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________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
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(MARK ONE)
[x] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
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COMMISSION FILE NUMBER 1-3608
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WARNER-LAMBERT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 201 TABOR ROAD 22-1598912
(STATE OR OTHER JURISDICTION OF MORRIS PLAINS, NEW JERSEY 07950 (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) (ADDRESS OF PRINCIPAL IDENTIFICATION NO.)
EXECUTIVE OFFICES, INCLUDING ZIP
CODE)
</TABLE>
201-540-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- --------------------------------------------------------------- ------------------------------------------------
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Common Stock (Par Value $1 Per Share) The New York Stock Exchange, Inc.
The Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
Rights to Purchase Series A The New York Stock Exchange, Inc.
Participating Cumulative Preferred Stock The Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. YES [x] NO [ ].
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
Warner-Lambert Company as of February 21, 1997 was approximately $22.9 billion.
The number of shares outstanding of the registrant's Common Stock as of
February 21, 1997 was 271,597,188 shares, Common Stock, par value $1.00 per
share.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Warner-Lambert Company Annual Report to Shareholders for
1996 -- Part I, Part II and Part IV.
Portions of the Proxy Statement for Annual Meeting of Stockholders of
Warner-Lambert Company to be held April 22, 1997 -- Part III.
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PART I
ITEM 1. BUSINESS.
The term 'Warner-Lambert' or the 'Company' refers to Warner-Lambert
Company, a Delaware corporation organized in that state in 1920, and its
consolidated subsidiaries, unless otherwise indicated or unless the context
otherwise requires.
Industry Segments and Geographic Areas. Financial information by industry
segment and geographic area for the years 1996, 1995 and 1994 is presented in
the Warner-Lambert 1996 Annual Report to Shareholders as set forth below.
The summary of Warner-Lambert's industry segments, geographic areas and
related financial information, set forth in Note 19 to the consolidated
financial statements on page 39 of the Warner-Lambert 1996 Annual Report, is
incorporated herein by reference.
All product names appearing in capitalized letters in this report on Form
10-K are registered trademarks of Warner-Lambert, its affiliates, related
companies or licensors. ZANTAC, ZANTAC 75 and BECONASE are registered trademarks
of Glaxo Wellcome plc ('Glaxo Wellcome'), its affiliates or related companies.
BUSINESS SEGMENTS
A detailed description of Warner-Lambert's industry segments is as follows:
Pharmaceutical Products
The principal products of Warner-Lambert in its Pharmaceutical Products
segment are ethical pharmaceuticals, biologicals and capsules.
Ethical Pharmaceuticals and Biologicals: Warner-Lambert manufactures and/or
sells, in the United States and/or internationally, an extensive line of ethical
pharmaceuticals and biologicals under trademarks and trade names such as
PARKE-DAVIS and GOEDECKE. Among these products are analgesics (PONSTAN, PONSTEL,
VALORON, VALORON-N, VEGANIN and VALTRAN), anesthetics (KETALAR), anthelmintics
(VANQUIN), anticonvulsants (CELONTIN, CEREBYX, DILANTIN, ZARONTIN and
NEURONTIN), anti-infectives (CHLOROMYCETIN, COLYMYCIN, DORYX, ERYC, MANDELAMINE
and OMNICEF (cefdinir)), antivaricosities (HEPATHROMBIN), anti-viral agents
(VIRA-A), bronchodilators (CHOLEDYL SA), cardiovascular products (NOVADRAL,
DILZEM, ACCUPRIL, ACCUZIDE, NITROSTAT, PIMENOL and PROCANBID), cognition drugs
for treatment of mild-to-moderate Alzheimer's disease (COGNEX), dermatologics
(BEBEN), diabetes drugs for non-insulin dependent diabetes mellitus patients
currently on insulin who are inadequately controlled by insulin (REZULIN),
prescription hemorrhoidal preparations (ANUSOL HC), hemostatic agents
(THROMBOSTAT), hormonal agents (PITRESSIN), lipid regulators (LIPITOR and
LOPID), oral contraceptives (ESTROSTEP and LOESTRIN), oxytocics (PITOCIN),
psychotherapeutic products (CETAL RETARD, DEMETRIN and NARDIL) and urinary
analgesics (PYRIDIUM).
The Company received U.S. Food and Drug Administration ('FDA') clearance to
market the anticonvulsant treatment CEREBYX in August 1996, the oral
contraceptive ESTROSTEP in October 1996 and the hormone replacement therapy
FEMPATCH in December 1996.
In December 1996 Warner-Lambert received FDA clearance to market the
cholesterol-lowering agent LIPITOR (Warner-Lambert's trademark for atorvastatin)
and began to ship the product in January 1997. The Company has also received
marketing approval in Canada, the United Kingdom and Germany for the drug.
Atorvastatin is marketed as LIPITOR in Canada and the United Kingdom and as
SORTIS in Germany.
Warner-Lambert received FDA clearance in January 1997 to market REZULIN
(Warner-Lambert's trademark for troglitazone), a diabetes drug for non-insulin
dependent diabetes mellitus patients currently on insulin who are inadequately
controlled by insulin. The Company has licensed the product from Sankyo Company,
Ltd. ('Sankyo') for North America and certain other areas, including
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Central America, South America (except for Brazil and Venezuela where the
Company will co-promote the product with an affiliate of Sankyo), Australia, New
Zealand and the Philippines.
Warner-Lambert's pharmaceutical products are promoted for the most part
directly to health care professionals through personal solicitation of doctors
and other professionals by sales representatives with scientific training,
direct mail contact and advertising in professional journals. They are sold
either directly or through wholesalers to government agencies, chain and
independent retail pharmacies, hospitals, clinics, long-term care facilities,
mail order houses and health maintenance organizations. Sales to managed care
entities have become an increasingly large part of Warner-Lambert's domestic
pharmaceutical sales. The Company estimates that more than 55% of pharmaceutical
sales in the United States during 1996 were made to managed care entities
(including government agencies and hospitals). For further discussion of
Warner-Lambert's ethical products, see 'Item 1. Business -- Regulation' below.
Capsules: Warner-Lambert is the leading worldwide producer of empty
hard-gelatin capsules used by pharmaceutical companies for their production of
encapsulated products. These capsules are used by Warner-Lambert or manufactured
by Warner-Lambert according to the specifications of each of its customers and
are sold under such trademarks as CAPSUGEL, CONI-SNAP, SNAP-FIT and
Press-Fit'tm' gelcaps.
Other: In March 1996, Warner-Lambert sold Warner Chilcott Laboratories, its
generic pharmaceutical business to Nale Laboratories plc. The decision to sell
the generic drug business reflects the Company's intention to focus its
resources more fully on its core pharmaceutical, consumer health care products
and confectionery businesses.
Consumer Health Care Products
The principal products of Warner-Lambert in its Consumer Health Care
Products segment are over-the-counter health care products, shaving products and
pet care products.
Over-the-Counter Products: Warner-Lambert manufactures and/or sells, in the
United States and/or internationally, an extensive line of over-the-counter
pharmaceuticals and health care products under trade names such as
Warner-Lambert Consumer Healthcare. Among these products are antacids (ROLAIDS,
Extra Strength ROLAIDS and GELUSIL), dermatological products (LUBRIDERM,
LUBRIDERM Body Bar, LUBRIDERM Loofa Bar, LUBRIDERM Seriously Sensitive,
LUBRIDERM Moisture Recovery, ROSKEN SKIN REPAIR, CORN HUSKERS and LISTEREX),
topical antibiotic ointments (NEOSPORIN and POLYSPORIN), cold and sinus
preparations (SUDAFED, SINUTAB, SINUTAB NON-DRYING, SUDAFED NON-DRYING and
ACTIFED), antihistamines and allergy products (ACTIFED Allergy, SUDAFED PLUS,
BENADRYL, BENADRYL-D, BENADRYL Cold, BENADRYL CHEWABLES, BENADRYL Allergy/Sinus/
Headache and BENADRYL Dye-Free), hemorrhoidal preparations (ANUSOL, ANUSOL HC-1
and TUCKS), vaginal moisturizers (REPLENS), laxatives (AGORAL), cough
syrups/suppressants (BENYLIN, BENYLIN-DM, BENYLIN DECONGESTANT, BENYLIN
EXPECTORANT and BENYLIN PEDIATRIC), vitamins (MYADEC), antipruritic (CALADRYL,
BENADRYL spray, cream, gel and stick and STINGOSE), rubbing alcohol (LAVACOL),
hydrogen peroxide (PROXACOL), self-diagnostic early pregnancy test kits
(e.p.t.'r'), oral antiseptics (LISTERINE, COOL MINT LISTERINE and FRESHBURST
LISTERINE), mouthwash/dental rinses (LISTERMINT), toothpaste (COOLMINT
LISTERINE), effervescent denture cleaning tablets and denture cleanser pastes
(EFFERDENT, EFFERDENT PLUS and FRESH 'N BRITE), denture adhesives (EFFERGRIP),
head lice treatments (NIX) and diaper rash preparations (BOROFAX).
In December 1993, Warner-Lambert signed separate agreements with Wellcome
plc ('Wellcome') and Glaxo plc ('Glaxo') governing the establishment of joint
ventures in various countries to develop and market a broad range of
nonprescription consumer health care products. Glaxo acquired Wellcome in 1995
and changed the name of the combined company to Glaxo Wellcome plc.
Warner-Lambert's agreement with Wellcome called for both companies to
contribute to the Warner Wellcome joint venture operations current and future
over-the-counter ('OTC') products. Joint venture operations formed pursuant to a
global principles agreement began in 1994 in the United
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States, Canada, Australia, New Zealand and certain countries in Europe. On June
30, 1996 the Company purchased Glaxo Wellcome's U.S. and European interests in
the Warner Wellcome joint venture operations. In the third quarter of 1996, the
Company purchased Glaxo Wellcome's interest in the Warner Wellcome joint venture
operations in Canada, Australia and New Zealand and certain OTC assets in
Mexico, effectively ending this joint venture with Glaxo Wellcome. The purchase
price for the entire transaction was approximately $1.1 billion.
In 1993 Warner-Lambert and Glaxo formed a joint venture in the United
States (referred to as the 'Glaxo Wellcome Warner-Lambert joint venture') to
develop, seek approval of and market OTC versions of Glaxo prescription drugs in
the United States. On June 30, 1996 the Glaxo Wellcome Warner-Lambert joint
venture was restructured so that in addition to developing and marketing OTC
versions of Glaxo prescription drugs, Glaxo Wellcome and Warner-Lambert will
also develop and market certain Wellcome OTC switch products in the United
States and in other major markets, including the United Kingdom.
In April 1996 the Glaxo Wellcome Warner-Lambert joint venture in the United
States began marketing ZANTAC 75, an OTC version of Glaxo Wellcome's
prescription drug ZANTAC, for the treatment of episodic heartburn, acid
indigestion and sour stomach. ZANTAC 75 has been marketed for OTC use in the
United Kingdom by the Glaxo Wellcome Warner-Lambert joint venture as a treatment
for these same symptoms. Glaxo Wellcome and Warner-Lambert have also been
marketing in the United Kingdom an allergy nasal spray, BECONASE, an OTC version
of Glaxo Wellcome's prescription drug.
Over-the-counter products are promoted principally through consumer
advertising and promotional programs and some are promoted directly to health
care professionals. They are sold principally to drug wholesalers, chain and
retail pharmacies, chain and independent food stores, mass merchandisers,
physician supply houses and hospitals.
Shaving Products: Warner-Lambert manufactures and sells razors and blades,
both domestically and internationally. Shaving products are manufactured and
marketed under the SCHICK and other trademarks worldwide and the WILKINSON SWORD
trademark in Europe, the United States and Canada. Permanent (nondisposable)
products marketed under the SCHICK trademark include TRACER/FX, SCHICK
PROTECTOR, SUPER II, SUPER II PLUS, ULTREX PLUS, SILK EFFECTS, SLIM TWIN,
ADVANTAGE, PERSONAL TOUCH and INJECTOR PLUS CHROMIUM. Disposable twin blade
products marketed under the SCHICK trademark include SCHICK DISPOSABLE, SLIM
TWIN, PERSONAL TOUCH and ULTREX DISPOSABLE. Products marketed under the
WILKINSON SWORD trademark include nondisposable systems such as PROTECTOR, FX
PERFORMER, PROFILE, SYSTEM II, DUPLO and LADY PROTECTOR, and disposable products
that include COLOURS, PRONTO, RETRACTOR, RETRACTOR TWIN and EXTRA II.
Warner-Lambert's shaving products are promoted principally through consumer
advertising and promotional programs. They are distributed directly to
wholesalers for sale to smaller retailers, drugstores, pharmacies and to retail
outlets, including pharmacies, food stores, variety stores, mass merchandisers
and other miscellaneous outlets.
Pet Care Products: Warner-Lambert manufactures and/or sells various
products on a worldwide basis for ornamental fish and for reptiles and other
small pets, as well as books relating to various pets, under various trademarks
including TETRA, TETRA POND, TETRA PRESS, TETRA TERRAFAUNA, HILENA, ZOOMEDICA
FRICKINGER and TETRA SECONDNATURE. In addition, Warner-Lambert manufactures
and/or distributes aquarium products (including power filters and replacement
cartridges, air pumps, heaters, plastic plants and other accessories) that are
marketed largely under the WHISPER and SECONDNATURE trademarks. These pet care
products are promoted to consumers through cooperative advertising and to
retailers through direct promotion and advertising in trade publications. They
are sold to wholesalers for sale to smaller retailers and directly to larger
chain stores and retailers, in each case for ultimate sale to consumers.
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Confectionery Products
The principal products of Warner-Lambert in its Confectionery Products
segment are chewing gums, breath mints and cough tablets.
Warner-Lambert manufactures and/or sells, in the United States and/or
internationally, a broad line of chewing gums, bubble gums, breath mints and
cough tablets. Among these products are chewing gums (CHICLETS, CHICLETS TINY
SIZE, CINN*A*BURST, MINT*A*BURST, FRUIT*A*BURST, CLORETS, DENTYNE, DENTYNE
Sugarfree and TRIDENT) and bubble gums (BUBBLICIOUS and BUBBALOO). The breath
mint line includes CERTS, Sugarfree CERTS, CERTS Cool Mint Drops'tm' and
CLORETS. The cough tablet line consists of HALLS, HALLS Juniors, HALLS-PLUS,
Sugar Free HALLS and HALLS Vitamin C. The Company also sells throat drops
(CELESTIAL SEASONINGS SOOTHERS). In addition, the Company sells several
specialty candies and mints. The specialty candies and mints lines include a
line of hard candies and mints that are sold under the SAILA and Koldt'tm'
trademarks.
Warner-Lambert's confectionery products are promoted directly to the
consumer primarily through consumer advertising and in-store promotion programs.
They are sold directly to chain and independent food stores, chain pharmacies
and mass merchandisers or through candy and tobacco wholesalers and to other
miscellaneous outlets which in turn sell to consumers.
INTERNATIONAL OPERATIONS
Although Warner-Lambert has globalized most of its organization on a
segment basis, Warner-Lambert's international businesses are carried on
principally through subsidiaries and branches, which are generally staffed and
managed by citizens of the countries in which they operate. Approximately 25,000
of Warner-Lambert's employees are located outside the United States and Puerto
Rico and only a small number of such employees are U.S. citizens. Certain of the
products described above are manufactured and marketed solely in the United
States and certain other products are manufactured and marketed solely in one or
more foreign countries.
International sales to unaffiliated customers in 1996 amounted to
approximately 56% of the Company's worldwide sales. International sales do not
include sales of products exported from the United States, which sales represent
less than 1% of total U.S. sales. The seven largest markets with respect to the
distribution of Warner-Lambert products sold outside the United States during
1996 were Japan, Germany, France, the United Kingdom, Canada, Italy and Brazil.
Sales in these markets accounted for approximately 60% of Warner-Lambert's
international sales, with no one country accounting for more than 14% of
international sales.
On January 1, 1996 the Company's international businesses changed their
reporting period from a fiscal-year basis ending November 30 to a calendar-year
basis ending December 31. See Note 1 to the consolidated financial statements on
page 30 of the Warner-Lambert 1996 Annual Report, incorporated herein by
reference.
In accordance with customary market conditions, sales made outside the
United States are generally made on longer terms of payment than would be
customary in the United States. In addition, international operations are
subject to certain risks inherent in carrying on business abroad, including
possible nationalization, expropriation, price and exchange controls and other
governmental action, as well as fluctuations in currency exchange rates. The
likelihood of such occurrences varies from country to country and is not
predictable. However, the Company believes that its geographic diversity
minimizes exposure to currency fluctuations resulting in one or more foreign
countries.
COMPETITION
Most markets in which Warner-Lambert is engaged are highly competitive and
characterized by substantial expenditures in the advertising and promotion of
new and existing products. In addition, there is intense competition in research
and development in all of Warner-Lambert's industry segments. No material part
of the business of any of Warner-Lambert's industry segments is dependent upon
one or a few customers.
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MATERIALS AND SUPPLIES
Warner-Lambert's products, in general, are produced and packaged at its own
facilities. Other than certain products manufactured by Glaxo Wellcome, certain
pet products and certain other products, relatively few items are manufactured
in whole or in part by outside suppliers. Raw materials and packaging supplies
are purchased from a variety of outside suppliers. Although the Company, in an
effort to achieve cost savings, is consolidating its sources of supply, the
Company does not believe that the loss of any one source of such materials and
supplies would have a material effect on the business of any of Warner-Lambert's
industry segments. Warner-Lambert seeks to protect against fluctuating costs and
to assure availability of raw materials and packaging supplies by, among other
things, locating alternative sources of supply and, in some instances, making
selective advance purchases.
TRADEMARKS AND PATENTS
Warner-Lambert's major trademarks are protected by registration in the
United States and other countries where its products are marketed.
Warner-Lambert believes these trademarks are important to the marketing of the
related products and acts to protect them from infringement. Warner-Lambert owns
and/or licenses many patents and has many patent applications pending in the
patent offices of the United States and other countries. Although a number of
products and product lines have patent protection that is significant in the
marketing of such products, the management of Warner-Lambert does not consider
that any single patent or related group of patents is material to
Warner-Lambert's business as a whole or any of its industry segments.
Warner-Lambert anticipates, however, that patents on LIPITOR and REZULIN may, in
the future, become material to Warner-Lambert's business as a whole.
RESEARCH AND DEVELOPMENT
Warner-Lambert employs over 2,000 scientific and technical personnel in
research and development activities at various research facilities located in
the United States and in foreign countries. Warner-Lambert invested
approximately $555 million in research and development in 1996, compared with
$501 million in 1995 and $456 million in 1994. Approximately 84% of
Warner-Lambert's 1996 research and development spending was related to
pharmaceutical products. Warner-Lambert believes research and development
activities are essential to its business and intends to continue such
activities.
EMPLOYEES
At December 31, 1996, approximately 38,000 people were employed by
Warner-Lambert throughout the world.
REGULATION
Warner-Lambert's business is subject to varying degrees of governmental
regulation in the countries in which it manufactures and distributes products.
In the United States, the food, drug and cosmetic industries are subject to
regulation by various federal, state and local agencies with respect to product
safety and effectiveness, manufacturing and advertising and labeling.
Accordingly, from time to time, with respect to particular products under
review, such agencies may require Warner-Lambert to address safety, efficacy,
manufacturing and/or regulatory issues, to conduct additional testing or to
modify its advertising and/or labeling.
In 1993, a consent decree with the FDA was entered into by Warner-Lambert
and two of its principal officers, covering issues related to manufacturing and
quality practices and procedures. The decree is a court-approved agreement that
primarily requires Warner-Lambert to certify that laboratory and/or
manufacturing facilities in the United States and Puerto Rico are in compliance
with current Good Manufacturing Practices established by the FDA. Relevant
facility and laboratory certifications have been obtained in all U.S. and Puerto
Rico plants. The terms of the consent decree are applicable until at least
August 1998.
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The FDA's Application Integrity Policy ('AIP') was applied to
Warner-Lambert's Fajardo and Vega Baja, Puerto Rico facilities in September
1992. The FDA has completed its review of the Vega Baja and Fajardo, Puerto Rico
facilities and confirmed that these facilities are no longer subject to the AIP.
In October 1996, the U.S. Congress enacted the Comprehensive
Methamphetamine Control Act of 1996 (the 'Methamphetamine Control Act') which,
when effective in October 1997, will bring certain of the Company's
over-the-counter pharmaceutical products containing pseudoephedrine
hydrochloride under the chemical control provisions of the Controlled Substances
Act through the revocation of an exemption for listed chemicals contained in
drugs lawfully marketed under the Federal Food, Drug and Cosmetic Act. The
Methamphetamine Control Act, among other things, imposes new regulatory
restrictions on persons handling such products including recordkeeping and
reporting of certain transactions to the Drug Enforcement Administration.
However, the Methamphetamine Control Act creates a 'safe harbor' for traditional
retail outlets which sell pharmaceutical products in designated packaging
containing limited amounts of pseudoephedrine almost exclusively for personal
use to walk-in customers or in face-to-face direct sales. These retailers will
not, in general, be subject to the recordkeeping and reporting requirements of
the Methamphetamine Control Act. The Company is concerned that the restrictions
of the Methamphetamine Control Act could induce certain pharmacies and other
retail outlets which carry such products to keep such products 'behind the
counter' or no longer to carry such products. Warner-Lambert believes that the
Methamphetamine Control Act will not have a material adverse effect on
Warner-Lambert's financial position, liquidity, cash flow or results of
operations for any year.
Regulatory requirements concerning the research and development of drug
products have increased in complexity and scope in recent years. This has
resulted in a substantial increase in the time and expense required to bring new
products to market. At the same time, the FDA requirements for approval of
generic drugs (drugs containing the same active chemical as an innovator's
product) have been reduced as a result of the adoption of abbreviated new drug
approval procedures for most generic drugs. Generic versions of many of
Warner-Lambert's products in the Pharmaceutical Products segment are being
marketed in the United States, and generic substitution legislation, which
permits a pharmacist to substitute a generic version of a drug for the one
prescribed, has been enacted in some form in all states. These factors have
resulted in increased competition from generic manufacturers in the market for
ethical products.
The regulatory agencies under whose purview Warner-Lambert operates have
administrative and legal powers that may subject Warner-Lambert and its products
to seizure actions, product recalls and other civil and criminal actions. They
may also subject the industry to emergency regulatory requirements.
Warner-Lambert's policy is to comply fully with all regulatory requirements. It
is impossible to predict, however, what effect, if any, these matters or any
pending or future legislation, regulations or governmental actions may have on
the conduct of Warner-Lambert's business in the future.
In most of the foreign countries where Warner-Lambert does business, it is
subject to a regulatory and legislative climate similar to or more restrictive
than that described above. The Company cannot predict whether or what type of
measures will be encountered in the future.
ENVIRONMENT
Warner-Lambert is responsible for compliance with a number of environmental
laws and regulations. Warner-Lambert maintains control systems designed to
assure compliance in all material respects with environmental laws and
regulations, including environmental policies and maintenance of a worldwide
audit program.
Warner-Lambert is involved in various administrative or judicial
proceedings related to environmental 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 by third parties. For some of the sites, other
parties (defined as potentially responsible parties) may be jointly and
severally responsible, along with Warner-
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Lambert, to pay remediation and other related expenses. For other sites, for
example, those sites which Warner-Lambert currently owns or previously owned,
Warner-Lambert may be the sole party responsible for clean-up costs. While it is
not possible to predict with certainty the outcome of such matters or the total
cost of remediation, Warner-Lambert believes it is unlikely that their ultimate
disposition will have a material adverse effect on Warner-Lambert's financial
position, liquidity, cash flow or results of operations for any year. Actions
with respect to environmental programs and compliance result in operating
expenses and capital expenditures. Warner-Lambert's capital expenditures with
respect to environmental programs and compliance in 1996 were not, and in 1997
are not expected to be, material to the business of Warner-Lambert.
For additional information relating to environmental matters, see 'Item 3.
Legal Proceedings' and Note 18 to the consolidated financial statements on page
38 of the Warner-Lambert 1996 Annual Report, incorporated herein by reference.
ITEM 2. PROPERTIES.
The executive offices of Warner-Lambert are located in Morris Plains, New
Jersey. In the United States, including Puerto Rico, Warner-Lambert owns
facilities aggregating approximately 6,947,000 square feet and leases facilities
having an aggregate of approximately 293,000 square feet.
Warner-Lambert's U.S. manufacturing plants are located in Lititz,
Pennsylvania (pharmaceuticals and consumer health care products); Rockford,
Illinois (confectionery products); Rochester, Michigan (pharmaceuticals);
Holland, Michigan (pharmaceuticals); Morris Plains, New Jersey (pharmaceuticals
and consumer health care products); Greenwood, South Carolina (capsules);
Milford, Connecticut (razors and blades); and Blacksburg, Virginia (pet care
products). Warner-Lambert Inc., a wholly-owned subsidiary of Warner-Lambert
operating in Puerto Rico, has plants located in Fajardo (pharmaceuticals); and
Vega Baja (pharmaceuticals, consumer health care and confectionery products).
In the United States, Warner-Lambert currently distributes its various
products through its manufacturing plants and two primary distribution centers
located in Lititz, Pennsylvania and Elk Grove, Illinois. Principal U.S. research
facilities are located in Ann Arbor, Michigan (pharmaceuticals) and Morris
Plains, New Jersey (pharmaceuticals, consumer health care and confectionery
products).
Internationally, Warner-Lambert owns, leases or operates, through its
subsidiaries or branches, 65 production facilities in 33 countries. Principal
international manufacturing plants are located in Germany, Canada, Mexico,
Japan, Ireland, France, Brazil, Colombia and Australia. Principal international
research facilities are located in Germany, Japan, the United Kingdom and
Canada.
In order to achieve its objectives of increased efficiency and a lower cost
of goods sold, Warner-Lambert, over a number of years and at significant cost,
has consolidated many of its plants and facilities around the world. This has
often resulted in the production of pharmaceutical products, consumer health
care products and/or confectionery products at a single facility.
Warner-Lambert's facilities are generally in good operating condition and
repair and at present are adequately utilized within reasonable limits. Leases
are not material to the business of Warner-Lambert taken as a whole.
ITEM 3. LEGAL PROCEEDINGS.
For a discussion of Warner-Lambert's consent decree with the FDA, covering
issues related to compliance with current Good Manufacturing Practices
established by the FDA, and other regulatory matters, see 'Item 1.
Business -- Regulation' above. For additional information relating to
environmental matters see 'Item 1. Business -- Environment' above.
In 1993, Warner-Lambert received a Complaint and Compliance Order from the
Environmental Protection Agency (the '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. Although it is too early to predict the
outcome of this action,
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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.
Beginning in late 1993, 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. In June
1996 the Court approved Warner-Lambert's agreement to settle part of the
consolidated federal cases, specifically, the class action conspiracy lawsuit,
for a total of $15.1 million. This settlement also provides injunctive relief
which obligates Warner-Lambert, among other things, not to refuse to discount
its drugs to retail pharmacies solely based on their status as retailers and to
provide retail pharmacies the opportunity to negotiate and earn discounts
comparable to those given to managed care entities if they can demonstrate an
ability to affect market share in the same or similar manner that such managed
care entities can. The settlement has been appealed by three groups of
plaintiff-class members and such appeal is pending. Certain other rulings of the
judge presiding in this case have also been appealed. At present, Warner-Lambert
cannot predict the outcome of the remaining federal lawsuits.
The state cases pending in California, brought by classes of pharmacies and
consumers, have been coordinated in the Superior Court of California, County of
San Francisco. Warner-Lambert has also been named as a defendant in actions in
state courts in Alabama, Minnesota and Wisconsin brought by classes of
pharmacies, each arising from the same allegations of price discrimination. In
addition the Company is named in class action complaints filed in the states of
Alabama, Arizona, Colorado, Florida, Kansas, Maine, Michigan, Minnesota, New
York, Washington and Wisconsin and in the District of Columbia, brought by
classes of consumers who purchased brand name prescription drugs at retail
pharmacies. These cases also arise 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 the remaining 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.
Warner-Lambert has been served with and has responded to a subpoena by the
Federal Trade Commission which is conducting an investigation to determine
whether Warner-Lambert and twenty-one other pharmaceutical manufacturers have
engaged in concerted activities to raise the prices of pharmaceutical products
in the United States. Warner-Lambert is cooperating with this investigation and
cannot at present predict its outcome.
In 1994, Warner-Lambert received a civil enforcement action letter and
draft complaint from the Department of Justice (the 'Department') alleging
violation of the Clean Water Act with regard to the operation of the wastewater
treatment plant at its Vega Baja, Puerto Rico facility. Warner-Lambert is
negotiating a resolution of this matter with the Department and cannot at
present predict its outcome.
In addition, the Environmental Crimes Section of the Department is
conducting an inquiry of Warner-Lambert and certain present and former
employees, relating to historical compliance of the Vega Baja, Puerto Rico
wastewater treatment facility with the Clean Water Act and the discharge permit
issued to the facility. Warner-Lambert is cooperating fully with this inquiry
and cannot at present predict its outcome.
Warner-Lambert Inc., a wholly-owned subsidiary of Warner-Lambert, has been
named as a defendant in class actions filed in Puerto Rico Superior Court by
current and former employees from the Vega Baja, Carolina and Fajardo plants, as
well as Kelly Services temporary employees assigned to those plants. The
lawsuits seek monetary relief for alleged violations of local statutes and
decrees relating to meal period payments, minimum wage, overtime and vacation
pay. Warner-Lambert believes that these actions are without merit and will
defend these actions vigorously. Although it is too early to predict the outcome
of these actions, Warner-Lambert does not at present expect these lawsuits to
have a material adverse effect on the Company's financial position, liquidity,
cash flow or results of operations.
8
<PAGE>
<PAGE>
In February 1997, Warner-Lambert, along with certain other pharmaceutical
companies and certain other manufacturers of calcium containing products, was
named as a defendant in separate lawsuits filed in the Superior Court of
California, City and County of San Francisco by the Natural Resources Defense
Council and the California Attorney General. The lawsuits seek monetary and
injunctive relief for the alleged failure by the Company to warn consumers that
certain products manufactured and sold by it (including ROLAIDS) contain unsafe
levels of lead. 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 them to have a
material adverse effect on its financial position, liquidity, cash flow or
results of operations.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
Not Applicable.
EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the executive officers of Warner-Lambert as of
March 1, 1997 is set forth below:
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- --------------------------------- --- ---------------------- --------------------------------------------
<S> <C> <C> <C>
Melvin R. Goodes................. 61 Chairman of the Board Chairman of the Board and Chief Executive
and Chief Executive Officer (since August 1991)
Officer; Director
Lodewijk J. R. de Vink........... 52 President and Chief President and Chief Operating Officer (since
Operating Officer; August 1991)
Director
John F. Walsh.................... 54 Executive Vice Executive Vice President (since January
President 1991); President, Consumer Healthcare
Sector (since December 1994); President,
Consumer Products Sector (January 1992 --
December 1994)
Ernest J. Larini................. 54 Vice President and Vice President and Chief Financial Officer
Chief Financial (since November 1992); Vice President,
Officer Financial Administration (June 1992 --
October 1992); Vice President and
Controller (May 1990 -- May 1992)
J. Frank Lazo.................... 49 Vice President Vice President (since April 1990);
President, Confectionery Sector (since
December 1994); President, Latin
America/Asia/ Australia/Middle East/Africa
Group (January 1992 -- December 1994)
Anthony H. Wild, Ph.D. .......... 48 Vice President Vice President (since September 1995);
President, Pharmaceutical Sector (since
May 1996); President, Parke-Davis, North
America (February 1995 -- May 1996);
President, Schering-Plough-Japan,
Schering-Plough Corporation (August
1989 -- February 1995)
John S. Craig.................... 45 Vice President Vice President (since January 1996);
President, American Chicle Group (since
July 1995); President and Chief Executive
Officer, Lender's Bagel Bakery division of
Kraft Foods, Inc. (September 1986 --
February 1994)
</TABLE>
(table continued on next page)
9
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- --------------------------------- --- ---------------------- --------------------------------------------
<S> <C> <C> <C>
Ronald M. Cresswell, Ph.D. ...... 62 Vice President Vice President (since May 1988); Chairman,
Parke-Davis Research (since November 1989)
Raymond M. Fino.................. 54 Vice President Vice President, Human Resources (since
January 1985)
Philip M. Gross.................. 55 Vice President Vice President (since January 1990); Vice
President, Strategic Management Processes
(since January 1994); President, Novon
Products Group (January 1990 -- January
1994)
Gregory L. Johnson............... 50 Vice President and Vice President and General Counsel (since
General Counsel October 1983)
Richard W. Keelty................ 55 Vice President Vice President (since January 1996); Vice
President, Public Affairs, (since December
1995); Vice President, Public Relations
(November 1990 -- November 1995)
Joseph E. Lynch.................. 45 Vice President and Vice President and Controller (since June
Controller 1995); Comptroller, American Home Products
Corporation (March 1995 -- June 1995);
Director, Corporate Accounting and
Budgets, American Cyanamid Company (June
1991 -- March 1995)
F. Phillip Milhomme.............. 60 Vice President Vice President (since January 1992);
President, Confectionery Products,
Europe/Middle East/Africa (since December
1994); President, Consumer Products,
Europe (January 1992 -- December 1994)
S. Morgan Morton................. 57 Vice President Vice President (since January 1994);
President, Warner Lambert Consumer
Healthcare U.S.A. (since June 1996);
President, Warner Wellcome Consumer
Healthcare U.S.A. (December 1995 -- June
1996); President, Shaving Products Group
(September 1993 -- December 1995);
President, Schick (January
1992 -- September 1993)
Harold F. Oberkfell.............. 50 Vice President Vice President (since January 1992);
President, Latin America/Asia Sector
(since February 1995); President,
Parke-Davis, North America (January
1992 -- February 1995)
Maurice A. Renshaw............... 50 Vice President Vice President (since January 1997);
President, Parke-Davis, U.S. and Mexico
(since August 1996); President,
Warner-Lambert KK, Japan (December
1989 -- August 1996)
</TABLE>
(table continued on next page)
10
<PAGE>
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
- --------------------------------- --- ---------------------- --------------------------------------------
<S> <C> <C> <C>
Joseph E. Smith.................. 57 Vice President Vice President (since January 1994);
President, Shaving Products Group (since
December 1995); Vice President, External
Relations (January 1994 -- December 1995);
Executive Vice President (January
1991 -- January 1994); President,
Pharmaceutical Sector (January
1992 -- January 1994)
William S. Woodson............... 62 Vice President and Vice President and Treasurer (since December
Treasurer 1991)
Rae G. Paltiel................... 50 Secretary Secretary (since February 1986)
</TABLE>
All of the above-mentioned officers, with the exception of Mr. Craig, Mr.
Lynch and Dr. Wild, have been employed by Warner-Lambert for the past five
years.
Mr. Craig has been employed by Warner-Lambert since July 1995. Prior to
that time, Mr. Craig had been employed by Kraft Foods, Inc., serving as
President and Chief Executive Officer of Kraft's Lender's Bagel Bakery division
from September 1986 to February 1994. Kraft Foods, Inc., a wholly-owned
subsidiary of Philip Morris Companies Inc., is a multinational producer of
packaged grocery products with sales of approximately $31 billion in 1994.
Mr. Lynch has been employed by Warner-Lambert since June 1995. Prior to
that time and during his last three months with American Cyanamid Company, which
was acquired by American Home Products Corporation in November 1994, Mr. Lynch
performed certain functions of Comptroller at American Home Products Corporation
from March 1995 to June 1995. American Home Products is a multinational health
care and food products company with sales of approximately $9.0 billion in 1994.
From April 1991 to March 1995, Mr. Lynch held the position of Director,
Corporate Accounting and Budgets, American Cyanamid Company and from March 1988
to April 1991 he served as Controller of American Cyanamid's Latin America
Group. Prior to being acquired by American Home Products Corporation, American
Cyanamid Company was a multinational medical and agricultural products company
with sales of approximately $4.2 billion in 1993.
Dr. Wild has been employed by Warner-Lambert since February 1995. Prior to
that time, Dr. Wild had been employed by Schering-Plough Corporation. From
August 1989 to February 1995, Dr. Wild held the position of President of
Schering-Plough-Japan. Schering-Plough Corporation, a multinational
pharmaceutical company, had sales of approximately $4.7 billion in 1994.
None of the above officers has any family relationship with any Director or
with any other officer. Officers are elected by the Board of Directors for a
term of office lasting until the next annual organizational meeting of the Board
of Directors or until their successors are elected and have qualified. No
officer listed above was appointed pursuant to any arrangement or understanding
between such officer and the Board of Directors or any member or members
thereof.
11
<PAGE>
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal market on which the Company's stock is traded is the New York
Stock Exchange, but the stock is also listed and traded on the following
domestic and international stock exchanges: Chicago, Pacific, London and Zurich.
Shareholders of record totaled approximately 40,000 as of December 31, 1996.
Cash dividends paid in 1996 totaled $374 million. A dividend of $.345 per share
was paid in each quarter of 1996 for an annual total of $1.38 per share. After
giving effect to the two-for-one stock split effective May 1996, this was a 6.2
percent increase over the prior year total of $1.30 per share, paid in four
quarterly dividends of $.325 per share during 1995. The information set forth
under the caption 'Market Prices of Common Stock and Dividends' on page 41 of
the Warner-Lambert 1996 Annual Report is incorporated herein by reference.
ITEM 6. SELECTED FINANCIAL DATA.
The information set forth under the caption 'Five-Year Summary of Selected
Financial Data' on page 26 of the Warner-Lambert 1996 Annual Report is
incorporated herein by reference.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
The information set forth under the caption 'Management's Discussion and
Analysis' on pages 42 through 47 of the Warner-Lambert 1996 Annual Report is
incorporated herein by reference and should be read in conjunction with the
consolidated financial statements and the notes thereto contained on pages 27
through 40 of the Warner-Lambert 1996 Annual Report.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of Warner-Lambert and its
subsidiaries, listed in Item 14(a)1 and included in the Warner-Lambert 1996
Annual Report on pages 27 through 39, together with the report thereon of Price
Waterhouse LLP dated January 27, 1997 on page 40 of the Warner-Lambert 1996
Annual Report, and quarterly financial information on page 41 of the
Warner-Lambert 1996 Annual Report, are incorporated herein by reference.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not Applicable.
12
<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The required information relating to the Warner-Lambert Directors and
nominees is incorporated herein by reference to pages 3 through 8 of the
Warner-Lambert Proxy Statement for the Annual Meeting of Stockholders to be held
on April 22, 1997. Information relating to executive officers of Warner-Lambert
is set forth in Part I of this Form 10-K on pages 9 through 11. Information
relating to compliance with Section 16(a) of the Securities Exchange Act of 1934
is contained in the Proxy Statement, referred to above, at page 10 and such
information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information relating to executive compensation is contained in the Proxy
Statement, referred to above in Item 10, at pages 13 through 23 and such
information is incorporated herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
(a) Information relating to the beneficial ownership of more than five
percent of Warner-Lambert's Common Stock is contained in the Proxy Statement,
referred to above in Item 10, at page 10 and such information is incorporated
herein by reference.
(b) Information relating to security ownership of management is contained
in the Proxy Statement, referred to above in Item 10, at page 9 and such
information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not Applicable.
13
<PAGE>
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. ALL FINANCIAL STATEMENTS
The following items are included in Part II of this report through
incorporation by reference to pages 27 through 40 of the Warner-Lambert
1996 Annual Report:
Consolidated Statements of Income for each of the three years in
the period ended December 31, 1996.
Consolidated Statements of Retained Earnings for each of the
three years in the period ended December 31, 1996.
Consolidated Balance Sheets at December 31, 1996 and 1995.
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1996.
Notes to Consolidated Financial Statements.
Report of Independent Accountants.
2. FINANCIAL STATEMENT SCHEDULE
Included in Part IV of this report:
Report of Independent Accountants on Financial Statement Schedule.
Schedule II -- Valuation and Qualifying Accounts.
Schedules other than those listed above are omitted because they are
either not applicable or the required information is included through
incorporation by reference to pages 27 through 40 of the Warner-Lambert
1996 Annual Report.
3. EXHIBITS
(3) Articles of Incorporation and By-Laws.
(a) Restated Certificate of Incorporation of Warner-Lambert Company
filed November 10, 1972, as amended to April 23, 1996
(Incorporated by reference to Warner-Lambert's Current Report on
Form 8-K, dated April 23, 1996).
(b) By-Laws of Warner-Lambert Company, as amended to October 25, 1988
(Incorporated by reference to Warner-Lambert's Quarterly Report on
Form 10-Q for the quarter ended September 30, 1988 (File No.
1-3608)).
(4) Instruments defining the rights of security holders, including
indentures.
(a) Rights Agreement, dated as of June 28, 1988, and amended as of
June 27, 1989, between Warner-Lambert Company and First Chicago
Trust Company of New York, as Rights Agent (Incorporated by
reference to Warner-Lambert's Registration Statement on Form 8-A,
dated June 28, 1988, as amended by Form 8, dated July 5, 1989
(File No. 1-3608)).
(b) Warner-Lambert agrees to furnish to the Commission, upon request,
a copy of each instrument with respect to issues of long-term
debt of Warner-Lambert. The principal amount of debt issues
authorized under each such instrument does not exceed 10% of the
total assets of Warner-Lambert.
(10) Material contracts.
<TABLE>
<S> <C>
(a)* Warner-Lambert Company 1983 Stock Option Plan, as amended to November 26, 1991 (Incorporated
by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991 (File
No. 1-3608)).
(b)* Warner-Lambert Company 1987 Stock Option Plan, as amended to November 26, 1991 (Incorporated
by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991 (File
No. 1-3608)).
(c)* Warner-Lambert Company 1989 Stock Plan, as amended to November 26, 1991 (Incorporated by
reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991 (File No.
1-3608)).
(d)* Warner-Lambert Company 1992 Stock Plan, as amended to November 1, 1996.
</TABLE>
14
<PAGE>
<PAGE>
<TABLE>
<S> <C>
(e)* Warner-Lambert Company 1996 Stock Plan, as amended to November 1, 1996.
(f)* Warner-Lambert Company Incentive Compensation Plan, as amended to September 27, 1994
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994).
(g)* Warner-Lambert Company Supplemental Pension Income Plan, as amended to November 28, 1995
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December
31, 1995).
(h)* Group Plan Participation by Non-employee Directors (Incorporated by reference to
Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-3608)).
(i)* Warner-Lambert Company Directors' Retirement Plan, as amended to June 1, 1995 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30,
1995).
(j)* Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as
amended to January 1, 1997 (Incorporated by reference to Warner-Lambert's Quarterly Report on
Form 10-Q for the quarter ended March 31, 1996).
(k)* Warner-Lambert Company Executive Severance Plan, as amended to September 27, 1994
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1994).
(l)* Restricted Stock Plan for Directors of Warner-Lambert Company, as amended to January 28, 1992
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December
31, 1991 (File No. 1-3608)).
(m)* Employment Agreement dated September 24, 1985 between Warner-Lambert Company and Melvin R.
Goodes, Chairman of the Board and Chief Executive Officer, as amended to August 1, 1991
(Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter
ended September 30, 1991 (File No. 1-3608)).
(n)* Employment Agreement effective as of August 1, 1991 between Warner-Lambert Company and
Lodewijk J. R. de Vink, President and Chief Operating Officer (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 (File
No. 1-3608)).
</TABLE>
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Copy of the Warner-Lambert Company Annual Report for the year ended
December 31, 1996. Such report, except for those portions thereof
which are expressly incorporated by reference herein, is furnished
solely for the information of the Commission and is not to be deemed
'filed' as part of this filing.
(21) Subsidiaries of the registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule (EDGAR filing only).
- ------------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Form 10-K pursuant to Item 14(c).
(b) REPORTS ON FORM 8-K
None.
Warner-Lambert will furnish to any holder of its securities, upon request
and at a reasonable cost, copies of the Exhibits listed in Item 14.
15
<PAGE>
<PAGE>
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors and Shareholders of
WARNER-LAMBERT COMPANY
Our audits of the consolidated financial statements referred to in our
report dated January 27, 1997 appearing on page 40 of the 1996 Annual Report to
Shareholders of Warner-Lambert Company (which report and consolidated financial
statements are incorporated by reference in this Annual Report on Form 10-K)
also included an audit of the Financial Statement Schedule listed in Item 14(a)2
of this Form 10-K. In our opinion, this Financial Statement Schedule presents
fairly, in all material respects, the information set forth therein when read in
conjunction with the related consolidated financial statements.
PRICE WATERHOUSE LLP
4 Headquarters Plaza North
Morristown, New Jersey
January 27, 1997
16
<PAGE>
<PAGE>
SCHEDULE II
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1996, 1995 AND 1994
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
- ------------------------------------------------------------------ ---------- ---------- ---------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Year ended December 31, 1996:
Allowance for doubtful accounts.............................. $ 20.7 $ 22.3 $ 6.4 $36.6
Allowance for deferred tax assets (a)........................ 37.0 - 8.2 28.8
---------- ---------- ---------- -------
$ 57.7 $ 22.3 $ 14.6 $65.4
---------- ---------- ---------- -------
Year ended December 31, 1995:
Allowance for doubtful accounts.............................. $ 21.8 $ 4.3 $ 5.4 $20.7
Allowance for deferred tax assets (b)........................ 44.6 - 7.6 37.0
---------- ---------- ---------- -------
$ 66.4 $ 4.3 $ 13.0 $57.7
---------- ---------- ---------- -------
Year ended December 31, 1994:
Allowance for doubtful accounts.............................. $ 20.5 $ 4.4 $ 3.1 $21.8
Allowance for deferred tax assets (c)........................ 61.9 14.9 32.2 44.6
---------- ---------- ---------- -------
$ 82.4 $ 19.3 $ 35.3 $66.4
---------- ---------- ---------- -------
</TABLE>
- ------------
(a) In 1996, the decrease in valuation allowances of $8.2 primarily reflected
the impact of European deferred tax assets related to restructuring reserve
activity (see Notes 3 and 14 to the consolidated financial statements).
(b) Deductions in 1995 were due to improved profitability in European
operations which resulted in the realization of some deferred tax assets
associated with the 1991 restructuring.
(c) Additions in 1994 primarily represented valuation allowances for foreign
capital loss carryforwards. Deductions in 1994 were primarily due to
improved profitability in European operations which resulted in realization
of some of the deferred tax assets associated with the 1991 restructuring.
17
<PAGE>
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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
<TABLE>
<S> <C>
Dated as of March 20, 1997 By /s/ MELVIN R. GOODES
......................................
Melvin R. Goodes
Chairman of the Board
and Chief Executive Officer
</TABLE>
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
/s/ MELVIN R. GOODES
By ................................................
Melvin R. Goodes
Chairman of the Board
and Chief Executive Officer
(Principal Executive Officer)
and Director
/s/ ERNEST J. LARINI
By ................................................
Ernest J. Larini
Vice President and Chief
Financial Officer
(Principal Financial Officer)
/s/ JOSEPH E. LYNCH
By ................................................
Joseph E. Lynch
Vice President and Controller
(Principal Accounting Officer)
March 20, 1997
/s/ ROBERT N. BURT
By ................................................
Robert N. Burt, Director
/s/ DONALD C. CLARK
By ................................................
Donald C. Clark, Director
/s/ LODEWIJK J. R. DE VINK
By ................................................
Lodewijk J. R. de Vink, Director
</TABLE>
18
<PAGE>
<PAGE>
<TABLE>
<S> <C> <C>
/s/ JOHN A. GEORGES
By ................................................
John A. Georges, Director
/s/ WILLIAM H. GRAY III
By ................................................
William H. Gray III, Director
/s/ WILLIAM R. HOWELL
By ................................................
William R. Howell, Director
/s/ LASALLE D. LEFFALL, JR.
By ................................................
LaSalle D. Leffall, Jr., M.D., Director
/s/ PATRICIA SHONTZ LONGE
By ................................................
Patricia Shontz Longe, Ph.D., Director March 20, 1997
/s/ ALEX J. MANDL
By ................................................
Alex J. Mandl, Director
/s/ LAWRENCE G. RAWL
By ................................................
Lawrence G. Rawl, Director
/s/ MICHAEL I. SOVERN
By ................................................
Michael I. Sovern, Director
/s/ JOSEPH D. WILLIAMS
By ................................................
Joseph D. Williams, Director
</TABLE>
19
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------
<S> <C> <C>
(3) Articles of Incorporation and By-Laws.
(a) Restated Certificate of Incorporation of Warner-Lambert Company filed November 10, 1972, as amended
to April 23, 1996 (Incorporated by reference to Warner-Lambert's Current Report on Form 8-K, dated
April 23, 1996).
(b) By-Laws of Warner-Lambert Company, as amended to October 25, 1988 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30, 1988 (File No.
1-3608)).
(4) Instruments defining the rights of security holders, including indentures.
(a) Rights Agreement, dated as of June 28, 1988, and amended as of June 27, 1989, between
Warner-Lambert Company and First Chicago Trust Company of New York, as Rights Agent (Incorporated
by reference to Warner-Lambert's Registration Statement on Form 8-A, dated June 28, 1988, as
amended by Form 8, dated July 5, 1989 (File No. 1-3608)).
(b) Warner-Lambert agrees to furnish to the Commission, upon request, a copy of each instrument with
respect to issues of long-term debt of Warner-Lambert. The principal amount of debt issues
authorized under each such instrument does not exceed 10% of the total assets of Warner-Lambert.
(10) Material contracts.
(a) Warner-Lambert Company 1983 Stock Option Plan, as amended to November 26, 1991 (Incorporated by
reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991 (File No.
1-3608)).
(b) Warner-Lambert Company 1987 Stock Option Plan, as amended to November 26, 1991 (Incorporated by
reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991 (File No.
1-3608)).
(c) Warner-Lambert Company 1989 Stock Plan, as amended to November 26, 1991 (Incorporated by reference
to Warner-Lambert's Form 10-K for the fiscal year ended December 31, 1991 (File No. 1-3608)).
(d) Warner-Lambert Company 1992 Stock Plan, as amended to November 1, 1996.
(e) Warner-Lambert Company 1996 Stock Plan, as amended to November 1, 1996.
(f) Warner-Lambert Company Incentive Compensation Plan, as amended to September 27, 1994 (Incorporated
by reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994).
(g) Warner-Lambert Company Supplemental Pension Income Plan, as amended to November 28, 1995
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31,
1995).
(h) Group Plan Participation by Non-employee Directors (Incorporated by reference to Warner-Lambert's
Form 10-K for the fiscal year ended December 31, 1991
(File No. 1-3608)).
(i) Warner-Lambert Company Directors' Retirement Plan, as amended to June 1, 1995 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995).
(j) Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as amended
to January 1, 1997 (Incorporated by reference to Warner-Lambert's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996).
(k) Warner-Lambert Company Executive Severance Plan, as amended to September 27, 1994 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30,
1994).
(l) Restricted Stock Plan for Directors of Warner-Lambert Company, as amended to January 28, 1992
(Incorporated by reference to Warner-Lambert's Form 10-K for the fiscal year ended December 31,
1991 (File No. 1-3608)).
(m) Employment Agreement dated September 24, 1985 between Warner-Lambert Company and Melvin R. Goodes,
Chairman of the Board and Chief Executive Officer, as amended to August 1, 1991 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended September 30,
1991 (File No. 1-3608)).
(n) Employment Agreement effective as of August 1, 1991 between Warner-Lambert Company and Lodewijk J.
R. de Vink, President and Chief Operating Officer (Incorporated by reference to Warner-Lambert's
Quarterly Report on Form 10-Q for the quarter ended September 30, 1991 (File No. 1-3608)).
(12) Computation of Ratio of Earnings to Fixed Charges.
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------
<S> <C>
(13) Copy of the Warner-Lambert Company Annual Report for the year ended December 31, 1996. Such report,
except for those portions thereof which are expressly incorporated by reference herein, is furnished
solely for the information of the Commission and is not to be deemed 'filed' as part of this filing.
(21) Subsidiaries of the registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule (EDGAR filing only).
</TABLE>
STATEMENT OF DIFFERENCES
The trademark symbol shall be expressed as..............'tm'
The registered trademark symbol shall be expressed as...'r'
<PAGE>
<PAGE>
WARNER-LAMBERT COMPANY
1992 STOCK PLAN
AS AMENDED TO NOVEMBER 1, 1996
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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.
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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.
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.
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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.
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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
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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
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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
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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.
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(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
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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
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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.
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(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
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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,
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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
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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
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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:
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(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.
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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.
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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 the date established by the
Secretary of the Company 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 such 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
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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 once per year and shall become effective on the January
1st which follows such election; provided, however, that no election to defer
amounts into the Stock Account shall become effective unless the transaction
qualifies as exempt under Rule 16b-3(d) under the Act. 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 or if any such election would result in a transaction which would not
qualify as exempt under Rule 16b-3(d) under the Act, he or she shall be deemed
to have elected deferral to the Cash Account. In addition, a Director may cease
deferring amounts into the Stock Account at any time by written notice delivered
to the Secretary and thereafter such amounts shall be credited 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
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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 to
convert all or any portion of his or her Stock Account to his or her Cash
Account; provided, however, that no such election shall become effective unless
the transaction qualifies as exempt under Rule 16b-3(f) under the Act. 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 the last day of the month in which such election is made by the Closing Price
of shares of Common Stock on such date.
(b) Cash Account to Stock Account. A Director may elect to
convert all or any portion of his or her Cash Account to his or her Stock
Account; provided, however, that no such election shall become effective unless
the transaction qualifies as exempt under Rule 16b-3(f) under the Act. 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 the last day of the month in which such election is made by the
Closing Price of shares of Common Stock on such date.
(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 last day of the month in which the election is made.
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
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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
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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
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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 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 under the Act and the
qualification of the
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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
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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
"Non-Employee Directors" (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
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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
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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
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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,
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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
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WARNER-LAMBERT COMPANY
1996 STOCK PLAN
AS AMENDED TO NOVEMBER 1, 1996
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WARNER-LAMBERT COMPANY
1996 STOCK PLAN
ARTICLE I
Purpose of Plan
Section 1.1. Purpose.
(a) The purpose of the 1996 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.
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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.
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.
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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 1996 Stock Plan.
Plan Year: The calendar year.
Predecessor Plans: The Warner-Lambert Directors' Fees Deferral Plan,
the Warner-Lambert Consulting Fees Deferral Plan, the Deferred Compensation Plan
for Directors of Warner- Lambert Company and the Warner-Lambert 1992 Stock Plan.
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.
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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.
(a) Stock Awards may not be granted in any year which provide
for the issuance of more than 1.65% of the shares of Common Stock outstanding
(including issued shares reacquired by the Company) on the January 1 of the year
of grant. Restricted Stock may not be granted in any year for more than 20% of
the shares authorized under the preceding sentence. Shares of Common Stock
issued under the Plan may be either
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authorized and unissued shares or issued shares reacquired by the Company.
Notwithstanding the above limitation, in any year in which Stock Awards
(including Restricted Stock) 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.
(b) Stock Awards may not be granted in any year to any
individual which provide for the issuance of more than 600,000 shares of Common
Stock (as such number shall be adjusted in accordance with Article X).
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.
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.
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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
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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.
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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;
provided, however, that the Option Price shall not be less than the Fair Market
Value of Warner-Lambert Common Stock on the date of grant. 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 or as otherwise determined by the Committee, 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
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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
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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
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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) 20,000,000 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
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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, Section 6.5 and Section
6.6, or as otherwise determined by the Committee, 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
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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
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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.
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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.
Subject to the provisions of Section 7.3, 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, and 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.
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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
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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
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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,
equitable adjustments shall be made to prevent dilution or enlargement of rights
(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, (iv) in the number of Stock Credits in each Director's Stock Account
and (v) in any other aspect of the Plan as the Committee shall deem appropriate;
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
424(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.
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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 the date established by the
Secretary of the Company 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 such 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 once per year and shall become effective on the January
1st which follows such election; provided, however, that no election to defer
amounts into the Stock Account shall become effective unless the transaction
qualifies as exempt under Rule 16b-3(d) under the Act. 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 or if any such election would result in a transaction which would not
qualify as exempt under Rule 16b- 3(d) under the Act, he or she shall be deemed
to have elected deferral to the Cash Account. In addition, a Director may cease
deferring amounts into the Stock Account at any time by written notice delivered
to the Secretary and thereafter such amounts shall be credited to the Cash
Account. Compensation deferred to a Cash Account or Stock Account shall result
in Cash Credits or Stock Credits, respectively.
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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 to
convert all or any portion of his or her Stock Account to his or her Cash
Account; provided, however, that no such election shall become effective unless
the transaction qualifies as exempt under Rule 16b-3(f) under the Act. 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 the last day of the month in which such election is made by the Closing Price
of shares of Common Stock on such date.
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(b) Cash Account to Stock Account. A Director may elect to
convert all or any portion of his or her Cash Account to his or her Stock
Account; provided, however, that no such election shall become effective unless
the transaction qualifies as exempt under Rule 16b-3(f) under the Act. 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 the last day of the month in which such election is made by the
Closing Price of shares of Common Stock on such date.
(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 last day of the month in which the election is made.
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).
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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,
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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 and account
balances accrued under any Predecessor Plans shall be governed by the provisions
of this Plan, 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
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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 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.
<PAGE>
<PAGE>
- 25 -
(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 "Non-Employee Directors" (as defined in said Rule) as a condition
of the continued
<PAGE>
<PAGE>
- 26 -
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
<PAGE>
<PAGE>
- 27 -
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
<PAGE>
<PAGE>
- 28 -
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 or under Company policy. 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
<PAGE>
<PAGE>
- 29 -
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.
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
<PAGE>
<PAGE>
- 30 -
1996. Approval will require 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. If approved, the Plan shall become effective January 1, 1997.
Section 15.2. Term of Plan. No Stock Awards may be granted hereunder
after April 23, 2007. 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
<PAGE>
<PAGE>
EXHIBIT 12
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
-------------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- ------ ------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Earnings before income taxes and accounting changes
(less minority interests)............................. $1,107.7 $1,018.6 $ 913.1 $318.5 $858.2
Add:
Interest on indebtedness - excluding amount
capitalized...................................... 145.9 122.7 93.7 64.2 80.8
Amortization of debt expense....................... .5 .4 .4 .5 .6
Interest factor in rent expense(a)................. 27.5 26.9 26.2 25.4 23.4
-------- -------- -------- ------ ------
Adjusted earnings............................. $1,281.6 $1,168.6 $1,033.4 $408.6 $963.0
-------- -------- -------- ------ ------
Fixed Charges:
Interest on indebtedness........................... $ 145.9 $ 122.7 $ 93.7 $ 64.2 $ 80.8
Capitalized interest............................... 9.6 10.1 9.4 8.6 8.1
Amortization of debt expense....................... .5 .4 .4 .5 .6
Interest factor in rent expense(a)................. 27.5 26.9 26.2 25.4 23.4
-------- -------- -------- ------ ------
Total fixed charges........................... $ 183.5 $ 160.1 $ 129.7 $ 98.7 $112.9
-------- -------- -------- ------ ------
Ratio of earnings to fixed charges..................... 7.0 7.3 8.0 4.1(b) 8.5
-------- -------- -------- ------ ------
</TABLE>
- ------------
(a) Represents one third of rental expense, which the Company believes is a
reasonable approximation.
(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.
<PAGE>
<PAGE>
Warner-Lambert Company and Subsidiaries
Five-year Summary of Selected Financial Data
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
- ----------------------------------------------------------------------------------------
(Dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
RESULTS FOR YEAR:
Net sales $7,231 $7,040 $6,417 $5,794 $5,598
Cost of goods sold 2,347 2,428 2,155 1,918 1,814
Research and development
expense 555 501 456 465 473
Income before income taxes,
minority interests and
accounting changes 1,177 1,149 1,005 318 (b) 860
Income before accounting
changes 787 740 694 285 (b) 644
Net income 787 740 694 331 (b,c) 644
Per common share (a):
Income before accounting
changes 2.90 2.74 2.59 1.06 (b) 2.39
Net income 2.90 2.74 2.59 1.23 (b,c) 2.39
- ------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION:
Current assets $2,785 $2,778 $2,515 $2,219 $2,176
Current liabilities 2,137 2,425 2,353 2,016 1,333
Working capital 648 353 162 203 843
Property, plant and
equipment 2,168 2,006 1,846 1,599 1,507
Total assets 7,197 6,101 5,533 4,828 4,077
Long-term debt 1,720 634 535 546 565
Total debt 2,300 1,529 1,460 1,199 736
Shareholders' equity 2,581 2,246 1,816 1,390 1,528
- ------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION (a):
Average number of common
shares outstanding
(in millions) 271.2 270.0 268.2 270.0 269.4
Common stock price per share:
High $ 80 $ 49 $43 3/8 $38 3/16 $39 5/8
Low 44 5/8 36 11/16 30 29 7/8 29 3/16
Year-end 75 48 9/16 38 1/2 33 3/4 34 9/16
Book value per common share 9.52 8.28 6.75 5.18 5.65
Cash dividends per
common share 1.38 1.30 1.22 1.14 1.02
- ------------------------------------------------------------------------------------------
OTHER DATA:
Number of employees
(in thousands) 38 37 36 35 34
Capital expenditures $389 $387 $406 $347 $334
Cash dividends paid 374 351 327 308 275
Depreciation and amortization 231 202 181 170 156
- ------------------------------------------------------------------------------------------
<FN>
(a) Years prior to 1996 were restated for a two-for-one stock split effective
May 1996.
(b) Includes a net restructuring charge of $525 pretax ($360 after tax or $1.34
per share).
(c) Includes a credit of $63 or $.23 per share for the adoption of SFAS No.
109, "Accounting for Income Taxes" and a charge of $17 after tax or $.06
per share to adopt SFAS No. 112, "Employers' Accounting for Postemployment
Benefits."
</FN>
</TABLE>
26
<PAGE>
<PAGE>
Warner-Lambert Company and Subsidiaries
Consolidated Statements of Income
- ----------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------
(Dollars in millions,
except per share amounts)
Net sales $7,231.4 $7,039.8 $6,416.8
- ----------------------------------------------------------------------
Costs and expenses:
Cost of goods sold 2,346.9 2,427.5 2,155.1
Selling, general and
administrative 3,115.8 2,979.8 2,735.4
Research and development 554.8 501.2 456.0
Other expense (income), net 37.2 (17.3) 65.0
- ----------------------------------------------------------------------
Total costs and expenses 6,054.7 5,891.2 5,411.5
- ----------------------------------------------------------------------
Income before income taxes and
minority interests 1,176.7 1,148.6 1,005.3
Provision for income taxes 321.2 279.1 219.1
Minority interests 69.0 130.0 92.2
- ----------------------------------------------------------------------
Net income $ 786.5 $ 739.5 $ 694.0
- ----------------------------------------------------------------------
Net income per common share* $ 2.90 $ 2.74 $ 2.59
- ----------------------------------------------------------------------
Consolidated Statements of Retained Earnings
- ----------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------
(Dollars in millions,
except per share amounts)
Retained earnings at beginning
of year $3,042.9 $2,654.5 $2,287.7
Net income 786.5 739.5 694.0
Cash dividends paid
on common shares (374.4) (351.1) (327.2)
International operations year-
end change (Note 1) (18.8) - -
- ----------------------------------------------------------------------
Retained earnings at end of year $3,436.2 $3,042.9 $2,654.5
- ----------------------------------------------------------------------
Cash dividends per common share* $ 1.38 $ 1.30 $ 1.22
- ----------------------------------------------------------------------
*1995 and 1994 were restated for a two-for-one stock split effective
May 1996.
See notes to consolidated financial statements.
27
<PAGE>
<PAGE>
Warner-Lambert Company and Subsidiaries
Consolidated Balance Sheets
- ---------------------------------------------------------------------
December 31, 1996 1995
- ---------------------------------------------------------------------
(Dollars in millions)
Assets:
Cash and cash equivalents $ 390.8 $ 295.8
Short-term investments 101.5 267.4
Accounts receivable, less allowances of
$36.6 in 1996 and $20.7 in 1995 1,148.7 1,129.7
Other receivables 155.2 109.8
Inventories 647.0 645.7
Prepaid expenses and other current
assets 341.6 329.6
- ---------------------------------------------------------------------
Total current assets 2,784.8 2,778.0
Investments and other assets 496.6 654.3
Equity investments in
affiliated companies 292.1 257.5
Property, plant and equipment 2,168.0 2,006.3
Intangible assets 1,455.8 404.8
- ---------------------------------------------------------------------
$ 7,197.3 $6,100.9
- ---------------------------------------------------------------------
Liabilities and shareholders' equity:
Short-term debt $ 579.2 $ 894.6
Accounts payable, trade 613.0 523.8
Accrued compensation 170.3 166.3
Other current liabilities 614.6 671.2
Federal, state and foreign income taxes 159.8 169.3
- ---------------------------------------------------------------------
Total current liabilities 2,136.9 2,425.2
Long-term debt 1,720.5 634.5
Deferred income taxes 143.5 128.4
Other noncurrent liabilities 615.4 666.7
Shareholders' equity:
Preferred stock - none issued - -
Common stock issued:
1996 - 320,660,536 shares;
1995 - 160,330,268 shares 320.7 160.3
Capital in excess of par value 125.8 217.5
Retained earnings 3,436.2 3,042.9
Cumulative translation adjustments (236.2) (216.3)
Treasury stock, at cost:
1996 - 49,456,251 shares;
1995 - 24,731,378 shares (1,065.5) (958.3)
- ---------------------------------------------------------------------
Total shareholders' equity 2,581.0 2,246.1
- ---------------------------------------------------------------------
$ 7,197.3 $6,100.9
- ---------------------------------------------------------------------
See notes to consolidated financial statements.
28
<PAGE>
<PAGE>
Warner-Lambert Company and Subsidiaries
Consolidated Statements of Cash Flows
- ----------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------
(Dollars in millions)
Operating Activities:
Net income $ 786.5 $ 739.5 $ 694.0
Adjustments to reconcile
net income to net cash
provided by operating activities:
Depreciation and amortization 230.8 201.9 181.4
Gains on sales of businesses (75.2) (117.0) -
Minority interests 69.0 130.0 92.2
Deferred income taxes 70.7 91.5 44.3
Changes in assets and liabilities,
net of effects from acquisitions/
dispositions of businesses:
Receivables (211.3) (171.9) (167.9)
Inventories (23.9) (20.0) (140.6)
Accounts payable and accrued
liabilities 108.4 (23.1) (77.5)
Other 67.3 (31.7) 19.1
- ----------------------------------------------------------------------
Net cash provided by operating
activities 1,022.3 799.2 645.0
- ----------------------------------------------------------------------
Investing Activities:
Purchases of investments (217.1) (438.5) (656.1)
Proceeds from sales of investments 500.4 340.8 415.7
Capital expenditures (389.0) (387.3) (406.4)
Acquisitions of businesses (1,064.8) (34.3) (66.3)
Proceeds from dispositions of businesses 137.4 136.1 -
Other (80.4) 15.6 13.2
- ----------------------------------------------------------------------
Net cash used by investing activities(1,113.5) (367.6) (699.9)
- ----------------------------------------------------------------------
Financing Activities:
Proceeds from borrowings 2,165.2 1,828.6 762.7
Principal payments on borrowings (1,422.7) (1,766.6) (527.6)
Purchases of treasury stock (138.9) (17.6) (41.7)
Cash dividends paid (374.4) (351.1) (327.2)
Distributions paid to minority interests (102.4) (96.5) (79.4)
Proceeds from stock option exercises 64.1 61.2 43.1
- ----------------------------------------------------------------------
Net cash provided (used) by
financing activities 190.9 (342.0) (170.1)
- ----------------------------------------------------------------------
Effect of exchange rate changes on
cash and cash equivalents (4.7) (11.7) 2.4
- ----------------------------------------------------------------------
Net increase (decrease) in cash and
cash equivalents 95.0 77.9 (222.6)
Cash and cash equivalents at beginning
of year 295.8 217.9 440.5
- ----------------------------------------------------------------------
Cash and cash equivalents at end of year $ 390.8 $ 295.8 $ 217.9
- ----------------------------------------------------------------------
See notes to consolidated financial statements.
29
<PAGE>
<PAGE>
Notes to Consolidated Financial Statements
Warner-Lambert Company and Subsidiaries
(Dollars in millions, except per share amounts)
Note 1 - Significant Accounting Policies:
Basis of consolidation - The consolidated financial statements include
the accounts of Warner-Lambert Company and all controlled,
majority-owned subsidiaries ("Warner-Lambert" or the "company").
Investments in companies in which Warner-Lambert's interest is between
20 percent and 50 percent are accounted for using the equity method.
Effective January 1, 1996, the company's international operations that
previously reported financial results on a fiscal-year basis ending
November 30 changed to a calendar-year basis ending December 31. The
change was made primarily to reflect the results of these operations
on a more timely basis. The results of operations for international
subsidiaries for the month of December 1995 are included as a charge
of $18.8 against retained earnings.
In 1996, marketing expense and administrative and general expense
categories have been combined in one line item - Selling, general and
administrative in the accompanying Consolidated Statements of Income.
Also, intangible amortization and certain other expenses have been
reported in Other expense (income), net. Previously, these items were
reported in administrative and general expense. These
reclassifications have been made to the prior years' financial
statements. Additionally, certain other prior year amounts have been
reclassified to conform with the current year presentation.
Use of estimates - The preparation of financial statements in
conformity with generally accepted accounting principles requires
management to make estimates and use assumptions that affect certain
reported amounts. Actual amounts could differ from those estimates.
Cash equivalents - Cash equivalents include nonequity short-term
investments with original maturity dates of 90 days or less.
Inventories - Inventories are valued at the lower of cost or market.
Cost is determined principally on the basis of first-in, first-out or
standards which approximate average cost.
Property, plant and equipment - Property, plant and equipment are
recorded at cost. The cost of maintenance, repairs, minor renewals
and betterments and minor equipment items is charged to income; the
cost of major renewals and betterments is capitalized. Depreciation
is calculated generally on the straight-line method over the estimated
useful lives of the various classes of assets.
Intangible assets - Intangible assets are recorded at cost and are
amortized on the straight-line method over appropriate periods not
exceeding 40 years. The company continually reviews goodwill and
other intangible assets to evaluate whether events or changes have
occurred that would suggest an impairment of carrying value. An
impairment would be recognized when expected future operating cash
flows are lower than the carrying value.
Advertising costs - Advertising costs are expensed as incurred and
amounted to $670.6 in 1996, $644.0 in 1995 and $601.3 in 1994.
Net income per common share - Net income per common share is computed
based on the average number of common shares outstanding during the
year. The dilutive effect of common stock equivalents is immaterial.
The average number of shares used in the determination of net income
per common share was 271,220,000 in 1996, 270,043,000 in 1995 and
268,224,000 in 1994. The average number of shares and all per share
amounts for prior years have been restated to reflect a two-for-one
stock split effective May 1996 as discussed in Note 15.
Note 2 - Interest Income and Interest Expense:
Interest income and interest expense are included in Other expense
(income), net. Interest income totaled $54.8, $49.7 and $49.7 and
interest expense totaled $145.9, $122.7 and $93.7 in 1996, 1995 and
1994, respectively. Total interest paid was $140.7, $112.8 and $86.2
in 1996, 1995 and 1994, respectively. Interest costs of $9.6, $10.1
and $9.4 in 1996, 1995 and 1994, respectively, have been capitalized
and included in Property, plant and equipment.
Note 3 - Restructuring:
In 1993 and 1991, the company recorded restructuring charges of $525.2
($360.4 after tax or $1.34 per share) and $544.0 ($418.0 after tax or
$1.56 per share), respectively. The total of $1,069.2 was recorded
for worldwide rationalization of manufacturing and distribution
facilities and for organizational restructuring and related workforce
reductions of about 5,500 positions. These rationalization programs
were prompted by changes in the company's competitive environment,
including the growing impact of managed health care, cost containment
efforts in the U.S., cost regulations in Europe, the elimination of
30
<PAGE>
<PAGE>
trade barriers throughout the world and changes in U.S. tax law. As
of December 31, 1996, 19 manufacturing sites were closed and workforce
reductions of approximately 3,970 positions were made primarily in the
U.S. sales force, Puerto Rico manufacturing, worldwide administrative
operations and European research. Activities still to be completed
include closing seven facilities, worldwide work-systems redesign and
severance associated with these projects.
Initial 1993 and 1991 provisions and the subsequent utilization by
major components are summarized in the table below:
- ----------------------------------------------------------------------
Amounts Reserve
1993 & 1991 Utilized Balance at
Restructuring Through December
Provisions 1996 31, 1996
- ----------------------------------------------------------------------
Severance and related costs $ 468.0 $393.7 $ 74.3
Plant closures and related costs 161.5 128.8 32.7
Work-systems redesign 71.5 51.3 20.2
Operating losses during 35.3 35.3 -
phase-out period
Other 107.3 96.3 11.0
Asset write-offs 225.6 225.6 -
- ---------------------------------------------------------------------
Total $1,069.2 $931.0 $138.2
- ---------------------------------------------------------------------
Amounts utilized through December 31, 1996 include redistribution
among categories based on actual restructuring actions and project
forecasts. The company reduced reserve balances designated for
severance and related costs by $87.1 and increased balances for plant
closures and related costs by $57.5, work-systems redesign by $18.6
and other costs by $11.0. These redistributions were necessary due to
delays in completion, higher projected costs for plant closures and
the acceleration of the work-systems redesign projects enabling some
positions to be eliminated through attrition rather than severance.
The original scopes of the restructuring projects and the number of
positions to be eliminated remain substantially unchanged.
Reserves are considered utilized when specific restructuring criteria
are completed or benefits paid. As of December 31, 1996, Other
current liabilities included $54.2 and Other noncurrent liabilities
included $84.0 of the remaining restructuring reserve balance to be
utilized. The company has determined that the restructuring reserve
balance is adequate to cover the remaining restructuring actions and
that the restructuring programs are expected to be substantially
completed by the end of 1997.
Note 4 - Acquisitions and Divestitures:
Warner-Lambert entered into an agreement in December 1993 with
Wellcome plc to establish a joint venture with operations in various
countries to develop and market a broad range of over-the-counter
(OTC) products. The joint venture, referred to as Warner Wellcome,
commenced operations in 1994. Glaxo plc acquired Wellcome plc in 1995
and changed the name of the combined company to Glaxo Wellcome plc.
In 1996, Warner-Lambert purchased Glaxo Wellcome plc's minority
interest in the Warner Wellcome joint venture operations. The
transaction was completed in the second half of the year. Total
consideration for the acquisition including estimated acquisition
costs was approximately $1.1 billion. The transaction was financed
with commercial paper.
In April 1995, Warner-Lambert acquired Adams S.A., a privately held
manufacturer of confectionery products in Argentina. In June 1994,
Warner-Lambert acquired Saila S.p.A., a privately held confectionery
company based in Italy. Cash consideration excluding cash acquired
for these acquisitions was $34.3 in 1995 and $66.3 in 1994.
All acquisitions have been accounted for under the purchase method.
The excess of purchase price over the estimated fair values of the net
tangible and identifiable intangible assets acquired has been treated
as goodwill. Net assets and results of operations of Adams S.A. and
Saila S.p.A. have been included in the consolidated financial
statements since the dates of acquisition. Financial results of
Warner Wellcome were consolidated prior to acquisition of the minority
interest. The acquisitions did not have a material pro forma impact
on consolidated earnings.
In the first quarter 1996, Warner-Lambert sold Warner Chilcott
Laboratories, its generic pharmaceutical business. Net proceeds were
$137.4. The sale resulted in a pretax gain of $75.2, which is
included in Other expense (income), net. On an after tax basis, the
gain was $45.7 or $.17 per share.
In the third quarter 1995, the company sold its PRO toothbrush
business. Net proceeds were $136.1 resulting in a pretax gain of
$117.0, which is included in Other expense (income), net. On an after
tax basis, the gain was $82.4 or $.31 per share.
31
<PAGE>
<PAGE>
Note 5 - International Operations:
In translating foreign currency financial statements, local currencies
of foreign subsidiaries and branches have generally been determined to
be the functional currencies, except for those in hyperinflationary
economies, principally in Latin America. Net aggregate exchange
losses resulting from foreign currency transactions and translation
adjustments related to subsidiaries operating in highly inflationary
countries amounted to $7.6, $14.3 and $15.3 in 1996, 1995 and 1994,
respectively. The cumulative translation adjustments component of
shareholders' equity was charged with $19.9 in 1996, and $35.3 in 1995
and was credited with $43.8 in 1994.
Note 6 - Inventories:
- ---------------------------------------------------------------------
December 31, 1996 1995
- ---------------------------------------------------------------------
Raw materials $130.9 $110.0
Finishing supplies 52.0 48.0
Work in process 69.2 89.1
Finished goods 394.9 398.6
- ---------------------------------------------------------------------
$647.0 $645.7
- ---------------------------------------------------------------------
Note 7 - Property, Plant and Equipment:
- ---------------------------------------------------------------------
December 31, 1996 1995
- ---------------------------------------------------------------------
Land $ 39.6 $ 39.4
Buildings 1,187.4 1,098.5
Machinery, furniture and fixtures 2,430.6 2,278.7
- ---------------------------------------------------------------------
3,657.6 3,416.6
Less accumulated depreciation (1,489.6) (1,410.3)
- ---------------------------------------------------------------------
$ 2,168.0 $ 2,006.3
- ---------------------------------------------------------------------
Depreciation expense totaled $199.1, $186.3 and $168.9 in 1996, 1995
and 1994, respectively.
Note 8 - Intangible Assets:
- ---------------------------------------------------------------------
December 31, 1996 1995
- ---------------------------------------------------------------------
Goodwill $1,001.6 $232.9
Trademarks and other intangibles 564.1 251.9
- --------------------------------------------------------------------
1,565.7 484.8
Less accumulated amortization (109.9) (80.0)
- ---------------------------------------------------------------------
$1,455.8 $404.8
- ---------------------------------------------------------------------
The 1996 intangible asset balance includes $1.1 billion related to the
purchase of Glaxo Wellcome plc's interest in the Warner Wellcome joint
venture operations discussed in Note 4.
Amortization expense totaled $31.7, $15.6 and $12.5 in 1996, 1995 and
1994, respectively.
Note 9 - Debt:
The components of Short-term debt were as follows:
- ---------------------------------------------------------------------
December 31, 1996 1995
- ---------------------------------------------------------------------
Commercial paper $172.8 $473.0
Notes payable 401.0 305.0
Current portion of long-term debt 5.4 116.6
- ---------------------------------------------------------------------
$579.2 $894.6
- ---------------------------------------------------------------------
The weighted-average interest rate was 6.6 percent and 6.2 percent for
commercial paper and notes payable outstanding at December 31, 1996
and 1995, respectively. The company has lines-of-credit arrangements
with numerous banks with interest rates generally equal to the best
prevailing rate. At December 31, 1996, worldwide unused lines of
credit amounted to $2.5 billion.
The components of Long-term debt were as follows:
- ---------------------------------------------------------------------
December 31, 1996 1995
- ---------------------------------------------------------------------
Commercial paper $1,250.5 $200.0
6 5/8% notes due 2002 199.7 199.7
8% notes due 1998 150.0 150.0
7.6% industrial revenue bonds due 2014 24.6 24.6
Other 95.7 60.2
- ---------------------------------------------------------------------
$1,720.5 $634.5
- ---------------------------------------------------------------------
At December 31, 1996, the company classified as Long-term debt
$1,250.5 of commercial paper for which the company has the intent and
ability to refinance on a long-term basis. This commercial paper is
supported by lines of credit.
The aggregate annual maturities of long-term debt at December 31,
1996, payable in each of the years 1998 through 2001,excluding short-
term borrowings reclassified to long-term are $167.9, $29.2, $19.0 and
$18.5, respectively.
Note 10 - Financial Instruments:
The estimated fair values of financial instruments were as follows:
- ---------------------------------------------------------------------
December 31, 1996 1995
- ---------------------------------------------------------------------
Carrying Fair Carrying Fair
( ) = Liability Amount Value Amount Value
- ---------------------------------------------------------------------
Investment securities $ 247.0 $ 246.8 $ 534.6 $ 536.5
Long-term debt (1,720.5) (1,727.4) (634.5) (655.1)
Interest rate swaps - - (1.2) (2.1)
Foreign exchange contracts - 17.4 - 7.1
- ---------------------------------------------------------------------
32
<PAGE>
<PAGE>
Investment securities and Long-term debt were valued at quoted market
prices for similar instruments. The fair values of the remaining
financial instruments in the preceding table are based on dealer
quotes and reflect the estimated amounts that the company would pay or
receive to terminate the contracts. The carrying values of all other
financial instruments in the Consolidated Balance Sheets approximate
fair values.
The investment securities were reported in the following balance sheet
categories:
- -------------------------------------------------------------------
December 31, 1996 1995
- -------------------------------------------------------------------
Cash and cash equivalents $ 10.1 $ 34.1
Short-term investments 99.9 256.8
Investments and other assets 137.0 243.7
- -------------------------------------------------------------------
$247.0 $534.6
- -------------------------------------------------------------------
The investment securities portfolio was primarily comprised of
negotiable certificates of deposit, Puerto Rico government bonds,
guaranteed collateralized mortgage obligations and Ginnie Mae
certificates as of year-end 1996 and 1995. These securities are
classified as "held-to-maturity." Equity securities, categorized as
"available-for-sale," were immaterial.
As of December 31, 1996, the long-term investments of $137.0 included
$35.7 of interest-bearing, mortgage-backed securities maturing beyond
ten years.
Financial instruments that potentially subject the company to
concentrations of credit risk are trade receivables and interest-
bearing investments. The company sells a broad range of products in
the pharmaceutical, consumer health care and confectionery businesses
worldwide. The company's products are distributed to wholesalers and
directly or indirectly to pharmacies, chain food stores, mass
merchandisers, smaller independent retailers, hospitals, government
agencies, health maintenance organizations and other managed care
entities. Due to the large number and diversity of the company's
customer base, concentrations of credit risk with respect to trade
receivables are limited. The company does not normally require
collateral. The company's interest-bearing investments are high-
quality liquid instruments, such as certificates of deposit issued by
major banks or securities issued or guaranteed by the U.S. or other
governments. The company limits the amount of credit exposure to any
one issuer.
The company does not hold or issue financial instruments for trading
purposes nor is it a party to leveraged derivatives. The company uses
derivatives, particularly interest rate swaps and forward or purchased
option foreign exchange contracts, that are relatively straightforward
and involve little complexity as hedge instruments to manage interest
rate and foreign currency risk.
The counterparties to the company's derivatives consist of major
international financial institutions. Because of the number of these
institutions and their high credit ratings, management believes
derivatives do not present significant credit risk to the company.
The company has used interest rate swap agreements that converted
fixed rates on long-term debt to floating rates with the intent of
reducing interest expense. As of December 31, 1995, the company had
$250.0 notional amount of interest rate swap agreements outstanding
which matured in 1996. In 1995, these swaps were fixed at a weighted-
average interest pay rate of 8.7 percent and a receive rate of 8.1
percent. As a result of interest rate swap agreements, interest
expense increased $.6 in 1996, $3.2 in 1995 and decreased $3.7 in
1994.
The company's foreign exchange risk management objectives are to
stabilize cash flows and reported income from the effects of foreign
currency fluctuations. Extensive international business activities
result in a variety of foreign currency exposures including foreign
currency denominated assets and liabilities, firm commitments,
anticipated intercompany sales and purchases of goods and services,
dividend and royalty remittances and anticipated net income of foreign
affiliates, which is hedged on an intra-quarter basis. The company's
strategy in managing these currency risks is to selectively hedge
exposures by entering into forward or purchased option foreign
exchange contracts for periods of up to two years. The company
believes the risks associated with its unhedged exposures are not
significant.
At December 31, 1996 and 1995, the company had forward or purchased
option foreign exchange contracts with contractual amounts of $375.2
and $158.6, respectively to exchange foreign currencies. These
contracts principally exchange Japanese yen, British pounds, German
marks and French francs for U.S. dollars; Canadian dollars for Italian
lira and British pounds in 1996; and Japanese yen for U.S. dollars in
1995.
Gains and losses related to effective hedges, including hedges of
anticipated transactions, are recognized in income as part of, and
concurrent with, the hedged transaction. Cash flows associated with
derivative financial instruments are classified as operating in the
Consolidated Statements of Cash Flows.
33
<PAGE>
<PAGE>
Note 11 - Leases:
The company rents various facilities and equipment. Rental expense
amounted to $82.6, $80.8 and $78.5 in 1996, 1995 and 1994,
respectively.
The future minimum rental commitments under noncancellable capital and
operating leases at December 31, 1996 are summarized below:
- ---------------------------------------------------------------------
Capital Operating
- ---------------------------------------------------------------------
1997 $ 4.2 $ 42.0
1998 3.7 34.3
1999 15.7 19.0
2000 2.4 13.7
2001 4.0 12.3
Remaining years 8.6 91.4
- --------------------------------------------------------------------
Total minimum lease payments 38.6 212.7
Less minimum sublease income - (29.8)
------------------------
Net minimum lease payments 38.6 $182.9
-------
Less amount representing interest (9.7)
- -----------------------------------------------------
Present value of minimum lease payments $28.9
- -----------------------------------------------------
Property, plant and equipment included capitalized leases of $33.5,
less accumulated depreciation of $3.5, at December 31, 1996 and $23.4,
less accumulated depreciation of $3.9, at December 31, 1995.
Long-term debt included capitalized lease obligations of $27.1 and
$16.1 at those respective dates.
Note 12 - Pensions:
The company has various noncontributory pension plans covering
substantially all of its employees in the U.S. Benefits covering most
employees are based on years of service and average compensation
during the last years of employment. Current policy is to fund these
plans in an amount that ranges from the minimum contribution required
by ERISA to the maximum tax-deductible contribution. Certain foreign
subsidiaries also have various plans, which are funded in accordance
with the statutory requirements of the particular countries.
The plans' funded status at December 31 was as follows:
- ----------------------------------------------------------------------
Plans in Which
Plans in Accumulated
Which Assets Exceed Benefits
Accumulated Benefits Exceed Assets
- ----------------------------------------------------------------------
1996 1995 1996 1995
- ----------------------------------------------------------------------
Plan assets at fair value $2,044.6 $1,812.9 $ 23.8 $ 75.1
(primarily invested in
equities and bonds)
- ----------------------------------------------------------------------
Actuarial present value of
accumulated benefit
obligation:
Vested 1,792.8 1,671.5 107.4 155.5
Nonvested 40.6 43.2 12.6 13.9
- ----------------------------------------------------------------------
1,833.4 1,714.7 120.0 169.4
Estimated future
salary increases 172.9 176.2 29.1 32.0
- ----------------------------------------------------------------------
Projected benefit
obligation 2,006.3 1,890.9 149.1 201.4
- ----------------------------------------------------------------------
Plan assets in excess of
(less than) projected
benefit obligation 38.3 (78.0) (125.3) (126.3)
Unrecognized net
(asset) obligation (4.7) (5.7) 4.0 6.5
Unrecognized prior
service cost 43.9 55.2 0.7 5.2
Unrecognized net
actuarial loss 67.2 189.7 27.5 31.0
Minimum liability
adjustment - - (12.5) (23.8)
- ----------------------------------------------------------------------
Net pension asset
(liability) included
in the Consolidated
Balance Sheets $ 144.7 $ 161.2 $(105.6) $(107.4)
- ----------------------------------------------------------------------
Foreign plan assets at fair value included in the above table were
$707.3 in 1996 and $629.8 in 1995. The foreign plan projected benefit
obligation was $690.9 in 1996 and $666.6 in 1995.
The assumptions for the U.S. plans included a 10.5 percent expected
long-term rate of return on plan assets and an expected 4.0 percent
increase in salary levels for each of the years ended December 31,
1996,
34
<PAGE>
<PAGE>
1995 and 1994. The weighted-average discount rate was 8.0
percent, 7.75 percent and 8.75 percent for 1996, 1995 and 1994,
respectively. Assumptions for foreign plans did not vary
significantly from the U.S. plans.
Pension costs for the plans included the following components:
- ----------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- ----------------------------------------------------------------------
Service cost - benefits earned
during the year $ 53.8 $ 49.3 $ 50.9
Interest cost on projected
benefit obligation 153.3 144.4 134.3
Return on assets (237.9) (276.7) (24.2)
Net amortization and deferral 84.2 108.8 (124.5)
- ----------------------------------------------------------------------
Net pension expense $ 53.4 $ 25.8 $ 36.5
- ----------------------------------------------------------------------
Net pension expense attributable to foreign plans included in the
above was $17.5, $22.2 and $21.4 in 1996, 1995 and 1994, respectively.
Note 13 - Other Postretirement Benefits:
The company provides other postretirement benefits, primarily health
insurance, for domestic employees who retired prior to January 1, 1992
and their dependents. Although the plans are currently
noncontributory, the company has implemented a cap which limits future
contributions for medical and dental coverage under these plans. The
company is generally self-insured for these costs and the plans are
funded on a pay-as-you-go basis. U.S. employees retiring after
December 31, 1991 receive additional pension benefits based on years
of service in lieu of these benefits.
The net periodic postretirement benefit cost for domestic retirees
amounted to $17.0, $17.4 and $15.0 in 1996, 1995 and 1994,
respectively. These amounts primarily represent the accrual of
interest on the present value obligation.
A reconciliation from the plans' benefit obligation to the liabilities
recognized in the Consolidated Balance Sheets as of the latest
actuarial valuations was as follows:
- ---------------------------------------------------------------------
December 31, 1996 1995
- ---------------------------------------------------------------------
Accumulated postretirement benefit
obligation $186.0 $187.7
Unrecognized prior service (credit) cost (8.3) 1.6
Unrecognized net actuarial loss (50.4) (59.3)
- ---------------------------------------------------------------------
Accrued postretirement benefit cost
recognized in the Consolidated
Balance Sheets $127.3 $130.0
- ---------------------------------------------------------------------
The health care cost trend rate used to develop the accumulated
postretirement benefit obligation for those retirees under age 65 was
11.1 percent in 1996 declining to 5.5 percent over 10 years. For
those 65 and over, a rate of 7.2 percent was used in 1996 declining to
5.5 percent over 5 years. A one percentage point increase in the
health care cost trend rate in each year would increase the
accumulated postretirement benefit obligation as of December 31, 1996
by $6.8 and the net periodic postretirement benefit cost for 1996 by
$.6. The weighted-average discount rate was 8.0 percent, 7.75 percent
and 8.75 percent for 1996, 1995 and 1994, respectively.
Other postretirement benefits for foreign plans expensed under the
cash method in 1996, 1995 and 1994 were not material.
Note 14 - Income Taxes:
The components of income before income taxes and minority interests
were:
- ---------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------
U.S. and Puerto Rico $ 515.1 $ 485.6 $ 469.2
Foreign 661.6 663.0 536.1
- ---------------------------------------------------------------------
$1,176.7 $1,148.6 $1,005.3
- ---------------------------------------------------------------------
The Provision for income taxes consisted of:
- ---------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------
Current:
Federal $ 39.2 $ 17.6 $ 22.7
Foreign 194.1 163.5 143.4
State and Puerto Rico 17.2 6.5 8.7
- ---------------------------------------------------------------------
250.5 187.6 174.8
- ---------------------------------------------------------------------
Deferred:
Federal 25.8 30.5 38.0
Foreign 39.5 55.3 .8
State and Puerto Rico 5.4 5.7 5.5
- ---------------------------------------------------------------------
70.7 91.5 44.3
- ---------------------------------------------------------------------
Provision for income taxes $321.2 $279.1 $219.1
- ---------------------------------------------------------------------
35
<PAGE>
<PAGE>
The tax effects of significant temporary differences which comprise
the deferred tax assets and liabilities were as follows:
- ----------------------------------------------------------------------
December 31, 1996 1995
- ----------------------------------------------------------------------
Assets Liabilities Assets Liabilities
- ----------------------------------------------------------------------
Restructuring reserves $ 82.3 - $129.2 $ -
Compensation/benefits 80.5 - 75.6 -
Postretirement/post-
employment obligations 60.2 - 62.2 -
Inventory 31.2 10.0 25.3 10.1
Foreign tax loss and
other carryforwards 27.4 - 38.3 -
Research tax credit
carryforwards 25.3 - 17.7 -
Pensions 12.5 54.4 25.3 56.0
Property, plant and
equipment 11.9 193.6 7.6 180.3
Intangibles - 37.4 - 28.8
Other 138.1 56.6 123.7 35.0
- ---------------------------------------------------------------------
469.4 352.0 504.9 310.2
Valuation allowances (28.8) - (37.0) -
- ---------------------------------------------------------------------
$440.6 $352.0 $467.9 $310.2
- ---------------------------------------------------------------------
The research tax credit carryforwards of $25.3 expire in 2009, 2010
and 2011.
In 1996, the decrease in valuation allowances of $8.2 primarily
reflected the impact of European deferred tax assets related to
restructuring reserve activity discussed in Note 3.
Income taxes of $205.1, $173.6 and $186.1 were paid during 1996, 1995
and 1994, respectively. Prepaid expenses and other current assets
included deferred income taxes of $154.4 and $168.2 at December 31,
1996 and 1995, respectively. Investments and other assets included
deferred income taxes of $94.2 and $131.7 at December 31, 1996 and
1995, respectively.
The earnings of Warner-Lambert's operations in Puerto Rico are subject
to tax pursuant to a grant, effective through September 2011. The
grant provides for certain tax relief if certain conditions are met.
The company continued to be in compliance with these conditions at
December 31, 1996.
Earnings of foreign subsidiaries considered to be reinvested for an
indefinite period at December 31, 1996 were approximately $880.8. No
additional U.S. income taxes or foreign withholding taxes have been
provided on these earnings. It would be impractical to compute the
estimated deferred tax liability on these earnings.
As of December 31, 1996, Warner-Lambert's U.S. federal income tax
returns through 1989 have been examined and settled with the Internal
Revenue Service.
The company's effective income tax rate differed from the U.S.
statutory tax rate as follows:
- ---------------------------------------------------------------------
Years Ended December 31, 1996 1995 1994
- ---------------------------------------------------------------------
U.S. statutory tax rate 35.0% 35.0% 35.0%
Income earned in Puerto Rico (6.2) (4.6) (5.0)
Foreign income subject to increased
(reduced) tax rates including
taxes on repatriation .5 (1.9) (7.1)
U.S. research tax credit, net (.6) (.5) (.6)
State and local taxes, net 1.0 .7 .7
Other items, net (.7) (1.3) 1.0
Effect of minority interests (1.7) (3.1) (2.2)
- ---------------------------------------------------------------------
Effective tax rate 27.3% 24.3% 21.8%
- ---------------------------------------------------------------------
Note 15 - Shareholders' Equity:
The authorized preferred stock of Warner-Lambert is 5 million shares
with a par value of $1.00 per share, of which there are no shares
issued.
Common stock issued was $320.7, $160.3 and $160.3 at December 31,
1996, 1995 and 1994, respectively. On April 23, 1996 the shareholders
approved an increase in the number of authorized shares of common
stock from 300 million to 500 million in order to effectuate a two-
for-one stock split effective May 3, 1996. Par value remained at
$1.00 per share. The stock split was recorded by increasing Common
stock issued and reducing Capital in excess of par value by $160.3.
The average number of common shares outstanding and all per share
information have been restated to reflect the stock split.
36
<PAGE>
<PAGE>
Changes in certain components of shareholders' equity are summarized
as follows:
- ---------------------------------------------------------------------
Treasury Stock
Capital in ----------------------
Excess of Shares in
Par Value Thousands Cost
- ---------------------------------------------------------------------
Balance at December 31, 1993 $ 120.1 (26,191) $ (953.7)
Shares repurchased, at cost - (647) (41.7)
Employee benefit plans 35.0 1,103 25.8
Unrealized market value adjust-
ments on equity securities (2.9) - -
- ---------------------------------------------------------------------
Balance at December 31, 1994 152.2 (25,735) (969.6)
Shares repurchased, at cost - (229) (17.6)
Employee benefit plans 54.1 1,233 28.9
Unrealized market value adjust-
ments on equity securities 11.2 - -
- ---------------------------------------------------------------------
Balance at December 31, 1995 217.5 (24,731) (958.3)
Two-for-one stock split (160.3) (24,731) -
Shares repurchased, at cost - (2,423) (138.9)
Employee benefit plans 64.8 2,429 31.7
Unrealized market value adjust-
ments on equity securities 3.8 - -
- ---------------------------------------------------------------------
Balance at December 31, 1996 $ 125.8 (49,456) $(1,065.5)
- ---------------------------------------------------------------------
Pursuant to the company's Stockholder Rights Plan, a right is attached
to each outstanding share of common stock. In the event that any
person or group acquires 20 percent or more of the outstanding common
shares, or acquires the company in a merger or other business
combination, or engages in certain self-dealing transactions, each
right (other than those held by the "Acquiring Person") will entitle
its holder to purchase, for a specified purchase price, stock of the
company or the Acquiring Person having a market value of twice such
purchase price. The rights expire on July 8, 1998 and can be redeemed
for $.0025 per right by the Board of Directors prior to the time the
rights become exercisable.
Note 16 - Stock Options and Awards:
Warner-Lambert has stock awards outstanding at December 31, 1996
granted under stock plans established in 1992, 1989, 1987 and 1983.
On April 23, 1996, shareholders approved the 1996 Stock Plan, which
became effective January 1, 1997. The 1996 Stock Plan provides for
the granting of stock awards to employees in the form of options to
purchase shares of common stock at a price equal to fair market value
on the date of the grant, restricted stock and performance awards.
Options generally become exercisable in installments of 25 percent per
year on each of the first through the fourth anniversaries of the
grant date and have a maximum term of 10 years. Restricted stock
granted to employees is delivered upon the expiration of restricted
periods established at the time of grant. Performance awards, which
are also subject to restricted periods, provide for the recipient to
receive payment in shares, cash or any combination thereof equivalent
to the award being granted.
The aggregate number of shares of common stock which may be awarded
under the 1996 Stock Plan in any year is not more than 1.65 percent of
the issued shares on January 1 of the year of the grant. In any year
in which stock awards are granted for less than the maximum
permissible number of shares, the balance of unused shares will be
added to the number of shares permitted to be granted during the
following year. No stock awards may be made under the 1996 Stock Plan
after April 23, 2007.
The company applies APB Opinion No. 25, "Accounting for Stock Issued
to Employees," and related Interpretations in accounting for its stock
awards. Accordingly, no compensation cost has been recognized for
stock options. Compensation expense is recorded over the vesting
period for restricted stock and performance awards. Had compensation
cost been recorded as an alternative provided by FASB Statement No.
123, "Accounting for Stock-Based Compensation," for options granted in
1996 and 1995, the company's net income and earnings per share would
have been reduced by $10.7 or $.04 per share in 1996 and by $1.8 or
$.01 per share in 1995. These amounts are for disclosure purposes
only and may not be representative of future calculations since the
estimated fair value of stock options is amortized to expense over the
vesting period, and additional options may be granted in future years.
The fair value for these options was estimated at the date of grant
using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 1996: dividend yield of 3.12
percent; expected volatility of 20.78 percent; risk free interest rate
of 6.22 percent; and expected life of 5.9 years. Assumptions did not
vary significantly for the prior year.
Transactions involving stock options are summarized as follows and
reflect a two-for-one stock split effective May 1996:
- ---------------------------------------------------------------------
Weighted-
Number Average
of Exercise
Shares Price
- ---------------------------------------------------------------------
Stock options outstanding, December 31, 1994 18,594,644 $31.30
Granted 4,084,050 43.06
Exercised (2,356,620) 25.96
Forfeited (720,222) 34.96
- ---------------------------------------------------------------------
Stock options outstanding, December 31, 1995 19,601,852 34.27
Granted 4,044,440 59.53
Exercised (2,336,465) 27.42
Forfeited (480,714) 45.75
- ---------------------------------------------------------------------
Stock options outstanding, December 31, 1996 20,829,113 39.68
- ---------------------------------------------------------------------
Weighted-average fair value of stock options:
Granted during 1995 9.99
Granted during 1996 13.81
Shares available for annual stock award
grants at:
December 31, 1995 15,757,512
December 31, 1996 5,290,898
- ---------------------------------------------------------------------
37
<PAGE>
<PAGE>
The following table summarizes outstanding and exercisable stock
options as of December 31, 1996:
- ----------------------------------------------------------------------
Stock Options Outstanding Stock Options Exercisable
- ----------------------------------------------------------------------
Weighted-
Average Weighted- Weighted-
Range of Remaining Average Average
Exercise Number Contractual Exercise Number Exercise
Prices Outstanding Life (years) Price Exercisable Price
- ----------------------------------------------------------------------
$15-$30 1,906,337 2.3 $22.78 1,641,337 $22.34
30- 45 15,053,336 6.8 36.70 9,105,889 35.26
45- 60 1,949,136 9.3 52.52 2,400 47.91
60- 73 1,920,304 9.8 66.77 - -
- ----------------------------------------------------------------------
15- 73 20,829,113 6.9 39.68 10,749,626 33.29
- ----------------------------------------------------------------------
Note 17 - Contingencies:
Various claims, suits and complaints, such as those involving
government regulations, patents and trademarks and product liability,
arise in the ordinary course of Warner-Lambert's business. In the
opinion of management, all such pending matters are without merit or
are of such kind, or involve such amounts, as would not have a
material adverse effect on the company's consolidated financial
position, liquidity, cash flows or results of operations for any year.
Note 18 - Environmental Liabilities:
The company is involved in various environmental matters including
actions initiated by the Environmental Protection Agency under the
Comprehensive Environmental Response, Compensation and Liability Act
(i.e., CERCLA or Superfund and similar legislation), various state
environmental organizations and other parties. The company is
presently engaged in environmental remediation at certain sites,
including sites previously owned.
The company accrues costs for an estimated environmental liability
when management becomes aware that a liability is probable and is able
to reasonably estimate the company's share. Generally, that occurs no
later than when feasibility studies and related cost assessments of
remedial techniques are completed, and the extent to which other
potentially responsible parties (PRPs) can be expected to contribute
is determined. For most sites, there are other PRPs that may be
jointly and severally liable to pay all cleanup costs. Outside
consultants are generally used to assess the costs of remediation.
Accruals are established based on current technology and are not
discounted.
Some portion of the liabilities associated with the company's
environmental actions may be covered by insurance. The company is
currently in litigation with respect to the scope and extent of
liability coverage from certain insurance companies; however,
recoveries will not be recorded as income until there is assurance
that recoveries are forthcoming.
In management's opinion, the liabilities for all matters mentioned
above which are probable and reasonably estimable are adequately
accrued. Although it is not possible to predict with certainty the
outcome of the matters described above or the ultimate costs of
remediation, management believes it is unlikely that their ultimate
disposition will have a material adverse effect on the company's
consolidated financial position, liquidity, cash flows or results of
operations for any year.
38
<PAGE>
<PAGE>
Note 19 - Segment Information:
Industry segments are comprised as follows: Pharmaceutical - consisting of
ethical pharmaceuticals, biologicals and empty hard-gelatin capsules; Consumer
Health Care - consisting of OTC, shaving and pet care products; Confectionery -
consisting of chewing gums and breath mints. In 1996, Halls tablets were
reclassified from the Consumer Health Care segment to the Confectionery segment,
reflecting management by the company's confectionery team throughout the world
and marketing primarily as a confectionery outside the U.S. All prior year
segment data have been restated accordingly.
In 1996, approximately one half of Pharmaceutical and Consumer Health Care sales
were from the U.S. and one half of Confectionery sales were from the Americas
and Far East. The seven largest markets outside the U.S. were Japan, Germany,
France, the United Kingdom, Canada, Italy and Brazil. Sales in these markets
accounted for approximately 60 percent of international sales with no one
country accounting for more than 14 percent.
<TABLE>
<CAPTION>
Industry Segments
- --------------------------------------------------------------------------------------------------
Research and
Net Sales (a) Operating Profit Development Expense
- --------------------------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pharmaceutical $2,505 $2,356 $2,079 $1,014(d) $ 822 $ 716 $(465) $(408) $(368)
Consumer Health Care 2,797 2,788 2,512 697 767(c) 611 (61) (63) (63)
Confectionery 1,929 1,896 1,826 293 293 367 (29) (30) (25)
-------------------------
Research and develop-
ment expense (555) (501) (456) $(555) $(501) $(456)
- --------------------------------------------------------------------------------------------------
Net sales and
operating profit $7,231 $7,040 $6,417 1,449 1,381 1,238
- --------------------------------------------
Corporate expense (b) (272) (232) (233)
- --------------------- -------------------------
Income before income
taxes and minority
interests $1,177 $1,149 $1,005
- --------------------- -------------------------
<CAPTION>
- --------------------------------------------------------------------------------------------------
Depreciation and
Identifiable Assets Amortization Capital Expenditures
- --------------------------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pharmaceutical $2,513 $2,274 $1,991 $ 97 $ 95 $ 80 $185 $176 $183
Consumer Health Care 2,795 1,766 1,664 79 56 53 85 88 110
Confectionery 1,240 1,100 1,045 46 41 39 102 100 102
- --------------------------------------------------------------------------------------------------
Subtotal 6,548 5,140 4,700 222 192 172 372 364 395
Corporate 649 961 833 9 10 9 17 23 11
- --------------------------------------------------------------------------------------------------
Total $7,197 $6,101 $5,533 $231 $202 $181 $389 $387 $406
- --------------------------------------------------------------------------------------------------
Geographic Areas
<CAPTION>
- --------------------------------------------------------------------------------------------------
Net Sales (a) Operating Profit Identifiable Assets
- --------------------------------------------------------------------------------------------------
1996 1995 1994 1996 1995 1994 1996 1995 1994
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $3,173 $3,023 $2,954 $1,036(d)$ 912(c)$ 844 $2,922 $2,090 $1,915
Europe, Middle East
and Africa 1,999 1,980 1,618 553 538 428 2,153 1,897 1,649
Americas and Far
East 2,059 2,037 1,845 415 432 422 1,473 1,153 1,136
- --------------------------------------------------------------------------------------------------
Subtotal 7,231 7,040 6,417 2,004 1,882 1,694 6,548 5,140 4,700
Research and develop-
ment expense (555) (501) (456)
- --------------------------------------------------------------------------------------------------
Total $7,231 $7,040 $6,417 $1,449 $1,381 $1,238 $6,548 $5,140 $4,700
- --------------------------------------------------------------------------------------------------
<FN>
(a) Export sales, intersegment sales and intergeographic area sales were not
material.
(b) Corporate expense includes general corporate income and expense, corporate
investment income, interest expense and net foreign currency adjustments.
(c) Includes a $117 pretax gain on the sale of the PRO toothbrush business.
(d) Includes a $75 pretax gain on the sale of Warner Chilcott Laboratories.
</FN>
</TABLE>
39
<PAGE>
<PAGE>
Report by Management
Management of Warner-Lambert Company has prepared the accompanying
consolidated financial statements and related information in conformity
with generally accepted accounting principles and is responsible for the
information and representations in such financial statements, including
estimates and judgments required for their preparation. Price Waterhouse
LLP, independent accountants, has audited the consolidated financial
statements and their report appears herein.
In order to meet its responsibilities, management maintains a system of
internal controls designed to provide reasonable assurance that assets are
safeguarded and that financial records properly reflect all transactions.
The internal control system is augmented by an ongoing internal audit
program, an organizational structure that provides for appropriate division
of responsibility and communication programs that explain the company's
policies and standards.
The Audit Committee of the Board of Directors, composed entirely of
nonemployee directors, meets periodically with the independent accountants,
management and internal auditors to review auditing, internal accounting
controls and other financial reporting matters. Both the independent
accountants and internal auditors have full access to the Audit Committee.
Management also recognizes its responsibility for fostering a strong
ethical climate so that the company's affairs are conducted according to
the highest standards of personal and corporate conduct. This
responsibility is characterized and reflected in the company's Creed, which
summarizes Warner-Lambert's commitment to its customers, colleagues,
shareholders, business partners and society, and the creation of a
corporate compliance program, which is a formal system designed to oversee
compliance with applicable laws, regulations, policies and procedures on a
worldwide basis.
Report of Independent Accountants
PRICE WATERHOUSE LLP
To the Board of Directors and Shareholders of Warner-Lambert Company
In our opinion, the accompanying consolidated balance sheets and the
related consolidated statements of income and retained earnings and of cash
flows present fairly, in all material respects, the financial position of
Warner-Lambert Company and its subsidiaries at December 31, 1996 and 1995,
and the results of their operations and their cash flows for each of the
three years in the period ended December 31, 1996, in conformity with
generally accepted accounting principles. These financial statements are
the responsibility of the company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable
basis for the opinion expressed above.
Price Waterhouse LLP
- --------------------
4 Headquarters Plaza North
Morristown, New Jersey
January 27, 1997
40
<PAGE>
<PAGE>
Quarterly Financial Information:
(Dollars in millions, except per share amounts)
- ---------------------------------------------------------------------------
1996 Quarters
- ---------------------------------------------------------------------------
First Second Third Fourth
- ---------------------------------------------------------------------------
Net sales $1,829.2 $1,791.2 $1,768.0 $1,843.0
Gross profit 1,239.6 1,219.2 1,187.8 1,237.9
Net income 249.5 213.3 152.7 171.0
Net income per
common share* .92 .79 .56 .63
- ---------------------------------------------------------------------------
First quarter 1996 results include a gain from the sale of Warner Chilcott
Laboratories of $45.7 after tax or $.17 per share, see Note 4.
- ---------------------------------------------------------------------------
1995 Quarters
- ---------------------------------------------------------------------------
First Second Third Fourth
- ---------------------------------------------------------------------------
Net sales $1,604.6 $1,799.6 $1,775.7 $1,859.9
Gross profit 1,072.3 1,188.0 1,153.6 1,198.4
Net income 201.4 201.0 214.0 123.1
Net income per
common share* .75 .75 .79 .45
- ---------------------------------------------------------------------------
Third quarter 1995 results include a gain from the sale of the PRO
toothbrush business of $82.4 after tax or $.31 per share, see Note 4.
Market Prices of Common Stock and Dividends*:
- ---------------------------------------------------------------------------
1996 Range of Prices 1995 Range of Prices
- ---------------------------------------------------------------------------
Dividends Dividends
High Low per Share High Low per Share
- ---------------------------------------------------------------------------
First quarter $ 54 $44 5/8 $.345 $ 40 3/4 $36 11/16 $.325
Second quarter 57 3/4 52 1/8 .345 43 1/4 38 3/4 .325
Third quarter 66 1/8 49 3/8 .345 49 41 5/16 .325
Fourth quarter 80 61 7/8 .345 48 9/16 42 5/16 .325
- ---------------------------------------------------------------------------
*Amounts reflect a two-for-one stock split effective May 1996.
The 1996 cumulative monthly percent change in Warner-Lambert stock price versus
the Dow Jones Industrial Average and the Standard and Poor's 500 Index,
excluding dividends reinvested, presented in graphic format, was as follows:
Warner-Lambert Dow Jones S&P 500
-------------- --------- -------
Jan. (3.47) 5.44 3.26
Feb. 1.80 7.20 3.98
Mar. 6.31 9.19 4.80
Apr. 15.19 8.83 6.21
May 15.32 10.28 8.64
June 13.26 10.50 8.88
Jul. 12.23 8.05 3.90
Aug. 22.52 9.75 5.85
Sept. 35.91 14.95 11.59
Oct. 31.02 17.83 14.50
Nov. 47.23 27.45 22.91
Dec. 54.44 26.01 20.26
41
<PAGE>
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
RESULTS OF OPERATIONS
- ---------------------
NET SALES
Sales in 1996 of $7,231 million were 3 percent higher than in 1995. Sales
increased 5 percent excluding the impact of the divestitures of the company's
Warner Chilcott generic pharmaceutical and PRO toothbrush businesses. Unit
volume growth, excluding the divestitures, was 6 percent and price increases
added 2 percent. Foreign exchange rate changes had an unfavorable impact of 3
percent. Sales of ZANTAC 75, an over-the-counter (OTC) version of Glaxo
Wellcome's prescription drug ZANTAC, are not reflected in the company's reported
sales since the company uses the equity method of accounting for the joint
venture that markets this product. If these sales had been consolidated, sales
would have increased an additional 2 percent in 1996.
Sales in 1995 of $7,040 million were 10 percent higher than in 1994. Unit volume
growth was 7 percent, price increases added 2 percent and foreign exchange rate
changes had a favorable impact of 1 percent. Unit volume growth of 2 percent was
attributable to the inclusion of products contributed by Glaxo Wellcome to the
international Warner Wellcome joint venture operations that were not in
existence for the full year in 1994, and from businesses acquired in 1995 and
1994.
Net sales, presented in a graphic format, were $5.6 billion in 1992,
$5.8 billion in 1993, $6.4 billion in 1994, $7.0 billion in 1995 and
$7.2 billion in 1996.
On a geographic basis, U.S. sales increased $150 million or 5 percent to $3,173
million in 1996. Adjusted for the Warner Chilcott divestiture, U.S. sales
increased 9 percent. If sales of ZANTAC 75 were also included, U.S. sales would
have increased an additional 5 percent. International sales increased $41
million or 1 percent to $4,058 million in 1996. At constant exchange rates,
international sales increased 6 percent. In 1995 U.S. sales were $3,023 million,
an increase of $69 million, or 2 percent over 1994. International sales
increased $554 million, or 16 percent to $4,017 million, 14 percent at constant
exchange rates. International sales growth of 4 percent in 1995 resulted from
the full-year inclusion of Glaxo Wellcome products and from businesses acquired
in 1995 and 1994.
42
<PAGE>
<PAGE>
Effective January 1, 1996 the company's international operations changed their
reporting period from a fiscal-year basis ending November 30 to a calendar-year
basis ending December 31 (See Note 1). References to 1996 represent the calendar
year ended December 31 and references to 1995 and 1994 represent the fiscal year
ended November 30.
Pharmaceutical Products
- -----------------------
(Dollars in millions) 1996 1995 1994
------------- ------------- -------
Net Sales $ 2,505 +6% $ 2,356 +13% $ 2,079
Pharmaceutical segment sales in the U.S. increased 10 percent to $1,181 million
in 1996. In March 1996 Warner-Lambert sold its Warner Chilcott generic
pharmaceutical business (See Note 4). Excluding the impact of this divestiture,
sales increased 22 percent. Products with significant sales growth included the
add-on antiepileptic NEURONTIN, the oral contraceptive LOESTRIN, the
cardiovascular drug ACCUPRIL and the anticonvulsant DILANTIN.
During 1996 the company made substantial progress toward bringing to market the
following three products which are anticipated to be commercially significant:
REZULIN (troglitazone), a diabetes drug for non-insulin dependent diabetes
mellitus patients currently on insulin who are inadequately controlled by
insulin; LIPITOR (atorvastatin calcium), a cholesterol-lowering agent; and
OMNICEF (cefdinir capsules), an oral cephalosporin antibiotic.
In January 1997 Warner-Lambert received marketing clearance from the U.S. Food
and Drug Administration (FDA) for REZULIN. In November 1996 the company signed
an agreement to establish a joint venture partnership with Sankyo Company, Ltd.,
from whom the company licensed the product for North America and other areas,
and entered an agreement with the joint venture to co-promote REZULIN and
ACCUPRIL. Warner-Lambert received rights to market or co-promote REZULIN in
additional markets, including Mexico, Central America, most of South America,
Australia, New Zealand and the Philippines. In addition, by agreement,
Warner-Lambert will have the opportunity to co-promote Sankyo products in the
U.S.
In December 1996 Warner-Lambert received marketing clearance from the FDA for
LIPITOR. The company also received marketing clearance in the United Kingdom,
where the drug will be marketed as LIPITOR and in Germany, where it will be
labeled SORTIS. The company entered into a ten-year marketing agreement with
Pfizer Inc. to co-promote LIPITOR in the U.S. and on a broad basis in the
international marketplace. The terms of the agreement call for milestone
payments followed by a sharing of promotional expenses and the cost of long-term
research and development studies. Pfizer will receive a portion of the profits
based on the drug achieving certain sales targets.
In September 1996 the company submitted a New Drug Application to the FDA for
OMNICEF which was licensed from Fujisawa Pharmaceutical Co., Ltd. for most
markets outside of Japan. Additionally, during 1996 the company received FDA
clearance to market the cardiovascular drug PROCANBID, the antiepileptic
CEREBYX, the oral contraceptive ESTROSTEP and the low-dose transdermal estrogen
replacement system FEMPATCH.
International pharmaceutical sales increased 4 percent to $1,324 million in
1996. At constant exchange rates, international sales increased 8 percent. Major
contributors to international sales growth were ACCUPRIL and NEURONTIN.
In 1995 U.S. sales increased 7 percent to $1,077 million despite the sales
erosion and price reductions of the lipid-regulator LOPID and its generic
equivalent, gemfibrozil, as a result of generic competition. Sales of the two
products declined $72 million in 1995. U.S. sales growth was led by NEURONTIN,
ACCUPRIL, LOESTRIN, DILANTIN and CAPSUGEL empty hard-gelatin capsules.
International sales increased 20 percent in 1995 to $1,279 million, or 13
percent at constant rates of exchange. Sales growth was led by ACCUPRIL,
CAPSUGEL and the analgesic VALORON.
43
<PAGE>
<PAGE>
Consumer Health Care Products
- -----------------------------
(Dollars in millions) 1996 1995 1994
------------ ------------ -------
Net Sales $ 2,797 -% $ 2,788 +11% $2,512
Consumer health care segment sales for all reporting periods reflect the
reclassification of HALLS tablets to the confectionery segment (See Note 19).
Consumer health care sales in the U.S. rose 3 percent to $1,403 million in 1996.
Products with significant sales growth in the U.S. included NIX head lice
medication, SUDAFED cold medication and the company's shaving products. If sales
of ZANTAC 75 were included, U.S. sales would have increased an additional 11
percent. International sales decreased 2 percent to $1,394 million, but adjusted
for the PRO divestiture and the impact of exchange, sales increased 4 percent.
Products with significant international sales growth included the company's
shaving products, LISTERINE antiseptic mouthwash, NIX and ACTIFED cold
medication.
In December 1993 Warner-Lambert signed separate agreements with both Wellcome
plc (Wellcome) and Glaxo plc (Glaxo) governing the establishment of joint
ventures in various countries to develop and market a broad range of
nonprescription consumer health care products. Glaxo acquired Wellcome in 1995
and changed the name of the combined company to Glaxo Wellcome plc (Glaxo
Wellcome).
Warner-Lambert's agreement with Wellcome called for both companies to contribute
to the joint venture operations (referred to as Warner Wellcome) current and
future OTC products. Joint venture operations formed pursuant to a global
principles agreement began in 1994 and Warner-Lambert consolidated their
financial results. In 1996 the company purchased Glaxo Wellcome's interests in
the Warner Wellcome joint venture operations for approximately $1.1 billion.
In 1993 Warner-Lambert and Glaxo formed a joint venture in the U.S. (referred to
as Glaxo Wellcome Warner-Lambert) to develop, seek approval of and market OTC
versions of Glaxo prescription drugs in the U.S. In 1996 the Glaxo Wellcome
Warner-Lambert joint venture was restructured so that in addition to developing
and marketing OTC versions of Glaxo prescription drugs, it will also develop and
market Wellcome's OTC switch products, including ZOVIRAX cold sore cream, in the
U.S. and other major markets. In April 1996 Glaxo Wellcome Warner-Lambert began
marketing ZANTAC 75 in the U.S. Due to the substantial marketing expenses
associated with the launch of ZANTAC 75 the company incurred a loss from the
Glaxo Wellcome Warner-Lambert joint venture in 1996.
In 1995 segment sales increased 11 percent to $2,788 million. The full-year
inclusion of Wellcome products, including SUDAFED, ACTIFED, NEOSPORIN topical
anti-infective and ZOVIRAX in the international Warner Wellcome joint venture
operations resulted in sales growth of 3 percent in this segment. U.S. sales
increased 4 percent in 1995 to $1,361 million. Sales benefited from the
introduction of COOL MINT LISTERINE toothpaste in August 1995. Products with
U.S. sales growth included the company's shaving products, SUDAFED, NEOSPORIN
and BENADRYL allergy medication. International sales increased 18 percent to
$1,427 million, or 13 percent at constant exchange rates. International sales
growth of 7 percent was attributable to the full-year inclusion of Wellcome
products. Products with strong international growth included the company's
shaving products, TETRA aquarium products and LISTERINE.
Confectionery Products
- ----------------------
(Dollars in millions) 1996 1995 1994
------------- ------------- -------
Net Sales $ 1,929 +2% $ 1,896 +4% $ 1,826
Confectionery segment sales for all reporting periods reflect the
reclassification of HALLS from the consumer health care segment. Confectionery
sales in the U.S. increased 1 percent to $589 million in 1996. International
sales increased 2 percent to $1,340 million or 9 percent at constant exchange
rates. The decline in the value of foreign currencies, particularly the Mexican
peso and the Japanese yen, adversely impacted this segment's sales by $86
million. Products with strong international sales growth included HALLS,
CHICLETS candy-coated gum and DENTYNE chewing gum.
44
<PAGE>
<PAGE>
In 1995 confectionery sales in the U.S. declined 9 percent to $585 million. The
decline was the result of an overall softness in the gum market, a reduction in
trade inventory levels and significant competitive activity, as well as the
timing and extent of trade incentives and promotional programs. International
confectionery sales were $1,311 million, an increase of 11 percent, or 16
percent at constant exchange rates. In 1995 Warner-Lambert acquired Adams S.A.,
a company based in Argentina and in 1994 Warner-Lambert acquired Saila S.p.A., a
company based in Italy. The acquisition of these businesses increased this
segment's international sales by approximately 4 percent in 1995. International
sales growth was led by HALLS, BUBBALOO bubble gum and TRIDENT sugarless gum.
COSTS AND EXPENSES
Cost of goods sold fell 3 percent in 1996, after increasing 13 percent in 1995.
Cost of goods sold as a percentage of net sales fell to 32.5% from 34.5% in 1995
and 33.6% in 1994. The ratios fell in each of the company's segments in 1996,
due to productivity improvement and a favorable product mix. The most notable
improvement was in the pharmaceutical segment in the U.S. due to the absence of
the Warner Chilcott business and an increase in sales of higher-margin products.
The increase in the company's ratio in 1995 was primarily attributable to the
confectionery segment. This segment's ratio increased due to a greater
proportion of sales in countries that have higher cost ratios combined with a
higher cost ratio in the U.S. resulting from lower volume.
Selling, general and administrative expense in 1996 and 1995 increased 5 percent
and 9 percent, respectively. Increased expenses in 1996 were attributable to the
pharmaceutical segment, primarily in the U.S., due to higher sales incentives
and increased advertising and promotion to support NEURONTIN, ACCUPRIL, LOESTRIN
and pre-launch spending on new products. In 1995 expenses increased in each
segment. The overall increase in 1995 was primarily due to the full-year
inclusion of the international Warner Wellcome joint venture operations. As a
percentage of net sales, selling, general and administrative expense was 43.1%
compared with 42.3% in 1995 and 42.6% in 1994.
Research and development expense increased 11 percent and 10 percent in 1996 and
1995, respectively, due to higher spending on clinical development of new
products and pre-NDA submission activities. As a percentage of net sales,
research and development expense was 7.7% in 1996 and 7.1% in 1995 and 1994. For
1997 the company plans to invest $640 million in research and development, a
projected increase of 15 percent compared with 1996.
Other expense (income), net in 1996 included a gain of $75 million on the sale
of the Warner Chilcott business and the receipt of $83 million related to a
co-promotion agreement with Pfizer and in 1995 included a gain of $117 million
from the sale of the company's PRO toothbrush business. Other expense (income),
net in 1996 was unfavorable compared to 1995 primarily due to greater interest
expense and intangible amortization. Other expense (income), net in 1995 was
favorable compared to 1994 primarily due to the PRO toothbrush gain, partially
offset by increased interest expense.
In 1993 and 1991 the company recorded net restructuring charges of $525 million
pretax ($360 million after tax or $1.34 per share) and $544 million pretax ($418
million after tax or $1.56 per share), respectively. See Note 3 to the
consolidated financial statements for the detailed provisions and subsequent
utilization of reserves. In 1993 the company estimated that the 1993
restructuring actions would generate average annual pretax savings compared with
pre-restructuring spending levels of approximately $150 million by 1997.
Similarly, in 1991 the company estimated that the 1991 restructuring actions
would generate approximately $1 billion in cumulative pretax savings through
1998. The company is unaware of any event that would significantly change
spending or anticipated savings with respect to the 1993 and 1991 restructuring
actions. The restructuring activities are proceeding generally as planned and
are expected to be substantially completed by the end of 1997. The company
invests the savings in its core businesses to further strengthen its overall
competitive position and enhance its long-term profitability. The company
anticipates that the remaining spending for the 1993 and 1991 restructuring
activities will be funded from cash provided by operations.
45
<PAGE>
<PAGE>
INCOME TAXES
1996 1995 1994
---- ---- ----
Effective tax rate:
As reported 27.3% 24.3% 21.8%
After minority interests 29.0% 27.4% 24.0%
In 1996 the increases in the company's effective tax rates on a reported basis
and after minority interests were principally due to taxes associated with the
gain on the sale of Warner Chilcott and changes in the company's global profit
composition. These increases were partially offset by greater tax benefits from
operations in Puerto Rico.
In 1995 the increases in the company's effective tax rates were principally due
to a greater proportion of the company's taxable earnings being derived from
international businesses located in higher tax rate jurisdictions. In addition,
the rates increased due to the phase-in of a U.S. tax law enacted in 1993 that
changed the way research and development expenses were charged to foreign source
income.
The company anticipates an increase in its effective tax rate in 1997 of
approximately 1 percentage point. The projected increase is primarily due to a
change in the U.S. tax law enacted in 1996 that subjects a greater amount of
income in Puerto Rico to taxation.
NET INCOME
In 1996 both net income of $787 million and earnings per share of $2.90
increased 6 percent over 1995. The sale of Warner Chilcott in 1996 resulted in
an after tax gain of $46 million or $.17 per share and the sale of the PRO
toothbrush business in 1995 resulted in an after tax gain of $82 million or $.31
per share. In 1995 net income of $740 million and earnings per share of $2.74
increased 7 percent and 6 percent, respectively.
INFLATION
Inflation has not been a significant factor in Warner-Lambert's business because
of the modest rates of inflation in the U.S. and the principal foreign countries
in which the company maintains operations.
LIQUIDITY AND FINANCIAL CONDITION
- ---------------------------------
Selected data:
(Dollars in millions)
1996 1995 1994
------ ------ ------
Net debt $1,712 $741 $841
Net debt to net capital(equity
and net debt) 40% 25% 32%
Return on average shareholders'
equity 33% 36% 43%
Return on average total assets 12% 13% 13%
Cash and cash equivalents were $391 million at December 31, 1996, an increase of
$95 million from December 31, 1995. The company also held $197 million in
nonequity securities, included in short-term investments and investments and
other assets, that management views as cash equivalents, representing a decrease
of $295 million from 1995. Net debt (total debt less cash and cash equivalents
and other nonequity securities) increased $971 million from December 31, 1995,
reflecting the purchase of Glaxo Wellcome's interest in the Warner Wellcome
joint venture operations. The purchase was financed with commercial paper, which
was classified as long-term debt due to the company's intent and ability to
refinance on a long-term basis.
Cash and cash equivalents were $296 million at December 31, 1995, an increase of
$78 million from December 31, 1994. The company also held $492 million in other
nonequity securities that did not qualify as cash equivalents, representing an
increase of $91 million from 1994. Net debt decreased $100 million from December
31, 1994.
In 1996 cash provided by operating activities of $1,022 million increased $223
million compared to 1995 and was primarily used to fund capital expenditures of
$389 million and pay dividends of $374 million. Capital expenditures in 1996
primarily were to expand and upgrade the worldwide manufacturing capacity for
existing and new products. In 1995 cash provided by operating activities of $799
million
46
<PAGE>
<PAGE>
increased $154 million primarily due to increased earnings and improved
inventory turnover and was primarily used to fund capital expenditures of $387
million and pay dividends of $351 million.
Capital expenditures are expected to increase in 1997, reflecting planned
manufacturing upgrades and expansions to support new and existing products. The
company intends to fund capital expenditures with cash provided by operations.
The company has readily available financial resources, including unused
worldwide lines of credit totaling $2.5 billion. The increase in leverage
related to the purchase of Glaxo Wellcome's interests in the Warner Wellcome
joint venture operations resulted in a ratings downgrade in 1996 by both
Standard and Poor's Corporation (AA to AA-) and Moody's Investor Services (Aa3
to A1). However, the company has the ability to issue commercial paper at
favorable rates. The lines of credit support commercial paper borrowing
arrangements. The company has shelf registrations filed with the Securities and
Exchange Commission under which it can issue up to $850 million of debt
securities for general corporate purposes.
In January 1997 the Board of Directors approved a 10 percent increase in the
quarterly dividend to $.38 per share payable in the first quarter of 1997. The
company anticipates that the quarterly dividend rate will remain $.38 per share
during 1997 and that dividends will be paid with cash provided by operations.
Management is confident that cash flows from operations will be adequate to
repay its borrowings without requiring the disposition of any significant
strategic core business or asset and still allow the company to continue to fund
its operations, pay dividends and maintain its ongoing commitment to research
and development, marketing and capital expenditures without restricting its
ability to make further acquisitions.
Dividends per share reflecting a two-for-one stock split effective May 1996,
presented in graphic format, were $1.02 in 1992, $1.14 in 1993, $1.22 in 1994,
$1.30 in 1995 and $1.38 in 1996.
47
<PAGE>
<PAGE>
Product names appearing in capital letters are registered trademarks of
Warner-Lambert Company, its affiliates, related companies or its licensors.
ZANTAC, ZANTAC 75 and ZOVIRAX are registered trademarks of Glaxo Wellcome, its
affiliates or related companies. PRO is a registered trademark of The Gillette
Company.
<PAGE>
<PAGE>
Exhibit 21
The following is a list of subsidiaries of Warner-Lambert showing the state or
country of organization and the percentage of voting securities owned by
Warner-Lambert or by subsidiaries of Warner-Lambert as of December 31, 1996.
Except as otherwise indicated, such subsidiaries are included in the
consolidated financial statements.
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
- ------------------ --------------- -----------------------
Page 1 of 4
<S> <C> <C>
Adams Brands, Inc.....................................................Philippines 100
American Chicle Company...............................................Delaware 100
Euronett, Inc.........................................................Delaware 100
Grupo Warner Lambert Mexico, S.A. de C.V..............................Mexico 100
International Affiliated Corporation..................................Delaware 100
Warner-Lambert GmbH.............................................Germany 100 International Affiliated
Corporation
Parke, Davis GmbH......................................Germany 100 Warner-Lambert GmbH
Goedecke Aktiengesellschaft............................Germany 100 Warner-Lambert GmbH
Adenylchemie GmbH...............................Germany 100 Goedecke Aktiengesellschaft
Goedecke Gesellschaft m.b.H.....................Austria 100 Goedecke Aktiengesellschaft
International Company for Gum and
Confectionery (INCOGUM) S.A.E...................Egypt 57 Warner-Lambert GmbH
PanServ-Anzeigen-Service GmbH..........................Germany 100 Warner-Lambert GmbH
Warner-Lambert Consumer Products GmbH, Berlin..........Germany 100 Warner-Lambert GmbH
Warner-Lambert Consumer Products GmbH,
Frankfurt................................Germany 100 Warner-Lambert Consumer Products
GmbH, Berlin
Wilkinson Sword GmbH............................Austria 100 Warner-Lambert Consumer Products
GmbH, Berlin
NV Wilkinson Sword S.A..........................Belgium 100 Warner-Lambert Consumer Products
GmbH, Berlin
Wilkinson Sword SpA.............................Italy 99 Warner-Lambert Consumer Products
GmbH, Berlin
1 Wilkinson Sword Limited
Wilkinson Sword S.A.E...........................Spain 100 Warner-Lambert Consumer Products
GmbH, Berlin
Wilkinson Sword Tras Urunleri Ticaret Ltd.
Sirketi..................................Turkey 99.8 Warner-Lambert Consumer
Products GmbH, Berlin
.2 Warner-Lambert GmbH
Wilkinson Sword Verwaltungs GmbH................Germany 100 Warner-Lambert Consumer Products
GmbH, Berlin
W&A Grundstucksverwaltungs GbR...........Germany 97 Wilkinson Sword Verwaltungs GmbH
3 Warner-Lambert Consumer Products
GmbH, Berlin
Warner-Lambert Europaische Beteiligungs GmbH...........Germany 100 Warner-Lambert GmbH
Parke-Davis GmbH................................Austria 100 Warner-Lambert Europaische
Beteiligungs GmbH
Warner-Lambert (Schweiz) AG.....................Switzerland 100 Warner-Lambert Europaische
Beteiligungs GmbH
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
- ------------------ --------------- -----------------------
Page 2 of 4
<S> <C> <C>
Keystone Chemurgic Corp...............................................Delaware 100
Exchic C.A. Limited.............................................Bermuda 57.4
42.6 Keystone Chemurgic Corp.
Warner-Lambert Guatemala, S.A...................................Guatemala 100 Keystone Chemurgic Corp.
Lambert & Feasley, Inc................................................New York 100
Latin American Holdings Inc...........................................Delaware 100
Laboratorios Laprofa, Sociedad Anonima..........................Guatemala 100 Latin American Holdings Inc.
Warner-Lambert Industria e Comercio Limitada....................Brazil 100 Latin American Holdings Inc.
Quantum Investments S.A...............................Uruguay 100 Warner-Lambert Industria e
Comercio Limitada
Adams S.A........................................Argentina 100 Quantum Investments S.A.
Med-Tech Ventures, Inc................................................Delaware 100
Meito Adams Co., Ltd.* ...............................................Japan 50
Parke-Davis Sales Corporation.........................................Virgin Islands 100
Parke, Davis & Company ("Parke-Davis")................................Michigan 100
Parke-Davis Korea Limited.......................................Korea 100 Parke-Davis
P-D Co., Inc....................................................Delaware 100 Parke-Davis
Warner-Lambert (Belgium) N.V..........................Belgium 100 P-D Co., Inc.
Capsugel AG...........................................Switzerland 100 P-D Co., Inc.
Empresas Warner Lambert S.A...........................Chile 90 P-D Co., Inc.
10 Tabor Corporation
Parke-Davis (Thailand) Limited........................Thailand 100 P-D Co., Inc.
Parke-Davis ("Parke-Davis France")....................France 84.1 P-D Co., Inc.
14 Warner-Lambert Ireland Limited
1.9 Warner-Lambert Consumer
Products GmbH, Berlin
Adams France.....................................France 100 Parke-Davis France
Cachou Lajaunie..................................France 100 Parke-Davis France
Capsugel France..................................France 100 Parke-Davis France
Societe Nouvelle des Pastilles de Vichy..........France 100 Parke-Davis France
C.M.S. Diffusion............................France 99 Societe Nouvelle des Pastilles
de Vichy
1 Parke-Davis France
Warner-Lambert Company AG.............................Switzerland 100 P-D Co., Inc.
Adams (Thailand) Limited.........................Thailand 100 Warner-Lambert Company AG
Warner-Lambert (East Africa) Limited.............Kenya 100 Warner-Lambert Company AG
Warner-Lambert Pottery Road Limited..............Ireland 100 Warner-Lambert Company AG
* Subsidiary not consolidated
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
- ------------------ --------------- -----------------------
Page 3 of 4
<S> <C> <C>
Parke, Davis & Company, Inc.......................................Philippines 100 Parke-Davis
Parke, Davis & Company, Limited...................................Pakistan 75.6 Parke-Davis
Parke Davis International Limited.................................Bahamas 100 Parke-Davis
Parke Davis Pty. Limited..........................................Australia 100 Parke-Davis
Warner-Lambert Pty. Limited..............................Australia 100 Parke Davis Pty. Limited
Parke Davis Wellcome Consumer Health Products Pty.
Limited...................................Australia 100 Parke Davis Pty. Limited
Warner-Lambert (UK) Limited.......................................United Kingdom 100 Parke-Davis
Lambert Chemical Company Limited.........................United Kingdom 100 Warner-Lambert (UK) Limited
Parke Davis & Co. Limited................................Jersey, Channel 100 Warner-Lambert (UK) Limited
Islands
Wilkinson Sword Limited..................................United Kingdom 100 Warner-Lambert (UK) Limited
Warner-Lambert Canada Inc.........................................Canada 100 Parke-Davis
Omni Laboratories Inc....................................Canada 100 Warner-Lambert Canada Inc.
Parke-Davis Afrique de l'Ouest...........................Senegal 100 Warner-Lambert Canada Inc.
Renrall K.K..............................................Japan 100 Warner-Lambert Canada Inc.
Wellcome Consumer Health Products, Inc...................Canada 100 Warner-Lambert Canada Inc.
Warner Wellcome Consumer Health Products............Canada 73 Wellcome Consumer Health
Products Inc.
27 Warner-Lambert Canada Inc.
Glaxo Wellcome Warner-Lambert, OTC*............Canada 50 Wellcome Consumer Health
Products Inc.
Parke Davis, S.A.......................................................Spain 86
14 Warner-Lambert Company AG
Laboratorios Parke Davis, S.L. ...................................Spain 100 Parke Davis, S.A.
Parke-Davis S.p.A......................................................Italy 100 (Indirect)
Parke-Davis Scandinavia AB.............................................Sweden 100
P.T. Capsugel Indonesia................................................Indonesia 90
10 International Affiliated
Corporation
Suzhou Capsugel'r' Ltd. * ............................................People's Republic
of China 50
Tabor Corporation......................................................Delaware 100
Chicle Adams, S.A.................................................Colombia 80.3 Tabor Corporation
19.7 Latin American Holdings Inc.
Tetra-Werke Dr. rer. nat. Ulrich Baensch GmbH..........................Germany 100 (Indirect)
Tetra Heimtierbedarf GmbH.........................................Germany 100 Tetra-Werke Dr. rer. nat.
Ulrich Baensch GmbH
Biorell GmbH.............................................Germany 100 Tetra Heimtierbedarf GmbH
HILENA Biologische und Chemische Erzeugnisse GmbH...Germany 100 Biorell GmbH
Zoomedica Frickhinger GmbH...............................Germany 100 Tetra Heimtierbedarf GmbH
Wilkinson Sword GmbH.............................................Germany 51 Tetra-Werke Dr. rer. nat.
Ulrich Baensch GmbH
49 Warner-Lambert Consumer
Products GmbH, Berlin
W-C Laboratories Inc..................................................Delaware 100
Warner Lambert Distribuidora, S.A. de C.V.............................Mexico 100
* Subsidiary not consolidated
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
STATE OR COUNTRY
NAME OF SUBSIDIARY OF ORGANIZATION PERCENTAGE OF OWNERSHIP
- ------------------ --------------- -----------------------
Page 4 of 4
<S> <C> <C>
Warner-Lambert de Venezuela S.A.......................................Venezuela 93.2
6.8 Parke-Davis
Chicle Adams, S.A..............................................Venezuela 100 Warner-Lambert de Venezuela S.A.
Laboratorios Substantia, C.A...................................Venezuela 80 Warner-Lambert de Venezuela S.A.
Warner-Lambert Europe N.V.............................................Belgium 100
Warner-Lambert Holland B.V............................................Netherlands 100
Parke-Davis B.V...............................................Netherlands 100 Warner-Lambert Holland B.V.
Substantia - Produtos Farmaceuticos, Limitada...........Portugal 97.5 Parke-Davis B.V.
2.5 Parke-Davis France
Parke-Davis Pharmaceuticals Limited...........................Cayman Islands,
British West Indies 99 Warner-Lambert Holland B.V.
1 Parke-Davis B.V.
Schick Nederland B.V..........................................Netherlands 100 Warner-Lambert Holland B.V.
Warner Lambert A.E......................................Greece 99 Schick Nederland B.V.
1 Warner-Lambert Holland B.V.
Wilkinson Sword B.V...........................................Netherlands 100 Warner-Lambert Holland B.V.
Warner-Lambert Inc....................................................Nevada 100
Warner-Lambert India Private Limited..................................India 100
Warner-Lambert Ireland Limited........................................Ireland 100 (Indirect)
Warner-Lambert Distributors (Ireland) Ltd.....................Ireland 100 Warner-Lambert Ireland Limited
Warner-Lambert Export Limited.................................Ireland 100 Warner-Lambert Ireland Limited
Warner-Lambert Plaistow Manufacturing...................Ireland 50 Warner-Lambert Export Limited
17 (Indirect)
Warner-Lambert KK.....................................................Japan 65
35 Tetra-Werke Dr. rer. nat. Ulrich
Baensch GmbH
Warner-Lambert Ltd....................................................Delaware 100
Warner-Lambert de Panama, Sociedad Anonima....................Panama 100 Warner-Lambert Ltd.
Warner-Lambert Manufacturing (Ireland) Ltd............................Cayman Islands,
British West Indies 100
Warner-Lambert (NZ) Limited...........................................New Zealand 100
Parke Davis Wellcome Consumer Healthcare Pty. Limited.........New Zealand 100 Warner-Lambert (NZ) Limited
Warner-Lambert Philippines, Inc.......................................Philippines 100
Warner-Lambert (Portugal) Comercio e Industria, Limitada..............Portugal 100
Warner-Lambert S.A. (Proprietary) Limited.............................South Africa 100
Wilcox Sweets (Proprietary) Limited...........................South Africa 100 Warner-Lambert S.A. (Proprietary)
Limited
Warner-Lambert (Thailand) Limited.....................................Thailand 100 (Indirect)
Warner-Lambert Consumer Healthcare ...................................New York 92.4
7.6 Warner-Lambert Ltd.
Willinger Bros., Inc..................................................Delaware 100
</TABLE>
The foregoing list omits 10 domestic subsidiaries and 74 foreign subsidiaries
which, considered in the aggregate, would not constitute a significant
subsidiary.
<PAGE>
<PAGE>
EXHIBIT 23
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-8 (Registration Nos.
33-21123, 2-86826, 33-17584, 33-28375, 33-12209, 33-49244, 33-57918 and
333-19311) and on Form S-3 (Registration Nos. 333-04353, 33-4049, 33-38725 and
33-55692) of Warner-Lambert Company of our report dated January 27, 1997
appearing on page 40 of Warner-Lambert Company's 1996 Annual Report to
Shareholders which is incorporated in this Annual Report on Form 10-K. We also
consent to the incorporation by reference of our report on the Financial
Statement Schedule, which appears on page 16 of this Form 10-K.
PRICE WATERHOUSE LLP
4 Headquarters Plaza North
Morristown, New Jersey 07962
March 20, 1997
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
FINANCIAL DATA SCHEDULE
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1996 AND FROM
THE RELATED CONSOLIDATED STATEMENT OF INCOME FOR THE 12 MONTH
PERIOD ENDED DECEMBER 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 391
<SECURITIES> 102
<RECEIVABLES> 1,149
<ALLOWANCES> 0
<INVENTORY> 647
<CURRENT-ASSETS> 2,785
<PP&E> 3,658
<DEPRECIATION> 1,490
<TOTAL-ASSETS> 7,197
<CURRENT-LIABILITIES> 2,137
<BONDS> 1,720
0
0
<COMMON> 321
<OTHER-SE> 2,260
<TOTAL-LIABILITY-AND-EQUITY> 7,197
<SALES> 7,231
<TOTAL-REVENUES> 7,231
<CGS> 2,347
<TOTAL-COSTS> 2,347
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 146
<INCOME-PRETAX> 1,177
<INCOME-TAX> 321
<INCOME-CONTINUING> 787
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 787
<EPS-PRIMARY> 2.90<F1>
<EPS-DILUTED> 0
<FN>
<F1>Reflects two-for-one stock split effective May 1996. Prior year
financial data schedules have not been restated for this
recapitalization.
</FN>
</TABLE>
