the Closing under the terms of the Customer Contracts; (ii)
except to the extent Buyer is specifically entitled to reimbursement pursuant to
the terms of Section 2.10, obligations for the return of Products and for
Product coupons returned after the Closing Date; (iii) state and federal
Medicaid/Medicare rebates, managed care and administrative fees, in connection
with Products sold in the Territory by Buyer (a) under the Marketing and
Distribution Agreement, or (b) after the Closing Date; (iv) all customer
chargebacks and similar payments to customers in connection with Products sold
in the Territory, having activity dates (the date that a wholesaler ships the
Product to a customer) from and after June 22, 2000; and (v) all product
liability claims relating to the occurrences of injuries caused by Products sold
by Buyer or the Purchased Assets from and after the Closing, except for any
liabilities for which Seller has specifically agreed to indemnify Buyer pursuant
to the terms of the Supply Agreements.

         1.7 "Books and Records" shall mean the original books and records of
Seller related exclusively to the Products or the Purchased Assets and copies of
such other books and records of Seller to the extent related to the Purchased
Assets.

         1.8 "Brands" shall have the meaning set forth in the first whereas
clause of this Agreement.

         1.9 "Closing" shall have the meaning set forth in Section 2.3.

         1.10 "Closing Date" shall have the meaning set forth in Section 2.3.

         1.11 "Code" shall mean the U.S. Internal Revenue Code of 1986, as
amended.

         1.12 "Commercially Reasonable Efforts" shall mean reasonable efforts
and resources at least equal to those normally used by a Party for a product
owned by it or to which it has rights.

         1.13 "Copromotion Agreement" shall mean that certain copromotion
agreement entered into by the parties on even date herewith, pursuant to which
Seller will have the right to copromote with Buyer, Buyer's pharmaceutical
products containing ramipril or ramiprilat, including, without limitation,
ALTACE(R).

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         1.14 "Customer Contracts" shall mean those contracts listed in Exhibit
B hereto, between Seller or any of its Affiliates and certain third parties
pursuant to which such third parties, inter alia, purchase or use any Products
sold by Seller or its Affiliates in the Territory.

         1.15 "Costs" shall have the meanings set forth in Section 8.1.

         1.16 "Encumbrances" shall mean all claims, security interests, liens,
pledges, charges, escrows, rights of first refusal, mortgages, hypothecations,
indentures, security agreements or any other encumbrances of any kind, whether
existing now or by reason of acceleration because of the conveyance of the
Purchased Assets.

         1.17 "Excluded Assets" shall mean any and all of the assets of Seller
not specifically included among the Purchased Assets, including but not limited
to, cash; cash equivalents; accounts receivables; any type of receivable
relating to Taxes; inventory for all Products which are subject to the Supply
Agreements, including but not limited to finished goods, packaging materials,
raw materials and works in progress; all machinery and equipment used in the
manufacture of all Products; Excluded Know-How; and other intellectual property
(to the extent relating to geographic areas outside the Territory).

         1.18 "Excluded Know-How" shall mean any and all Know-How owned or
controlled by Seller or one of its Affiliates other than the Included Know-How,
including without limitation Know-How related to Seller's product(s) other than
the Products.

         1.19 "Governmental Authority" shall mean any governmental department,
commission, board, bureau, agency, court or other instrumentality of the United
States including but not limited to federal, state, district, territory
possession, or commonwealth thereof.

         1.20 "HSR Act" shall have the meaning set forth in Section 6.3.

         1.21 "Included Intellectual Property" shall mean (i) all Included
Know-how; (ii) all Purchased Trademarks; (iii) the registered internet domain
name "Nordette.com"; and (iv) all copyrights, copyright registrations and
applications for registration, inventions, designs, industrial and utility
models (including registrations and applications for registration thereof), and
all other intellectual property rights (other than the Licensed Trademarks)
whether registered or not, in each case in this clause (iv) which are owned by
Seller and exclusively related to the Products.

         1.22 "Included Know-How" shall mean any and all Know-How owned by
Seller exclusively related to the Products and/or the Purchased Assets.

         1.23 "Indemnifying Party" shall have the meaning set forth in Section
8.2(i).

         1.24 "Indicia" shall have the meaning set forth in Section 7.

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         1.25 "Know-How" shall mean any and all product specifications,
processes, product designs, plans, trade secrets, ideas, concepts,
manufacturing, engineering and other manuals and drawings, SOP's, PLC's, flow
diagrams, chemical, pharmacological, toxicological, pharmaceutical, physical and
analytical, safety, quality assurance, quality control and clinical data,
technical information, 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.

         1.26 "License Agreement" shall mean the non-exclusive license
agreement, in the form of Exhibit C attached hereto and incorporated herein by
reference.

         1.27 "Licensed Trademarks" shall mean the those trademarks indemnified
on Exhibit D attached hereto in the Territory.

         1.28 "Marketing and Distribution Agreement" shall mean the Marketing
and Distribution Agreement in the form of Exhibit E attached hereto, pursuant to
which Seller shall market and distribute the Products on Buyer's behalf from
June 22, 2000 until the Closing Date, or such earlier date as this Agreement may
be terminated pursuant to Section 9.2.

         1.29 "Material Adverse Effect" shall mean any event, circumstance or
effect that is materially adverse to the Purchased Assets or the business,
assets, operations, results of operations or financial condition of the
manufacture, distribution or sale of any of the Products, taken as a whole,
other than any event, change, circumstance or effect relating (x) to the United
States economy in general, (y) in general to the industries in which the
Products are sold and not specifically relating to the Products; provided that
the Products, taken as a whole, are 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.

         1.30 "Minimum Loss" shall have the meaning set forth in Section 8.3.

         1.31 "Net Sales" shall mean the gross amount invoiced for a Product by
Buyer or its Affiliates to unaffiliated third parties in the Territory, less
returns and less the following amounts to the extent deducted from or on such
invoice or absorbed or accrued by Buyer or its Affiliates as required by United
States generally accepted accounting principles: (i) customary quantity, trade
and/or cash discounts, chargebacks, returns, allowances, rebates (including any
and all federal, state or local government rebates, e.g., Medicaid rebates) and
price adjustments allowed or given; and (ii) sales and other excise taxes and
duties directly related to the sale, to the extent such items are included in
the gross invoice price.

         1.32 "Note" shall mean the promissory note in the principal amount of
$25 million, in the form attached as Exhibit A to the Stock and Note Purchase
Agreement.

         1.33 "Permitted Encumbrances" shall have the meaning set forth in
Section 3.3(b).

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         1.34 "Person" shall mean an individual, a corporation, a 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.

         1.35 "Post-Closing Tax Period" shall mean any Tax period (or portion
thereof) beginning on the day immediately following the Closing Date.

         1.36 "Pre-Closing Tax Period" shall mean any Tax period (or portion
thereof) ending on the Closing Date.

         1.37 " Products" shall mean the products bearing one of the Trademarks
assisting of one of the Brands listed in Exhibit A hereto and sold for human use
prior to Closing.

         1.38 "Purchase Price" shall have the meaning set forth in Section 2.1.

         1.39 "Purchased Assets" shall mean, collectively, in each case relating
solely to the Products in the Territory, the Included Intellectual Property,
Buyer's rights and obligations under the License Agreement, Books and Records,
historical sales data, marketing and promotional materials and plans, all
transferable licenses, permits or other Governmental Authority authorizations
exclusively relating to the Products, including the Regulatory Approvals (except
for the New Drug Applications for the Nordette(R) Product, which shall be
transferred to Buyer as provided in Section 6.8(d)), the rights and future
obligations of Seller relating exclusively to the Products under the Customer
Contracts, and all goodwill related exclusively to the Brands.

         1.40 "Purchased Trademarks" shall mean (a) the trademarks listed on
Schedule 3.6(a), service marks, trade names (excluding the names "American Home
Products," "Wyeth-Ayerst," "Lederle", the "Safer Sex Initiative" and "Pilpak"
trademark currently used in connection with the Nordette(R) Product, and
derivatives and variations thereof), trade dress, labels, logos and all other
names and slogans owned by Seller and exclusively associated with the Brands,
whether or not registered, and any applications or registrations therefor, and
(b) any associated goodwill incident thereto, in each case which are exclusively
employed in connection with the Purchased Assets as currently manufactured,
distributed and sold and specifically limited to applicability and use in the
Territory.

         1.41 "Regulatory Approvals" shall mean all authorizations by the
appropriate Governmental Authorities which are required for the manufacture
(other than manufacturing facilities licenses, approvals or authorization),
marketing, promotion, pricing and sale of the Products in the Territory,
including approved New Drug Applications for the Products which are owned by
Seller or its Affiliates, together with all supplements, licenses and all
correspondence to or from Governmental Authorities exclusively related to the
Products in the Territory.

         1.42 "Stock and Note Purchase Agreement" shall mean the Stock and Note
Purchase Agreement entered into by the Parties on June 22, 2000.

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         1.43 "Supply Agreements" shall mean the Supply Agreements substantially
in the form of Exhibit F-1 and Exhibit F-2 related to (a) the Bicillin(R) and
Wycillin(R) Products; and (b) the Nordette(R) Product.

         1.44 "Taxes" (and with correlative meanings, "Tax," "Taxes," and
"Taxable") shall mean all taxes of any kind imposed by a federal, state, local
or foreign Governmental Authority, 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, excise, stamp,
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.

         1.45 "TB Tine Test Products" shall mean Seller's tuberculin, purified
protein derivative (PPD) tine test products.

         1.46 "Termination Date" shall have the meaning set forth in Section
9.1.

         1.47 "Territory" shall mean the United States of America, the District
of Columbia and the Commonwealth of Puerto Rico.

         1.48 "Trademark License Agreement" shall mean the Trademark License
Agreement covering the Licensed Trademarks substantially in the form of Exhibit
G attached hereto.

         1.49 "Transaction Agreements" shall mean this Agreement, the Marketing
and Distribution Agreement, the Supply Agreements, the License Agreement, the
Stock and Note Purchase Agreement and the Trademark License Agreement.

                                    ARTICLE 2

                     PURCHASE AND SALE; CLOSING; ALLOCATION

         2.1 Purchase and Sale. Upon the terms and subject to the conditions of
this Agreement, (a) Seller shall sell, assign, transfer and deliver to Buyer the
Purchased Assets, and (b) Buyer shall purchase and accept the Purchased Assets
from Seller, subject to Buyer's assumption of the Assumed Liabilities, for an
aggregate purchase price of two hundred million dollars ($200,000,000)
(collectively, the "Purchase Price"). The Purchase Price shall be payable as
provided in Section 2.4(a).

         2.2 Assumption of Liabilities. With respect to the purchase and sale of
the Purchased Assets, in addition to payment of the Purchase Price and pursuant
to assumption agreements to be executed and delivered in accordance with Section
2.4(g), Buyer shall assume at the Closing and subsequently, in due course in
accordance with the terms applicable thereto,

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pay, honor and discharge (except where it is contesting in good faith) all of
the Assumed Liabilities.

         2.3 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 Purchased Assets and the consummation of the other
transactions contemplated hereby (the "Closing") shall take place at the offices
of Wyeth-Ayerst Laboratories, 150 A-3 North Radnor-Chester Road, St. Davids, PA
19087 on the later of July 7, 2000 or the third business day after the date on
which the last to be fulfilled or waived of the conditions set forth in Article
7 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
11:59 p.m. on the Closing Date.

         2.4 Deliveries by Buyer. At the Closing, Buyer shall deliver, or cause
to be delivered, to Seller the following:

             (a) cash in the amount of One Hundred and Seventy-Five Million
         Dollars ($175 million) payable by wire transfer in immediately
         available funds to a U.S. bank account of Seller (which account shall
         be designated by Seller no fewer than two business days prior to the
         Closing Date);

             (b) the certificate executed by an authorized officer of Buyer
         required to be delivered pursuant to Section 7.2(c);

             (c) a certificate, executed by an authorized officer of Buyer,
         certifying (i) the due organization and good standing of Buyer, and
         (ii) the authority and incumbency of officers of Buyer executing this
         Agreement and the other agreements, instruments or certificates
         delivered at the Closing;

             (d) the Supply Agreements, duly executed by Buyer;

             (e) the License Agreement, duly executed by Seller;

             (f) the Trademark License Agreement, duly executed by Seller;

             (g) the Note in the principal amount of Twenty-Five Million Dollars
         ($25 million), duly issued and executed by Buyer;

             (h) a copy of the notice(s) required by 21 CFR 314.72(a)(i) from
         Buyer to the FDA relative to the transfer of ownership of the
         Bicillin(R) and Wycillin(R) Products;

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             (i) such instruments of assumption and other certificates,
         instruments or documents, in form and substance reasonably acceptable
         to Buyer and Seller, as may be necessary to effect Buyer's assumption
         under Applicable Laws of the Purchased Assets and the Assumed
         Liabilities; and

             (j) such other instruments and documents, in form and substance
         reasonably acceptable to Buyer and Seller, as may be necessary to
         effect the Closing.

         2.5 Deliveries by Seller. At the Closing, Seller shall deliver to Buyer
the following:

             (a) the certificate executed by authorized officers of Seller
         required to be delivered pursuant to Section 7.3(c);

             (b) a certificate, executed by an authorized officer of Seller,
         certifying (i) the due organization and good standing of Seller, and
         (ii) the authority and incumbency of officers of Seller executing this
         Agreement and the other agreements, instruments or certificates
         delivered upon the Closing;

             (c) the Supply Agreements, duly executed by Seller;

             (d) the License Agreement, duly executed by Seller;

             (e) the Trademark License Agreement, duly executed by Seller;

             (f) the Note, duly acknowledged and agreed to by Seller

             (g) a copy of the notice(s) required by 21 CFR 314.72(a)(i) from
         Seller to the FDA relative to the transfer of ownership of the
         ownership of the Bicillin(R) and Wycillin(R) Products;

             (h) bills of sale and any other appropriate instruments of sale and
         conveyance, in form and substance reasonably acceptable to Buyer and
         Seller, transferring under Applicable Laws all Included Intellectual
         Property included within the Purchased Assets to Buyer or its
         Affiliates subject to the Permitted Encumbrances. Buyer, at its own
         expense, shall prepare any and all individual assignment documents
         required and record them with the U.S. Patent and Trademark Offices;

             (i) to the extent the following items have not previously been
         provided to Buyer;

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                 (i)  complete and accurate copies of Seller's and its relevant
                      Affiliates' customer lists including relevant sales data
                      for the Products; and

                 (ii) copies of current and pending Customer Contracts for the
                      Products, which shall be redacted for the purpose of
                      deleting information that is not related to the Products
                      and other confidential information; and

             (i) such other instruments and documents, in form and substance
         reasonably acceptable to Buyer and Seller, as may be necessary to
         effect the Closing.

         2.6 Delivery of Financial Statements. Within thirty (30) days of the
Closing Date, Seller will deliver to Buyer audited financial statements for the
Products for the year 1999. In addition, Seller will deliver to Buyer unaudited
financial statements for the Products for the first two calendar quarters of
2000. King agrees to reimburse AHPC for the expenses for the preparation of such
financial statements which are estimated to be thirty-five thousand dollars
($35,000). Buyer and Seller shall cooperate with one another in connection with
the preparation of said financial statements for the Products. Buyer
acknowledges that said financial statements for the Products will be prepared in
accordance with usual and customary financial information provided in prior
audited statements delivered to Buyer by Seller.

         2.7 Allocation.

             (a) Prior to Closing, Buyer and Seller shall use diligent efforts
         to agree upon a statement, (the "Allocation Statement") setting forth
         the respective values of the Purchased Assets, which shall be used for
         the allocation of the Purchase Price among the Purchased Assets.

             (b) Seller and Buyer covenant and agree to report for Tax purposes
         the allocation of such Purchase Price among the Purchased Assets in a
         manner entirely consistent with the Allocation Statement and agree to
         act in accordance with such Allocation Statement and in filing all tax
         returns (including without limitation filing Form 8594 with its federal
         income tax return for the taxable year that includes the date of the
         Closing) and in the course of any tax audit, tax review or tax
         litigation relating thereto.

         2.8 Seller's Retention of Certain Rights. Notwithstanding anything to
the contrary contained in this Agreement, and for purposes of clarity, except as
described on Schedule 2.8, Seller shall retain ownership of and all rights in
and to (i) the current NDC numbers and product codes it uses for each of the
Products (subject to Buyer's right to sell Products under the Supply Agreements
using said NDC numbers and product codes), (ii) the real and personal property
(including without limitation all equipment) and general manufacturing know-how
used by Seller in manufacturing the Products (either before, during or after the
term of this Agreement)

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other than the Included Know-How, (iii) the Excluded Know-how without
limitation, (iv) to utilize the Included Know-how (a) without restriction
outside the Territory, and (b) within the Territory (i) to manufacture,
distribute, promote, advertise, use, and/or sell products other than the
Products, (ii) to produce the Products under the Supply Agreements, (iii) to
manufacture, use and sell Products both in and outside the Territory as
veterinary pharmaceutical products, or have the foregoing activities done, (iv)
to manufacture, distribute, promote, advertise, use and/or sell Products for
direct export by Seller and/or its Affiliates outside of the Territory, or have
the foregoing activities done. This Agreement shall not affect the rights of
Seller, and/or its Affiliates, to utilize in countries and territories other
than the Territory, Seller's trademarks, copyrights, trade dress, product
shapes, packaging, label, product, and other designs and Indicia of Seller's
ownership; and (v) to supply Berlex Laboratories with its requirements of the
monophasic oral contraceptive product equivalent to the Nordette(R) Product.

         2.9 Contingent Payment. Seventy five million dollars ($75,000,000) of
the Purchase Price (the "Contingent Payment") shall be received by Seller as
contingent payment for aggregate, consolidated Net Sales of the Products in
calendar year 2001 totaling not less than twenty one million dollars
($21,000,000) (the "Sales Target"), such Contingent Payment subject to pro rata
reduction for Net Sales of Products below the Sales Target. Notwithstanding the
foregoing, the full Purchase Price, including the Contingent Payment, shall be
retained by Seller with no refund of the Contingent Payment if Buyer fails to
use Commercially Reasonable Efforts to promote and sell the Products, or if
there are Net Sales of any Product greater than in the ordinary course of
business for the calendar quarter ending December 31, 2000 or calendar years
ending December 31, 2001 and starting January 1, 2002. If the immediately
preceding sentence does not apply, then Seller shall pay to Buyer, within thirty
(30) days after receiving from Buyer's chief financial officer a certificate as
to the aforesaid Net Sales during the relevant periods, a payment in the amount
of the Contingent Payment if the Sales Target is not achieved, or such portion
of such Payment as shall reflect a pro rata reduction for consolidated Net Sales
of Products during 2001 of less than the Sales Target.

         2.10 Seller's Covenant Not to Compete. Seller covenants not to sell,
directly or indirectly, in the Territory any generic to the Products until after
the third annual anniversary of the Closing Date, provided that in the event
Seller or any of its Affiliates merges with, acquires, or is acquired by any
other business that, prior to such merger or acquisition was selling any generic
to any of the Product(s) in the Territory, then Seller shall be permitted to
continue selling such generic to the Product(s) in unlimited quantities
notwithstanding anything in this Agreement to the contrary. The Supply Agreement
between Seller and Berlex Laboratories by which Seller has agreed to supply
Berlex with its requirements of the monophasic oral contraceptive product
equivalent to the Nordette(R) Product shall be deemed not to be a breach of
Seller's covenant not to compete. In the event that Seller merges with, acquires
or is acquired by any other business selling any generic to any of the
Product(s), Seller shall promptly notify Buyer in writing if and when Seller
determines to sell or outlicense any such generic product. Buyer shall have
sixty (60) days from the date such notice is given to make a written proposal to
Seller for the acquisition of rights to such generic product(s). If Buyer
provides such notice to Seller within such sixty (60) days, the Parties shall
negotiate in good faith the terms and conditions of an agreement for Buyer's
acquisition of rights to such generic product(s). In the

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event that (i) Buyer does not provide such notice to Seller within sixty (60)
days of the giving of Seller's notice or (ii) Buyer does provide such notice and
after a period of sixty (60) days from the date of such notice, despite good
faith negotiations, the Parties have not entered into a written agreement
setting forth the terms and conditions of such acquisition of rights to such
generic product(s), Seller shall have the right to at any time within the
following six (6) calendar months sell or otherwise transfer rights to such
generic product(s) to any third party on terms and conditions, taken as a whole,
that are not more favorable to the third party than those last offered to Buyer
by Seller in writing, and after such six (6) calendar month period at any time
on any terms and conditions.

         2.11 Returns. As of the Closing Date and thereafter, Buyer shall be
responsible for all returns of Products sold in the Territory by Buyer provided,
however, that for the period of six (6) months following the Closing Date,
Seller will reimburse Buyer in an amount not to exceed one million dollars
($1,000,000) for all qualified returns of Products bearing a Seller label sold
by or on behalf of Seller or its Affiliates prior to the Closing Date (other
than Products sold by Buyer under the Marketing and Distribution Agreement) for
which returns, Buyer gives a refund or credit to the customer, provided,
however, that any credits or refunds Seller directly gives to any customer's
returns of any such Product shall be credited toward such reimbursement and
Buyer shall refund to Seller any amount of credits and refunds given by Seller
to customers which amount, in conjunction with any reimbursements made by Seller
to Buyer under this Section 2.10, exceeds one million dollars ($1,000,000). Five
(5) months after the Closing Date, Seller shall send a written notice to all
customers for Products during calendar year 2000 up to the Closing Date stating
that Seller shall no longer accept returns of the Products and refer such
customers to Buyer. Seller's reimbursement obligation shall not extend to
storage or other defects attributable to Buyer. Buyer shall not encourage
Products returns or accept unusual amounts of Products returns outside of the
normal course of business without the prior written consent of Seller. Seller
shall have the right to audit the Products returns submitted by Buyer for
reimbursement. For reimbursement, Buyer must submit a written request for
reimbursement to Seller and supply Seller with all related supporting
documentation reasonably requested by Seller and in the possession or control of
Buyer.

         2.12 Chargebacks. As of the Closing Date and thereafter, Buyer shall be
responsible for all customer chargebacks for Products sold in the Territory,
provided, however, that with respect to such sales of Products, Seller for a
period of six (6) months after June 22, 2000 shall reimburse Buyer for all
qualified customer chargebacks having activity dates prior to June 22, 2000.

         2.13 Reacquisition Rights. In the event that Seller terminates the
Copromotion Agreement pursuant to Section 11.3(a) or Section 11.3(b) thereof,
Seller shall have the right, but not the obligation, to reacquire all Purchased
Assets sold to Buyer hereunder which in any way relate to the Nordette(R)
Products. If Seller so elects to reacquire such Purchased Assets, Seller shall,
within thirty (30) days of the effective termination date of the Copromotion
Agreement, give Buyer written notice of such election. Upon Buyer's receipt of
such notice the Parties shall promptly, but in no event less than thirty (30)
days, negotiate, in good faith and execute an asset purchase agreement for the
transfer of such Purchased Assets to Seller, provided, however, that

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the total consideration payable by Seller for such reacquisition of rights shall
be one hundred ten million dollars ($110,000,000) payable in immediately
available funds by wire transfer on the closing date of such asset purchase
agreement. Additionally, upon Sellers reacquisition of such Purchased Assets (i)
Buyer's rights under the Trademark License Nordette(R) Products shall
automatically terminate, (ii) Buyer's rights, under the License Agreement, to
use Excluded Know-How relating to the Nordette(R) Products shall automatically
terminate, (iii) the Nordette(R) Supply Agreement shall automatically terminate,
and (iv) Buyer's rights, under the Marketing and Distribution Agreement to the
extent they relate to the Nordette(R) Products shall automatically terminate.

                                    ARTICLE 3

                    REPRESENTATIONS AND WARRANTIES OF SELLER

           Seller hereby represents and warrants to Buyer as follows:

         3.1 Organization, Good Standing, Power, Etc. Seller is a corporation
duly organized, validly existing and in good standing under the laws of the
state of Delaware. Seller has the requisite corporate power and authority to
execute and deliver this Agreement and the Transaction Agreements contemplated
hereby and to consummate the transactions contemplated hereby and thereby. The
execution and delivery of this Agreement by Seller, the execution and delivery
by Seller of the Transaction Agreements, and the consummation by Seller of the
transactions contemplated hereby and thereby have been duly authorized by all
necessary corporate action on the part of Seller and no other or further
corporate proceedings will be necessary for the execution and delivery of such
agreements by Seller, the performance by Seller of its obligations hereunder and
thereunder and the consummation by Seller of the transactions contemplated
hereby or thereby. This Agreement has been duly executed and delivered by Seller
and constitutes a legal, valid and binding obligation of Seller enforceable
against such Seller 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.

         3.2 Governmental Authorization; Required Consents. The execution,
delivery and performance by Seller of this Agreement and the Transaction
Agreements and the consummation by Seller of the transactions contemplated
hereby or 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 6.3 hereof or as set forth in Schedule 3.2, other than
where the failure to obtain such consent, approval or authorization, or to give
or make any such notice or filing, would not be reasonably expected to have a
Material Adverse Effect.

                                       12
<PAGE>   14

         3.3 Properties.

             (a) Except as set forth on Schedule 3.3(a), Seller has good and
         marketable title to all Purchased Assets.

             (b) No Purchased Asset is subject to any Encumbrance, except (i)
         liens for Taxes, assessments and other governmental charges not yet due
         and payable or being contested in good faith; (ii) immaterial
         mechanics', workmen's, repairmen's, warehousemen's, carriers' or other
         like liens arising or incurred in the ordinary course of business; and
         (iii) any Encumbrances which do not materially detract from the value
         of such Purchased Asset as now used, or materially interfere with any
         present or intended use of such Purchased Assets (all items included in
         items (i) through (iii) are referred to collectively herein as the
         "Permitted Encumbrances").

         3.4 Sufficiency of Intellectual Property. Upon consummation of the
transactions contemplated hereby, Buyer will have acquired good and marketable
title in and to each of the Purchased Assets, free and clear of all
Encumbrances, except the Permitted Encumbrances. Other than as described on
Schedule 3.3 (subject to Section 3.7 of this Agreement) or any Excluded Asset,
the Included Intellectual Property and the Licensed Trademarks constitute, and
on the Closing Date will constitute, all of the intellectual property rights
used, necessary for use, or held for use in the manufacture, testing, release
sale and distribution of the Products in the Territory.

         3.5 Litigation. Except as set forth in Schedule 3.5, there is no civil,
criminal or administrative action, suit, hearing, proceeding or investigation
pending or, to the knowledge of Seller, threatened against the Seller relating
directly to the Purchased Assets or the transactions contemplated hereby, other
than those that individually or in the aggregate would not be reasonably
expected to have a Material Adverse Effect.

         3.6 Intellectual Property Rights.

             (a) Schedule 3.6(a) sets forth a listing of (i) all Purchased
         Trademarks, registered copyrights and applications for copyright
         registration, industrial and utility model registrations and
         applications therefor, and design registrations and applications
         therefor, included in the Included Intellectual Property that are owned
         by Seller and included in the Purchased Assets, (ii) all contracts
         under which Seller is licensed or otherwise uses or is permitted to use
         Included Intellectual Property primarily in connection with the
         Purchased Assets, (iii) all contracts under which Seller licenses or
         otherwise permits any Party to use Included Intellectual Property used
         primarily in connection with the Purchased Assets.

             (b) To the knowledge of Seller (i) except as set forth in Schedule
         3.6(b)(i), no Person has claimed that the Purchased Assets infringe on
         or

                                       13
<PAGE>   15

         otherwise violate the intellectual property rights of any other Person
         and (ii) except as set forth on Schedule 3.6(b)(ii) no Person is
         challenging or infringing or otherwise violating the Included
         Intellectual Property.

             (c) Except as disclosed on Schedule 3.6(c), Seller either (i) owns
         the entire right, title and interest in and to the Included
         Intellectual Property free and clear of any Encumbrances; or (ii) has
         the royalty-free right to use the same.

         3.7 Compliance with Law. Except as set forth in Schedule 3.4 or
Schedule 3.7 the Purchased Assets have been utilized in compliance with all
Applicable Laws, except where the failure so to comply would not be reasonably
expected to have a Material Adverse Effect.

         3.8 FDA Matters. Except as set forth on Schedule 3.8, none of the
Products are being manufactured (other than manufacture in connection with
research and development) packaged, tested or released or sold by Seller which
at the date hereof would require any approval of the FDA or any other
Governmental Authority for the purpose for which they are being manufactured,
assembled or sold for which such approval has not been obtained. There is no
action or proceeding by the FDA or any other Governmental Authority, including,
but not limited to, recall procedures, pending or, to the knowledge of Seller,
threatened against Seller relating to safety or efficacy of any of the Purchased
Assets.

         3.9 Facilities and Manufacturing. Except as set forth on Schedule 3.9,
and only to the extent it could have a Material Adverse Effect on the Purchased
Assets or AHPC's performance hereunder or under any of the Transaction
Agreements, during the period commencing on January 1, 1998, and ending on the
date hereof, with respect only to the Products, neither AHPC nor its Affiliates
have received or been subject to: (i) any FDA form 483's relative to the
Products; (ii) any FDA Notices of Adverse Findings relative to the Products; or
(iii) warning letters or other correspondence from the FDA or any other
governmental officials or agencies concerning the Products in which the FDA or
other such governmental officials or agencies asserted that the operations of
AHPC were not in compliance with applicable law, regulations, rules or
guidelines.

         3.10 Broker's Fees. Seller has 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.

         3.11 No Other Representations of Warranties. Except for the
representations and warranties of Seller expressly set forth in this Agreement,
neither Seller nor any other Person makes any other express or implied
representation or warranty on behalf of Seller, or otherwise with respect of the
Products or the Purchased Assets.

                                       14
<PAGE>   16

                                    ARTICLE 4

                     REPRESENTATIONS AND WARRANTIES OF BUYER

              Buyer hereby represents and warrants to Seller that:

         4.1 Corporate Organization, Good Standing, Power. Buyer is a
corporation duly organized, validly existing and in good standing under the laws
of the state of Tennessee. Buyer has the requisite corporate power and authority
to execute and deliver this Agreement and the Transaction Agreements
contemplated hereby and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of this Agreement by Buyer, the execution
and delivery by Buyer of the Transaction Agreements, 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
or further corporate proceedings will be necessary for the execution and
delivery of such agreements by Buyer, the performance by Buyer of its
obligations hereunder and thereunder and the consummation by Buyer of the
transactions contemplated hereby or thereby. This Agreement has been duly
executed and delivered by Buyer and constitutes a legal, valid and binding
obligation of Buyer enforceable against such 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.

         4.2 Broker's Fees. 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.

         4.3 Consents and Approvals. Except as contemplated by Section 6.3
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.

         4.4 Financial Capability. Buyer has sufficient funds available or loan
commitments to purchase the Purchased Assets on the terms and subject to the
conditions of this Agreement.

         4.5 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.

                                       15
<PAGE>   17

                                    ARTICLE 5

                     CONDUCT OF BUSINESS PENDING THE CLOSING

         Seller agrees that:

         5.1 Conduct of the Business. From the date hereof until the Closing
Date, Seller shall utilize the Purchased Assets in the ordinary course
consistent with past practice and shall not take any action to encourage its
customers to purchase quantities of Products prior to the Closing Date that are
in excess of the quantities needed by such customers to satisfy their normal
inventory requirements for such Products. Buyer acknowledges that Seller
implemented a 3.4% price increase for the Bicillin(R) product on or about June
1, 2000 with no buy-in.

         5.2 Certain Actions. Seller shall not waive, release, grant or transfer
any Included Intellectual Property or modify or change in any material respect
any existing material license, distribution agreement or other document, in each
case, other than in the ordinary course of business.

                                    ARTICLE 6

                              ADDITIONAL AGREEMENTS

         The parties hereto agree that:

         6.1 Expenses. 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.

         6.2 Additional Agreements. Subject to the terms and conditions herein
provided, each of the Parties hereto agrees (i) to use 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 use reasonable efforts to obtain all
necessary consents and approvals (or effective waiver thereof) from other
parties to material agreements, contracts, instruments and other contracts;
provided, however, that if any such consents and approvals are not obtained,
Seller shall cooperate with Buyer after the Closing to provide to Buyer
substantially equivalent benefits under or with respect to the matter as to
which the approval or consent is not obtained, (iii) to defend all lawsuits or
other legal proceedings challenging this Agreement or the consummation of the
transactions contemplated hereby, (iv) to use 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, and (v) including assigning or reassigning, or granting
rights, in relation to assets contemplated by this Agreement to be

                                       16
<PAGE>   18

retained by Seller or transferred to Buyer and inadvertently transferred to
Buyer or retained by Seller, as the case may be.

         6.3 Filings and Authorizations. Seller and Buyer have filed all
notifications and information required to be filed or supplied pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
in connection with the transactions contemplated by this Agreement. Seller and
Buyer, as promptly as practicable, will make, or cause to be made, all such
other filings and submissions under Applicable Laws, or to their subsidiaries
and Affiliates, as may be required for them to consummate the transactions
contemplated hereby in accordance with the terms of this Agreement, and Buyer
will obtain, or cause to be obtained, 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.

         6.4 Use of Certain Names. Within ninety (90) days after the Closing,
Buyer shall revise product literature and labeling (including stickering),
change packaging and stationery, and otherwise discontinue use of the names
"American Home Products," "Wyeth-Ayerst," "Lederle", the "Safer Sex Initiative"
and "Pilpak" trademarks currently used in connection with the Nordette(R)
Product, and derivatives and variations thereof in the manner set forth in the
Supply Agreements.

         6.5 Transaction Agreements. At the Closing, Seller will enter into the
Marketing and Distribution Agreement, the Supply Agreements, the License
Agreement, and the Trademark License Agreement with Buyer.

         6.6 Use of Certain Assets. The parties agree that Seller, and/or its
Affiliates, own trademarks, copyrights, trade dress, product shapes, packaging,
label, product, and other designs and indicia of ownership (hereinafter
collectively, "Indicia") associated with the Brands and the Products and the
cartons and containers therefor used for advertising and other materials
associated therewith as well as various registrations thereof in countries and
territories other than the Territory. Buyer hereby acknowledges the validity and
ownership by Seller of any and all such Indicia and any and all registrations
thereof and hereby agrees that except in the Territory and as expressly provided
for in this Agreement, Buyer shall not after the Closing directly or indirectly
associate, register, use, or apply or permit the association, registration, use
or application of any of such Indicia or registrations or anything imitative of
or which resembles or is confusingly similar to or with any of such Indicia or
registrations in connection with any business of or associated with Buyer or its
Affiliates or to or with any products manufactured, permitted, or distributed by
or for Buyer or its Affiliates. The provisions of this paragraph shall survive
Closing indefinitely.

         6.7 Option to TB Tine Test Products. Provided that Buyer is not in
breach of any material term of this Agreement at the time of its exercise, Buyer
shall have an exclusive option (the "Option Right") to purchase the TB Tine Test
Products for the sum of seven million dollars ($7,000,000), exercisable on or
after January 2, 2001 and before April 1, 2001. Buyer may exercise its Option
Right by written notice to Seller made at any time from January 2, 2001

                                       17
<PAGE>   19

through March 31, 2001. If Buyer exercises its Option Right the Parties shall
negotiate in good faith the remaining terms of an asset purchase agreement for
the sale and purchase of the TB Tine Test Products. If, after a period of ninety
(90) days from the date of Buyer's notice of exercise of its Option Right,
despite good faith negotiations, the Parties have not entered into a written
agreement setting forth the terms of the sale and purchase of the TB Tine Test
Products, Seller shall have the right to at any time within the following six
(6) calendar months sell the TB Tine Test Products to any third party on terms
and conditions, taken on a whole, that are not more favorable to the third party
than those last offered to Buyer by Seller in writing, and after such six (6)
calendar month period at any time on any terms and conditions.

         6.8 Regulatory Matters.

             (a) Within thirty (30) days after the Closing Date, Seller shall
         provide Buyer with complete copies of Sellers Regulatory Approvals for
         the Products on the Territory and all correspondence or other documents
         reasonably related to such Regulatory Approvals.

             (b) Buyer irrevocably grants to Seller and its Affiliates the right
         to reference and quote the Regulatory Approvals and all portions
         thereof to support Seller's Product related activities outside of the
         Territory and to support any veterinary pharmaceutical products, which
         Seller currently markets or sells or may, in the future, market or
         sell. Buyer shall not amend the Regulatory Approvals for the
         Bicillin(R) and Wycillin(R) Products during the respective term of the
         Supply Agreement for each such Product without the prior written
         consent of Seller, such consent not to be unreasonably withheld, and
         Seller shall respond to Buyer's request for consent within thirty (30)
         days from such request.

             (c) Upon transfer and assignment of each of the Regulatory
         Approvals to Buyer, as provided in Section 2.5 and Section 6.8(d), and
         thereafter Buyer shall be solely responsible for conducting all
         activities in connection with such Regulatory Approvals for the
         Bicillin(R), Wycillin(R), and Nordette(R) Products, as applicable,
         including, without limitation, communicating, and preparing and filing
         all reports (including, without limitation, adverse drug experience
         reports) with the appropriate Governmental Authorities in the Territory
         and interacting with any third parties with respect to Products sold or
         distributed in the Territory; provided, however, that for up to sixty
         (60) days after such transfer, Seller shall assist and cooperate in the
         transition of such activities to Buyer. Additionally, to the extent
         that Buyer is obligated, under Applicable Laws, to report to
         Governmental Authorities in the Territory, adverse drug experiences
         associated with Products sold by or on behalf of Seller outside of the
         Territory, Seller shall provide Buyer with information about such
         adverse drug experiences in accordance with the provisions of this
         Section, and to the extent that Seller is obligated under Applicable
         Laws to report adverse drug experiences associated with Products sold
         by or on behalf of Buyer inside the Territory, Buyer shall

                                       18
<PAGE>   20

         provide Seller with information about such adverse drug experiences in
         accordance with the provisions of this Section 6.9.

             (d) Seller and Buyer shall work together to transfer and assign
         Seller's current New Drug Application for the Nordette(R) Product in
         the Territory to Buyer at such time and in such a manner that is
         reasonably acceptable to both Parties and which will permit AHPC to
         continue manufacturing products equivalent to the Nordette(R) for sale
         to Berlex for resale in the Territory or for sale by AHPC or its
         Affiliates, directly or indirectly, outside the Territory

             (e) After the Closing Date, Buyer shall pay all NDA maintenance
         fees and any establishment license fees of Buyer, its Affiliates or
         third parties which must be paid with respect to facilities used in the
         manufacture of Products by or on behalf of Buyer. Notwithstanding the
         foregoing, for so long as Seller is supplying Products to Buyer in
         accordance with the Supply Agreements, Seller shall pay any
         establishment license fees which must be paid with respect to Seller's,
         its Affiliates or subcontractor's facilities used for the manufacture
         of the Products.

             (f) In order for the Parties to comply with their respective
         responsibilities under this Section 6.8 and otherwise relating to the
         reporting of adverse drug experiences, to the extent either Party
         receives any information regarding adverse drug experiences related to
         the use of the Product, whether such use is within or outside of the
         Territory, such Party shall promptly provide the other Party with such
         information in accordance with the Adverse Event Reporting Procedures
         (as may be amended from time to time upon mutual agreement) set forth
         in Exhibit H.

             (g) AHPC covenants to complete at its expense the open regulatory
         issues identified on Exhibit I, as soon as reasonably practicable
         after the Closing, for filing with the FDA by King.

         6.9 Technology Transfer.

             (a) As soon as practicable after the Closing, Seller shall furnish
         Buyer with one (1) copy of the Included Know-How, including all
         technical, manufacturing and Seller's other written information,
         including but not limited to process sheets, raw material and process
         specifications, manuals, vendors lists, and other writing specifically
         relating to the Products, which are currently used by Seller, its
         Affiliates or sub-contractors to manufacture package, test or release
         or have manufactured, packaged, tested or released Products according
         to the methods used by Seller or its Affiliates or sub-contractors to
         manufacture, package, test or release or have manufactured, packaged,
         tested or released Products according to the methods used by Seller or
         its Affiliates or sub-contractors. Seller agrees that Buyer, its
         Affiliates or its permitted sublicensees,

                                       19
<PAGE>   21

         may use all Included Know-How listed in the preceding sentence for the
         manufacture, packaging, testing or release of the Products for sale in
         the Territory.

             (b) In connection with the transfer of information described in
         Section 6.9(a), Seller shall permit a reasonable number of Buyer's
         technically skilled personnel and sub-contractors designated by Buyer
         (with travel and living expenses paid by Buyer) to make one or more
         visits to such facilities of Seller or its Affiliates as may be engaged
         in the manufacture of Products for up to an aggregate of thirty (30)
         man-days in order to inspect and be instructed in all manufacturing
         techniques and procedures used by Seller, its Affiliates or
         sub-contractors in the manufacture of Products.

             (c) Buyer agrees that it and its designees shall use all Included
         Know-How provided to Buyer by or on behalf of Seller, its Affiliates or
         sub-contractors for the sole purpose of making, using and/or selling
         the Products only for human use in the Territory and shall not use or
         permit any third party to use such Included Know-How for the purpose of
         making Products for sale outside the Territory or for use as veterinary
         pharmaceutical products within or outside of the Territory. In the
         event, due to Buyer's failure to comply with any provision of the
         Transaction Agreements, the Included Know-How is used for the purpose
         of making Products for either sale outside the Territory or sale as
         veterinary pharmaceutical products within or outside of the Territory,
         Buyer shall immediately cease such use and/or sale and take such action
         as may be necessary to prevent a third party from using such Included
         Know-How for the purpose of making Products for sale outside the
         Territory. The provisions of this Section shall not limit any other
         remedy Seller has on account of the use of the Included Know-How for
         the purpose of making Products for sale outside the Territory or for
         sale as veterinary pharmaceutical products within or outside the
         Territory.

             (d) Seller agrees that it and its designees shall use all Included
         Know-How only for purposes consistent with Seller's retained rights
         under Section 2.7. In the event, due to Seller's failure to comply with
         any provisions of the Transaction Agreements, the Included Know-How is
         used for purposes inconsistent with Seller's retained rights under
         Section 2.7, Seller shall immediately cease such use and/or sale and
         take such action as may be necessary to prevent a third party from
         using such Included Know-How for the purpose of making Products for
         human use for sale inside the Territory. The provisions of this Section
         shall not limit any other remedy Buyer has an account of the use of the
         Included Know-How for the purpose of making Products for human use for
         sale inside the Territory.

         6.10 Customer Contracts. A complete and accurate list of each Customer
Contract pursuant to which Seller or its Affiliates is, immediately prior to the
date of this Agreement, selling any of the Products, either with or without
other products of Seller and its

                                       20
<PAGE>   22

Affiliates, to third party buyers is attached hereto as Exhibit B. Seller shall
provide, pursuant to Section 2.5(g), to Buyer a complete and accurate copy of
each such Customer Contract except that such copies may have information
redacted as provided in Section 2.5(g). After the Closing Date, Seller and Buyer
shall use their mutual Commercially Reasonable Efforts to obtain the release of
Seller and/or its Affiliate(s) from any further obligation with respect to the
Products under each of the Customer Contracts, except that Seller will continue
to comply with the Customer Contracts in respect to its obligations thereunder
relating to products other than the Products and events and actions, omissions
or contractual obligations of Seller occurring or accruing prior to the Closing
Date other than filling customer orders not filled as of the Closing Date. The
Parties understand and agree that, because the right to sell the Products is
being transferred to Buyer pursuant to this Agreement, after the Closing Date,
Seller will no longer have the right to sell the Products under the Customer
Contracts. Buyer covenants and agrees that it will continue to honor all of
Seller's and its Affiliates' commitments made in each such Customer Contract
with respect to supplying the Products after the Closing Date, including,
without limitation, the sale prices, for the Products throughout the term of
each such Customer Contract. Buyer covenants that it will not terminate any
Customer Contract as to any of the Products which is terminable by Buyer, other
than for uncured breach by the third party buyer, except on at least sixty (60)
days notice to the third party buyer. Seller agrees that after the Closing Date
it will not take any action with respect to any Customer Contract which will
extend the term of such Customer Contract for any Product or otherwise adversely
affect Buyer, or create or agree to any additional obligations, with respect to
any Product, without the prior written consent of Buyer.

                                    ARTICLE 7

                                   CONDITIONS

         7.1 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) all consents and approvals of Governmental Authorities, if any,
         necessary to permit the consummation of the transactions contemplated
         by this Agreement shall have been obtained and any waiting period
         (including any extension thereof) applicable to the consummation of the
         Agreement under the HSR Act 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 or executive order promulgated or enacted by any
         Governmental Authority shall be in effect that would restrain or
         otherwise prevent the consummation of the transactions contemplated by
         the Agreement.

                                       21
<PAGE>   23

         7.2 Conditions to the Obligation of Seller. The obligation of Seller 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, except
         for changes contemplated by this Agreement;

             (c) Buyer shall have furnished to Seller 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 7.2(a) and (b) have
         been satisfied; and

             (d) Buyer shall have sufficient funds to meet its obligations under
         Section 2.4(a) hereof.

         7.3 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:

             (a) Seller 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;

             (b) the representations and warranties of Seller 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, except
         for changes contemplated by this Agreement; and

             (c) Seller shall have furnished to Buyer a certificate, dated as of
         the Closing Date, signed by a duly authorized officer of Seller to the
         effect that all conditions set forth in Sections 7.3(a) and (b) have
         been satisfied.

                                    ARTICLE 8

                                 INDEMNIFICATION

         8.1 Indemnification.

             (a) Subject to Section 8.3, Seller shall indemnify, defend and hold
         harmless Buyer and its Affiliates, and their respective officers,
         directors,

                                       22
<PAGE>   24

         employees, agents 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 VIII as
         "Costs"), arising from or attributable to:

                 (i)   The breach of any representation or warranty made by
                       Seller in this Agreement;

                 (ii)  Any failure of Seller duly to perform or observe any
                       covenant or agreement to be performed or observed by
                       Seller pursuant to this Agreement;

                 (iii) The Excluded Liabilities; and

                 (iv)  Except as otherwise specifically set forth in the Supply
                       Agreements, any bodily injuries occurring before the
                       Closing Date based upon, arising out of or resulting from
                       the use of a Product.

             (b) Buyer shall indemnify and hold harmless Seller and its
         Affiliates, and their respective officers, directors, employees, agents
         and controlling Persons from Costs arising from or attributable to:

                 (i)   The breach in 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; and

                 (iii) The Assumed Liabilities.

             (c) Seller and Buyer shall indemnify the other for all Taxes for
         the periods and in the manner described in Section 6.4 which shall be
         the sole and exclusive basis of indemnity for Taxes under this
         Agreement.

         8.2 Procedures.

             (a) Promptly after the receipt by any Person entitled to indemnity
         hereunder of notice under this paragraph 8.2, of (i) any claim or (ii)
         the commencement of any action or proceeding, such Person (the
         "Aggrieved Party") will, if a claim with respect thereto is to be made
         against any Party obligated to provide indemnification pursuant to this
         Article 8 (the "Indemnifying Party"), give such Indemnifying Party
         written notice of such claim or the commencement

                                       23
<PAGE>   25

         of such action or proceeding and shall permit the Indemnifying Party to
         assume the defense of any such claim or any litigation resulting from
         such claim, and, upon such assumption, shall cooperate fully with the
         Indemnifying Party in the conduct of such defense. Failure by the
         Indemnifying Party to notify the Aggrieved Party of its election to
         defend any such action within a reasonable time, but in no event more
         than fifteen 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 shall be limited
         to taking all steps necessary in the defense or settlement of such
         claim or litigation resulting therefrom. 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. 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 does not include as an
         unconditional term thereof the giving by the claimant or the plaintiff
         to the Aggrieved Party of a release from all liability in respect of
         such claim or litigation. In addition, all awards and costs payable by
         a third party to the Aggrieved Party or the Indemnifying Party shall
         belong to the Indemnifying Party.

             (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, unless the Indemnifying Party shall deposit with the
         Aggrieved Party a sum equivalent to the total amount demanded (subject
         to the limitation set forth in Section 8.3(b)) in such claim or
         litigation less the Minimum Loss, or shall deliver to the Aggrieved
         Party a surety bond in form and substance reasonably satisfactory to
         the Aggrieved Party in such amount, 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 expenses, legal or otherwise, incurred by the Aggrieved
         Party in connection with the defense against or settlement of such
         claim or litigation. If no settlement of such claim or litigation is
         made, the Indemnifying Party shall promptly reimburse the Aggrieved
         Party for the amount of any judgment rendered with respect to such
         claim or in such litigation and of all expenses, legal or otherwise,
         incurred by the Aggrieved Party in the defense against such claim or
         litigation.

         8.3 Limitations. An Aggrieved Party shall not be entitled to recover
any Costs under Section 8.1(a) until the aggregate amount of the Costs suffered
by the Aggrieved Party thereunder shall equal or exceed one million dollars
($1,000,000) (the "Minimum Loss"), at which time the indemnification provided
under Section 8.1(a) shall apply to all Costs in excess

                                       24
<PAGE>   26

of the Minimum Loss, and (b) the maximum liability under Section 8.1(a) for an
Indemnifying Party shall not exceed ten million dollars ($10,000,000) in the
aggregate.

         8.4 Indemnification as Sole Remedy. The indemnification provided in
this Article 8, subject to the limitations set forth herein, shall be the
exclusive post-Closing remedy for damages available to any Aggrieved Party.

                                    ARTICLE 9

                                   TERMINATION

         9.1 Termination. This Agreement may be terminated at any time prior to
the Closing Date:

             (a) by mutual written consent of Buyer and Seller;

             (b) by Seller if the Closing shall not have occurred on or prior to
         September 30, 2000; or

             (c) Subject to Section 6.3, by Buyer or Seller if a court of
         competent jurisdiction or Governmental Authority 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.

         The date on which this Agreement is terminated pursuant to any of the
foregoing subsections of this Section 9.1 is herein referred to as the
"Termination Date."

         9.2 Effect of Termination. Upon the termination of this Agreement
pursuant to Section 9.1, (a) this Agreement shall forthwith become null and
void, except that nothing herein shall relieve any Party from liability for
breach of this Agreement prior to such termination, (b) the Marketing and
Distribution Agreement shall automatically terminate, and (c) Buyer shall pay to
Seller one hundred thousand dollars ($100,000) for each day that the Marketing
and Distribution Agreement was in effect.

                                   ARTICLE 10

                               GENERAL PROVISIONS

         10.1 Public Statements. So long as this Agreement is in effect, none of
the Parties hereto shall issue or cause the dissemination 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

                                       25
<PAGE>   27
by applicable law or legal process. The parties agree that the press release
attached hereto as Exhibit J may be released on the Closing Date.

         10.2 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 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 Seller:

             Wyeth-Ayerst Laboratories
             555 E. Lancaster Avenue
             St. Davids, PA  19087
             Attention:  Senior Vice President
                         Global Business Development
             Telecopier Number: (610) 688-9498

             with a copy to:

             American Home Products Corporation
             Five Giralda Farms
             Madison, New Jersey 07940
             Attention:  Senior Vice President
                         and General Counsel
             Telecopier Number: (973) 660-7155

         (b) if to Buyer:
             King Pharmaceuticals, Inc.
             501 Fifth Street
             Bristol, Tennessee  37620
             Attention:  President
             Telecopier Number:  (423) 989-8806

             with a copy to:

             King Pharmaceuticals, Inc.
             501 Fifth Street
             Bristol, Tennessee  37620
             Attention: Executive Vice President and General Counsel
             Telecopier Number: (423) 989-6282

         Notice so given (in the case of notice so given by mail) shall be
deemed to be given and received on the third calendar day after mailing or the
next business day if sent by a

                                       26
<PAGE>   28

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.

         10.3 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 for a period of thirty six (36) months
after the Closing Date except for those relating to Taxes, which representations
and warranties shall survive until the period of the applicable statute of
limitations has expired. Except for claims relating to Taxes, in no event shall
any amounts be recovered from an Indemnifying Party under Article 8 or otherwise
for any matter for which a written notice of claim specifying in reasonable
detail the specific nature of the Costs and the estimated amount of such Costs
("Claim Notice") is not delivered to the other Party prior to the close of
business on the thirty six (36) month anniversary date of the Closing Date, and
the indemnities granted by Seller and Buyer in Article 8 shall terminate thirty
six (36) months after the Closing Date; provided, however, that such indemnities
shall survive with respect only to the specific matter that is the subject of
any Claim Notice delivered in good faith within such thirty six (36) month
period and otherwise in compliance with the requirements of Article 8 until the
earlier to occur of (A) the date on which a final nonappealable resolution of
the matter described in such Claim Notice has been reached or (B) the date on
which the matter described in such Claim Notice has otherwise reached final
resolution.

         10.4 Amendment. This Agreement may not be amended except by an
instrument in writing signed on behalf of each of the Parties hereto.

         10.5 Waiver. 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.

         10.6 Parties in Interest. This Agreement may not be assigned by a Party
without the prior written consent of the other Parties hereto provided, however,
that either Party may assign this Agreement without such consent in connection
with the sale or other transfer for of all or substantially all of its assets.
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.

         10.7 Seller's Knowledge. When "to the knowledge of Seller" or similar
phrase is used herein it shall be deemed to refer to the actual knowledge of any
Executive Vice President, Sr. Vice President or Vice President of the
Wyeth-Ayerst Laboratories division of American Home Products Corporation.

         10.8 Entire Agreement; Governing Law; Miscellaneous. With the exception
of the Confidentiality Agreements dated April 5, 2000 by and between the
Parties, 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

                                       27
<PAGE>   29

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 without giving effect to the principles of conflicts of laws
thereunder. 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.

         10.9 Waiver of Bulk Sales. The Parties waive compliance with any bulk
sales or similar laws in connection with the consummation of the transactions
contemplated by the Transaction Agreements.

                  (remainder of page intentionally left blank)

                                       28
<PAGE>   30
         10.10 Exhibits and Schedules. All Exhibits and Schedules referred to
herein form an integral part of this Agreement and are incorporated into this
Agreement by reference.

         IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first above written.

                                    AMERICAN HOME PRODUCTS CORPORATION

                                    By: /s/ Kenneth J. Martin
                                        ----------------------------------------
                                        Name: Kenneth J. Martin
                                        Title: Senior Vice President and Chief
                                               Financial Officer

                                    KING PHARMACEUTICALS, INC.

                                    By: /s/ Jefferson J. Gregory
                                        ----------------------------------------
                                        Name: Jefferson J. Gregory
                                        Title: President and Chief Operating
                                               Officer

                                       29<PAGE>   1

                                                                    Exhibit 10.3

                        STOCK AND NOTE PURCHASE AGREEMENT

                                 by and between

                           KING PHARMACEUTICALS, INC.

                                       and

                       AMERICAN HOME PRODUCTS CORPORATION

                                  June 22, 2000

<PAGE>   2
                                TABLE OF CONTENTS

1.       Purchase and Sale of Shares and the Note.......................       1
         1.1      Sale and Issuance of Shares...........................       1
         1.2      Sale and Issuance of the Note.........................       2

2.       Representations and Warranties of the Company..................       2
         2.1      Organization, Good Standing and Qualification.........       2
         2.2      Authorization.........................................       3
         2.3      Valid Issuance of Shares and Listing..................       3
         2.4      Capitalization........................................       3
         2.5      SEC Reports and Certain Changes.......................       5
         2.6      Financial Statements and Title to Assets..............       5
         2.7      Contracts.............................................       6
         2.8      Compliance and Permits................................       6
         2.9      Compliance with Other Instruments.....................       7
         2.10     Governmental Consents.................................       7
         2.11     Litigation............................................       7
         2.12     Taxes.................................................       7
         2.13     Intellectual Property.................................       8
         2.14     Registration..........................................       8

3.       Representations and Warranties of AHPC.........................       8
         3.1      Organization, Good Standing and Qualification.........       8
         3.2      Authorization.........................................       8
         3.3      Governmental Consents.................................       9
         3.4      Accredited Investor...................................       9

4.       Filings and Authorizations.....................................       9

5.       Conditions to Obligation of Each Party to Effect the
         Transactions Contemplated by this Agreement ...................       9

6.       Conditions of AHPC's Obligations at each Closing...............      10

7.       Conditions of the Company's Obligations at Each Closing........      12

8.       Covenants......................................................      12
         8.1      Lock-up...............................................      13
         8.2      Lenders' Consent......................................      13

9.       Miscellaneous..................................................      13
         9.1      Survival of Warranties................................      13

                                       i
<PAGE>   3

         9.2      Assignment; Successors and Assigns....................      13
         9.3      Governing Law.........................................      13
         9.4      Counterparts..........................................      13
         9.5      Titles and Subtitles..................................      13
         9.6      Notices...............................................      14
         9.7      Finder's Fees.........................................      14
         9.8      Expenses..............................................      15
         9.9      Publicity.............................................      15
         9.10     Amendments and Waivers................................      15
         9.11     Severability..........................................      15
         9.12     Entire Agreement......................................      15

                                       ii
<PAGE>   4

                        STOCK AND NOTE PURCHASE AGREEMENT

                  THIS STOCK AND NOTE PURCHASE AGREEMENT is made as of the 22nd
day of June, 2000 by and between King Pharmaceuticals, Inc., a Tennessee
corporation having its principal place of business at 501 Fifth Street, Bristol,
Tennessee (the "Company"), and American Home Products Corporation, a Delaware
corporation having its principal place of business at 5 Giralda Farms, Madison,
New Jersey ("AHPC").

         WHEREAS, simultaneously herewith, Wyeth-Ayerst Laboratories, a division
of AHPC ("Wyeth"), and the Company have entered into a Co-Promotion Agreement
(the "Co-Promotion Agreement") pursuant to which the Company's Altace(R) product
will be marketed in the United States and the Commonwealth of Puerto Rico;

         WHEREAS, simultaneously herewith, Wyeth and the Company have entered
into an Asset Purchase Agreement (the "Asset Purchase Agreement") pursuant to
which the Company has agreed to acquire Wyeth's Nordette(R), Bicillin(R) and
Wycillin(R) products, subject to certain conditions to closing set forth in the
Asset Purchase Agreement, including but not limited to, AHPC's acceptance of a
promissory note made by the Company in favor of AHPC in the principal amount of
TWENTY-FIVE MILLION DOLLARS ($25 million) in the form of Exhibit A attached
hereto as partial payment of the purchase price set forth in the Asset Purchase
Agreement;

         WHEREAS, simultaneously herewith, Wyeth and the Company have entered
into two Manufacturing and Supply Agreements (the "Supply Agreements") pursuant
to which Wyeth has agreed to supply in finished goods form (i) Nordette, and
(ii) Bicillin(R) and Wycillin(R) to the Company; and

         WHEREAS, in connection with the transactions set forth above, AHPC has
agreed to purchase shares of common stock of the Company on the terms and
conditions hereof;

         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:

1.       Purchase and Sale of Shares and the Note.

         1.1      Sale and Issuance of Shares.

         Subject to the terms and conditions of this Agreement, the Company
agrees to sell and issue to AHPC at the First Closing (as defined below)
1,928,021 shares of the Company's Common Stock (as defined below) (the "Shares")
which is equal to $75,000,000 (SEVENTY-FIVE MILLION DOLLARS) divided by $38.90
per share and AHPC agrees to pay $75,000,000 (SEVENTY-FIVE MILLION DOLLARS)

                                       1
<PAGE>   5

(the "Purchase Price") to the Company at the First Closing.

         1.2      Sale and Issuance of the Note.

         Subject to the terms and conditions of this Agreement and the Asset
Purchase Agreement, at the Second Closing (as defined below) the Company agrees
to issue and AHPC agrees to purchase the Note in the principal amount of
$25,000,000 (TWENTY-FIVE MILLION DOLLARS).

         1.3      Closings.

         (a) The closing for the purchase and sale of the Shares shall take
place at the offices of AHPC, 5 Giralda Farms, Madison, New Jersey 07940,
simultaneously with the execution of this Agreement upon the satisfaction or
waiver of the conditions set forth in Articles 5, 6 and 7 hereof or at such
other time and place as the Company and AHPC mutually agree upon in writing
(which shall be designated as the "First Closing").

         (b) The closing for the issuance and sale of the Note shall take place
simultaneously with and at the location of the closing of the transactions
contemplated by Asset Purchase Agreement (the "Second Closing" with each of the
First Closing and Second Closing being referred to herein individually as a
"Closing").

         (c) At the First Closing, among other things, the Company shall deliver
to AHPC a certificate representing the Shares. In consideration of such
delivery, AHPC shall make payment for the Shares by delivery to the Company of
the Purchase Price in immediately available funds by wire transfer of funds to
the Company's designated bank account.

         (d) At the Second Closing, among other things, the Company shall
deliver to AHPC the fully-executed Note as partial payment of the purchase price
to be paid under the Asset Purchase Agreement.

2.       Representations and Warranties of the Company.

         The Company hereby represents and warrants to AHPC that:

         2.1      Organization, Good Standing and Qualification.

         The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Tennessee and has all requisite
corporate power and authority to carry on its business as now conducted and as
proposed to be conducted. The Company is duly qualified to transact business and
is in good standing in each jurisdiction in which the failure so to qualify
would have a material adverse effect on the business, operations, properties,
assets, prospects or condition

                                       2
<PAGE>   6

(financial or otherwise) of the Company and its subsidiaries taken as a whole (a
"Material Adverse Effect"). Except as disclosed in the Form 10-K (as defined
herein), the Company has no subsidiaries.

         2.2      Authorization.

         The Company has all requisite corporate power and authority (i) to
execute, deliver and perform its obligations under this Agreement, (ii) to
execute, deliver and perform its obligations under the Co-Promotion Agreement,
the Asset Purchase Agreement, (subject to the Company's lenders' consent which
shall be obtained prior to the Second Closing) the Note and the Supply
Agreements (together, the "Related Agreements"), (ii) to issue the Shares and
the Note in the manner and for the purpose contemplated by this Agreement, and
(iii) to execute, deliver and perform its obligations under all other agreements
and instruments executed and delivered by it pursuant to or in connection with
this Agreement and the Related Agreements. All corporate action on the part of
the Company, its officers, directors and shareholders necessary for the
authorization, execution and delivery of this Agreement, and the Related
Agreements and the performance of all obligations of the Company hereunder and
thereunder and the authorization, issuance (or reservation for issuance) and
delivery of the Shares, and the Note (when issued) has been taken or will be
taken prior to the First Closing or the Second Closing, as the case may be, and
this Agreement and each of the Related Agreements constitute valid and legally
binding obligations of the Company, enforceable in accordance with their
respective terms, except (x) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium, and other laws of general application affecting
enforcement of creditors' rights generally and (y) as limited by laws relating
to the availability of specific performance, injunctive relief, or other
equitable remedies.

         2.3      Valid Issuance of Shares and Listing.

         The Shares, when issued, sold and delivered in accordance with the
terms hereof for the consideration expressed herein, will be duly and validly
issued, fully paid and nonassessable and such Shares will be issued in
compliance with all applicable federal and state securities laws and will be
listed on the New York Stock Exchange and upon issuance be eligible for trading,
subject to the restrictions set forth in Section 8.1 hereof.

         2.4      Capitalization.

         (a) The authorized capital stock of the Company consists of one hundred
fifty million (150,000,000) shares of common stock, no par value per share (the
"Common Stock") and fifteen million (15,000,000) shares of preferred stock, no
par value (the

                                       3
<PAGE>   7

"Preferred Stock"). As of June 22, 2000: (i) ninety million, thirty-nine
thousand, seven hundred eleven (90,039,711) shares of Common Stock were issued
and outstanding; (ii) seven million, two hundred thousand (7,200,000) shares of
Common Stock were reserved for issuance upon the exercise of outstanding
employee stock options or other rights to purchase or receive the Common Stock
granted under the Company's 1997 Incentive and Nonqualified Stock Option Plan
(the "1997 Plan"); (iii) six hundred seventy-five thousand (675,000) shares of
Common Stock were reserved for issuance upon the exercise of outstanding stock
options or other rights to receive the Common Stock granted under the Company's
1998 Non-employee Director Stock Option Plan (the "1998 Plan" and together with
the 1997 Plan, the "Company Stock Option Plans"); (iv) no shares of Common Stock
were held by the Company in the Company's treasury; and (v) no shares of
Preferred Stock were issued or outstanding.

         (b) All outstanding shares of capital stock of the Company are, and all
Shares will be, when issued, duly authorized, validly issued, fully paid and
nonassessable and not subject to preemptive rights. Except as set forth in this
Section 2.4 and except for changes resulting from the issuance of shares of
Common Stock pursuant to the Company Stock Option Plans or shares of Common
Stock issuable upon exercise of the rights distributed pursuant to the Rights
Agreement, dated as of June 25, 1998, between the Company and Union Planters
Bank, N.A. (the "Rights Agreement") to the holders of Common Stock pursuant to
the Rights Agreement or as expressly permitted by this Agreement, (i) there are
not issued, reserved for issuance or outstanding (A) any shares of capital stock
or other voting securities of the Company, (B) any securities of the Company or
any Company subsidiary convertible into or exchangeable or exercisable for
shares of capital stock or voting securities of or ownership interests in the
Company or any Company subsidiary, (C) any warrants, calls, options or other
rights to acquire from the Company or any Company subsidiary, and any obligation
of the Company or any Company subsidiary to issue, any capital stock, voting
securities or other ownership interests in, or securities convertible into or
exchangeable or exercisable for capital stock or voting securities of or other
ownership interests in, the Company or any Company subsidiary, (ii) there are no
outstanding obligations of the Company or any Company subsidiary to repurchase,
redeem or otherwise acquire any such securities or to issue, deliver or sell, or
cause to be issued, delivered or sold, any such securities, and (iii) except as
contemplated in this Agreement, the Company is not presently under any
obligation, has not agreed or committed, and has not granted rights, to register
under the Securities Act or the Exchange Act, or otherwise file any registration
statement under any such statute covering, any of its currently outstanding
capital stock or other securities or any of its capital stock or other
securities that may be subsequently issued.

                                       4
<PAGE>   8

         (c) As of the date hereof, neither the Company nor any Company
subsidiary is a party to any agreement granting any preemptive or antidilutive
rights with respect to any securities of the Company or any Company subsidiary
that are outstanding as of the date hereof, or with respect to any securities of
the Company or any Company subsidiary that may be subsequently issued upon the
conversion or exercise of any instrument outstanding as of the date hereof.

         2.5      SEC Reports and Certain Changes.

         (a)      The Company has heretofore filed with the U.S. Securities and
Exchange Commission (the "SEC") pursuant to the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), all reports and other documents required to be
filed, including an Annual Report on Form 10-K for the year ended December 31,
1999 (the "Form 10-K"). As of their respective filing dates, none of such
reports or other documents required to be filed with the SEC under the rules and
regulations of the SEC ("SEC Filings") at the time they were filed, contained
any untrue statement of a material fact or omitted to state a material fact
required to be stated therein or necessary in order to make the statements made,
in light of the circumstances under which they were made, not misleading. Since
December 31, 1999, the Company has timely filed with the SEC all SEC Filings and
all such SEC Filings complied with all applicable requirements of the Securities
Act of 1933, as amended (the "Securities Act"), and the Exchange Act, as
applicable and the rules thereunder.

         (b) Since December 31, 1999, and except as set forth in SEC Filings or
otherwise previously disclosed to AHPC in writing, there has been no change in
the business, assets, liabilities, financial condition or operating results of
the Company from that reflected in the Form 10-K, except changes in the ordinary
course of business that have not, individually or in the aggregate, resulted in
and are not reasonably expected to result in a Material Adverse Effect.

         2.6      Financial Statements and Title to Assets

         The audited consolidated financial statements of the Company included
or incorporated by reference in the Form 10-K and the unaudited interim
financial statements contained in the quarterly reports on Form 10-Q each have
been prepared in accordance with the published rules and regulations of the SEC
and with U.S. generally accepted accounting principles applied on a consistent
basis throughout the periods indicated therein and with each other, except as
may be indicated therein or in the notes thereto, and fairly present in all
material respects the financial condition of the Company as of the respective
dates thereof and the results of its operations and statements of cash

                                       5
<PAGE>   9

flows for the respective periods then ended, subject, in the case of unaudited
interim financial statements, to usual year-end adjustments. Except as reflected
in such financial statements, the Company has no material liabilities, absolute
or contingent, other than ordinary course liabilities incurred since the date of
the last such financial statements in connection with the conduct of the
business of the Company. Except as otherwise set forth in the SEC Filings, the
Company has good and marketable title to all material property and assets
reflected in the financial statements to the Form 10-K (or as described in the
SEC Filings).

         2.7      Contracts.

         With respect to each of the agreements filed as an exhibit to the SEC
Filings which remain in full force and effect and all of the agreements that
would have been required to be filed as an exhibit to the SEC Filings if any
such agreements had been entered into as of the date of filing of any such SEC
Filing ("Material Contracts"), the Company is not, and has no actual knowledge
that any other party is, in default under or in respect of any Material
Contract, the result of which default would have a Material Adverse Effect.

         2.8      Compliance and Permits.

         (a) Except as disclosed in the SEC Filings, the Company has complied
with, and is not in default under or in violation of its Second Amended and
Restated Charter, By-laws or any and all laws, ordinances and regulations or
other governmental restrictions, orders, judgments or decrees applicable to the
Company, where any such default or violation would have a Material Adverse
Effect. Except as disclosed in the SEC Filings, the Company has not received
written notice of any possible or actual violation of any applicable law,
ordinance, regulation, or order, the result of which violation would be
reasonably expected to have a Material Adverse Effect. Neither the execution and
delivery of this Agreement or any of the Related Agreements nor the consummation
of the transactions contemplated hereby or thereby will violate, conflict with
or result in a breach or result in the acceleration or termination of, or the
creation in any third party of the right to accelerate, terminate, modify or
cancel, any material indenture, contract, lease, sublease, loan agreement, note
or other material obligation or liability to which the Company is a party or is
bound or to which any of its assets are subject which would result in a Material
Adverse Effect.

         (b) Except as disclosed in SEC Filings, the Company has, and is not in
default in any material respect under, all governmental franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which would be reasonably expected to
have a

                                       6
<PAGE>   10

Material Adverse Effect.

         2.9      Compliance with Other Instruments.

         The execution, delivery and performance of this Agreement or any of the
Related Agreements and the transactions contemplated hereby and thereby will not
result in any violation of or constitute, with or without the passage of time
and the giving of notice, either a default under any provision of its Second
Amended and Restated Charter or By-laws of the Company or any material provision
of any material indenture, agreement or other instrument by which the Company or
any of its properties or assets is bound, or result in the creation or
imposition of any lien, or encumbrance upon any of the material properties or
assets of the Company.

         2.10     Governmental Consents.

         Except for any notification required filed or supplied pursuant to the
Hart-Scott Rodino Antitrust Improvements Act of 1976, as amended and the rules
promulgated thereunder (the "HSR Act"), no consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any federal, state or local governmental authority is required on
the part of the Company in connection with the Company's valid execution,
delivery and performance of this Agreement or any of the Related Agreements. The
filings under state securities laws, if any, will be effected by the Company at
its cost within the applicable stipulated statutory period.

         2.11     Litigation.

         There is no action, suit, proceeding or investigation pending or, to
the knowledge of the Company, currently threatened against the Company which
questions the validity of this Agreement or any of the Related Agreements, or
the right of the Company to enter into such instruments or to consummate the
transactions contemplated hereby or thereby. Except as disclosed in SEC Filings,
there is no action, suit, proceeding or investigation pending or, to the
knowledge of the Company, currently threatened against the Company, which singly
or in the aggregate, if the subject of an unfavorable decision, ruling or
finding, would have or would reasonably be expected to have a Material Adverse
Effect.

         2.12     Taxes.

         The Company has filed all federal, state and other tax returns which
are required to be filed and has heretofore paid all taxes which have become due
and payable, except where the failure to file or pay would not be reasonably
expected to have a Material Adverse Effect.

                                       7
<PAGE>   11

         2.13     Intellectual Property.

         Except as disclosed in the SEC Filings, to the knowledge of the
Company, the Company owns, or possesses adequate rights to use, all of their
patents, patent rights, trade secrets, know-how, proprietary techniques,
including processes and substances, trademarks, service marks, trade names and
copyrights described or referred to in the SEC Filings or owned or used by it or
which is necessary for the conduct of its business as presently conducted,
except where the failure to own or possess such patents, patent rights, trade
secrets, know-how, proprietary techniques, including processes and substances,
trademarks, service marks, trade names and copyrights would not have a Material
Adverse Effect. Except as disclosed in the SEC Filings, the Company has not
received any notice of infringement of or conflict with asserted rights of
others with respect to any patents, patent rights, trade secrets, know-how,
proprietary techniques, including processes and substances, trademarks, service
marks, trade names and copyrights which, singly or in the aggregate, if the
subject of an unfavorable decision, ruling or finding, would be reasonably
expected to have a Material Adverse Effect.

         2.14     Registration.

         The Shares have been registered under the Securities Act on Form S-3 in
a shelf registration filed with the SEC on January 21, 2000, subject to
completion on or prior to the consummation of the sale transaction contemplated
hereunder at Closing. At Closing, the Shares shall be freely tradable under
applicable securities laws or stock exchange rules by AHPC, subject only to the
restrictions set forth in Section 8.1 of this Agreement; provided that AHPC has
not taken any action with any third party (other than the Company) which would
further restrict its ability to dispose of such Common Stock by contract or
otherwise.

3.       Representations and Warranties of AHPC.

         AHPC hereby represents and warrants that:

         3.1      Organization, Good Standing and Qualification.

         AHPC is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has all requisite corporate
power and authority to carry on its business as now conducted and as proposed to
be conducted.

         3.2      Authorization.

         All corporate action on the part of AHPC, its officers and directors
necessary for the authorization, execution and delivery

                                       8
<PAGE>   12

of this Agreement, each of the Related Agreements, the performance of all
obligations of AHPC hereunder and thereunder has been taken or will be taken
prior to each Closing, and this Agreement, and the Related Agreements,
constitute valid and legally binding obligations of AHPC enforceable in
accordance with their respective terms, except (i) as limited by applicable
bankruptcy, insolvency, reorganization, moratorium, and other laws of general
application affecting the enforcement of creditors' rights generally, (ii) as
limited by laws relating to the availability of specific performance, injunctive
relief, or other equitable remedies.

         3.3      Governmental Consents.

         Other than matters contemplated by this Agreement, and the Related
Agreements and any notifications required to be filed or supplied pursuant to
the HSR Act, no consent, approval, order or authorization of, or registration,
qualification, designation, declaration or filing with, any federal, state or
local governmental authority is required on the part of AHPC in connection with
AHPC's valid execution, delivery and performance of this Agreement, the Related
Agreements or the issuance of the Shares which are to be purchased by AHPC
hereunder.

         3.4      Accredited Investor.

         AHPC is an "accredited investor" as such term is defined in Rule 501(d)
of the Securities Act and is purchasing the Note for its own account for
investment purposes.

4.       Filings and Authorizations.

         The Company and AHPC have filed or supplied, or caused to be filed or
supplied, all notifications and information required to be filed or supplied
pursuant to the HSR Act in connection with the transactions contemplated by this
Agreement. The Company and AHPC, as promptly as practicable, (a) will make, or
cause to be made, all such other filings and submissions under laws, rules and
regulations applicable to them as may be required for them to consummate the
transactions contemplated hereby in accordance with the terms of this Agreement,
and (b) will use reasonable efforts to obtain, or cause to be obtained, all
authorizations, approvals, consents and waivers from all governmental
authorities necessary to be obtained by them in order for them to consummate
such transactions.

5.       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

                                       9
<PAGE>   13

fulfillment at or prior to the date of each of the First Closing and the Second
Closing of the following conditions:

         (a) all governmental and other consents and approvals, if any,
necessary to permit the consummation of the transactions contemplated by this
Agreement shall have been obtained and any waiting period (and any extension
thereof) applicable to the consummation of the Agreement under the HSR Act shall
have expired or been terminated; and

         (b) no stop order or other order enjoining the sale of the Shares or
the Note to be purchased and sold at the First Closing and the Second Closing,
respectively, shall have been issued and no proceedings for such purpose shall
be pending or, to the knowledge of the Company, threatened by the SEC or any
commissioner of corporations or similar officer of any state having jurisdiction
over this transaction and no preliminary or permanent injunction or other order,
decree or ruling issued by a court of competent jurisdiction or by a
governmental, regulatory or administrative agency or commission nor any statute,
rule, regulation or executive order promulgated or enacted by any governmental
authority shall be in effect that would restrain or otherwise prevent the
consummation of the transactions contemplated by the Agreement.

6.       Conditions of AHPC's Obligations at each Closing.

         (a) The obligations of AHPC under subsection 1.1 of this Agreement are
subject to the fulfillment on or before each Closing of the following applicable
conditions, the waiver of which shall not be effective without the consent of
AHPC thereto:

                  (i) Representations and Warranties. The representations and
         warranties of the Company contained in Section 2 shall be true in all
         material respects on and as of each Closing with the same effect as
         though such representations and warranties had been made on and as of
         the date of such Closing (except for representations and warranties
         that speak as of a specific time, which need only be true and correct
         in all material respects as of such date or time).

                  (ii) Performance. The Company shall have performed and
         complied in all material respects with all agreements, obligations and
         conditions contained in this Agreement that are required to be
         performed or complied with by it on or before each Closing, and all
         corporate or other proceedings in connection with the transactions
         contemplated at each such Closing and all documents incident thereto
         shall be reasonably satisfactory in form and in substance to AHPC.

                  (iii) Compliance Certificate. An officer of the

                                       10
<PAGE>   14

         Company shall have delivered to AHPC a certificate certifying that (a)
         the conditions specified in Sections 6(a)(i) and 6(a)(ii) have been
         fulfilled.

                  (iv) Proceedings and Documents. All corporate and other
         proceedings in connection with the transactions contemplated at each
         Closing and all documents incident thereto shall be reasonably
         satisfactory in form and substance to AHPC and they shall have received
         all such counterpart original and certified or other copies of such
         documents as they may reasonably request.

                  (v) Related Agreements. Prior to or at the First Closing, the
         Company and AHPC shall have entered into the Related Agreements (other
         than the Note which shall be issued and delivered at the Second
         Closing).

                  (vi) Certificate. At each Closing, the Company shall have
         furnished to AHPC a certificate, signed by an authorized officer of the
         Company, certifying: (i) the due organization and good standing of the
         Company; (ii) the corporate resolutions of the Company authorizing the
         transactions contemplated by this Agreement; and (iii) the incumbency
         of officers of the Company executing this Agreement and the other
         instruments or certificates delivered at each Closing.

                  (vii) Share Certificates. At the First Closing, the Company
         shall have furnished to AHPC a certificate or certificates representing
         the Shares (free and clear of all liens, claims and other encumbrances
         except as otherwise provided herein) to be purchased and sold at such
         Closing, accompanied by the requisite stock transfer tax stamps or
         funds for the purchase thereof;

                  (viii) Opinions of counsel. At the First Closing and at the
         Second Closing, the Company shall have furnished to AHPC two separate
         opinions of Baker, Donelson, Bearman & Caldwell in the forms attached
         hereto as Exhibit B to be delivered at the First Closing and Exhibit C
         to be delivered at the Second Closing; and

                  (ix) Delivery of the Note. At the Second Closing, among other
         things, the Company shall deliver the fully executed Note in the
         principal amount of $25 million dollars; and

                  (x) Other Documentation. The Company shall have furnished to
         AHPC such other instruments and documents, in form and substance
         reasonably acceptable to AHPC, as may be necessary to effect each
         Closing.

                                       11
<PAGE>   15

7.       Conditions of the Company's Obligations at Each Closing.

         (a) The obligations of the Company to AHPC under this Agreement are
subject to the fulfillment on or before each Closing of the following applicable
conditions by AHPC:

                  (i) Representations and Warranties. The representations and
         warranties of AHPC contained in Section 3 shall be true in all material
         respects on and as of each Closing with the same effect as though such
         representations and warranties had been made on and as of such Closing
         (except for representations and warranties that speak as of a specific
         time, which need only be true and correct in all material respects as
         of such date or time);

                  (ii) Performance. AHPC shall have performed and complied in
         all material respects with all agreements, obligations and conditions
         contained in this Agreement that are required to be performed or
         complied with by it on or before each Closing, and all corporate or
         other proceedings in connection with the transactions contemplated at
         each such Closing and all documents incident thereto shall be
         reasonably satisfactory in form and in substance to the Company;

                  (iii) Compliance Certificate. An officer of AHPC shall have
         delivered to the Company a certificate certifying that the conditions
         specified in Sections 7.1(a)(i) and 7.1(a)(ii) have been fulfilled;

                  (iv) Payment of Purchase Price. At the First Closing, AHPC
         shall have delivered the purchase price required to be paid at such
         Closing;

                  (v) Related Agreements. At the First Closing, the Company and
         AHPC shall have entered into each of the Related Agreements (other than
         the Note which shall be accepted at the Second Closing) each of even
         date herewith;

                  (vi) Acceptance of the Note. At the Second Closing, AHPC shall
         accept the fully-executed Note as partial payment of the consideration
         required under the Asset Purchase Agreement; and

                  (vii) Other Documentation. AHPC shall have furnished to the
         Company such other instruments and documents, in form and substance
         reasonably acceptable to the Company, as may be necessary to effect
         each Closing.

8.       Covenants.

                                       12
<PAGE>   16

         8.1      Lock-up.

         AHPC hereby agrees during the time period commencing on the Closing
until thirty (30) days following the Closing, that without the prior written
consent of the Company (which may be withheld in the Company's sole discretion),
it shall not, directly or indirectly sell, offer to sell, contract to sell
(including, without limitation, any short sale), grant any option to purchase or
otherwise transfer or dispose of any of the Shares.

         8.2      Lenders' Consent.

         The Company shall use its best efforts to promptly seek and obtain any
required consents from the Companys' lenders permitting the issuance of the Note
at the Second Closing.

9.       Miscellaneous.

         9.1      Survival of Warranties.

         The warranties, representations and covenants of the Company and AHPC
contained in or made pursuant to this Agreement shall survive the execution and
delivery of this Agreement and Closing.

         9.2      Assignment; Successors and Assigns.

         Neither this Agreement nor any of the rights, interests or obligations
hereunder shall be assigned by the parties hereto without the prior written
consent of the other party. Except as otherwise provided herein, the terms and
conditions of this Agreement shall inure to the benefit of and be binding upon
the respective successors and assigns of the parties). Nothing in this
Agreement, express or implied, is intended to confer upon any party other than
the parties hereto or their respective successors and assigns any rights,
remedies, obligations, or liabilities under or by reason of this Agreement,
except as expressly provided in this Agreement.

         9.3      Governing Law.

         This Agreement shall be governed by and construed under the laws of the
State of New York, without regard to the conflicts of laws of such state.

         9.4      Counterparts.

         This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original, but all of which together shall constitute
one and the same instrument.

         9.5      Titles and Subtitles.

                                       13
<PAGE>   17

         The titles and subtitles used in this Agreement are used for
convenience only and are not to be considered in construing or interpreting this
Agreement.

         9.6      Notices.

         Unless otherwise provided, any notice required or permitted under this
Agreement shall be given in writing by personal delivery to the party to be
notified or by Federal Express or other reliable overnight package delivery
service or registered or certified mail, postage prepaid and addressed to the
party to be notified at the following addresses, or at such other address as
such party may designate by five (5) days' advance written notice to the other
parties (with notice deemed given upon receipt):

         If to the Company:

         King Pharmaceuticals, Inc.
         501 Fifth Street
         Bristol, Tennessee 37620
         Attn: Chief Executive Officer
         Facsimile: (423) 989-8006

         With a copy to:

         King Pharmaceuticals, Inc.
         501 Fifth Street
         Bristol, Tennessee 37620
         Attn:  Executive Vice President
                and General Counsel
         Facsimile: (423) 989-6282

         If to AHPC:

         American Home Products Corporation
         5 Giralda Farms
         Madison, New Jersey  07940
         Attn:  Senior Vice President
                and General Counsel
         Facsimile: (973) 660-7155

         9.7      Finder's Fees.

         Each party represents that it neither is nor will be obligated for any
finders' fee or commission in connection with this transaction. Each party
agrees to indemnify and to hold harmless the other from any liability for any
commission or compensation in the nature of a finders' fee (and the costs and
expenses of defending against such liability or asserted liability) for which
the indemnifying party or any of its

                                       14
<PAGE>   18

officers, partners, employees, or representatives is responsible.

         9.8      Expenses.

         Irrespective of whether the Closing is effected, each party shall pay
all costs and expenses that it incurs with respect to the negotiation,
execution, delivery and performance of this Agreement. Notwithstanding the
foregoing, the Company shall pay any and all stamp, transfer and other similar
taxes payable or determined to be payable in connection with the execution and
delivery of this Agreement or any securities purchased hereunder, and shall save
and hold AHPC harmless from and against any and all liabilities with respect to
or resulting from any delay in paying, or omission to pay, such taxes.

         9.9      Publicity.

         Except for information which is required to be disclosed by applicable
law, neither party hereto shall issue any press releases or public statements
with regard to this Agreement or the Related Agreements without first seeking
the approval of the other party, which shall not be unreasonably withheld or
delayed.

         9.10     Amendments and Waivers.

         Any term of this Agreement may be amended and the observance of any
term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or prospectively), only with the written
consent of the Company and AHPC. Any amendment or waiver effected in accordance
with this paragraph shall be binding upon each holder of any securities
purchased under this Agreement at the time outstanding, each future holder of
all such securities, and the Company.

         9.11     Severability.

         If one or more provisions of this Agreement are held to be
unenforceable under applicable law, such provision shall be excluded from this
Agreement and the balance of the Agreement shall be interpreted as if such
provision were so excluded and shall be enforceable in accordance with its
terms.

         9.12     Entire Agreement.

         This Agreement and the documents referred to herein constitute the
entire agreement among the parties and no party shall be liable or bound to any
other party in any manner by any warranties, representations, or covenants
except as specifically set forth herein or therein.

             [The remainder of this page intentionally left blank.]

                                       15
<PAGE>   19

         IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.

                                       KING PHARMACEUTICALS, INC.

                                       By: /s/ Jefferson J. Gregory
                                           --------------------------------
                                       Name: Jefferson J. Gregory
                                       Title: President and Chief Operating
                                              Officer

                                       AMERICAN HOME PRODUCTS CORPORATION

                                       By: /s/ Kenneth J. Martin
                                           ------------------------------
                                       Name: Kenneth J. Martin
                                       Title: Senior Vice President and
                                              Chief Financial Officer

                                       16

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