WARNER LAMBERT CO, 10-K, 1998-03-24

WARNER LAMBERT CO
10-K, 1998-03-24
PHARMACEUTICAL PREPARATIONS

Previous: VIRGINIA ELECTRIC & POWER CO, 3, 1998-03-24

Next: WASTE MANAGEMENT INC /DE/, SC 13D/A, 1998-03-24

________________________________________________________________________________

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM 10-K

<TABLE>
<S> <C>
(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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM TO
</TABLE>

COMMISSION FILE NUMBER 1-3608
------------------------
WARNER-LAMBERT COMPANY
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
------------------------

<TABLE>
<S> <C> <C>
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>

973-540-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)

------------------------

SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:

<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
- --------------------------------------------------------------- ------------------------------------------------
<S> <C>
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.
Junior Participating Preferred Stock The Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
</TABLE>

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 27, 1998 was approximately $39.9 billion.

The number of shares outstanding of the registrant's Common Stock as of
February 27, 1998 was 272,614,910 shares, Common Stock, par value $1.00 per
share.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the Warner-Lambert Company Annual Report to Shareholders for
1997 -- 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 28, 1998 -- Part III.

________________________________________________________________________________

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 1997, 1996 and 1995 is presented in
the Warner-Lambert 1997 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 18 to the consolidated
financial statements on pages 45 through 46 of the Warner-Lambert 1997 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, BECONASE and ZOVIRAX are registered
trademarks of Glaxo Wellcome plc ('Glaxo Wellcome'), its affiliates or related
companies. CELESTIAL SEASONINGS and HERBAL COMFORT are registered trademarks of
Celestial Seasonings Inc.

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, NEURONTIN and
ZARONTIN), anti-infectives (CHLOROMYCETIN, COLYMYCIN and OMNICEF),
antivaricosities (HEPATHROMBIN), anti-viral agents (VIRA-A), cardiovascular
products (NOVADRAL, DILZEM, ACCUPRIL, ACCURETIC, ACCUZIDE, NITROSTAT, PIRMENOL
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 (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 transdermal estrogen replacement systems
(FEMPATCH).

In December 1996, Warner-Lambert received U.S. Food and Drug Administration
('FDA') clearance to market the cholesterol-lowering agent LIPITOR
(Warner-Lambert's trademark for atorvastatin) and began marketing the product in
February 1997. The Company has also received marketing approval in over twenty
countries for the drug and has begun or will begin to market LIPITOR in those
countries. Atorvastatin is primarily marketed as LIPITOR, SORTIS and ZARATOR in
the various countries. The Company co-promotes LIPITOR through a marketing
agreement with Pfizer Inc.

Warner-Lambert received FDA clearance in January 1997 to market REZULIN
(Warner-Lambert's trademark for troglitazone), a diabetes drug initially used
for non-insulin dependent diabetes mellitus patients currently on insulin who
are inadequately controlled by insulin. The Company also received FDA clearance
in 1997 to market REZULIN as a monotherapy and for use in combination with a
sulfonylurea for non-insulin dependent diabetes mellitus patients. The Company

markets REZULIN with Sankyo Company, Ltd. ('Sankyo') from whom the Company
licenses the product for North America and certain other areas, including
Central America, South America, Australia, New Zealand and the Philippines. The
Company has rights to co-promote the product with an affiliate of Sankyo in
Brazil and Venezuela.

REZULIN was first marketed in March 1997 in the United States and achieved
worldwide sales of $420 million during 1997. On November 3, 1997, the Company
initiated changes in the prescribing information for REZULIN. These changes were
made in response to rare reports during marketed use of hepatic injuries, which
are usually reversible, and extremely rare reports of hepatic failures, which
could result in liver transplants or death. The Company continued to review the
safety experience with REZULIN (including worldwide reports of adverse events)
following the November 3rd announcement. Based on this review, on December 1,
1997, the Company announced additional labeling changes for REZULIN which
prominently recommend that physicians monitor patients more frequently for signs
of liver dysfunction. While the reports to date (both prior to the December 1st
announcement and thereafter) do not indicate a greater incidence of hepatic
events than was seen in the clinical trials which resulted in priority review
and approval by the FDA, the labeling changes were made to minimize as much as
possible the risk for these very rare but potentially serious adverse liver
events. The Company does not believe that the labeling changes will appreciably
diminish the population of patients eligible for this important medication.

In December 1997, Warner-Lambert received clearance from the FDA to market
OMNICEF, a broad spectrum cephalosporin antibiotic for adult and pediatric use.
OMNICEF, which is licensed from Fujisawa Pharmaceutical Co., Ltd., is the
largest selling cephalosporin in Japan. Warner-Lambert received its first
marketing authorization in the world for OMNICEF in the Philippines in July 1994
and began marketing the product in that country in January 1995. The Company has
also received marketing approval and has launched the product in Indonesia and
Thailand.

On December 26, 1997, the Company filed a New Drug Application ('NDA') with
the FDA for marketing approval for suramin, a treatment for hormone refractory
prostate cancer.

The Company plans to file eight NDAs and supplemental NDAs in 1998. These
filings include one new chemical entity in late stage development, which is
clinafloxacin, a new generation fluoroquinolone antibiotic for the treatment of
serious, life-threatening infections.

In May 1997, Warner-Lambert purchased the remaining 66% of the Jouveinal
group it did not already own. In January 1993, Warner-Lambert initially acquired
a 34% interest in Jouveinal, a privately held French pharmaceutical group.
Warner-Lambert believes its acquisition of the Jouveinal group, which achieved
sales of $220 million in 1996 and is France's 15th largest pharmaceutical group,
will strengthen Warner-Lambert's presence in France. The Jouveinal group
specialized in ethical and OTC pharmaceuticals, as well as fine chemicals and
food flavors. In order to focus on its core pharmaceutical, consumer healthcare
and confectionery businesses, Warner-Lambert sold the fine chemical business and
the food flavors business of the Jouveinal group in December 1997.

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 64% of its
pharmaceutical sales in the United States during 1997 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, V-Cap'tm' and
Press-Fit'tm' gelcaps.

Other: On February 27, 1998, the Company sold its sterile manufacturing
facility in Rochester, Michigan as well as certain minor prescription products
for $125 million to Parkedale Pharmaceuticals, Inc., a wholly owned subsidiary
of King Pharmaceuticals, Inc.

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), antipruritics
(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, COOLMINT LISTERINE and FRESHBURST
LISTERINE), mouthwash/dental rinses (LISTERMINT), toothpaste (COOLMINT LISTERINE
and COOLMINT LISTERINE Tartar Control), 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 1993, Warner-Lambert and Glaxo Wellcome formed a joint venture in the
United States, to develop, seek approval of and market over-the-counter ('OTC')
versions of Glaxo Wellcome prescription drugs in the United States. On June 30,
1996 Warner-Lambert and Glaxo Wellcome formed additional joint ventures to
develop and market certain Glaxo Wellcome OTC switch products in other major
markets, including the United Kingdom (the 'Glaxo Wellcome Warner-Lambert joint
venture(s)'). 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 by the
Glaxo Wellcome Warner-Lambert joint venture in the United Kingdom and Australia
as a treatment for these same symptoms. Glaxo Wellcome and Warner-Lambert have
also been marketing an allergy nasal spray, BECONASE, an OTC version of Glaxo
Wellcome's prescription drug, in the United Kingdom and ZOVIRAX, a cold sore
cream, in Germany, France, the United Kingdom, Australia and certain other
countries.

In 1996, the Company purchased Glaxo Wellcome's United States, European,
Canadian, Australian and New Zealand interests in other joint venture operations
between Warner-Lambert and Glaxo Wellcome relating to nonpresciption consumer
health care products (e.g. ACTIFED, NEOSPORIN and SUDAFED) 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.

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 are marketed under various trademarks
including FX HYPER, FX PERFORMER, INJECTOR, LADY PROTECTOR, PERSONAL TOUCH,
PROTECTOR, SILK EFFECTS, SUPER II, SUPER II PLUS, TRACER/FX and ULTREX PLUS.
Disposable products are marketed under a variety of trademarks including
COLOURS, EXTRA II, PERSONAL TOUCH, RETRACTOR, SCHICK Disposable, ST and ULTREX
Disposable. In some countries, Warner-Lambert also sells a shaving-related line
of toiletries.

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 HILENA, TETRA, TETRA POND, TETRA PRESS, TETRA SECONDNATURE, TETRA
TERRAFAUNA and ZOOMEDICA. 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 SECONDNATURE, TETRA tec and WHISPER trademarks. These
pet care products are promoted to consumers through advertising, direct
marketing and sponsorship programs and to retailers through direct promotion,
advertising in trade publications and TETRA Club membership. 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.

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, DENTYNE Ice'tm' and TRIDENT) and bubble gums (BUBBLICIOUS, BUBBALOO
and MOTITAS). The breath mint line includes CERTS, Sugarfree CERTS, CERTS COOL
MINT DROPS, CERTS COOL MINT DROPS Freshmint, CERTS Powerful Mints 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) and dietary supplements (HALLS Zinc Defense'tm' and
CELESTIAL SEASONINGS HERBAL COMFORT). In addition, the Company sells several
specialty candies and mints, including a line of hard candies and mints that are
sold under the SAILA and Koldt'tm' trademarks. The Koldt product is sold as
CLORETS Optimints'tm' in Thailand.

In 1997, Warner-Lambert launched CERTS Powerful Mints, a flavored mint with
RETSYN, CERTS COOL MINT DROPS Freshmint, an oval-shaped breath drop with a
flavored center formula, DENTYNE Ice'tm', a sugar-free pellet-form gum and two
dietary supplements, HALLS Zinc Defense'tm' and CELESTIAL SEASONINGS HERBAL
COMFORT with echinacea in the United States.

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 and
independent 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 27,000
of Warner-Lambert's employees are located outside the United States and Puerto
Rico and only a small number of such employees are United States 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 1997 amounted to
approximately 48% 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 United States sales. The seven largest markets with
respect to the distribution of Warner-Lambert products sold outside the United
States during 1997 were Germany, Japan, France, Canada, the United Kingdom,
Mexico and Brazil. Sales in these markets accounted for approximately 60% of
Warner-Lambert's international sales, with no one country accounting for more
than 12% 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 36 of the Warner-Lambert 1997 Annual Report, incorporated herein by
reference.

In March 1997, Warner-Lambert opened confectionery plants in Guangzhou,
China and Bangalore, India. Both plants are currently manufacturing and selling
HALLS cough tablets and CLORETS and CHICLETS chewing gums.

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.

YEAR 2000

Discussion on how the Company is addressing year 2000 compliance, set forth
under the caption 'Management's Discussion and Analysis' on page 51 of the
Annual Report, is incorporated herein by reference.

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 through
its subcontractors, certain pet products and certain other products (including
the active ingredient for REZULIN (troglitazone), which is supplied by Sankyo),
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 outside supply, the Company does not believe that
the loss of any one source of such materials and supplies (other than the supply
of the active ingredient for REZULIN from Sankyo) 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 registered 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 $672 million in research and development in 1997, compared with
$555 million in 1996 and $501 million in 1995. Approximately 85% of
Warner-Lambert's 1997 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, 1997, approximately 40,000 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 United States
and Puerto Rico plants. The terms of the consent decree are applicable until at
least August 1998.

In October 1996, the United States Congress enacted the Comprehensive
Methamphetamine Control Act of 1996 (the 'Methamphetamine Control Act') which
brought 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. 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.

On July 30, 1997, the European Community Decision 97/534 (the 'Decision')
was adopted prohibiting the use or importation in the European Union market of
any bovine, ovine or caprine products that potentially contain specified risk
materials (including the use of these materials in food, medicinal products and
cosmetics). The Decision was enacted to address the concern over the possible
spread of transmissible spongiform encephalopathy and could have the effect of
banning ruminant materials such as gelatin, glycerin, tallow and tallow
derivatives that are pervasive in the pharmaceutical, over-the-counter drug,
food and other industries. The Decision initially was intended to become
effective on January 1, 1998, but given the potential impact the Decision may
have on the availability of necessary pharmaceutical, over-the-counter drug and
food products, its effective date was delayed until April 1, 1998. European
Community legislators are considering further amendments to the Decision that
would allow for the continued sale and import of a majority of the Company's
affected products in the European Union market. If such amendments are not
enacted, the Decision could have a material adverse impact on Warner-Lambert's
business.

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 (the 'EPA') 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-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 1997 were not, and in 1998 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 17 to the consolidated financial statements on page
45 of the Warner-Lambert 1997 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 6,996,000 square feet and leases facilities
having an aggregate of approximately 408,000 square feet.

Warner-Lambert's United States manufacturing plants are located in Lititz,
Pennsylvania (pharmaceuticals and consumer health care products); Rockford,
Illinois (confectionery products); Holland, Michigan (pharmaceuticals); Morris
Plains, New Jersey (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). Parke-Davis Pharmaceuticals Limited, a wholly-owned
subsidiary of Warner-Lambert, operating in Puerto Rico, has a plant located in
Vega Baja (pharmaceuticals). On March 1, 1998, Warner-Lambert Inc. and
Warner-Lambert licensed certain intellectual property and transferred certain
tangible assets in Vega Baja to Parke-Davis Pharmaceuticals Limited. For a
discussion on the sale of the manufacturing facility located in Rochester,
Michigan see 'Item 1. Business Segments -- Pharmaceutical Products' above.

In the United States, Warner-Lambert currently distributes its various
products through two distribution centers located in Lititz, Pennsylvania and
Elk Grove, Illinois. Principal United States 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, 69 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 France, 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. The loss of
one or more of Warner-Lambert's own production and packaging facilities could
have a material adverse effect on certain of Warner-Lambert's industry segments.

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 late 1993, Warner-Lambert, along with numerous other pharmaceutical
manufacturers and wholesalers, was sued in a number of state and federal
antitrust lawsuits seeking damages (including trebled and statutory damages,
where applicable) and injunctive relief. These actions arose from allegations
that the defendant drug companies, acting alone or in concert, engaged in
differential pricing

whereby they favored institutions, managed care entities, mail order pharmacies
and other buyers with lower prices for brand name prescription drugs than those
afforded to retail pharmacies. The federal cases, which were brought by
retailers, 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 contains certain commitments regarding Warner-Lambert's
pricing of brand name prescription drugs. Appeals of the District Court's
approval of this settlement were unsuccessful, and the commitments have become
effective. Certain other rulings of the judge presiding in this case were also
appealed, and the judge was reversed on all rulings. The cases have been
remanded to the District Court, and trial of the class action conspiracy suit
against the non-settling defendant pharmaceutical manufacturers and wholesalers
has been scheduled for September 1998.

In April 1997, after execution of the federal class settlement referred to
above but prior to the formal effectiveness of its pricing commitments, the same
plaintiff-class members brought a new purported class action relating to the
time period subsequent to the execution of the settlement. This new class suit
sought only injunctive relief. At present, Warner-Lambert cannot predict the
outcome of this and the other remaining federal lawsuits in which it is a
defendant.

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 filed in Alabama, Minnesota, Mississippi and Wisconsin brought by
classes of pharmacies, each arising from the same allegations of differential
pricing. With its co-defendants, the Company has agreed to settle the Minnesota
and Wisconsin actions. The Company's share of the Minnesota settlement, which
has been approved and its share of the Wisconsin Settlement, which is still
subject to court approval, are not material. In addition, the Company is named
in class action complaints filed in Alabama, Arizona, Florida, Kansas, Maine,
Michigan, Minnesota, New York, North Carolina, Tennessee, Wisconsin and 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 differential pricing. It is too early to predict the outcome of
the remaining actions, but 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.

The Federal Trade Commission (the 'FTC') 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 was served with and
responded to two subpoenas from the FTC in 1996 and 1997, respectively, and is
continuing to cooperate with this investigation. Warner-Lambert cannot at
present predict the outcome of this investigation.

In 1993, Warner-Lambert received a Complaint and Compliance Order (the
'Complaint') from 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. An administrative hearing on all counts of the Complaint
is scheduled for March 1998. Although it is too early to predict the outcome of
this action, 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 Inc. 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.

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, 1998 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................. 62 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........... 53 President and Chief President and Chief Operating Officer
Operating Officer; (since August 1991)
Director
John F. Walsh.................... 55 Executive Vice Executive Vice President (since January
President 1991); President, Shaving Products Group
(since August 1997); President, Consumer
Healthcare Sector (December 1994 -- July
1997); President, Consumer Products
Sector (January 1992 -- December 1994)
Ernest J. Larini................. 55 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.................... 50 Vice President Vice President (since April 1990);
President, Adams (since December 1994);
President, Latin
America/Asia/Australia/Middle East/Africa
Group (January 1992
-- December 1994)
S. Morgan Morton................. 58 Vice President Vice President (since January 1994);
President, Consumer Healthcare Sector
(since August 1997); President,
Warner-Lambert Consumer Healthcare U.S.A.
(June 1996 -- July 1997); 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)
Anthony H. Wild, Ph.D............ 49 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)
</TABLE>

(table continued on next 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>
John S. Craig.................... 46 Vice President Vice President (since January 1996);
President, Adams USA (since July 1995);
President and Chief Executive Officer,
Lender's Bagel Bakery division of Kraft
Foods, Inc. (September 1986 -- February
1994)
Ronald M. Cresswell, Ph.D........ 63 Vice President Vice President (since May 1988); Chairman,
Parke-Davis Research (since November
1989)
Raymond M. Fino.................. 55 Vice President Vice President, Human Resources (since
January 1985)
Philip M. Gross.................. 56 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............... 51 Vice President and Vice President and General Counsel (since
General Counsel October 1983)
Richard W. Keelty................ 56 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.................. 46 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.............. 61 Vice President Vice President (since January 1992);
President, Adams, Europe/Middle
East/Africa (since December 1994);
President, Consumer Products, Europe
(January 1992 -- December 1994)
Harold F. Oberkfell.............. 51 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............... 51 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)
William S. Woodson............... 63 Vice President and Vice President and Treasurer (since
Treasurer December 1991)
Rae G. Paltiel................... 51 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. Prior to being
acquired by American Home Products Corporation, American Cyanamid Company was a
multinational medical and agricultural products company with sales of
approximately $4.3 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 $4.5 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.

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, 1997.
Cash dividends paid in 1997 totaled $413.1 million. A dividend of $.38 per share
was paid in each quarter of 1997 for an annual total of $1.52 per share. This
was a 10.1% increase over the prior year total of $1.38 per share, paid in four
quarterly dividends of $.345 per share during 1996. The information set forth
under the caption 'Market Prices of Common Stock and Dividends' on page 48 of
the Warner-Lambert 1997 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 32 of the Warner-Lambert 1997 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 49 through 52 of the Warner-Lambert 1997 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 33
through 46 of the Warner-Lambert 1997 Annual Report.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

The information set forth under the caption 'Management's Discussion and
Analysis' on page 52 of the Warner-Lambert 1997 Annual Report and in Note 10 to
the consolidated financial statements on pages 39 through 40 of the
Warner-Lambert 1997 Annual Report is incorporated herein by reference.

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 1997
Annual Report on pages 33 through 46, together with the report thereon of Price
Waterhouse LLP dated January 26, 1998 on page 47 of the Warner-Lambert 1997
Annual Report, and quarterly financial information on page 48 of the
Warner-Lambert 1997 Annual Report, are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

Not Applicable.

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 from pages 2 through 9 of the
Warner-Lambert Proxy Statement for the Annual Meeting of Stockholders to be held
on April 28, 1998. Information relating to executive officers of Warner-Lambert
is set forth in Part I of this Form 10-K on pages 10 through 12. 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 11 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 24 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 11 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 10 and such
information is incorporated herein by reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

Not Applicable.

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 33 through 47 of the Warner-Lambert
1997 Annual Report:

Consolidated Statements of Income for each of the three years in
the period ended December 31, 1997.

Consolidated Statements of Retained Earnings for each of the
three years in the period ended December 31, 1997.

Consolidated Balance Sheets at December 31, 1997 and 1996.

Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1997.

Notes to Consolidated Financial Statements.

Report by Management.

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 33 through 47 of the Warner-Lambert
1997 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 (File No. 1-3608)).

(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) Amended and Restated Rights Agreement, dated as of March 25,
1997, 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-A/A, dated July 5, 1989 and
by Form 8-A/A, dated March 27, 1997 (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 March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (File No. 1-3608)).
(b)* Warner-Lambert Company 1987 Stock Option Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (File No. 1-3608)).
</TABLE>

<TABLE>
<S> <C>
(c)* Warner-Lambert Company 1989 Stock Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (File No. 1-3608)).
(d)* Warner-Lambert Company 1992 Stock Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (File No. 1-3608)).
(e)* Warner-Lambert Company 1996 Stock Plan, as amended to November 25, 1997.
(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 (File No. 1-3608)).
(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 (File No. 1-3608)).
(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 (File No. 1-3608)).
(j)* Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as
amended to October 1, 1997.
(k)* Warner-Lambert Company Executive Severance Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31,
1997 (File No. 1-3608)).
(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, 1997. 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).

(99) Cautionary Statements Relating to 'Safe Harbor' Provisions of the
Private Securities Litigation Reform Act of 1995.

- ------------

* 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

(1) A Current Report on Form 8-K, dated March 25, 1997, was filed with the
Securities and Exchange Commission during the quarter ended March 31,
1997, in connection with the amendment by the Board of Directors of
the Company of the Company's preferred share purchase rights
(originally declared as a dividend on June 28, 1988), as more fully
described in the Amended and Restated Rights Agreement dated as of
March 25, 1997, between the Company and First Chicago Trust Company of
New York, as Rights Agent.

(2) A Current Report on Form 8-K, dated December 1, 1997, was filed with
the Securities and Exchange Commission in December 1997, in connection
with new label changes for REZULIN (troglitazone), the Company's drug
for type 2 diabetes.

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.

WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE

To the Board of Directors of
WARNER-LAMBERT COMPANY

Our audits of the consolidated financial statements referred to in our
report dated January 26, 1998 appearing on page 47 of the 1997 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 26, 1998

SCHEDULE II

WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995

<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, 1997:
Allowance for doubtful accounts.............................. $ 36.6 $ 3.9 $ 6.0 $34.5
Allowance for deferred tax assets............................ 28.8 .1 -- 28.9
---------- ---------- ---------- -------
$ 65.4 $ 4.0 $ 6.0 $63.4
---------- ---------- ---------- -------
---------- ---------- ---------- -------
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
---------- ---------- ---------- -------
---------- ---------- ---------- -------
</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.

(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.

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

Dated as of March 24, 1998 By /S/ MELVIN R. GOODES
..............................................
Melvin R. Goodes
Chairman of the Board
and Chief Executive Officer

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.

/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 24, 1998

/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

/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 24, 1998

/S/ GEORGE A. LORCH
By ................................................
George A. Lorch, Director

/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

EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------

<C> <S> <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 (File No. 1-3608)).
(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) Amended and Restated Rights Agreement, dated as of March 25, 1997, 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-A/A,
dated July 5, 1989 and by Form 8-A/A, dated March 27, 1997 (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 March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(File No. 1-3608)).
(b) Warner-Lambert Company 1987 Stock Option Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(File No. 1-3608)).
(c) Warner-Lambert Company 1989 Stock Plan, as amended to March 25, 1997 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 (File No.
1-3608)).
(d) Warner-Lambert Company 1992 Stock Plan, as amended to March 25, 1997 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997 (File No.
1-3608)).
(e) Warner-Lambert Company 1996 Stock Plan, as amended to November 25, 1997.
(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 (File No. 1-3608)).
(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 (File No. 1-3608)).
(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
(File No. 1-3608)).
(j) Warner-Lambert Excess Savings Plan, formerly Warner-Lambert Supplemental Savings Plan, as amended
to October 1, 1997.
(k) Warner-Lambert Company Executive Severance Plan, as amended to March 25, 1997 (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q for the quarter ended March 31, 1997
(File No. 1-3608)).
(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>

<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF DOCUMENT
- ------ -----------------------
<S> <C>
(12) Computation of Ratio of Earnings to Fixed Charges.
(13) Copy of the Warner-Lambert Company Annual Report for the year ended December 31, 1997. 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).
(99) Cautionary Statements Relating to 'Safe Harbor' Provisions of the Private Securities Litigation Reform
Act of 1995.
</TABLE>

<PAGE>

WARNER-LAMBERT COMPANY

1996 STOCK PLAN

AS AMENDED TO NOVEMBER 25, 1997

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.

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.

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.

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 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.

Section 4.2. Number of Options and Rights.

(a) The Committee may grant more than one Option or Right to an
individual during the life of the Plan and, subject to the requirements of
Section 422 of the Code with respect to incentive stock options, such Option or
Right may be in addition to, in tandem with, or in substitution for, options or
rights previously granted under the Plan or under another stock plan of the
Company or of another corporation and assumed by the Company.

(b) The Committee may permit the voluntary surrender of all or a
portion of any Option granted under the Plan or any prior plan to be conditioned
upon the granting to the Employee of a new Option for the same or a different

number of shares as the Option surrendered, or may require such voluntary
surrender as a condition precedent to a grant of a new Option to such Employee.
Such new Option shall be exercisable at the price, during the period, and in
accordance with any other terms or conditions specified by the Committee at the
time the new Option is granted.

Section 4.3. Option and Right Agreements. The Company shall effect the
grant of Options and Rights under the Plan, in accordance with determinations
made by the Committee, by execution of instruments in writing, in a form
approved by the Committee. Each Option and Right shall contain such terms and
conditions (which need not be the same for all Options and Rights, whether
granted at the same time or at different times) as the Committee shall deem to
be appropriate. The Committee may, in its sole discretion, and subject to such
terms and conditions as it may adopt, accelerate the date or dates on which some
or all outstanding Options and Rights may be exercised. Except as otherwise
provided by the Committee, Options and Rights shall be exercised by submitting
to the Company a signed copy of a notice of exercise in a form to be supplied by
the Company and the exercise of an Option or Right shall be effective on the
date on which the Company receives such notice at its principal corporate
offices.

Section 4.4. Non-Transferability of Option or Right. No Option or Right
granted under the Plan to an Employee shall be transferable by the Employee
otherwise than by will or by the laws of descent and distribution or pursuant to
a "qualified domestic relations order" (as defined in the Code), and such Option
and Right shall be exercisable, during the Employee's lifetime, only by such
Employee.

Section 4.5. Optionees and Grantees not Stockholders. An Optionee or
Grantee or legal representative thereof shall have none of the rights of a
stockholder with respect to shares subject to Options or Rights until such
shares shall be issued upon exercise of the Option or Right.

Section 4.6. Certain Events. (a) 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.

(b) As used in the Plan, a "Merger of Equals" shall mean either: (a) a
Change in Control of Warner-Lambert Company, pursuant to the terms of which the
stockholders of Warner-Lambert Company receive consideration, including
securities, with an Aggregate Value (as defined below) not greater than 115
percent of the average closing price of the Common Stock of Warner-Lambert
Company on the Composite Tape for New York Stock Exchange issues for the twenty
business days immediately preceding the earlier of the execution of the
definitive agreement pertaining to the transaction or the public announcement of
the transaction; or (b) any other Change in Control of Warner-Lambert Company
which the Board of Directors, in its sole discretion, determines to be a "Merger
of Equals" for the purposes of this provision. For purposes of this section,
"Aggregate Value" shall mean the consideration to be received by the
stockholders of Warner-Lambert Company equal to the sum of (A) cash, (B) the
value of any securities and (C) the value of any other non-cash consideration.
The value of securities received shall equal the average closing price of the
security on the principal security exchange on which such security is listed for
the twenty business days immediately preceding the earlier of the execution of
the definitive agreement pertaining to the transaction or the public
announcement of the transaction. For securities not traded on a security
exchange, and for any other non-cash consideration that is received, the value
of such security or such non-cash consideration shall be determined by the Board
of Directors.

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 the termination of employment,
giving effect to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) with respect to the percent of the total
number of shares to which the Option relates which may be purchased from time to
time during the Option Period and have not been removed pursuant to Section
5.3(a).

Section 5.5. Termination of Employment On or After Age 55. An Optionee
whose employment terminates on or after age 55, by reason other than death,
shall be entitled to exercise such Option if the Optionee was entitled to
exercise the Option at the date of the termination, without, however, giving
effect to the limitations, if any, which may have been imposed by the Committee
pursuant to Section 5.3(b) with respect to the percent of the total number of
shares to which the

Option relates which may be purchased from time to time during the Option
Period; provided, however, that such Option shall be exercisable until the later
of (i) the three-year period after termination of employment, or (ii) the period
after termination of employment which is equal to the number of full months that
the Option has been outstanding prior to such termination, but in no event after
the expiration of the Option Period.

Section 5.6. Death of Optionee. If an Optionee should die:

(a) while in the employ of the Company, the Option theretofore
granted shall, if the Optionee was entitled to exercise the Option at the date
of death, be exercisable by the estate of the Optionee, or by a person who
acquired the right to exercise such Option by bequest or inheritance or by
reason of the death of the Optionee, without, however, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant to
Section 5.3(b) with respect to the percent of the total number of shares to
which the Option relates which may be purchased from time to time during the
Option Period; provided, however, that such Option shall be exercisable until
the later of (i) the three-year period after termination of employment, or (ii)
the period after termination of employment which is equal to the number of full
months that the Option has been outstanding prior to such termination, but in no
event after the expiration of the Option Period;

(b) within the three-month period after the date of the
termination of employment before age 55, the Option theretofore granted shall be
exercisable by the estate of the Optionee, or by a person who acquired the right
to exercise such Option by bequest or inheritance or by reason of the death of
the Optionee, but then only if and to the extent that the Optionee was entitled
to exercise the Option at the date of death, giving effect to the limitations,
if any, which may have been imposed by the Committee pursuant to Section 5.3(b)
with respect to the percent of the total number of shares to which the Option
relates which may be purchased from time to time during the Option Period and
have not been removed pursuant to Section 5.3(a); provided, however, that such
Option shall be exercisable only within the twelve-month period next succeeding
the death of the Optionee and in no event after the expiration of the Option
Period; or

(c) after the date of the termination of employment on or after
age 55, the Option theretofore granted shall, if the Optionee was entitled to
exercise the Option at the date of death, be exercisable by the estate of the
Optionee, or by a person who acquired the right to exercise such Option by
bequest or inheritance or by reason of the death of the Optionee, without,
however, giving effect to the limitations, if any, which may have been imposed
by the Committee pursuant to Section 5.3(b) with respect to the percent of the
total number of shares to which the Option relates which may be purchased from
time to time during the Option Period; provided, however, that such Option shall
be exercisable until the latest of (i) the three-year period after termination
of employment, (ii) the period after termination of

employment which is equal to the number of full months that the Option has been
outstanding prior to such termination, or (iii) the twelve-month period after
the death of the Optionee provided such death occurs before the later of (i) or
(ii), but in no event after the expiration of the Option Period.

Section 5.7. Payment for shares. Payment for shares of Common Stock
shall be made in full at the time of exercise of the Option. Nothing herein
shall be construed to prohibit the Company from making a loan or advance to the
Optionee for the purpose of financing, in whole or in part, the purchase of
optioned shares. Payment of the Option Price shall be made in cash or, with the
consent of the Committee, in whole or in part in Common Stock, Stock Awards or
other consideration. Payment may also be made by delivering a properly executed
exercise notice together with irrevocable instructions to a third party to
promptly deliver to the Company the amount of sale or loan proceeds to pay the
exercise price.

Section 5.8. Incentive Stock Options. Options granted in the form of
incentive stock options shall be subject, in addition to the foregoing
provisions, to the following provisions:

(a) Annual Limit. To the extent that the aggregate Fair Market
Value (determined at the time of grant) of the Common Stock with respect to
which incentive stock options are exercisable for the first time by any Optionee
during any calendar year (under the Plan or under any other stock plan of the
Company) exceeds $100,000, such options shall be treated as options which are
not incentive stock options.

(b) Ten Percent Shareholder. No incentive stock option shall be
granted to any individual who, at the time of the proposed grant, owns Common
Stock possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of Warner-Lambert or any Subsidiary.

(c) Option Period. No incentive stock option shall be exercisable
after the expiration of ten years from the date of grant.

(d) Option Price. The Option Price of an incentive stock option
shall not be less than the Fair Market Value per share on the date of grant.

(e) Subsidiary. Incentive stock options may only be granted to
employees of Warner-Lambert and its Subsidiaries.

(f) Aggregate Limit. The aggregate number of shares of Common
Stock which may be issued pursuant to the exercise of incentive stock options
shall not exceed the lesser of (i) 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.

Section 5.9. Rollover Options. Notwithstanding anything herein to the
contrary, in the event of a Merger of Equals all Options granted hereunder shall
become immediately exercisable by the Optionee and the Options shall be
converted into options to purchase the stock of the company which other
shareholders of Warner-Lambert Company receive in the transaction (the "Rollover
Options"). The Rollover Options shall be subject to the same terms and
conditions as those applicable to the Options held prior to the Merger of
Equals, including, but not limited to, exercisability and Option Period, except
as hereinafter provided. If the Aggregate Value consists only of shares of a
publicly traded security ("New Security"), each Rollover Option shall entitle
the holder to purchase the number of shares of New Security which is equal to
the product of (a) the Exchange Ratio (as hereinafter defined) and (b) the
number of shares of Common Stock subject to the Option immediately prior to the
effective date of the Merger of Equals (rounded to the nearest full number of
shares). The exercise price for each Rollover Option shall be the exercise price
per share of each Option divided by the Exchange Ratio (rounded to the nearest
full cent). For purposes hereof, "Exchange Ratio" shall mean the ratio for
exchanging Common Stock held by the stockholders of Warner-Lambert Company for
shares of New Security which is set forth in the definitive agreement pertaining
to the transaction. If the Aggregate Value consists of consideration other than
New Securities, the Board shall make appropriate adjustments to the number of
Rollover Options and the exercise price thereof. In addition, with respect to
Options granted after March 25, 1997, if an optionee who is not 55 years old is
terminated within three (3) years following the Merger of Equals (for a reason
other than "Termination for Just Cause," as defined in the Warner-Lambert
Company Enhanced Severance Plan), such optionee's Options shall remain
exercisable notwithstanding such termination of employment by the Company or any
successor or its affiliates and such Options shall be exercisable until two
years following the termination of employment, but in no event after the
expiration of the Option Period.

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, 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 such date, or (ii) during any other
period permitted under the provisions of Rule 16b-3 promulgated pursuant to the
Act. In addition, a payment of cash shall be made to a Reporting Person who has
held the Right at least six months from the date of its

grant promptly following a Change in Control of Warner-Lambert which Change in
Control is outside the control of any Reporting Person within the meaning of the
aforesaid Rule 16b-3. The Company intends that this provision shall comply with
the requirements of Rule 16b-3 under the Act. Should this provision not be
necessary to comply with the requirements of such Rule or should any additional
provision be necessary in order to comply with the requirements of such Rule,
the Committee may amend the Plan accordingly, without the necessity of obtaining
the approval of stockholders of the Company. Any fraction of a share resulting
from the above calculation shall be disregarded.

Section 6.5. Termination of Employment. If, prior to the expiration of a
Reference Option, the employment of the Grantee by the Company should terminate,
by reason other than death, the related Right shall terminate, except that if,
after a Grantee shall have remained in the employ of the Company for the period
specified by the Committee, such Grantee's employment should terminate on or
after age 55, the Right theretofore granted shall be exercisable until the later
of (i) the three-year period after termination of employment, or (ii) the period
after termination of employment which is equal to the number of full months that
the Reference Option has been outstanding prior to such termination, but in no
event after the expiration of the Option Period, without, however, giving effect
to the limitations, if any, which may have been imposed by the Committee
pursuant to Section 5.3(b) hereof.

Section 6.6. Death of Grantee. If a Grantee should die prior to the
termination of the Reference Option:

(a) while in the employ of the Company, the Right theretofore
granted shall, if the Grantee was entitled to exercise the Right at the date of
death, be exercisable by the estate of the Grantee, or by a person who acquired
the right to exercise such Right by bequest or inheritance or by reason of the
death of the Grantee, without, however, giving effect to the limitations, if
any, which may have been imposed by the Committee pursuant to Section 5.3(b)
hereof with respect to the percent of the total number of shares to which the
Right relates which may be purchased from time to time during the Option Period;
provided, however, that such Right shall be exercisable until the later of (i)
the three-year period after termination of employment, or (ii) the period after
termination of employment which is equal to the number of full months that the
Reference Option has been outstanding prior to such termination, but in no event
after the expiration of the Option Period; or

(b) after the date of the termination of employment on or after
age 55, the Right theretofore granted shall, if the Grantee was entitled to
exercise the Right at the date of death, be exercisable by the estate of the
Grantee, or by a person who acquired the right to exercise such Right by bequest
or inheritance or by reason of the death of the Grantee, without, however,
giving effect to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) hereof with respect to the percent of the
total number of shares to which the Right relates which may be purchased from
time to time during the Option Period; provided, however, that such Right shall
be exercisable until the latest of (i) the three-year

period after termination of employment, (ii) the period after termination of
employment which is equal to the number of full months that the Reference Option
has been outstanding prior to such termination, or (iii) the twelve-month period
after the death of the Grantee provided such death occurs before the later of
(i) or (ii), but in no event after the expiration of the Option Period.

Section 6.7. Limited Rights. Notwithstanding anything herein to the
contrary, Limited Rights may be granted hereunder by the Committee with respect
to the options granted under this Plan or any other stock option plan of the
Company which shall entitle the holder to receive a payment of cash promptly
following a Change in Control of Warner-Lambert which Change in Control is
outside the control of any Reporting Person within the meaning of Rule 16b-3
under the Act. Such payment of cash shall be made to a Reporting Person only if
such person has held such Limited Right at least six months from the date of its
grant. Promptly following any such Change in Control, the Optionee shall be
entitled to receive a cash payment equal to the excess of the Fair Market Value
of a share of Common Stock on the Valuation Date over the Option Price of the
related Option multiplied by the number of shares with respect to which the
Limited Right relates (in such case the method of determining the Fair Market
Value in the third sentence of Section 4.6(a) 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.
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.

Section 7.4. Delivery of Restricted Shares. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, to the Participant or the
Participant's beneficiary or estate, as the case may be. The Company shall not
be required to deliver any fractional share of Common Stock but shall pay, in
lieu thereof, the fair market value (measured as of the date the restrictions
lapse) of such fractional share to the Participant or the Participant's
beneficiary or estate, as the case may be. Notwithstanding the foregoing, the
Committee may authorize the delivery of the Restricted Stock to a Participant
during the Restricted Period, in which event any stock certificates in respect
of shares of Restricted Stock thus delivered to a Participant during the
Restricted Period applicable to such shares shall bear an appropriate legend
referring to the terms and conditions, including the restrictions, applicable
thereto.

Section 7.5. Certain Events.

(a) In the event of a Change in Control of Warner-Lambert the
rights and privileges of Participants hereunder shall be governed by the
following clause (i), clause (ii) or clause (iii), as appropriate:

(i) Value of Restricted Stock. All shares of Restricted
Stock then outstanding shall be immediately forfeited and shall revert to the
Company as treasury shares and, in lieu thereof, each Participant shall receive
a cash payment equal to the Value of the Restricted Stock (as hereinafter
defined); provided, however, that if the Participant is a Reporting Person at
the time of the Change in Control of Warner-Lambert, the provisions of clause
(ii) shall govern the rights and privileges of such Participant.

(ii) Reporting Persons. All shares of Restricted Stock
previously granted to Participants who are Reporting Persons at the time of the
Change in

Control of Warner-Lambert, which Change in Control is outside the control of any
Reporting Person within the meaning of Rule 16b-3 under the Act, and which are
then outstanding and have been outstanding for a period of at least six (6)
months, shall be immediately forfeited and shall revert to the Company as
treasury shares and, in lieu thereof, such Participant shall receive a cash
payment equal to the Value of the Restricted Stock.

(iii) Lapse of Restrictions. In the event that clause (ii)
shall not become operational with respect to a Participant who is a Reporting
Person, all restrictions applicable to shares of Restricted Stock previously
granted to such Participant and then outstanding shall expire and such shares
shall thereupon be delivered to the Participant free of all restrictions.

(b) As used in the Plan, the "Value of the Restricted Stock"
shall be the higher of (a) the highest closing price per share of Common Stock
on the Composite Tape for New York Stock Exchange issues during the 30 day
period prior to the Change in Control of Warner-Lambert, or (b) if the Change in
Control of Warner-Lambert occurs as a result of a tender or exchange offer or
consummation of a Transaction, then the highest price per share of Common Stock
pursuant thereto, multiplied by the total number of shares of Restricted Stock
granted to such Participant and then outstanding, regardless of whether the
restrictions applicable thereto shall have previously lapsed. Any consideration
other than cash forming a part or all of the consideration for Common Stock to
be paid pursuant to the applicable transaction shall be valued at the valuation
placed thereon by the Board of Directors. Adjustments, if any, shall be made in
accordance with Section 10.1 hereof.

ARTICLE VIII

Terms and Conditions of Performance Awards

Section 8.1. Terms and Conditions. The Committee may grant Performance
Awards, determine the consideration therefor, which may include prior efforts
and accomplishments, and establish the terms and conditions thereof, which may
include provisions based upon periods of time, performance (corporate, group,
individual or otherwise), combinations thereof or such other provisions as the
Committee may determine to be appropriate. Performance Awards may consist of
shares of Common Stock or awards that are valued by reference to shares of
Common Stock (e.g., phantom stock or restricted stock units), cash or such other
measure as the Committee shall determine. Performance Awards may provide for
payment in shares of Common Stock, cash, other property or any combination
thereof as determined by the Committee. Shares of Common Stock issued pursuant
to this Section 8.1 may be issued for no cash consideration or for such minimum
consideration as may be required by applicable law. The Committee shall
determine whether payment shall be made in a lump sum, installments or deferred.
With respect to Performance Awards which are valued by reference to shares of
Common Stock, the Committee shall also determine whether the Participant may be
entitled to receive a payment of,

or credit equivalent to, any dividends payable with respect to such shares of
Common Stock and the terms and conditions applicable thereto. Further, if a
payment of cash is to be made on a deferred basis, the Committee shall establish
whether interest shall be credited, the rate thereof and any other terms and
conditions applicable thereto. The limitations on transfer set forth in Section
4.4 shall be applicable to all Performance Awards.

ARTICLE IX

Regulatory Compliance and Listing

Section 9.1. Regulatory Compliance and Listing. The issuance or delivery
of any Stock Awards and shares of Common Stock pursuant thereto may be postponed
by the Company for such periods as may be required to comply with any applicable
requirements under the Federal securities laws, any applicable listing
requirements of any national securities exchange or any requirements under any
other law or regulation applicable thereto, and the Company shall not be
obligated to issue or deliver any such awards or shares if the issuance or
delivery thereof shall constitute a violation of any provision of any law or of
any regulation of any governmental authority or any national securities
exchange.

ARTICLE X

Adjustment in Event of Changes in Capitalization

Section 10.1. Adjustments. In the event of a recapitalization, stock
split, stock dividend, combination or exchange of shares, merger, consolidation,
rights offering, reorganization, liquidation, or the sale, conveyance, lease or
other transfer by Warner-Lambert of all or substantially all of its property, or
any other change in the corporate structure or shares of Warner-Lambert,
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.

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.

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. Prior to January 1, 1998, 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 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 shall
be made only in cash. Distributions in respect of a Director's Stock Account
shall be made only in shares of Common Stock.

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 number of Stock Credits attributable to each distribution
shall be equal to the number obtained by multiplying the current number of Stock
Credits in such Stock Account by a fraction, the numerator of which is one (1)
and the denominator of which is the number of years in which distributions
remain to be made (including the current distribution).

Section 11.8. Financial Hardship. Notwithstanding any other provision
hereof, at the written request of a Director or a Director's legal
representative, the Committee, in its sole discretion, upon a finding that
continued deferral will result in financial hardship to the Director, may
authorize (i) the payment of all or a part of a Director's Accounts in a single
installment prior to his or her ceasing to be a Director or (ii) the
acceleration of payment of any multiple installments thereof; provided, however,
that Directors may not receive distributions under this Section 11.8 if such
distribution would result in liability of the Director under Section 16 of the
Act.

Section 11.9. Distribution upon Death. Upon the death of a Director, the
Committee shall pay all of such Director's Cash Account and Stock Account in a
single installment to the beneficiary designated by the Director. All such
designations shall be made in writing and delivered to the Secretary. A Director
may from time to time revoke or change any such designation by written notice to
the Secretary. If there is no designation on file with the Secretary at the time
of the Director's death, or if the beneficiary designated therein shall have
predeceased the Director, such distributions shall be made to the executor or
administrator of the Director's estate. Any distribution under this Section 11.9
shall be made as soon as practicable following notification to the Committee of
the Director's death.

Section 11.10. Certain Events. Notwithstanding any other provision
hereof, in the event of a Change in Control of Warner-Lambert which is outside
of the control of any Reporting Person within the meaning of Rule 16b-3 under
the Act, the balance in the Stock Account of each Director shall be converted to
the Cash Account. For this purpose, the balance in the Stock Account shall be
determined by

multiplying the number of Stock Credits by the higher of (i) the highest Closing
Price during the period commencing 30 days prior to such Change in Control or
(ii) if the Change in Control of Warner-Lambert occurs as a result of a tender
or exchange offer or consummation of a Transaction, then the highest price per
share of Common Stock pursuant thereto. Any consideration other than cash
forming a part or all of the consideration for Common Stock to be paid pursuant
to the applicable transaction shall be valued at the valuation placed thereon by
the Board of Directors. Adjustments, if any, shall be made in accordance with
Article X hereof. Within 30 days after a Change in Control of Warner-Lambert,
each Director may designate a distribution schedule which may provide for a lump
sum payment or installment payments over a period of up to 15 years, provided,
however, that no payment shall be made for a period of one year after the Change
in Control. In the event that a Director shall not make a designation in
accordance with the preceding sentence, the balance in the Cash Account shall be
distributed in a lump sum one year after the Change in Control.

Section 11.11. Valuations. Notwithstanding any other provision hereof,
in any instance in which a Director's Stock Account is to be valued by reference
to the Closing Price of shares of Common Stock on a single day, the Committee
may declare such price to be unrepresentative of the market value of such Common
Stock and, in lieu thereof, shall base such valuation on the average of the
Closing Prices of shares of Common Stock on each Business Day during the
calendar quarter ending coincident with or immediately preceding the day which
would otherwise serve as the basis for the valuation.

Section 11.12. Funding. The Company's sole obligation to a Director or
any person claiming under or through any Director in respect of the payment of
any balance in an Account shall be solely a contractual obligation in accordance
with the terms of the Plan. No promise hereunder shall be secured by any
specific assets of the Company, nor shall any assets of the Company be
designated as attributable or allocated to the satisfaction of such promises.

Section 11.13. Status of Stock Credits. Stock Credits are not, and do
not constitute, shares of Common Stock, and no right as a holder of shares of
Common Stock shall devolve upon a Director by reason of his or her participation
in the Plan.

Section 11.14. Non-Trading Date. In the event that the date of the
determination of a Closing Price hereunder shall be a date which shall not be a
date on which the Common Stock is traded on the New York Stock Exchange,
determination of such Closing Price shall be made as of the first date
thereafter on which the Common Stock is so traded.

Section 11.15. No Right To Reelection. Nothing in the Plan shall be
deemed to create any obligation on the part of the Board to nominate any
Director for reelection by the Company's stockholders, nor confer upon any
Director the right to remain a member of the Board of Directors.

Section 11.16. Predecessor Plans. Upon the Effective Date of the Plan,
no further benefits shall accrue under any Predecessor Plans 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 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.

(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 qualification of the Plan (and transactions thereunder) under Rule
16b-3.

ARTICLE XIII

Termination or Amendment of the Plan

Section 13.1. Termination or Amendment.

(a) The Board may at any time terminate the Plan and may from
time to time alter or amend the Plan or any part thereof (including any
amendment deemed necessary to ensure that the Company may comply with any
regulatory requirement referred to in Article IX); provided, however, that,
unless otherwise required by law, the rights of a Participant with respect to
Stock Awards granted or the rights of a Director with respect to his or her
Accounts prior to such termination, alteration or amendment may not be impaired
without the consent of such Participant or Director, as the case may be, and,
provided further, without the approval of the Company's stockholders, no
alteration or amendment may be made which would require approval of such
stockholders as a condition of compliance with Rule 16b-3 under the Act. The
Company intends that the Plan (and transactions thereunder) shall comply with
the requirements of Rule 16b-3 promulgated pursuant to the Act. Should any
provisions hereof not be necessary in order to comply with the requirements of
such Rule or should any additional provisions be necessary in order to so
comply, the Committee may amend the Plan accordingly, without the necessity of
obtaining approval of the stockholders of Warner-Lambert.

(b) The Committee may at any time adopt any amendment to the Plan
which (i)(A) does not increase Plan liabilities by an amount in excess of five
million dollars ($5,000,000) and does not increase Plan expense by an amount in
excess of five hundred thousand dollars ($500,000) or (B) is required by an
applicable law, regulation or ruling, (ii) can be undertaken by the Board of
Directors under the terms of the Plan, (iii) does not involve a termination of
the Plan, (iv) does not affect the limitations contained in this sentence, and
(v) does not affect the composition or compensation of the Committee.

(c) The Committee shall have the power to cancel all Rights
theretofore granted pursuant to the Plan in the event that it shall determine
that the accounting effects of the grant or exercise of Rights under the Plan
would not be in the best interests of the Company.

(d) Any action which may be undertaken by the Committee pursuant
to the terms hereof may be undertaken by the Board, except as provided in Rule
16b-3 promulgated pursuant to the Act.

ARTICLE XIV

Miscellaneous

Section 14.1. No Right To Employment. Nothing in the Plan shall be
deemed to confer upon any Participant the right to remain in the employ of the
Company.

Section 14.2. Withholding of Taxes.

(a) The Company shall have the right to require, prior to the
issuance or delivery of any shares of Common Stock or the payment of any cash
hereunder,

payment by the Participant or the Director, as the case may be, of any taxes
required by law with respect thereto.

(b) The Committee may permit any such withholding obligation to
be satisfied by reducing the number of shares of Common Stock otherwise
deliverable. A Reporting Person may elect to have a sufficient number of shares
of Common Stock withheld to fulfill such tax obligations (hereinafter a
"Withholding Election") only if the election complies with the following
conditions: (x) the Withholding Election shall be subject to the disapproval of
the Committee and (y) the Withholding Election is made (i) during the period
beginning on the third business day following the date of release for
publication of the quarterly or annual summary statements of sales and earnings
of the Company and ending on the twelfth business day following such date, or
(ii) during any other period in which a Withholding Election may be made under
the provisions of Rule 16b-3 promulgated pursuant to the Act. Any fraction of a
share of Common Stock required to satisfy such tax obligations shall be
disregarded and the amount due shall be paid instead in cash by the Participant.

Section 14.3. No Assignment of Benefits. No benefit payable under the
Plan shall, except as otherwise specifically provided by law, be subject in any
manner to anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, attach,
sell, transfer, assign, pledge, encumber or charge any such benefit shall be
void, and any such benefit shall not in any manner be liable for or subject to
the debts, contracts, liabilities, engagements or torts of any person who shall
be entitled to such benefit, nor shall it be subject to attachment or legal
process for or against such person. If any person entitled to a benefit
hereunder shall be adjudicated a bankrupt or shall attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge such benefit, or if
any attempt is made to subject any such benefit to the debts, contracts,
liabilities, engagements or torts of any person entitled to such benefit, then
such benefit shall, in the discretion of the Committee, cease and terminate, and
in that event the Committee may cause such benefit, or any part thereof, to be
held or applied for the benefit of such person, his or her spouse, children or
other dependents, or any of them, in such manner and in such proportion as the
Committee shall determine.

Section 14.4. Death; Disability; Termination. The Committee shall
establish the provisions which shall govern in the event of the death,
disability, or termination (including layoff) of a Participant or a Director,
which provisions may be different than the provisions otherwise described herein
with respect to death, disability, and termination. If, for any reason, the
Committee shall determine that it is not desirable because of the incapacity of
the person who shall be entitled to receive any payments hereunder, to make such
payments directly to such person, the Committee may apply such payment for the
benefit of such person in any way that the Committee shall deem advisable or may
make any such payment to any third person who, in the judgment of the Committee,
will apply such payment for the benefit of the person entitled thereto. In the
event of such payment, the Company, the Board of Directors and the Committee
shall be discharged from all further liability therefor.

The employment of an Employee who becomes disabled shall be deemed terminated
for purposes of the Plan as of the date benefit payments would have commenced
under the Warner-Lambert Long Term Disability Benefits Plan had the Participant
been enrolled in such plan, except as otherwise provided herein 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
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 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>

WARNER-LAMBERT EXCESS SAVINGS PLAN

As Amended To October 1, 1997

TABLE OF CONTENTS

ARTICLE SECTION PAGE

1 Purpose of Plan
1.1 Establishment of Plan 1-1

2 Definitions
2.1 Accounts 2-1
2.2 Affiliated Company 2-1
2.3 After-Tax Contributions 2-1
2.4 Annual Reported Earnings Per Share 2-1
2.5 Beneficiary 2-1
2.6 Board of Directors 2-1
2.7 Company 2-2
2.8 Company Matching Contributions 2-2
2.9 Company Matching Contribution Account 2-2
2.10 Compensation 2-2
2.11 Compensation Reduction Agreement 2-2
2.12 Effective Date 2-2
2.13 Election Change Date 2-2
2.14 Employee 2-2
2.15 Hardship 2-2
2.16 Investment Committee 2-3
2.17 Participant 2-3
2.18 Participating Company or Companies 2-3
2.19 Plan 2-3
2.20 Plan Year 2-3
2.21 Pre-Tax Contributions 2-3
2.22 Pre-Tax Contributions Account 2-4
2.23 Regular Contributions 2-4
2.24 Retirement Committee 2-4
2.25 Savings and Stock Plan 2-4
2.26 Savings Contributions 2-4
2.27 Savings Contributions Account 2-4
2.28 Total Disability 2-4
2.29 Valuation Date 2-4

3 Requirements for Participation
3.1 Eligibility 3-1
3.2 Requirements 3-1
3.3 Establishing an Account 3-1
3.4 Collective Bargaining Units 3-2

3.5 ERISA 3-2

TABLE OF CONTENTS, CONTINUED

ARTICLE SECTION PAGE

4 Participant Contributions
------------------------
4.1 Elections 4-1
4.2 Savings Contributions 4-1
4.3 Savings and Stock Plan Discontinuations 4-2
4.4 Valuations 4-2
4.5 Effective Date of Elections 4-2

5 Company Contributions
---------------------
5.1 Company Matching Contributions 5-1
5.2 Valuations 5-3

6 Vesting
-------
6.1 Savings Contributions Accounts 6-1
6.2 Company Matching Contributions 6-1

7 Absence of Funding 7-1
------------------
8 Distributions After Termination of
Employment
8.1 Termination of Employment 8-1
8.2 Death 8-1
8.3 Disability 8-1
8.4 Valuation of Accounts Upon
Distribution 8-1

9 Withdrawals While Employed
--------------------------
9.1 Hardship Withdrawals 9-1
9.2 Suspensions 9-1
9.3 Third Withdrawals 9-1
9.4 Section 16(b) Transactions 9-2

10 Administration of the Plan 10-1
--------------------------

11 Amendment of the Plan
---------------------
11.1 Amendments 11-1
11.2 Collective Bargaining Units 11-2
11.3 Investment Committee Actions 11-2
11.4 Deemed Amendments 11-2

TABLE OF CONTENTS, CONTINUED

ARTICLE SECTION PAGE

12 Termination or Suspension of the Plan
-------------------------------------
12.1 Termination 12-1
12.2 Suspension 12-1

13 General Provisions
------------------
13.1 Plan Not a Contract 13-1
13.2 Nonalienation, etc. 13-1
13.3 Incapacity 13-2
13.4 Applicable Law 13-3
13.5 Quarterly Statements 13-3
13.6 Distributions 13-3
13.7 Waivers 13-3
13.8 Similar Treatment 13-3
13.9 Claims 13-3
13.10 Indemnifications 13-4

1-1

ARTICLE 1

Purpose of Plan

1.1 Establishment of Plan. The Warner-Lambert Excess Savings Plan is
established and maintained by the Company primarily for the purpose of providing
deferred compensation for a select group of management or highly-compensated
employees. The Plan is exempt from the provisions of the Employee Retirement
Income Security Act of 1974 ("ERISA"), relating to participation, vesting,
funding and fiduciary responsibilities. The Company intends that the portion of
this Plan that provides benefits in excess of the limitations on contributions
imposed by section 415 of the Code shall be treated as a separate plan which is
an excess benefit plan as defined in ERISA Section 3(36).

2 - 1

ARTICLE 2

Definitions

Whenever used herein, unless the context otherwise indicates, the
masculine pronoun shall include the feminine pronoun and the feminine pronoun
shall include the masculine and the singular shall include the plural and the
plural shall include the singular.

2.1 "Accounts." The aggregate of a Participant's Savings Contributions
Account and Company Matching Contributions Account.

2.2 "Affiliated Company." An entity as defined in Article 2 of the
Savings and Stock Plan.

2.3 "After-Tax Contributions." The contributions of an Employee made
pursuant to Article 4 of the Savings and Stock Plan and without regard to a
Compensation Reduction Agreement.

2.4 "Annual Reported Earnings Per Share." The annual basic earnings per
share as reported to the Investment Committee by the Company's independent
auditor for purposes of the Company's annual report. Notwithstanding the
foregoing, any extraordinary, unusual or nonrecurring gains or losses shall be
disregarded by the Investment Committee.

2.5 "Beneficiary." The person or persons determined in accordance with
Article 16 of the Savings and Stock Plan, entitled to a distribution upon the
death of a Participant.

2-2

2.6 "Board of Directors." The Board of Directors of the Company, or the
Executive Committee thereof.

2.7 "Company." Warner-Lambert Company or any successor to it in
ownership of substantially all of its assets, whether by merger, consolidation
or otherwise.

2.8 "Company Matching Contributions." The contributions of a
Participating Company on behalf of a Participant, as provided in Section 5.1.

2.9 "Company Matching Contributions Account." An individual account
established under the Plan to which Company Matching Contributions are credited.

2.10 "Compensation." The amount defined in Article 2 of the Savings and
Stock Plan, except that Compensation shall not be limited as provided in Section
401(a)(17) of the Internal Revenue Code of 1986, as amended (the "Code").

2.11 "Compensation Reduction Agreement." The agreement to make
contributions to this Plan between an Employee and the Participating Company by
which he is employed.

2.12 "Effective Date." November 1, 1987.

2.13 "Election Change Date." The dates set forth in Article 2 of the
Savings and Stock Plan.

2.14 "Employee." All persons as defined in Article 2 of the Savings and

2-3
Stock Plan.

2.15 "Hardship." A severe financial hardship to the Participant
resulting from a sudden and unexpected illness or accident of the Participant or
of a dependent (as defined in Section 152 of the Code) of the Participant, loss
of the Participant's property due to casualty, or other similar extraordinary
and unforeseeable circumstances arising as a result of events beyond the control
of the Participant. A Hardship does not exist to the extent that a financial
condition is or may be relieved (i) through reimbursement or compensation by
insurance or otherwise, (ii) by liquidation of the Participant's assets, to the
extent that liquidation of such assets would not itself cause severe financial
hardship, or (iii) by cessation of deferrals under the Plan. The need to send a
Participant's child to college or the desire to purchase a home do not
constitute Hardships.

2.16 "Investment Committee." The Investment Committee as appointed by
the Retirement Committee pursuant to Article 10 of this Plan.

2.17 "Participant." A person who shall have met the requirements for
participation in the Plan as provided in Article 3 and whose participation shall
not have terminated as provided in such Article.

2.18 "Participating Company or Companies." Those companies whose
employees are authorized by the Board of Directors to participate in the Savings
and Stock Plan, as provided for in Article 2 of such plan.

2.19 "Plan." The Warner-Lambert Excess Savings Plan, as in effect from

2-4
time to time.

2.20 "Plan Year." The calendar year. However, the first Plan Year shall
begin November 1, 1987 and end December 31, 1987.

2.21 "Pre-Tax Contributions." The contributions authorized by a
Participant pursuant to Article 4 of the Savings and Stock Plan and made by a
Participating Company.

2.22 "Pre-Tax Contributions Account." The account described in Article 2
of the Savings and Stock Plan.

2.23 "Regular Contributions." With respect to each Participant, the
After-Tax Contributions and the Pre-Tax Contributions made pursuant to Article 4
of the Savings and Stock Plan.

2.24 "Retirement Committee." The Retirement and Savings Plan Committee
(U.S.), as appointed by the Board of Directors, pursuant to Article 10 of the
Plan.

2.25 "Savings and Stock Plan" The Warner-Lambert Savings and Stock Plan,
as it may be amended from time to time.

2.26 "Savings Contributions." The contributions, sometimes referred to
as Excess Savings Contributions, authorized by a Participant pursuant to Article
4.

2.27 "Savings Contributions Account." An individual account established
under the Plan to which a Participant's Savings Contributions, and the earnings
thereon, are credited.

2.28 "Total Disability." A Total Disability as defined in Article 2 of
the Savings and Stock Plan.

2.29 "Valuation Date." The valuation date or dates established under the

2-5

Savings and Stock Plan.

3-1

ARTICLE 3

Requirements for Participation

3.1 Eligibility. Any person who is an Employee on the Effective Date is
eligible to participate provided he satisfied, and continues to satisfy, the
requirements of Section 3.2. Any other Employee is eligible to participate as of
the first of the month following the date he satisfies the requirements of
Section 3.2. In the event that a Participant fails to continue to meet the
requirements of Section 3.2, the Participant may no longer make contributions to
the Plan or receive Company Matching Contributions to the Plan until such time
that he once again meets such requirements.

3.2 Requirements. An Employee eligible to participate under Section 3.1
of the Plan must first satisfy the following requirements:

(a) He is a participant in and making contributions to the Savings and
Stock Plan; and

(b) His Compensation for the current year is greater than $80,000 or
such other dollar amount as set forth in Code Section 414(q)(1); and

(c) The amount the Employee could otherwise contribute to the Savings
and Stock Plan is limited under (i) Section 401(a)(17) of the Code, (ii) Article
4 of the Savings and Stock Plan, or (iii) Article 6 of the Savings and Stock
Plan as to the amount of annual additions as defined in that Article; and

(d) The Employee is contributing the maximum pre-tax amount permitted
under the limits referenced in (ii) of subsection (c).

3-2

3.3 Establishing an Account. Any Employee who is eligible to become a
Participant shall become a Participant by making an election as provided in
Section 4.1. A person who becomes a Participant shall remain a Participant as
long as he shall continue to have an Account.

3.4 Collective Bargaining Units. Notwithstanding any other provisions of
this Plan to the contrary, and to the extent determined by the Investment
Committee, no Employee may become a Participant in this Plan while in a
collective bargaining unit represented by a certified or recognized bargaining
representative, unless such unit has entered into a collective bargaining
agreement which provides that such members of such unit shall participate in the
Plan, and such participation is approved by the Investment Committee.

3.5 ERISA. The Plan is established and maintained by the Company
"primarily for the purpose of providing deferred compensation for a select group
of management or highly compensated employees," within the meaning of ERISA. The
Company reserves the right to end the participation of any employee whose
continued participation may jeopardize this qualification.

4-1

ARTICLE 4

Participant Contributions

4.1 Elections. Savings Contributions shall be voluntarily authorized by
a Participant by means of a Compensation Reduction Agreement executed by the
Participant in the manner required by the Investment Committee. Contribution
amounts may be changed as of any Election Change Date designated by the
Investment Committee for this purpose.

4.2 Savings Contributions.

(a) Excess Savings Contributions. A Participant may elect by way of a
Compensation Reduction Agreement to reduce his Compensation by an amount,
expressed as a whole percentage, which does not exceed 15% when aggregated with
the percentage of his Compensation being contributed by him to the Savings and
Stock Plan.

(b) Incremental Savings Contributions. In addition, a Participant whose
compensation under the Savings and Stock Plan is subject to the limitations of
Section 401(a)(17) of the Code may elect to reduce his Compensation in an amount
equal to the difference between his Compensation and the applicable section
401(a)(17) limit multiplied by the total percentage elected for his Savings and
Stock Plan contributions.

4-2

4.3 Savings and Stock Plan Discontinuations. If a Participant elects to
discontinue all or any portion of his contributions to the Savings and Stock
Plan, he must also discontinue his Savings Contributions until such time that he
resumes making the maximum contribution he is permitted to make under the
Savings and Stock Plan after considering the limitations specified in Articles 4
and 6 of such plan. After such time he may resume making Savings Contributions
as of any Election Change Date.

4.4 Valuations. On the basis of the valuations made on each Valuation
Date, Savings Contributions authorized by a Participant shall be credited with
interest, at a rate equal to the return on the Fixed Income Fund in the Savings
and Stock Plan.

4.5 Effective Date Of Elections. Notwithstanding any other provision of
the Plan, no election by a Participant (including an election to discontinue
contributions) shall take effect prior to the Participant's next payroll period.

5-1

ARTICLE 5

Company Contributions

5.1 Company Matching Contributions.

(a) Excess and Additional Savings Match. Company Matching Contributions
shall be made in respect of a Participant's Excess Savings Contributions and
Incremental Savings Contributions up to, but not exceeding, an amount equal to
the difference between 6% of the Participant's Compensation and the
Participant's Regular Contributions made during the same period to the Savings
and Stock Plan. Effective January 1, 1994, the amount of the Company Matching
Contributions on Excess Savings Contributions and Incremental Savings
Contributions shall be equal to 35%.

(b) Additional Company Matching Contributions.

(i) Additional Company Matching Contributions will be made in accordance with
the following table:

ADDITIONAL MATCH ANNUAL REPORTED EARNINGS
- ---------------- ------------------------

PER SHARE GROWTH
------------------------
25% 12% or greater, but less than 16%
45% 16% or greater, but less than 20%
65% 20% or greater

Company Matching Contributions made pursuant to the preceding table will be made
as soon as practicable after the Investment Committee receives a determination
of the Annual Reported Earnings Per Share. Additional Company

5-2

Matching Contributions shall be made in respect of the Participant's Excess
Savings Contributions and Incremental Savings Contributions up to, but not
exceeding, an amount equal to the difference between 6% of the Participant's
Compensation and the Participant's Regular Contributions made during the same
period to the Savings and Stock Plan. Such additional Company Matching
Contributions will be allocated in a lump sum based upon the amount of
qualifying contributions made during the prior calendar year provided that such
Participant (a) had completed three Years of Plan Membership as of the last day
of the prior calendar year and (b) was eligible to make Savings Contributions to
the Plan as of the last day of the calendar year notwithstanding any suspension
provisions of the Plan to the contrary.

(ii) Each Participant who would have received an Additional Matching Company
Contribution to the Savings and Stock Plan attributable to Annual Reported
Earnings Per Share Growth but for the limitations on Section 401(m)
Contributions under Section 4.12 of the Savings and Stock Plan shall receive a
Company contribution to this Plan equal to the amount of such foregone
contribution to the Savings and Stock Plan.

(c) 10% Match. Each Participant whose pre-tax contributions to the
Savings and Stock Plan are limited to less than 6% and whose Regular
Contributions are greater than his pre-tax contributions shall also be credited
Company Matching Contributions in the amount of the difference between the match
actually credited in the Savings and Stock Plan and the amount that would have
been credited had

5-3

the Participant's Regular Contributions been made solely on a pre-tax basis.

5.2 Valuations. Amounts credited prior to May 1, 1991 to a Participant's
Company Matching Contributions Account will be deemed held in shares of Company
common stock and will be adjusted on the basis of the valuations made on each
Valuation Date to reflect any increases or decreases in the market value of
Company common stock, and the value of any dividends which may be credited
thereon. Amounts credited on or after May 1, 1991 to a Participant's Company
Matching Contributions Account will be adjusted on the basis of the return
provided by the Fixed Income Fund of the Savings and Stock Plan.

6-1

ARTICLE 6

Vesting

6.1 Savings Contribution Accounts. A Participant's interest in his
Savings Contributions Account shall be fully vested.

6.2 Company Matching Contributions. A Participant's interest in his
Company Matching Contributions Account shall be vested when the Participant is
fully vested in his Company Matching Contributions Account under Article 7 of
the Savings and Stock Plan.

7-1

ARTICLE 7

Absence of Funding

The sole obligation of the Company (or any Participating Company)
hereunder to a Participant, Beneficiary or any other person claiming through
such individual is a contractual obligation to make payments in accordance with
the terms of the Plan. No amount of cash or other property shall be set aside as
a separate trust for the payment of any benefits under the Plan. Any benefits
payable under the Plan shall be paid directly by the Company only out of the
general assets of the Company.

8-1

ARTICLE 8

Distributions After Termination of Employment

8.1 Termination of Employment. If a Participant's employment shall
terminate, the value of his Accounts in which he is vested in accordance with
Article 6 shall be distributed to him in a lump sum, by check, as soon as
practicable after such termination.

8.2 Death. If a Participant's employment shall terminate by reason of
his death, the value of his Accounts in which he is vested in accordance with
Article 6 shall be distributed in a lump sum, by check, as soon as practicable
after such death, to the Beneficiary who is entitled or becomes entitled to
receive benefits from the Savings and Stock Plan upon the death of the
Participant.

8.3 Disability. If a Participant becomes Totally Disabled, such
Participant shall receive the value of his Accounts in a lump sum by check as
soon as reasonably practicable.

8.4 Valuation of Account upon Distribution. For purposes of determining
the amount to be distributed under this Article, the portion of a Participant's
Company Matching Contributions Account which is deemed held in shares of Company
common stock as provided under Section 5.2 will be determined by multiplying (i)
the number of Company shares deemed held in the Participant's Company Matching
Contributions Account by (ii) the average price for Company shares traded in the
Savings and Stock Plan on the appropriate Valuation Date. In the event that no
such trades take place in the Savings and Stock Plan on such date, the amount in
clause (ii) above shall be the closing price listed on the New York Stock
Exchange for Company shares on the appropriate Valuation Date.

9-1

ARTICLE 9

Withdrawals While Employed

9.1 Hardship Withdrawals. If the Investment Committee determines that a
Participant has incurred a Hardship, he can withdraw all or part of his Savings
Contributions Account (including interest) and, to the extent vested and
provided that all of his Savings Contributions Account has first been withdrawn,
his Company Matching Contributions Account, provided, however, that he has first
withdrawn the maximum amount available from the Savings and Stock Plan,
including the amount, if any, in his Pre-Tax Contributions Account. The amount
available for any withdrawal shall not exceed that amount determined by the
Investment Committee as necessary to alleviate such Hardship.

9.2 Suspensions. A Participant who makes a withdrawal under this Article
shall immediately cease making contributions to this Plan and shall not again be
eligible to make or authorize contributions under this Plan until the first day
of any month which is at least six months after the pay day on which
contributions were discontinued and after the receipt by the Investment
Committee of a notice of election to resume such contributions. No Participant
may elect to make more than two withdrawals during any calendar year, except as
may be provided in Section 9.3.

9.3 Third Withdrawals. Notwithstanding the provisions of Section 9.2,
the Investment Committee may, in its absolute discretion and in accordance with
such criteria as it may establish, permit a Participant to make a third
withdrawal from the Plan during a calendar year if the Investment Committee is
satisfied that such

9-2

withdrawal is necessitated by extreme or unusual circumstances. The Investment
Committee may impose such conditions on such third withdrawal as it deems
appropriate, including, without limitation, requiring that the Participant
withdraw the entire amount of his Account which is available for withdrawal or
suspending the Participant from contributing to the Plan for a period not to
exceed 12 months.

9.4 Section 16(b) Transactions. Notwithstanding the foregoing provisions
of this Article 9, Participants who are subject to Section 16 of the Securities
Exchange Act of 1934 (the "Act") may not make withdrawals from their Company
Matching Contributions Accounts unless counsel to the Company has opined that
such withdrawals will not cause transactions in respect of the Plan to be
nonexempt transactions under Section 16(b) of the Act.

10-1

ARTICLE 10

Administration of the Plan

This Plan shall be administered in the same way that the Savings and
Stock Plan is administered, as set forth in Article 13 of the Savings and Stock
Plan (to the extent such Article applies), except that administrative expenses
of the Plan shall be paid by each Participating Company.

11-1

ARTICLE 11

Amendment of the Plan

11.1 Amendments. The Board of Directors shall have the right at any time
or from time to time to modify or amend the Plan in whole or in part. No such
modification or amendment shall retroactively reduce the rights of any
Participant or Beneficiary unless required by law.

Notwithstanding any other provisions of this Plan, all amounts credited
to a Participant's Savings Contributions Account and Company Matching
Contributions Account (regardless of whether vested pursuant to Article 6) shall
be payable promptly in a lump sum following a "Change in Control of the
Company." For purposes hereof, a "Change in Control of the Company" shall be
deemed to have occurred if (i) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the
"Act")) is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then outstanding securities,
(ii) the stockholders of the Company approve a merger, consolidation, sale or
disposition of all or substantially all of the Company's assets or plan of
liquidation, or (iii) the composition of the Board of Directors of
Warner-Lambert Company (for purposes of this paragraph, the "Board") at any time
during any consecutive twenty-four (24) month period changes such that the
Continuity Directors (as hereinafter defined) cease for any reason to constitute
at least fifty-one percent (51%) of the Board. For purposes of the foregoing
clause (iii), "Continuity Directors" means those members of the Board

11-2

who either (a) were directors at the beginning of such consecutive twenty-four
(24) month period, or (b)(1) filled a vacancy during such twenty-four (24) month
period created by reason of (x) death, (y) a medically determinable physical or
mental impairment which renders the director substantially unable to function as
a director or (z) retirement at the last mandatory retirement age in effect for
at least two (2) years, and (2) were elected, nominated or voted for by at least
fifty-one percent (51%) of the current directors who were also directors at the
commencement of such twenty-four (24) month period.

To the extent that implementation of the Warner-Lambert Enhanced
Severance Plan and the Warner-Lambert Executive Severance Plan requires the
accrual of amounts hereunder, this Plan is hereby amended to include such
amounts under Article 4 or Article 5 hereof, as appropriate.

11.2 Collective Bargaining Units. No modification or amendment of the
Plan shall be applicable to Participants in a collective bargaining unit
represented by a certified or recognized bargaining representative, unless or
until, if at all, an applicable collective bargaining agreement which has been
approved by the Retirement Committee specifically provides otherwise.

11.3 Retirement Committee Actions. The Retirement Committee may
undertake any action with respect to the Plan (including the adoption of
amendments) which (a)(i) does not increase Plan liabilities by an amount in
excess of five million dollars ($5,000,000) and does not increase Plan expense
by an amount in excess of five hundred thousand dollars ($500,000) or (ii) is
required by

11-3

an applicable law, regulation or ruling, (b) can be undertaken by the Board of
Directors under the terms of the Plan, (c) does not involve a termination or
suspension of the Plan, (d) does not affect the limitations contained in this
sentence and (e) does not affect the composition or compensation of the
Retirement Committee.

11.4 Investment Committee Actions. The Investment Committee may
undertake any action with respect to the Plan (including the adoption of
amendments) which (a)(i) does not increase Plan liabilities by an amount in
excess of two million five hundred thousand dollars ($2,500,000) and does not
increase Plan expense by an amount in excess of two hundred fifty thousand
dollars ($250,000) or (ii) is required by an applicable law, regulation or
ruling, (b) can be undertaken by the Board of Directors under the terms of the
Plan, (c) does not involve a termination or suspension of the Plan, (d) does not
affect the limitations contained in this sentence, (e) does not affect the
composition or compensation of the Retirement Committee, (f) does not have a
disproportionate or preferential impact on officers' compensation and (g) does
not significantly impact Plan design. In exercising its rights under this
section, the Investment Committee shall be deemed to exercise a management
prerogative as a delegatee of the Board of Directors, and shall not be deemed a
fiduciary.

11.5 Adoption by Resolution. All actions, including Plan amendments,
which are undertaken by the Board of Directors, Retirement Committee or
Investment Committee shall be authorized by a duly adopted resolution approved

11-4

by the respective body.

11.6 Deemed Amendments. Subject to the restrictions of Section 11.3 and
11.4 hereof or action by the Board of Directors, the Retirement Committee or the
Investment Committee to the contrary, this Plan shall be deemed amended or
modified at the time of amendment or modification of the Savings and Stock Plan
to the extent necessary to (i) provide consistency in the provisions of this
Plan and the Savings and Stock Plan with respect to definitions and their
related operational provisions, and (ii) maintain the relationship between the
benefits provided by this Plan and the Savings and Stock Plan. Amendments or
modifications to the Plan made pursuant to this section shall be effective as of
the effective date of the related amendment or modification to the Savings and
Stock Plan unless the Board of Directors, the Retirement Committee or the
Investment Committee declares otherwise.

12 - 1

ARTICLE 12

Termination or Suspension of the Plan

12.1 Termination. The Company intends to continue the Plan indefinitely;
however, the Board of Directors may at any time terminate the Plan by a
resolution specifying the date of termination.

12.2 Suspension. The Board of Directors may at any time and from time to
time suspend or reduce the rate of Participating Company contributions to the
Plan by a resolution specifying the period of suspension or reduction.

13 - 1

ARTICLE 13

General Provisions

13.1 Plan Not a Contract. The Plan shall not be deemed to constitute a
contract between any company and any Participant, former Participant,
Beneficiary, person in its employ or other person, or a contract for the benefit
of any person, or to be a consideration for, or an inducement or condition of,
the employment of any person, or to give any right to be retained in the employ
of any company, or to interfere with the right of any company to discharge any
person in its employ at any time without regard to the effect which such
discharge shall have, if any, upon his rights under the Plan.

13.2 Nonalienation, etc. No benefits under this Plan to any Participant
or Beneficiary shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, whether voluntary or
involuntary, and any attempt to so anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge the same shall be void, nor shall any such benefits
be in any way liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person entitled to such benefits, nor shall any
benefits be subject to attachment or legal process for or against any such
person. If any such Participant or Beneficiary has been adjudicated bankrupt or
has purported to anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge any such benefits, voluntarily or involuntarily, or if any attempt is
made to subject any such benefits to the debts, contracts, liabilities,
engagements or torts of the person entitled to any such benefits, then the
Investment Committee may, in its discretion, cause such benefits, or any part

13 -2

thereof, to be held or applied for the benefit of or distributed to such
Participant or Beneficiary, or held or applied for the benefit of or distributed
to the spouse, children or other dependents, or any of them, or any other
person, in such manner and in such proportion as the Investment Committee shall
determine and such determination shall be binding and conclusive on all persons,
including the person originally entitled to such benefits and, where applicable,
his Beneficiary.

13.3 Incapacity. If, for any reason, the Investment Committee shall
determine that it is not desirable, because of the minority or other incapacity
(whether or not recognized or recognizable by law) of the person who shall be
entitled to receive any distribution under the Plan, to withhold such
distribution or to make such distribution directly to such person, the
Investment Committee may apply any such distribution for the benefit of such
person in any way that the Investment Committee shall deem advisable or to make
any such distribution to any third person who, in the judgment of the Investment
Committee, will apply such distribution for the benefit of the person entitled
thereto. Such distribution for the benefit of the person entitled thereto, or to
a third person for his benefit, having been made, each Participating Company and
the Investment Committee shall be discharged from all further liability for such
distribution.

13.4 Applicable Law. The provisions of the Plan shall be construed,
administered and governed under the laws of the State of New Jersey (other than
the provisions governing conflict of laws) to the extent not preempted by the
Employee Retirement Income Security Act of 1974.

13 -3

13.5 Quarterly Statements. As soon as practicable after the end of each
calendar quarter, the Investment Committee shall furnish each Participant with a
statement of his participation in the Plan.

13.6 Distributions. All distributions under this Plan shall be subject
to any tax and other laws and statutes, and regulations thereunder, and the
decrees or rulings of any court or any administrative or other regulatory
representative or agency, deemed by the Investment Committee to be applicable.

13.7 Waivers. A Participant or Beneficiary may, by notice in writing to
the Investment Committee, at any time and from time to time, waive his right to
participate in this Plan, subject to the requirements of the Investment
Committee.

13.8 Similar Treatment. All Participants in similar circumstances shall
be treated alike for all purposes of the Plan.

13.9 Claims. If any person shall claim a right to receive any benefit
under the Plan, the Investment Committee shall determine whether such benefit is
permitted or required by the terms of the Plan. If the Investment Committee
shall determine that no such benefit is permitted or required, it shall provide
written notice to such person setting forth the reasons for such determination
in a manner calculated to be understood by the recipient. A person who receives
such notice may, by written request filed with the Investment Committee within
60 days after the receipt of the notice, request a review of such determination
by the Investment Committee. If so requested, the Investment Committee shall
review such

13 - 4

determination and shall notify such person of its decision in writing within 60
days after receipt of such request for review (120 days if special circumstances
require an extension of time), setting forth therein the reasons for its
decision.

13.10 Indemnifications. Each member of the Investment Committee and of
the board of directors of any Participating Company, and each other Employee who
is charged with administrative duties or responsibilities with respect to the
Plan, shall be indemnified by the Participating Companies against liability
imposed on him and against all expenses and costs which may be reasonably
incurred by him in connection with or resulting from any action, suit or
proceeding, or any claim against him, if he shall have been made a party to such
action, suit or proceeding, or such claim shall have been made, by reason of his
having administrative or other duties with respect to the Plan; but such
indemnification shall not apply to matters as to which he shall be finally
adjudged therein to have been liable on account of, or to have been guilty of,
gross negligence or willful misconduct in the performance of his duties with
respect to the Plan. In the case of settlement of any such action, proceeding or
claim before a final adjudication, the right of indemnification shall similarly
exist.

WARNER-LAMBERT COMPANY

<PAGE>

EXHIBIT 12

WARNER-LAMBERT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES

<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- ------
(DOLLARS IN MILLIONS)

<S> <C> <C> <C> <C> <C>
Earnings before income taxes and accounting changes (less
minority interests)..................................... $1,233.4 $1,107.7 $1,018.6 $ 913.1 $318.5
Add:
Interest on indebtedness -- excluding amount
capitalized........................................ 167.0 145.9 122.7 93.7 64.2
Amortization of debt expense......................... .4 .5 .4 .4 .5
Interest factor in rent expense(a)................... 30.7 27.5 26.9 26.2 25.4
-------- -------- -------- -------- ------
Adjusted earnings............................... $1,431.5 $1,281.6 $1,168.6 $1,033.4 $408.6
-------- -------- -------- -------- ------
-------- -------- -------- -------- ------
Fixed Charges:
Interest on indebtedness............................. $ 167.0 $ 145.9 $ 122.7 $ 93.7 $ 64.2
Capitalized interest................................. 8.3 9.6 10.1 9.4 8.6
Amortization of debt expense......................... .4 .5 .4 .4 .5
Interest factor in rent expense(a)................... 30.7 27.5 26.9 26.2 25.4
-------- -------- -------- -------- ------
Total fixed charges............................. $ 206.4 $ 183.5 $ 160.1 $ 129.7 $ 98.7
-------- -------- -------- -------- ------
-------- -------- -------- -------- ------
Ratio of earnings to fixed charges........................ 6.9 7.0 7.3 8.0 4.1(b)
-------- -------- -------- -------- ------
-------- -------- -------- -------- ------
</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>

Warner-Lambert Company and Subsidiaries
Five-year Summary of Selected Financial Data

<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993
- ------------------------------------------------------------------------------------------
(Dollars in millions, except per share amounts)
<S> <C> <C> <C> <C> <C>
RESULTS FOR YEAR:
Net sales $8,180 $7,231 $7,040 $6,417 $5,794
Cost of goods sold 2,408 2,347 2,428 2,155 1,918
Research and development
expense 672 555 501 456 465
Income before income taxes,
minority interests and
accounting changes 1,233 1,177 1,149 1,005 318 (a)
Income before accounting
changes 870 787 740 694 285 (a)
Net income 870 787 740 694 331 (a,b)

Net income per common share - basic:
Income before accounting
changes 3.20 2.90 2.74 2.59 1.06 (a)
Net income 3.20 2.90 2.74 2.59 1.23 (a,b)

Net income per common share - diluted:
Income before accounting
changes 3.11 2.85 2.71 2.57 1.05 (a)
Net income 3.11 2.85 2.71 2.57 1.22 (a,b)
- ------------------------------------------------------------------------------------------
YEAR-END FINANCIAL POSITION:
Current assets $3,297 $2,785 $2,778 $2,515 $2,219
Current liabilities 2,589 2,137 2,425 2,353 2,016
Working capital 708 648 353 162 203
Property, plant and
equipment 2,427 2,168 2,006 1,846 1,599
Total assets 8,031 7,197 6,101 5,533 4,828
Long-term debt 1,831 1,720 634 535 546
Total debt 2,203 2,300 1,529 1,460 1,199
Shareholders' equity 2,836 2,581 2,246 1,816 1,390
- ------------------------------------------------------------------------------------------
COMMON STOCK INFORMATION:
Average number of common
shares outstanding
(in millions) 271.7 271.2 270.0 268.2 270.0
Common stock price per share:
High $152 5/8 $ 80 $ 49 $43 3/8 $38 3/16
Low 69 1/2 44 5/8 36 11/16 30 29 7/8
Year-end 124 3/16 75 48 9/16 38 1/2 33 3/4
Book value per common share 10.42 9.52 8.28 6.75 5.18
Cash dividends per
common share 1.52 1.38 1.30 1.22 1.14
- ------------------------------------------------------------------------------------------
OTHER DATA:
Number of employees
(in thousands) 40 38 37 36 35
Capital expenditures $495 $389 $387 $406 $347
Cash dividends paid 413 374 351 327 308
Depreciation and amortization 275 231 202 181 170
- ------------------------------------------------------------------------------------------
</TABLE>

(a) Includes a net restructuring charge of $525 pretax ($360 after tax or $1.34
per share).
(b) 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."

Warner-Lambert Company and Subsidiaries
Consolidated Statements of Income
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Years Ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------
(Dollars in millions,
except per share amounts)
<S> <C> <C> <C>
Net sales $8,179.8 $7,231.4 $7,039.8
- ---------------------------------------------------------------------
Costs and expenses:
Cost of goods sold 2,407.6 2,346.9 2,427.5
Selling, general and
administrative 3,676.3 3,115.8 2,979.8
Research and development 672.2 554.8 501.2
Other expense (income), net 190.3 37.2 (17.3)
- ---------------------------------------------------------------------
Total costs and expenses 6,946.4 6,054.7 5,891.2
- ---------------------------------------------------------------------
Income before income taxes and
minority interests 1,233.4 1,176.7 1,148.6
Provision for income taxes 363.9 321.2 279.1
Minority interests - 69.0 130.0
- ---------------------------------------------------------------------
Net income $ 869.5 $ 786.5 $ 739.5
- ---------------------------------------------------------------------
Net income per common share:
Basic $ 3.20 $ 2.90 $ 2.74
Diluted $ 3.11 $ 2.85 $ 2.71
- ---------------------------------------------------------------------

Consolidated Statements of Retained Earnings
- ---------------------------------------------------------------------
Years Ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------
(Dollars in millions,
except per share amounts)
Retained earnings at beginning
of year $3,436.2 $3,042.9 $2,654.5
Net income 869.5 786.5 739.5
Cash dividends paid
on common shares (413.1) (374.4) (351.1)
International operations year-
end change (Note 1) - (18.8) -
- ---------------------------------------------------------------------
Retained earnings at end of year $3,892.6 $3,436.2 $3,042.9
- ---------------------------------------------------------------------
Cash dividends per common share $ 1.52 $ 1.38 $ 1.30
- ---------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

<TABLE>
<CAPTION>
Warner-Lambert Company and Subsidiaries
Consolidated Balance Sheets
- ---------------------------------------------------------------------
December 31, 1997 1996
- ---------------------------------------------------------------------
(Dollars in millions)
Assets:
<S> <C> <C>
Cash and cash equivalents $ 756.5 $ 390.8
Short-term investments 16.7 101.5
Accounts receivable, less allowances of
$34.5 in 1997 and $36.6 in 1996 1,160.2 1,148.7
Other receivables 210.3 155.2
Inventories 742.9 647.0
Prepaid expenses and other current assets 410.4 341.6
- ---------------------------------------------------------------------
Total current assets 3,297.0 2,784.8

Investments and other assets 593.8 788.7
Property, plant and equipment 2,427.0 2,168.0
Intangible assets 1,712.7 1,455.8
- ---------------------------------------------------------------------
$ 8,030.5 $ 7,197.3
- ---------------------------------------------------------------------

Liabilities and shareholders' equity:
Short-term debt $ 372.1 $ 579.2
Accounts payable, trade 890.6 613.0
Accrued compensation 186.6 170.3
Other current liabilities 894.0 614.6
Federal, state and foreign income taxes 245.6 159.8
- ---------------------------------------------------------------------
Total current liabilities 2,588.9 2,136.9

Long-term debt 1,831.2 1,720.5
Deferred income taxes 172.7 143.5
Other noncurrent liabilities 602.2 615.4
Shareholders' equity:
Preferred stock - none issued - -
Common stock issued:
1997 and 1996 - 320,660,536 shares 320.7 320.7
Capital in excess of par value 216.7 125.8
Retained earnings 3,892.6 3,436.2
Cumulative translation adjustments (430.0) (236.2)
Treasury stock, at cost:
1997 - 48,436,529 shares;
1996 - 49,456,251 shares (1,164.5) (1,065.5)
- ---------------------------------------------------------------------
Total shareholders' equity 2,835.5 2,581.0
- ---------------------------------------------------------------------
$ 8,030.5 $ 7,197.3
- ---------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

Warner-Lambert Company and Subsidiaries
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
Years Ended December 31, 1997 1996 1995
- --------------------------------------------------------------------------------
(Dollars in millions)
<S> <C> <C> <C>
Operating Activities:
Net income $ 869.5 $ 786.5 $ 739.5
Adjustments to reconcile
net income to net cash
provided by operating activities:

Depreciation and amortization 275.5 230.8 201.9
Gains on sales of businesses - (75.2) (117.0)
Minority interests - 69.0 130.0
Deferred income taxes (27.6) 70.7 91.5
Changes in assets and liabilities,
net of effects from acquisitions/
dispositions of businesses:
Receivables (121.3) (211.3) (171.9)
Inventories (110.1) (23.9) (20.0)
Accounts payable and accrued
liabilities 660.6 108.4 (23.1)
Other, net 17.2 67.3 (31.7)
- ---------------------------------------------------------------------------------
Net cash provided by operating
activities 1,563.8 1,022.3 799.2
- ---------------------------------------------------------------------------------
Investing Activities:
Purchases of investments (17.2) (217.1) (438.5)
Proceeds from maturities/sales of
investments 112.5 500.4 340.8
Capital expenditures (494.8) (389.0) (387.3)
Acquisitions of businesses (229.0) (1,064.8) (34.3)
Proceeds from dispositions of businesses - 137.4 136.1
Other, net (16.8) (80.4) 15.6
- ---------------------------------------------------------------------------------
Net cash used by investing activities (645.3) (1,113.5) (367.6)
- ---------------------------------------------------------------------------------
Financing Activities:
Proceeds from borrowings 1,564.7 2,165.2 1,828.6
Principal payments on borrowings (1,609.4) (1,422.7) (1,766.6)
Purchases of treasury stock (135.2) (138.9) (17.6)
Cash dividends paid (413.1) (374.4) (351.1)
Distributions paid to minority interests - (102.4) (96.5)
Proceeds from stock option exercises 71.9 64.1 61.2
- ---------------------------------------------------------------------------------
Net cash (used) provided by
financing activities (521.1) 190.9 (342.0)
- ---------------------------------------------------------------------------------
Effect of exchange rate changes on
cash and cash equivalents (31.7) (4.7) (11.7)
- ---------------------------------------------------------------------------------
Net increase in cash and cash equivalents 365.7 95.0 77.9
Cash and cash equivalents at beginning
of year 390.8 295.8 217.9
- ---------------------------------------------------------------------------------
Cash and cash equivalents at end of year $ 756.5 $ 390.8 $ 295.8
- ---------------------------------------------------------------------------------
</TABLE>

See notes to consolidated financial statements.

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.

Reclassification - Certain 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
$819.8 in 1997, $670.6 in 1996 and $644.0 in 1995.

Newly issued accounting standards - In June 1997, the Financial Accounting
Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS)
No. 130, "Reporting Comprehensive Income," which establishes standards for
reporting the components of comprehensive income and SFAS No. 131, "Disclosures
about Segments of an Enterprise and Related Information," which replaces
existing segment disclosure requirements and requires reporting certain
financial information regarding operating segments on the basis used internally
by management to evaluate segment performance. The company will adopt SFAS Nos.
130 and 131 in the first quarter of 1998 and year-end 1998, respectively. These
Statements will affect disclosure and presentation in the financial statements
but will have no impact on the company's consolidated financial position,
liquidity, cash flows or results of operations.

Note 2 - Net Income Per Common Share:

In February 1997, the FASB issued SFAS No. 128, "Earnings per Share," (EPS)
which requires dual presentation of basic and diluted EPS for all periods. Basic
EPS is computed by dividing net income by the average number of common shares
outstanding for the period. The diluted EPS computation includes the potential
impact on the average number of common shares outstanding if all common stock
options issued are exercised. The dilutive effect of stock options is computed
using the treasury stock method which assumes the repurchase of common shares by
the company at the average market price for the period. The Statement was
effective December 31, 1997.

<TABLE>
<CAPTION>
The EPS computations were as follows:
(Shares in thousands)
- ---------------------------------------------------------------------
1997 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C> <C>
Basic EPS:
Net income $869.5 $786.5 $739.5
Average common shares outstanding 271,729 271,220 270,043
- ---------------------------------------------------------------------
$3.20 $2.90 $2.74
- ---------------------------------------------------------------------
Diluted EPS:
Net income $869.5 $786.5 $739.5

Average common shares outstanding 271,729 271,220 270,043
Impact of potential future stock
option exercises, net of shares
repurchased 8,001 4,474 2,572
- ---------------------------------------------------------------------
Average common shares outstanding -
assuming dilution 279,730 275,694 272,615
- ---------------------------------------------------------------------
$3.11 $2.85 $2.71
- ---------------------------------------------------------------------
</TABLE>

Note 3 - Interest Income and Interest Expense:

Interest income and interest expense are included in Other expense (income),
net. Interest income totaled $41.7, $54.8 and $49.7 and interest expense totaled
$167.0, $145.9 and $122.7 in 1997, 1996 and 1995, respectively. Total interest
paid was $151.9, $140.7 and $112.8 and interest costs of $8.3, $9.6 and $10.1
have been capitalized and included in Property, plant and equipment for those
respective periods.

Note 4 - Acquisitions and Divestitures:

On May 21, 1997, Warner-Lambert Company purchased the remaining 66 percent of
the Jouveinal group it did not already own. In January 1993, Warner-Lambert
initially acquired a 34 percent interest in Jouveinal, a privately held French
pharmaceutical group. Prior to the acquisition of the remaining interest,
Jouveinal was accounted for as an equity method investment. Other smaller
acquisitions were also completed during the second quarter of 1997, the effects
of which were not material. Total consideration, including estimated acquisition
costs, net of cash acquired and proceeds from the sale of certain acquired
assets, was approximately $235.0 for these acquisitions. The transactions were
financed with a long-term credit facility.

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. Warner-Lambert entered into an agreement in
December 1993 with Wellcome plc to establish this joint venture with operations
in various countries to develop and market a broad range of over-the-counter
(OTC) products. The joint venture commenced operations in 1994. Glaxo plc
acquired Wellcome plc in 1995 and changed the name of the combined company to
Glaxo Wellcome plc.

In April 1995, Warner-Lambert acquired Adams S.A., a privately held manufacturer
of confectionery products in Argentina for cash consideration, net of cash
acquired, of $34.3.

All acquisitions have been accounted for under the purchase method. The excess
of purchase price over the estimated fair values of net tangible and
identifiable intangible assets acquired has been treated as goodwill. Net assets
and results of operations of all acquisitions, except Warner Wellcome, have been
included in the consolidated financial statements since the effective
acquisition dates. 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 for the
year ended December 31, 1996. 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 for the year ended December 31, 1995. On an
after-tax basis, the gain was $82.4 or $.31 per share.

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 (gains) losses resulting
from foreign currency transactions and translation adjustments related to
subsidiaries operating in highly inflationary countries amounted to $(18.2),
$7.6 and $14.3 in 1997, 1996 and 1995, respectively. The cumulative translation
adjustments component of shareholders' equity was charged with $193.8, $19.9 and
$35.3 in 1997, 1996 and 1995, respectively. The increase in the 1997

charge was due to the strengthening of the U.S. dollar versus several
international currencies during the year.

Note 6 - Inventories:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C>
Raw materials $167.7 $130.9
Finishing supplies 53.1 52.0
Work in process 95.6 69.2
Finished goods 426.5 394.9
- ---------------------------------------------------------------------
$742.9 $647.0
- ---------------------------------------------------------------------
</TABLE>

Note 7 - Property, Plant and Equipment:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C>
Land $ 38.6 $ 39.6
Buildings 1,245.7 1,187.4
Machinery, furniture and fixtures 2,684.6 2,430.6
- ---------------------------------------------------------------------
3,968.9 3,657.6
Less accumulated depreciation (1,541.9) (1,489.6)
- ---------------------------------------------------------------------
$ 2,427.0 $2,168.0
- ---------------------------------------------------------------------
</TABLE>

Depreciation expense totaled $218.8, $199.1 and $186.3 in 1997, 1996 and 1995,
respectively.

Note 8 - Intangible Assets:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C>
Goodwill $1,267.5 $1,001.6
Trademarks and other intangibles 602.3 564.1
- --------------------------------------------------------------------
1,869.8 1,565.7
Less accumulated amortization (157.1) (109.9)
- ---------------------------------------------------------------------
$1,712.7 $1,455.8
- ---------------------------------------------------------------------
</TABLE>

The increase in the intangible assets balance was primarily related to the
Jouveinal acquisition discussed in Note 4.

Amortization expense totaled $56.7, $31.7 and $15.6 in 1997, 1996 and 1995,
respectively.

Note 9 - Debt:

The components of Short-term debt were as follows:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C>
Commercial paper $ - $172.8
Notes payable 209.7 401.0
Current portion of long-term debt 162.4 5.4
- ---------------------------------------------------------------------
$372.1 $579.2
- ---------------------------------------------------------------------
</TABLE>

The weighted-average interest rate, excluding the current portion of long-term
debt, was 6.2 percent and 6.6 percent for commercial paper and notes payable
outstanding at December 31, 1997 and 1996, respectively. The company has
lines-of-credit arrangements with numerous banks with interest rates generally
equal to the best prevailing rate. At December 31, 1997, worldwide unused lines
of credit amounted to $2.4 billion. The 1997 current portion of long-term debt
includes $150.0 notes due 1998. During 1997, the company paid the short-term
portion of commercial paper borrowings and reclassified a $200.0 note payable to
long-term.

The components of Long-term debt were as follows:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1997 1996
- ---------------------------------------------------------------------
<S> <C> <C>
Commercial paper $ 990.0 $1,250.5
Variable rate term loan 354.7 -
Variable rate master note 200.0 -
6 5/8% notes due 2002 199.7 199.7
8% notes due 1998 - 150.0
7.6% industrial revenue bonds due 2014 24.6 24.6
Other 62.2 95.7
- ---------------------------------------------------------------------
$1,831.2 $1,720.5
- ---------------------------------------------------------------------
</TABLE>

At December 31, 1997, all commercial paper and the master note have been
classified as long-term debt due to the company's intent and ability to
refinance on a long-term basis. These instruments are supported by lines of
credit. At December 31, 1997, the weighted-average interest rate was 5.8 percent
for commercial paper outstanding. The interest rate on the master note at
December 31, 1997 was 5.7 percent.

The variable rate term loan has an annual interest rate based on local interbank
rates plus a margin. The weighted-average interest rate at December 31, 1997 was
4.4 percent. A portion of the loan matures in 2001 with the balance due in 2002.

The aggregate annual maturities of long-term debt at December 31, 1997, payable
in each of the years 1999 through 2002, excluding short-term borrowings
reclassified to long-term are $24.2, $12.3, $64.5 and $503.8, respectively.

As of December 31, 1997, the company had shelf registrations filed with the
Securities and Exchange Commission under which it could issue up to $850.0 of
debt securities for general corporate purposes. In January 1998, the company
refinanced certain other debt by issuing $250.0 of 5 3/4 percent notes due 2003
and $250.0 of 6 percent notes due 2008 leaving $350.0 of debt registered under
the shelf registration.

Note 10 - Financial Instruments:

The estimated fair values of financial instruments were as follows:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
December 31, 1997 1996
- ---------------------------------------------------------------------
Carrying Fair Carrying Fair
( ) = Liability Amount Value Amount Value
- ---------------------------------------------------------------------
<S> <C> <C> <C> <C>
Investment securities $ 168.3 $ 168.7 $ 247.0 $ 246.8
Long-term debt (1,831.2) (1,836.9) (1,720.5) (1,727.4)
Foreign exchange
contracts (.7) 12.5 - 17.4
- ---------------------------------------------------------------------
</TABLE>

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:

<TABLE>
<CAPTION>
- -------------------------------------------------------------------
December 31, 1997 1996
- -------------------------------------------------------------------
<S> <C> <C>
Cash and cash equivalents $ 28.8 $ 10.1
Short-term investments 16.0 99.9
Investments and other assets 123.5 137.0
- -------------------------------------------------------------------
$168.3 $247.0
- -------------------------------------------------------------------
</TABLE>

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 1997 and 1996.
These securities are classified as "held-to-maturity." Equity securities,
categorized as "available-for-sale," were immaterial.

As of December 31, 1997, the long-term investments of $123.5 included $18.1 of
interest-bearing, mortgage-backed securities maturing beyond 10 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
risks.

The company's foreign exchange risk management objectives are to stabilize cash
flows and reported income from the effect of foreign currency fluctuations and
reduce the overall foreign exchange exposure to insignificant levels. 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,
intercompany lending, net investments in foreign subsidiaries and anticipated
net income of foreign affiliates. The company continually monitors its exposures
and enters into foreign exchange contracts for periods of up to two years to
hedge such exposures.

At December 31, 1997 and 1996, the company had forward or purchased option
foreign exchange contracts with contractual amounts of $514.2 and $375.2,
respectively. These contracts principally exchange Japanese yen, German marks,
British pounds and French francs for U.S. dollars; Canadian dollars for Italian
lira and British pounds; and U.S. dollars for Irish punts in 1997; and Japanese
yen, British pounds, German marks and French francs for U.S. dollars; and
Canadian dollars for Italian lira and British pounds in 1996.

The company's interest rate risk management objectives are to manage the
interest cost of debt by using a mix of long-term fixed rate and short-term
variable rate instruments and entering into certain interest rate swap
agreements. Interest rate swap agreements were not material during 1997 or 1996.

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.

Gains and losses related to derivatives designated as effective hedges of firm
commitments are deferred and recognized in income as part of, and concurrent
with, the underlying hedged transaction. Other derivative instruments, which are
primarily related to hedging foreign currency denominated assets and liabilities
and anticipated net income of foreign subsidiaries, are

marked to market on a current basis with gains and losses recognized in Other
expense (income), net. Cash flows associated with derivative financial
instruments are classified as operating in the Consolidated Statements of Cash
Flows.

Note 11 - Leases:

The company rents various facilities and equipment. Rental expense amounted to
$92.1, $82.6 and $80.8 in 1997, 1996 and 1995, respectively.

The future minimum rental commitments under noncancellable capital and operating
leases at December 31, 1997 are summarized below:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Capital Operating
- ---------------------------------------------------------------------
<S> <C> <C>
1998 $ 3.5 $ 53.1
1999 15.5 35.9
2000 2.1 19.4
2001 3.5 12.7
2002 1.4 12.9
Remaining years 6.2 112.9
- --------------------------------------------------------------------
Total minimum lease payments 32.2 246.9
Less minimum sublease income - (30.2)
------------------------
Net minimum lease payments 32.2 $216.7
-------------------------
Less amount representing interest (6.5)
- -----------------------------------------------------
Present value of minimum lease payments $25.7
- -----------------------------------------------------
</TABLE>

Property, plant and equipment included capitalized leases of $30.2, less
accumulated depreciation of $3.5, at December 31, 1997 and $33.5, less
accumulated depreciation of $3.5, at December 31, 1996. Long-term debt included
capitalized lease obligations of $24.2 and $27.1 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:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Plans in Which
Plans in Accumulated
Which Assets Exceed Benefits
Accumulated Benefits Exceed Assets
- ----------------------------------------------------------------------
1997 1996 1997 1996
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Plan assets at fair value $2,280.0 $2,044.6 $ 22.6 $ 23.8
(primarily invested in
equities and bonds)
- ----------------------------------------------------------------------
Actuarial present value of
accumulated benefit
obligation:
Vested 1,914.8 1,792.8 118.3 107.4
Nonvested 43.3 40.6 18.2 12.6
- ----------------------------------------------------------------------
1,958.1 1,833.4 136.5 120.0
Estimated future
salary increases 177.1 172.9 26.7 29.1
- ----------------------------------------------------------------------
Projected benefit
obligation 2,135.2 2,006.3 163.2 149.1
- ----------------------------------------------------------------------
Plan assets in excess of
(less than) projected
benefit obligation 144.8 38.3 (140.6) (125.3)
Unrecognized net
(asset) obligation (4.0) (4.7) 3.3 4.0
Unrecognized prior
service cost 38.4 43.9 .6 .7
Unrecognized net
actuarial (gain) loss (8.0) 67.2 36.5 27.5
Minimum liability
adjustment - - (18.3) (12.5)
- ----------------------------------------------------------------------
Net pension asset
(liability) included
in the Consolidated
Balance Sheets $ 171.2 $ 144.7 $(118.5) $(105.6)
- ----------------------------------------------------------------------
</TABLE>

Foreign plan assets at fair value included in the preceding table were $760.0 in
1997 and $707.3 in 1996. The foreign plan projected benefit obligation was
$710.6 in 1997 and $690.9 in 1996.

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, 1997, 1996 and 1995. The
weighted-average discount rate was 7.75 percent, 8.0 percent and 7.75 percent
for 1997, 1996 and 1995, respectively. Assumptions for foreign plans did not
vary significantly from the U.S. plans.

Pension costs for the plans included the following components:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Years Ended December 31, 1997 1996 1995
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Service cost - benefits earned
during the year $ 54.4 $ 53.8 $ 49.3
Interest cost on projected
benefit obligation 156.0 153.3 144.4
Return on assets (319.7) (237.9) (276.7)
Net amortization and deferral 155.4 84.2 108.8
- ----------------------------------------------------------------------
Net pension expense $ 46.1 $ 53.4 $ 25.8
- ----------------------------------------------------------------------
</TABLE>

Net pension expense attributable to foreign plans included in the above was
$14.8, $17.5 and $22.2 in 1997, 1996 and 1995, respectively.

Note 13 - Other Postretirement Benefits:

The company provides other postretirement benefits, primarily health insurance,
to qualifying domestic retirees and their dependents. The company is generally
self-insured for these costs and the plans are funded on a pay-as-you-go basis.
These plans are currently noncontributory for domestic employees who retired
prior to January 1, 1992 and the company has implemented a cap which limits
future contributions for medical and dental coverage under these plans.
Effective January 1, 1998 the company expanded the health insurance program
to include all domestic employees who have retired after December 31, 1991
and their dependents, and future retirees meeting minimum age and service
requirements. These benefits are contributory, and also contain provisions
that limit future company cost. This amendment increased the accumulated
postretirement benefit obligation by $88.8 as of December 31, 1997. This
amount will be amortized to expense over the average remaining employee service
period of six years to reach eligibility beginning in 1998.

The net periodic postretirement benefit cost for domestic retirees amounted to
$17.5, $17.0 and $17.4 in 1997, 1996 and 1995, 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:

<TABLE>
<CAPTION>
- ------------------------------------------------------------------
December 31, 1997 1996
- ------------------------------------------------------------------
<S> <C> <C>
Accumulated postretirement benefit
obligation $273.1 $186.0
Unrecognized prior service cost (96.5) (8.3)
Unrecognized net actuarial loss (51.6) (50.4)
- ------------------------------------------------------------------
Accrued postretirement benefit cost
recognized in the Consolidated
Balance Sheets $125.0 $127.3
- ------------------------------------------------------------------
</TABLE>

The weighted-average discount rate used to develop the accumulated
postretirement benefit obligation was 7.75 percent, 8.0 percent and 7.75 percent
for 1997, 1996 and 1995, respectively. As a result of the amendment discussed
above, separate assumed health care cost trend rates were used. For those
employees retiring before January 1, 1992, the assumed health care cost trend
rate was 9.8 percent in 1997 declining to 5.5 percent over eight years for
retirees under age 65. For those 65 and over, a rate of 6.3 percent was used in
1997 declining to 5.5 percent over three years. For those employees retiring
after December 31, 1991, rates of either 9.5 percent or 7.0 percent were used in
1997 depending on coverage option, with both rates declining to 5.0 percent over
seven years. A one percentage point increase in the health care cost trend rates
in each year would increase the accumulated postretirement benefit obligation as
of December 31, 1997 by $13.1 and the net periodic postretirement benefit cost
for 1997 by $.6.

Other postretirement benefits for foreign plans expensed under the cash method
in 1997, 1996 and 1995 were not material.

Note 14 - Income Taxes:

The components of income before income taxes and minority interests were:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Years Ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C> <C>
U.S. and Puerto Rico $ 560.5 $ 515.1 $ 485.6
Foreign 672.9 661.6 663.0
- ---------------------------------------------------------------------
$1,233.4 $1,176.7 $1,148.6
- ---------------------------------------------------------------------

The Provision for income taxes consisted of:
- ---------------------------------------------------------------------
Years Ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------
Current:
Federal $132.9 $ 39.2 $ 17.6
Foreign 226.6 194.1 163.5
State and Puerto Rico 32.0 17.2 6.5
- ---------------------------------------------------------------------
391.5 250.5 187.6
- ---------------------------------------------------------------------
Deferred:
Federal (26.7) 25.8 30.5
Foreign (1.9) 39.5 55.3
State and Puerto Rico 1.0 5.4 5.7
- ---------------------------------------------------------------------
(27.6) 70.7 91.5
- ---------------------------------------------------------------------
Provision for income taxes $363.9 $321.2 $279.1
- ---------------------------------------------------------------------
</TABLE>

The tax effects of significant temporary differences which comprise the deferred
tax assets and liabilities were as follows:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
December 31, 1997 1996
- ----------------------------------------------------------------------
Assets Liabilities Assets Liabilities
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C>
Restructuring reserves $ 62.4 $ - $ 82.3 $ -
Compensation/benefits 103.4 - 80.5 -
Postretirement/post-
employment obligations 60.3 - 60.2 -
Inventory 42.2 10.8 31.2 10.0
Foreign tax loss and
other carryforwards 42.2 - 27.4 -
Research tax credit
carryforwards 30.2 - 25.3 -
Pensions 14.2 61.0 12.5 54.4
Property, plant and
equipment 30.3 200.0 11.9 193.6
Intangibles - 80.0 - 37.4
Other 158.5 60.4 138.1 56.6
- ---------------------------------------------------------------------
543.7 412.2 469.4 352.0
Valuation allowances (28.9) - (28.8) -
- ---------------------------------------------------------------------
$514.8 $412.2 $440.6 $352.0
- ---------------------------------------------------------------------
</TABLE>

The research tax credit carryforwards of $30.2 expire in 2010, 2011 and 2012.

Income taxes of $246.5, $205.1 and $173.6 were paid during 1997, 1996 and 1995,
respectively. Prepaid expenses and other current assets included deferred income
taxes of $206.4 and $154.4 at December 31, 1997 and 1996, respectively.
Investments and other assets included deferred income taxes of $99.8 and $94.2
at December 31, 1997 and 1996, 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, 1997.

Earnings of foreign subsidiaries considered to be reinvested for an indefinite
period at December 31, 1997 were approximately $1.3 billion. 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.

The Provision for income taxes in 1997 was reduced by 1.4 percentage points due
to the favorable tax impact of the liquidation of a foreign affiliate.

As of December 31, 1997, Warner-Lambert's U.S. federal income tax returns
through 1992 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:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Years Ended December 31, 1997 1996 1995
- ---------------------------------------------------------------------
<S> <C> <C> <C>
U.S. statutory tax rate 35.0% 35.0% 35.0%
Tax exemption for Puerto Rico operations (3.3) (6.2) (4.6)
Foreign income subject to increased
(reduced) tax rates including
taxes on repatriation .9 .5 (1.9)
U.S. research tax credit, net (1.2) (.6) (.5)
State and local taxes, net 1.0 1.0 .7
Other items, net (2.9) (.7) (1.3)
Effect of minority interests - (1.7) (3.1)
- ---------------------------------------------------------------------
Effective tax rate 29.5% 27.3% 24.3%
- ---------------------------------------------------------------------
</TABLE>

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, $320.7 and $160.3 at December 31, 1997, 1996 and
1995, respectively. On April 23, 1996, the shareholders approved an increase in
the number of shares authorized from 300 million to 500 million in order to
effectuate a two-for-one stock split effective May 3, 1996.

Changes in certain components of shareholders' equity are summarized as follows:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Treasury Stock
Capital in ----------------------
Excess of Shares in
Par Value Thousands Cost
- ---------------------------------------------------------------------
<S> <C> <C> <C>
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
adjustments 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
adjustments on equity securities 3.8 - -
- ---------------------------------------------------------------------
Balance at December 31, 1996 125.8 (49,456) (1,065.5)
Shares repurchased, at cost - (1,436) (135.2)
Employee benefit plans 101.9 2,455 36.2
Unrealized market value
adjustments on equity securities (11.0) - -
- ---------------------------------------------------------------------
Balance at December 31, 1997 $ 216.7 (48,437) $(1,164.5)
- ---------------------------------------------------------------------
</TABLE>

Pursuant to the company's Stockholder Rights Plan, as amended March 25, 1997, a
right is attached to each outstanding share of common stock. In the event that
any person or group acquires 15 percent or more of the outstanding common
shares, or acquires the company in a merger or other business combination, 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 March 25, 2007 and can be redeemed for $.01 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, 1997 granted under
various stock plans. Future grants may be issued under 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. Expense of $13.3, $9.2 and $5.0 for restricted stock and
performance awards was charged to income in 1997, 1996 and 1995, respectively.
Had compensation cost been recorded as an alternative provided by FASB Statement
No. 123, "Accounting for Stock-Based Compensation," for options granted in 1997,
1996 and 1995, the company's net income and basic earnings per share would have
been reduced by $29.2 or $.11 per share in 1997, 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 would be 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 1997: dividend yield of 2.81 percent; expected volatility of
20.59 percent; risk free interest rate of 6.21 percent; and expected life of 5.9
years. Assumptions did not vary significantly for prior years.

Transactions involving stock options are summarized as follows:

<TABLE>
<CAPTION>
- ---------------------------------------------------------------------
Weighted-
Number Average
of Exercise
Shares Price
- ---------------------------------------------------------------------
<S> <C> <C>
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
Granted 4,818,730 87.16
Exercised (2,390,549) 30.10
Forfeited (442,077) 63.15
- ---------------------------------------------------------------------
Stock options outstanding, December 31, 1997 22,815,217 50.26
- ---------------------------------------------------------------------
Weighted-average fair value of stock options:
Granted during 1995 9.99
Granted during 1996 13.81
Granted during 1997 20.97
Shares available for annual stock award
grants at:
December 31, 1995 15,757,512
December 31, 1996 5,290,898
December 31, 1997 5,737,352
- ----------------------------------------------------------------------
</TABLE>

The following table summarizes outstanding and exercisable stock options as of
December 31, 1997:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
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
- ----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$18-$45 14,448,817 5.6 $ 35.98 11,029,958 $34.98
46- 70 2,812,680 8.4 55.43 673,948 55.47
71- 95 5,418,705 9.1 83.87 225,984 72.38
96- 144 135,015 9.6 121.77 - -
- ----------------------------------------------------------------------
18- 144 22,815,217 6.8 50.26 11,929,890 36.85
- ----------------------------------------------------------------------
</TABLE>

Note 17 - Contingencies and Environmental Liabilities:

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.

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 environmental matters mentioned
above which are probable and reasonably estimable are adequately accrued.
Although it is not possible to predict with certainty the outcome of these
matters 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.

Note 18 - 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.

The company's pharmaceutical products are promoted primarily to health care
professionals and are sold either directly or through wholesalers. Consumer
Health Care products are promoted principally through consumer advertising and
promotional programs. They are sold principally to drug wholesalers, pharmacies,
food stores, mass merchandisers, physician supply houses and hospitals.
Confectionery products are promoted primarily through consumer advertising and
in-store promotions and are sold directly to food stores, pharmacies and mass
merchandisers which in turn sell to consumers.

In 1997, 60 percent of Pharmaceutical sales and 52 percent of Consumer Health
Care sales were from the U.S. and 48 percent of Confectionery sales were from
the Americas and Far East. The seven largest markets outside the U.S. were
Germany, Japan, France, Canada, the United Kingdom, Mexico and Brazil. Sales in
these markets accounted for approximately 60 percent of international sales with
no one country accounting for more than 12 percent.

Industry Segments

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Research and
Net Sales (a) Operating Profit Development Expense
- --------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pharmaceutical $3,620 $2,505 $2,356 $1,386 $1,014(d) $ 822 $(573) $(465) $(408)
Consumer Health Care 2,691 2,797 2,788 612 697 767(c) (67) (61) (63)
Confectionery 1,869 1,929 1,896 224 293 293 (32) (29) (30)
------------------------
Research and develop-
ment expense (672) (555) (501) $(672) $(555) $(501)
- --------------------------------------------------------------------------------------------------
Net sales and
operating profit $8,180 $7,231 $7,040 1,550 1,449 1,381
- --------------------------------------------
Corporate expense (b) (316) (272) (232)
- --------------------- -------------------------
Income before income
taxes and minority
interests $1,234 $1,177 $1,149
- --------------------- -------------------------
- --------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
Depreciation and
Identifiable Assets Amortization Capital Expenditures
- --------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pharmaceutical $3,214 $2,513 $2,274 $122 $ 97 $ 95 $258 $185 $176
Consumer Health Care 2,686 2,795 1,766 96 79 56 112 85 88
Confectionery 1,192 1,240 1,100 49 46 41 81 102 100
- --------------------------------------------------------------------------------------------------
Subtotal 7,092 6,548 5,140 267 222 192 451 372 364
Corporate 939 649 961 8 9 10 44 17 23
- --------------------------------------------------------------------------------------------------
Total $8,031 $7,197 $6,101 $275 $231 $202 $495 $389 $387
- --------------------------------------------------------------------------------------------------
</TABLE>

Geographic Areas

<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------
Net Sales (a) Operating Profit Identifiable Assets
- --------------------------------------------------------------------------------------------------
1997 1996 1995 1997 1996 1995 1997 1996 1995
- --------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
United States $4,469 $3,342 $3,196 $1,106 $1,058(d)$ 909(c)$3,418 $2,940 $2,093
Europe, Middle East
and Africa 2,998 2,218 2,175 865 551 536 2,481 2,160 1,903
Americas and Far
East 2,112 2,150 2,097 350 430 432 1,343 1,499 1,160
Intergeographic area
elimination (e) (1,399) (479) (428) (99) (35) 5 (150) (51) (16)
- --------------------------------------------------------------------------------------------------
Subtotal 8,180 7,231 7,040 2,222 2,004 1,882 7,092 6,548 5,140

Research and develop-
ment expense (672) (555) (501)
- --------------------------------------------------------------------------------------------------
Total $8,180 $7,231 $7,040 $1,550 $1,449 $1,381 $7,092 $6,548 $5,140
- --------------------------------------------------------------------------------------------------
</TABLE>
(a) Export sales and intersegment sales were not material. Intergeographic area
sales for the years ended December 31, 1997, 1996 and 1995, respectively
were: United States - $246, $169 and $173, Europe, Middle East and Africa -
$966, $219 and $195, and Americas and Far East - $187, $91 and $60.
(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.
(e) Products are transferred between geographic areas based on prevailing
economic and market factors.

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,
suppliers 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.

Melvin R. Goodes Ernest J. Larini
Chairman and Chief Vice President and
Executive Officer Chief Financial Officer

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, of 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, 1997 and 1996, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1997, 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 26, 1998

Quarterly Financial Information:

<TABLE>
<CAPTION>
(Dollars in millions, except per share amounts)
- ----------------------------------------------------------------------------
1997 Quarters
- ----------------------------------------------------------------------------
First Second Third Fourth
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Net sales $1,777.4 $1,966.7 $2,108.3 $2,327.4
Gross profit 1,228.2 1,373.1 1,494.3 1,676.6
Net income 204.1 231.4 198.3 235.7
Net income per common share:
Basic .75 .85 .73 .87
Diluted .73 .83 .71 .84
- ----------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
1996 Quarters
- ----------------------------------------------------------------------------
First Second Third Fourth
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
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:
Basic .92 .79 .56 .63
Diluted .91 .77 .55 .62
- ----------------------------------------------------------------------------
</TABLE>

First quarter 1996 results include a gain from the sale of Warner Chilcott
Laboratories of $45.7 after tax or $.17 per share.

Market Prices of Common Stock and Dividends:

<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------
1997 Range of Prices 1996 Range of Prices
- ----------------------------------------------------------------------------
Dividends Dividends
High Low per Share High Low per Share
- ----------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
First quarter $ 93 1/4 $ 69 1/2 $.38 $54 $44 5/8 $.345
Second quarter 125 1/2 81 .38 57 3/4 52 1/8 .345
Third quarter 147 1/4 124 5/16 .38 66 1/8 49 3/8 .345
Fourth quarter 152 5/8 108 1/2 .38 80 61 7/8 .345
- ----------------------------------------------------------------------------
</TABLE>

Research and development expenditures, presented in graphic format, were $464.9
in 1993, $456.0 in 1994, $501.2 in 1995, $554.8 in 1996 and $672.2 in 1997.

Net sales, presented in graphic format, were $5,793.7 in 1993, $6,416.8 in 1994,
$7,039.8 in 1995, $7,231.4 in 1996 and $8,179.8 in 1997.

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS

NET SALES
- ---------
Sales in 1997 of $8,180 million were 13 percent higher than in 1996. Sales
increased 17 percent adjusting for the unfavorable impact of foreign exchange
rate changes. Unit volume grew by 16 percent with price increases adding 1
percent to sales growth.

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 business in the first quarter of 1996 and
PRO toothbrush business in the third quarter of 1995. 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.

On a geographic basis, U.S. sales increased $1,049 million or 33 percent to
$4,223 million in 1997. International sales decreased $101 million or 2 percent
to $3,957 million. At constant exchange rates, international sales increased 5
percent. U.S. sales in 1996 increased $150 million or 5 percent to $3,173
million from 1995. Adjusted for the Warner Chilcott divestiture, U.S. sales
increased 9 percent in 1996. International sales increased $41 million or 1
percent to $4,058 million in 1996, 6 percent at constant exchange rates.

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 1997 and 1996 represent the
calendar years ended December 31 and references to 1995 represent the fiscal
year ended November 30.

Pharmaceutical Products
- -----------------------
(Dollars in millions) 1997 1996 1995
------------- ------------ -------
Net Sales $ 3,620 +45% $ 2,505 +6% $ 2,356

Pharmaceutical sales in the U.S. increased 84 percent to $2,170 million in 1997.
The sales increase was attributable to the successful 1997 launches of the
cholesterol-lowering agent LIPITOR and the type 2 diabetes drug REZULIN. Other
pharmaceutical products in the U.S., including the anticonvulsant DILANTIN, the
cardiovascular drug ACCUPRIL and the oral contraceptive LOESTRIN, experienced
sales declines due to an adjustment of wholesaler inventory levels during 1997.

International pharmaceutical sales increased 10 percent to $1,450 million in
1997, 19 percent at constant exchange rates. The increase was attributable to
the 1997 launch of LIPITOR in several countries and the May 1997 acquisition of
the remaining 66 percent of the Jouveinal group that the company did not already
own. Jouveinal sales of $105 million are included in the company's 1997 sales.
Prior to April 30, 1997 Jouveinal sales were not reflected in reported
Warner-Lambert sales results since the company's 34 percent interest in the
Jouveinal group was accounted for using the equity method.

LIPITOR achieved worldwide sales of $865 million during 1997. The company began
marketing LIPITOR in the U.S. in February 1997 and by year-end in several
additional countries including Canada, the United Kingdom and Germany. The
company expects to begin selling LIPITOR in several additional countries during
1998, including France. Warner-Lambert co- promotes LIPITOR through a ten-year
marketing agreement with Pfizer Inc. The agreement includes a quid-pro-quo
provision giving Warner-Lambert the right to co-promote one of Pfizer's
products.

REZULIN achieved worldwide sales of $420 million during 1997. Warner- Lambert
markets REZULIN with Sankyo Company, Ltd., from whom the company licenses the
product for North America and other areas. REZULIN was first marketed in March
1997 in the U.S. for treatment of type 2 diabetes patients inadequately
controlled by insulin. On August 4, 1997, the company announced that REZULIN
received clearance by the Food and Drug Administration (FDA) for use as either
monotherapy or combination therapy with other commonly used agents which made
REZULIN available to a broad range of type 2 diabetes patients. On November 3,
1997, the company initiated changes in the prescribing information for REZULIN.
These changes were made in response to rare reports during marketed use of
hepatic injuries, which are usually reversible, and extremely rare reports of
hepatic failures, which could result in liver transplants or death. The company
continued to review the safety experience with REZULIN (including worldwide
reports of adverse events) following the November 3rd announcement. Based on
this review, on December 1, 1997, the company announced additional labeling
changes for REZULIN which prominently recommend that physicians monitor patients
more frequently for signs of liver dysfunction. While the reports to date (both
prior to the December 1st announcement and thereafter) do not indicate a greater
incidence of hepatic events than was seen in the clinical trials which resulted
in priority review and approval by the FDA, the labeling changes were made to
minimize as much as

possible the risk for these very rare but potentially serious adverse liver
events. The company does not believe that the labeling changes will appreciably
diminish the population of patients eligible for this important medication.

With the growth of these new products, pharmaceutical segment sales will
represent a significantly greater percentage of the company's total sales,
particularly in the U.S. and to a lesser degree in international markets.

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 in 1996
included the add-on antiepileptic NEURONTIN, LOESTRIN, ACCUPRIL and DILANTIN.

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 in 1996 were ACCUPRIL and NEURONTIN.

Consumer Health Care Products
- -----------------------------
(Dollars in millions) 1997 1996 1995
------------- ------------- -------
Net Sales $ 2,691 -4% $ 2,797 -% $ 2,788

Consumer health care sales in the U.S. of $1,411 million were essentially
unchanged for 1997. U.S. shaving products sales increased 22 percent to
$199 million in 1997 due to the launch of the PROTECTOR shaving system and
the newly designed SLIM TWIN disposable razor.

International consumer health care sales fell 8 percent to $1,280 million for
1997, or 1 percent at constant exchange rates. In mid-1996 the Glaxo Wellcome
Warner-Lambert joint venture agreement was revised to include ZOVIRAX cold sore
cream. Therefore, ZOVIRAX sales are no longer recorded in the company's
consolidated sales since the company uses the equity method of accounting for
this joint venture. If international sales of the Glaxo Wellcome Warner-Lambert
joint venture were consolidated, the decline in international sales would have
been positively impacted by 2 percentage points.

International shaving products sales decreased 6 percent to $540 million in 1997
but increased 2 percent at constant rates. The negative currency impact related
to shaving products sales is due to weakness in the Japanese yen and the German
mark. International sales of the company's TETRA pet care products business fell
17 percent to $118 million, or 7 percent at constant exchange rates. This
decline was primarily attributable to Japan, where sales fell due to market
weakness and the decrease in the value of the yen.

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 SUDAFED cold
medication, NIX head lice medication and the company's shaving products.

International consumer health care sales decreased 2 percent in 1996 to $1,394
million. Adjusted for the PRO divestiture in the third quarter of 1995 and the
impact of exchange, sales increased 4 percent in 1996. Products with significant
international sales growth included the company's shaving products, LISTERINE
antiseptic mouthwash, NIX and ACTIFED cold medication.

Confectionery Products
- ----------------------
(Dollars in millions) 1997 1996 1995
------------- ------------- -------
Net Sales $ 1,869 -3% $ 1,929 +2% $ 1,896

Confectionery sales in the U.S. increased 9 percent to $642 million in 1997
primarily due to the launches of DENTYNE Ice chewing gum, HALLS Zinc Defense
cold season dietary supplement and CERTS Powerful Mints breath freshener.

International confectionery sales were $1,227 million in 1997, a decrease of 8
percent or 4 percent at constant exchange rates. The international sales decline
was primarily attributable to Japan, where sales fell due to intense
competition, market weakness and the decrease in the value of the yen and was
partly attributable to the weakness in most European currencies.

Confectionery sales in the U.S. increased 1 percent to $589 million in
1996.

International confectionery sales increased 2 percent in 1996 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 cough tablets, CHICLETS candy-coated gum and DENTYNE
chewing gum.

COSTS AND EXPENSES
- ------------------
Cost of goods sold increased 3 percent in 1997 and fell 3 percent in 1996. As a
percentage of net sales, cost of goods sold fell to 29.4% from 32.5% in 1996 and
34.5% in 1995. The improvement in the ratio was partly attributable to an
increase in pharmaceutical segment product sales, with generally higher margins
than consumer health care or confectionery products, as a percentage of total
company sales. Also contributing to the improvement in the ratio was a favorable
product mix within the pharmaceutical segment. The ratio fell in 1996 compared
to 1995 due to productivity improvement and a favorable product mix. The most
notable improvement in 1996 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.

Selling, general and administrative expense in 1997 and 1996 increased 18
percent and 5 percent, respectively. Pharmaceutical segment expenses
significantly increased in 1997 to support new products. Quarterly settlements
of co-promotion agreements related to LIPITOR and REZULIN are recorded in
selling expense. International pharmaceutical segment expenses also increased
partly due to the May 1997 Jouveinal acquisition. 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. As a
percentage of net sales, selling, general and administrative expense was 44.9%
compared with 43.1% in 1996 and 42.3% in 1995.

Research and development expense increased 21 percent and 11 percent in 1997 and
1996, respectively. As a percentage of net sales, research and development
expense was 8.2% in 1997, 7.7% in 1996 and 7.1% in 1995. For 1998 the company
plans to invest $790 million in research and development, a projected increase
of 18 percent compared with 1997.

Other expense (income), net in 1997 included increases in intangible
amortization of $25 million and net interest expense of $34 million. These
increases resulted primarily from the company's purchase of Glaxo Wellcome's
interest in the Warner Wellcome joint venture operations in mid-1996 and, to a
lesser degree, the May 1997 Jouveinal acquisition. Other expense (income), net
in 1996 included milestone payments received from Pfizer Inc. of $83 million
related to the LIPITOR co-promotion agreement, a gain of $75 million on the sale
of the Warner Chilcott business 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.

The company is actively addressing its information technology infrastructure,
including hardware, software and facilities, with the goal of achieving year
2000 compliance in all areas of operations, including, to the extent
practicable, relationships with vendors, suppliers and customers. The company
has created a task force of company professionals and outside experts to
coordinate worldwide year 2000 compliance efforts. The task force has oversight
responsibility for monitoring all year 2000 compliance efforts, including
replacement or modification of current systems, which are expected to be
completed during 1999. Maintenance or modification costs will be expensed as
incurred, while the costs of new information technology will be capitalized and
amortized in accordance with company policy. Although management does not expect
the associated incremental costs to have a material impact on the company's
consolidated financial position, liquidity, cash flows or results of operations,
currently unforeseen developments or delays could cause this expectation to
change. Also, there is no guarantee that the vendors, suppliers and customers
with whom the company does business will achieve timely year 2000 compliance, or
that such failure would not have a material adverse impact on the company.

INCOME TAXES
- ------------
1997 1996 1995
---- ---- ----
Effective tax rate:
As reported 29.5% 27.3% 24.3%
After minority interests 29.5% 29.0% 27.4%

The company's tax rate on a reported basis increased 2.2 percentage points. An
increase of 1.7 percentage points resulted from the absence of minority
interests in 1997. In addition, a net increase of .5 percentage points is
related to a 1996 tax law change that subjects a greater amount of income in
Puerto Rico to taxation as well as to increased taxes on income generated in
high tax jurisdictions. These increases are partly offset by the absence of
higher taxes on the 1996 gain from the sale of the Warner Chilcott business, the
favorable impact of the extension of the U.S. research tax credit enacted in
August 1997 and the favorable impact of the liquidation of a foreign affiliate.

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.

The company anticipates a decrease in its effective tax rate in 1998 of
approximately .5 percentage points. The projected decrease is primarily due to
increased income generated in foreign jurisdictions with lower tax rates,
partially offset by the absence of the favorable impact of the foreign affiliate
liquidation in 1997.

NET INCOME
- ----------
In 1997 net income of $870 million increased 11 percent and basic earnings per
share of $3.20 increased 10 percent. In 1996 both net income of $787 million and
basic 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.

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 in the principal foreign
countries in which the company maintains operations.

LIQUIDITY AND FINANCIAL CONDITION
- ---------------------------------
Selected data:
(Dollars in millions)

1997 1996 1995
------ ------ ----
Net debt $1,347 $1,712 $741
Net debt to net capital (equity
and net debt) 32% 40% 25%
Return on average shareholders'
equity 32% 33% 36%
Return on average total assets 11% 12% 13%

Net debt (total debt less cash and cash equivalents and other nonequity
securities) decreased $365 million from December 31, 1996. Cash and cash
equivalents were $757 million at December 31, 1997, an increase of $366 million
from December 31, 1996. The company also held $100 million in nonequity
securities, included in short-term investments and investments and other assets,
that management views as cash equivalents, representing a decrease of $97
million from 1996. This net increase of $269 million is primarily attributable
to an increase in cash provided by operating activities which was partly
attributable to the timing of new product co-promotion payments which are made
subsequent to the end of each quarter. Total debt of $2,203 million at December
31, 1997 decreased $96 million from December 31, 1996.

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 representing a decrease of $295 million from 1995. Net debt
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.

In 1997 cash provided by operating activities of $1,564 million was primarily
used to fund capital expenditures of $495 million, to pay dividends of $413
million and for business acquisitions of $229 million. 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 are expected to increase approximately 60 percent in 1998
in support of additional manufacturing operations and expanded research
facilities. 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 $2.4 billion. The company has the ability to
issue commercial paper at favorable rates. The lines of credit support
commercial paper and bank borrowing arrangements. As of December 31, 1997 the
company had shelf registrations filed with the Securities and Exchange
Commission under which it could issue up to $850 million of debt securities for
general corporate purposes. In January 1998 the company refinanced certain other
debt by issuing $250 million of 5 3/4% notes due 2003 and $250 million of 6%
notes due 2008 leaving $350 million of debt registered under the shelf
registration.

In November 1997 the Board of Directors voted in favor of a three-for-one split
of Warner-Lambert common stock. The stock split is subject to shareholder
approval of an increase in the number of authorized common shares from 500
million to 1.2 billion. If approved, this stock split would occur on May 8, 1998
and the quarterly dividend rate would be proportionately adjusted.

In January 1998 the Board of Directors approved a 26 percent increase in the
quarterly dividend to $.48 per share payable in the first quarter of 1998. The
company anticipates that the quarterly dividend rate will remain $.48 per share
on a pre-split basis during 1998 and that dividends will be paid with cash
provided by operations.

MARKET RISK
- -----------
The company's primary market risk exposures consist of interest rate risk and
foreign currency exchange risk. See Note 10 "Financial Instruments" to the
consolidated financial statements for the company's objectives and strategies
for managing potential exposures related to these risks.

Management primarily uses derivative instruments, the majority of which are
forward exchange contracts involving multiple currencies, to hedge exposures to
certain foreign currency fluctuations as described in Note 10. As hedges, gains
and losses on forward contracts are offset by the effects of currency movements
on respective underlying hedged transactions. Therefore, with respect to
derivative instruments outstanding at December 31, 1997, a change of 10 percent
in currency rates would not have a material effect on the company's consolidated
financial position, liquidity, cash flows or results of operations.

The company holds certain instruments, primarily debt obligations, which are
sensitive to changes in market interest rates. At December 31, 1997 the majority
of the company's variable rate debt consisted of short-term commercial paper
which is subject to changes in market interest rates. However, at December 31,
1997, a change of 10 percent in interest rates would not have a material effect
on the company's consolidated financial position, liquidity, cash flows or
results of operations.

Product names appearing in capital letters are registered trademarks of
Warner-Lambert Company, its affiliates, related companies or its licensors.
ZOVIRAX is a registered trademark of Glaxo Wellcome plc, its affiliates or
related companies. PRO is a registered trademark of The Gillette Company.

<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, 1997.
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
- ----------------------------------- --------------------------- --------------------------------------------------------
<S> <C> <C> <C>
American Chicle Company............ Delaware 100
Euronett, Inc. .................... Delaware 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
Wilkinson Sword GmbH... Austria 100 Warner-Lambert Consumer Products GmbH, Berlin
S.A. Wilkinson Sword
NV................... Belgium 100 Warner-Lambert Consumer Products GmbH, Berlin
Wilkinson Sword
S.p.A. .............. 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 98 Wilkinson Sword Verwaltungs GmbH
2 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
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 Goedecke Aktiengesellschaft
Adams France........... France 100 Parke-Davis France
Cachou Lajaunie........ France 100 Parke-Davis France
Capsugel France........ France 100 Parke-Davis France
</TABLE>

(continued on next page)

(continued from previous page)

<S> <C> <C> <C>
Societe Nouvelle des
Pastilles de Vichy... France 100 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
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
Warner-Lambert Consumer
Healthcare 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 Islands 100 Warner-Lambert (UK) Limited
Wilkinson Sword Limited.... United Kingdom 100 Warner-Lambert (UK) Limited
Warner-Lambert Canada Inc. .... Canada 100 Parke-Davis
Glaxo Wellcome
Warner-Lambert, OTC*..... Canada 50 Warner-Lambert Canada Inc.
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 75 Warner-Lambert Canada Inc.
25 Warner-Lambert K.K.
Warner-Lambert Espana, S.A. ....... Spain 86
14 Warner-Lambert Company AG
Laboratorios Parke Davis,
S.L. ........................ Spain 100 Warner-Lambert Espana, S.A.
Parke-Davis S.p.A.................. Italy 100 (Indirect)
Warner-Lambert Nordic 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
Verwaltungsgesellschaft
m.b.H........................ Germany 100 Tetra-Werke Dr. rer. nat. Ulrich Baensch GmbH
Tetra Werke Holding GmbH....... Germany 100 Tetra-Werke Dr. rer. nat. Ulrich Baensch GmbH
Tetra Heimtierbedarf
GmbH..................... Germany 100 Tetra Werke Holding 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
Warner-Lambert Consumer
Healthcare....................... New York 92.4
7.6 Warner-Lambert Ltd.
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 99.8
.2 P-D Co., Inc.
Warner-Lambert Holland B.V. ....... Netherlands 100
Parke-Davis B.V. .............. Netherlands 100 Warner-Lambert Holland B.V.
Grupo Warner Lambert
Mexico, S.A. de C.V. .... Mexico 100 Parke-Davis B.V.
Warner Lambert
Distribuidora, S.A. de
C.V...................... Mexico 100 Parke-Davis B.V.
Warner-Lambert Philippines,
Inc...................... Philippines 100 Parke-Davis B.V.
Zalmplaat Holding B.V. .... Netherlands 100 Parke-Davis B.V.
</TABLE>

(continued on next page)

(continued from previous page)

<S> <C> <C> <C>
Dom Farm S.C.A. ....... France 100 Zalmplaat Holding B.V.
Jouveinal
S.C.A. .......... France 62.2 Dom Farm S.C.A.
25.1 Zalmplaat Holding B.V.
12.7 Parke-Davis
Cayman Islands,
British West Indies
Parke-Davis Pharmaceuticals
Limited...................... 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.
Warner-Lambert Ireland
Limited...................... Ireland 100 Warner-Lambert Holland B.V.
Plaistow Limited........... Ireland 100 Warner-Lambert Ireland Limited
Warner-Lambert Plaistow
Manufacturing........ Ireland 50 Plaistow Limited
50 Warner-Lambert Export Limited
Warner-Lambert Distributors
(Ireland) Limited........ Ireland 100 Warner-Lambert Ireland Limited
Warner-Lambert Export
Limited.................. Ireland 100 Warner-Lambert Ireland Limited
Island
Pharmaceuticals...... Ireland 100 Warner-Lambert Export Limited
Warner-Lambert Cork
Limited.............. Ireland 100 Warner-Lambert Export Limited
Wilkinson Sword Nederland
B.V. ........................ Netherlands 100 Warner-Lambert Holland B.V.
Warner-Lambert Inc. ............... Nevada 100
Warner-Lambert India Private
Limited.......................... India 100
Warner-Lambert K.K. ............... 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.
Cayman Islands,
British West Indies
Warner-Lambert Manufacturing
(Ireland) Ltd. .................. 100
Warner-Lambert (NZ) Limited........ New Zealand 100
Warner-Lambert Consumer
Healthcare Pty. Limited...... New Zealand 100 Warner-Lambert (NZ) Limited
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)
W-C Laboratories Inc. ............. Delaware 100
Willinger Bros., Inc. ............. Delaware 100
</TABLE>

- ------------

* Subsidiary not consolidated

The foregoing list omits 9 domestic subsidiaries and 83 foreign
subsidiaries which, considered in the aggregate, would not constitute a
significant subsidiary.

<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. 33-4049, 33-38725, 33-55692 and
333-04353) of Warner-Lambert Company of our report dated January 26, 1998
appearing on page 47 of Warner-Lambert Company's 1997 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 18 of this Form 10-K.

PRICE WATERHOUSE LLP

4 Headquarters Plaza North
Morristown, New Jersey 07962
March 24, 1998

<PAGE>

<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT DECEMBER 31, 1997 AND FROM THE RELATED
CONSOLIDATED STATEMENT OF INCOME FOR THE 12 MONTH PERIOD ENDED DECEMBER 31, 1997
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-31-1997
<PERIOD-END> DEC-31-1997
<CASH> 756
<SECURITIES> 17
<RECEIVABLES> 1,160
<ALLOWANCES> 0
<INVENTORY> 743
<CURRENT-ASSETS> 3,297
<PP&E> 3,969
<DEPRECIATION> 1,542
<TOTAL-ASSETS> 8,031
<CURRENT-LIABILITIES> 2,589
<BONDS> 1,831
0
0
<COMMON> 321
<OTHER-SE> 2,515
<TOTAL-LIABILITY-AND-EQUITY> 8,031
<SALES> 8,180
<TOTAL-REVENUES> 8,180
<CGS> 2,408
<TOTAL-COSTS> 2,408
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 167
<INCOME-PRETAX> 1,233
<INCOME-TAX> 364
<INCOME-CONTINUING> 870
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 870
<EPS-PRIMARY> 3.20<F1>
<EPS-DILUTED> 3.11

<FN>
<F1> Amount represents basic earnings per share.
</FN>

<PAGE>

EXHIBIT 99(a)

CAUTIONARY STATEMENTS RELATING TO 'SAFE HARBOR' PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995

Certain Company communications contain forward-looking statements. These
statements may be identified by the use of forward-looking words or phrases such
as 'believe,' 'expect,' 'anticipate,' 'should,' 'planned,' 'may,' 'estimated'
and 'potential.' These forward-looking statements are based on the Company's
current expectations. The Private Securities Litigation Reform Act of 1995
provides a 'safe harbor' for such forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause actual results and experience to differ materially from the
anticipated results or other expectations expressed in such forward-looking
statements. The risks and uncertainties that may affect the operations,
performance, development and results of the Company's business include:

Changes in the favorable market reaction to the Company's significant
new pharmaceutical products, the cholesterol-lowering agent LIPITOR and the
type 2 diabetes drug REZULIN.

Competitive factors, including managed care and other groups or
institutions seeking price discounts; technological advances attained by
competitors; and patents granted to or contested by competitors, which
would result in their ability to compete against the Company more
effectively.

Difficulties or delays in pharmaceutical product development,
including, but not limited to, the inability to identify viable new
chemical compounds, to successfully complete toxicology testing and/or
clinical trials, to obtain regulatory approval for the compounds or to gain
market acceptance of approved products.

Unexpected safety or efficacy concerns arising with respect to
marketed products, whether or not scientifically justified, leading to
product recalls, withdrawals or other actions which could result in
declining sales.

The expiration of patents or governmental grants of exclusivity with
respect to the Company's products.

Government laws and regulations affecting domestic and international
operations, which could include matters affecting drug approval and
pricing; or actions of regulatory agencies with respect to products and/or
manufacturing facilities which could result in fines, products interruption
or withdrawal, plant closures or consent decrees.

Changes in economic conditions (including inflation, interest rates
and foreign currency exchange rates) in the global marketplace, including
Canada, Japan, Mexico and Western Europe, where the Company has significant
businesses.

Significant litigation adverse to the Company, including,
particularly, product liability litigation, antitrust litigation and patent
and trademark litigation.