FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From To
-------- --------
Commission File Number 1-3608
WARNER-LAMBERT COMPANY
(Exact name of registrant as specified in its charter)
Delaware 22-1598912
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Tabor Road, Morris Plains, New Jersey
(Address of principal executive offices)
07950
(Zip Code)
Registrant's telephone number, including area code: (201) 540-2000
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of
the issuer's classes of Common Stock, as of the latest
practicable date.
CLASS Outstanding at October 31, 1994
----- -------------------------------
Common Stock, $1 par value 134,524,409
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WARNER-LAMBERT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30, 1994 December 31, 1993
------------------ -----------------
(Millions of dollars)
ASSETS:
Cash and cash equivalents $ 82.3 $ 440.5
Receivables 1,156.2 890.8
Inventories 631.4 476.5
Prepaid expenses and other current assets 605.4 410.9
-------- --------
Total current assets 2,475.3 2,218.7
Investments and other assets 592.5 487.4
Equity investments in affiliated companies 229.7 208.6
Property, plant and equipment 1,716.5 1,599.3
Intangible assets 381.2 314.1
-------- --------
Total assets $5,395.2 $4,828.1
======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Commercial paper $ 662.2 $ 507.5
Notes payable - banks and other 269.1 145.3
Accounts payable, trade 420.2 427.1
Accrued compensation 130.6 116.9
Other current liabilities 632.8 638.8
Federal, state and foreign income taxes 161.9 180.3
-------- --------
Total current liabilities 2,276.8 2,015.9
Long-term debt 542.2 546.2
Other noncurrent liabilities 780.1 867.8
-------- --------
Total liabilities 3,599.1 3,429.9
-------- --------
Minority interests 43.6 8.6
Shareholders' equity:
Preferred stock - none issued - -
Common stock - 160,330,268 shares issued 160.3 160.3
Capital in excess of par value 149.1 120.1
Retained earnings 2,598.9 2,287.7
Cumulative translation adjustments (184.2) (224.8)
Treasury stock, at cost (1994 - 25,833,712
shares; 1993 - 26,190,513 shares) (971.6) (953.7)
-------- --------
Total shareholders' equity 1,752.5 1,389.6
-------- --------
Total liabilities and shareholders'
equity $5,395.2 $4,828.1
======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
WARNER-LAMBERT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
----------------- ----------------
1994 1993 1994 1993
---- ---- ---- ----
(Millions of dollars, except per share amounts)
NET SALES $1,671.0 $1,478.5 $4,696.1 $4,259.9
COSTS AND EXPENSES:
Cost of goods sold 569.4 498.3 1,557.7 1,381.1
Marketing 600.4 564.2 1,699.3 1,604.0
Administrative and general 115.5 101.4 315.6 279.6
Research and development 124.2 118.5 322.6 336.9
Other(income)expense, net 4.1 2.4 (4.2) (30.4)
Restructuring - - - 70.0
-------- -------- -------- --------
Total costs and expenses 1,413.6 1,284.8 3,891.0 3,641.2
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES,
MINORITY INTERESTS AND
ACCOUNTING CHANGES 257.4 193.7 805.1 618.7
Provision for income taxes 53.5 38.0 175.7 136.9
Minority interests 34.7 (.2) 73.1 (.1)
-------- -------- -------- --------
INCOME BEFORE ACCOUNTING CHANGES 169.2 155.9 556.3 481.9
Accounting changes (net of tax) - - - 46.0
-------- -------- -------- --------
NET INCOME $ 169.2 $ 155.9 $ 556.3 $ 527.9
======== ======== ======== ========
PER COMMON SHARE:
Income before accounting
changes $ 1.26 $ 1.16 $ 4.15 $ 3.57
Accounting changes - - - .34
-------- -------- -------- --------
Net income $ 1.26 $ 1.16 $ 4.15 $ 3.91
======== ======== ======== ========
Cash dividends paid $ .61 $ .57 $ 1.83 $ 1.71
======== ======== ======== ========
See accompanying notes to consolidated financial statements.
<PAGE>
WARNER-LAMBERT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months
Ended September 30,
------------------
1994 1993
------------------
(Millions of dollars)
OPERATING ACTIVITIES:
Net income $ 556.3 $ 527.9
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 133.8 125.0
Accounting changes (net of tax) - (46.0)
Restructuring - 70.0
Changes in assets and liabilities, net of
effects from acquisitions/dispositions
of businesses:
Receivables (231.4) (156.0)
Inventories (137.4) (90.2)
Accounts payable, and accrued
liabilities (177.5) (107.2)
Other items, net 39.3 (53.5)
------- -------
Net cash provided by operating activities 183.1 270.0
------- -------
INVESTING ACTIVITIES:
Purchase of investments (560.6) (190.7)
Proceeds from sale of investments 281.1 126.5
Purchase of property, plant and equipment (223.8) (206.0)
Acquisitions of businesses (59.7) (419.9)
Other 16.9 8.6
------- -------
Net cash used by investing activities (546.1) (681.5)
------- -------
FINANCING ACTIVITIES:
Proceeds from borrowings 345.1 524.2
Principal payments on borrowings (94.1) (63.5)
Purchase of treasury stock (41.2) (75.3)
Cash dividends paid (245.1) (231.4)
Proceeds from exercise of stock options 38.2 8.7
------- -------
Net cash provided by financing activities 2.9 162.7
------- -------
Effect of exchange rate changes on cash
and cash equivalents 1.9 (10.5)
------- -------
Decrease in cash and cash equivalents (358.2) (259.3)
Cash and cash equivalents at beginning of year 440.5 718.4
------- -------
Cash and cash equivalents at end of period $ 82.3 $ 459.1
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
WARNER-LAMBERT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE A: The interim financial statements presented herein should be
read in conjunction with Warner-Lambert Company's 1993 Annual
Report.
NOTE B: The results of operations for the interim periods are not
necessarily indicative of the results for the full year.
NOTE C: In the opinion of management, all adjustments considered
necessary for a fair presentation of the results for the
interim periods have been included in the consolidated
financial statements.
NOTE D: Net income per share for the three and nine months ended
September 30, 1994 and September 30, 1993 has been computed
based on the average number of shares of common stock
outstanding during each period. The effect on net income per
share from the assumed conversion of common stock equivalents
was not material. The average number of shares of common
stock outstanding during the three months ended September 30,
1994 and September 30, 1993 was 134,199,000 and 134,939,000,
respectively and during the nine months ended September 30,
1994 and September 30, 1993 was 133,979,000 and 135,185,000,
respectively.
NOTE E: Interest payments for the nine months ended September 30, 1994
and September 30, 1993 were $68.3 million and $51.6 million,
respectively. Income tax payments for the same periods were
$155.5 million and $131.9 million, respectively.
NOTE F: Major classes of inventories were as follows:
September 30, 1994 December 31, 1993
------------------ -----------------
(In millions)
Raw materials $106.7 $ 88.6
Finishing supplies 54.6 38.6
Goods in process 94.9 79.3
Finished goods 375.2 270.0
------ ------
$631.4 $476.5
====== ======
NOTE G: Property, plant and equipment balances were as follows:
September 30, 1994 December 31, 1993
------------------ -----------------
(In millions)
Property, plant and equipment $ 3,025.5 $ 2,834.2
Less accumulated depreciation (1,309.0) (1,234.9)
--------- ---------
Net $ 1,716.5 $ 1,599.3
========== =========
<PAGE>
NOTE H: Intangible asset balances were as follows:
September 30, 1994 December 31, 1993
------------------ -----------------
(In millions)
Patents, trademarks,
goodwill and other
intangibles $ 440.0 $ 361.4
Less accumulated amortization (58.8) (47.3)
------- -------
Net $ 381.2 $ 314.1
======= =======
NOTE I: Warner Wellcome Consumer Health Products:
Warner-Lambert and Wellcome plc formed an alliance to develop
and market non-prescription consumer health care products.
The U.S. and Canadian joint ventures became operational in the
first quarter of 1994. Joint ventures in Australia, New
Zealand and certain countries in Europe became operational in
June 1994. Warner-Lambert has voting control of the joint
ventures and has consolidated the financial results.
Wellcome's share of the operating results of the joint
ventures has been reflected as minority interest. Warner-
Lambert's consolidated net sales included products contributed
by Wellcome of approximately $211 million for the nine months
ended September 30, 1994. The alliance did not have a
significant impact on the results of operations.
NOTE J: The company adopted the provisions of SFAS No. 115,
"Accounting for Certain Investments in Debt and Equity
Securities," effective January 1, 1994. The adoption of the
statement had no impact on the company's earnings. At January
1, 1994, the company's portfolio of Held-to-Maturity
securities had immaterial unrealized holding gains and no
unrealized holding losses. Securities categorized as
Available-For-Sale are immaterial.
NOTE K: In June 1994, Warner-Lambert acquired Saila S.p.A., a
privately held confectionery company based in Italy. The
total purchase price is approximately $66 million which
includes $7 million classified as a current liability.
Reported results of operations for 1994 and 1993 would not
have differed significantly had the above acquisition taken
place at the beginning of 1993. The above acquisition has
been accounted for by the purchase method of accounting. The
excess of the purchase price over the estimated fair value of
the net assets acquired has been treated as goodwill and will
be amortized over 40 years.
<PAGE>
NOTE L: The company has interest rate swaps agreements having a total
notional amount of $450 million which mature in 1996 through
2002. The swap agreements effectively convert fixed rates on
long-term debt to floating rates. The company's objective
with respect to entering into such swap agreements is to
reduce the company's overall interest expense. As of
September 30, 1994, the weighted average floating rate paid
was 6.2% for the entire swap position.
The company is exposed to currency fluctuations against the
U.S. dollar. The company uses forward currency contracts to
hedge risks associated with exchange volatility. Major
exposures considered for hedging include: foreign currency
denominated receivables and payables, dividends relating to
foreign subsidiaries and various anticipated foreign currency
denominated sales and purchases. The company believes the
risks associated with its unhedged exposures are not
significant.
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
THIRD QUARTER AND NINE MONTHS ENDED SEPTEMBER 30, 1994
- ------------------------------------------------------
COMPARED WITH CORRESPONDING PERIOD IN 1993
- ------------------------------------------
REVENUES
- --------
Worldwide sales for the third quarter and nine-month period rose 13
percent to $1,671 million and 10 percent to $4,696 million, respectively.
Sales growth of approximately 6 percent for each period was from
businesses that Warner-Lambert acquired in 1993 and products contributed
by Wellcome plc to the Warner Wellcome joint ventures (discussed below),
partly offset by the absence of the chocolate/caramel business (which was
sold in October 1993). Unit volume gains were 14 percent for the third
quarter and 11 percent for the nine-month period and price decreases
reduced sales by 2 percent in the third quarter. Foreign exchange rate
changes had a favorable impact of 1 percent on the third quarter and an
unfavorable impact of 1 percent on the nine-month sales results. U.S.
sales increased $94 million or 13 percent to $825 million for the third
quarter and $157 million or 8 percent to $2,207 million for the nine-month
period. International sales increased $99 million to $846 million for the
third quarter and $280 million to $2,489 million for the nine-month
period, a 13 percent increase for both periods. At constant exchange
rates, international sales increased 12 percent for the third quarter and
14 percent for the nine-month period.
SEGMENT SALES THREE MONTHS ENDED NINE MONTHS ENDED
(Dollars in SEPTEMBER 30, SEPTEMBER 30,
Millions) ---------------------------- ---------------------------
Percent Percent
1994 1993 Increase/ 1994 1993 Increase/
(Decrease) (Decrease)
-------- -------- -------- -------- -------- --------
Pharmaceutical $ 536.2 $ 533.6 .5 % $1,557.0 $1,580.1 (1.5)%
Consumer
Health Care 803.3 606.2 32.5 2,136.5 1,700.4 25.7
Confectionery 331.5 338.7 (2.1) 1,002.6 979.4 2.4
-------- -------- -------- --------
Consolidated
Net Sales $1,671.0 $1,478.5 13.0 $4,696.1 $4,259.9 10.2
======== ======== ======== ========
Pharmaceutical sales in the U.S. fell 1 percent to $274 million for the
third quarter and 6 percent to $764 million for the nine-month period
primarily due to sales erosion of the lipid-regulator Lopid as a result of
generic competition.
<PAGE>
Partly offsetting the sales decline of Lopid in the U.S. for the nine-month
period was sales growth from the cardiovascular drug Accupril (which
benefited from expanded labeling as a treatment for congestive heart
failure), the anticonvulsant Dilantin, sales from Cognex, the company's
drug for the treatment of Alzheimer's disease (which was introduced in the
third quarter of 1993), and from the add-on epilepsy therapy Neurontin
(which was launched during the first quarter of 1994). International
pharmaceutical sales for both the third quarter and nine-month period
increased 3 percent to $262 million and to $793 million, respectively. At
constant exchange rates, international sales increased 1 percent for the
third quarter and 6 percent for the nine-month period. Products with
international sales growth for both periods were Accupril and Capsugel
empty hard-gelatin capsules. Cognex has received marketing approval in
France, Argentina, Australia, Brazil and Uruguay. Pending the finalization
of distribution agreements with regulatory authorities, international
shipments of Cognex may begin in the fourth quarter.
Warner-Lambert continues to make progress in resolving the issues related
to the consent decree that the company entered into with the U.S. Food and
Drug Administration (FDA) in 1993. The consent decree with the FDA is a
court-approved agreement that primarily requires the company to certify
that laboratory and/or manufacturing procedures at its pharmaceutical
manufacturing facilities in the U.S. and Puerto Rico meet current Good
Manufacturing Practices established by the FDA. Most of the company's
pharmaceutical products have returned to full manufacture and distribution,
and laboratories in all U.S. pharmaceutical plants have received
certification. The company is working with the FDA to complete facility
certification for the Vega Baja and Fajardo plants in Puerto Rico.
Sales of the consumer health care products segment of $803 million for the
third quarter and $2,137 million for the nine-month period were 33 percent
and 26 percent higher than the corresponding periods in 1993. Warner-
Lambert acquired several businesses in this reporting segment in 1993,
including the principal operations of the Wilkinson Sword wet shave
business and Willinger Bros., Inc., a manufacturer and distributor of
aquarium products. Sales from these businesses and sales of approximately
$99 million in the third quarter and $211 million in the nine-month period
from products contributed by Wellcome plc to the Warner Wellcome joint
ventures increased this segment's sales by approximately 18 percent for
both the third quarter and the nine-month period.
The Warner Wellcome alliance calls for both Warner-Lambert and Wellcome plc
to contribute to the joint ventures current and future over-the-counter
(OTC) products. Joint ventures became operational in the U.S. and Canada
in January 1994 and in Australia, New Zealand and certain countries in
Europe in June 1994. After a two-year phase-in period, Warner-Lambert will
receive approximately 70 percent and Wellcome will receive approximately 30
percent of the profits generated by Warner Wellcome in the U.S. A New Drug
Application (NDA) for the conversion to OTC use of Wellcome's anti-viral
drug Zovirax as a genital herpes medication was filed with the FDA in
August 1993. Subject to such conversion, profits on OTC Zovirax sales in
the U.S. will be shared in favor of Wellcome. Profits on current OTC
products will be shared equally in Canada, Europe, Australia and New
Zealand. Profits on certain formulations of Zovirax cold sore cream sold
over-the-counter outside the U.S. will be shared equally, subject to a
royalty to Wellcome if sales exceed a threshold amount. Other future OTC
switch products will be subject to a profit split in favor of the
innovator. Zovirax cold sore cream has been approved for OTC use and is
being sold in the U.K., Ireland, Germany and Switzerland.
Warner-Lambert and Glaxo Holdings plc formed a joint venture in the U.S.
that commenced operation in December 1993. The joint venture will develop,
seek approval of and market OTC versions of Glaxo prescription drugs in the
U.S., including Zantac, its pharmaceutical product for ulcer treatment.
Additional joint ventures are expected to be formed with Glaxo in other
major markets outside the U.S., excluding Japan. In the U.S., Warner-
Lambert assigned its interest in the joint venture to Warner Wellcome.
Warner Wellcome and Glaxo will share development costs and profits equally,
with Glaxo receiving a royalty on OTC sales by the joint venture and
Wellcome receiving ten percent of Warner Wellcome's share of the U.S. joint
venture's profits. On September 30, 1994, Glaxo submitted a NDA filing to
the FDA for Zantac's sale as an OTC product in the U.S. In the first
quarter of 1994, Warner-Lambert began marketing Glaxo's nasal spray
Beconase for OTC sale in the U.K.
In the U.S. consumer health care sales grew 38 percent to $433 million for
the third quarter and 28 percent to $1,082 million for the nine-month
period. Sales from businesses that Warner-Lambert acquired in 1993 and the
inclusion of Wellcome products, including Sudafed and Actifed cold
medications and Neosporin topical anti-infective, increased sales by
approximately 24 percent in each period. Sales growth in the U.S. for both
periods was from Listerine Antiseptic mouthwash (resulting from the
introduction in the third quarter of 1994 of FreshBurst flavor), Benadryl
antihistamine (benefiting from the introduction in the third quarter of
1994 of Benadryl Dye-Free antihistamine) and sales from Silk Effects
women's wet-shave system (which was introduced in the third quarter of
1994). International sales advanced 27 percent to $371 million for the
third quarter and 23 percent to $1,055 million for the nine-month period.
At constant exchange rates, international sales increased 25 percent and 24
percent, respectively. The international growth reflected the inclusion of
the Wilkinson products and the Wellcome products in Canada, Europe,
Australia and New Zealand and the continued success of Halls cough tablets,
Tetra aquarium products and Schick wet-shaving products. Sales growth of
approximately 11 percent for the third quarter and 12 percent for the nine-
month period was from businesses that Warner-Lambert acquired in 1993 and
the inclusion of Wellcome products.
Confectionery sales in the U.S. fell 15 percent to $118 million in the
third quarter and 8 percent to $362 million for the nine-month period due
to the sale of the chocolate/caramel business in the fourth quarter of
1993. Excluding chocolate/caramel sales, sales grew 3 percent for the
third quarter and 4 percent for the nine-month period. Sales growth in the
U.S. resulted from Mint*A*Burst stick gum (introduced in December 1993) and
the introduction in the third quarter of 1994 of Fruit Waves hard candy and
Power Rangers gum. International confectionery sales increased 7 percent
to $214 million for the third quarter and 10 percent to $641 million for
the nine-month period. At constant exchange rates, international sales
increased 8 percent and 11 percent, respectively. Major contributors to
international sales growth were Trident sugarless gum, Chiclets candy-
coated gum and Clorets gums and mints.
<PAGE>
COSTS AND EXPENSES
- ------------------
Cost of goods sold in the third quarter of 1994 increased 14 percent to
$569 million compared with $498 million for the same period last year. For
the nine-month period, cost of goods sold of $1,558 million was 13 percent
higher than $1,381 million in the first nine months of 1993. Cost of goods
sold as a percentage of sales increased to 34.1 percent in the third
quarter from 33.7 percent in the third quarter of 1993, and to 33.2 percent
for the first nine months of 1994 from 32.4 percent for the first nine
months of 1993. The increases in the ratios are due to two factors: a
higher percentage of sales being generated by the consumer health care
segment (which has a lower gross profit margin than the pharmaceutical
segment), and higher pharmaceutical segment ratios, resulting from both an
unfavorable product mix and higher costs related to regulatory compliance
issues.
Marketing expense rose 6 percent in each period, to $600 million in the
third quarter compared with $564 million for the same period last year, and
to $1,699 million for the nine-month period versus $1,604 million for the
same period one year ago. The increases in marketing expense for both
periods were due to the inclusion of the acquired businesses and the Warner
Wellcome alliance, and from the introduction of new products, partially
offset by reductions in the U.S. pharmaceutical sales force. As a
percentage of sales, marketing expense in the third quarter of 1994 was
35.9 percent compared with 38.2 percent for the same quarter last year, and
for the nine-month period the ratio was 36.2 percent versus 37.7 percent
one year ago, as sales growth outpaced the company's investment in
marketing expense.
Administrative and general expense was $116 million for the third quarter
and $316 million for the first nine months of 1994, increasing 14 percent
and 13 percent, respectively, from year-ago levels. Higher expenses were
primarily due to the inclusion of the acquired companies' results and the
Warner Wellcome alliance, coupled with greater administrative costs and
quality assurance expenses related to regulatory compliance issues.
Research and development expense rose 5 percent to $124 million in the
third quarter compared with $118 million for the same period last year.
For the nine-month period, research and development expense was $323
million, 4 percent lower than the $337 million that was spent in the same
period in 1993, reflecting reduced spending on selected pharmaceutical
programs. As a percentage of sales, research and development expense in
the third quarter of 1994 was 7.4 percent of sales versus 8.0 percent for
the same quarter last year, and for the nine-month period the ratio was 6.9
percent versus 7.9 percent one year ago, as sales growth outpaced the
company's investment in research and development.
Other (income) expense, net was $(4) million for the first nine months of
1994, decreasing $26 million from the same period last year, primarily due
to higher interest expense (resulting from increased debt levels from the
company's 1993 and 1994 acquisitions) and higher currency exchange losses.
Minority interests increased $35 million in the third quarter and $73
million during the nine-month period of 1994 as a result of the Warner
Wellcome joint ventures.
<PAGE>
Restructuring
- -------------
Nine month 1993 results include a first quarter restructuring charge of $70
million pretax ($45 million after tax or $.33 per share) relating to the
disposition of the Novon specialty polymer business. In November 1993 the
company discontinued the operations of the Novon Products Group.
In November 1993, the company announced a restructuring program that
resulted in a pretax charge of $468 million, covering the rationalization
of manufacturing facilities, organizational restructuring and related
workforce reductions. Activity through September 30, 1994, included the
closing of two manufacturing sites, (Carolina, Puerto Rico and Harbin,
China). At September 30, other current liabilities and other noncurrent
liabilities included $269 million for the program. At present, the company
is unaware of any event that would significantly change the program's
spending or savings.
ACCOUNTING CHANGES
- ------------------
The company adopted, effective January 1, 1993, Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which
increased net income in 1993 by $63 million or $.47 per share; and SFAS No.
112, "Employers' Accounting for Postemployment Benefits," which decreased
net income in 1993 by $17 million or $.13 per share.
INCOME TAXES
- ------------
The effective income tax rate was 20.8 percent for the third quarter and
21.8 percent for the first nine months of 1994 compared with 19.6 percent
for the 1993 third quarter and 23.5 percent for the nine-month period. The
1993 nine-month rate excludes the impact of the accounting changes and the
restructuring charge. The lower rate for the first nine months of 1994
reflects the impact of changes in valuation allowances and the reporting of
minority interests. This decrease was partially offset by the absence of
the benefit received in the third quarter of 1993 of the retroactive
extension of the U.S. research tax credit, other U.S. tax law changes, as
well as the increased taxation of international operations and reduced
benefits from tax-advantaged jurisdictions.
NET INCOME
- ----------
Net income was $169 million or $1.26 per share in the third quarter and
$556 million or $4.15 per share for the nine-month period in 1994, compared
with $156 million or $1.16 per share and $528 million or $3.91 per share
for the third quarter and nine months in 1993, respectively. For the third
quarter, net income and earnings per share rose 9 percent versus the same
period a year ago. For the nine-month period, excluding the restructuring
charge and accounting changes in 1993, net income and earnings per share
increased 6 percent from the comparable prior year period.
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
- -------------------------------
Total cash and cash equivalents amounted to $82 million, a decrease of $358
million since December 31, 1993. The company also holds $440 million in
securities and time deposits that do not qualify as cash equivalents,
representing an additional investment of $280 million since December 31.
Cash provided by operating activities of $183 million and a net increase in
borrowings of $251 million was principally used for the payment of
dividends of $245 million, for the net investment in securities and time
deposits of $280 million, for the purchase of property, plant and equipment
of $224 million, for the acquisition of businesses of $60 million and for
the repurchase of company stock of $41 million, resulting in the reduction
in cash and cash equivalents. Warner-Lambert's net debt (total debt less
total cash and cash equivalents and the securities and time deposits) of
$951 million at September 30, 1994 increased $353 million from $598 million
at December 31, 1993.
Expenditures for property, plant and equipment for the year 1994 are
expected to be approximately $389 million. The company announced plans to
make an initial capital investment of approximately $30 million over the
next three years to establish a confectionery products operation in the
People's Republic of China.
ENVIRONMENT
- -----------
The company maintains control systems designed to assure compliance in all
material respects with applicable environmental laws and regulations.
Warner-Lambert is involved in various environmental matters, including
actions initiated by the Environmental Protection Agency under the
Comprehensive Environmental Response, Compensation and Liability Act, also
known as Superfund, or by state authorities under similar state legislation
or other parties. It is not possible to predict with certainty the outcome
of such matters or the total cost of remediation. In the opinion of
management, such proceedings will not result in a material adverse effect
on the company's financial position, liquidity, cash flow or results of
operations for any year.
SHAREHOLDER INFORMATION
- -----------------------
In January 1994, the Board of Directors approved a 7 percent increase in
the quarterly dividend to $.61 cents per share, which was paid in each of
the first three quarters of 1994.
<PAGE>
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
For a discussion of Warner-Lambert's consent decree with
the U.S. Food and Drug Administration ("FDA"), covering issues
related to compliance with current Good Manufacturing Practices
established by the FDA, see above under Part I, Item 2,
"Management's Discussion and Analysis of Financial Condition and
Results of Operations."
Warner-Lambert and certain present and former employees
have been served with subpoenas by the U.S. Attorney's office in
Maryland, which is conducting an inquiry relating to compliance with
FDA regulations, to produce records and/or appear before a federal
grand jury in Baltimore. Warner-Lambert is cooperating with the
inquiry and cannot predict what the outcome of the investigation
will be.
In September 1993, Warner-Lambert received a Complaint
and Compliance Order from the Environmental Protection Agency
("EPA") seeking penalties of $268,000 for alleged violations of the
Resource Conservation and Recovery Act, Boilers and Industrial
Furnace regulations. Warner-Lambert is contesting the allegations
contained within the Complaint and has entered into negotiations
with the EPA in an attempt to resolve these issues. Warner-Lambert
is also currently engaged in discussions with the EPA, Region II,
regarding certain environmental issues relating to its waste water
treatment facility at its Vega Baja, Puerto Rico plant.
Warner-Lambert, along with numerous other pharmaceutical
manufacturers and wholesalers, has been sued in a number of state
and federal antitrust lawsuits by retail pharmacies seeking treble
damages and injunctive relief. These actions arise from alleged
price discrimination by which the defendant drug companies, acting
alone or in concert, are alleged to have favored institutions,
managed care entities, mail order pharmacies and other buyers with
lower prices for brand name prescription drugs than those afforded
to plaintiff retailers. The federal cases have been consolidated by
the Judicial Panel on Multidistrict Litigation and transferred to
the U.S. District Court for the Northern District of Illinois for
pre-trial proceedings. The state cases pending in California have
been coordinated in the Superior Court of California, County of San
Francisco. Warner-Lambert has also been named as a defendant in an
action in Alabama state court brought by a class of consumers and a
class of pharmacies and in an action in Wisconsin state court
brought by a class of pharmacies, each arising from the same
allegations of price discrimination. Warner-Lambert believes that
these actions are without merit and will defend itself vigorously.
Although it is too early to predict the outcome of these actions,
Warner-Lambert does not at present expect this litigation to have a
material adverse effect on its financial position, liquidity, cash
flow or results of operations.
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
(10) Material contracts
(a) Warner-Lambert Company 1992 Stock Plan,
as amended to September 27, 1994.
(b) Warner-Lambert Company Incentive
Compensation Plan, as amended to
September 27, 1994.
(c) Warner-Lambert Company Supplemental
Pension Income Plan, as amended to
September 27, 1994.
(d) Warner-Lambert Excess Savings Plan,
formerly Warner-Lambert Supplemental
Savings Plan, as amended to October 1,
1994.
(e) Warner-Lambert Company Executive
Severance Plan, as amended to September
27, 1994.
(12) Computation of Ratio of Earnings to Fixed
Charges.
(27) Financial Data Schedule (filed
electronically).
(b) Warner-Lambert has not filed any reports on Form
8-K for the quarter ended September 30, 1994.
<PAGE>
S I G N A T U R E S
-------------------
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned thereunto duly
authorized.
WARNER-LAMBERT COMPANY
(Registrant)
Date: November 11, 1994 By: Ernest J. Larini
----------------
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: November 11, 1994 By: William F. Gilroy
-----------------
Vice President and Controller
(Principal Accounting Officer)
<PAGE>
EXHIBIT INDEX
-------------
Exhibit No. Exhibit Page No.
- ----------- ------- --------
(10) Material contracts
(a) Warner-Lambert Company 1992 Stock
Plan, as amended to September
27, 1994.
(b) Warner-Lambert Company Incentive
Compensation Plan, as amended to
September 27, 1994.
(c) Warner-Lambert Company Supplemental
Pension Income Plan, as amended to
September 27, 1994.
(d) Warner-Lambert Excess Savings Plan,
formerly Warner-Lambert Supplemental
Savings Plan, as amended to October 1,
1994.
(e) Warner-Lambert Company Executive
Severance Plan, as amended to
September 27, 1994.
(12) Computation of Ratio of Earnings
to Fixed Charges.
(27) Financial Data Schedule (filed
electronically).
<TABLE>
EXHIBIT 12
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Years Ended December 31,
Nine Months Ended --------------------------------------------
September 30, 1994 1993 1992 1991 1990 1989
---------------- ---- ---- ---- ---- ----
Earnings before income taxes and
<S> <C> <C> <C> <C> <C> <C>
accounting changes $ 732.0 $ 318.5 $ 858.2 $ 221.5 $ 680.7 $ 591.6
Add:
Interest on indebtedness-
excluding amount capitalized 68.2 64.2 80.8 58.2 68.7 55.6
Amortization of debt expense .3 .5 .6 .4 .3 1.0
Interest factor in rent
expense (a) 19.1 25.4 23.4 22.3 20.6 17.9
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Adjusted Earnings $ 819.6 $ 408.6 $ 963.0 $ 302.4 $ 770.3 $ 666.1
======= ======= ======= ======= ======= =======
Fixed Charges:
Interest on indebtedness $ 68.2 $ 64.2 $ 80.8 $ 58.2 $ 68.7 $ 55.6
Capitalized interest 7.2 8.6 8.1 9.4 5.2 6.3
Amortization of debt expense .3 .5 .6 .4 .3 1.0
Interest factor in rent
expense (a) 19.1 25.4 23.4 22.3 20.6 17.9
------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Total Fixed Charges $ 94.8 $ 98.7 $ 112.9 $ 90.3 $ 94.8 $ 80.8
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 8.6 4.1(b) 8.5 3.3(c) 8.1 8.2
======= ======= ======= ======= ======= =======
(a) One third of rental expense (which the company believes to be a reasonable approximation of the
interest factor of such rental expense).
(b) The company's ratio of earnings to fixed charges for 1993 would have been 9.5 excluding the
restructuring charge of $525.2 million.
(c) The company's ratio of earnings to fixed charges for 1991 would have been 9.4 excluding the
restructuring charge of $544.0 million.
</TABLE>
WARNER-LAMBERT COMPANY
1992 STOCK PLAN
As Amended to September 27, 1994
<PAGE>
WARNER-LAMBERT COMPANY
1992 STOCK PLAN
ARTICLE I
Purpose of Plan
Section 1.1. Purpose.
(a) The purpose of the 1992 Stock Plan is to provide
additional incentive to selected officers and other employees
of the Company (as hereinafter defined), to recognize and
reward their efforts and accomplishments in order to strengthen
the desire of employees to remain with the Company and
stimulate their efforts on behalf of the Company and to attract
and retain persons of competence, and, by encouraging ownership
of a stock interest in the Company, to gain for the Company the
advantages inherent in employees having a sense of
proprietorship.
(b) In addition, the Plan (as hereinafter defined)
will assist in the attraction and retention of non-employee
members of the Board of Directors by providing the opportunity
for such Directors to obtain a proprietary interest in the
Company's success and progress and with increased flexibility
in the timing of the receipt of fees for services on, and
attending meetings of, the Board of Directors and committees
thereof.
ARTICLE II
Definitions
Section 2.1. Definitions. Whenever used herein, unless
the context otherwise indicates, the following terms shall have
the respective meaning set forth below:
Account: A Cash Account or a Stock Account.
Act: The Securities Exchange Act of 1934, as amended.
Affiliate: Any corporation, partnership, association,
joint-stock company, business trust, joint venture or
unincorporated organization controlled, directly or indirectly,
by Warner-Lambert. Warner-Lambert shall be deemed to control
any such entity if Warner-Lambert possesses, directly or
indirectly, the power to direct or cause the direction of its
management and policies, whether through the ownership of
voting securities, by contract or otherwise.
Board of Directors (or Board): The Board of Directors of
Warner-Lambert.
Business Day: A day except for a Saturday, Sunday or a
legal holiday.
Cash Account: The Account which reflects the Compensation
deferred by a Director pursuant to Section 11.3.
Cash Credit: A credit to a Director's Cash Account,
expressed in whole dollars and fractions thereof, pursuant to
Section 11.3.
Closing Price: The closing price of the Common Stock on
the Composite Tape for New York Stock Exchange issues.
Code: The Internal Revenue Code of 1986, as amended.
Committee: The committee appointed to administer the Plan
in accordance with Section 12.1 hereof.
Common Stock: Common Stock, par value $1.00 per share, of
Warner-Lambert.
Company: Warner-Lambert and its Affiliates.
Compensation: All cash remuneration payable to a Director
for services to the Company as a Director or as a consultant,
other than reimbursement for expenses, and shall include
retainer fees for service on, and fees for attendance at
meetings of, the Board and any committees thereof.
Conversion Election Date: A date described in Section
11.5 by which a Director may elect to convert all or any
portion of his or her Cash Account to his or her Stock Account
and vice versa.
Deferred Compensation Account: An account established by
the Company for a Director under a Predecessor Plan.
Director: Any member of the Board of Directors who is not
an employee of the Company or any of its Affiliates.
Effective Date: The date specified in Article XV hereof.
Employee: Officers and other employees of the Company or
any of its Affiliates (including such persons who are also
members of the Board of Directors).
Fair Market Value: As used in the Plan, the term "Fair
Market Value" shall be the mean between the high and low sales
prices for Common Stock on the Composite Tape for New York
Stock Exchange issues on the date the calculation thereof shall
be made. In the event the date of calculation shall be a date
on which the Common Stock shall not trade on the New York Stock
Exchange, determination of Fair Market Value shall be made as
of the first date prior thereto on which the Common Stock shall
have traded on the New York Stock Exchange.
Grantee: A Participant to whom Rights have been granted
in accordance with the provisions of Articles IV and VI hereof.
Option: The grant to Participants of options to purchase
shares of Common Stock in accordance with the provisions of
Articles IV and V hereof.
Optionee: A Participant to whom one or more Options have
been granted in accordance with the provisions of Articles IV
and V hereof.
Option Period: The period of time during which an Option
may be exercised in accordance with the provisions hereof.
Option Price: The price per share payable to the Company
for shares of Common Stock upon the exercise of an Option.
Participant: Each Employee to whom a Stock Award is
granted under the Plan.
Performance Awards: Awards made to Employees in
accordance with the provisions of Article VIII hereof.
Plan: The Warner-Lambert Company 1992 Stock Plan.
Plan Year: The calendar year.
Predecessor Plans: The Warner-Lambert Directors' Fees
Deferral Plan, the Warner-Lambert Consulting Fees Deferral Plan
and the Deferred Compensation Plan for Directors of Warner-
Lambert Company.
Reference Option: An Option, other than an incentive
stock option, to which a Right shall relate.
Reporting Person: A person subject to the reporting
requirements of Section 16(a) of the Act, excluding former
officers and directors whose transactions in Common Stock are
no longer subject to Section 16 of the Act.
Restricted Period: The period of time from the date of
grant of Restricted Stock until the lapse of restrictions
attached thereto.
Restricted Stock: Common Stock granted under the Plan
which is subject to restrictions in accordance with the
provisions of Article VII hereof.
Right: The grant to Participants of rights to acquire
shares of Common Stock in accordance with the provisions of
Articles IV and VI hereof.
Secretary: The Secretary of Warner-Lambert.
Spread: The amount by which the Option Price that would
be payable by the Grantee upon the exercise of the Reference
Option is less than the Fair Market Value of a share of Common
Stock on the date the related Right was granted.
Stock Account: The Account which reflects the
Compensation deferred by a Director pursuant to Section 11.4.
Stock Award: A grant of Options, Rights, Restricted Stock
or Performance Awards in accordance with the provisions hereof.
Stock Credit: A credit to a Director's Stock Account,
expressed in whole shares and fractions thereof, pursuant to
Section 11.4.
Subsidiary: Any corporation (other than Warner-Lambert)
in an unbroken chain of corporations beginning with and
including Warner-Lambert if, at the time of the granting of a
Stock Award, each of the corporations other than the last
corporation in said unbroken chain owns stock possessing 50
percent or more of the total combined voting power of all
classes of stock in one of the other corporations in such
chain.
Valuation Date: The date on which a Right is exercised.
Warner-Lambert: Warner-Lambert Company or any successor
to it in ownership of substantially all of its assets, whether
by merger, consolidation or otherwise.
Article III
Eligibility and Grants
Section 3.1. Eligibility and Grants. The Committee shall
determine the Employees who shall be granted Stock Awards and
the number of shares thereof. The Committee may make more than
one grant to an Employee during the life of the Plan. Each
grant shall be evidenced by a written instrument duly executed
by or on behalf of the Company.
Section 3.2. Share Limitation. Stock Awards may not be
granted in any year which provide for the issuance of more than
1.75% of the shares of Common Stock outstanding (including
issued shares reacquired by the Company) on the January 1 of
the year of grant. Shares of Common Stock issued under the
Plan may be either authorized and unissued shares or issued
shares reacquired by the Company. Notwithstanding the above
limitation, in any year in which Stock Awards are granted which
provide for the issuance of less than the maximum permissible
number of shares, the balance of such unused shares shall be
added to the limitation in subsequent years. In addition, if
any Option granted under the Plan shall expire, terminate or be
cancelled for any reason without having been exercised in full,
the corresponding number of unpurchased shares shall be added
to the limitation in subsequent years; provided, however, that
if such expired, terminated or cancelled Option shall have been
a Reference Option, none of such unpurchased shares shall again
become available for purposes of the Plan to the extent that
the related Right granted under the Plan is exercised.
Further, if any shares of Common Stock granted hereunder are
forfeited or such award otherwise terminates without the
delivery of such shares upon the lapse of restrictions, the
shares subject to such grant, to the extent of such forfeiture
or termination, shall be added to the limitation in subsequent
years so long as the Participant received no "benefits of
ownership" (within the meaning of Section 16 of the Act) in
connection with such grant. To the extent permitted by Section
16 of the Act, any shares of Common Stock issued under the Plan
through the assumption or substitution of outstanding grants
from an acquired company shall not reduce the shares available
under the Plan.
ARTICLE IV
General Terms of Options and Rights
Section 4.1. Consideration. The Committee shall
determine the consideration to the Company for the granting of
Options and Rights under the Plan, as well as the conditions,
if any, which it may deem appropriate to ensure that such
consideration will be received by, or will accrue to, the
Company, and, in the discretion of the Committee, such
consideration need not be the same, but may vary for Options
and Rights granted under the Plan at the same time or from time
to time.
Section 4.2. Number of Options and Rights.
(a) The Committee may grant more than one Option or
Right to an individual during the life of the Plan and, subject
to the requirements of Section 422 of the Code with respect to
incentive stock options, such Option or Right may be in
addition to, in tandem with, or in substitution for, options or
rights previously granted under the Plan or under another stock
plan of the Company or of another corporation and assumed by
the Company.
(b) The Committee may permit the voluntary surrender
of all or a portion of any Option granted under the Plan or any
prior plan to be conditioned upon the granting to the Employee
of a new Option for the same or a different number of shares as
the Option surrendered, or may require such voluntary surrender
as a condition precedent to a grant of a new Option to such
Employee. Such new Option shall be exercisable at the price,
during the period, and in accordance with any other terms or
conditions specified by the Committee at the time the new
Option is granted.
Section 4.3. Option and Right Agreements. The Company
shall effect the grant of Options and Rights under the Plan, in
accordance with determinations made by the Committee, by
execution of instruments in writing, in a form approved by the
Committee. Each Option and Right shall contain such terms and
conditions (which need not be the same for all Options and
Rights, whether granted at the same time or at different times)
as the Committee shall deem to be appropriate. The Committee
may, in its sole discretion, and subject to such terms and
conditions as it may adopt, accelerate the date or dates on
which some or all outstanding Options and Rights may be
exercised. Except as otherwise provided by the Committee,
Options and Rights shall be exercised by submitting to the
Company a signed copy of a notice of exercise in a form to be
supplied by the Company and the exercise of an Option or Right
shall be effective on the date on which the Company receives
such notice at its principal corporate offices.
Section 4.4. Non-Transferability of Option or Right. No
Option or Right granted under the Plan to an Employee shall be
transferable by the Employee otherwise than by will or by the
laws of descent and distribution or pursuant to a "qualified
domestic relations order" (as defined in the Code), and such
Option and Right shall be exercisable, during the Employee's
lifetime, only by such Employee.
Section 4.5. Optionees and Grantees not Stockholders. An
Optionee or Grantee or legal representative thereof shall have
none of the rights of a stockholder with respect to shares
subject to Options or Rights until such shares shall be issued
upon exercise of the Option or Right.
Section 4.6. Certain Events. As used in the Plan, a
"Change in Control of Warner-Lambert" shall be deemed to have
occurred if (i) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Act is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of Warner-Lambert representing twenty
percent (20%) or more of the combined voting power of Warner-
Lambert's then outstanding securities, (ii) upon the
consummation of a merger, consolidation, sale or disposition of
all or substantially all of Warner-Lambert's assets or plan of
liquidation which is approved by the stockholders of Warner-
Lambert (a "Transaction"), or (iii) the composition of the
Board at any time during any consecutive twenty-four (24) month
period changes such that the Continuity Directors (as
hereinafter defined) cease for any reason to constitute at
least fifty-one percent (51%) of the Board. For purposes of
the foregoing clause (iii), "Continuity Directors" means those
members of the Board who either (a) were directors at the
beginning of such consecutive twenty-four (24) month period, or
(b)(1) filled a vacancy during such twenty-four (24) month
period created by reason of (x) death, (y) a medically
determinable physical or mental impairment which renders the
director substantially unable to function as a director or (z)
retirement at the last mandatory retirement age in effect for
at least two (2) years, and (2) were elected, nominated or
voted for by at least fifty-one percent (51%) of the current
directors who were also directors at the commencement of such
twenty-four (24) month period. Notwithstanding the provisions
of Article II hereof, upon the exercise of a Right during the
30-day period following Warner-Lambert obtaining actual
knowledge of a Change in Control of Warner-Lambert, "Fair
Market Value" of a share of Common Stock on the Valuation Date
shall be equal to the higher of (i) the highest closing sale
price per share of Common Stock of Warner-Lambert on the
Composite Tape for New York Stock Exchange issues during the
period commencing 30 days prior to such Change in Control and
ending immediately prior to such exercise or (ii) if the Change
in Control of Warner-Lambert occurs as a result of a tender or
exchange offer or consummation of a Transaction, then the
highest price per share of Common Stock pursuant thereto. Any
consideration other than cash forming a part or all of the
consideration for Common Stock to be paid pursuant to the
applicable transaction shall be valued at the valuation placed
thereon by the Board. Adjustments, if any, shall be made in
accordance with Section 10.1 hereof.
ARTICLE V
Terms and Conditions of Options
Section 5.1. Types of Options. Options granted under the
Plan shall be in the form of (i) incentive stock options as
defined in Section 422 of the Code, or (ii) options not
qualifying under such section, or both, in the discretion of
the Committee. The status of each Option shall be identified
in the Option agreement.
Section 5.2. Option Price. The Option Price shall be
such as shall be fixed by the Committee, subject to adjustment
pursuant to Section 10.1 hereof. The date of the granting of
an Option under the Plan shall be the date fixed by the
Committee.
Section 5.3. Period of Option.
(a) No part of an Option may be exercised unless the
Optionee remains in the continuous employ of the Company for
the period of time specified by the Committee, except that upon
the occurrence of a Change in Control of Warner-Lambert all
Options may be exercised without giving effect to the period of
employment limitation and the limitations, if any, which may
have been imposed by the Committee pursuant to Section 5.3(b)
with respect to the percent of the total number of shares to
which the Option relates which may be purchased from time to
time during the Option Period.
(b) Options will be exercisable thereafter over the
Option Period, which, in the case of each Option, shall be a
period determined by the Committee and will be exercisable at
such times and in such amounts as determined by the Committee
at the time each Option is granted. Notwithstanding any other
provision contained in this Plan, no Option shall be
exercisable after the expiration of the Option Period. Except
as provided in Sections 5.4, 5.5 and 5.6 hereof, no Option may
be exercised unless the Optionee is then in the employ of the
Company and shall have been continuously so employed since the
date of the grant of such Option.
Section 5.4. Termination of Employment Before Age 55. An
Optionee whose employment terminates before age 55, by reason
other than death, shall be entitled to exercise such Option,
only within the three-month period after the date of such
termination of employment and in no event after the expiration
of the Option Period, and then only if and to the extent that
the Optionee was entitled to exercise the Option at the date of
the termination of employment, giving effect to the
limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) with respect to the
percent of the total number of shares to which the Option
relates which may be purchased from time to time during the
Option Period and have not been removed pursuant to Section
5.3(a).
Section 5.5. Termination of Employment On or After Age
55. An Optionee whose employment terminates on or after age
55, by reason other than death, shall be entitled to exercise
such Option if the Optionee was entitled to exercise the Option
at the date of the termination, without, however, giving effect
to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) with respect to the
percent of the total number of shares to which the Option
relates which may be purchased from time to time during the
Option Period; provided, however, that such Option shall be
exercisable until the later of (i) the three-year period after
termination of employment, or (ii) the period after termination
of employment which is equal to the number of full months that
the Option has been outstanding prior to such termination, but
in no event after the expiration of the Option Period.
Section 5.6. Death of Optionee. If an Optionee should
die:
(a) while in the employ of the Company, the Option
theretofore granted shall, if the Optionee was entitled to
exercise the Option at the date of death, be exercisable by the
estate of the Optionee, or by a person who acquired the right
to exercise such Option by bequest or inheritance or by reason
of the death of the Optionee, without, however, giving effect
to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) with respect to the
percent of the total number of shares to which the Option
relates which may be purchased from time to time during the
Option Period; provided, however, that such Option shall be
exercisable until the later of (i) the three-year period after
termination of employment, or (ii) the period after termination
of employment which is equal to the number of full months that
the Option has been outstanding prior to such termination, but
in no event after the expiration of the Option Period;
(b) within the three-month period after the date of
the termination of employment before age 55, the Option
theretofore granted shall be exercisable by the estate of the
Optionee, or by a person who acquired the right to exercise
such Option by bequest or inheritance or by reason of the death
of the Optionee, but then only if and to the extent that the
Optionee was entitled to exercise the Option at the date of
death, giving effect to the limitations, if any, which may have
been imposed by the Committee pursuant to Section 5.3(b) with
respect to the percent of the total number of shares to which
the Option relates which may be purchased from time to time
during the Option Period and have not been removed pursuant to
Section 5.3(a); provided, however, that such Option shall be
exercisable only within the twelve-month period next succeeding
the death of the Optionee and in no event after the expiration
of the Option Period; or
(c) after the date of the termination of employment
on or after age 55, the Option theretofore granted shall, if
the Optionee was entitled to exercise the Option at the date of
death, be exercisable by the estate of the Optionee, or by a
person who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the
Optionee, without, however, giving effect to the limitations,
if any, which may have been imposed by the Committee pursuant
to Section 5.3(b) with respect to the percent of the total
number of shares to which the Option relates which may be
purchased from time to time during the Option Period; provided,
however, that such Option shall be exercisable until the latest
of (i) the three-year period after termination of employment,
(ii) the period after termination of employment which is equal
to the number of full months that the Option has been
outstanding prior to such termination, or (iii) the twelve-
month period after the death of the Optionee provided such
death occurs before the later of (i) or (ii), but in no event
after the expiration of the Option Period.
Section 5.7. Payment for shares. Payment for shares of
Common Stock shall be made in full at the time of exercise of
the Option. Nothing herein shall be construed to prohibit the
Company from making a loan or advance to the Optionee for the
purpose of financing, in whole or in part, the purchase of
optioned shares. Payment of the Option Price shall be made in
cash or, with the consent of the Committee, in whole or in part
in Common Stock, Stock Awards or other consideration. Payment
may also be made by delivering a properly executed exercise
notice together with irrevocable instructions to a third party
to promptly deliver to the Company the amount of sale or loan
proceeds to pay the exercise price.
Section 5.8. Incentive Stock Options. Options granted in
the form of incentive stock options shall be subject, in
addition to the foregoing provisions, to the following
provisions:
(a) Annual Limit. To the extent that the aggregate
Fair Market Value (determined at the time of grant) of the
Common Stock with respect to which incentive stock options are
exercisable for the first time by any Optionee during any
calendar year (under the Plan or under any other stock plan of
the Company) exceeds $100,000, such options shall be treated as
options which are not incentive stock options.
(b) Ten Percent Shareholder. No incentive stock
option shall be granted to any individual who, at the time of
the proposed grant, owns Common Stock possessing more than ten
percent (10%) of the total combined voting power of all classes
of stock of Warner-Lambert or any Subsidiary.
(c) Option Period. No incentive stock option shall
be exercisable after the expiration of ten years from the date
of grant.
(d) Option Price. The Option Price of an incentive
stock option shall not be less than the Fair Market Value per
share on the date of grant.
(e) Subsidiary. Incentive stock options may only be
granted to employees of Warner-Lambert and its Subsidiaries.
(f) Aggregate Limit. The aggregate number of shares
of Common Stock which may be issued pursuant to the exercise of
incentive stock options shall not exceed the lesser of (i)
10,000,000 shares or (ii) the number of shares determined in
accordance with the share limitation specified in Section 3.2
hereof.
The Company intends that Options designated by the Committee as
incentive stock options shall constitute incentive stock
options under Section 422 of the Code. Should any of the
foregoing provisions not be necessary in order to so comply or
should any additional provisions be required, the Committee may
amend the Plan accordingly, without the necessity of obtaining
the approval of stockholders of Warner-Lambert.
ARTICLE VI
Terms of Rights
Section 6.1. Relation to Option. Each Right shall relate
specifically to a Reference Option, then held by, or
concurrently granted to, the Grantee. Upon exercise of a Right
an amount shall be payable from Warner-Lambert, determined in
accordance with Section 6.3 hereof. The Reference Option shall
terminate to the extent that the related Right is exercised.
Section 6.2. Exercise of Right. A Right shall become
exercisable at such time, and in respect of such number of
shares of Common Stock, as the Reference Option is then
exercisable and such Right shall terminate upon termination of
the Reference Option, provided, however, that no Right shall be
exercisable unless the Grantee shall have remained in the
continuous employ of the Company for the period specified by
the Committee, except that upon the occurrence of a Change in
Control of Warner-Lambert, all Rights may be exercised without
giving effect to the period of employment limitation and the
limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) with respect to the
percent of the total number of shares to which the Right
relates which may be purchased from time to time during the
Option Period. Except as provided in this Section 6.2, and in
Sections 6.5 and 6.6, no Right shall be exercisable unless at
the time of such exercise the Grantee shall be in the employ of
the Company.
Section 6.3. Amount Payable Upon Exercise of Right. Upon
the exercise of a Right the amount payable shall be equal to:
(i) 100% of the Spread but not exceeding the
difference between the Option Price and the Fair Market
Value of a share of Common Stock on the Valuation Date;
plus
(ii) 125% of the amount, if any, by which the Fair
Market Value of a share of Common Stock on the Valuation
Date exceeds the Fair Market Value on the date the Right
was granted;
multiplied by the number of shares with respect to which the
Right is being exercised; provided, however, that the Committee
may grant Rights which provide that upon exercise the amount
payable shall be equal to 100% of the amount by which the Fair
Market Value of a share of Common Stock on the Valuation Date
exceeds the Fair Market Value on the date the Right was
granted.
Section 6.4. Form of Payment. The amount payable on
exercise of a Right shall be payable in cash, shares of Common
Stock valued at their Fair Market Value as of the Valuation
Date, or in any combination thereof; provided, however, that
the form of payment shall be in the sole discretion of the
Committee. In the event that any payment in the form of both
cash and shares of Common Stock is made to a Reporting Person,
the cash portion of such payment shall be made upon the Grantee
becoming taxable in respect of the Common Stock received upon
exercise of the Right. Notwithstanding the foregoing, a
payment, in whole or in part, of cash may be made to a
Reporting Person upon exercise of a Right only if the Right is
exercised (i) during the period beginning on the third business
day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of
the Company and ending on the twelfth business day following
such date, or (ii) during any other period permitted under the
provisions of Rule 16b-3 promulgated pursuant to the Act. In
addition, a payment of cash shall be made to a Reporting Person
who has held the Right at least six months from the date of its
grant promptly following a Change in Control of Warner-Lambert
which Change in Control is outside the control of any Reporting
Person within the meaning of the aforesaid Rule 16b-3. The
Company intends that this provision shall comply with the
requirements of Rule 16b-3 under the Act. Should this
provision not be necessary to comply with the requirements of
such Rule or should any additional provision be necessary in
order to comply with the requirements of such Rule, the
Committee may amend the Plan accordingly, without the necessity
of obtaining the approval of stockholders of the Company. Any
fraction of a share resulting from the above calculation shall
be disregarded.
Section 6.5. Termination of Employment. If, prior to the
expiration of a Reference Option, the employment of the Grantee
by the Company should terminate, by reason other than death,
the related Right shall terminate, except that if, after a
Grantee shall have remained in the employ of the Company for
the period specified by the Committee, such Grantee's
employment should terminate on or after age 55, the Right
theretofore granted shall be exercisable until the later of (i)
the three-year period after termination of employment, or (ii)
the period after termination of employment which is equal to
the number of full months that the Reference Option has been
outstanding prior to such termination, but in no event after
the expiration of the Option Period, without, however, giving
effect to the limitations, if any, which may have been imposed
by the Committee pursuant to Section 5.3(b) hereof.
Section 6.6. Death of Grantee. If a Grantee should die
prior to the termination of the Reference Option:
(a) while in the employ of the Company, the Right
theretofore granted shall, if the Grantee was entitled to
exercise the Right at the date of death, be exercisable by the
estate of the Grantee, or by a person who acquired the right to
exercise such Right by bequest or inheritance or by reason of
the death of the Grantee, without, however, giving effect to
the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) hereof with respect to the
percent of the total number of shares to which the Right
relates which may be purchased from time to time during the
Option Period; provided, however, that such Right shall be
exercisable until the later of (i) the three-year period after
termination of employment, or (ii) the period after termination
of employment which is equal to the number of full months that
the Reference Option has been outstanding prior to such
termination, but in no event after the expiration of the Option
Period; or
(b) after the date of the termination of employment
on or after age 55, the Right theretofore granted shall, if the
Grantee was entitled to exercise the Right at the date of
death, be exercisable by the estate of the Grantee, or by a
person who acquired the right to exercise such Right by bequest
or inheritance or by reason of the death of the Grantee,
without, however, giving effect to the limitations, if any,
which may have been imposed by the Committee pursuant to
Section 5.3(b) hereof with respect to the percent of the total
number of shares to which the Right relates which may be
purchased from time to time during the Option Period; provided,
however, that such Right shall be exercisable until the latest
of (i) the three-year period after termination of employment,
(ii) the period after termination of employment which is equal
to the number of full months that the Reference Option has been
outstanding prior to such termination, or (iii) the twelve-
month period after the death of the Grantee provided such death
occurs before the later of (i) or (ii), but in no event after
the expiration of the Option Period.
Section 6.7. Limited Rights. Notwithstanding anything
herein to the contrary, Limited Rights may be granted hereunder
by the Committee with respect to the options granted under this
Plan or any other stock option plan of the Company which shall
entitle the holder to receive a payment of cash promptly
following a Change in Control of Warner-Lambert which Change in
Control is outside the control of any Reporting Person within
the meaning of Rule 16b-3 under the Act. Such payment of cash
shall be made to a Reporting Person only if such person has
held such Limited Right at least six months from the date of
its grant. Promptly following any such Change in Control, the
Optionee shall be entitled to receive a cash payment equal to
the excess of the Fair Market Value of a share of Common Stock
on the Valuation Date over the Option Price of the related
Option multiplied by the number of shares with respect to which
the Limited Right relates (in such case the method of
determining the Fair Market Value in the third sentence of
Section 4.6 shall apply). Limited Rights shall expire on the
first to occur of their date of payment or expiration of the
Limited Right or the related Option. Further, upon payment of
a Limited Right, the related Option (and any other Right
related thereto) shall be cancelled. Except as otherwise
provided herein, the provisions of the Plan relating to Rights
shall also apply to Limited Rights.
ARTICLE VII
Terms And Conditions Of Restricted Stock
Section 7.1. General. The restrictions set forth in
Section 7.2 shall apply to each grant of Restricted Stock for
the duration of the Restricted Period.
Section 7.2. Restrictions. A stock certificate
representing the number of shares of Restricted Stock granted
shall be registered in the Participant's name but shall be held
in custody by the Company for the Participant's account. The
Participant shall have all rights and privileges of a
stockholder as to such Restricted Stock, including the right to
receive dividends and the right to vote such shares, except
that, subject to the provisions of Section 7.3, the following
restrictions shall apply: (i) the Participant shall not be
entitled to delivery of the certificate until the expiration of
the Restricted Period; (ii) none of the shares of Restricted
Stock may be sold, transferred, assigned, pledged, or otherwise
encumbered or disposed of during the Restricted Period; (iii)
the Participant shall, if requested by the Company, execute and
deliver to the Company, a stock power endorsed in blank; and
(iv) all of the shares of Restricted Stock still subject to
restrictions shall be forfeited and all rights of the
Participant to such shares shall terminate without further
obligation on the part of the Company if the Participant ceases
to be an Employee prior to the expiration of the Restricted
Period applicable to such shares. Upon the forfeiture (in
whole or in part) of shares of Restricted Stock, such forfeited
shares shall become treasury shares of the Company without
further action by the Participant. The Participant shall have
the same rights and privileges, and be subject to the same
restrictions, with respect to any shares received pursuant to
Section 10.1 hereof.
Section 7.3. Terms and Conditions. The Committee shall
establish the terms and conditions, which need not be the same
for all grants made under the Plan, applicable to the
Restricted Stock, and which may include restrictions based upon
periods of time, performance (corporate, group, individual or
otherwise), combinations thereof or such other restrictions as
the Committee shall determine to be appropriate. The Committee
may provide for the restrictions to lapse with respect to a
portion or portions of the Restricted Stock at different times
or upon the occurrence of different events and the Committee
may waive, in whole or in part, any or all restrictions
applicable to a grant of Restricted Stock. Restricted Stock
awards may be issued for no cash consideration or for such
minimum consideration as may be required by applicable law.
Section 7.4. Delivery of Restricted Shares. At the end
of the Restricted Period as herein provided, a stock
certificate for the number of shares of Restricted Stock with
respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, to the Participant or
the Participant's beneficiary or estate, as the case may be.
The Company shall not be required to deliver any fractional
share of Common Stock but shall pay, in lieu thereof, the fair
market value (measured as of the date the restrictions lapse)
of such fractional share to the Participant or the
Participant's beneficiary or estate, as the case may be.
Notwithstanding the foregoing, the Committee may authorize the
delivery of the Restricted Stock to a Participant during the
Restricted Period, in which event any stock certificates in
respect of shares of Restricted Stock thus delivered to a
Participant during the Restricted Period applicable to such
shares shall bear an appropriate legend referring to the terms
and conditions, including the restrictions, applicable thereto.
Section 7.5. Certain Events.
(a) In the event of a Change in Control of Warner-
Lambert the rights and privileges of Participants hereunder
shall be governed by the following clause (i), clause (ii) or
clause (iii), as appropriate:
(i) Value of Restricted Stock. All shares of
Restricted Stock then outstanding shall be immediately
forfeited and shall revert to the Company as treasury
shares and, in lieu thereof, each Participant shall
receive a cash payment equal to the Value of the
Restricted Stock (as hereinafter defined); provided,
however, that if the Participant is a Reporting Person at
the time of the Change in Control of Warner-Lambert, the
provisions of clause (ii) shall govern the rights and
privileges of such Participant.
(ii) Reporting Persons. All shares of
Restricted Stock previously granted to Participants who
are Reporting Persons at the time of the Change in Control
of Warner-Lambert, which Change in Control is outside the
control of any Reporting Person within the meaning of Rule
16b-3 under the Act, and which are then outstanding and
have been outstanding for a period of at least six (6)
months, shall be immediately forfeited and shall revert to
the Company as treasury shares and, in lieu thereof, such
Participant shall receive a cash payment equal to the
Value of the Restricted Stock.
(iii) Lapse of Restrictions. In the event that
clause (ii) shall not become operational with respect to a
Participant who is a Reporting Person, all restrictions
applicable to shares of Restricted Stock previously
granted to such Participant and then outstanding shall
expire and such shares shall thereupon be delivered to the
Participant free of all restrictions.
(b) As used in the Plan, the "Value of the
Restricted Stock" shall be the higher of (a) the highest
closing price per share of Common Stock on the Composite Tape
for New York Stock Exchange issues during the 30 day period
prior to the Change in Control of Warner-Lambert, or (b) if the
Change in Control of Warner-Lambert occurs as a result of a
tender or exchange offer or consummation of a Transaction, then
the highest price per share of Common Stock pursuant thereto,
multiplied by the total number of shares of Restricted Stock
granted to such Participant and then outstanding, regardless of
whether the restrictions applicable thereto shall have
previously lapsed. Any consideration other than cash forming a
part or all of the consideration for Common Stock to be paid
pursuant to the applicable transaction shall be valued at the
valuation placed thereon by the Board of Directors.
Adjustments, if any, shall be made in accordance with Section
10.1 hereof.
ARTICLE VIII
Terms and Conditions of Performance Awards
Section 8.1. Terms and Conditions. The Committee may
grant Performance Awards, determine the consideration therefor,
which may include prior efforts and accomplishments, and
establish the terms and conditions thereof, which may include
provisions based upon periods of time, performance (corporate,
group, individual or otherwise), combinations thereof or such
other provisions as the Committee may determine to be
appropriate. Performance Awards may consist of shares of
Common Stock or awards that are valued by reference to shares
of Common Stock (e.g., phantom stock or restricted stock
units), cash or such other measure as the Committee shall
determine. Performance Awards may provide for payment in
shares of Common Stock, cash, other property or any combination
thereof as determined by the Committee. Shares of Common Stock
issued pursuant to this Section 8.1 may be issued for no cash
consideration or for such minimum consideration as may be
required by applicable law. The Committee shall determine
whether payment shall be made in a lump sum, installments or
deferred. With respect to Performance Awards which are valued
by reference to shares of Common Stock, the Committee shall
also determine whether the Participant may be entitled to
receive a payment of, or credit equivalent to, any dividends
payable with respect to such shares of Common Stock and the
terms and conditions applicable thereto. Further, if a payment
of cash is to be made on a deferred basis, the Committee shall
establish whether interest shall be credited, the rate thereof
and any other terms and conditions applicable thereto. The
limitations on transfer set forth in Section 4.4 shall be
applicable to all Performance Awards.
ARTICLE IX
Regulatory Compliance and Listing
Section 9.1. Regulatory Compliance and Listing. The
issuance or delivery of any Stock Awards and shares of Common
Stock pursuant thereto may be postponed by the Company for such
periods as may be required to comply with any applicable
requirements under the Federal securities laws, any applicable
listing requirements of any national securities exchange or any
requirements under any other law or regulation applicable
thereto, and the Company shall not be obligated to issue or
deliver any such awards or shares if the issuance or delivery
thereof shall constitute a violation of any provision of any
law or of any regulation of any governmental authority or any
national securities exchange.
ARTICLE X
Adjustment in Event of Changes in Capitalization
Section 10.1. Adjustments. In the event of a
recapitalization, stock split, stock dividend, combination or
exchange of shares, merger, consolidation, rights offering,
reorganization, liquidation, or the sale, conveyance, lease or
other transfer by Warner-Lambert of all or substantially all of
its property, or any other change in the corporate structure or
shares of Warner-Lambert, the Committee may make such equitable
adjustments to prevent dilution or enlargement of rights as it
may deem appropriate, including adjustments (i) in the number
and class of shares authorized to be granted hereunder,
(including adjustment to the share limitation of Section 3.2
hereof), (ii) in the number and kind of shares available under
any outstanding Stock Awards (including substitution of shares
of another corporation), (iii) in the price of any Option, and
(iv) in the number of Stock Credits in each Director's Stock
Account; provided, however, that in no event may any change be
made to an incentive stock option which would constitute a
"modification" within the meaning of Section 425(h)(3) of the
Code. Stock Awards granted under the Plan shall contain such
provisions as are consistent with the foregoing with respect to
adjustments to be made in the number and kind of shares covered
thereby and in the Option Price in the event of any such
change.
ARTICLE XI
Directors' Deferred Compensation
Section 11.1. Election To Participate.
(a) Each Director may elect to defer payment of all
or any portion of his or her Compensation that is payable
during the immediately succeeding Plan Year. Such election
must be made with respect to all Compensation payable in such
succeeding Plan Year by June 30 of the Plan Year preceding the
Plan Year in which such Compensation otherwise would be paid
(or such later date as may be permissible under Rule 16b-3
under the Act but in no event later than December 31 of such
preceding Plan Year).
(b) An election to defer any Compensation shall be:
(i) in writing, (ii) delivered to the Secretary, and (iii)
irrevocable. A Director may file a new election each Plan Year
applicable to the immediately succeeding Plan Year. If no
election or revocation of a prior election is received by June
30 of any Plan Year (or such later date as may be permissible
under the preceding paragraph), the election, if any, in effect
for such Plan Year will continue to be effective for the
immediately succeeding Plan Year. If a Director does not elect
to defer Compensation payable during a Plan Year, all such
Compensation shall be paid directly to such Director in
accordance with resolutions adopted by the Board from time to
time.
Section 11.2. Mode of Deferral. A Director who has
elected to defer all or a portion of his or her Compensation as
provided in Section 11.1 hereof may further elect to have such
deferred amounts credited to a Cash Account, a Stock Account,
or a combination of both such Accounts. The Secretary shall
maintain such Accounts in the name of the Director. The
election referred to in this Section 11.2 may be made twice per
year and shall become effective on the July 1st or January 1st
which follows such election by at least six months. Any such
election shall be specified in a writing delivered by the
Director to the Secretary and shall be irrevocable. If a
Director fails to elect the Account to which deferral shall be
made, he or she shall be deemed to have elected deferral to the
Cash Account. Compensation deferred to a Cash Account or Stock
Account shall result in Cash Credits or Stock Credits,
respectively.
Section 11.3. Cash Account. The Cash Account of a
Director shall be credited, as of the day the deferred
Compensation otherwise would have been payable to such
Director, with Cash Credits equal to the dollar amount of such
deferred Compensation. The Cash Account shall be adjusted and
increased each year, as if interest was credited thereon, at
the rate utilized for adjusting deferred bonus accounts under
the Warner-Lambert Company Incentive Compensation Plan.
Section 11.4. Stock Account. The Stock Account of a
Director shall be credited, as of the day the deferred
Compensation otherwise would have been payable to such
Director, with Stock Credits equal to the number of shares of
Common Stock (including fractions of a share) that could have
been purchased with the amount of such deferred Compensation at
the Closing Price of shares of Common Stock on the day the
deferred Compensation otherwise would have been payable to such
Director. As of the date of any dividend record date for the
Common Stock, the Director's Stock Account shall be credited
with additional Stock Credits equal to the number of shares of
Common Stock (including fractions of a share) that could have
been purchased, at the Closing Price of shares of Common Stock
on such date, with the amount which would have been paid as
dividends on that number of shares (including fractions of a
share) of Common Stock which is equal to the number of Stock
Credits then attributed to the Director's Stock Account;
provided, however, that in the event that there is not then in
effect an election under Section 11.2 hereof to have any of
such Director's Compensation credited to a Stock Account and,
further, that the Director has elected under Section 11.5(a)
hereof to transfer his or her Stock Account to a Cash Account
then the amount which would have been credited to the Stock
Account in accordance with this sentence but for this proviso
shall instead be credited to such Director's Cash Account. In
the case of dividends paid in property other than cash, the
amount of the dividend shall be deemed to be the fair market
value of the property at the time of the payment of the
dividend, as determined in good faith by the Committee.
Section 11.5. Conversions.
(a) Stock Account to Cash Account. A Director may
elect on or before any June 30 to convert all or any portion of
his or her Stock Account to his or her Cash Account as of the
first Business Day of the year following the year in which the
election to convert is made. The amount to be credited to such
Director's Cash Account shall be obtained by multiplying the
number of Stock Credits credited to his or her Stock Account as
of such June 30 by the Closing Price of shares of Common Stock
on the following December 31.
In addition, a Director may elect on or before any
December 31 to convert all or any portion of his or her Stock
Account to his or her Cash Account as of the following July
1st. The amount to be credited to such Director's Cash Account
shall be obtained by multiplying the number of Stock Credits
credited to his or her Stock Account as of such December 31 by
the Closing Price of shares of Common Stock on the following
June 30.
(b) Cash Account to Stock Account. A Director may
elect on or before any June 30 to convert all or any portion of
his or her Cash Account to his or her Stock Account as of the
first Business Day of the year following the year in which the
election to convert is made. The number of Stock Credits to be
credited to such Director's Stock Account shall be obtained by
dividing the number of Cash Credits credited to his or her Cash
Account as of such June 30 by the Closing Price of shares of
Common Stock on the following December 31.
In addition, a Director may elect on or before any
December 31 to convert all or any portion of his or her Cash
Account to his or her Stock Account as of the following July
1st. The number of Stock Credits to be credited to such
Director's Stock Account shall be obtained by dividing the
number of Cash Credits credited to his or her Cash Account as
of such December 31 by the Closing Price of shares of Common
Stock on the following June 30.
(c) An election under this Section 11.5 shall be in
a writing delivered to the Secretary and may be revoked or
revised at any time prior to the Conversion Election Date to
which it relates.
Section 11.6. Distribution of Cash Account or Stock
Account.
(a) Distributions in respect of a Director's Cash
Account and Stock Account shall become payable in full to such
Director, annually, over a period of ten (10) years, except as
otherwise agreed to by the Committee and the Director,
beginning with the first day of the calendar year following the
year in which the individual ceases to be a member of the Board
of Directors.
(b) Distributions in respect of a Director's Cash
Account and Stock Account shall be made only in cash.
Section 11.7. Installment Amount.
(a) The amount of each distribution with respect to
a Director's Cash Account shall be the amount obtained by
multiplying the balance in such Account by a fraction, the
numerator of which is one (1) and the denominator of which is
the number of years in which distributions remain to be made
(including the current distribution).
(b) The amount of each distribution with respect to
a Director's Stock Account shall be the amount obtained by
multiplying the number of Stock Credits attributable to such
installment (determined as hereinafter provided) by the average
of the Closing Prices of shares of Common Stock on each
Business Day in the month immediately prior to the month in
which such installment is to be paid. The number of Stock
Credits attributable to an installment shall be equal to the
amount obtained by multiplying the current number of Stock
Credits in such Stock Account by a fraction, the numerator of
which is one (1) and the denominator of which is the number of
years in which distributions remain to be made (including the
current distribution).
Section 11.8. Financial Hardship. Notwithstanding any
other provision hereof, at the written request of a Director or
a Director's legal representative, the Committee, in its sole
discretion, upon a finding that continued deferral will result
in financial hardship to the Director, may authorize (i) the
payment of all or a part of a Director's Accounts in a single
installment prior to his or her ceasing to be a Director or
(ii) the acceleration of payment of any multiple installments
thereof; provided, however, that Directors may not receive
distributions under this Section 11.8 if such distribution
would result in liability of the Director under Section 16 of
the Act.
Section 11.9. Distribution upon Death. Upon the death of
a Director, the Committee shall pay all of such Director's Cash
Account and Stock Account in a single installment to the
beneficiary designated by the Director. All such designations
shall be made in writing and delivered to the Secretary. A
Director may from time to time revoke or change any such
designation by written notice to the Secretary. If there is no
designation on file with the Secretary at the time of the
Director's death, or if the beneficiary designated therein
shall have predeceased the Director, such distributions shall
be made to the executor or administrator of the Director's
estate. Any distribution under this Section 11.9 shall be made
as soon as practicable following notification to the Committee
of the Director's death and the value of the Stock Account for
the purpose of such distribution shall be based upon the
Closing Price of shares of Common Stock on the date of the
Director's death.
Section 11.10. Certain Events. Notwithstanding any other
provision hereof, in the event of a Change in Control of
Warner-Lambert which is outside of the control of any Reporting
Person within the meaning of Rule 16b-3 under the Act, the
balance in the Stock Account of each Director shall be
converted to the Cash Account. For this purpose, the balance
in the Stock Account shall be determined by multiplying the
number of Stock Credits by the higher of (i) the highest
Closing Price during the period commencing 30 days prior to
such Change in Control or (ii) if the Change in Control of
Warner-Lambert occurs as a result of a tender or exchange offer
or consummation of a Transaction, then the highest price per
share of Common Stock pursuant thereto. Any consideration
other than cash forming a part or all of the consideration for
Common Stock to be paid pursuant to the applicable transaction
shall be valued at the valuation placed thereon by the Board of
Directors. Adjustments, if any, shall be made in accordance
with Article X hereof. Within 30 days after a Change in
Control of Warner-Lambert, each Director may designate a
distribution schedule which may provide for a lump sum payment
or installment payments over a period of up to 15 years,
provided, however, that no payment shall be made for a period
of one year after the Change in Control. In the event that a
Director shall not make a designation in accordance with the
preceding sentence, the balance in the Cash Account shall be
distributed in a lump sum one year after the Change in Control.
Section 11.11. Valuations. Notwithstanding any other
provision hereof, in any instance in which a Director's Stock
Account is to be valued by reference to the Closing Price of
shares of Common Stock on a single day, the Committee may
declare such price to be unrepresentative of the market value
of such Common Stock and, in lieu thereof, shall base such
valuation on the average of the Closing Prices of shares of
Common Stock on each Business Day during the calendar quarter
ending coincident with or immediately preceding the day which
would otherwise serve as the basis for the valuation.
Section 11.12. Funding. The Company's sole obligation to
a Director or any person claiming under or through any Director
in respect of the payment of any balance in an Account shall be
solely a contractual obligation in accordance with the terms of
the Plan. No promise hereunder shall be secured by any
specific assets of the Company, nor shall any assets of the
Company be designated as attributable or allocated to the
satisfaction of such promises.
Section 11.13. Status of Stock Credits. Stock Credits
are not, and do not constitute, shares of Common Stock, and no
right as a holder of shares of Common Stock shall devolve upon
a Director by reason of his or her participation in the Plan.
Section 11.14. Non-Trading Date. In the event that the
date of the determination of a Closing Price hereunder shall be
a date which shall not be a date on which the Common Stock is
traded on the New York Stock Exchange, determination of such
Closing Price shall be made as of the first date thereafter on
which the Common Stock is so traded.
Section 11.15. No Right To Reelection. Nothing in the
Plan shall be deemed to create any obligation on the part of
the Board to nominate any Director for reelection by the
Company's stockholders, nor confer upon any Director the right
to remain a member of the Board of Directors.
Section 11.16. Predecessor Plans. Upon the Effective
Date of the Plan, no further benefits shall accrue under any
Predecessor Plans, except as provided in Section 11.18 hereof.
Section 11.17. Deferred Compensation Accounts. Upon the
Effective Date of the Plan, all Deferred Compensation Accounts
shall become subject to the terms and conditions of this Plan
in lieu of the terms and conditions of the Predecessor Plans,
except as provided in Section 11.18 hereof.
Section 11.18. Retired Directors. Benefits accrued under
Predecessor Plans which are in pay status on the Effective Date
shall continue to be paid in accordance with the provisions of
the Predecessor Plans.
Section 11.19. Federal Securities Law. The Company
intends that the provisions of this Article XI, and all
transactions effected in accordance with this Article XI, shall
comply with Rule 16b-3(d) under the Act. In the event that any
provision of this Article XI is not necessary to so comply or
any additional provision is necessary to obtain or maintain
such compliance, the Committee is authorized to revise the Plan
accordingly without obtaining approval of the stockholders of
Warner-Lambert. By way of illustration, and not limitation,
the Committee may bifurcate the provisions of this Article XI,
and such other provisions as it shall deem necessary, into a
separate plan (which plan shall be recognized as having
received approval of the stockholders of Warner-Lambert), if
the Committee shall deem such action necessary to maintain
qualification of Article XI (and transactions thereunder) under
Rule 16b-3(d) under the Act and the qualification of the
provisions of the Plan affecting Employees (and transactions
thereunder) under Rule 16b-3 under the Act.
ARTICLE XII
Administration
Section 12.1. Administration.
(a) The Plan shall be administered by a committee
consisting of not less than three members of the Board of
Directors, who shall be appointed by, and shall serve at the
pleasure of, the Board of Directors. No person who is or,
within one year prior thereto, has been eligible to receive an
award under the Plan or any other plan of the Company which
would result in loss of "disinterested person" status within
the meaning of Section 16 of the Act may be a member of the
Committee, and no person may be granted a Stock Award while a
member of the Committee. A majority of the Committee shall
constitute a quorum and the acts of a majority of the members
present at any meeting at which a quorum is present, expressed
from time to time by a vote at a meeting (including a meeting
held by telephone conference call or in which one or more
members of the Committee participate by telephone), or acts
approved in writing by a majority of the Committee, shall be
the acts of the Committee.
(b) In addition to the Committee's discretionary
authority set forth in other Articles hereof, the Committee has
discretionary authority to construe and interpret the Plan and
is authorized to establish such rules and regulations for the
proper administration of the Plan as it may deem advisable and
not inconsistent with the provisions of the Plan. All
questions arising under the Plan or under any rule or
regulation with respect to the Plan adopted by the Committee,
whether such questions involve an interpretation of the Plan or
otherwise, shall be decided by the Committee, and its decisions
shall be conclusive and binding in all cases.
(c) The Committee has discretionary authority to
determine the Employees to whom Stock Awards under the Plan are
to be granted, the terms and conditions applicable thereto and
the number of shares to be covered by each award. In selecting
the individuals to whom Stock Awards shall be granted, as well
as in determining the terms and conditions applicable thereto
and the number of shares subject to each grant, the Committee
shall consider the positions and responsibilities of the
Employees being considered, the nature of the services and
accomplishments of each, the value to the Company of their
services, their present and potential contribution to the
success of the Company, the anticipated number of years of
service remaining and such other factors as the Committee may
deem relevant. The Committee may obtain such advice or
assistance as it deems appropriate from persons not serving on
the Committee.
Section 12.2. Stock Awards Committee. In addition, and
not in limitation of the authority of the Committee, the Stock
Awards Committee (as hereinafter constituted) may grant Stock
Awards, in accordance with the provisions of the Plan,
including the establishment of the terms and conditions thereof
and the consideration to the Company therefor, to Employees
who, at the time of the grant, are not Reporting Persons. The
Stock Awards Committee, whose members need not serve on the
Board of Directors, shall be appointed by, and shall serve at
the pleasure of, the Committee. A majority of the Stock Awards
Committee shall constitute a quorum and the acts of a majority
of the members present at any meeting at which a quorum is
present, expressed from time to time by a vote at a meeting
(including a meeting held by telephone conference call or in
which one or more members of the Stock Awards Committee
participate by telephone), or acts approved in writing by a
majority of the Stock Awards Committee, shall be the acts of
the Stock Awards Committee. Notwithstanding the foregoing, the
Stock Awards Committee may not undertake any action which the
provisions of Rule 16b-3, promulgated pursuant to the Act,
require to be undertaken by "disinterested persons" (as defined
in said Rule) as a condition of the continued qualification of
the Plan (and transactions thereunder) under Rule 16b-3.
ARTICLE XIII
Termination or Amendment of the Plan
Section 13.1. Termination or Amendment.
(a) The Board may at any time terminate the Plan and
may from time to time alter or amend the Plan or any part
thereof (including any amendment deemed necessary to ensure
that the Company may comply with any regulatory requirement
referred to in Article IX); provided, however, that, unless
otherwise required by law, the rights of a Participant with
respect to Stock Awards granted or the rights of a Director
with respect to his or her Accounts prior to such termination,
alteration or amendment may not be impaired without the consent
of such Participant or Director, as the case may be, and,
provided further, without the approval of the Company's
stockholders, no alteration or amendment may be made which
would require approval of such stockholders as a condition of
compliance with Rule 16b-3 under the Act. The Company intends
that the Plan (and transactions thereunder) shall comply with
the requirements of Rule 16b-3 promulgated pursuant to the Act.
Should any provisions hereof not be necessary in order to
comply with the requirements of such Rule or should any
additional provisions be necessary in order to so comply, the
Committee may amend the Plan accordingly, without the necessity
of obtaining approval of the stockholders of Warner-Lambert.
(b) The Committee may at any time adopt any
amendment to the Plan which (i)(A) does not increase Plan
liabilities by an amount in excess of five million dollars
($5,000,000) and does not increase Plan expense by an amount in
excess of five hundred thousand dollars ($500,000) or (B) is
required by an applicable law, regulation or ruling, (ii) can
be undertaken by the Board of Directors under the terms of the
Plan, (iii) does not involve a termination of the Plan, (iv)
does not affect the limitations contained in this sentence, and
(v) does not affect the composition or compensation of the
Committee.
(c) The Committee shall have the power to cancel all
Rights theretofore granted pursuant to the Plan in the event
that it shall determine that the accounting effects of the
grant or exercise of Rights under the Plan would not be in the
best interests of the Company.
(d) Any action which may be undertaken by the
Committee pursuant to the terms hereof may be undertaken by the
Board, except as provided in Rule 16b-3 promulgated pursuant to
the Act.
ARTICLE XIV
Miscellaneous
Section 14.1. No Right To Employment. Nothing in the
Plan shall be deemed to confer upon any Participant the right
to remain in the employ of the Company.
Section 14.2. Withholding of Taxes.
(a) The Company shall have the right to require,
prior to the issuance or delivery of any shares of Common Stock
or the payment of any cash hereunder, payment by the
Participant or the Director, as the case may be, of any taxes
required by law with respect thereto.
(b) The Committee may permit any such withholding
obligation to be satisfied by reducing the number of shares of
Common Stock otherwise deliverable. A Reporting Person may
elect to have a sufficient number of shares of Common Stock
withheld to fulfill such tax obligations (hereinafter a
"Withholding Election") only if the election complies with the
following conditions: (x) the Withholding Election shall be
subject to the disapproval of the Committee and (y) the
Withholding Election is made (i) during the period beginning on
the third business day following the date of release for
publication of the quarterly or annual summary statements of
sales and earnings of the Company and ending on the twelfth
business day following such date, or (ii) during any other
period in which a Withholding Election may be made under the
provisions of Rule 16b-3 promulgated pursuant to the Act. Any
fraction of a share of Common Stock required to satisfy such
tax obligations shall be disregarded and the amount due shall
be paid instead in cash by the Participant.
Section 14.3. No Assignment of Benefits. No benefit
payable under the Plan shall, except as otherwise specifically
provided by law, be subject in any manner to anticipation,
alienation, attachment, sale, transfer, assignment, pledge,
encumbrance or charge, and any attempt to anticipate, alienate,
attach, sell, transfer, assign, pledge, encumber or charge any
such benefit shall be void, and any such benefit shall not in
any manner be liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person who shall be
entitled to such benefit, nor shall it be subject to attachment
or legal process for or against such person. If any person
entitled to a benefit hereunder shall be adjudicated a bankrupt
or shall attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge such benefit, or if any
attempt is made to subject any such benefit to the debts,
contracts, liabilities, engagements or torts of any person
entitled to such benefit, then such benefit shall, in the
discretion of the Committee, cease and terminate, and in that
event the Committee may cause such benefit, or any part
thereof, to be held or applied for the benefit of such person,
his or her spouse, children or other dependents, or any of
them, in such manner and in such proportion as the Committee
shall determine.
Section 14.4. Death; Disability; Termination. The
Committee shall establish the provisions which shall govern in
the event of the death, disability, or termination (including
layoff) of a Participant or a Director, which provisions may be
different than the provisions otherwise described herein with
respect to death, disability, and termination. If, for any
reason, the Committee shall determine that it is not desirable
because of the incapacity of the person who shall be entitled
to receive any payments hereunder, to make such payments
directly to such person, the Committee may apply such payment
for the benefit of such person in any way that the Committee
shall deem advisable or may make any such payment to any third
person who, in the judgment of the Committee, will apply such
payment for the benefit of the person entitled thereto. In the
event of such payment, the Company, the Board of Directors and
the Committee shall be discharged from all further liability
therefor. The employment of an Employee who becomes disabled
shall be deemed terminated for purposes of the Plan as of the
date benefit payments would have commenced under the Warner-
Lambert Long Term Disability Benefits Plan had the Participant
been enrolled in such plan, except as otherwise provided
herein. Absence on leave approved by the Company shall not be
considered an interruption of employment for any purpose of the
Plan.
Section 14.5. Listing and Other Conditions.
(a) As long as the Common Stock is listed on the New
York Stock Exchange, the issue of any shares of stock pursuant
to a Stock Award shall be conditioned upon the shares so to be
issued being listed on such Exchange. Warner-Lambert shall
make application for listing on such Exchange unlisted shares
subject to Stock Awards, but shall have no obligation to issue
such shares unless and until such shares are so listed, and the
right to exercise any Option or Right with respect to such
shares shall be suspended until such listing has been effected.
(b) If at any time counsel to Warner-Lambert shall
be of the opinion that any sale or delivery of shares of Common
Stock pursuant to a Stock Award is or may in the circumstances
be unlawful under the statutes, rules or regulations of any
applicable jurisdiction, Warner-Lambert shall have no
obligation to make such sale or delivery, or to make any
application or to effect or to maintain any qualification or
registration under the Securities Act of 1933, as amended, or
otherwise with respect to shares of Common Stock or Stock
Awards, and the right to exercise any Option or Right shall be
suspended until, in the opinion of said counsel, such sale or
delivery shall be lawful.
(c) Upon termination of any period of suspension
under this Section 14.5, any Stock Award affected by such
suspension which shall not then have expired or terminated
shall be reinstated as to all shares available before such
suspension and as to shares which would otherwise have become
available during the period of such suspension, but no such
suspension shall extend any Option Period.
Section 14.6. Governing Law. This Plan shall be governed
by the law of the State of New Jersey (regardless of the law
that might otherwise govern under applicable New Jersey
principles of conflict of laws).
Section 14.7. Construction. Wherever any words are used
herein in the masculine gender they shall be construed as
though they were also used in the feminine gender in all cases
where they would so apply, and wherever any words are used
herein in the singular form they shall be construed as though
they were also used in the plural form in all cases where they
would so apply.
Section 14.8. Laws of Foreign Jurisdictions. Without
amending the Plan, but subject to the limitations specified in
Article XIII hereof, the Committee may grant, amend,
administer, annul or terminate Stock Awards on such terms and
conditions, which may be different from those specified in the
Plan, as it may deem necessary or desirable to make available
tax or other benefits of the laws of any foreign jurisdiction.
Section 14.9. Other Plans. Nothing contained herein
shall prevent the Company from adopting additional compensation
plans or arrangements.
Section 14.10. Federal Securities Law. Notwithstanding
any other provision of the Plan, no transaction shall be given
effect on any date which would, in the opinion of counsel to
the Company, result in liability under Section 16(b) of the
Act. ARTICLE XV
Effective Date; Term of Plan
Section 15.1. Effective Date. The Plan shall be
submitted to the stockholders of Warner-Lambert for their
approval at the Annual Meeting of Stockholders to be held in
1992. The Plan shall become effective upon the affirmative
vote of the holders of a majority of the shares of Common Stock
present, or represented, and entitled to vote at the meeting.
Section 15.2. Term of Plan. No Stock Awards may be
granted hereunder after April 28, 1997. This Section 15.2
shall not affect any Stock Award granted prior to such date.
Further, the provisions of Article XI hereof (as amended from
time to time) are ongoing and shall continue until terminated
by the Board.
WARNER-LAMBERT COMPANY
WARNER-LAMBERT
COMPANY
***
Incentive Compensation Plan
As Amended To September 27, 1994
<PAGE>
WARNER-LAMBERT COMPANY
INCENTIVE COMPENSATION PLAN
_________
ARTICLE I
PURPOSE OF PLAN
Section 1.1. Warner-Lambert Company has prepared this
Plan in order to compensate and reward its Officers and key
Employees in managerial and other important positions for
their share in the growth and success of the Company and in
order to retain and attract persons of competence. The Plan
provides a means of sharing, in addition to salaries,
certain incentive compensation dependent on profits realized
by the Company.
ARTICLE II
DEFINITIONS
Section 2.1. For the purposes of the Plan, unless the
context otherwise indicates, the following definitions shall
be applicable:
(a) "Beneficiary" shall mean the person who has
been so designated by a Participant, on a form and in a
manner acceptable to the Committee or, if no person has
been so designated by a Participant or if a Participant
is not survived by the person so designated,
"Beneficiary" shall mean the estate of the Participant.
(b) "Board of Directors" or "Board" shall mean
the Board of Directors or the Executive Committee of
the Company.
(c) "Committee" shall mean the committee
appointed to administer the Plan, as provided in
Article X, as such committee may from time to time be
constituted.
(d) "Company" shall mean Warner-Lambert Company.
(e) "Deferred Bonus Account" shall mean the
account established in accordance with Section 4.4 of
this Plan.
(f) "Deferred Bonus Portion" shall mean the
amount of the Reserve allocated to a Participant which
is deferred in accordance with Section 4.3 of this
Plan.
(g) "Employee" shall mean an employee of the
Company or of a subsidiary of the Company.
(h) "Fiscal year" shall mean the calendar year or
such other fiscal year as may be established from time
to time by the Company.
(i) "Incentive Compensation Net Income" shall
mean the amount determined under Section 3.2 of this
Plan.
(j) "Incentive Compensation Reserve" shall mean
the appropriation provided for in Section 3.1 of this
Plan.
(k) "Officer" shall mean an officer of the
Company or of a subsidiary of the Company.
(l) "Participant" shall mean an Officer or
Employee (i) to whom an amount of additional incentive
compensation has been allocated under the Plan for any
Fiscal year in accordance with Section 3.4 of this
Plan, (ii) whose Deferred Bonus Portions or balance in
his Deferred Bonus Account to which he is entitled have
not been wholly distributed, or (iii) to whom an amount
of additional incentive compensation previously
allocated under the Plan remains subject to
restrictions, conditions or limitations imposed by the
Committee.
(m) "Plan" shall mean the Incentive Compensation
Plan as set forth herein and in predecessor documents,
and as amended from time to time.
(n) "Reserve" shall mean the Incentive
Compensation Reserve provided for in Section 3.1 of
this Plan.
(o) The use of the singular shall also include
within its meaning the plural and vice versa. The use
of masculine shall include feminine.
ARTICLE III
DETERMINATION AND MAINTENANCE OF INCENTIVE COMPENSATION
RESERVE; DETERMINATION OF PARTICIPANTS
Section 3.1. INCENTIVE COMPENSATION RESERVE.
Beginning with the Fiscal year commencing January 1, 1959,
there shall be established and maintained an Incentive
Compensation Reserve. The Board of Directors may in the
year 1960 and annually thereafter appropriate as additional
incentive compensation for the preceding year an amount up
to but not in excess of the Incentive Compensation Net
Income of the preceding Fiscal year as the Board of
Directors, in its discretion, shall determine. The amount
so appropriated shall be credited to the Reserve.
Section 3.2. DEFINITION OF INCENTIVE COMPENSATION NET
INCOME. The term "Incentive Compensation Net Income" shall
consist of an amount equal to four percent (4%) of the
amount by which the net profit shall exceed six percent (6%)
of the capital actually employed in carrying on the business
of the Company (as such capital shall be determined from
time to time by the Board of Directors, including in such
determination an appropriate amount for goodwill); provided,
however, that no such additional incentive compensation
shall be paid for any Fiscal year of the Company during
which the amount which would otherwise be available for such
purposes shall be less than $80,000, or for any year in
which no cash dividend is paid on the common stock of the
Company.
Said net profit shall be the net profit of the Company
and its subsidiaries computed on a consolidated basis
determined in accordance with generally accepted accounting
principles, provided that, in any event, in making such
determination, the following provisions of this Section
shall govern:
(a) The net profit shall be determined before any
deduction for federal or equivalent foreign taxes based
on income and before any deduction in respect of or
provision for appropriations or distributions made or
to be made under this Plan.
(b) In determining net profit there shall be
deducted an amount equal to dividends and interest
accruing during such year on any stock or other
securities of the Company which are senior to common
stock of the Company, or on any stock or other
securities of a subsidiary not held by the Company or a
subsidiary, which were outstanding during each year.
(c) There shall be excluded from such net profit
extraordinary or unusual or infrequently occurring
items of income and expense which, individually or in
the aggregate, are material in amount.
Section 3.3. PROCEDURE FOR DETERMINATION OF INCENTIVE
COMPENSATION NET INCOME AND AMOUNT OF ANNUAL APPROPRIATION
TO RESERVE. (a) As soon as feasible after the close of the
Fiscal year 1959, and the close of each Fiscal year
thereafter, the fiscal officers of the Company shall
determine the amount of the Incentive Compensation Net
Income for the preceding Fiscal year in accordance with the
provisions of Section 3.2 hereof, and shall report such
determination to the Board of Directors, to the Committee,
and to the independent public accountants of the Company.
(b) The independent public accountants of the Company
shall review such determination and report to the Committee
and to the Board of Directors their opinion thereof and any
corrections which they deem proper. The Committee upon the
receipt of such determination and report shall recommend to
the Board of Directors the amount of the annual
appropriation to be made by the Company to the Reserve,
which shall not exceed the maximum amount authorized by the
provisions of Section 3.1 hereof, as additional incentive
compensation for the preceding year.
(c) Such reports of the fiscal officers of the Company
and of the independent public accountants, and such
determination and recommendations of the Committee, shall be
reviewed by and subject to the approval of the Board of
Directors, which shall authorize the appropriation to be
made by the Company to the Reserve as additional incentive
compensation for the preceding year as provided in Section
3.1, within the maximum limit therein provided.
Section 3.4. DETERMINATION OF PARTICIPANTS AND AMOUNT
OF ALLOCATIONS. The Committee shall each year, after
consultation with management, determine the Officers and key
Employees who shall be entitled to participate under the
Plan for the preceding year, and the amount to be allocated
to each such person as additional incentive compensation for
such year, and the restrictions, conditions or limitations,
if any, which are to be imposed upon all or any part of any
amounts allocated to any or all Participants under the Plan,
which determination shall be reviewed by and subject to the
approval of the Board of Directors. The total compensation
to each Participant, including salary, additional incentive
compensation payable pursuant to the Plan, retirement and
all other benefits, shall not, in the opinion of the
Committee and of the Board of Directors, be in excess of the
fair and reasonable compensation for the services of such
Participant. All determinations, by the Committee and the
Board, of Incentive Compensation Net Income for any year, of
the amounts to be appropriated annually to the Reserve, the
determination of the persons to participate under the Plan,
and the amounts to be allocated to each, shall be final and
conclusive and binding upon all interested parties. No
director shall vote on his own participation in the Plan.
If all of the Reserve for a Fiscal year shall not be
allocated as additional incentive compensation, the excess
shall be credited to the earnings of such Fiscal year.
ARTICLE IV
CURRENT CASH PAYMENTS; ELIGIBILITY FOR DEFERRAL OF BONUS;
DEFERRED BONUS ELECTION; DEFERRED BONUS ACCOUNT
Section 4.1. CURRENT CASH PAYMENTS. Except as
provided in Section 4.3, the amount of the Reserve allocated
to a Participant for any Fiscal year shall be paid, in cash,
to such Participant as soon as practicable in the calendar
year in which such amount is allocated to the Participant,
on a date fixed by the Committee.
Section 4.2. ELIGIBILITY FOR DEFERRAL OF BONUS.
Commencing with Reserves allocated for Fiscal years after
1984, the Committee shall determine the Officers and
Employees who shall be eligible to elect deferral, in
accordance with the provisions of Section 4.3. The
Committee may change such eligibility from time to time in
its sole discretion.
Notwithstanding the foregoing provisions of this
Section 4.2, a Participant who has satisfied the
requirements to elect deferral with respect to allocations
made for Fiscal years prior to 1984 in accordance with
Section 2.5 of the Plan, As Amended To September 27, 1983,
shall continue to be eligible to elect deferral.
Section 4.3. DEFERRED BONUS ELECTION. An Officer or
Employee who is eligible for deferral in accordance with
Section 4.2 hereof may each year elect to defer payment of
all or a portion of the Reserve which may be allocated to
him with respect to such Fiscal year, provided that the
election is made on or before December 31 of the year with
respect to which such allocation is made. The amount so
deferred shall be referred to as the Deferred Bonus Portion.
Except as provided in Article XI, an election to defer
payment of any portion of the Reserve allocated to a
Participant for a particular year shall become irrevocable
on the last day of the year on which such election may be
made.
Section 4.4. DEFERRED BONUS ACCOUNT. There shall be
established, in the name of each Participant who has made
the election described in Section 4.3, a Deferred Bonus
Account. As of January 1 of the year immediately following
the year with respect to which the Deferred Bonus Portion
relates, each Participant's Deferred Bonus Account shall be
credited with the amount of the Deferred Bonus Portion.
Payment of amounts credited to a Participant's Deferred
Bonus Account shall be made in the manner and at the time
prescribed in Section 6.1.
ARTICLE V
INVESTMENT OF AND RETURN ON DEFERRED BONUS PORTION
Section 5.1. USE OF DEFERRED BONUS ACCOUNTS BY
COMPANY. The Company shall not be required to segregate the
funds required for the establishment of a Participant's
Deferred Bonus Account but may utilize such funds for such
purposes as it deems appropriate, including working capital.
Section 5.2. ADJUSTMENT TO DEFERRED BONUS ACCOUNTS.
Deferred Bonus Accounts shall be adjusted and increased each
year, as if interest was credited thereon, at the average
prime rate (as determined by the Committee) for the year
plus 4% which shall be credited to each Participant's
Deferred Bonus Account as of December 31 in each year, or as
of such other date during the year as shall be determined by
the Committee, and such adjustment shall thereafter become a
part of the Participant's Deferred Bonus Account. The rate
of adjustment to be credited to Participants' Deferred Bonus
Accounts shall be subject to annual review by the Committee
which may, in its sole discretion, change such rate as to
succeeding periods. Upon the occurrence of a Change in
Control (as hereinafter defined), the formula for
determining the rate of adjustment to be credited to
Deferred Bonus Accounts of Participants in all future years
may not be reduced below the formula in effect at the Change
in Control. For purposes hereof, a Change in Control shall
be deemed to have occurred if (i) any person (as such term
is used in Sections 13(d) and 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Act")), is or becomes
the beneficial owner (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the
Company's then outstanding securities, (ii) the stockholders
of the Company approve a merger, consolidation, sale or
disposition of all or substantially all of the Company's
assets or plan of liquidation, or (iii) the composition of
the Board of Directors of Warner-Lambert Company (for
purposes of this paragraph, the "Board") at any time during
any consecutive twenty-four (24) month period changes such
that the Continuity Directors (as hereinafter defined) cease
for any reason to constitute at least fifty-one percent
(51%) of the Board. For purposes of the foregoing clause
(iii), "Continuity Directors" means those members of the
Board who either (a) were directors at the beginning of such
consecutive twenty-four (24) month period, or (b)(1) filled
a vacancy during such twenty-four (24) month period created
by reason of (x) death, (y) a medically determinable
physical or mental impairment which renders the director
substantially unable to function as a director or (z)
retirement at the last mandatory retirement age in effect
for at least two (2) years, and (2) were elected, nominated
or voted for by at least fifty-one percent (51%) of the
current directors who were also directors at the
commencement of such twenty-four (24) month period.
ARTICLE VI
PAYMENT OF DEFERRED BONUS ACCOUNTS
Section 6.1. DISTRIBUTIONS OUT OF DEFERRED BONUS
ACCOUNTS. Subject to the provisions of Section 7.1 hereof,
distributions in respect of the Deferred Bonus Account of
any Participant shall, unless the Committee otherwise
determines, become payable in full to such Participant or to
his Beneficiary, as the case may be, in cash, annually, over
a period of not less than three nor more than fifteen years,
as determined by the Committee, upon the happening of any of
the events described in this Section. The first payment
shall be made within fifteen months after the happening of
any such event. The amount of each distribution shall be
the amount obtained by multiplying the balance in the
Participant's Deferred Bonus Account by a fraction, the
numerator of which is 1 and the denominator of which is the
number of years in which distributions remain to be made
(including the current distribution).
The Participant's Deferred Bonus Account shall be
charged with the amount of each distribution.
The events are as follows:
(a) TERMINATION OF PARTICIPANT'S EMPLOYMENT WITH
THE COMPANY OR A SUBSIDIARY. Termination of a
Participant's employment provided that a leave of
absence approved by the Company shall not constitute a
termination of service. In the event of a
Participant's death, the Deferred Bonus Account shall
be distributed to the Participant's Beneficiary.
(b) TOTAL AND PERMANENT DISABILITY. Such
disability shall be deemed to have occurred only when
certified by a physician appointed by the Company or by
a physician acceptable to the Company. In the event of
the cessation of such disability and the return of such
Participant to work for the Company, distribution in
respect of such part, if any, of such balance as shall
remain to his credit shall be deferred and shall be
made only to such extent and at such time as distri-
bution would otherwise be made in accordance with the
Plan.
Section 6.2. WITHHOLDING OF TAXES. There shall be
deducted from all payments under the Plan any taxes or other
amounts required by any government to be withheld from any
such payments.
Section 6.3. ACCELERATED DISTRIBUTIONS FROM DEFERRED
BONUS ACCOUNTS. Notwithstanding any other provision of the
Plan, upon the occurrence of a Change in Control, the
provisions of this Section 6.3 shall govern all
distributions from the Plan to Participants. Upon the first
to occur after a Change in Control of the Participant's
termination of service with the Company or total and
permanent disability, the Participant shall promptly receive
a lump sum payment, in cash, of the balance in his Deferred
Bonus Account, provided, however, if (x) a Participant was
eligible for bonus deferral under Section 4.2 hereof on
September 27, 1994, and he or she consented in writing to
the provisions described in the following sentence prior to
November 1, 1994, or (y) a Participant became eligible for
bonus deferral after September 27, 1994, then the provisions
described in the following sentence shall apply in lieu of
this sentence. Upon the first to occur within 3 years after
a Change in Control of a Participant's termination of
employment with the Company or the Participant's total and
permanent disability, he or she may, within 30 days
thereafter, designate a distribution schedule for their
Deferred Bonus Account which schedule may provide for a lump
sum payment or installment payments over a period of up to
15 years, provided, however, that no payment shall be made
until the end of the severance period (for example, if the
Participant is entitled to 3 years' severance pay, deferred
bonus payments may not begin until 3 years after termination
even if such Participant receives the severance pay in a
lump sum at termination). If a Participant to whom the
preceding sentence is applicable fails to designate a
distribution schedule in accordance with such sentence, then
the Deferred Bonus Account shall be distributed in a lump
sum at the end of the severance period. This Section shall
not apply to Participants with respect to whom an event
described in Section 6.1 occurred prior to the Change in
Control.
ARTICLE VII
CONTINGENCIES RESULTING IN REDUCTION OF DEFERRED BONUS
ACCOUNTS
Section 7.1. Notwithstanding any of the provisions
hereinabove set forth (except Section 6.3), distribution in
respect of the balance in the Deferred Bonus Account of any
Participant shall be subject to the following conditions:
(a) REDUCTION OF DEFERRED BONUS ACCOUNTS ON
CERTAIN TERMINATIONS OF EMPLOYMENT. If a Participant
shall cease to be an Employee within a period of three
years following the close of a Fiscal year with respect
to which an allocation shall have been made to him, the
balance in his Deferred Bonus Account and the Company's
obligation in respect thereof shall be reduced as
follows: for the third Fiscal year preceding the year
in which he shall cease to be an Employee the balance
shall be reduced by the sum of 5% of the amount
credited to his Deferred Bonus Account with respect to
that year and all adjustments allocable thereto; for
the second Fiscal year preceding such termination of
employment the balance shall be reduced by the sum of
10% of the amount credited to his Deferred Bonus
Account with respect to that year and all adjustments
allocable thereto; and for the Fiscal year immediately
preceding such termination of employment the balance
shall be reduced by the sum of 15% of the amount
credited to his Deferred Bonus Account with respect to
that year and all adjustments allocable thereto. The
amount by which any balance in a Deferred Bonus Account
shall be reduced shall be forfeited by the Participant,
and the Company's obligation in respect thereto shall
be canceled. No such reduction in a balance in a
Deferred Bonus Account, or the cancellation of the
Company's obligation in respect thereto, shall be made,
however, where termination of employment shall have
resulted from death, disability or retirement under a
retirement plan of the Company or a subsidiary, or
shall occur under circumstances deemed by the Committee
in its sole discretion not to be contrary to the
interests of the Company.
(b) SERVICES TO BE RENDERED AFTER TERMINATION OF
EMPLOYMENT. Each Participant who has a balance in a
Deferred Bonus Account shall, after he ceased to be an
Employee, make himself available for such consultative
and advisory services as the Company may reasonably
request taking fairly into consideration the age,
health, residence, and individual circumstances of the
Participant and the total amount of his allocation. If
such Participant shall unreasonably refuse to render
such services, the Company's obligation to make further
payments in respect of the balance in his Deferred
Bonus Account shall forthwith terminate. Such
Participant shall have no obligation to render any
services pursuant to this Plan after he shall cease to
be an Employee except as may be required by the Company
under this subparagraph, and the death or disability of
such Participant or the failure of the Company to call
upon him for rendering of the services called for under
this subparagraph shall not affect in any way the right
of such Participant or his Beneficiary, as the case may
be, to receive distributions with respect to the unpaid
balance in his Deferred Bonus Account, it being the
intent and purpose of this subparagraph that the
obligation of the Participant shall be to use his best
efforts to render such consultative and advisory
services, if any, as the Company may reasonably call
upon him to render during each Fiscal year in which
distribution in respect of the balance in his Deferred
Bonus Account shall have been made or shall be due to
him.
(c) ALLOCATIONS LOST TO BE RETAINED BY COMPANY.
Any amount which a Participant shall not be entitled to
receive by virtue of the provisions of paragraphs (a)
and (b) of this Section shall be retained by the
Company free of all claim or restrictions and the
appropriate amount eliminated from the Participant's
Deferred Bonus Account and the Reserve.
(d) In the event of the occurrence of a Change in
Control, the foregoing provisions of this Section 7
shall cease to apply to Participants.
ARTICLE VIII
SCOPE OF PLAN
Section 8.1. TO WHOM APPLICABLE. This Plan shall
apply to such Officers and key Employees as may be selected
by or under the authority of the Committee after
consultation with the management of the Company.
Section 8.2. NO PROHIBITION AGAINST OTHER PLANS.
Nothing in this Plan shall be construed as preventing the
Company or any of its subsidiaries from establishing sales
commission plans or any other or different plans providing
for incentive compensation for employees.
ARTICLE IX
GENERAL CONDITIONS; MISCELLANEOUS PROVISIONS
Section 9.1. PLAN AMENDMENTS. The Board of Directors
may from time to time amend, suspend or terminate in whole
or in part or may reinstate any or all of the provisions of
the Plan, except that (a) no amendment, suspension or
termination may, without his consent, apply to the payment
made to any Participant of any Reserve amount allocated to
such participant (deferred or otherwise), or with respect to
the balance in his Deferred Bonus Account, prior to the
effective date of such amendment, suspension or termination,
and (b) no amendment may be made which will increase the
maximum amount which may be appropriated to the Reserve
under the Plan without prior approval of the holders of a
majority of the outstanding shares of the common stock of
the Company. Notwithstanding anything in the preceding
sentence to the contrary, the Committee may adopt any
amendment to the Plan which (a)(i) does not increase Plan
liabilities by an amount in excess of five million dollars
($5,000,000) and does not increase Plan expense by an amount
in excess of five hundred thousand dollars ($500,000) or
(ii) is required by an applicable law, regulation or ruling,
(b) can be undertaken by the Board of Directors under the
terms of the Plan, (c) does not involve a termination or
suspension of the Plan, and (d) does not affect the
limitations contained in this sentence and does not affect
the composition or compensation of the Committee. Without
limiting the generality of the foregoing, the Board of
Directors or the Committee may, subject to the limitations
contained in this Section, amend or rescind any provision of
the Plan so as to change the number of installments or
modify the period of time during which any such installments
shall be paid and the contingencies under which any such
installments shall be paid.
Section 9.2. NON-ASSIGNABILITY OF BENEFITS; LOANS
PROHIBITED. Except as otherwise required by law, it is a
condition of the Plan that no Participant or any person
claiming under or through any Participant shall have any
right to assign, transfer, appropriate, encumber, or
anticipate his interest in the Plan or any payments to be
made thereunder, and no benefits or payments, rights or
interests of a Participant of any kind or nature shall in
any way be subject to any legal process to levy upon,
garnishee or attach the same for payment of any claim
against the Participant or any person claiming under or
through the Participant nor shall any Participant or any
person claiming under or through any Participant have any
right of any kind whatsoever with respect to the Plan or any
interest therein other than the right to receive
distributions under the Plan as and when the same are due
and payable under the terms of the Plan.
No loan shall be made by the Company to any Participant
of any amount allocated to him under the Plan.
Section 9.3. RIGHT TO TERMINATE EMPLOYMENT. The
selection of any Officer or Employee for participation in
the Plan in any year shall not give such Participant any
right to participate in the Plan in any future year or to be
retained in the employ of the Company or any subsidiary, and
the right and power of the Company or any subsidiary to
dismiss or discharge any Participant is specifically
reserved.
Section 9.4. UNCLAIMED BENEFIT. Any benefit hereunder
which is unclaimed, including outstanding checks, may, as
determined by the Committee, be forfeited.
Section 9.5. NO VESTED RIGHTS OF PARTICIPANTS. The
Company's sole obligation to a Participant or any person
claiming under or through any Participant in respect of the
payment of any balance in his Deferred Bonus Account shall
be solely a contractual obligation in accordance with the
terms of this Plan. The Company shall have no further or
other obligation in respect of any amounts described above.
The Deferred Bonus Accounts and the Deferred Bonus Portions
credited thereto shall not be held or set aside in trust.
No Participant or any person claiming under or through him
shall have any vested or other rights in the Reserve, in the
Deferred Bonus Portion or the Deferred Bonus Account in his
name.
No Participant shall have any right with respect to any
allocation, until such allocation or written notice thereof
shall have been delivered to him; nor shall any such
Participant or any person claiming under or through him have
any right or interest in this Plan, or in the Reserve, or in
any allocation hereunder, or in any balance in any Deferred
Bonus Account unless and until all the terms, conditions and
provisions of the Plan that affect such Participant have
been complied with as specified herein and, in such case,
only to the extent provided herein.
Section 9.6. WITHHOLDING OF DISTRIBUTIONS. In the
event that any dispute shall arise as to the person or
persons to whom any distribution shall be made, the Company
may withhold such distribution until such dispute shall have
been determined in accordance with law. All distributions
to Participants and Beneficiaries shall be subject to any
applicable tax, community property or other statutes and
regulations of the United States or of any state having
jurisdiction thereof.
Section 9.7. RELIANCE ON ACCOUNTS. The Board of
Directors and the Committee may rely upon any information
supplied to them by an Officer or by the Company's
independent public accountants in connection with the
administration of the Plan. The determination of the
Company's independent public accountants as to the Incentive
Compensation Net Income of the Company for any year and the
maximum amounts which may be appropriated to the Reserve in
any year and any other computations or matters arising under
the Plan and referred to such independent public accountants
by the Committee or the Board for determination shall be
final, conclusive and binding on the Company and on all
Participants and upon all persons claiming through or under
any Participant.
Section 9.8. LIABILITY. No member of the Board of
Directors or of the Committee shall be liable for any act or
action, whether of commission or omission, taken by any
other member, or by any officer, agent, or employee or by
any investment advisor or financial institution appointed by
the Committee.
Section 9.9. GOVERNING LAW. This Plan shall be
governed by the law of the State of New York (regardless of
the law that might otherwise govern under applicable New
York principles of conflicts of laws).
ARTICLE X
ADMINISTRATION OF THE PLAN; COMMITTEE
Section 10.1. APPOINTMENTS OF COMMITTEE. The Plan
shall be administered by a Committee of not less than three
members to be appointed by the Board of Directors from among
its own members, none of whom shall be a present Officer or
Employee. No member of the Committee shall be eligible to
participate in the Plan or in any award of incentive
compensation allocated under the Plan after the date he
becomes a member of the Committee. The membership of the
Committee may be reduced, changed or increased from time to
time in the absolute discretion of the Board of Directors.
Section 10.2. ORGANIZATION OF COMMITTEE. The
Committee shall select a Chairman from among its members and
designate a Secretary, who need not be a member of the
Committee and who may be a Participant under the Plan. The
Secretary shall keep all records of meetings of the
Committee and of any actions taken by the Committee. A
majority of the Committee shall constitute a quorum and the
decision of a majority of the members of the Committee
present at any meeting at which a quorum is present,
expressed from time to time by a vote at a meeting
(including a meeting held by telephone conference call or in
which one or more members of the Committee participate by
telephone), or the decision of a majority of the members
expressed in writing without a meeting, shall govern and
control the exercise of the authority of the Committee. The
Committee shall meet at such time and place as the Chairman
shall designate. The Committee shall serve without
compensation, except that they shall be entitled to the
usual attendance fees and disbursements in connection with
attending any meeting.
Section 10.3. POWERS AND DUTIES OF COMMITTEE. The
Committee shall have full discretionary power to construe
and interpret this Plan, to modify the rate of adjustment to
be paid on the amounts in the Deferred Bonus Accounts on a
prospective basis, to determine any and all questions
arising under the Plan, including the right to remedy
possible ambiguities, inconsistencies and omissions, and to
establish and amend rules and regulations for its
administration. Similarly, the determination of the
happening of any of the contingencies mentioned in Article
VII resulting in the loss or reduction of benefits therein
provided, the determination of those who may participate in
additional incentive compensation under the Plan, the amount
of individual allocation to such Participants, and whether
distributions to any Participants or their Beneficiaries
should be made otherwise than in installments of from three
to fifteen years provided for in Section 6.1, shall rest in
the absolute discretion of the Committee subject to the
review of the Board as herein provided (and no Participant
or Beneficiary shall have the right to require any
distribution otherwise than in accordance with said Section
6.1). The Committee shall make an initial determination of
the amount of the Reserve to be allocated to Participants
and the restrictions, conditions or limitations upon the
payment of all or any part of any amounts allocated to a
Participant under the Plan it considers appropriate at the
time such amount is allocated.
All such determinations, constructions, interpreta-
tions, rules and regulations made pursuant to this Section
shall be conclusive and binding upon all Participants and on
all persons claiming under or through any Participant.
ARTICLE XI
REVOCATION OF ELECTION TO DEFER PAYMENT
FOR FINANCIAL HARDSHIP
Section 11.1. The Committee may, in its sole
discretion, alter or revoke an election made by a
Participant to defer payment of any amount of the Reserve
allocated to such Participant, on a clear showing of
financial hardship suffered or to be suffered by such
Participant.
ARTICLE XII
CONTINGENT ALLOTMENT RESERVE ACCOUNT
Section 12.1. A Participant who had a Contingent
Allotment Reserve Account under the Plan as in effect before
December 31, 1976 shall continue to be governed by the terms
and conditions of Article XII of the Plan, As Amended To
September 27, 1983, with respect to such Contingent
Allotment Reserve Account.
ARTICLE XIII
APPROVAL; EFFECTIVE DATE
Section 13.1. This document restates the Plan in its
entirety, as adopted by the stockholders of the Company at
the Annual Meeting of Stockholders of the Company on May 12,
1959, and as amended by all amendments to the Plan since
that date.
* * *
______________________________________________________________
WARNER-LAMBERT COMPANY
* * *
Supplemental Pension Income Plan
As Amended to September 27, 1994
<PAGE>
WARNER-LAMBERT COMPANY
SUPPLEMENTAL PENSION INCOME PLAN
ARTICLE I
Purpose
SECTION 1.1. There is hereby established a Supplemental
Pension Income Plan in order to attract and hold officers and
key employees in senior managerial and other important positions
with the Company and its Affiliates by providing such executives
compensation in the form of supplemental pension and retirement
income in amounts reasonably related to their compensation and
the length of their service with the Company.
ARTICLE II
Definitions
SECTION 2.1. Whenever used herein, unless the context
otherwise indicates, the following terms shall have the respec-
tive meanings set forth below:
Affiliate: any person directly or indirectly
controlling, controlled by, or under direct or indirect
common control with another Person. A Person shall be
deemed to control another Person if such Person possesses,
directly or indirectly, the power to direct or cause the
direction of the management and policies of such other
Person, whether through the ownership of voting securities,
by contract or otherwise.
Average Final Compensation: the total amount of an
Employee's Compensation for the three calendar years during
which his Compensation was the highest of the five year
period of Service ending with his Early or Normal
Retirement Date, divided by 3.
Average Final Salary: the total amount of an
Employee's Salary for the three calendar years during which
his salary was the highest of the five year period of
Service ending with his Early or Normal Retirement Date,
divided by 3.
Basic Pension Income: the amount of annual pension
benefits determined in accordance with Article V hereof.
Board of Directors: the Board of Directors of the
Company or the Executive Committee thereof.
Committee: the Committee authorized to administer the
Plan pursuant to Article IX hereof.
Company: Warner-Lambert Company, its predecessors, or
any successor to it in ownership of substantially all of
its assets, whether by merger, consolidation or otherwise.
Compensation: An Employee's Salary during the calendar
year plus the amount, if any, allocated to the Employee as
additional incentive compensation with respect to the
preceding year pursuant to Section 3.4 of the Warner-
Lambert Company Incentive Compensation Plan, not including
any amount allocated subject to restrictions dependent upon
future per share earnings of the Company.
Early Retirement Date: the first day of the calendar
month coincident with or next following any date, prior to
a Participant's Normal Retirement Date and on or after his
55th birthday, on which he shall retire.
Employee: any person in the employ of the Company or
its domestic Affiliates.
Internal Revenue Code: Internal Revenue Code of 1986,
as amended.
Normal Retirement Date: the first day of the calendar
month coincident with or next following a Participant's
65th birthday.
Participant: a person who shall have met the require-
ments for participation in the Retirement Plan as provided
in Article III thereof and whose participation in the
Retirement Plan shall not have terminated as provided in
said Article.
Pension Income Objective: the annual amount determined
in accordance with Article IV hereof.
Person: an individual, a partnership, a joint venture,
a corporation, a trust, an unincorporated organization, and
a government or any department or agency thereof.
Plan: the Supplemental Pension Income Plan as set
forth herein and as amended from time to time.
Postponed Retirement Date: the first day of the
calendar month coincident with or next following any date,
subsequent to a Participant's Normal Retirement Date, on
which he shall retire.
Retired Senior Executive: a person who has met the
requirements of Article III or XIII, as the case may be.
Retirement Date: an individual's Retirement Date shall
be his Normal, Early or Postponed Retirement Date,
whichever is coincident with or next follows his
termination of Service.
Retirement Plan: the Warner-Lambert Retirement Plan as
in effect on the date hereof and as subsequently amended.
Retirement Plan Benefit: the amount of the annual
benefit that a Retired Senior Executive is eligible to
receive under the Retirement Plan (determined without
regard to the flat dollar benefit of Section 9 of Article
VI of the Retirement Plan) and under Article VII of this
Plan, determined as of and commencing on his Retirement
Date or, if greater, the amount of such benefit that he
would have been eligible to receive if he had begun to
participate in the Retirement Plan when he first became
eligible to do so and thereafter neither voluntarily ceased
to make contributions to, nor elected a refund of
contributions under, the Retirement Plan.
Salary: effective January 1, 1990, an Employee's
annualized basic remuneration paid as of the first day of
the calendar year for services performed for the Company or
its Affiliates, plus any amounts contributed on his behalf
pursuant to Section 4.1 of the Warner-Lambert Supplemental
Savings Plan during the calendar year, and excluding any
bonuses or other compensation.
Salary/Age Minimum: a number, representing the
combination of Salary, expressed in $1,000 units, and age
required for eligibility for a Supplemental Pension Income,
which shall equal 200 on the effective date of the Plan.
For each calendar year subsequent to calendar year 1975,
the Salary/Age Minimum shall equal
(i) the Salary/Age Minimum for the preceding
year; plus or minus
(ii) one-fourth of the percentage increase or
decrease in the Bureau of Labor Statistics Consumer
Price Index for Urban Wage Earners and Clerical
Workers: U.S. City Average, All Items, 1967=100, for
such preceding year multiplied by the difference
between such preceding year's Salary/Age Minimum and
65.
Service: a period of service with the Company or its
Affiliates determined in accordance with service rules
applicable to the Retirement Plan in effect at the time
when the determination shall be made.
Spouse's Supplemental Pension Income: the annual
amount of benefits to be paid to a Surviving Spouse under
Article VI hereof.
Supplemental Pension Income: the annual amount of
benefits to be paid to a Retired Senior Executive under
Article VI hereof.
Supplemental Retirement Plan Income: the benefits to
be paid to a Participant (or his spouse, contingent
annuitant or other person) under Article VII hereof.
Surviving Spouse: the person to whom an Employee or
Retired Senior Executive was married on the date of his
death if the marriage occurred (a) on or before the date on
which the Retired Senior Executive's retirement income
shall have commenced or (b) at least one year prior to the
death of the Employee who dies prior to commencing receipt
of benefits.
ARTICLE III
Eligibility for Supplemental Pension Income
SECTION 3.1. An Employee shall be eligible to receive a
Supplemental Pension Income in an amount determined in
accordance with Article VI hereof if he meets the following
requirements as of his Early or Normal Retirement Date:
(a) he has attained age fifty-five (55);
(b) he has completed at least five (5) years of
Service;
(c) he is a Participant in the Retirement Plan;
(d) the sum of his Average Final Salary divided by
$1,000 plus his age in years equals or exceeds the
Salary/Age Minimum;
(e) he is not entitled to receive Equity Annuity
Retirement Income pursuant to Article VII of the Retirement
Plan;
(f) he is at salary grade 17 or higher; and
(g) if he retires on an Early Retirement Date prior
to age 62, the Committee has approved his eligibility.
SECTION 3.2. The Committee, acting within its discretion,
may designate an Employee who meets all of the requirements of
Section 3.1 hereof as of his Early or Normal Retirement Date
except (d) and/or (f) as being eligible to receive a
Supplemental Pension Income provided:
(a) with respect to Section 3.1(d), the sum referred
to therein equals or exceeds 90% of the Salary/Age Minimum
as of his Early or Normal Retirement Date; and
(b) with respect to Section 3.1(f), the Employee was
at salary grade 17 or higher during at least 24 months of
the five year period of Service ending with his Early or
Normal Retirement Date.
The designation authorized by this Section 3.2 shall be made
only within the period beginning on the Employee's Early or
Normal Retirement Date and ending one year thereafter.
SECTION 3.3. For the purposes of Section 3.1 and Section
3.2, an Employee whose Service is terminated by his death shall
be deemed to have retired immediately prior to the date of his
death. If he would have qualified as a Retired Senior Executive
at that time, his Surviving Spouse, if any, shall be eligible
for a Spouse's Supplemental Pension Income in accordance with
Section 6.2.
ARTICLE IV
Pension Income Objective
SECTION 4.1. For each Retired Senior Executive who
retires on a Normal or Postponed Retirement Date, a Pension
Income Objective shall be calculated as of his Normal Retirement
Date by multiplying the sum of:
(a) 3.36% for each year of his Service after he
attains age 45, up to 10 years; plus
(b) 2.24% for each year of his Service after he
attains age 45, in excess of 10 and up to 20 years
times his Average Final Compensation. No period of
Service after Normal Retirement Date shall be taken
into account in determining a Pension Income
Objective, except as otherwise required by law.
SECTION 4.2. For each Retired Senior Executive who
retires on an Early Retirement Date, a Pension Income Objective
shall be calculated in the amount provided in Section 4.1
hereof, reduced by the amount obtained by multiplying the sum
of:
(a) 6% for each year, if any, between his Early
Retirement Date and his 60th birthday; plus
(b) 3% for each year, if any, between the later of
his Early Retirement Date or his 60th birthday and his
62nd birthday.
SECTION 4.3. Periods of less than a year shall be
included in the calculations required by this Article IV as the
number of complete months in such period divided by 12. A
period of fifteen days or more shall be included in such
calculation as a complete month; a period of less than fifteen
days shall be disregarded.
ARTICLE V
Basic Pension Income
SECTION 5.1. For each Retired Senior Executive there
shall be computed a Basic Pension Income as of his Retirement
Date. The Basic Pension Income shall equal the sum of the
amounts of annual pension benefit determined in accordance with
Section 5.2 or Section 5.3, whichever is applicable.
SECTION 5.2. The Basic Pension Income for each Retired
Senior Executive who retires on a Normal or Postponed Retirement
Date shall be the sum of the following amounts determined as of
his Normal Retirement Date and converted as hereinafter
described:
(a) his Retirement Plan Benefit;
(b) the amount of any pension benefit that he is
eligible to receive under a pension plan maintained by
any Affiliate of the Company or any other company;
(c) the amount of any annual pension benefit that he
is eligible to receive under the Social Security Act,
or would be eligible to receive if he were to realize
no net earnings from self-employment and no wages for
services rendered after his Retirement Date;
(d) the amount of any annual pension benefit that he
is eligible to receive under any other statutory or
governmental pension program; and
(e) the amount of any other pension benefit that he
is eligible to receive now or in the future under any
other pension plan, contract or program, including a
pension plan established by the Retired Senior
Executive with respect to periods of self-employment,
and any individual retirement account, annuity, or
bond established under the Employee Retirement Income
Security Act of 1974 (collectively referred to herein
as "IRA"), or any IRA equivalent established under the
laws of a foreign government, to the extent funded by
a distribution of any of the benefits (whether
directly or indirectly) described in paragraph (b) or
(d) above, but excluding an IRA, or such an IRA
equivalent, to the extent funded with the Retired
Senior Executive's own contributions.
Amounts of Basic Pension Income shall be determined before
any reduction which may have resulted from an election by the
Retired Senior Executive to receive a lump-sum benefit in lieu
of a pension benefit, whether or not related to his own contri-
butions. The amount of any annual pension benefit payments
which commence prior or subsequent to Normal Retirement Date
shall be determined as if the payment of such benefits commenced
on Normal Retirement Date irrespective of the date on which the
pension actually commenced. The amount of any annual pension
(not including Section 5.2(c) amounts) determined at Normal
Retirement Date other than on a 50% joint and survivor basis
shall be converted actuarially to a pension payable on such
basis.
SECTION 5.3. The Basic Pension Income for a Retired
Senior Executive who retires on an Early Retirement Date shall
be the sum of the amounts of annual pension benefits listed in
Section 5.2 hereof, determined as if the payment of such
benefits commenced on the Retired Senior Executive's Normal
Retirement Date. Such sum shall be actuarially reduced to the
later of the Early Retirement Date or the earliest date such
pension benefits are actually available. Amounts (not including
Section 5.2(c) amounts) payable other than on a 50% joint and
survivor basis shall be converted actuarially to a pension
payable on such basis as of the later of the Early Retirement
Date or the earliest date such pension benefits are actually
available. In the event that the payment of any annual pension
benefit listed in Section 5.2 hereof shall first become
available on a date following the Early Retirement Date of such
Retired Senior Executive, the amount of such annual pension
benefit shall be included in the Basic Pension Income of such
Retired Senior Executive only from and after the first date on
which the benefit is available.
SECTION 5.4. Notwithstanding the foregoing, payments to
or other amounts realized by the Retired Senior Executive
pursuant to a deferred compensation agreement, a profit sharing
plan, a stock option or alternate stock plan or any other
incentive compensation plan or agreement shall not be included
in computing his Basic Pension Income.
ARTICLE VI
Supplemental Pension Income
SECTION 6.1. There shall be paid to each Retired Senior
Executive who retires on a Retirement Date a Supplemental
Pension Income which shall be an annual amount equal to the
excess, if any, of his Pension Income Objective computed in
accordance with Article IV hereof over his Basic Pension Income
computed in accordance with Article V hereof.
SECTION 6.2. If a Retired Senior Executive shall die
survived by a Surviving Spouse, such Surviving Spouse shall be
paid a Spouse's Supplemental Pension Income which shall be an
amount equal to one-half of the amount of the Supplemental
Pension Income which otherwise would have been payable to the
Retired Senior Executive.
ARTICLE VII
Supplemental Retirement Plan Income
SECTION 7.1. There shall be paid to each Participant (or
his spouse, contingent annuitant or other person), in accordance
with Section 7.2 hereof, a Supplemental Retirement Plan Income
which shall be the additional amount which would have been
payable to him or her from the Retirement Plan if the
limitations of the Internal Revenue Code were not applicable.
For this purpose, the limitations of the Internal Revenue Code
include, but are not limited to, Sections 415, 401(a)(17) and
401(a)(4), and therefore, this Section 7.1 shall include, but
not be limited to, the additional amount that would be payable
to him or her if Compensation as defined in the Retirement Plan
was to include deferred annual bonuses (but not long term
bonuses), Compensation in excess of $150,000 (as adjusted) and
contributions to the Excess Savings Plan (other than matching
contributions).
SECTION 7.2. Payment of Supplemental Retirement Plan
Income to a Participant or to his spouse, contingent annuitant
or other person shall be governed by the provisions of the
Retirement Plan in all respects, except that any amounts
otherwise payable as Equity Annuity Retirement Income as
referred to in Article VII of the Retirement Plan shall be
payable hereunder as Dollar Annuity Retirement Income as
referred to in Article VI of the Retirement Plan.
ARTICLE VIII
Absence of Funding
SECTION 8.1. The sole obligation of the Company hereunder
to a Retired Senior Executive, Surviving Spouse, Participant, or
any other person claiming through or under any such individual,
is a contractual obligation to make payments in accordance with
the terms hereof. No amount of cash or other property shall be
set aside as a separate trust for the payment of any
Supplemental Pension Income or Supplemental Retirement Plan
Income under the Plan, except that the Company may, in its sole
discretion, establish a trust for the purpose of paying benefits
under the Plan, the assets of which shall remain subject to the
claims of the general creditors of the Company in the event of
the Company's bankruptcy or insolvency, in accordance with the
provisions of any such trust. Any amounts payable under the
Plan shall be paid by the Company directly only out of the
general assets of the Company, or shall be paid from such a
trust.
SECTION 8.2. No Retired Senior Executive or other
Employee shall acquire, or otherwise be vested with, any rights
under Article VI of the Plan prior to his Retirement Date.
SECTION 8.3. Participation in the Plan shall not confer
upon any Employee the right to remain in the employ of the
Company or its Affiliates, and the right and power of the
Company or its Affiliates to dismiss or discharge any Employee
is specifically reserved.
ARTICLE IX
Administration
SECTION 9.1. The Plan shall be administered by a
Committee of not less than three members to be appointed by the
Board of Directors from among its own members, none of whom
shall be Employees. The membership of the Committee may be
reduced, changed or increased from time to time in the absolute
discretion of the Board of Directors. The Committee shall
select a Chairman from among its members and designate any
person as Secretary, who need not be a member of the Committee
and who may be an Employee. The Secretary shall keep all
records of meetings of the Committee and of any actions taken by
the Committee. A majority of the Committee shall constitute a
quorum and the decision of a majority of the members of the
Committee present at any meeting at which a quorum is present,
expressed from time to time by a vote at a meeting (including a
meeting held by telephone conference call or in which one or
more members of the Committee participate by telephone), or the
decision of a majority of the members expressed in writing
without a meeting, shall govern and control the exercise of the
authority of the Committee.
SECTION 9.2. The Committee shall have full discretionary
power to construe and interpret the Plan, to determine any and
all questions arising under the Plan, including the right to
remedy possible ambiguities, inconsistencies and omissions, and
to establish and amend rules and regulations for its
administration. All such determinations, constructions,
interpretations, rules and regulations made pursuant to this
Section 9.2 shall be conclusive and binding upon all Employees
and on all persons claiming under or through any Employee.
SECTION 9.3. The Committee shall determine, within its
discretion, the actuarial methods and assumptions to be used in
determining any amount payable under the Plan. The Committee
may rely on the advice of such independent actuaries or other
persons as it may deem proper in making such determination.
SECTION 9.4. No member of the Board of Directors or of
the Committee shall be liable for any act or action, whether of
commission or omission, taken by any other member, or by any
officer, agent or employee or by any investment advisor or
financial institution appointed by any such person; nor, except
in circumstances involving his bad faith, for anything done or
omitted to be done by himself.
SECTION 9.5. The Committee may require, as a condition to
the payment of any amounts under this Plan, that a Retired
Senior Executive or Surviving Spouse disclose such information
as the Committee shall deem necessary to determine the Basic
Pension Income of such Retired Senior Executive. All such
information shall be held in confidence by the Committee. In
the event that the Committee shall determine that all such
necessary information shall not have been provided, it shall
redetermine the Basic Pension Income and the amount of the
Supplemental Pension Income to be paid thereafter, and it may,
on a finding of an intentional omission or misrepresentation by
a Retired Senior Executive or Surviving Spouse, reduce
subsequent payments by the amount of any such prior payments in
excess of amounts actually due or terminate payments under the
Plan to such Retired Senior Executive or Surviving Spouse.
ARTICLE X
Manner of Payment of Supplemental Pension Income
SECTION 10.1. An amount equal to one-twelfth of the
Supplemental Pension Income shall be paid to a Retired Senior
Executive on his Retirement Date and on the first day of each
calendar month thereafter, but not after the first day of the
calendar month in which the Retired Senior Executive shall die.
SECTION 10.2. An amount equal to one-twelfth of the
Spouse's Supplemental Pension Income provided in accordance with
Section 6.2 hereof shall be paid to a Surviving Spouse on
the first day of the calendar month next following the month in
which the Retired Senior Executive shall die, and on the first
day of each calendar month thereafter, but not after the first
day of the month in which the Surviving Spouse shall die.
ARTICLE XI
Miscellaneous
SECTION 11.1. Neither the establishment of this Plan, nor
any modification thereof, nor the payment of any benefits, shall
be construed as giving to any Employee, Participant, Retired
Senior Executive, Surviving Spouse or other person any legal or
equitable right against the Company, or any officer or employee
thereof, except as herein provided. Under no circumstances
shall the terms of employment of any Employee, Participant,
Retired Senior Executive or any other person be modified or in
any way affected thereby.
SECTION 11.2. No benefit payable under the Plan shall,
except as otherwise specifically provided by law, be subject in
any manner to anticipation, alienation, attachment, sale,
transfer, assignment, pledge, encumbrance or charge, and any
attempt to anticipate, alienate, attach, sell, transfer, assign,
pledge, encumber or charge any such benefit shall be void, and
any such benefit shall not in any manner be liable for or
subject to the debts, contracts, liabilities, engagements or
torts of any person who shall be entitled to such benefit, nor
shall it be subject to attachment or legal process for or
against such person.
SECTION 11.3. If any person entitled to a benefit
hereunder shall be adjudicated a bankrupt or shall attempt to
anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge such benefit, or if any attempt is made to subject any
such benefit to the debts, contracts, liabilities, engagements
or torts of any person entitled to such benefit, then such
benefit shall, in the discretion of the Committee, cease and
terminate, and in that event the Committee may cause such
benefit, or any part thereof, to be held or applied for the
benefit of such person, his spouse, children or other
dependents, or any of them, or other beneficiary, in such manner
and in such proportion as the Committee shall determine.
SECTION 11.4. If, for any reason, the Committee shall
determine that it is not desirable because of the incapacity of
the person who shall be entitled to receive any payments
hereunder, to make such payments directly to such person, the
Committee may apply such payment for the benefit of such person
in any way that the Committee shall deem advisable or may make
any such payment to any third person who, in the judgment of the
Committee, will apply such payment for the benefit of the person
entitled thereto. In the event of such payment the Company and
the Committee shall be discharged from all further liability for
such payment.
SECTION 11.5. Each Retired Senior Executive shall, after
his Retirement Date, make himself available for such
consultative and advisory services as the Company may reasonably
request, taking fairly into consideration the age, health,
residence, and individual circumstances of the Retired Senior
Executive and the total amount of his Supplemental Pension
Income. If such Retired Senior Executive shall unreasonably
refuse to render such services, the Company's obligation to make
further payments under the Plan shall forthwith terminate.
SECTION 11.6. This Plan shall be governed by the law of
the State of New Jersey (regardless of the law that might
otherwise govern under applicable New Jersey principles of
conflicts of laws).
SECTION 11.7. Wherever any words are used herein in the
masculine gender they shall be construed as though they were
also used in the feminine gender in all cases where they would
so apply, and wherever any words are used herein in the singular
form they shall be construed as though they were also used in
the plural form in all cases where they would so apply.
SECTION 11.8. No loan shall be made by the Company to any
person of any amount of his benefit hereunder or of any amount
the security for which is his benefit hereunder.
SECTION 11.9. Any benefit hereunder which is unclaimed,
including outstanding checks, may, as determined by the
Committee, be forfeited.
ARTICLE XII
Amendment and Effective Date
SECTION 12.1. The Board of Directors shall have the right
at any time or from time to time to modify, amend or terminate
the Plan in whole or in part; provided, however, that no such
modification, amendment or termination shall reduce the amount
of any benefits payable under the Plan on the date thereof; and
further provided, that following a Change in Control of the
Company (as defined in Section 13.2 hereof), no modification or
amendment shall be made, directly or indirectly, to the
provisions of Article XIII hereof without the consent of 90% of
the individuals described therein.
SECTION 12.2. Notwithstanding anything in Section 12.1 to
the contrary, the Committee may adopt any amendment to the Plan
which (a)(i) does not increase Plan liabilities by an amount in
excess of five million dollars ($5,000,000) and does not
increase Plan expense by an amount in excess of five hundred
thousand dollars ($500,000) or (ii) is required by an applicable
law, regulation or ruling, (b) can be undertaken by the Board of
Directors under the terms of the Plan, (c) does not involve a
termination or suspension of the Plan, and (d) does not affect
the limitations contained in this sentence and does not affect
the composition or compensation of the Committee.
SECTION 12.3. This document restates the Plan in its
entirety, as adopted by the Board of Directors, effective
January 1, 1975, and as amended by all amendments to the Plan
since that date. In the case of Employees who retire after
January 1, 1980, the determination of Salary and Compensation
for all years shall be in accordance with the terms of the Plan
as then in effect.
SECTION 12.4 Subject to the restriction of Section 12.2
or action by the Board of Directors or the Committee to the
contrary, this Plan shall be deemed amended or modified at the
time of amendment or modification of the Retirement Plan to the
extent necessary to (i) provide consistency in the provisions of
this Plan and the Retirement Plan with respect to definitions
and their related operational provisions, and (ii) maintain the
relationship between the benefits provided by this Plan and the
Retirement Plan. Amendments or modifications to the Plan made
pursuant to this section shall be effective as of the effective
date of the related amendment or modification to the Retirement
Plan unless the Board of Directors or Committee declare
otherwise.
SECTION 12.5 All actions, including Plan amendments,
which are undertaken by the Board of Directors or the Committee
shall be authorized by a duly adopted resolution approved by the
respective body.
ARTICLE XIII
Effect of Certain Events
SECTION 13.1. Notwithstanding anything to the contrary
contained in this Plan, the provisions set forth in this Section
shall apply following a Change in Control of the Company (as
defined in Section 13.2 hereof):
(a) an Employee shall be eligible to receive a
Supplemental Pension Income in an amount determined in
accordance with Article VI hereof if he was at salary
grade 17 or higher prior to such Change in Control of
the Company and an "Activation Event" (as defined in
the Executive Severance Plan) shall have occurred with
respect to such Employee;
(b) the provisions of Sections 9.5 and 11.5 shall no
longer apply; and
(c) as soon as practicable after an Employee has
satisfied the requirements set forth in (a) above
(whether or not such Employee has terminated his
Service), or with respect to a Retired Senior
Executive, as soon as practicable upon such Change in
Control of the Company, the Company shall furnish to
such Employee or Retired Senior Executive (or, if
applicable, his Surviving Spouse) a letter which
acknowledges the right of such Employee or Retired
Senior Executive (or Surviving Spouse) to receive, and
the obligation of the Company to provide, benefits in
accordance with the provisions of this Plan. The
Company shall furnish a similar letter to each
Participant (or his spouse, contingent annuitant or
other person) who is receiving or is entitled to
receive Supplemental Retirement Plan Income pursuant
to Article VII hereof. The aforementioned letters
shall constitute an enforceable contract with the
Company.
SECTION 13.2. For purposes hereof, a "Change in Control of
the Company" shall be deemed to have occurred if (i) any person
(as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Act")) is or
becomes the beneficial owner (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the
Company's then outstanding securities, (ii) the stockholders of
the Company approve a merger, consolidation, sale or disposition
of all or substantially all of the Company's assets or plan of
liquidation, or (iii) the composition of the Board of Directors
of Warner-Lambert Company (for purposes of this paragraph, the
"Board") at any time during any consecutive twenty-four (24)
month period changes such that the Continuity Directors (as
hereinafter defined) cease for any reason to constitute at least
fifty-one percent (51%) of the Board. For purposes of the
foregoing clause (iii), "Continuity Directors" means those
members of the Board who either (a) were directors at the
beginning of such consecutive twenty-four (24) month period, or
(b)(1) filled a vacancy during such twenty-four (24) month
period created by reason of (x) death, (y) a medically
determinable physical or mental impairment which renders the
director substantially unable to function as a director or (z)
retirement at the last mandatory retirement age in effect for at
least two (2) years, and (2) were elected, nominated or voted
for by at least fifty-one percent (51%) of the current directors
who were also directors at the commencement of such twenty-four
(24) month period.
SECTION 13.3 To the extent that implementation of the
Warner-Lambert Enhanced Severance Plan and the Warner-Lambert
Executive Severance Plan requires the accrual of amounts
hereunder, this Plan is hereby amended to include such amounts
as Supplemental Retirement Plan Income under Article VII hereof.
ARTICLE XIV
Lump Sum Payment
SECTION 14.1. Notwithstanding any other provisions hereof,
in the event that (x) an Employee receives a lump sum payment
from the Retirement Plan in lieu of all other benefits under
such plan or (y) the benefit under this Plan which is payable to
the Employee is less than $50 per month at normal retirement age
or at any earlier date in which benefits are payable hereunder
(regardless of the amount payable to such employee from the
Retirement Plan), then the Employee shall receive a lump sum
payment of the benefit which is payable from this Plan with the
amount thereof determined in accordance with Section 7 of
Appendix B of the Retirement Plan.
WARNER-LAMBERT COMPANY
WARNER-LAMBERT EXCESS SAVINGS PLAN
Effective November 1, 1987
As Amended to October 1, 1994
<PAGE>
TABLE OF CONTENTS
ARTICLE SECTION PAGE
1 Purpose of Plan
1.1 Establishment of Plan 1-1
2 Definitions
2.1 Accounts 2-1
2.2 Affiliated Company 2-1
2.3 After-Tax Contributions 2-1
2.4 Annual Reported Earnings Per Share 2-1
2.5 Beneficiary 2-1
2.6 Board of Directors 2-1
2.7 Company 2-2
2.8 Company Matching Contributions 2-1
2.9 Company Matching Contributions
Account 2-2
2.10 Compensation 2-2
2.11 Compensation Reduction Agreement 2-2
2.12 Effective Date 2-2
2.13 Election Change Date 2-2
2.14 Employee 2-2
2.15 Hardship 2-2
2.16 Investment Committee 2-3
2.17 Participant 2-3
2.18 Participating Company or Companies 2-3
2.19 Plan 2-3
2.20 Plan Year 2-3
2.21 Pre-Tax Contributions 2-3
2.22 Pre-Tax Contributions Account 2-4
2.23 Qualified Domestic Relations Order 2-4
2.24 Regular Contributions 2-4
2.25 Retirement Committee 2-4
2.26 Savings and Stock Plan 2-4
2.27 Savings Contributions 2-4
2.28 Savings Contributions Account 2-4
2.29 Total Disability 2-5
2.30 Valuation Date 2-5
3 Requirements for Participation
3.1 Eligibility 3-1
3.2 Requirements 3-1
3.3 Establishing an Account 3-1
3.4 Collective Bargaining Units 3-2
<PAGE>
TABLE OF CONTENTS, CONTINUED
ARTICLE SECTION PAGE
4 Participant Contributions
4.1 Elections 4-1
4.2 Savings Contributions 4-1
4.3 Savings and Stock Plan
Discontinuations 4-2
4.4 Valuations 4-3
5 Company Contributions
5.1 Company Matching Contributions 5-1
5.2 Valuations 5-3
6 Vesting
6.1 Savings Contributions Accounts 6-1
6.2 Company Matching Contributions 6-1
7 Absence of Funding 7-1
8 Distributions After Termination of
Employment
8.1 Termination of Employment 8-1
8.2 Death 8-1
8.3 Disability 8-1
8.4 Valuation of Accounts Upon
Distribution 8-1
9 Withdrawals While Employed
9.1 Hardship Withdrawals 9-1
9.2 Suspensions 9-1
9.3 Third Withdrawals 9-1
9.4 Section 16(b) Transactions 9-2
10 Administration of the Plan 10-1
11 Amendment of the Plan
11.1 Amendments 11-1
11.2 Collective Bargaining Units 11-2
11.3 Investment Committee Actions 11-2
11.4 Deemed Amendments 11-2
12 Termination or Suspension of the Plan
12.1 Termination 12-1
12.2 Suspension 12-1<PAGE>
TABLE OF CONTENTS, CONTINUED
ARTICLE SECTION PAGE
13 General Provisions
13.1 Plan Not a Contract 13-1
13.2 Nonalienation, etc. 13-1
13.3 Qualified Domestic Relations Orders 13-2
13.4 Incapacity 13-2
13.5 Applicable Law 13-3
13.6 Quarterly Statements 13-3
13.7 Distributions 13-3
13.8 Waivers 13-3
13.9 Similar Treatment 13-4
13.10 Claims 13-4
13.11 Indemnifications 13-4
<PAGE>
ARTICLE 1
Purpose of Plan
1.1 Establishment of Plan. The Warner-Lambert Excess
Savings Plan is established and maintained by the Company
primarily for the purpose of providing deferred compensation
for a select group of management or highly-compensated
employees. The Plan is exempt from the provisions of the
Employee Retirement Income Security Act of 1974 ("ERISA"),
relating to participation, vesting, funding and fiduciary
responsibilities. The Company intends that the portion of
this Plan that provides benefits in excess of the limitations
on contributions imposed by section 415 of the Code shall be
treated as a separate plan which is an excess benefit plan as
defined in ERISA Section 3(36).<PAGE>
ARTICLE 2
Definitions
Whenever used herein, unless the context otherwise
indicates, the masculine pronoun shall include the feminine
pronoun and the feminine pronoun shall include the masculine
and the singular shall include the plural and the plural shall
include the singular.
2.1 "Accounts." The aggregate of a Participant's
Savings Contributions Account and Company Matching
Contributions Account.
2.2 "Affiliated Company." An entity as defined in
Article 2 of the Savings and Stock Plan.
2.3 "After-Tax Contributions." The contributions of an
Employee made pursuant to Article 4 of the Savings and Stock
Plan and without regard to a Compensation Reduction Agreement.
2.4 "Annual Reported Earnings Per Share." The annual
earnings per share as reported to the Investment Committee by
the Company's independent auditor for purposes of the
Company's annual report. Notwithstanding the foregoing, any
extraordinary, unusual or nonrecurring gains or losses shall
be disregarded by the Investment Committee.
2.5 "Beneficiary." The person or persons determined in
accordance with Article 16 of the Savings and Stock Plan,
entitled to a distribution upon the death of a Participant.
2.6 "Board of Directors." The Board of Directors of the
Company, or the Executive Committee thereof.
2.7 "Company." Warner-Lambert Company or any successor
to it in ownership of substantially all of its assets, whether
by merger, consolidation or otherwise.
2.8 "Company Matching Contributions." The contributions
of a Participating Company on behalf of a Participant, as
provided in Section 5.1.
2.9 "Company Matching Contributions Account." An
individual account established under the Plan to which Company
Matching Contributions are credited.
2.10 "Compensation." The amount defined in Article 2 of
the Savings and Stock Plan, except that Compensation shall not
be limited as provided in Section 401(a)(17) of the Internal
Revenue Code of 1986, as amended (the "Code").
2.11 "Compensation Reduction Agreement." The agreement
to make contributions to this Plan between an Employee and the
Participating Company by which he is employed.
2.12 "Effective Date." November 1, 1987.
2.13 "Election Change Date." The dates set forth in
Article 2 of the Savings and Stock Plan.
2.14 "Employee." All persons as defined in Article 2 of
the Savings and Stock Plan.
2.15 "Hardship." A severe financial hardship to the
Participant resulting from a sudden and unexpected illness or
accident of the Participant or of a dependent (as defined in
Section 152 of the Code) of the Participant, loss of the
Participant's property due to casualty, or other similar
extraordinary and unforeseeable circumstances arising as a
result of events beyond the control of the Participant. A
Hardship does not exist to the extent that a financial
condition is or may be relieved (i) through reimbursement or
compensation by insurance or otherwise, (ii) by liquidation of
the Participant's assets, to the extent that liquidation of
such assets would not itself cause severe financial hardship,
or (iii) by cessation of deferrals under the Plan. The need
to send a Participant's child to college or the desire to
purchase a home do not constitute Hardships.
2.16 "Investment Committee." The Investment Committee as
appointed by the Retirement Committee pursuant to Article 10
of this Plan.
2.17 "Participant." A person who shall have met the
requirements for participation in the Plan as provided in
Article 3 and whose participation shall not have terminated as
provided in such Article.
2.18 "Participating Company or Companies." Those
companies whose employees are authorized by the Board of
Directors to participate in the Savings and Stock Plan, as
provided for in Article 2 of such plan.
2.19 "Plan." The Warner-Lambert Excess Savings Plan, as
in effect from time to time.
2.20 "Plan Year." The calendar year. However, the first
Plan Year shall begin November 1, 1987 and end December 31,
1987.
2.21 "Pre-Tax Contributions." The contributions
authorized by a Participant pursuant to Article 4 of the
Savings and Stock Plan and made by a Participating Company.
2.22 "Pre-Tax Contributions Account." The account
described in Article 2 of the Savings and Stock Plan.
2.23 "Qualified Domestic Relations Order." Any judgment,
decree or order (including approval of a property settlement)
determined to meet the requirements of section 414(p) of the
Code, in accordance with reasonable procedures established by
the Investment Committee.
2.24 "Regular Contributions." With respect to each
Participant, the After-Tax Contributions and the Pre-Tax
Contributions made pursuant to Article 4 of the Savings and
Stock Plan.
2.25 "Retirement Committee." The Retirement and Savings
Plan Committee (U.S.), as appointed by the Board of Directors,
pursuant to Article 10 of the Plan.
2.26 "Savings and Stock Plan" The Warner-Lambert Savings
and Stock Plan, as it may be amended from time to time.
2.27 "Savings Contributions." The contributions,
sometimes referred to as Excess Savings Contributions,
authorized by a Participant pursuant to Article 4.
2.28 "Savings Contributions Account." An individual
account established under the Plan to which a Participant's
Savings Contributions, and the earnings thereon, are credited.
2.29 "Total Disability." A Total Disability as defined
in Article 2 of the Savings and Stock Plan.
2.30 "Valuation Date." The valuation date or dates
established under the Savings and Stock Plan.
<PAGE>
ARTICLE 3
Requirements for Participation
3.1 Eligibility. Any person who is an Employee on the
Effective Date is eligible to participate provided he
satisfied, and continues to satisfy, the requirements of
Section 3.2. Any other Employee is eligible to participate as
of the first of the month following the date he satisfies the
requirements of Section 3.2. In the event that a Participant
fails to continue to meet the requirements of Section 3.2, the
Participant may no longer make contributions to the Plan or
receive Company Matching Contributions to the Plan until such
time that he once again meets such requirements.
3.2 Requirements. An Employee eligible to participate
under Section 3.1 of the Plan must first satisfy the following
requirements:
(a) He is a participant in and making contributions to
the Savings and Stock Plan; and
(b) His Compensation is greater than or equal to $66,000
or such other dollar amount as set forth in Code Section
414(q)(1)(C); and
(c) The amount the Employee could otherwise contribute to
the Savings and Stock Plan is limited under (i) Section
401(a)(17) of the Code, (ii) Article 4 of the Savings and
Stock Plan, or (iii) Article 6 of the Savings and Stock Plan
as to the amount of annual additions as defined in that
Article; and
(d) The Employee is contributing (either directly or
through a Compensation Reduction Agreement) the maximum amount
permitted under the limits referenced in (ii) of subsection
(c).
3.3 Establishing an Account. Any Employee who is
eligible to become a Participant shall become a Participant by
making an election as provided in Section 4.1. A person who
becomes a Participant shall remain a Participant as long as he
shall continue to have an Account.
3.4 Collective Bargaining Units. Notwithstanding any
other provisions of this Plan to the contrary, and to the
extent determined by the Investment Committee, no Employee may
become a Participant in this Plan while in a collective
bargaining unit represented by a certified or recognized
bargaining representative, unless such unit has entered into a
collective bargaining agreement which provides that such
members of such unit shall participate in the Plan, and such
participation is approved by the Investment Committee.
<PAGE>
ARTICLE 4
Participant Contributions
4.1 Elections. Savings Contributions shall be
voluntarily authorized by a Participant by means of a
Compensation Reduction Agreement executed by the Participant
in the manner required by the Investment Committee.
Contribution amounts may be changed as of any Election Change
Date designated by the Investment Committee for this purpose.
4.2 Savings Contributions.
(a) Excess Savings Contributions. A Participant may
elect by way of a Compensation Reduction Agreement to reduce
his Compensation by an amount, expressed as a whole
percentage, which does not exceed 15% when aggregated with the
percentage of his Compensation being contributed by him to the
Savings and Stock Plan.
(b) Incremental Savings Contributions. In addition, a
Participant whose compensation under the Savings and Stock
Plan is subject to the limitations of Section 401(a)(17) of
the Code may elect to reduce his Compensation in an amount
equal to the difference between his Compensation and the
applicable section 401(a)(17) limit multiplied by the total
percentage elected for his Savings and Stock Plan
contributions.
(c) Savings Contributions shall be credited to the
Participant's Savings Contributions Account.
4.3 Savings and Stock Plan Discontinuations. If a
Participant elects to discontinue all or any portion of his
contributions to the Savings and Stock Plan, he must also
discontinue his Savings Contributions until such time that he
resumes making the maximum contribution he is permitted to
make under the Savings and Stock Plan after considering the
limitations specified in Articles 4 and 6 of such plan. After
such time he may resume making Savings Contributions as of any
Election Change Date.
4.4 Valuations. On the basis of the valuations made on
each Valuation Date, Savings Contributions authorized by a
Participant shall be credited with interest, at a rate equal
to the return on the Fixed Income Fund in the Savings and
Stock Plan.<PAGE>
ARTICLE 5
Company Contributions
5.1 Company Matching Contributions.
(a) Excess and Additional Savings Match. Company
Matching Contributions shall be made in respect of a
Participant's Excess Savings Contributions and Incremental
Savings Contributions up to, but not exceeding, an amount
equal to the difference between 6% of the Participant's
Compensation and the Participant's Regular Contributions made
during the same period to the Savings and Stock Plan.
Effective January 1, 1994, the amount of the Company Matching
Contributions on Excess Savings Contributions and Incremental
Savings Contributions shall be equal to 35%.
(b) Additional Company Matching Contributions.
Additional Company Matching Contributions will be made in
accordance with the following table:
ADDITIONAL MATCH ANNUAL REPORTED EARNINGS PER SHARE GROWTH
25% 12% or greater, but less than 16%
45% 16% or greater, but less than 20%
65% 20% or greater
Company Matching Contributions made pursuant to the preceding
table will be made as soon as practicable after the Investment
Committee receives a determination of the Annual Reported
Earnings Per Share. Additional Company Matching Contributions
shall be made in respect of the Participant's Excess Savings
Contributions and Incremental Savings Contributions up to, but
not exceeding, an amount equal to the difference between 6% of
the Participant's Compensation and the Participant's Regular
Contributions made during the same period to the Savings and
Stock Plan. Such additional Company Matching Contributions
will be allocated in a lump sum based upon the amount of
qualifying contributions made during the prior calendar year
provided that such participant was (a) a vested Employee that
calendar year and (b) was eligible to make Savings
Contributions to the Plan as of the last day of the calendar
year notwithstanding any suspension provisions of the Plan to
the contrary.
(c) 10% Match. Each Participant whose pre-tax
contributions to the Savings and Stock Plan are limited to
less than 6% and whose Regular Contributions are greater than
his pre-tax contributions shall also be credited Company
Matching Contributions in the amount of the difference between
the match actually credited in the Savings and Stock Plan and
the amount that would have been credited had the Participant's
Regular Contributions been made solely on a pre-tax basis.
5.2 Valuations. Amounts credited prior to May 1, 1991 to
a Participant's Company Matching Contributions Account will be
deemed held in shares of Company common stock and will be
adjusted on the basis of the valuations made on each Valuation
Date to reflect any increases or decreases in the market value
of Company common stock, and the value of any dividends which
may be credited thereon. Amounts credited on or after May 1,
1991 to a Participant's Company Matching Contributions Account
will be adjusted on the basis of the return provided by the
Fixed Income Fund of the Savings and Stock Plan.
<PAGE>
ARTICLE 6
Vesting
6.1 Savings Contribution Accounts. A Participant's
interest in his Savings Contributions Account shall be fully
vested.
6.2 Company Matching Contributions. A Participant's
interest in his Company Matching Contributions Account shall
be vested when the Participant is fully vested in his Company
Matching Contributions Account under Article 7 of the Savings
and Stock Plan.<PAGE>
ARTICLE 7
Absence of Funding
The sole obligation of the Company (or any Participating
Company) hereunder to a Participant, Beneficiary or any other
person claiming through such individual is a contractual
obligation to make payments in accordance with the terms of
the Plan. No amount of cash or other property shall be set
aside as a separate trust for the payment of any benefits
under the Plan. Any benefits payable under the Plan shall be
paid directly by the Company only out of the general assets of
the Company.<PAGE>
ARTICLE 8
Distributions After Termination of Employment
8.1 Termination of Employment. If a Participant's
employment shall terminate, the value of his Accounts in which
he is vested in accordance with Article 6 shall be distributed
to him in a lump sum, by check, as soon as practicable after
such termination.
8.2 Death. If a Participant's employment shall terminate
by reason of his death, the value of his Accounts in which he
is vested in accordance with Article 6 shall be distributed in
a lump sum, by check, as soon as practicable after such death,
to the Beneficiary who is entitled or becomes entitled to
receive benefits from the Savings and Stock Plan upon the
death of the Participant.
8.3 Disability. If a Participant becomes entitled to a
distribution under the Savings and Stock Plan due to Total
Disability, such Participant shall be eligible to receive the
value of his Accounts in a lump sum by check as soon as
reasonably practicable following his proper request for a
distribution from the Investment Committee.
8.4 Valuation of Account upon Distribution. For purposes
of determining the amount to be distributed under this
Article, the portion of a Participant's Company Matching
Contributions Account which is deemed held in shares of
Company common stock as provided under Section 5.2 will be
determined by multiplying (i) the number of Company shares
deemed held in the Participant's Company Matching
Contributions Account by (ii) the average price for Company
shares traded in the Savings and Stock Plan on the appropriate
Valuation Date. In the event that no such trades take place
in the Savings and Stock Plan on such date, the amount in
clause (ii) above shall be the closing price listed on the New
York Stock Exchange for Company shares on the appropriate
Valuation Date. <PAGE>
ARTICLE 9
Withdrawals While Employed
9.1 Hardship Withdrawals. If the Investment Committee
determines that a Participant has incurred a Hardship, he can
withdraw all or part of his Savings Contributions Account
(including interest) and, to the extent vested and provided
that all of his Savings Contributions Account has first been
withdrawn, his Company Matching Contributions Account,
provided, however, that he has first withdrawn the maximum
amount available from the Savings and Stock Plan, including
the amount, if any, in his Pre-Tax Contributions Account. The
amount available for any withdrawal shall not exceed that
amount determined by the Investment Committee as necessary to
alleviate such Hardship.
9.2 Suspensions. A Participant who makes a withdrawal
under this Article shall immediately cease making
contributions to this Plan and shall not again be eligible to
make or authorize contributions under this Plan until the
first day of any month which is at least six months after the
pay day on which contributions were discontinued and after the
receipt by the Investment Committee of a notice of election to
resume such contributions. No Participant may elect to make
more than two withdrawals during any calendar year, except as
may be provided in Section 9.3.
9.3 Third Withdrawals. Notwithstanding the provisions of
Section 9.2, the Investment Committee may, in its absolute
discretion and in accordance with such criteria as it may
establish, permit a Participant to make a third withdrawal
from the Plan during a calendar year if the Investment
Committee is satisfied that such withdrawal is necessitated by
extreme or unusual circumstances. The Investment Committee
may impose such conditions on such third withdrawal as it
deems appropriate, including, without limitation, requiring
that the Participant withdraw the entire amount of his Account
which is available for withdrawal or suspending the
Participant from contributing to the Plan for a period not to
exceed 12 months.
9.4 Section 16(b) Transactions. Notwithstanding the
foregoing provisions of this Article 9, Participants who are
subject to Section 16 of the Securities Exchange Act of 1934
(the "Act") may not make withdrawals from their Company
Matching Contributions Accounts unless counsel to the Company
has opined that such withdrawals will not cause transactions
in respect of the Plan to be nonexempt transactions under
Section 16(b) of the Act.<PAGE>
ARTICLE 10
Administration of the Plan
This Plan shall be administered in the same way that the
Savings and Stock Plan is administered, as set forth in
Article 13 of the Savings and Stock Plan (to the extent such
Article applies), except that administrative expenses of the
Plan shall be paid by each Participating Company.
<PAGE>
ARTICLE 11
Amendment of the Plan
11.1 Amendments. The Board of Directors shall have the
right at any time or from time to time to modify or amend the
Plan in whole or in part. No such modification or amendment
shall retroactively reduce the rights of any Participant or
Beneficiary unless required by law.
Notwithstanding any other provisions of this Plan, all
amounts credited to a Participant's Savings Contributions
Account and Company Matching Contributions Account (regardless
of whether vested pursuant to Article 6) shall be payable
promptly in a lump sum following a "Change in Control of the
Company." For purposes hereof, a "Change in Control of the
Company" shall be deemed to have occurred if (i) any person
(as such term is used in Sections 13(d) and 14(d)(2) of the
Securities Exchange Act of 1934, as amended (the "Act")) is or
becomes the beneficial owner (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company
representing 20% or more of the combined voting power of the
Company's then outstanding securities, (ii) the stockholders
of the Company approve a merger, consolidation, sale or
disposition of all or substantially all of the Company's
assets or plan of liquidation, or (iii) the composition of the
Board of Directors of Warner-Lambert Company (for purposes of
this paragraph, the "Board") at any time during any
consecutive twenty-four (24) month period changes such that
the Continuity Directors (as hereinafter defined) cease for
any reason to constitute at least fifty-one percent (51%) of
the Board. For purposes of the foregoing clause (iii),
"Continuity Directors" means those members of the Board who
either (a) were directors at the beginning of such consecutive
twenty-four (24) month period, or (b)(1) filled a vacancy
during such twenty-four (24) month period created by reason of
(x) death, (y) a medically determinable physical or mental
impairment which renders the director substantially unable to
function as a director or (z) retirement at the last mandatory
retirement age in effect for at least two (2) years, and (2)
were elected, nominated or voted for by at least fifty-one
percent (51%) of the current directors who were also directors
at the commencement of such twenty-four (24) month period.
To the extent that implementation of the Warner-Lambert
Enhanced Severance Plan and the Warner-Lambert Executive
Severance Plan requires the accrual of amounts hereunder, this
Plan is hereby amended to include such amounts under Article 4
or Article 5 hereof, as appropriate.
11.2 Collective Bargaining Units. No modification or
amendment of the Plan shall be applicable to Participants in a
collective bargaining unit represented by a certified or
recognized bargaining representative, unless or until, if at
all, an applicable collective bargaining agreement which has
been approved by the Retirement Committee specifically
provides otherwise.
11.3 Retirement Committee Actions. The Retirement
Committee may undertake any action with respect to the Plan
(including the adoption of amendments) which (a)(i) does not
increase Plan liabilities by an amount in excess of five
million dollars ($5,000,000) and does not increase Plan
expense by an amount in excess of five hundred thousand
dollars ($500,000) or (ii) is required by an applicable law,
regulation or ruling, (b) can be undertaken by the Board of
Directors under the terms of the Plan, (c) does not involve a
termination or suspension of the Plan, (d) does not affect the
limitations contained in this sentence and (e) does not affect
the composition or compensation of the Retirement Committee.
11.4 Investment Committee Actions. The Investment
Committee may undertake any action with respect to the Plan
(including the adoption of amendments) which (a)(i) does not
increase Plan liabilities by an amount in excess of two
million five hundred thousand dollars ($2,,500,000) and does
not increase Plan expense by an amount in excess of two
hundred fifty thousand dollars ($250,000) or (ii) is required
by an applicable law, regulation or ruling, (b) can be
undertaken by the Board of Directors under the terms of the
Plan, (c) does not involve a termination or suspension of the
Plan, (d) does not affect the limitations contained in this
sentence, (e) does not affect the composition or compensation
of the Retirement Committee, (f) does not have a
disproportionate or preferential impact on officers'
compensation and (g) does not significantly impact Plan
design. In exercising its rights under this section, the
Investment Committee shall be deemed to exercise a management
perogative as a delegatee of the Board of Directors, and shall
not be deemed a fiduciary.
14.5 Adoption by Resolution. All actions, including
Plan amendemtns, which are undertaken by the Board of
Directors, Retirement Committee or Investment Committee shall
be authorized by a duly adopted resolution approved by the
respective body.
11.6 Deemed Amendments. Subject to the restrictions of
Section 11.3 and 11.4 hereof or action by the Board of
Directors, the Retirememt Committee or the Investment
Committee to the contrary, this Plan shall be deemed amended
or modified at the time of amendment or modification of the
Savings and Stock Plan to the extent necessary to (i) provide
consistency in the provisions of this Plan and the Savings and
Stock Plan with respect to definitions and their related
operational provisions, and (ii) maintain the relationship
between the benefits provided by this Plan and the Savings and
Stock Plan. Amendments or modifications to the Plan made
pursuant to this section shall be effective as of the
effective date of the related amendment or modification to the
Savings and Stock Plan unless the Board of Directors, the
Retirement Committee or the Investment Committee declares
otherwise. <PAGE>
ARTICLE 12
Termination or Suspension of the Plan
12.1 Termination. The Company intends to continue the
Plan indefinitely; however, the Board of Directors may at any
time terminate the Plan by a resolution specifying the date of
termination.
12.2 Suspension. The Board of Directors may at any time
and from time to time suspend or reduce the rate of
Participating Company contributions to the Plan by a
resolution specifying the period of suspension or reduction.
<PAGE>
ARTICLE 13
General Provisions
13.1 Plan Not a Contract. The Plan shall not be deemed
to constitute a contract between any company and any
Participant, former Participant, Beneficiary, person in its
employ or other person, or a contract for the benefit of any
person, or to be a consideration for, or an inducement or
condition of, the employment of any person, or to give any
right to be retained in the employ of any company, or to
interfere with the right of any company to discharge any
person in its employ at any time without regard to the effect
which such discharge shall have, if any, upon his rights under
the Plan.
13.2 Nonalienation, etc. Except as provided in Section
13.3, no distribution under this Plan to any Participant or
Beneficiary shall be subject in any manner to anticipation,
alienation, sale, transfer, assignment, pledge, encumbrance or
charge, whether voluntary or involuntary, and any attempt to
so anticipate, alienate, sell, transfer, assign, pledge,
encumber or charge the same shall be void, nor shall any such
distribution be in any way liable for or subject to the debts,
contracts, liabilities, engagements or torts of any person
entitled to such distribution, nor shall any distribution be
subject to attachment or legal process for or against any such
person. If any such Participant or Beneficiary has been
adjudicated bankrupt or has purported to anticipate, alienate,
sell, transfer, assign, pledge, encumber or charge any such
distribution, voluntarily or involuntarily, or if any attempt
is made to subject any such distribution to the debts,
contracts, liabilities, engagements or torts of the person
entitled to any such distribution, then the Investment
Committee may, in its discretion, cause such distribution, or
any part thereof, to be held or applied for the benefit of or
distributed to such Participant or Beneficiary, or held or
applied for the benefit of or distributed to the spouse,
children or other dependents, or any of them, or any other
person, in such manner and in such proportion as the
Investment Committee shall determine and such determination
shall be binding and conclusive on all persons, including the
person originally entitled to such distribution and, where
applicable, his Beneficiary.
13.3 Qualified Domestic Relations Orders. The Investment
Committee shall recognize and honor any judgment, decree or
order entered on or after the Effective Date under a state
domestic relations law which the Investment Committee
determines to be a Qualified Domestic Relations Order in
accordance with such reasonable procedures to determine such
status as the Investment Committee shall establish.
13.4 Incapacity. If, for any reason, the Investment
Committee shall determine that it is not desirable, because of
the minority or other incapacity (whether or not recognized or
recognizable by law) of the person who shall be entitled to
receive any distribution under the Plan, to withhold such
distribution or to make such distribution directly to such
person, the Investment Committee may apply any such
distribution for the benefit of such person in any way that
the Investment Committee shall deem advisable or to make any
such distribution to any third person who, in the judgment of
the Investment Committee, will apply such distribution for the
benefit of the person entitled thereto. Such distribution for
the benefit of the person entitled thereto, or to a third
person for his benefit, having been made, each Participating
Company and the Investment Committee shall be discharged from
all further liability for such distribution.
13.5 Applicable Law. The provisions of the Plan shall be
construed, administered and governed under the laws of the
State of New Jersey (other than the provisions governing
conflict of laws) to the extent not preempted by the Employee
Retirement Income Security Act of 1974.
13.6 Quarterly Statements. As soon as practicable after
the end of each calendar quarter, the Investment Committee
shall furnish each Participant with a statement of his
participation in the Plan.
13.7 Distributions. All distributions under this Plan
shall be subject to any tax and other laws and statutes, and
regulations thereunder, and the decrees or rulings of any
court or any administrative or other regulatory representative
or agency, deemed by the Investment Committee to be
applicable.
13.8 Waivers. A Participant or Beneficiary may, by
notice in writing to the Investment Committee, at any time and
from time to time, waive his right to receive all or any part
of the benefits payable to him hereunder, subject to the
requirements of the Investment Committee.
13.9 Similar Treatment. All Participants in similar
circumstances shall be treated alike for all purposes of the
Plan.
13.10 Claims. If any person shall claim a right to
receive any benefit under the Plan, the Investment Committee
shall determine whether such benefit is permitted or required
by the terms of the Plan. If the Investment Committee shall
determine that no such benefit is permitted or required, it
shall provide written notice to such person setting forth the
reasons for such determination in a manner calculated to be
understood by the recipient. A person who receives such
notice may, by written request filed with the Investment
Committee within 60 days after the receipt of the notice,
request a review of such determination by the Investment
Committee. If so requested, the Investment Committee shall
review such determination and shall notify such person of its
decision in writing within 60 days after receipt of such
request for review (120 days if special circumstances require
an extension of time), setting forth therein the reasons for
its decision.
13.11 Indemnifications. Each member of the Investment
Committee and of the board of directors of any Participating
Company, and each other Employee who is charged with
administrative duties or responsibilities with respect to the
Plan, shall be indemnified by the Participating Companies
against liability imposed on him and against all expenses and
costs which may be reasonably incurred by him in connection
with or resulting from any action, suit or proceeding, or any
claim against him, if he shall have been made a party to such
action, suit or proceeding, or such claim shall have been
made, by reason of his having administrative or other duties
with respect to the Plan; but such indemnification shall not
apply to matters as to which he shall be finally adjudged
therein to have been liable on account of, or to have been
guilty of, gross negligence or willful misconduct in the
performance of his duties with respect to the Plan. In the
case of settlement of any such action, proceeding or claim
before a final adjudication, the right of indemnification
shall similarly exist.
WARNER-LAMBERT COMPANY
WARNER-LAMBERT COMPANY
EXECUTIVE SEVERANCE PLAN
As Amended To September 27, 1994
<PAGE>
WARNER-LAMBERT COMPANY
EXECUTIVE SEVERANCE PLAN
Section 1. Establishment of Plan. Warner-Lambert
Company (the "Company") hereby establishes this Executive
Severance Plan (the "Plan"). The Plan shall become
effective as of February 17, 1988 (the "Effective Date").
Section 2. Purposes of Plan. In recognition of the
establishment of the Enhanced Severance Plan which is not
applicable to Participants (as hereinafter defined) in this
Plan, and in further recognition of the several different
concerns of Executives encompassed hereby, the purposes of
the Plan are to: (a) fulfill the Company's commitment under
the Warner-Lambert Creed of attracting and retaining capable
people as a means of both addressing the health and well-
being of people throughout the world and providing a fair
and attractive economic return to the Company's
shareholders; (b) address the concerns of the Company's
Executives regarding job security; and (c) help ensure that
the Executives receive the benefits which they legitimately
expect in the normal course of their employment.
Section 3. Definition of Executives; Eligibility.
3.1. Definition of Executives. For purposes of this
Plan, the term "Executives" shall mean (a) all employees of
the Company who are subject to the reporting requirements of
Section 16(a) of the Act (as hereinafter defined)
("Corporate Officers") on the Effective Date; (b) all
persons who become Corporate Officers after the Effective
Date and (c) all employees of the Company who are designated
by the Board of Directors of the Company (the "Board") or by
the Executive Committee of the Company (as such bodies are
constituted prior to the occurrence of a Change in Control
(as hereinafter defined)) as eligible for participation in
this Plan ("Designated Employees"). For purposes of this
Plan, the term "Act" shall mean the Securities Exchange Act
of 1934, as amended.
3.2. Eligibility. All Executives shall participate in
the Plan (the "Participants"); provided, however, that (i)
except as provided in clauses (iii) and (iv) of this
subsection, an Executive shall cease to be a Participant at
the time such Executive ceases to be a Corporate Officer;
(ii) no person who is not an Executive at the time of the
occurrence of a Change in Control shall become a Participant
thereafter; (iii) except as provided in clause (iv) of this
subsection, the participation of a Designated Employee shall
cease at the time that such employee ceases to be a
corporate officer appointed to such position by the Board of
Directors, unless such employee continues to be a Corporate
Officer; and (iv) no Executives who are Participants at the
time of the occurrence of a Change in Control shall cease
participation without their written consent.
Section 4. Definition of Change in Control; Activation
Event.
4.1. Change In Control. For purposes of this Plan, a
"Change in Control" of the Company shall be deemed to have
occurred if (i) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Act) is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities, (ii) the stockholders of the Company
approve a merger, consolidation, sale or disposition of all
or substantially all of the Company's assets or plan of
liquidation or (iii) the composition of the Board at any
time during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as hereinafter
defined) cease for any reason to constitute at least fifty-
one percent (51%) of the Board. For purposes of the
foregoing clause (iii), "Continuity Directors" means those
members of the Board who either (a) were directors at the
beginning of such consecutive twenty-four (24) month period,
or (b)(1) filled a vacancy during such twenty-four (24)
month period created by reason of (x) death, (y) a medically
determinable physical or mental impairment which renders the
director substantially unable to function as a director or
(z) retirement at the last mandatory retirement age in
effect for at least two (2) years, and (2) were elected,
nominated or voted for by at least fifty-one percent (51%)
of the current directors who were also directors at the
commencement of such twenty-four (24) month period.
4.2. Activation Event. For purposes of this Plan, the
term "Activation Event" shall mean a termination of
employment with the Company (whether voluntary or
involuntary) within three (3) years after a Change in
Control for any reason other than death or Termination for
Just Cause (as hereinafter defined).
Section 5. Severance Benefits. Upon the occurrence of
an Activation Event with respect to a Participant, the
following shall apply to such Participant: (a) the benefits
specified in Severance Policy #163, as such policy is in
effect immediately prior to the occurrence of the Change in
Control (including amounts due by reason of such event) (the
"Severance Policy"), shall be paid to the Participant, in
accordance with the coverage provisions thereof, even though
the termination would not otherwise give rise to severance
payments, provided, however, that the Severance Pay Duration
Period (as defined in the Severance Policy) of Participants
shall be thirty-six (36) months; (b) severance benefits
shall be determined on the basis of base pay plus Bonus
Amount (as hereinafter defined), extrapolated for the entire
Severance Pay Duration Period, as determined in accordance
with paragraph (a) hereof (for example severance benefits
shall include payment of, and benefits continuance shall in
part be based upon, three (3) times the Participant's Bonus
Amount); (c) severance payments and continued eligibility
for other benefits shall not terminate upon other
employment, retirement or death; (d) severance payments
(including amounts paid in respect of the Participant's
Bonus Amount) shall, at the election of the Participant, be
made monthly or in a lump sum (regardless of eligibility
therefor under the Severance Policy) and the receipt of a
lump sum payment shall not terminate coverage under other
benefit arrangements which are otherwise continued during
the Severance Pay Duration Period under the Severance
Policy; and (e) the Company shall provide third party
outplacement assistance consistent with the Company's prior
practices. For purposes hereof, the term "Bonus Amount"
shall mean the target award for such Participant's job grade
as set forth in Exhibit 5 hereto, as such schedule may be
revised from time to time; provided, however, that upon the
occurrence of a Change in Control, the target awards may not
be reduced.
Section 6. Retirement Plans. Upon the occurrence of a
Change in Control, the vesting requirement applicable to
Participants shall become five (5) Years of Service (as
defined in the Warner-Lambert Retirement Plan (the
"Retirement Plan")) and upon the occurrence of an Activation
Event with respect to a Participant, such Participant shall
receive credit for all purposes of the Retirement Plan for
the Severance Pay Duration Period (including the extension
thereto provided under Section 5) and the payments received
in respect of such Period to the extent permissible under
the Internal Revenue Code of 1986, as amended (the "Code"),
with the balance of such credit, if any, being given under
the Warner-Lambert Supplemental Pension Income Plan (the
"Supplemental Pension Plan"). In addition, upon the
occurrence of an Activation Event with respect to a
Participant, eligibility for Supplemental Pension Income
under the Supplemental Pension Plan shall become attainment
of salary grade 17 prior to the Change in Control. To
implement the aforementioned, the Retirement Plan is hereby
amended by (i) deleting the second parenthetical in the
first sentence of Section 7 of Article XIII thereof, and
(ii) revising the third sentence of Section 7 of Section
XIII thereof, to read in its entirety as provided in Exhibit
6(a) hereto. Further, the Supplemental Pension Plan is
hereby amended by (i) adding the phrase "and the Warner-
Lambert Executive Severance Plan" after the fifteenth word
of Section 13.3 of Article XIII thereof and revising Section
13.1(a) to read in its entirety as provided in Exhibit 6(b)
hereto.
Section 7. Savings Plan. Upon the occurrence of an
Activation Event with respect to a Participant, such
Participant shall receive credit for all purposes of the
Warner-Lambert Savings and Stock Plan (the "Savings Plan")
for the Severance Pay Duration Period (including the
extension thereto provided under Section 5) and the payments
received in respect of such Period (exclusive of Bonus
Amounts) to the extent permissible under the Code, with the
balance of such credit, if any, being given under the
Warner-Lambert Supplemental Savings Plan (the "Supplemental
Savings Plan"). To implement the aforementioned, the
Savings Plan is hereby amended by (i) deleting the second
parenthetical in the first sentence of Section 7.6 thereof,
(ii) revising the third sentence of Section 7.6 thereof, to
read in its entirety as provided in Exhibit 7 hereto and
(iii) the Supplemental Savings Plan is hereby amended by
adding the phrase "and the Warner-Lambert Executive
Severance Plan" after the fifteenth word of the last
paragraph of Section 11.1 of Article 11 thereof.
Section 8. Incentive Compensation Plan. Upon the
occurrence of a Change in Control, (i) the formula for
determining the rate for adjustments to Deferred Bonus
Accounts (as defined in the Warner-Lambert Company Incentive
Compensation Plan (the "Incentive Compensation Plan")) may
not be lower for succeeding periods than the formula in
effect at the occurrence of the Change in Control (for
example, if the formula in effect at the Change in Control
is the average prime rate plus two (2) percent, the formula
for all future years may not be lower than the average prime
rate plus two (2) percent); (ii) the consulting and
forfeiture provisions of the Incentive Compensation Plan
shall no longer apply; (iii) the Company shall promptly
transfer an amount equal to the aggregate of all Deferred
Bonus Accounts to a trustee under an irrevocable trust
commonly known as a "Rabbi Trust"; and (iv) upon a
Participant's termination of employment with the Company, he
shall promptly receive the balance in his Deferred Bonus
Account in a lump sum distribution (provided, however, if
the Participant had a Deferred Bonus Account on September
27, 1994, and he or she consented in writing to the
provisions described in the following clause (v) prior to
November 1, 1994, then such provisions shall apply in lieu
of this clause (iv)); and (v) upon a Participant's
termination of employment with the Company within 3 years
after a change in Control, he or she may, within 30 days
thereafter, designate a distribution schedule for their
Deferred Bonus Account which schedule may provide for a lump
sum payment or installment payments over a period of up to
15 years, provided, however, that no payment shall be made
until the end of the severance period (for example, if the
Participant is entitled to 3 years' severance pay, deferred
bonus payments may not begin until 3 years after termination
even if such Participant receives the severance pay in a
lump sum at termination). To implement the aforementioned,
the Incentive Compensation Plan is hereby amended by (i)
deleting the second parenthetical in the third sentence of
Section 5.2 thereof and (ii) deleting the parenthetical in
the first sentence of Sections 6.3 and 7.1(d) thereof.
Section 9. Stock Option Plans. Upon the occurrence of
a Change in Control, all Options (as such term is defined in
the Stock Option Plans (as hereinafter defined)) then
outstanding under the Warner-Lambert Company 1974 Stock
Option and Alternate Stock Plan, the Warner-Lambert Company
1983 Stock Option Plan and the Warner-Lambert Company 1987
Stock Option Plan (collectively, the "Stock Option Plans")
and held by Participants shall become immediately
exercisable by the optionee. Effective as of the Effective
Date of the Plan, limited stock appreciation rights
("LSAR's") are hereby granted to all Participants, at such
Effective Date, in connection with all outstanding options
held by such Participants which are not Reference Options
(as defined in the Stock Option Plans). Such LSAR's shall
only be exercisable for a thirty (30) day period beginning
on the date of the occurrence of a Change in Control unless
(i) the optionee is subject to the reporting requirements of
Section 16(a) of the Act at the time of the occurrence of
the Change in Control and (ii) such event occurs within six
(6) months of the date of grant of the LSAR's, in which case
the LSAR's shall only be exercisable during the thirty (30)
day period beginning six (6) months after the grant of the
LSAR's. Such LSAR's shall remain exercisable (during the
thirty (30) day period beginning on the date of the
occurrence of the Change in Control or during the thirty
(30) day period beginning six (6) months after the grant of
the LSAR's, as the case may be), notwithstanding the
termination of the optionee's employment with the Company.
Upon the occurrence of the Change in Control within six (6)
months of the date of grant of the LSAR's, the Company shall
promptly transfer to a trustee under an irrevocable trust
commonly known as a "Rabbi Trust" for the benefit of the
Participants the maximum amount of cash estimated to be
necessary to satisfy the Company's obligations upon exercise
of all such LSAR's. Upon exercise of an LSAR, a Participant
shall be entitled to receive a cash payment equal to the
excess of the Fair Market Value (as hereinafter defined) on
the date of exercise of a share of Warner-Lambert Common
Stock over the grant price of the Option to which the LSAR
relates multiplied by the number of shares with respect to
which the LSAR is being exercised. For purposes hereof, the
term "Fair Market Value" shall have the same definition
currently applicable to the exercise of a Right (as defined
in the Stock Option Plans) during the thirty (30) day period
following a Change in Control. In addition, upon the
occurrence of a Change in Control, all Rights then
outstanding under the Stock Option Plans and held by
Participants shall become immediately exercisable by the
grantee; provided, however, that such Rights which have been
held by the grantee for less than six (6) months shall
become fully exercisable only during the thirty (30) day
period beginning six (6) months after the date of grant,
notwithstanding the termination of the grantee's employment
with the Company. Upon the occurrence of a Change in
Control, the Company shall promptly transfer to a trustee
under a Rabbi Trust for the benefit of Participants the
maximum amount of cash estimated to be necessary to satisfy
the Company's obligations upon exercise of all outstanding
Rights then held by Participants for less than six (6)
months. To implement the aforementioned, (i) Article 7 of
the Stock Option Plans is hereby amended by deleting
paragraph (i) of Section 7(b) thereof in its entirety and
substituting a new Paragraph (i) therefor, to read in its
entirety as provided in Exhibit 9(a) hereto; (ii) Article 8
of the Stock Option Plans is hereby amended by deleting
Paragraph (b) thereof in its entirety and substituting a new
Paragraph (b) therefor, to read in its entirety as provided
in Exhibit 9(b) hereto; and (iii) Article 8 of the Stock
Option Plans is hereby amended by adding a new Paragraph (f)
thereto, to read in its entirety as provided in Exhibit 9(c)
hereto. In addition, all Options and Rights presently
outstanding are hereby amended by deleting the last
paragraph of Paragraph 1 thereof in its entirety and
substituting therefor the language as provided in Exhibit
9(d) hereto.
Section 10. Medical Benefits. Upon the occurrence of
an Activation Event with respect to a Participant, such
Participant's coverage under the Warner-Lambert Medical Plan
and the Warner-Lambert Dental Plan (or HMO, as the case may
be) shall continue for the duration of the Severance Pay
Duration Period (including the extensions thereto provided
under Section 5), whether or not the Participant receives
the severance payments in a lump sum or in monthly payments.
In addition, for purposes of determining eligibility for
medical and dental coverage after retirement, a
Participant's Severance Pay Duration Period (including the
extensions thereto provided under Section 5) shall count as
a period of employment with the Company, whether or not the
Participant elects to receive severance payments in a lump
sum or in monthly payments. Further, upon the occurrence of
a Change in Control, the Company's retiree medical plan may
not be terminated or amended in a manner that is not also
applicable to active employees.
Section 11. Termination of Plan. This Plan may not be
terminated with respect to any Participant without the
written consent of such Participant.
Section 12. Amendment of Plan. This Plan may not be
amended in any manner which has a significant adverse effect
on any Participant and his rights hereunder without the
written consent of such Participant. Notwithstanding the
foregoing, upon the occurrence of a Change in Control, this
Plan may not be amended in any respect without the written
consent of each Participant affected by such proposed
amendment. Notwithstanding any other provision hereof, the
Plan may be amended in order to obtain or maintain the
status of (i) the Retirement Plan and Savings Plan as
qualified plans under Section 401(a) of the Code and (ii)
the Stock Option Plans as qualified under Rule 16b-3
promulgated pursuant to the Act.
Section 13. Administration. The Chief Executive
Officer of the Company shall appoint a committee (the
"Committee") consisting of three (3) Participants, one of
whom shall be the Corporate Vice President, Human Resources,
who shall act as chairman, to administer the Plan. The
Committee shall have the authority to interpret the Plan and
to adopt rules for the implementation thereof.
Section 14. Termination for Just Cause. For purposes
of this Plan, the term "Termination for Just Cause" shall
mean termination for the commission of a wrongful action
such as theft of Company property or alcohol or drug abuse.
The Company intends that Termination for Just Cause shall be
limited to actions which are comparable to theft or
substance abuse. The determination of whether alleged
grounds for termination qualify as a Termination for Just
Cause shall be made by an Arbitration Panel (as hereinafter
defined).
Section 15. Contract Right of Participants. The Board
of Directors of the Company intends this Plan to constitute
an enforceable contract between the Company and each
Participant and intends this Plan to vest rights in such
Participants as third party beneficiaries.
Section 16. Compensation. For all purposes hereof,
except Section 3 and except to the extent provided in
Section 5 with respect to the determination of a
Participant's Bonus Amount, a Participant's compensation,
rate of base earnings, job grade, target award or similar
amounts or status shall be the higher of such amount, grade
or status (as the case may be) at the time of (i) the
occurrence of a Change in Control, or (ii) the termination
of the Participant's employment.
Section 17. Construction. Wherever any words are used
herein in the masculine gender they shall be construed as
though they were also used in the feminine gender in all
cases where they would so apply, and wherever any words are
used herein in the singular form they shall be construed as
though they were also used in the plural form in all cases
where they would so apply.
Section 18. Governing Law. This Plan shall be
governed by the law of the State of New Jersey (regardless
of the law that might otherwise govern under applicable New
Jersey principles of conflict of laws).
Section 19. Successors and Assigns. The Plan shall be
binding upon the Company and upon any assignee or successor
in interest to the Company.
Section 20. Excise Tax Reimbursement Agreements. As
soon as practicable after the Effective Date, all
Participants shall enter into excise tax reimbursement
agreements substantially in the form provided in Exhibit 20
hereto. The objective of these agreements is to reimburse
the Participants, on an after-tax basis, for any federal
excise tax or similar state or local taxes (whether or not
such taxes are in existence on the date hereof) that would
be imposed as a result of a change in control of the
Company.
Section 21. Arbitration Panel. For purposes of this
Plan, the term "Arbitration Panel" shall mean three (3)
independent arbitrators, one of whom shall be selected by
the Company, one by the Participant and the third shall be
selected by the two other arbitrators. In the event that
agreement cannot be reached on the selection of the third
arbitrator, such arbitrator shall be selected by the
American Arbitration Association. All arbitrators shall be
selected from a list provided by the American Arbitration
Association. All matters presented to the Arbitration Panel
shall be decided by majority vote. All costs of the
arbitration, including the Participant's attorneys' fees, if
any, shall be paid by the Company.
Section 22. Uniform Definition of Change in Control.
The definitions of change in control in the Retirement Plan,
Savings Plan, Warner-Lambert Company Supplemental Pension
Income Plan, Severance Policy, Warner-Lambert Supplemental
Savings Plan, Stock Option Plans, Warner-Lambert Company
1989 Stock Plan, Restricted Stock Plan for Directors of
Warner-Lambert Company, Deferred Compensation Plan for
Directors of Warner-Lambert Company and Warner-Lambert
Company Directors' Retirement Plan shall be amended to
incorporate the definition of "Change in Control" contained
in Section 4 of this Plan. To implement the foregoing, such
plans are hereby amended as provided in Exhibit 22 hereto.
Section 23. Notice of Termination. During the three
(3) year period after the occurrence of a Change in Control,
the employment of a Participant may not be terminated,
except in the event of Termination for Just Cause, unless
the Participant has received six (6) months' advance notice
of the termination in a letter written to such Participant,
which letter shall specify (i) the date of termination,
which date shall not be sooner than six (6) months after
receipt of such letter by the Participant, (ii) the reason
for termination, and (iii) a commitment to honor this Plan,
including, without limitation, the Severance Policy, and to
pay to the Participant all amounts to which the Participant
is entitled thereunder. In addition, the expiration of such
three (3) year period shall not extinguish the rights of any
Participant who has received notice of termination during
such three (3) year period (i) to a full six (6) month
notice period (even if such notice period thereby extends
beyond the three (3) year period), and (ii) to a payment of
such Participant's severance and other benefits in
accordance with the provisions of this Plan.
Section 24. Maintenance of Status Quo. Upon the
occurrence of a Change in Control, no Participant's salary,
bonus or benefits may be reduced for a period of three (3)
years provided that such Participant's performance is
acceptable. For purposes of this Section, a Participant's
performance shall be considered "acceptable" unless the
Participant receives a written performance appraisal
indicating (a) that such Participant's overall performance
(i) is not acceptable and (ii) has not been acceptable
during a performance review period extending at least six
(6) months and (b) the specific reasons the Participant's
performance is not acceptable. Further, such performance
appraisal must have been (a) reviewed and concurred in by
the Participant's supervisor, the supervisor's supervisor
(unless the Participant's supervisor is the Chief Executive
Officer of the Company) and the Participant's Human
Resources representative and (b) preceded by a written
warning given to such Participant which shall have provided
a reasonable opportunity for the Participant to improve his
or her performance.
WARNER-LAMBERT COMPANY<PAGE>
EXHIBIT 5
Target Annual Incentive Award
Target Percentage
Grade of Grade Midpoint
23 70%
22 65
21 58
20 55
19 52
18 49
17 39
16 37
15 34
14 31
13 28
12 24
11 20
10 16
9 8
8 5<PAGE>
EXHIBIT 6(a)
Retirement Plan
"The term "Activation Event" shall also include a
termination of employment with the Company (whether
voluntary or involuntary) within two (2) years after a
Change in Control for any reason other than death or
Termination for Just Cause (i) with respect to Participants
who are covered by the Executive Severance Plan at the time
of occurrence of the Change in Control, and (ii) with
respect to all other Participants (x) if the Change in
Control occurs otherwise than through a transaction approved
and authorized or consented to by the Board of Directors of
the Company, as constituted prior to such transaction, or
(y) in such other circumstance as the Board of Directors
shall deem appropriate."<PAGE>
EXHIBIT 6(b)
Supplemental Pension Plan
(a) an Employee shall be eligible to receive a
Supplemental Pension Income in an amount determined in
accordance with Article VI hereof if he was at salary grade
17 or higher prior to such Change in Control of the Company
and an "Activation Event" (as defined in the Executive
Severance Plan) shall have occurred with respect to such
Employee;<PAGE>
EXHIBIT 7
Savings Plan
"The term "Activation Event" shall also include a
termination of employment with the Company (whether
voluntary or involuntary) within two (2) years after a
Change in Control (as hereinafter defined) for any reason
other than death or Termination for Just Cause (i) with
respect to Participants who are covered by the Executive
Severance Plan at the time of occurrence of the Change in
Control, and (ii) with respect to all other Participants (x)
if the Change in Control occurs otherwise than through a
transaction approved and authorized or consented to by the
Board of Directors of the Company, as constituted prior to
such transaction, or (y) in such other circumstance as the
Board of Directors shall deem appropriate."
<PAGE>
EXHIBIT 9(a)
Stock Option Plans
"(i) Notwithstanding any other provision contained in
this Plan, no part of an Option may be exercised unless the
Optionee remains in the continuous employ of the Company for
one year from the date the Option is granted except that
upon the occurrence of a Change in Control of Warner-Lambert
Company (as hereinafter defined) all Options may be
exercised without giving effect to the one year limitation
and the limitations, if any, which may have been imposed by
the Committee pursuant to paragraph (b)(ii) of this Article
7 with respect to the percent of the total number of shares
to which the Option relates which may be purchased from time
to time during the Option Period."
<PAGE>
EXHIBIT 9(b)
Stock Option Plans
"(b) Exercise of Right. A Right shall become
exercisable at such time, and in respect of such number of
shares of Common Stock, as the Reference Option is then
exercisable and such Right shall terminate upon termination
of the Reference Option, provided, however, that no Right
shall be exercisable unless the Grantee shall have remained
in the continuous employ of the Company for one year from
the date the Right was granted except that upon the
occurrence of a Change in Control of Warner-Lambert Company,
all Rights may be exercised without giving effect to the one
year limitation and the limitations, if any, which may have
been imposed by the Committee pursuant to paragraph (b)(ii)
of Article 7 with respect to the percent of the total number
of shares to which the Right relates which may be purchased
from time to time during the Option Period; provided,
however, that Rights which have been held for less than six
months on the date of the occurrence of a Change in Control
by Grantees who at the time of the occurrence of the Change
in Control are subject to the reporting requirements of
Section 16(a) of the Act may be exercised only during the
thirty (30) day period beginning six months after the date
of grant of the Right, notwithstanding the termination of
the Grantee's employment with the Company, and without
giving effect to the one year limitation and the
limitations, if any, which may have been imposed by the
Committee pursuant to paragraph (b)(ii) of Article 7 with
respect to the percent of the total number of shares to
which the Right relates which may be purchased from time to
time during the Option Period. Except as provided in this
paragraph (b) and in paragraphs (d) and (e) of this Article
8, no Right shall be exercisable unless at the time of such
exercise the Grantee shall be in the employ of the Company.
The date on which the exercise of a Right is effective shall
hereinafter be referred to as the Valuation Date."
<PAGE>
EXHIBIT 9(c)
Stock Option Plans
"(f) Notwithstanding anything herein to the contrary,
Limited Rights may be granted hereunder by the Compensation
Committee with respect to the Options granted under the Plan
(which are not Reference Options), which shall be
exercisable only upon the occurrence of a Change in Control.
Such Limited Rights may only be exercised by Optionees
during the thirty (30) day period beginning on the date of
the occurrence of a Change in Control unless (i) at the time
of the occurrence of the Change in Control such Optionee is
subject to the reporting requirements of Section 16(a) of
the Act and (ii) such event occurs within six (6) months of
the date of grant, in which case such Limited Rights may
only be exercised during the thirty (30) day period
beginning six (6) months after the grant of the Limited
Rights. During the period specified in the preceding
sentence, such Limited Rights may be exercised notwith-
standing the termination of the Optionee's employment with
the Company. Upon the exercise of a Limited Right, the
Optionee shall be entitled to receive a cash payment equal
to the excess of the Fair Market Value of a share of Common
Stock on the Valuation Date over the Option Price of the
related Option multiplied by the number of shares with
respect to which the Limited Right is being exercised (in
such case the method of determining the Fair Market Value in
the third sentence of Section 6(i) shall apply). Limited
Rights shall expire on the first to occur of the date of
exercise or expiration of the right of exercise of the
Limited Right or of the related Option. Further, upon
exercise of a Limited Right, the related Option shall be
cancelled. The Board of Directors reserves the right to
cancel all outstanding Limited Rights in accordance with
Sections 11 and 12 of the Executive Severance Plan. Except
as otherwise provided herein, the provisions of the Plan
relating to Rights shall also apply to Limited Rights."
<PAGE>
EXHIBIT 9(d)
Stock Option Plans
"Notwithstanding anything herein to the contrary, this
Option may be exercised in full as of the date on which
there occurs a "Change in Control of Warner-Lambert Company"
(as defined in the Plan).
Further, you are hereby granted Limited Rights (as
defined in the Plan) with respect to those Options presently
held by you which were not granted in tandem with Rights.
These Limited Rights may only be exercised by you during the
thirty (30) day period beginning on the date of the
occurrence of a "Change in Control" (as hereinafter defined)
unless (i) you are subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Act"), at the time of the occurrence of the
Change in Control (a "Reporting Person") and (ii) such
Change in Control occurs within six (6) months of the date
of grant of the Limited Rights, in which case these Limited
Rights may only be exercised during the thirty (30) day
period beginning six (6) months after the date of grant of
the Limited Rights. Lastly, upon exercise of a Limited
Right, you shall be entitled to receive a cash payment equal
to the excess of the "Fair Market Value" (as defined in the
Plan) of a share of Common Stock on the date of exercise
over the Option Price multiplied by the number of shares
with respect to the Limited Right is being exercised.
Notwithstanding the foregoing, the Company reserves the
right to cancel all outstanding Limited Rights in the event
that the Board of Directors of the Company cancels the
Executive Severance Plan. Except as otherwise provided
herein, the provisions of the Plan relating to Rights shall
also apply to Limited Rights.
In addition, notwithstanding anything herein to the
contrary, Rights which are outstanding on the date of the
occurrence of a Change in Control may be exercised in full;
provided, however, that if you are a Reporting Person and
the Change in Control occurs within six (6) months after the
date of grant of the Right, the Right may only be exercised
during the thirty (30) day period beginning six (6) months
after the date of grant of the Right.
For purposes hereof, a Change in Control shall be
deemed to have occurred if (i) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Act) is or
becomes the beneficial owner (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting
power of the Company's then outstanding securities, (ii) the
stockholders of the Company approve a merger, consolidation,
sale or disposition of all or substantially all of the
Company's assets or plan of liquidation or (iii) the
composition of the Board of Directors of the Company at any
time during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as hereinafter
defined) cease for any reason to constitute at least fifty-
one percent (51%) of the Board. For purposes of the
foregoing clause (iii), "Continuity Directors" means those
members of the Board who either (a) were directors at the
beginning of such consecutive twenty-four (24) month period,
or (b)(1) filled a vacancy during such twenty-four (24)
month period created by reason of (x) death, (y) a medically
determinable physical or mental impairment which renders the
director substantially unable to function as a director or
(z) retirement at the last mandatory retirement age in
effect for at least two (2) years, and (2) were elected,
nominated or voted for by at least fifty-one percent (51%)
of the current directors who were also directors at the
commencement of such twenty-four (24) month period."
<PAGE>
EXHIBIT 20
This AGREEMENT, made and entered into as of June __,
1990 (this "Agreement"), between Warner-Lambert Company, a
Delaware corporation (the "Company"), and ________________
_________________________ (the "Executive").
WHEREAS, the Executive is a highly valued employee of
the Company; and
WHEREAS, the Company has awarded the Executive, in the
ordinary course of business and during the Executive's
employment with the Company, certain employee benefits,
including, but not limited to, employee stock options, that
are designed to compensate the Executive for his services to
the Company and to give him incentive to expend every effort
to produce the best results for the benefit of the Company's
shareholders; and
WHEREAS, in light of the economic climate and in an
effort to foster a sense of job security for the Executive,
the Company and the Executive have entered into certain
arrangements (the "Executive Compensation Arrangements")
regarding the Executive's employee benefits, including, but
not limited to, arrangements regarding the accelerated
vesting of employee stock options and the payment of
severance, that are designed to preserve the Executive's
benefits in the event of a change in control of the Company;
and
WHEREAS, there exists uncertainty in the tax law
whether, and/or to what extent, the Executive Compensation
Arrangements will subject the Executive to the tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar state or local taxes,
(all such taxes, whether or not in existence on the date
hereof, being collectively referred to herein as the "Excise
Tax") thereby diminishing the value of the employee benefits
to which the Executive is entitled;
NOW, THEREFORE, in consideration of the mutual premises
and covenants contained herein, the Company and the
Executive do hereby covenant and agree as follows:
1. Special Payments. In the event that the Executive
becomes entitled to any payments and such payments, or any
part thereof, will be subject to the Excise Tax, the Company
shall pay to the Executive, in accordance with the
provisions set forth below, an additional amount (a "Special
Payment") that may be necessary to reimburse the Executive,
on an after-tax basis, for any Excise Tax that may be
imposed by reason of such payments, or any portion thereof,
and for any federal, state and local income tax and Excise
Tax that may be imposed by reason of the Special Payment.
2. Calculation of Excise Tax and Special Payment. The
Special Payment shall be paid to the Executive as promptly
as practicable following a change in control of the Company
once Price Waterhouse has calculated the estimated Excise
Tax to be imposed on the Executive, except as otherwise
provided in paragraph 3. For purposes of determining
whether any payments will be subject to Excise Tax and the
amount of such Excise Tax, all amounts in any manner
connected with a change in control, whether received by the
Executive at such time or not and including amounts which
the Executive has the right to receive in the future as a
result of the change in control (i) shall be treated as
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, and (ii) the value
of any non-cash benefits or any deferred payment or benefit
shall be determined by Price Waterhouse in accordance with
the principles of Section 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of any Special
Payment, the Executive shall be deemed to pay state and
local income taxes at the highest marginal rate of taxation
imposed by the state and locality in which the Executive
resides or is employed (or both) in the calendar year in
which the Special Payment is to be made, and federal income
taxes at the highest marginal rate of taxation in the
calendar year in which the Special Payment is to be made,
net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local
taxes. At no additional cost to the Executive, Price
Waterhouse shall be responsible for completing and filing
appropriate tax returns for the Executive in connection with
the Special Payment hereunder, consistent with Price
Waterhouse's calculation of such Special Payment.
3. Subsequent Special Payment. In the event that
Price Waterhouse shall determine that payments may be
subject to the Excise Tax if made but that it is uncertain
whether such payments will in fact be made, for example,
payments of severance that will only be made if the
Executive terminates his employment, or in the event that
Price Waterhouse shall determine that payments are not
subject to the Excise Tax but that there is a possibility of
such payments being so treated, Price Waterhouse shall
provide the Company and the Executive with an estimate of
the maximum amount of the Special Payment that might be
required to be paid pursuant to this Agreement. Thereupon
the Company shall promptly transfer to a trustee of an
irrevocable trust commonly known as a "Rabbi Trust" the
maximum additional amount of cash estimated to be necessary
to satisfy the Company's obligations under this Agreement
after taking into consideration any Special Payments
previously made to the Executive. The existence of such
trust shall not discharge the Company's obligations
hereunder and the Company shall continue to have the
obligation to make such payments except to the extent that
payments are actually made to the Executive from such fund.
Additional Special Payments shall be made to the Executive
upon a determination by Price Waterhouse that subsequent
payments received by the Executive, for example, payments of
severance following termination of employment, will result
in additional Excise Tax.
4. Adjustment of Special Payments. (a) In the event
that subsequently enacted or decided statutes, regulations,
administrative rulings or case law indicate, in the view of
Price Waterhouse, that the calculation of the Excise Tax
previously made by Price Waterhouse overstates the
Executive's liability for such Excise Tax, the Company may
direct the Executive, at the Company's sole expense, to file
for a refund of such Excise Tax or take such other actions
as Price Waterhouse reasonably may request in order to
reduce the Executive's liability for Excise Tax and to
ensure that the payments and any Special Payments made to
the Executive pursuant to this Agreement are not determined
to be "parachute payments" within the meaning of Section
280G(b)(2) of the Code, provided that the Company shall have
taken consistent positions on its tax returns and the
Company has issued similar directives to all similarly
situated executives or former executives of the Company who
have received Excise Tax reimbursement payments. The
Executive shall cooperate in good faith in assisting the
Company and Price Waterhouse in their actions pursuant to
this paragraph 4(a).
(b) If it shall be determined, following the
payment to the Executive of the Special Payment, in a final
judicial determination or a final administrative settlement
to which the Executive is a party that the calculation of
the Excise Tax and/or the Special Payment is in error, then
Price Waterhouse will determine the amount (the "Adjustment
Amount"), if any, which the Executive must pay to the
Company or the Company must pay to the Executive, as the
case may be, in order to put the Executive in the same
position, after taking account of any and all taxes
(including penalties and interest) paid by or for the
Executive or refunded to or for the benefit of the Executive
and of the value to the Executive of any and all tax
deductions allowed or disallowed with respect to any
adjustment made in such determination or settlement or
pursuant to this clause, as he would have been in had he
received the Special Payment using the calculations set
forth in such determination or settlement; provided,
however, that as soon as practicable after the Adjustment
Amount has been so determined, the Company shall pay the
Adjustment Amount to the Executive, or the Executive shall
pay the Adjustment Amount to the Company, as the case may
be. In the event that the amount of the estimated Special
Payment exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company
to the Executive payable on the fifth day after demand by
the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(c) The Executive will promptly notify the Company
in writing whenever he receives notice of the institution of
a judicial or administrative proceeding, formal or informal,
in which the federal tax treatment of any amount paid or
payable under this Agreement is being reviewed or is in
dispute. The Company agrees that, in the event it desires
the claim to be contested, it shall request promptly (but in
no event later than 30 days after notice from the Executive
or such earlier period as the Internal Revenue Service may
specify for responding to such claim) that the Executive
contest the claim. Unless required by law, the Executive
agrees not to make any payment of any tax which is the
subject of the claim before he has given the notice or
during the 30-day period thereafter unless he receives
written instruction from the Company to make such payment,
in which case the Executive will act promptly in accordance
with such instructions. If the Company requests that the
Executive contest the claim and provides the Executive with
an opinion of its counsel, at the Company's sole expense,
setting forth the facts and legal analysis on which it is
based, to the effect that there exists a substantial
likelihood of success in contesting the claim, the Executive
will contest the claim by pursuing administrative remedies,
suing for a refund in the appropriate court or contesting
the claim in the United States Tax Court, all at the
Company's sole expense. If requested by the Company in
writing, the Executive will, at the sole expense of the
Company, take all reasonably necessary actions not adverse
to the Executive to compromise or settle the claim, but in
no event will the Executive compromise or settle the claim
or cease to contest the claim without the written consent of
the Company, which consent shall not be unreasonably
withheld. The Executive agrees, at the sole expense of the
Company, to take appropriate appeals of any judgment or
decision that would require the Company to make a Special
Payment under paragraph 1 if requested by the Company and if
the Executive is provided with an opinion of the Company's
counsel, at the Company's sole expense, setting forth the
facts and legal analysis on which it is based, to the effect
that there exists a substantial likelihood of success on
appeal.
(d) The Company shall pay or reimburse the
Executive from time to time, within five business days after
presentation of reasonable documentation therefor, for all
costs and expenses, including reasonable attorney's fees
incurred as a result of contesting a claim or seeking a
refund with respect to Excise Taxes.
(e) Should the Company fail to provide direction
to the Executive in accordance with the provisions of this
Paragraph 4, the Executive, promptly following the
Executive's written request for such direction, shall take
whatever action he deems appropriate (the Company having no
right to later challenge that decision) and it shall be
deemed that the Company requested him to take that action.
5. State or Local Taxes. All issues surrounding the
application of any Excise Tax which is a state or local tax
shall be resolved by Price Waterhouse based upon the
principles underlying the purpose of this Agreement and by
reference to the methodology, to the extent relevant,
established in Paragraphs 2, 3, and 4 hereof.
6. Amendment; Waiver. This Agreement may not be
modified, amended, waived or terminated in any manner except
by an instrument in writing signed by both parties hereto.
At any time prior to a change in control, the Board of
Directors of the Company may substitute another firm of
certified public accountants. The waiver by either party of
compliance with any provision of this Agreement by the other
party shall not operate or be construed as a waiver of any
other provision of this Agreement, or of any subsequent
breach by such party of a provision of this Agreement.
7. Governing Law. All matters affecting this
Agreement, including the validity thereof, are to be
governed by, interpreted and construed in accordance with
the laws of the State of New Jersey, except provisions
relating to conflict of laws.
8. Notices. Any notice hereunder by either party to
the other shall be given in writing by personal delivery or
certified mail, return receipt requested. If addressed to
the Executive, the notice shall be delivered or mailed to
the Executive at the address specified under the Executive's
signature hereto, or if addressed to the Company, the notice
shall be delivered or mailed to the Company at its executive
offices to the attention of Vice President and General
Counsel. A notice shall be deemed given, if by personal
delivery, on the date of such delivery or, if by certified
mail, on the date shown on the applicable return receipt.
9. Counterparts. This Agreement may be executed by
either of the parties hereto in counterpart, each of which
shall be deemed to be an original, but all such counterparts
shall together constitute one and the same instrument.
10. Headings. The headings of paragraphs herein are
included solely for convenience of reference and shall not
control the meaning or interpretation of any of the
provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused the
Agreement to be signed by its officer pursuant to the
authority of its Board of Directors, and the Executive has
executed this Agreement, as of the day and year first
written above.
WARNER-LAMBERT COMPANY
By __________________________
Name:
Title:
[NAME]
______________________________
Address:
<PAGE>
EXHIBIT 22
1. The third sentence of the second paragraph of
Section 1 of Article XXI of the Retirement Plan, the second
sentence of the second paragraph of Section 14.1 of Article
14 of the Savings Plan, Section 13.2 of Article XIII of the
Supplemental Pension Income Plan, the second sentence of the
second paragraph of Section 11.1 of Article 11 of the
Supplemental Savings Plan, Article 6(h) of the Stock Option
Plans and the first sentence of Section 4.6 of the Warner-
Lambert Company 1989 Stock Plan, are hereby amended by
deleting the phrase "(with respect to persons who are not
participants in the Warner-Lambert Executive Severance
Plan)".
2. Section 11.2 of Article XI of the Warner-Lambert
Company Directors' Retirement Plan, the last sentence of
Section 4.6 of Article IV of the Deferred Compensation Plan
for Directors of Warner-Lambert Company and Section 4.5(b)
of the Restricted Stock Plan for Directors of Warner-Lambert
Company are hereby amended by adding the following provision
at the end thereof:
"or (iii) the composition of the Board at any time
during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as
hereinafter defined) cease for any reason to constitute
at least fifty-one percent (51%) of the Board. For
purposes of the foregoing clause (iii), "Continuity
Directors" means those members of the Board who either
(a) were directors at the beginning of such consecutive
twenty-four (24) month period, or (b)(1) filled a
vacancy during such twenty-four (24) month period
created by reason of (x) death, (y) a medically
determinable physical or mental impairment which
renders the director substantially unable to function
as a director or (z) retirement at the last mandatory
retirement age in effect for at least two (2) years,
and (2) were elected, nominated or voted for by at
least fifty-one percent (51%) of the current directors
who were also directors at the commencement of such
twenty-four (24) month period."
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT SEPTEMBER 30, 1994 AND FROM THE RELATED
CONSOLIDATED STATEMENT OF INCOME FOR THE 9 MONTH PERIOD ENDED SEPTEMBER 30,
1994, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<CASH> 82
<SECURITIES> 152
<RECEIVABLES> 1,178
<ALLOWANCES> 22
<INVENTORY> 631
<CURRENT-ASSETS> 2,475
<PP&E> 3,026
<DEPRECIATION> 1,309
<TOTAL-ASSETS> 5,395
<CURRENT-LIABILITIES> 2,277
<BONDS> 542
<COMMON> 160
0
0
<OTHER-SE> 1,592
<TOTAL-LIABILITY-AND-EQUITY> 5,395
<SALES> 4,696
<TOTAL-REVENUES> 4,696
<CGS> 1,558
<TOTAL-COSTS> 1,558
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68
<INCOME-PRETAX> 805
<INCOME-TAX> 176
<INCOME-CONTINUING> 556
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 556
<EPS-PRIMARY> 4.15
<EPS-DILUTED> 4.15
</TABLE>
