FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Quarterly Period Ended June 30, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From To
------- -------
Commission File Number 1-3608
WARNER-LAMBERT COMPANY
(Exact name of registrant as specified in its charter)
Delaware 22-1598912
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
201 Tabor Road, Morris Plains, New Jersey
(Address of principal executive offices)
07950
(Zip Code)
Registrant's telephone number, including area code: (973) 540-2000
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13
or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months, and (2) has been subject to
such filing requirements for the past 90 days.
YES X NO
--- ---
Indicate the number of shares outstanding of each of
the issuer's classes of Common Stock, as of the latest
practicable date.
CLASS Outstanding at July 31, 1998
----- -----------------------------
Common Stock, $1 par value 820,899,011*
* Reflects a three-for-one stock split of the Registrant's
Common Stock for stockholders of record as of May 8, 1998.
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WARNER-LAMBERT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
June 30, December 31,
1998 1997
--------- -----------
(Dollars in millions)
ASSETS:
Cash and cash equivalents $ 690.1 $ 756.5
Receivables 1,594.9 1,370.5
Inventories 830.4 742.9
Prepaid expenses and other current assets 484.5 427.1
--------- ---------
Total current assets 3,599.9 3,297.0
Investments and other assets 602.2 593.8
Property, plant and equipment 2,423.3 2,427.0
Intangible assets 1,666.5 1,712.7
--------- ---------
Total assets $ 8,291.9 $ 8,030.5
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term debt $ 528.6 $ 372.1
Accounts payable, trade 929.6 890.6
Accrued compensation 212.2 186.6
Other current liabilities 972.8 894.0
Federal, state and foreign income taxes 307.1 245.6
--------- ---------
Total current liabilities 2,950.3 2,588.9
Long-term debt 1,357.2 1,831.2
Other noncurrent liabilities 807.1 774.9
Shareholders' equity:
Preferred stock - none issued - -
Common stock issued: 1998 - 961,981,608
shares; 1997 - 320,660,536 shares 962.0 320.7
Capital in excess of par 46.3 225.4
Retained earnings 3,881.1 3,892.6
Treasury stock, at cost: (1998 - 142,705,816
shares; 1997 - 48,436,529 shares) (1,240.4) (1,164.5)
Accumulated other comprehensive income (471.7) (438.7)
--------- ---------
Total shareholders' equity 3,177.3 2,835.5
--------- ---------
Total liabilities and shareholders'
equity $ 8,291.9 $ 8,030.5
========= =========
See accompanying notes to consolidated financial statements.
WARNER-LAMBERT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Six Months
Ended June 30, Ended June 30,
--------------- ---------------
1998 1997 1998 1997
---- ---- ---- ----
(Dollars in millions, except per share amounts)
NET SALES $2,556.7 $1,966.7 $4,775.6 $3,744.1
COSTS AND EXPENSES:
Cost of goods sold 655.8 593.6 1,260.4 1,142.8
Selling, general and
administrative 1,169.9 857.6 2,181.3 1,619.8
Research and development 206.3 158.2 389.2 292.1
Other expense (income), net 48.5 26.8 75.1 67.3
-------- -------- -------- --------
Total costs and expenses 2,080.5 1,636.2 3,906.0 3,122.0
-------- -------- -------- --------
INCOME BEFORE INCOME TAXES 476.2 330.5 869.6 622.1
Provision for income taxes 138.1 99.1 252.2 186.6
-------- -------- -------- --------
NET INCOME $ 338.1 $ 231.4 $ 617.4 $ 435.5
======== ======== ======== ========
NET INCOME PER COMMON SHARE:
Basic* $ .41 $ .28 $ .75 $ .53
Diluted* $ .40 $ .28 $ .73 $ .52
DIVIDENDS PER COMMON SHARE* $ .16 $ .13 $ .32 $ .25
* Amounts reflect a three-for-one stock split as described in NOTE F.
See accompanying notes to consolidated financial statements.
WARNER-LAMBERT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months
Ended June 30,
---------------
1998 1997
---- ----
(Dollars in millions)
OPERATING ACTIVITIES:
Net income $ 617.4 $ 435.5
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 140.7 125.2
Changes in assets and liabilities, net of
effects from disposition of business:
Receivables (262.5) (134.5)
Inventories (97.3) (110.0)
Accounts payable and accrued liabilities 258.7 141.8
Other, net (47.4) (56.3)
-------- --------
Net cash provided by operating activities 609.6 401.7
-------- --------
INVESTING ACTIVITIES:
Purchases of investments (27.7) (11.4)
Proceeds from maturities/sales of investments 40.9 83.5
Capital expenditures (240.1) (144.2)
Acquisitions of businesses - (283.0)
Proceeds from disposition of business 125.0 -
Other, net 35.7 (4.1)
-------- --------
Net cash used by investing activities (66.2) (359.2)
-------- --------
FINANCING ACTIVITIES:
Proceeds from borrowings 668.5 1,225.8
Principal payments on borrowings (961.4) (848.1)
Purchases of treasury stock (96.7) (86.2)
Cash dividends paid (262.0) (206.3)
Proceeds from stock option exercises 50.0 44.0
-------- --------
Net cash (used) provided by financing
activities (601.6) 129.2
-------- --------
Effect of exchange rate changes on cash
and cash equivalents (8.2) (17.6)
-------- --------
Net (decrease) increase in cash
and cash equivalents (66.4) 154.1
Cash and cash equivalents at beginning of year 756.5 390.8
-------- --------
Cash and cash equivalents at end of period $ 690.1 $ 544.9
======== ========
See accompanying notes to consolidated financial statements.
WARNER-LAMBERT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
(Dollars in millions, except per share amounts)
NOTE A: The interim financial statements presented herein should be read
in conjunction with Warner-Lambert Company's 1997 Annual Report.
NOTE B: The results of operations for the interim periods are not
necessarily indicative of the results for the full year.
NOTE C: In the opinion of management, all adjustments considered
necessary for a fair presentation of the results for the interim
periods have been included in the consolidated financial
statements.
NOTE D: Certain prior year amounts have been reclassified to conform
with the current year presentation.
NOTE E: On July 31, 1998, Warner-Lambert signed a letter of intent to
acquire Glaxo Wellcome's (Glaxo) rights to over-the-counter (OTC)
Zantac [R] products in the United States and Canada in exchange
principally for Warner-Lambert's rights to OTC Zantac [R]
products in all other markets, OTC Zovirax [R] and
Beconase [R], and future Glaxo prescription to OTC switch
products. These products are currently marketed through joint
ventures between Warner-Lambert and Glaxo, which were
formed to develop, seek approval of and market OTC versions of
Glaxo prescription drugs. This transaction, which will
effectively end these joint ventures, is subject to negotiation
and completion of final agreements and the receipt of required
corporate and regulatory approvals.
NOTE F: On April 28, 1998 the stockholders approved an increase in the
number of authorized shares of common stock from 500 million to
1.2 billion in order to effectuate a three-for-one stock split
effective May 8, 1998. Par value remained at $1.00 per share.
The stock split was recorded by increasing common stock issued by
$641.3 and reducing Capital in excess of par value by $274.2 and
Retained earnings by $367.1. In addition, the average number of
common shares outstanding and all per share information have been
restated to reflect the stock split.
NOTE G: In the first quarter of 1998, the company sold its Rochester,
Michigan pharmaceutical manufacturing plant as well as certain
minor prescription products for approximately $125.0. The
resulting pretax gain of $66.6 was offset by costs related to
the company's plans to close two of its foreign manufacturing
facilities. The results of these transactions are recorded in
Other expense (income), net for the six months ended June 30,
1998.
NOTE H: In June 1998, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards (SFAS) No.
133, "Accounting for Derivative Instruments and Hedging
Activities," which establishes accounting and reporting standards
for derivative instruments. The Statement, which is effective
for the first quarter 2000, requires all derivates to be measured
at fair value and recognized as either assets or liabilities.
Management is in the process of reviewing this new pronouncement
and currently does not expect adoption of this Statement to have
a material effect on the company's consolidated financial
position, liquidity, cash flows or results of operations.
In June 1997, the FASB issued SFAS No. 130, "Comprehensive
Income," which requires reporting the components of comprehensive
income in a financial statement, on an annual basis, as part of a
full set of general purpose financial statements. This Statement
became effective in the first quarter 1998. Total comprehensive
income includes net income and other comprehensive income which
consists primarily of foreign currency translation adjustments.
Total comprehensive income was $324.3 and $221.1 for the second
quarters of 1998 and 1997, respectively. Total comprehensive
income for the six-month periods ended June 30, 1998 and 1997 was
$584.4 and $333.3, respectively.
In 1998, Cumulative translation adjustments, and certain other
equity adjustments which were previously reported in Capital in
excess of par, have been combined in one line item, Accumulated
other comprehensive income, in the accompanying Condensed
Consolidated Balance Sheet. These reclassifications have also
been made to the 1997 Condensed Consolidated Balance Sheet.
NOTE I: The Net income per common share computations were as follows:
(Shares in thousands)
Three Months Ended Six Months Ended
June 30, June 30
---------------- ----------------
1998 1997 1998 1997
---- ---- ---- ----
Basic:
Net income $338.1 $231.4 $617.4 $435.5
Average common shares
outstanding 819,511 814,378 818,748 814,202
------- ------- ------- -------
$.41* $.28* $.75* $.53*
======= ======= ======= =======
Diluted:
Net income $338.1 $231.4 $617.4 $435.5
Average common shares
outstanding 819,511 814,378 818,748 814,202
Impact of potential future
stock option exercises,
net of shares repurchased 29,433 22,791 27,924 21,083
------- ------- ------- -------
Average common shares
outstanding - assuming
dilution 848,944 837,169 846,672 835,285
------- ------- ------- -------
$.40* $.28* $.73* $.52*
======= ======= ======= =======
* Amounts reflect a three-for-one stock split as described in
NOTE F.
NOTE J: Major classes of inventories were as follows:
June 30, 1998 December 31, 1997
-------------- -----------------
Raw materials $222.0 $167.7
Finishing supplies 46.5 53.1
Work in process 154.5 95.6
Finished goods 407.4 426.5
------ ------
$830.4 $742.9
====== ======
NOTE K: Property, plant and equipment balances were as follows:
June 30, 1998 December 31, 1997
-------------- -----------------
Property, plant and equipment $ 4,059.7 $ 3,968.9
Less accumulated depreciation (1,636.4) (1,541.9)
--------- ---------
Net $ 2,423.3 $ 2,427.0
========= =========
NOTE L: Intangible asset balances were as follows:
June 30, 1998 December 31, 1997
-------------- -----------------
Goodwill $1,258.8 $1,267.5
Trademarks and other
intangibles 590.3 602.3
Less accumulated amortization (182.6) (157.1)
-------- --------
Net $1,666.5 $1,712.7
======== ========
NOTE M: Included in Other expense (income), net was interest expense of
$26.2 and $47.5 for the second quarters of 1998 and 1997,
respectively. Interest expense for the first six months of 1998
and 1997 was $62.0 and $86.7, respectively.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
SECOND QUARTER AND SIX MONTHS ENDED JUNE 30, 1998
- -------------------------------------------------
COMPARED WITH CORRESPONDING PERIODS IN 1997
- -------------------------------------------
NET SALES
- ---------
Sales for the second quarter of 1998 of $2,557 million were 30
percent above 1997 second quarter sales. For the first six months
of 1998 sales rose 28 percent to $4,776 million compared to the same
period one year ago. Adjusting for the unfavorable impact of
foreign exchange rate changes sales increased 34 percent for the
quarter and 32 percent for the six-month period. Sales growth was
driven by unit volume growth of 38 percent for the second quarter
and 35 percent for the first six months of 1998.
U.S. sales increased $527 million or 55 percent to $1,486 million
for the quarter and $919 million or 51 percent to $2,706 million for
the first six months of 1998 compared to the same periods one year
ago. International sales increased $63 million or 6 percent to
$1,071 million for the second quarter and increased $113 million or
6 percent to $2,070 million for the first six months of 1998
compared to the same periods one year ago. At constant exchange
rates, international sales increased 15 percent and 14 percent for
the second quarter and first six months of 1998, respectively.
SEGMENT SALES Three Months Ended Six Months Ended
(Dollars in June 30, June 30,
Millions) ----------------------- -----------------------
Percent Percent
Increase/ Increase/
1998 1997 (Decrease) 1998 1997 (Decrease)
---- ---- -------- ---- ---- --------
Pharmaceutical $1,413 $ 825 71 % $2,538 $1,511 68 %
Consumer Health
Care 676 675 - 1,325 1,337 (1)
Confectionery 468 467 - 913 896 2
------ ------ ------ ------
Consolidated
Net Sales $2,557 $1,967 30 % $4,776 $3,744 28 %
====== ====== ====== ======
Worldwide pharmaceutical sales increased 71 percent to $1,413
million in the second quarter of 1998 and increased 68 percent to
$2,538 million for the first six months of 1998 compared to the same
periods one year ago. The sales increase was primarily attributable
to the continued growth of the cholesterol-lowering agent LIPITOR,
the type 2 diabetes drug REZULIN, the add-on epilepsy therapy
NEURONTIN and the cardiovascular drug ACCUPRIL which achieved
worldwide sales as follows:
Three months ended Six months ended
June 30, 1998 June 30, 1998
------------------ ----------------
(Dollars in Millions)
LIPITOR $533 $911
REZULIN 226 364
NEURONTIN 122 218
ACCUPRIL 119 218
Pharmaceutical sales in the U.S. increased 107 percent to $966
million in the second quarter of 1998 and 101 percent to $1,681
million for the first six months of 1998. International
pharmaceutical sales increased 25 percent to $447 million or 35
percent at constant exchange rates in the second quarter. For the
first six months of 1998 international pharmaceutical sales
increased 27 percent to $857 million or 37 percent at constant
exchange rates.
Worldwide sales of LIPITOR more than tripled to $533 million for the
quarter compared to the same period one year ago. LIPITOR has
recently received additional indications for types III
(dysbetalipoproteinemia) and IV (isolated hypertriglyceridemia)
lipid disorders. As a result, LIPITOR continues to be the
cholesterol-lowering medication indicated for the broadest range of
lipid abnormalities. LIPITOR now holds a 35 percent share of new
prescriptions in the U.S. cholesterol lowering market. Nearly 4
million Americans have been treated with LIPITOR.
In the quarter, REZULIN sales almost tripled to $226 million
compared to the same period one year ago. REZULIN, the first in a
new class of drugs known as thiazolidinediones, targets insulin
resistance - an underlying cause of type 2 diabetes. Since its
launch in March 1997, more than 1 million Americans with type 2
diabetes have initiated treatment with REZULIN.
In the fourth quarter of 1997 the company initiated changes in the
prescribing information for REZULIN in response to reports of rare
cases of severe hepatic dysfunction during marketed use. The
changes included a recommendation that healthcare providers monitor
patients for signs of liver dysfunction. In July 1998 these
monitoring guidelines were modified to recommend additional liver
testing. The company has also sent letters to one half million
health-care professionals alerting them to the new labeling and
stressing the importance of vigilant monitoring for indications of
liver injury. The company continues to find that the benefits of
REZULIN outweigh the potential risks that may be associated with the
product.
To sustain growth in currently marketed drugs including LIPITOR,
REZULIN and NEURONTIN, the company has initiated aggressive life-
cycle management programs exploring new indications and patient
populations.
In July 1998 the FDA approved the marketing of Celexa [R]
(citalopram HBr) for treatment of depression. Forest Laboratories
Inc. has the U.S. marketing rights to Celexa [R] and will co-promote
it with the Parke-Davis division of Warner Lambert. Celexa [R] is
the best selling antidepressant in 13 countries, including 8 in
Europe. In, 1998 the U.S. market for antidepressants is expected to
reach $6 billion.
Consumer health care segment sales in the U.S. increased 6 percent
to $365 million in the second quarter of 1998 and 7 percent to $719
million for the first six months of 1998 compared to the same
periods one year ago. Within the segment, U.S. Shaving products
sales increased 25 percent to $63 million for the second quarter and
31 percent to $114 million for the first six months of 1998 compared
to the same periods one year ago. The increase is due to the launch
of the PROTECTOR shaving system and the newly designed SLIM TWIN
disposable razor. Also contributing to the sales growth within the
segment were increased U.S. sales of SUDAFED cold/sinus medication,
BENADRYL allergy medication, LISTERINE mouthwash and the launch of
LUBRIDERM UV moisturizing and sun protection lotion.
International consumer health care segment sales fell 6 percent to
$311 million for the second quarter and 9 percent to $606 million
for the first six months of 1998 compared to the same periods one
year ago. The decrease reflects the impact of the overall economic
weakness in Asian markets. At constant exchange rates,
international segment sales increased 2 percent for the second
quarter and decreased 1 percent for the six-month period.
Within the consumer health care segment, international sales of the
company's Shaving products fell 10 percent to $133 million or 4
percent at constant exchange rates for the second quarter of 1998.
For the first six months of 1998 international Shaving products
sales fell 11 percent to $249 million, or 4 percent at constant
exchange rates compared to the same period one year ago.
International sales of the company's TETRA pet care products
business also fell 7 percent to $29 million and were unchanged at
constant exchange rates for the second quarter of 1998 and fell 12
percent to $57 million, or 5 percent at constant exchange rates for
the first six months of 1998 compared to the same periods one year
ago. Both the Shaving products and TETRA pet care divisions were
significantly impacted by the broad economic downturn in Japan.
On July 31, 1998, Warner-Lambert signed a letter of intent to acquire
Glaxo Wellcome's (Glaxo) rights to over-the-counter (OTC) Zantac [R]
products in the United States and Canada in exchange principally for
Warner-Lambert's rights to OTC Zantac [R] products in all other
markets, OTC Zovirax [R] and Beconase [R], and future Glaxo
prescription to OTC switch products. These products are currently
marketed through joint ventures between Warner-Lambert and Glaxo,
which were formed to develop, seek approval of and market OTC
versions of Glaxo prescription drugs. This transaction, which will
effectively end these joint ventures, is subject to negotiation and
completion of final agreements and the receipt of required corporate
and regulatory approvals. Sales of the joint ventures are not
currently reflected in reported sales results since the joint
ventures are accounted for on an equity basis. Through six months in
1998 the joint ventures recorded Zantac 75 [R] sales of $84 million
in the United States and Canada.
Confectionery sales in the U.S. increased 5 percent to $155 million
for the second quarter of 1998 and 11 percent to $306 million for
the first six months of 1998 compared to the same periods one year
ago. These increases are primarily due to the strong sales of
recently launched DENTYNE Ice chewing gum, CERTS COOL MINT DROPS and
CERTS Powerful Mints breath fresheners and continued strong sales of
TRIDENT sugarless gum.
International confectionery sales were $313 million, for the second
quarter of 1998, a decrease of 2 percent, or an increase of 6
percent at constant exchange rates. Sales were $607 million for the
first six months of 1998, a decrease of 2 percent, or an increase of
6 percent at constant exchange rates compared to the same periods
one year ago. The international sales increase at constant exchange
rates is primarily due to strong sales in Mexico, where sales
increased across all gum brands.
COSTS AND EXPENSES
- ------------------
As a percentage of net sales, cost of goods sold fell to 25.6% in
the second quarter of 1998 from 30.2% in the second quarter of 1997
and to 26.4% for the first six months of 1998 from 30.5% in the same
period one year ago. The improvement in the ratio for both
reporting periods is 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 is a favorable product mix within the pharmaceutical segment.
Selling, general and administrative expense in the second quarter of
1998 increased 36 percent compared with the second quarter of 1997
and 35 percent for the first six months of 1998 compared with the
six-month period one year ago. As a percentage of net sales,
selling, general and administrative expense for the quarter
increased to 45.8% compared with 43.6% for the same quarter last
year and for the first six months of 1998 increased to 45.7%
compared with 43.3% for the same time period last year.
Pharmaceutical segment expenses significantly increased for the
second quarter and the six-month period to support the new products.
Quarterly settlements of co-promotion agreements related to LIPITOR
and REZULIN are recorded in selling expense. Expenses increased in
the consumer health care and confectionery segments for the second
quarter and for the first six months of 1998 compared to the same
periods in the prior year. Management expects that selling, general
and administrative expenses will remain at or slightly above this
level as a percent of sales for the full year.
Research and development expense in the second quarter and first six
months of 1998 increased 30 percent and 33 percent, respectively,
over the same periods one year ago. However, as a percentage of net
sales, research and development expense has remained constant at
approximately 8%. For 1998 the company plans to invest
approximately $850 million in research and development, a projected
increase of 26 percent compared with 1997.
Other expense (income), net in the second quarter and first six
months of 1998 compared unfavorably by $22 million and $8 million
from the same periods in 1997. The unfavorability is partly
attributable to foreign currency transaction losses realized for the
second quarter and six months of 1998 as compared to foreign
currency transaction gains realized in the same periods in 1997.
Other expense (income), net in 1998 includes a gain on the sale of
the company's Rochester, Michigan manufacturing plant and certain
minor prescription products of $67 million which was offset by costs
related to the company's plans to close two of its foreign
manufacturing facilities.
INCOME TAXES
- ------------
The effective tax rate for the second quarter and first six months
of 1998 decreased to 29.0% from 30.0% in the same periods in 1997.
The decrease of 1.0 percentage point is primarily due to increased
income generated in foreign jurisdictions with lower tax rates.
NET INCOME
- ----------
Net income increased 46 percent and 42 percent for the second
quarter and the first six months of 1998, respectively compared to
the same periods one year ago.
On April 28, 1998 the stockholders approved an increase in the
number of authorized shares of common stock from 500 million to 1.2
billion in order to effectuate a three-for-one stock split for all
shares of record held on May 8, 1998. The additional shares were
registered on May 26, 1998.
Diluted earnings per share for the second quarter of 1998 increased
from $0.28 to $0.40 on a post-split basis. Diluted earnings per
share for the first six months of 1998 increased from $0.52 to
$0.73. Based on current planning assumptions, the company expects
to increase earnings per share by 40 percent this year.
LIQUIDITY AND FINANCIAL CONDITION
- ---------------------------------
Selected data:
June 30, December 31,
1998 1997
------- ------------
Net debt (in millions) $1,104 $1,347
Net debt to net capital(equity
and net debt) 26% 32%
Net debt (total debt less cash and cash equivalents and other
nonequity securities) decreased $243 million from December 31, 1997.
Cash and cash equivalents were $690 million at June 30, 1998, a
decrease of $66 million from December 31, 1997. The company also
held $92 million in nonequity securities, included in other current
assets and investments and other assets, that management views as
cash equivalents, representing a decrease of $9 million from
December 31, 1997. The total decrease in cash and cash equivalents
of $75 million is offset by a decrease in total debt of $318
million.
Cash provided by operating activities for the first six months of
1998 of $610 million was more than sufficient to fund capital
expenditures of $240 million and pay dividends of $262 million.
Cash flow in the first six months of 1998 also includes proceeds of
$125 million from the sale of the Rochester, Michigan pharmaceutical
manufacturing plant.
Planned capital expenditures for 1998 are estimated to be $800
million in support of additional manufacturing operations and
expanded research facilities. Over the next four years the company
plans to invest nearly $1 billion in pharmaceutical research and
manufacturing infrastructure alone. The company intends to fund
capital expenditures with cash provided by operations.
Statements made in this report that state "we believe," "we expect"
or otherwise state the company's predictions for the future are
forward-looking statements. Actual results might differ materially
from those projected in the forward-looking statements. Additional
information concerning factors that could cause actual results to
materially differ from those in the forward-looking statements is
contained in Exhibit 99 of the company's December 31, 1997 Form 10-K
filed with the Securities and Exchange Commission. Exhibit 99 to
the Form 10-K is incorporated by reference herein.
All product names appearing in capital letters are registered
trademarks of Warner-Lambert Company, its affiliates, related
companies or its licensors. Zantac [R], Zantac 75 [R], Zovirax [R],
and Beconase [R] are registered trademarks of Glaxo Wellcome, its
affiliates, related companies or licensors. Celexa [R] is a
registered trademark of Forest Laboratories Inc., its affiliates,
related companies or its licensors.
PART II - OTHER INFORMATION
---------------------------
Item 1. Legal Proceedings
-----------------
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 retailer 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 action 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 settled the
Minnesota and Wisconsin actions. The Company's share of these
settlements, which have been approved, 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. With its co-defendants,
the Company has agreed to settle these state consumer class actions.
The Company's share of these settlements, which are subject to court
approval in their respective jurisdictions, is not material.
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.
Warner-Lambert is also involved in various administrative or
judicial proceedings related to environmental actions initiated by
the Environmental Protection Agency under the Comprehensive
Environmental Response, Compensation and Liability Act (also known
as Superfund) or by state authorities under similar state
legislation, or by third parties. 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 flows or results of
operations for any year.
Warner-Lambert Inc., a wholly-owned subsidiary of Warner-Lambert,
has been named as a defendant in class actions filed in Puerto Rico
Superior Court by current and former employees from the Vega Baja,
Carolina and Fajardo plants, as well as Kelly Services temporary
employees assigned to those plants. The lawsuits seek monetary
relief for alleged violations of local statutes and decrees relating
to meal period payments, minimum wage, overtime and vacation pay.
Warner-Lambert believes that these actions are without merit and
will defend these actions vigorously. Although it is too early to
predict the outcome of these actions, Warner-Lambert does not at
present expect these lawsuits to have a material adverse effect on
the Company's financial position, liquidity, cash flows or results
of operations.
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) 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 28, 1998.
(10) Material contracts.
(a) Warner-Lambert Company 1987 Stock Option
Plan, as amended to January 27, 1998.
(b) Warner-Lambert Company 1989 Stock Plan,
as amended to January 27, 1998.
(c) Warner-Lambert Company 1992 Stock Plan,
as amended to January 27, 1998.
(d) Warner-Lambert Company 1996 Stock Plan,
as amended to January 27, 1998.
(12) Computation of Ratio of Earnings to Fixed
Charges.
(27) Financial Data Schedules (EDGAR filing only).
(a) Financial Data Schedule - June 30, 1998.
(b) Restated Financial Data Schedules - 1995
and 1996.
(c) Restated Financial Data Schedules - 1997.
(b) Reports on Form 8-K
-------------------
Warner-Lambert has not filed any reports on
Form 8-K for the quarter ended June 30,
1998.
S I G N A T U R E S
-------------------
Pursuant to the requirements of the Securities Exchange
Act of 1934, the Registrant has duly caused this Report to be
signed on its behalf by the undersigned thereunto duly
authorized.
WARNER-LAMBERT COMPANY
(Registrant)
Date: August 11, 1998 By: Ernest J. Larini
----------------
Vice President and
Chief Financial Officer
(Principal Financial Officer)
Date: August 11, 1998 By: Joseph E. Lynch
---------------
Vice President and Controller
(Principal Accounting Officer)
EXHIBIT INDEX
-------------
Exhibit No. Exhibit
- ----------- -------
(3) Articles of Incorporation and By-Laws.
(a) Restated Certificate of Incorporation of
Warner-Lambert Company filed November 10,
1972, as amended to April 28, 1998.
(10) Material contracts.
(a) Warner-Lambert Company 1987 Stock Option
Plan, as amended to January 27, 1998.
(b) Warner-Lambert Company 1989 Stock Plan, as
amended to January 27, 1998.
(c) Warner-Lambert Company 1992 Stock Plan, as
amended to January 27, 1998.
(d) Warner-Lambert Company 1996 Stock Plan, as
amended to January 27, 1998.
(12) Computation of Ratio of Earnings to Fixed
Charges.
(27) Financial Data Schedules (filed electronically).
(a) Financial Data Schedule - June 30, 1998.
(b) Restated Financial Data Schedules - 1995
and 1996.
(c) Restated Financial Data Schedules - 1997.
[Conformed Copy]
- ----------------------------------------------------------------
WARNER-LAMBERT COMPANY
a Delaware Corporation)
- --------------
Restated
Certificate of Incorporation
Filed November 10, 1972
RESTATED
CERTIFICATE OF INCORPORATION
OF
WARNER-LAMBERT COMPANY
Warner-Lambert Company was originally incorporated under the name
of William R. Warner & Co., Inc. The original Certificate of
Incorporation was filed with the Secretary of State on November 8,
1920.
The following Restated Certificate of Incorporation was duly
adopted by the Board of Directors in accordance with the
provisions of Section 245 of the General Corporation Law of the
State of Delaware, as amended, and only restates and integrates
and does not further amend the provisions of Warner-Lambert's
Certificate of Incorporation as heretofore amended or supplemented
and no discrepancy exists between those provisions and the
provisions of this restated certificate.
FIRST: The name of this Corporation is Warner-Lambert Company.
SECOND: The principal office of the Corporation in the State of
Delaware is located at No. 100 West Tenth Street, in the City of
Wilmington, County of New Castle. The name and address of its
resident agent is the Corporation Trust Company, No. 100 West
Tenth Street, Wilmington, Delaware.
THIRD: The nature of the business of the Corporation and the
objects or purposes proposed to be transacted, promoted or carried
on by it are as follows:
(a) To prepare, compound, manufacture, buy, sell, import, export
and generally deal in and with drugs, medicines, proprietary
articles, chewing gum, mints, confectioneries, druggist sundries,
tinctures, chemical, pomades, ointments, liniments, lotions,
toilet articles, perfumeries, cosmetics, soaps, essences, surgical
apparatus, physicians' and hospital supplies and specialties, and
all kinds of pharmaceutical, perfumery, toilet and medicinal
preparations and materials, and materials commonly known as
plastics, and to conduct and carry on, in all its branches, the
business of chemists, druggists, and manufacturers and dealers in
medicinal, chemical, perfumery, toilet, and pharmaceutical and
other compounds, preparations and materials, and materials
commonly known as plastics.
(b) To build, erect, construct, purchase, lease or otherwise
acquire, own, use, provide, maintain, establish, lease and hold
factories, warehouses, agencies, buildings, structures, offices,
works, mills, plants, foundries, shops, repair-shops, and work-
shops, with suitable plant engines, boilers, machinery, tracks and
equipment, and all things of whatsoever kind and nature suitable,
necessary, useful or convenient in connection with any or all of
the purposes of the Corporation or its business.
(c) To apply for, obtain, register, purchase, lease or otherwise
acquire and to hold, own, use, operate and introduce, and to sell,
assign, lease, pledge or otherwise dispose of any and all letters
patent, patent rights, licenses, privileges, copyrights, trade-
marks, trade names, of the United States or of any foreign
country, and any and all inventions, improvements and processes,
labels, designs, brands and blends, relating to or suitable,
necessary, useful or convenient in connection with the purposes of
the Corporations or its business, and to use, exercise, develop
and grant licenses in respect of, sell, traffic in an exchange the
same to the use and account of the Corporation.
(d) To purchase, lease or otherwise acquire, upon such terms and
conditions and in such manner as the Board of Directors of the
Corporation shall determine or agree to, all or any part of the
property, real or personal, tangible or intangible, of any nature
whatsoever, including the good will, plant, materials in process
and rights of all kinds, of any other corporation, domestic or
foreign, or of any person, firm or association, engaged in or
formed for the purpose of carrying on or conducting any business
or for any purpose or purposes similar to the business or to any
purpose or purposes of the Corporation, which may be suitable,
necessary, useful or convenient to carry out the purpose of the
Corporation or its business, and to pay for the same in case,
shares of stock, certificates of interest in shares of stock,
bonds, notes, debentures, or other securities, obligations or
evidences of indebtedness of the Corporation, or partly in cash or
partly in such shares of stock certificates of interest in shares
of stock bonds, notes, debentures or other securities, obligations
or evidences of indebtedness, or in such manner as may be agreed,
and to hold, possess and improve the same or any part thereof, and
to assume in connections with the acquisition of the same or any
part thereof, any liabilities of any such corporation, person,
firm or association , and to use in any legal manner the whole or
any part of the property so acquired and to pledge, mortgage, sell
or otherwise dispose of the same, or any part thereof, all in the
manner and to the extent now or hereafter authorized or permitted
by law.
(e) In the manner and to the extent, now or hereafter authorized
or permitted by law, to subscribe for, purchase or otherwise
acquire, whether in exchange for the issuance of its own shares of
stock, certificates of interest in shares of stock, bonds, notes,
debentures or other securities, obligations or evidences of
indebtedness or otherwise, and to own, hold, vote, mortgage,
pledge, sell, assign, transfer or otherwise use or dispose of and
to possess and exercise all of the rights, powers and privileges
of ownership in, the shares of stock, certificates of interest in
shares of stock, bonds, notes, debentures and other securities,
obligations, or evidences of indebtedness of any person, firm,
corporation or association, domestic or foreign, and also to
purchase or otherwise acquire, own, hold, sell, assign, transfer,
mortgage, pledge or otherwise use or dispose of the shares of
stock, certificates of interest in shares of stock, bonds, notes,
debentures, and other securities, obligations or evidences of
indebtedness of the Corporation.
(f) To guarantee the performance of any contract by, or the
payment of dividends upon any shares of stock, certificates of
interest in shares of stock of, any other person, firm,
corporation or association, domestic or foreign, any bonds, notes,
debentures or other securities, obligations or evidences of
indebtedness of which, or shares of stock, or certificates of
interest in shares of stock in which, are held by or for the
Corporations, or in the welfare of which the Corporation shall
have any interest or which is affiliated in business with the
Corporation through the use of joint laboratories, or through
contractual arrangements or agreements respecting the sale and
distribution of the Corporation's products and particularly any
corporation or corporations which may be appointed the
distributors of the Corporation's products, and to endorse or
otherwise guarantee or to become surety in respect to the payment
of the principal and interest of any bonds, notes, debentures or
other securities, obligations or evidences of indebtedness created
or issued by any such person, firm, corporations or associations,
to guarantee the bank loans of any such person, firm, corporations
or association, to guarantee the bank loans of any such person,
firm, corporation or association, to aid in any lawful manner, and
improve and develop, directly or indirectly, the properties, real
and personal, tangible and intangible, of any such person, firm,
corporation, or association, and to do any acts or things designed
to protect, preserve, improve or enhance the value of any such
bonds, notes, debentures or other securities, obligations or
evidences of indebtedness or such shares of stock, or certificates
of interest in shares of stock, or other property or any interest
of the Corporation.
(g) To borrow money, and, from time to time, to make, accept and
endorse, execute and issue bonds, notes, debentures or other
securities, obligations and evidences of indebtedness of the
Corporation for moneys borrowed or in payment for property
acquired or for any of the other purposes of the Corporation or
its business, and, in the manner, and to the extent, now or
hereafter authorized or permitted by law, to secure the payment of
any such bonds, notes, debentures, or other securities,
obligations and evidences of indebtedness by mortgage, pledge,
deed, indenture or other instrument of trust, or by other lien
upon, assignment of, or agreement in regard to, all or any part of
the property, real or personal, rights, privileges or franchises
of the Corporation, whether now owned or hereafter acquired, and
to provide that such bonds, notes, debentures or other securities,
obligations or evidences of indebtedness shall be convertible into
or exchangeable for stock or certificates of interest in shares of
stock of the Corporation upon such terms and conditions as the
Board of Directors shall determine and cause to be specified
therein.
(h) To have one or more offices and to carry on its operations
and transact and conduct its business within and without the State
of Delaware, and without restriction or limit as to amount, to
purchase, exchange, lease or otherwise acquire, hold, own, occupy,
use and develop, lease, mortgage, sell, convey, or otherwise
dispose of, and generally to trade with and deal in, all property
real and personal, of every kind, nature and description and all
rights, including rights of way, easements and water rights, of
every kind, nature and description, necessary for the purposes of
business of the Corporation, in any of the States, Districts,
Territories or dependencies of the United States and in any and
all foreign countries, subject always to the laws of such States,
Districts, Territories, dependencies or foreign countries.
(i) In general to do any or all of the things hereinbefore set
forth, and such other things as are necessary to the purposes of
the Corporation and its business as principal, factor, agent,
contractor or otherwise, either alone or in conjunction as
principal, factor, agent, contractor or otherwise, either alone or
in conjunction with any person, firm, corporation or association,
and in carrying on its business and for the purpose of attaining
or furthering any of its objects, to make and perform contracts
and to do all such acts and things and to exercise any and all
such powers to the same extent as a natural person might or could
do, all in the manner and to the extent, now or hereafter
authorized or permitted by law.
(j) To manufacture, purchase or otherwise acquire, own, mortgage,
pledge, sell, assign and transfer, or otherwise dispose of, to
invest, trade, deal in and deal with, goods, wares and merchandise
and real and personal property of every class and description.
(k) In general, to carry on any other business in connection with
the foregoing, whether manufacturing or otherwise, and to have and
exercise all the powers conferred by the laws of Delaware upon
corporations formed under the act pursuant to and under which the
Corporation is formed, and to do any or all of the things
hereinbefore set forth to the same extent as natural persons might
or could do.
(l) The foregoing clauses shall be construed as both purposes and
powers and the matters expressed in any clause shall be in no wise
restricted by restricted by reference to, or inference from, the
terms of any other clause, but shall be regarded as independent
purposes and powers, and the enumeration of specific purposes and
powers shall not be construed to restrict or limit in any manner
the general terms and powers of the Corporation, nor shall the
expression of one thing be deemed to exclude another, although it
be of like nature, not expressed.
FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is Fifty-five
Million (55,000,000) shares consisting of Fifty Million
(50,000,000) shares of Common Stock of the par value of One Dollar
($1) per share (hereinafter called the "Common Stock") and Five
Million (5,000,000) shares of Preferred Stock of the par value of
One Dollar ($1) per share (hereinafter called the "Preferred
Stock").
A statement of the designations, powers, preferences and rights,
and the qualifications, limitations or restrictions thereof, in
respect of the Preferred Stock and the Common Stock, is as
follows:
DIVISION A - PREFERRED STOCK
1. Series. (a) The Preferred Stock may be issued from time to
time in one or more series as herein provided. Each such series
shall be designated so as to distinguish the shares thereof from
the shares of all other series and shall have such voting powers,
full, special or limited, or no voting powers, and such
designations, preferences and relative, participating, optional or
other special rights, and qualifications, limitations or
restrictions thereof, as shall be stated and expressed in the
Certificate of Incorporation or any amendment thereto or in the
resolution or resolutions providing for the issue of such stock
adopted by the Board of Directors pursuant to authority expressly
vested in it by the provisions of the Certificate of
Incorporation. The shares of Preferred Stock of all series shall
be of equal rank and all shares of any particular series of the
Preferred Stock shall be identical, except that, if the dividends
thereon are cumulative, the date or dates from which they shall be
cumulative may differ. The terms of any series of Preferred Stock
may vary from the terms of any other series of Preferred Stock to
the full extent now or hereafter permitted by the laws of the
State of Delaware, and the terms of each series shall be fixed,
prior to the issuance thereof, in the manner provided in
subparagraph (b) of this Paragraph 1. Without limiting the
generality of the foregoing, shares of Preferred Stock of
different series may, subject to any applicable provisions of law,
vary in respect of the following terms:
(i) the distinctive designation of such series and the number of
shares of such series;
(ii) the rate or rates at which shares of such series shall be
entitled to receive dvidends, the conditions upon, and the times
of payment of, such dividends, the relationship and preference, if
any, of such dividends to dividends payable on shares of any other
class or classes of stock, and whether such dividends shall be
cumulative or non-cumulative, and, if cumulative, the date or
dates from which such dividends shall be cumulative;
(iii) if shares of such series are subject to redemption, the
time or times and the price or prices at which, and the terms and
conditions on which, such shares shall be redeemable;
(iv) the preference of the shares of such series over shares of
junior stock (as hereinafter defined) as to both dividends and
assets in the event of any voluntary or involuntary liquidation or
dissolution or winding up or distribution of assets of the
Corporation;
(v) the obligation, if any, of the Corporation to purchase,
redeem or retire shares of such series and/or to maintain a fund
for such purpose, and the amount or amounts to be payable from
time to time for such purpose or into such fund, the number of
shares to be purchased, redeemed or retired and the other terms
and conditions of any such obligation;
(vi) the voting rights, if any, full, special or limited, to be
given the shares of such series, including without limiting the
generality of the foregoing, the right, if any, as a series or in
conjunction with other series or classes, to elect one or more
members of the Board of Directors either generally or at certain
times or under certain circumstances, and restrictions, if any, on
particular corporate acts without a specified vote or consent of
holders of such shares (such as, among others, restrictions on
modifying the terms of such series of the Preferred Stock,
authorizing or issuing additional shares of Preferred Stock or
creating any class of stock ranking prior to or on a parity with
the Preferred stock as to dividends or assets);
(vii) the right, if any, to exchange or convert the shares of
such series into shares of any other class or classes, or of any
other series of the same or any other class or classes of stock of
the Corporation, and if so convertible or exchangeable, the
conversion price or prices, or the rates of exchange, and the
adjustments, if any, at which such conversion or exchange may be
made; and
(viii) any other preferences, and relative, participating,
optional or other special rights, and qualifications, limitations
or restrictions thereof.
The term "junior stock" as used in this Article FOURTH with
respect to the Preferred Stock means the Common Stock, as well as
any other class of stock of the Corporation at any time ranking
junior to the Preferred Stock as to dividends or assets.
(b) Authority is hereby expressly granted to and vested in the
Board of Directors at any time or from time to time to issue the
Preferred Stock as Preferred Stock of any series and, in
connection with the creation of each such series, so far as not
inconsistent with the provisions of this of Article FOURTH
applicable to all series of Preferred Stock, to fix, by resolution
or resolutions providing for the issue of shares thereof the
authorized number of shares of such series, which number may be
increased (unless otherwise provided by the Board of Directors in
creating such series) or decreased (but not below the number of
shares thereof then outstanding) from time to time by like action
of the Board of Directors, the voting powers of such series and
the designations, rights, preferences, and relative,
participating, optional or other special rights, and the
qualifications, limitations or restrictions thereof, of such
series.
2. Dividends. The holders of Preferred stock of each series
shall be entitled to receive, but only when and as declared by the
Board of Directors, out of the assets of the Corporation legally
available for dividends, cash dividends at the rate for such
series, on such conditions and at such times as shall be fixed as
herein provided, before any sum or sums shall be set aside for or
applied to the purchase or redemption of Preferred Stock of any
series or the purchase, redemption or other acquisition for value
of any junior stock and before any dividend (other than a dividend
in shares of Common Stock) shall be paid or declared, or any other
distribution shall be ordered or made, upon any junior stock. All
dividends, declared upon the Preferred stock of the respective
series outstanding shall be declared pro rata so that the amounts
of dividends declared per share on the Preferred Stock of
different series shall in all cases bear to each other the same
ratio that the respective dividend rights per share of such
respective series bear to each other.
3. Preference on Liquidation. (a) In the event of any voluntary
or involuntary liquidation or dissolution or winding up of the
Corporation, the Preferred Stock of all series shall be preferred
over all junior stocks as to both dividends and assets and the
holders of Preferred Stock of each series shall be entitled to
receive, out of the assets of the Corporation available for
distribution to its stockholders, whether from capital, surplus or
earnings, such amount as shall be fixed as herein provided, before
any distribution of such assets shall be made to the holders of
junior stocks; and in the event of any such distribution of
assets, the holders of the junior stocks shall be entitled, to the
exclusion of the holders of Preferred Stock of all series, to
share in all assets of the Corporation then remaining as
hereinafter in this Article FOURTH provided. If upon any
voluntary or involuntary liquidation or dissolution or winding up
of the Corporation, the amounts payable as aforesaid on or in
respect of the Preferred stock of all series are not paid in full,
the holders of shares of Preferred Stock of all series shall be
entitled, to the exclusion of holders of the junior stocks, to
share ratably in any distribution of assets according to the
respective amounts which would be payable in respect of the shares
held by them, respectively, upon such distribution if all amounts
payable on or in respect of the Preferred Stock of all series were
paid in full.
(b) A merger or consolidation of the Corporation with or into any
other corporation or a sale or conveyance of all or any part of
the assets of the Corporation (which shall not in fact result in
the liquidation of the Corporation and the distribution of assets
to stockholders) shall not be deemed to be a voluntary or
involuntary liquidation or dissolution or winding up of the
Corporation within the meaning of this Paragraph 3.
4. Redemption and Purchase. The Preferred Stock of all series,
or of any series thereof, at any time outstanding, may be redeemed
by the Corporation, at its election expressed by resolution of the
Board of Directors, subject to any limitation contained in the
resolution or resolutions providing for the issue of Preferred
Stock of such series adopted by the Board of Directors as herein
provided, at any time or from time to time, upon not less than
thirty (30) days' previous notice in writing to the holders of
record of the Preferred Stock to be redeemed, given by mail in
such manner as may be prescribed by resolution or resolutions of
the Board of Directors, at the then applicable redemption price
fixed as herein provided; provided, however, that Preferred Stock
of any series may be redeemed only after dividends upon the
Preferred Stock of all series then outstanding, at the rate for
each such series and on such conditions as shall have been fixed
as herein provided, shall have been paid, or declared and set
aside for payment. If less than all the Preferred Stock of any
series at the time outstanding is to be redeemed, the redemption
may be made either by lot or pro rata in such manner as may be
prescribed by resolution of the Board of Directors. From and
after the date fixed in any such notice as the date or redemption
(unless default shall be made by the Corporation in providing
moneys for the payment of the redemption price pursuant to such
notice), or, if the Corporation shall so elect, from and after a
date (hereinafter called the "date of deposit" and which shall be
prior to the date fixed as the date of redemption) on which the
Corporation shall provide moneys for the payment of the redemption
price by depositing the amount thereof for the account of the
holders of Preferred Stock entitled thereto with a bank or trust
company doing business in the Borough of Manhattan, in the City of
New York, and having capital and surplus of at least Five Million
Dollars ($5,000,000) pursuant to notice of such election included
in the notice of redemption specifying the date on which such
deposit will be made, all dividends on the Preferred Stock thereby
called for redemption shall cease to accrue and all rights of the
holders thereof as stockholders of the Corporation, except the
right to receive the redemption price as hereinafter provided and,
in the case of such deposit, any conversion or exchange rights not
theretofore expired, shall cease and terminate. Such conversion
or exchange rights, however, shall cease and terminate upon the
date fixed for redemption or upon any earlier date fixed in the
resolution or resolutions providing for the issue of Preferred
Stock of such series adopted by the Board of Directors as herein
provided. After the deposit of such amount with such bank or
trust company, the respective holders of record of the Preferred
Stock to be redeemed shall be entitled to receive the redemption
price at any time upon surrender to such bank or trust company of
the certificates for the shares to be redeemed. Any moneys so
deposited which shall remain unclaimed by the holders of such
Preferred Stock at the end of six (6) years after the redemption
date, together with any interest thereon which shall be allowed by
the bank or trust company with which the deposit shall have been
made, shall be paid by such bank or trust company to the
Corporation.
The Corporation shall also have power, at any time or from time to
time, to purchase, either at public or private sale or pursuant to
any sinking fund or agreement, the whole or any part of the
Preferred Stock or of any series thereof upon the best terms
believed reasonably obtainable or provided for in any such sinking
fund or agreement, but in no event at a price in respect of any
shares of Preferred Stock greater than the redemption price
thereof. Any redemption or purchase of Preferred Stock may be
effected by payment out of the net profits or surplus of the
Corporation or by the application of capital, all to the extent
and in the manner at the time permitted by the laws of Delaware,
except that no redemption or purchase of less than all the
Preferred Stock may be effected by the Corporation at any time
when dividends on the Preferred Stock are in arrears.
Subject to such limitations, if any, as may be provided in the
resolution or resolutions providing for the issue of Preferred
Stock of any series adopted by the Board of Directors as herein
provided, shares of Preferred Stock purchased, redeemed or
otherwise acquired by the Corporation (excepting shares of such
Stock acquired on the conversion or exchange thereof into or for
other shares of the Corporation) (a) shall, upon the filing by the
Corporation of a certificate pursuant to Delaware law reducing its
capital in respect of such shares, have the status of authorized
and unissued shares of Preferred Stock and may be reissued by the
Corporation at any time as shares of any series of Preferred Stock
and (b) shall, unless and until a certificate with respect thereto
is filed as aforesaid, constitute treasury stock; and shares of
Preferred Stock acquired on the conversion or exchange thereof
into or for other shares of the Corporation shall, after such
conversion or exchange, have the status of authorized and unissued
shares of Preferred Stock and may be reissued by the Corporation
at any time as shares of any series of Preferred Stock.
5. Voting Rights. The holders of the Preferred Stock shall have
no voting rights of any kind except as required by law and except
for such voting rights, if any, full, special or limited, as may
be given to shares of any one or more series of Preferred Stock in
the resolution or resolutions providing for the issue thereof
adopted by the Board of Directors as herein provided.
DIVISION B - COMMON STOCK
1. Dividend Rights. After full cumulative dividends on the
Preferred Stock shall have been paid or declared and set apart for
payment in accordance with Paragraph 2 of Division A above for all
past dividend periods and the then current dividend period, then
out of any funds lawfully available therefor under the laws of the
State of Delaware, dividends may be paid upon the Common Stock and
upon any other junior shares, to the exclusion of the Preferred
Stock, if, when and as declared by the Board of Directors in its
discretion, and any junior shares may be purchased, redeemed or
otherwise acquired by the Corporation.
2. Distribution of Assets. In the event of any liquidation,
dissolution or winding up of the Corporation, or any reduction of
its capital, resulting in a distribution of its assets to its
stockholders, whether voluntary or involuntary, after there shall
have been paid or set apart for the holders of Preferred Stock the
full preferential amounts to which they are respectively entitled
under the provisions of Paragraph 3 of Division A above, the
holders of the Common Stock shall be entitled to receive as a
class, pro rata, to the exclusion of the Preferred Stock, the
remaining assets of the Corporation available for distribution to
its stockholders.
3. Voting Power. The holders of the Common Stock shall, subject
to the provision of the By-laws of the Corporation and of the
statutes of the State of Delaware relating to the fixing of a
record date, be entitled to one vote for each share of Common
Stock held by them respectively, for the election of Directors and
for all other purposes.
DIVISION C - GENERAL PROVISIONS
1. No Preemptive Rights. Unless expressly conferred by the terms
of this Certificate of Incorporation, as amended from time to
time, or by the terms of a valid agreement to which the
Corporation is a party, or by the terms of the securities issued
by the Corporation, no holder of stock, or of rights or options to
purchase stock, of the Corporation of any class, as such, shall
have any preemptive or preferential right of subscription to any
shares of stock, or rights or options to purchase stock, of the
Corporation of any class whether now or hereafter authorized, or
to any obligations convertible into stock, or into rights or
options to purchase stock, of the Corporation (including any
notes, bonds or other evidences of indebtedness to which are
attached or with which are issued warrants or other rights to
purchase any stock of the Corporation), issued or sold, or any
right of subscription to any thereof other than such, if any, as
the Board of Directors in its discretion may from time to time fix
pursuant to the authority conferred by this Certificate of
Incorporation. Shares of stock, rights or options to purchase
stock, or obligations convertible into stock or into rights or
options to purchase stock, of the Corporation may from time to
time be issued and sold to such parties, whether stockholders or
others, as the Board of Directors in its sole discretion may
determine.
FIFTH: The minimum amount of capital with which the Corporation
shall commence business is $1,000.
SIXTH: The Corporation is to have perpetual existence.
SEVENTH: The private property of the stockholders shall not be
subject to the payment of corporate debts to any extent whatever.
EIGHTH: The number of directors which shall constitute the whole
Board of Directors of the Corporation shall be such as from time
to time shall be fixed by, or in the manner provided in, the By-
laws, provided, however, that initially such number shall be
sixteen, and provided further, that in no case shall such number
be less than seven. Vacancies in the Board of Directors, whether
created by an increase in the number of Directors or otherwise,
shall be filled in the manner provided in the By-laws.
NINTH: In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors shall, subject to the
laws of the State of Delaware, have the following powers:
(a) To make, alter, amend and repeal the By-laws of the
Corporation, and to set apart out of any funds of the Corporation
available for dividends a reserve or reserves for working capital
or any other proper purpose, and to abolish any such reserve in
the manner in which it was created.
(b) To appoint from among their number an Executive Committee of
five or more, which Committee, to the extent and in the manner
provided in the By-laws of the Corporation, shall have any may
exercise all the powers of the Board of Directors in the
management of the business and affairs of the Corporation, during
the intervals between the meetings of the Board of Directors.
(c) From time to time, to determine whether and to what extent,
and at what time and places, and under what conditions and
regulations, the accounts and books of the Corporation (other than
the stock ledger) or any of them, shall be open to the inspection
of stockholders, and no stockholder shall have any right to
inspect any book or account or document of the Corporation, except
as conferred by the laws of the State of Delaware or authorized by
a resolution of the stockholders or directors.
(d) To appoint one or more Vice-Presidents, one or more Assistant
Treasurers, and one or more Assistant Secretaries, and to provide
that the persons so appointed shall have and may exercise any of
the powers of the President, of the Treasurer, and of the
Secretary, respectively.
TENTH: All meetings of stockholders and directors may be held
either within or without the State of Delaware, and the
Corporation may have one or more offices and may keep the books of
the Corporation (except such books as are required by law to be
kept at the office of the Corporation in the State of Delaware)
outside of the State of Delaware, and at any such place or places,
as may from time to time be designated by the Board of Directors.
ELEVENTH: No contract or other transaction between the
Corporation and any other corporation shall be affected or
invalidated by reason of the fact that any one or more of the
directors or officers of the Corporation is or are interested in,
or is a director or officer or are directors or officers of, such
other corporation; and any director or directors or officer or
officers, individually or jointly, may be a party or parties to,
or may be interested in, any contract or transaction of the
Corporation or in which the Corporation is interested and no
contract, act or transaction of the Corporation with any person or
persons, firm, association or corporation, shall be affected or
invalidated by reason of the fact that any director or directors
or officer or officers of the Corporation is a party or are
parties to, or interested in, such contract, act or transaction,
or in any way connected with such person or persons, firm,
association or corporation, and each and every person who may
become a director or officer of the Corporation is hereby relieved
from any liability that might otherwise exist from thus
contracting with the Corporation for the benefit of himself or any
firm, association or corporation in which he may be in anywise
interested.
TWELFTH: The Corporation reserves the right to amend, alter,
change or repeal any provision herein contained in the manner now
or hereafter authorized or permitted by law, and all rights
conferred upon stockholders are subject to this provision.
IN WITNESS WHEREOF, I FRANK MARKOE, JR. have made this certificate
under the seal of said WARNER-LAMBERT COMPANY and have signed the
same as Senior Vice President thereof this seventh day of
November, 1972.
[CORPORATE SEAL]
FRANK MARKOE, JR.
Frank Markoe, Jr.
Senior Vice President
Attest: JOSEPH B. CAIN
Joseph B. Cain
Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WARNER-LAMBERT COMPANY
The undersigned, FRANK MARKOE, JR., an Executive Vice President of
Warner-Lambert Company, a corporation duly organized and existing
under the laws of the State of Delaware (hereinafter generally
referred to as the "Corporation"), does hereby certify that the
following amendment of the Certificate of Incorporation of the
Corporation, as heretofore amended, has been duly adopted in
accordance with the provisions of Section 242 of the General
Corporation Law of the State of Delaware, said amendment being
effected by deleting the introductory paragraph of Article FOURTH
of said Certificate of Incorporation, as heretofore amended, and
substituting in lieu thereof a new introductory paragraph reading
as follows:
"FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is One Hundred
Fifty-Five Million (155,000,000) shares consisting of One Hundred
Fifty Million (150,000,000) shares of Common Stock of the par
value of One Dollar ($1) per share (hereinafter called the 'Common
Stock') and Five Million (5,000,000) shares of Preferred Stock of
the par value of One Dollar ($1) per share (hereinafter called the
'Preferred Stock')."
IN WITNESS WHEREOF, the undersigned has made this certificate
under the seal of the Corporation and has signed the same as
Executive Vice President thereof this 24th day of April, 1973.
FRANK MARKOE, JR.
Frank Markoe, Jr.
Executive Vice President
[Corporate Seal]
Attest: JOSEPH B. CAIN
Joseph B. Cain
Secretary
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
WARNER-LAMBERT COMPANY
The undersigned, Robert J. Dircks, Executive Vice President and
Chief Financial Officer of Warner-Lambert Company, a corporation
duly organized and existing under the laws of the State of
Delaware (hereinafter generally referred to as the "Corporation"),
does hereby certify that the following amendment of the
Certificate of Incorporation of the Corporation, as heretofore
amended, has been duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of
Delaware, said amendment being effected by
(i) adding the following Article, which Article shall be and read
as follows:
"TWELFTH: No director of the Corporation shall be personally
liable to the Corporation or its stockholders for monetary damages
for breach of fiduciary duty by such director as a director;
provided, however, that this Article TWELFTH shall not eliminate
the liability of a director (unless otherwise permitted by
applicable law), (i) for any breach of the director's duty of
loyalty to the Corporation or its stockholders, (ii) for acts or
omissions not in good faith or which involve intentional
misconduct or a knowing violation of law, (iii) under section 174
of the General Corporation Law of the State of Delaware, or (iv)
for any transaction from which the director derived an improper
personal benefit. No amendment to or repeal of this Article
TWELFTH shall apply to or have any effect on the liability or
alleged liability of any director of the Corporation for or with
respect to any acts or omissions of such director occurring prior
to such amendment or repeal."
and (ii) renumbering the current Article TWELFTH as Article
THIRTEENTH.
IN WITNESS WHEREOF, the undersigned has made this certificate
under the seal of the Corporation and has signed the same as its
Executive Vice President and Chief Financial Officer this 28th day
of April, 1987.
[Corporate Seal] ROBERT J. DIRCKS
Robert J. Dircks
Executive Vice President and
Chief Financial Officer
Attest Rae G. Paltiel
Rae G. Paltiel
Secretary
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
WARNER-LAMBERT COMPANY
The undersigned, Robert J. Dircks, Executive Vice President and
Chief Financial Officer of Warner-Lambert Company, a corporation
duly organized and existing under the laws of the State of
Delaware (hereinafter generally referred to as the "Corporation"),
does hereby certify that the following amendment of the Restated
Certificate of Incorporation of the Corporation, as heretofore
amended, has been duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of
Delaware, said amendment being effected by deleting the
introductory paragraph of Article FOURTH and substituting in lieu
thereof a new introductory paragraph reading as follows:
"FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is Three Hundred
Five Million (305,000,000) shares consisting of Three Hundred
Million (300,000,000) shares of Common Stock of the par value of
One Dollar ($1) per share (hereinafter called the 'Common Stock')
and Five Million (5,000,000) shares of Preferred Stock of the par
value of One Dollar ($1) per share (hereinafter called the
'Preferred Stock')."
IN WITNESS WHEREOF, the undersigned has made this certificate
under the seal of the Corporation and has signed the same as its
Executive Vice President and Chief Financial Officer this 24th day
of April, 1990.
[Corporate Seal] Robert J. Dircks
Robert J. Dircks
Executive Vice President and
Chief Financial Officer
Attest Rae G. Paltiel
Rae G. Paltiel
Secretary
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
WARNER-LAMBERT COMPANY
The undersigned, Ernest J. Larini, Vice President and Chief
Financial Officer of Warner-Lambert Company, a corporation duly
organized and existing under the laws of the State of Delaware
(hereinafter generally referred to as the "Corporation"), does
hereby certify that the following amendment of the Restated
Certificate of Incorporation of the Corporation, as heretofore
amended, has been duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of
Delaware, said amendment being effected by deleting the
introductory paragraph of Article FOURTH and substituting in lieu
thereof a new introductory paragraph reading as follows:
"FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is Five Hundred Five
Million (505,000,000) shares consisting of Five Hundred Million
(500,000,000) shares of Common Stock of the par value of One
Dollar ($1) per share (hereinafter called the `Common Stock') and
Five Million (5,000,000) shares of Preferred Stock of the par
value of One Dollar ($1) per share (hereinafter called the
`Preferred Stock')."
IN WITNESS WHEREOF, the undersigned has made this certificate
under the seal of the Corporation and has signed the same as its
Vice President and Chief Financial Officer this 23rd day of April,
1996.
[Corporate Seal] ERNEST J. LARINI
Ernest J. Larini
Vice President and
Chief Financial Officer
Attest RAE G. PALTIEL
Rae G. Paltiel
Secretar
CERTIFICATE OF AMENDMENT
OF
RESTATED CERTIFICATE OF INCORPORATION
OF
WARNER-LAMBERT COMPANY
The undersigned, Ernest J. Larini, Vice President and Chief
Financial Officer of Warner-Lambert Company, a corporation duly
organized and existing under the laws of the State of Delaware
(hereinafter generally referred to as the "Corporation"), does
hereby certify that the following amendment of the Restated
Certificate of Incorporation of the Corporation, as heretofore
amended, has been duly adopted in accordance with the provisions
of Section 242 of the General Corporation Law of the State of
Delaware, said amendment being effected by deleting the
introductory paragraph of Article FOURTH and substituting in lieu
thereof a new introductory paragraph reading as follows:
"FOURTH: The total number of shares of all classes of stock which
the Corporation shall have authority to issue is One Billion Two
Hundred and Five Million (1,205,000,000) shares consisting of One
Billion Two Hundred Million (1,200,000,000) shares of Common Stock
of the par value of One Dollar ($1) per share (hereinafter called
the 'Common Stock') and Five Million (5,000,000) shares of
Preferred Stock of the par value of One Dollar ($1) per share
(hereinafter called the 'Preferred Stock')."
IN WITNESS WHEREOF, the undersigned has made this certificate
under the seal of the Corporation and has signed the same as its
Vice President and Chief Financial Officer this 28th day of April,
1998.
[Corporate Seal] ERNEST J. LARINI
Ernest J. Larini
Vice President and
Chief Financial Officer
Attest RAE G. PALTIEL
Rae G. Paltiel
Secretary
WARNER-LAMBERT COMPANY
1987 STOCK OPTION PLAN
AS AMENDED TO JANUARY 27, 1998
WARNER-LAMBERT COMPANY
1987 STOCK OPTION PLAN
There is hereby established a 1987 Stock Option Plan (the "Plan"). The
Plan provides for the grant to certain employees of Warner-Lambert Company
or of a subsidiary thereof of options to purchase ("Options") and rights to
acquire ("Rights") shares of stock of Warner-Lambert Company and for the
issuance, transfer or sale of such stock upon the exercise of such Options
or Rights. The term "Company" as used in the Plan shall include Warner-
Lambert Company and any present or future subsidiary thereof.
1.Purpose. The purpose of the Plan is to provide additional incentive to
the officers and other key employees of the Company, who are primarily
responsible for the management and growth of the Company or otherwise
materially contribute to the conduct and direction of its business,
operations and affairs, in order to strengthen their desire to remain in
the employ of the Company, stimulate their efforts on behalf of the Company
and to retain and attract persons of competence, and, by encouraging
ownership of a stock interest in Warner-Lambert Company, to gain for the
organization the advantages inherent in employees having a sense of
proprietorship.
2.The Stock. The aggregate number of shares of stock which may be issued,
transferred or sold upon the exercise of Options and Rights granted under
the Plan shall not, except as such number may be adjusted in accordance
with paragraph (f) of Article 6 hereof, exceed 6,000,000 shares of Common
Stock of Warner-Lambert Company ("Common Stock") which may be either
authorized and unissued shares or issued shares reacquired by the Company.
Notwithstanding the above limitation, 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
again be available for the purposes of the Plan; provided, however, that if
such expired, terminated or cancelled Option shall have been a "Reference
Option", as defined in paragraph (a) of Article 8 hereof, 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.
3.Employees. The term "Employees," as used in the Plan, shall mean
officers and other employees of the Company (including officers and other
employees who are also directors) within the classes referred to in Article
1 hereof.
4.Eligibility.
(a)Options shall be granted only to persons who, at the time of the grant
of the Option, are Employees of the Company. A person to whom an Option is
granted hereunder is hereinafter sometimes referred to as an "Optionee." A
committee of the Board of Directors of Warner-Lambert Company, constituted
as provided in Article 9 hereof (hereinafter called the "Committee"), will
determine the Employees who are to be granted Options under the Plan and
the number of shares subject to each Option.
(b)Rights shall be granted only to persons (hereinafter referred to as
"Grantees") who, at the time of the grant of the Right, are Employees of
the Company and who are, or concurrently become, holders of an Option,
which at the time of such grant of the Right has not yet been exercised in
full or expired, to purchase shares of Common Stock (a) granted pursuant to
the Plan or another stock option plan of the Company or (b) granted
pursuant to a stock option plan of another corporation and assumed by
Warner-Lambert Company (with all such options referred to in clauses (a)
and (b) hereinafter referred to as "Outstanding Options"). In determining
the total number of shares of Common Stock deemed issuable pursuant to an
Outstanding Option in accordance with the preceding sentence, fractions of
shares shall be disregarded and no cash shall be payable with respect
thereto. The Committee will determine which of the Employees among the
holders of Outstanding Options are to be granted Rights under the Plan and
the number of shares of Common Stock subject to each Right.
5.Subsidiary. The term "Subsidiary," as used herein, shall be deemed to
mean any corporation (other than Warner-Lambert Company) in an unbroken
chain of corporations beginning with and including Warner-Lambert Company
if, at the time of the granting of an Option or Right, 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.
6.General Terms of Options and Rights.
(a)Consideration. The Committee shall determine the consideration to
Warner-Lambert 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,
Warner-Lambert 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.
(b)Number of Options and Rights which may be granted to, and number of
shares which may be acquired by, Employees. 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 422A of the Internal Revenue Code of
1986 (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 Warner-Lambert Company or any Subsidiary or of another corporation
and assumed by Warner-Lambert Company.
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, all determined in
accordance with the provisions of the Plan without regard to the price,
period of exercise, or any other terms or conditions of the Option
surrendered (except as otherwise provided in paragraph (g) of Article 7
hereof).
(c)Period of grant of Options and Rights. Options and Rights under the
Plan may be granted at any time after the Plan has been approved by the
stockholders of Warner-Lambert Company. However, no Option or Right shall
be granted under the Plan after April 28, 1992.
(d)Option and Right Agreements. Warner-Lambert 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 and not inconsistent with the
provisions of the Plan, and such terms and conditions shall be agreed to in
writing by the Optionee and Grantee. 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. Options and Rights shall be exercised by
submitting to Warner-Lambert Company a signed copy of a notice of exercise
in a form to be supplied by Warner-Lambert Company. The exercise of an
Option or Right shall be effective on the date on which Warner-Lambert
Company receives such notice at its principal corporate offices.
(e)Non-Transferability of Option or Right. Except as otherwise provided by
the Committee, no Option or Right granted under the Plan to an Employee
shall be transferable by the Employee or otherwise than by will or by the
laws of descent and distribution, and such Option and Right shall be
exercisable, during the Employee's lifetime, only by such Employee.
(f)Effect of change in Common Stock. In the event of a reorganization,
recapitalization, liquidation, stock split, stock dividend, combination of
shares, merger or consolidation, or the sale, conveyance, lease or other
transfer by Warner-Lambert Company of all or substantially all of its
property, or any other change in the corporate structure or shares of
Warner-Lambert Company, pursuant to any of which events the then
outstanding shares of the Common Stock are split up or combined, or are
changed into, become exchangeable at the holder's election for, or entitle
the holder thereof to, other shares of stock, or in the case of any other
transaction described in section 425(a) of the Code, the Committee may
change the number and kind of shares available under the Plan and any
outstanding Option and Right (including substitution of shares of another
corporation), and the price of any Option and the Fair Market Value
determined under Articles 7 and 8 hereof in such manner as it shall deem
equitable; provided, however, that in no event may any change be made to an
incentive stock option which would constitute a "modification" within the
meaning of section 425(h)(3) of the Code. Options 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 per share in the event of any such change.
(g)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, transferred or sold upon exercise of the Option or Right.
(h)Change in Control of Warner-Lambert Company.
(I) As used in the Plan, a "Change in Control of Warner-Lambert 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 Warner-
Lambert Company representing 20% or more of the combined voting power of
Warner-Lambert Company's then outstanding securities, (ii) upon the
consummation of a merger, consolidation, sale or disposition of all or
substantially all of Warner-Lambert Company's assets or a plan of
liquidation which is approved by stockholders of Warner-Lambert Company (a
"Transaction"), or (iii) the composition of the Board of Directors of
Warner-Lambert Company (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.
(II) 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.
(i)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 of
Warner-Lambert Company on the Composite Tape for New York Stock Exchange
issues on the date the calculation thereof shall be made with such
adjustments, if any, as shall be made. In the event the date of
calculation shall be on a date which shall not be a trading date on the New
York Stock Exchange, determination of Fair Market Value shall be made as of
the first date prior thereto which shall have been a trading date on the
New York Stock Exchange. Notwithstanding the foregoing, upon the exercise
of a Right during the 30-day period following Warner-Lambert Company
obtaining actual knowledge of a Change in Control of Warner-Lambert
Company, "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,
regular way, per share of Common Stock of Warner-Lambert Company 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
Company occurs as a result of a tender or exchange offer or approval by
stockholders of Warner-Lambert Company of a Transaction, then the highest
price per share of Common Stock of Warner-Lambert Company pursuant thereto.
Any consideration other than cash forming a part or all of the
consideration for Common Stock to be paid pursuant to the exchange offer
shall be valued at the valuation placed thereon by the Board of Directors
of Warner-Lambert Company. Adjustments, if any, shall be made in
accordance with paragraph (f) of this Article 6.
(j)Types of Options. Options granted under the Plan shall be in the form
of (i) incentive stock options as defined in Section 422A 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.
7.Terms of Options.
(a)Option Price. The price or prices per share for shares of Common Stock
to be sold pursuant to an Option shall be such as shall be fixed by the
Committee but not less in any case than the Fair Market Value per share for
such stock on the date of the granting of the Option, subject to adjustment
pursuant to paragraph (f) of Article 6 hereof.
For the purposes of this Article 7, the date of the granting of an Option
under the Plan shall be the date fixed by the Committee as the date for
such Option for the Employee who is to be the recipient thereof.
(b)Period of Option and certain limitations on right to exercise.
(i)Notwithstanding any other provision contained in this Plan, no part of
an Option may be exercised unless the Optionee remains in the
continuous employ of the Company for one year from the date the
Option is granted except that upon the occurrence of a Change in
Control of Warner-Lambert Company (as hereinafter defined) all
Options may be exercised without giving effect to the one year
limitation and the limitations, if any, which may have been imposed
by the Committee pursuant to paragraph (b)(ii) of this Article 7 with
respect to the percent of the total number of shares to which the
Option relates which may be purchased from time to time during the
Option Period.
(ii)Options will be exercisable thereafter over the Option Period, which,
in the case of each Option, shall be a period of not more than ten
years and one day from the date of the grant of such Option, and,
subject to the provisions of paragraph (d) of Article 6, 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 paragraphs (c), (d) and (e) of this Article 7, 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. The Plan shall not confer upon any
Optionee any right with respect to continuation of employment by the
Company, nor shall it interfere in any way with the Employee's right
or the Company's right to terminate employment at any time.
(c)Termination of employment before age 55. An Optionee whose employment
terminates before age 55, by reason other than death, shall, but 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, be
entitled to exercise such Option 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 paragraph (b)(ii) of
this Article 7 with respect to the percent of the total number of shares to
which the Option relates which may be purchased from time to time during
the Option Period.
(d)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 paragraph (b)(ii) of this Article 7 with respect
to the percent of the total number of shares to which the Option relates
which may be purchased from time to time during the Option Period;
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.
(e)Death of Optionee. If an Optionee should die:
(i)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 paragraph (b)(ii) of this
Article 7 with respect to the percent of the total number of shares
to which the Option relates which may be purchased from time to time
during the Option Period; 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 and in no event
after the expiration of the Option Period;
(ii) 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 paragraph (b)(ii)
of this Article 7 with respect to the percent of the total number of
shares to which the Option relates which may be purchased from time
to time during the Option Period; provided, however, that such Option
shall be exercisable only within the twelve-month period next
succeeding the death of the Optionee, but in no event after the
expiration of the Option Period; or
(iii) 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 paragraph (b)(ii) of this Article 7 with respect to the
percent of the total number of shares to which the Option relates
which may be purchased from time to time during the Option Period;
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 that such death occurs before the later of (i)
or (ii), but in no event after the expiration of the Option Period.
(f)Payment for shares. Payment for shares of Common Stock purchased shall
be made in full at the time of exercise of the Option and no loan or
advance shall be made by the Company 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 of Warner-Lambert Company valued, for this purpose, at
the Fair Market Value of such Common Stock on the trading date on the New
York Stock Exchange immediately preceding the date of exercise. Prior to
the distribution of Common Stock to which the Optionee shall become
entitled, there shall first be deducted all applicable withholding taxes
unless the Committee shall have authorized other arrangements.
(g)Incentive Stock Options. Options granted in the form of incentive stock
options shall be subject, in addition to the foregoing provisions of this
Article 7, to the following provisions:
(i) Annual Limit. The aggregate Fair Market Value (determined at the time
of grant) of the Common Stock with respect to which incentive stock
options granted after December 31, 1986, may be exercisable for the
first time by any Optionee during any calendar year (under the Plan
or under any other stock plan of Warner-Lambert Company or any
Subsidiary) shall not exceed $100,000.
(ii) 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 of the total combined voting
power of all classes of stock of Warner-Lambert Company or any
Subsidiary.
(iii) Option Period. No incentive stock option shall be exercisable after
the expiration of ten years from the date of grant.
The Company intends that Options designated by the Committee as incentive
stock options shall constitute incentive stock options under Section 422A
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
Board of Directors may amend the Plan accordingly, without the necessity of
obtaining the approval of stockholders of Warner-Lambert Company.
(h) 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.
8.Terms of Rights. Each Right granted under the Plan shall be subject to
the following terms and conditions:
(a)Relation to Option. Each Right shall relate specifically to an
Outstanding Option, other than an incentive stock option, then held by, or
concurrently granted to, the Grantee (hereinafter referred to as the
"Reference Option"). Upon exercise of a Right an amount shall be payable
from Warner-Lambert Company, determined in accordance with paragraph (c) of
this Article 8. The Reference Option shall terminate to the extent that
the related Right is exercised.
(b) Exercise of Right. A Right shall become exercisable at such time, and
in respect of such number of shares of Common Stock, as the Reference
Option is then exercisable and such Right shall terminate upon termination
of the Reference Option, provided, however, that no Right shall be
exercisable unless the Grantee shall have remained in the continuous employ
of the Company for one year from the date the Right was granted except that
upon the occurrence of a Change in Control of Warner-Lambert Company, all
Rights may be exercised without giving effect to the one year limitation
and the limitations, if any, which may have been imposed by the Committee
pursuant to paragraph (b)(ii) of Article 7 with respect to the percent of
the total number of shares to which the Right relates which may be
purchased from time to time during the Option Period; provided, however,
that Rights which have been held for less than six months on the date of
the occurrence of a Change in Control by Grantees who at the time of the
occurrence of the Change in Control are subject to the reporting
requirements of Section 16(a) of the Act may be exercised only during the
thirty (30) day period beginning six months after the date of grant of the
Right, notwithstanding the termination of the Grantee's employment with the
Company, and without giving effect to the one year limitation and the
limitations, if any, which may have been imposed by the Committee pursuant
to paragraph (b)(ii) of Article 7 with respect to the percent of the total
number of shares to which the Right relates which may be purchased from
time to time during the Option Period. Except as provided in this
paragraph (b) and in paragraphs (d) and (e) of this Article 8, no Right
shall be exercisable unless at the time of such exercise the Grantee shall
be in the employ of the Company. The date on which the exercise of a Right
is effective shall hereinafter be referred to as the Valuation Date.
(c)Determination and payment of amount payable upon exercise of Right.
Upon the exercise of a Right the amount payable shall be equal to:
(i)if the price per share of Common Stock that would be payable by the
Grantee upon the exercise of the Reference Option ("Option Price") is
less than the Fair Market Value of a share of Common Stock on the
date the related Right was granted (this difference being referred to
as the "Spread"), 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 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 (x) 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, and (y) the amount payable shall not exceed an amount equal to the
number of shares with respect to which the Right is being exercised
multiplied by the Fair Market Value of a share of Common Stock on the
Valuation Date.
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, and prior to the payment
of the amount payable, whether in shares of Common Stock, cash or any
combination thereof, there shall first be deducted all applicable
withholding taxes, with such deduction being first applied against the
amount of cash, if any, which may be payable unless the Committee shall
have authorized other arrangements. In the event that any payment in the
form of both cash and shares of Common Stock is made to a person subject to
the reporting requirements of Section 16(a) of the Act, 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 person
subject to the reporting requirements of Section 16(a) of the Act 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 in which cash may be paid under
the provisions of Rule 16b-3 promulgated pursuant to the Act. In addition,
a payment of cash shall be made to a person subject to the reporting
requirements of Section 16(a) of the Act who has held the Right at least
six months from the date of its grant promptly following a Change in
Control of Warner-Lambert Company which Change in Control is outside the
control of any person subject to such reporting requirements 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
during the term of the Plan. 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 Board of Directors of Warner-Lambert Company may amend the Plan
accordingly, without the necessity of obtaining the approval of
stockholders of Warner-Lambert Company. Any fraction of a share resulting
from the above calculation shall be disregarded.
(d)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 one
year after the date of the grant of the Right, 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 paragraph
(b)(ii) of Article 7 hereof.
(e)Death of Grantee. If a Grantee should die prior to the termination of
the Reference Option:
(i)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 paragraph (b)(ii) of
Article 7 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
(ii)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 paragraph
(b)(ii) of Article 7 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.
(f) Notwithstanding anything herein to the contrary, Limited Rights may be
granted hereunder by the Committee with respect to the Options granted
under the Plan (which are not Reference Options), which shall entitle the
holder to receive a payment of cash promptly following a Change in Control
of Warner-Lambert Company which Change in Control is outside the control of
any person subject to the reporting requirements of Section 16(a) of the
Act within the meaning of Rule 16b-3 under the Act. Such payment of cash
shall be made to a person subject to the reporting requirements of Section
16(a) of the Act 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 is being
exercised (in such case the method of determining the Fair Market Value in
the third sentence of Section 6(i) shall apply). Limited Rights shall
expire on the first to occur of the date of exercise or expiration of the
right of exercise of the Limited Right or of the related Option. Further,
upon exercise of a Limited Right, the related Option shall be cancelled.
The Board of Directors reserves the right to cancel all outstanding Limited
Rights in accordance with Sections 11 and 12 of the Executive Severance
Plan. Except as otherwise provided herein, the provisions of the Plan
relating to Rights shall also apply to Limited Rights.
9.Administration of the Plan. The Plan shall be administered under the
supervision of the Board of Directors of Warner-Lambert Company by a
Committee consisting of not less than three Directors of Warner-Lambert
Company, 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 the holder of an Option or a Right under the Plan may be a member
of the Committee, and no person may be granted an Option or a Right 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.
In addition to the Committee's discretionary authority set forth in other
Articles hereof, the Committee 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. Unless
otherwise determined by the Board of Directors, 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.
The Committee shall determine the Employees to whom Options and Rights
under the Plan are to be granted and the number of shares to be covered by
each Option granted and the Reference Option to which each Right is to
relate. In selecting the individuals to whom Options or Rights shall be
granted, as well as in determining the number of shares subject to each
Option and the Reference Option to which each Right is to relate, 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 shall establish the provisions which shall govern in the
event of the death, disability or termination of an Optionee or Grantee,
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. An Employee's employment 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 Benefit
Plan had the Optionee or Grantee been enrolled in such plan, except as
otherwise provided herein. Absence on leave approved by the Company shall
not be considered an interruption of employment for any purpose of the
Plan.
In addition, and not in limitation of the authority of the Committee, the
Stock Option Committee (as hereinafter defined) may grant pre-employment
Options and Rights, in accordance with the provisions of the Plan,
including the establishment of the terms and conditions thereof and the
consideration to Warner-Lambert Company therefor, to Employees who, at the
time of the grant, are not subject to the reporting requirements of Section
16(a) of the Act. The Stock Option Committee, whose members need not be
Directors, shall be appointed by, and shall serve at the pleasure of, the
Committee. A majority of the Stock Option 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 Option Committee participate by
telephone), or acts approved in writing by a majority of the Stock Option
Committee, shall be the acts of the Stock Option Committee.
Notwithstanding the foregoing, the Stock Option Committee may not undertake
any action which the provisions of Rule 16b-3, promulgated pursuant to the
Act, require to be undertaken by "disinterested persons" (as defined in
said Rule) as a condition of the continued qualification of the Plan under
Rule 16b-3.
An Optionee or Grantee subject to the reporting requirements of Section
16(a) of the Act may satisfy all withholding tax requirements incident to
the exercise of Options or Rights wherein Common Stock is received upon
such exercise, by electing to have a sufficient number of shares of Common
Stock (valued for this purpose at the Fair Market Value of such Common
Stock on the trading date on the New York Stock Exchange on which such
taxes are due) withheld to fulfill such tax obligations (hereinafter a
"Withholding Election"); provided, however, that the Withholding Election
shall be subject to the disapproval of the Committee and further provided
that 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, (ii) six months
before the Option or Rights exercise becomes taxable, or (iii) 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
Optionee or Grantee. The Company intends that this Withholding Election
provision shall comply with the requirements of Rule 16b-3 under the Act
during the term of the Plan. 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 Board of Directors of Warner-Lambert Company may amend the Plan
accordingly, without the necessity of obtaining the approval of
stockholders of Warner-Lambert Company.
This Plan shall be governed by the law of the State of New York (regardless
of the law that might otherwise govern under applicable New York principles
of conflicts of laws).
10.Amendment and Discontinuance of the Plan; Cancellation of Rights. (a)
The Board of Directors of Warner-Lambert Company may at any time alter,
suspend or terminate the Plan, but, except in accordance with the
provisions of paragraph (f) of Article 6, paragraph (b) of this Article 10
and Article 11 hereof, no change shall be made which will have a material
adverse effect upon any Option or Right previously granted unless the
consent of the Optionee or the Grantee is obtained; provided, however, that
except in the case of adjustment made pursuant to paragraph (f) of Article
6 hereof, the Board of Directors may not, without further approval of the
stockholders, (i) increase the maximum number of shares for which Options
or Rights may be granted under the Plan, (ii) decrease the minimum Option
Price provided in the Plan, (iii) increase the total number of shares which
may be issued or transferred pursuant to Rights granted under the Plan, or
(iv) change the class of Employees eligible to receive Options or Rights.
(b)The Board of Directors shall have the power to cancel all Rights
theretofore granted pursuant to the Plan, in the event that it shall
determine, giving consideration to all the circumstances, that the ultimate
federal income tax effects or accounting effects of the grant or exercise
of Rights under the Plan would not be in the best interests of the Company.
(c)Notwithstanding anything in this Article 10 to the contrary, the
Committee may 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 or suspension 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.
(d)Notwithstanding the foregoing provisions of this Article 10, no person
may be divested of the ownership of Common Stock previously issued, sold or
transferred under the Plan.
11.Listing and other conditions. As long as the Common Stock is listed on
the New York Stock Exchange, the issue of any shares of stock pursuant to
an Option or Right granted under the Plan shall be conditioned upon the
shares so to be issued being listed on such Exchange. Warner-Lambert
Company will make application for listing on such Exchange unlisted shares
subject to Options and Rights under the Plan, 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.
If at any time counsel to Warner-Lambert Company shall be of the opinion
that any sale or delivery of shares of Common Stock pursuant to an Option
or Right granted under the Plan is or may in the circumstances be unlawful
under the statutes, rules or regulations of any applicable jurisdiction,
Warner-Lambert Company 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 or otherwise
with respect to shares of stock or Options or Rights under the Plan, and
the right to exercise any such Option or Right shall be suspended until, in
the opinion of said counsel, such sale or delivery shall be lawful.
Upon termination of any period of suspension under this Article 11, any
Option or Right affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all shares available upon
exercise of the Option or Right before such suspension and as to shares
which would otherwise have become available for purchase during the period
of such suspension, but no such suspension shall extend any Option Period.
12.Approval; Effective Date.
Effective Date. The Plan shall become effective upon approval by the
stockholders of Warner-Lambert Company at the Annual Meeting of
Stockholders to be held in 1987.
WARNER-LAMBERT COMPANY
1989 STOCK PLAN
AS AMENDED TO JANUARY 27, 1998
WARNER-LAMBERT COMPANY
1989 STOCK PLAN
ARTICLE I
Purpose of Plan
Section 1.1. Purpose. The purpose of the 1989 Stock Plan is to provide
additional incentive to the officers and other employees of the Company (as
hereinafter defined) and to recognize and reward efforts and
accomplishments in order to strengthen the desire of employees to remain
with the Company, stimulate their efforts on behalf of the Company and
attract and retain persons of competence, and, by encouraging ownership of
a stock interest in the Company, to gain for the organization the
advantages inherent in employees having a sense of proprietorship.
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:
Act: The Securities Exchange Act of 1934, as amended.
Board of Directors (or Board): The Board of Directors of Warner-Lambert.
Code: The Internal Revenue Code of 1986, as amended.
Committee: The committee appointed to administer the Plan in accordance
with Section 11.1 hereof.
Common Stock: Common Stock, par value $1.00 per share, of Warner-Lambert.
Company: Warner-Lambert and its Subsidiaries.
Employee: Officers and other employees of the Company (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 of
Warner-Lambert Company 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 on a date which shall not be a trading date on
the New York Stock Exchange, determination of Fair Market Value shall be
made as of the first date prior theretowhich shall have been a trading date
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 Optionshave 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 1989 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.
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.
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 Award: A grant of Options, Rights, Restricted Stock or Performance
Awards in accordance with the provisions hereof.
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 the exercise of a Right is effective.
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. The aggregate number of shares of Common
Stock which may be issued under the Plan shall not exceed 8,000,000 shares
of Common Stock which may be either authorized and unissued shares or
issued shares reacquired by the Company. Notwithstanding the above
limitation, 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 again be available for the
purposes of the Plan; 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 again be available under the Plan.
In addition, any shares of Common Stock issued under the Plan through the
assumption or substitution of outstanding grants from an acquired company
shall not reduce the shares available under the Plan.
ARTICLE IV
General Terms of Options and Rights
Section 4.1. Consideration. The Committee shall determine the
consideration to the Company for the granting of Options and Rights under
the Plan, as well as the conditions, if any, which it may deem appropriate
to ensure that such consideration will be received by, or will accrue to,
the Company, and, in the discretion of the Committee, such consideration
need not be the same, but may vary for Options and Rights granted under the
Plan at the same time or from time to time.
Section 4.2. Number of Options and Rights.
(a) The Committee may grant more than one Option or Right to an individual
during the life of the Plan and, subject to the requirements of Section
422A 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 Warner-
Lambert.
(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 Warner-Lambert a
signed copy of a notice of exercise in a form to be supplied by Warner-
Lambert and the exercise of an Option or Right shall be effective on the
date on which Warner-Lambert receives such notice at its principal
corporate offices.
Section 4.4. Non-Transferability of Option or Right. Except as otherwise
provided by the Committee, 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, 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 Company" shall be deemed to have occurred if (i)
any person (as such term is used in Sections 13(d) and 14(d)(2) of the Act
is or becomes the beneficial owner (as defined in Rule 13d-3 under the
Act), directly or indirectly, of securities of Warner-Lambert Company
representing 20% or more of the combined voting power of Warner-Lambert
Company's then outstanding securities, (ii) upon the consummation of a
merger, consolidation, sale or disposition of all or substantially all of
Warner-Lambert Company's assets or plan of liquidation which is approved by
shareholders of Warner-Lambert Company (a "Transaction"), or (iii) the
composition of the Board of Directors of Warner-Lambert Company (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 Company obtaining actual knowledge
of a Change in Control of Warner-Lambert Company, "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 Company 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 Company occurs as a result of a tender or exchange offer
or approval by stockholders of Warner-Lambert Company of a Transaction,
then the highest price per share of Common Stock of Warner-Lambert Company
pursuant thereto. Any consideration other than cash forming a part or all
of the consideration for Common Stock to be paid pursuant to the exchange
offer 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.
(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 422A 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 but not less in any case than the Fair Market Value
per share for such stock on the date of the granting of the Option, subject
to adjustment pursuant to Section 10.1 hereof. The date of the granting of
an Option under the Plan shall be the date fixed by the Committee as the
date for such Option for the Employee who is to be the recipient thereof.
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 one year from the date the Option
is granted except that upon the occurrence of a Change in Control of
Warner-Lambert Company all Options may be exercised without giving effect
to the one- year limitation and the limitations, if any, which may have
been imposed by the Committee pursuant to 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
(provided, however, that the term of an incentive stock option shall be a
period of not more than ten years from the date of the grant of such
Option), and will be exercisable at such times and in such amounts as
determined by the Committee at the time each Option is granted.
Notwithstanding any other provision contained in this Plan, no Option shall
be exercisable after the expiration of the Option Period. Except as
provided in Sections 5.4, 5.5 and 5.6 hereof, no Option may be exercised
unless the Optionee is then in the employ of the Company and shall have
been continuously so employed since the date of the grant of such Option.
Section 5.4. Termination of Employment Before Age 55. An Optionee whose
employment terminates before age 55, by reason other than death, shall be
entitled to exercise such Option, only within the three-month period after
the date of such termination of employment and in no event after the
expiration of the Option Period, and then only if and to the extent that
the Optionee was entitled to exercise the Option at the date of the
termination of employment, giving effect to the limitations, if any, which
may have been imposed by the Committee pursuant to Section 5.3(b) with
respect to the percent of the total number of shares to which the Option
relates which may be purchased from time to time during the Option Period.
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 and 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; 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
purchased 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 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.
The Company intends that Options designated by the Committee as incentive
stock options shall constitute incentive stock options under Section 422A
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 one year from the date the Right was granted,
except that upon the occurrence of a Change in Control of Warner-Lambert
Company, all Rights may be exercised without giving effect to the one-year
limitation and the limitations, if any, which may have been imposed by the
Committee pursuant to 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; provided, however, that Rights
which have been held for less than six months on the date of the occurrence
of a Change in Control by Grantees who at the time of the occurrence of the
Change in Control are Reporting Persons may be exercised only during the
thirty (30) day period beginning six months after the date of grant of the
Right, notwithstanding the termination of the Grantee's employment with the
Company, and without giving effect to the one-year limitation and the
limitations, if any, which may have been imposed by the Committee pursuant
to Section 5.3(b) with respect to the percent of the total number of shares
to which the Right relates which may be purchased from time to time during
the Option Period. Except as provided in this Section 6.2, and in Sections
6.5 and 6.6, no Right shall be exercisable unless at the time of such
exercise the Grantee shall be in the employ of the Company.
Section 6.3. Amount Payable Upon Exercise of Right. Upon the exercise of
a Right the amount payable shall be equal to:
(i) 100% of the Spread but not exceeding the difference between the Option
Price and the Fair Market Value of a share of Common Stock on the Valuation
Date; plus
(ii) 125% of the amount 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 (x) 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, and (y) the amount payable shall not exceed an amount equal to the
number of shares with respect to which the Right is being exercised
multiplied by the Fair Market Value of a share of Common Stock on the
Valuation Date.
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 in which
cash may be paid under the provisions of Rule 16b-3 promulgated pursuant to
the Act. In addition, a payment of cash shall be made to a person subject
to the reporting requirements of Section 16(a) of the Act who has held the
Right at least six months from the date of its grant promptly following a
Change in Control of Warner-Lambert Company which Change in Control is
outside the control of any person subject to such reporting requirements
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 one year after the date of the grant of the Right, 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 are not Reference Options under any such plan)
which shall entitle the holder to receive a payment of cash promptly
following a Change in Control of Warner-Lambert Company which Change in
Control is outside the control of any person subject to the reporting
requirements of Section 16(a) of the Act within the meaning of Rule 16b-3
under the Act. Such payment of cash shall be made to a person subject to
the reporting requirements of Section 16(a) of the Act 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 is being exercised (in such case the method of
determining the Fair Market Value in the second sentence of Section 4.6(a)
shall apply). Limited Rights shall expire on the first to occur of the
date of exercise or expiration of the right of exercise of the Limited
Right or of the related Option. Further, upon exercise of a Limited Right,
the related Option shall be cancelled. The Board of Directors reserves the
right to cancel all outstanding Limited Rights in accordance with Sections
11 and 12 of the Executive Severance Plan. Except as otherwise provided
herein, the provisions of the Plan relating to Rights shall also apply to
Limited Rights.
ARTICLE VII
Terms And Conditions Of Restricted Stock
Section 7.1. General. The restrictions set forth in Section 7.2 shall
apply to each grant of Restricted Stock for the duration of the Restricted
Period.
Section 7.2. Restrictions. A stock certificate representing the number of
shares of Restricted Stock granted shall be registered in the Participant's
name but shall be held in custody by the Company for the Participant's
account. The Participant shall have all rights and privileges of a
stockholder as to such Restricted Stock, including the right to receive
dividends and the right to vote such shares, except that, subject to the
provisions of Section 7.3, the following restrictions shall apply: (i) the
Participant shall not be entitled to delivery of the certificate until the
expiration of the Restricted Period; (ii) none of the shares of Restricted
Stock may be sold, transferred, assigned, pledged, or otherwise encumbered
or disposed of during the Restricted Period; (iii) the Participant shall,
if requested by the Company, execute and deliver to the Company, a stock
power endorsed in blank; and (iv) all of the shares of Restricted Stock
still subject to restrictions shall be forfeited and all rights of the
Participant to such shares shall terminate without further obligation on
the part of the Company if the Participant ceases to be an Employee prior
to the expiration of the Restricted Period applicable to such shares. Upon
the forfeiture (in whole or in part) of shares of Restricted Stock, such
forfeited shares shall become treasury shares of the Company without
further action by the Participant. The Participant shall have the same
rights and privileges, and be subject to the same restrictions, with
respect to any shares received pursuant to Section 10.1 hereof.
Section 7.3. Terms and Conditions. The Committee shall establish the
terms and conditions, which need not be the same for all grants made under
the Plan, applicable to the Restricted Stock, and which may include
restrictions based upon periods of time, performance (corporate, group,
individual or otherwise), combinations thereof or such other restrictions
as the Committee shall determine to be appropriate. The Committee may
provide for the restrictions to lapse with respect to a portion or portions
of the Restricted Stock at different times or upon the occurrence of
different events and the Committee may waive, in whole or in part, any or
all restrictions applicable to a grant of Restricted Stock. Restricted
Stock awards may be issued for no cash consideration or for such minimum
consideration as may be required by applicable law.
Section 7.4. Delivery of Restricted Shares. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall
be delivered, free of all such restrictions, to the Participant or the
Participant's beneficiary or estate, as the case may be. The Company shall
not be required to deliver any fractional share of Common Stock but shall
pay, in lieu thereof, the fair market value (measured as of the date the
restrictions lapse) of such fractional share to the Participant or the
Participant's beneficiary or estate, as the case may be. Notwithstanding
the foregoing, the Committee may authorize the delivery of the Restricted
Stock to a Participant during the Restricted Period, in which event any
stock certificates in respect of shares of Restricted Stock thus delivered
to a Participant during the Restricted Period applicable to such shares
shall bear an appropriate legend referring to the terms and conditions,
including the restrictions, applicable thereto.
Section 7.5. Certain Events.
(a) In the event of a Change in Control of Warner-Lambert Company 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 Company, 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 Company 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 Company, or (b) if the
Change in Control of Warner-Lambert Company occurs as a result of a tender
or exchange offer or approval by the stockholders of the Company 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 an exchange offer 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, 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.
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, separation, 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 the Company, the Committee may make such equitable
adjustments to prevent dilution or enlargement of rights as it may deem
appropriate in the number and class of shares authorized to be granted
hereunder, including adjustment to the share limitation of Section 3.2
hereof, and change the number and kind of shares available under any
outstanding Option and Right (including substitution of shares of another
corporation), and the price of any Option and the Fair Market Value in such
manner as it shall deem equitable; provided, however, that in no event may
any change be made to an incentive stock option which would constitute a
"modification" within the meaning of section 425(h)(3) of the Code.
Options 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
Administration
Section 11.1. 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 a Stock
Award under the Plan 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 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 shall 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 11.2. Stock Awards Committee. In addition, and not in limitation
of the authority of the Committee, the Stock Awards Committee (as
hereinafter constituted) may grant Stock Awards, in accordance with the
provisions of the Plan, including the establishment of the terms and
conditions thereof and the consideration to the Company therefor, to
Employees who, at the time of the grant, are not Reporting Persons. The
Stock Awards Committee, whose members need not serve on the Board of
Directors, shall be appointed by, and shall serve at the pleasure of, the
Committee. A majority of the Stock Awards Committee shall constitute a
quorum and the acts of a majority of the members present at any meeting at
which a quorum is present, expressed from time to time by a vote at a
meeting (including a meeting held by telephone conference call or in which
one or more members of the Stock Awards Committee participate by
telephone), or acts approved in writing by a majority of the Stock Awards
Committee, shall be the acts of the Stock Awards Committee.
Notwithstanding the foregoing, the Stock Awards Committee may not undertake
any action which the provisions of Rule 16b-3, promulgated pursuant to the
Act, require to be undertaken by "disinterested persons" (as defined in
said Rule) as a condition of the continued qualification of the Plan under
Rule 16b-3.
ARTICLE XII
Termination or Amendment of the Plan
Section 12.1. 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 prior to such termination, alteration or amendment may
not be impaired without the consent of such Participant and, provided
further, without the approval of the Company's stockholders, no alteration
or amendment may be made which would (i) increase the aggregate number of
shares of Common Stock that may be issued under the Plan (except by
operation of Article X), or (ii) change the category of employees eligible
to receive Stock Awards under the Plan. The Company intends that the Plan
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 the approval of the
Company's stockholders.
(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 XIII
Miscellaneous
Section 13.1. 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 13.2. 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 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, (ii) six months before the Stock Award
becomes taxable, or (iii) 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 13.3. 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 13.4. 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, 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. An Employee's employment shall be
deemed terminated for purposes of the Plan as of the date benefit payments
would have commenced under the Warner-Lambert Long Term Disability Benefits
Plan had the Participant been enrolled in such plan, except as otherwise
provided herein. Absence on leave approved by the Company shall not be
considered an interruption of employment for any purpose of the Plan.
Section 13.5. 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 13.5,
any Stock Award affected by such suspension which shall not then have
expired or terminated shall be reinstated as to all shares available before
such suspension and as to shares which would otherwise have become
available during the period of such suspension, but no such suspension
shall extend any Option Period.
Section 13.6. 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 13.7. 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 13.8. Laws of Foreign Jurisdictions. Without amending the Plan,
but subject to the limitations specified in Article XII 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 13.9. Other Plans. Nothing contained herein shall prevent the
Company from adopting additional compensation plans or arrangements.
ARTICLE XIV
Effective Date; Expiration
Section 14.1. 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 1989. The Plan shall become effective upon the
affirmative vote of the holders of a majority of the shares of Common Stock
present, or represented, and entitled to vote at the meeting.
Section 14.2. Expiration. No Stock Awards may be granted hereunder after
April 25, 1994. The expiration of the Plan as herein provided shall not
affect any Stock Award granted prior to such expiration.
WARNER-LAMBERT COMPANY
WARNER-LAMBERT COMPANY
1992 STOCK PLAN
As Amended to January 27, 1998
WARNER-LAMBERT COMPANY
1992 STOCK PLAN
ARTICLE I
Purpose of Plan
Section 1.1. Purpose.
(a) The purpose of the 1992 Stock Plan is to provide additional incentive to
selected officers and other employees of the Company (as hereinafter defined),
to recognize and reward their efforts and accomplishments in order to
strengthen the desire of employees to remain with the Company and stimulate
their efforts on behalf of the Company and to attract and retain persons of
competence, and, by encouraging ownership of a stock interest in the Company,
to gain for the Company the advantages inherent in employees having a sense of
proprietorship.
(b) In addition, the Plan (as hereinafter defined) will assist in the
attraction and retention of non-employee members of the Board of Directors by
providing the opportunity for such Directors to obtain a proprietary interest
in the Company's success and progress and with increased flexibility in the
timing of the receipt of fees for services on, and attending meetings of, the
Board of Directors and committees thereof.
ARTICLE II
Definitions
Section 2.1. Definitions. Whenever used herein, unless the context otherwise
indicates, the following terms shall have the respective meaning set forth
below:
Account: A Cash Account or a Stock Account.
Act: The Securities Exchange Act of 1934, as amended.
Affiliate: Any corporation, partnership, association, joint-stock company,
business trust, joint venture or unincorporated organization controlled,
directly or indirectly, by Warner-Lambert. Warner-Lambert shall be deemed to
control any such entity if Warner-Lambert possesses, directly or indirectly,
the power to direct or cause the direction of its management and policies,
whether through the ownership of voting securities, by contract or otherwise.
Board of Directors (or Board): The Board of Directors of Warner-Lambert.
Business Day: A day except for a Saturday, Sunday or a legal holiday.
Cash Account: The Account which reflects the Compensation deferred by a
Director pursuant to Section 11.3.
Cash Credit: A credit to a Director's Cash Account, expressed in whole
dollars and fractions thereof, pursuant to Section 11.3.
Closing Price: The closing price of the Common Stock on the Composite Tape
for New York Stock Exchange issues.
Code: The Internal Revenue Code of 1986, as amended.
Committee: The committee appointed to administer the Plan in accordance with
Section 12.1 hereof.
Common Stock: Common Stock, par value $1.00 per share, of Warner-Lambert.
Company: Warner-Lambert and its Affiliates.
Compensation: All cash remuneration payable to a Director for services to the
Company as a Director or as a consultant, other than reimbursement for
expenses, and shall include retainer fees for service on, and fees for
attendance at meetings of, the Board and any committees thereof.
Deferred Compensation Account: An account established by the Company for a
Director under a Predecessor Plan.
Director: Any member of the Board of Directors who is not an employee of the
Company or any of its Affiliates.
Effective Date: The date specified in Article XV hereof.
Employee: Officers and other employees of the Company or any of its
Affiliates (including such persons who are also members of the Board of
Directors).
Fair Market Value: As used in the Plan, the term "Fair Market Value" shall be
the mean between the high and low sales prices for Common Stock on the
Composite Tape for New York Stock Exchange issues on the date the calculation
thereof shall be made. In the event the date of calculation shall be a date
on which the Common Stock shall not trade on the New York Stock Exchange,
determination of Fair Market Value shall be made as of the first date prior
thereto on which the Common Stock shall have traded on the New York Stock
Exchange.
Grantee: A Participant to whom Rights have been granted in accordance with
the provisions of Articles IV and VI hereof.
Option: The grant to Participants of options to purchase shares of Common
Stock in accordance with the provisions of Articles IV and V hereof.
Optionee: A Participant to whom one or more Options have been granted in
accordance with the provisions of Articles IV and V hereof.
Option Period: The period of time during which an Option may be exercised in
accordance with the provisions hereof.
Option Price: The price per share payable to the Company for shares of Common
Stock upon the exercise of an Option.
Participant: Each Employee to whom a Stock Award is granted under the Plan.
Performance Awards: Awards made to Employees in accordance with the
provisions of Article VIII hereof.
Plan: The Warner-Lambert Company 1992 Stock Plan.
Plan Year: The calendar year.
Predecessor Plans: The Warner-Lambert Directors' Fees Deferral Plan, the
Warner-Lambert Consulting Fees Deferral Plan and the Deferred Compensation
Plan for Directors of Warner-Lambert Company.
Reference Option: An Option, other than an incentive stock option, to which a
Right shall relate.
Reporting Person: A person subject to the reporting requirements of Section
16(a) of the Act, excluding former officers and directors whose transactions
in Common Stock are no longer subject to Section 16 of the Act.
Restricted Period: The period of time from the date of grant of Restricted
Stock until the lapse of restrictions attached thereto.
Restricted Stock: Common Stock granted under the Plan which is subject to
restrictions in accordance with the provisions of Article VII hereof.
Right: The grant to Participants of rights to acquire shares of Common Stock
in accordance with the provisions of Articles IV and VI hereof.
Secretary: The Secretary of Warner-Lambert.
Spread: The amount by which the Option Price that would be payable by the
Grantee upon the exercise of the Reference Option is less than the Fair Market
Value of a share of Common Stock on the date the related Right was granted.
Stock Account: The Account which reflects the Compensation deferred by a
Director pursuant to Section 11.4.
Stock Award: A grant of Options, Rights, Restricted Stock or Performance
Awards in accordance with the provisions hereof.
Stock Credit: A credit to a Director's Stock Account, expressed in whole
shares and fractions thereof, pursuant to Section 11.4.
Subsidiary: Any corporation (other than Warner-Lambert) in an unbroken chain
of corporations beginning with and including Warner-Lambert if, at the time of
the granting of a Stock Award, each of the corporations other than the last
corporation in said unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
Valuation Date: The date on which a Right is exercised.
Warner-Lambert: Warner-Lambert Company or any successor to it in ownership of
substantially all of its assets, whether by merger, consolidation or
otherwise.
ARTICLE III
Eligibility and Grants
Section 3.1. Eligibility and Grants. The Committee shall determine the
Employees who shall be granted Stock Awards and the number of shares thereof.
The Committee may make more than one grant to an Employee during the life of
the Plan. Each grant shall be evidenced by a written instrument duly executed
by or on behalf of the Company.
Section 3.2. Share Limitation. Stock Awards may not be granted in any year
which provide for the issuance of more than 1.75% of the shares of Common
Stock outstanding (including issued shares reacquired by the Company) on the
January 1 of the year of grant. Shares of Common Stock issued under the Plan
may be either authorized and unissued shares or issued shares reacquired by
the Company. Notwithstanding the above limitation, in any year in which Stock
Awards are granted which provide for the issuance of less than the maximum
permissible number of shares, the balance of such unused shares shall be added
to the limitation in subsequent years. In addition, if any Option granted
under the Plan shall expire, terminate or be cancelled for any reason without
having been exercised in full, the corresponding number of unpurchased shares
shall be added to the limitation in subsequent years; provided, however, that
if such expired, terminated or cancelled Option shall have been a Reference
Option, none of such unpurchased shares shall again become available for
purposes of the Plan to the extent that the related Right granted under the
Plan is exercised. Further, if any shares of Common Stock granted hereunder
are forfeited or such award otherwise terminates without the delivery of such
shares upon the lapse of restrictions, the shares subject to such grant, to
the extent of such forfeiture or termination, shall be added to the limitation
in subsequent years so long as the Participant received no "benefits of
ownership" (within the meaning of Section 16 of the Act) in connection with
such grant. To the extent permitted by Section 16 of the Act, any shares of
Common Stock issued under the Plan through the assumption or substitution of
outstanding grants from an acquired company shall not reduce the shares
available under the Plan.
ARTICLE IV
General Terms of Options and Rights
Section 4.1. Consideration. The Committee shall determine the consideration
to the Company for the granting of Options and Rights under the Plan, as well
as the conditions, if any, which it may deem appropriate to ensure that such
consideration will be received by, or will accrue to, the Company, and, in the
discretion of the Committee, such consideration need not be the same, but may
vary for Options and Rights granted under the Plan at the same time or from
time to time.
Section 4.2. Number of Options and Rights.
(a) The Committee may grant more than one Option or Right to an individual
during the life of the Plan and, subject to the requirements of Section 422 of
the Code with respect to incentive stock options, such Option or Right may be
in addition to, in tandem with, or in substitution for, options or rights
previously granted under the Plan or under another stock plan of the Company
or of another corporation and assumed by the Company.
(b) The Committee may permit the voluntary surrender of all or a portion of
any Option granted under the Plan or any prior plan to be conditioned upon the
granting to the Employee of a new Option for the same or a different number of
shares as the Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Option to such Employee. Such new
Option shall be exercisable at the price, during the period, and in accordance
with any other terms or conditions specified by the Committee at the time the
new Option is granted.
Section 4.3. Option and Right Agreements. The Company shall effect the grant
of Options and Rights under the Plan, in accordance with determinations made
by the Committee, by execution of instruments in writing, in a form approved
by the Committee. Each Option and Right shall contain such terms and
conditions (which need not be the same for all Options and Rights, whether
granted at the same time or at different times) as the Committee shall deem to
be appropriate. The Committee may, in its sole discretion, and subject to
such terms and conditions as it may adopt, accelerate the date or dates on
which some or all outstanding Options and Rights may be exercised. Except as
otherwise provided by the Committee, Options and Rights shall be exercised by
submitting to the Company a signed copy of a notice of exercise in a form to
be supplied by the Company and the exercise of an Option or Right shall be
effective on the date on which the Company receives such notice at its
principal corporate offices.
Section 4.4. Non-Transferability of Option or Right. Except as otherwise
provided by the Committee, 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. The
date of the granting of an Option under the Plan shall be the date fixed by
the Committee.
Section 5.3. Period of Option.
(a) No part of an Option may be exercised unless the Optionee remains in the
continuous employ of the Company for the period of time specified by the
Committee, except that upon the occurrence of a Change in Control of Warner-
Lambert all Options may be exercised without giving effect to the period of
employment limitation and the limitations, if any, which may have been imposed
by the Committee pursuant to Section 5.3(b) with respect to the percent of the
total number of shares to which the Option relates which may be purchased from
time to time during the Option Period.
(b) Options will be exercisable thereafter over the Option Period, which, in
the case of each Option, shall be a period determined by the Committee and
will be exercisable at such times and in such amounts as determined by the
Committee at the time each Option is granted. Notwithstanding any other
provision contained in this Plan, no Option shall be exercisable after the
expiration of the Option Period. Except as provided in Sections 5.4, 5.5 and
5.6 hereof, no Option may be exercised unless the Optionee is then in the
employ of the Company and shall have been continuously so employed since the
date of the grant of such Option.
Section 5.4. Termination of Employment Before Age 55. An Optionee whose
employment terminates before age 55, by reason other than death, shall be
entitled to exercise such Option, only within the three-month period after the
date of such termination of employment and in no event after the expiration of
the Option Period, and then only if and to the extent that the Optionee was
entitled to exercise the Option at the date of the termination of employment,
giving effect to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) with respect to the percent of the total
number of shares to which the Option relates which may be purchased from time
to time during the Option Period and have not been removed pursuant to Section
5.3(a).
Section 5.5. Termination of Employment On or After Age 55. An Optionee whose
employment terminates on or after age 55, by reason other than death, shall be
entitled to exercise such Option if the Optionee was entitled to exercise the
Option at the date of the termination, without, however, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant to
Section 5.3(b) with respect to the percent of the total number of shares to
which the Option relates which may be purchased from time to time during the
Option Period; provided, however, that such Option shall be exercisable until
the later of (i) the three-year period after termination of employment, or
(ii) the period after termination of employment which is equal to the number
of full months that the Option has been outstanding prior to such termination,
but in no event after the expiration of the Option Period.
Section 5.6. Death of Optionee. If an Optionee should die:
(a) while in the employ of the Company, the Option theretofore granted shall,
if the Optionee was entitled to exercise the Option at the date of death, be
exercisable by the estate of the Optionee, or by a person who acquired the
right to exercise such Option by bequest or inheritance or by reason of the
death of the Optionee, without, however, giving effect to the limitations, if
any, which may have been imposed by the Committee pursuant to Section 5.3(b)
with respect to the percent of the total number of shares to which the Option
relates which may be purchased from time to time during the Option Period;
provided, however, that such Option shall be exercisable until the later of
(i) the three-year period after termination of employment, or (ii) the period
after termination of employment which is equal to the number of full months
that the Option has been outstanding prior to such termination, but in no
event after the expiration of the Option Period;
(b) within the three-month period after the date of the termination of
employment before age 55, the Option theretofore granted shall be exercisable
by the estate of the Optionee, or by a person who acquired the right to
exercise such Option by bequest or inheritance or by reason of the death of
the Optionee, but then only if and to the extent that the Optionee was
entitled to exercise the Option at the date of death, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant to
Section 5.3(b) with respect to the percent of the total number of shares to
which the Option relates which may be purchased from time to time during the
Option Period and have not been removed pursuant to Section 5.3(a); provided,
however, that such Option shall be exercisable only within the twelve-month
period next succeeding the death of the Optionee and in no event after the
expiration of the Option Period; or
(c) after the date of the termination of employment on or after age 55, the
Option theretofore granted shall, if the Optionee was entitled to exercise the
Option at the date of death, be exercisable by the estate of the Optionee, or
by a person who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the Optionee, without, however,
giving effect to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) with respect to the percent of the total
number of shares to which the Option relates which may be purchased from time
to time during the Option Period; provided, however, that such Option shall be
exercisable until the latest of (i) the three-year period after termination of
employment, (ii) the period after termination of employment which is equal to
the number of full months that the Option has been outstanding prior to such
termination, or (iii) the twelve-month period after the death of the Optionee
provided such death occurs before the later of (i) or (ii), but in no event
after the expiration of the Option Period.
Section 5.7. Payment for shares. Payment for shares of Common Stock shall be
made in full at the time of exercise of the Option. Nothing herein shall be
construed to prohibit the Company from making a loan or advance to the
Optionee for the purpose of financing, in whole or in part, the purchase of
optioned shares. Payment of the Option Price shall be made in cash or, with
the consent of the Committee, in whole or in part in Common Stock, Stock
Awards or other consideration. Payment may also be made by delivering a
properly executed exercise notice together with irrevocable instructions to a
third party to promptly deliver to the Company the amount of sale or loan
proceeds to pay the exercise price.
Section 5.8. Incentive Stock Options. Options granted in the form of
incentive stock options shall be subject, in addition to the foregoing
provisions, to the following provisions:
(a) Annual Limit. To the extent that the aggregate Fair Market Value
(determined at the time of grant) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by any Optionee
during any calendar year (under the Plan or under any other stock plan of the
Company) exceeds $100,000, such options shall be treated as options which are
not incentive stock options.
(b) Ten Percent Shareholder. No incentive stock option shall be granted to
any individual who, at the time of the proposed grant, owns Common Stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of Warner-Lambert or any Subsidiary.
(c) Option Period. No incentive stock option shall be exercisable after the
expiration of ten years from the date of grant.
(d) Option Price. The Option Price of an incentive stock option shall not be
less than the Fair Market Value per share on the date of grant.
(e) Subsidiary. Incentive stock options may only be granted to employees of
Warner-Lambert and its Subsidiaries.
(f) Aggregate Limit. The aggregate number of shares of Common Stock which
may be issued pursuant to the exercise of incentive stock options shall not
exceed the lesser of (i) 10,000,000 shares or (ii) the number of shares
determined in accordance with the share limitation specified in Section 3.2
hereof.
The Company intends that Options designated by the Committee as incentive
stock options shall constitute incentive stock options under Section 422 of
the Code. Should any of the foregoing provisions not be necessary in order to
so comply or should any additional provisions be required, the Committee may
amend the Plan accordingly, without the necessity of obtaining the approval of
stockholders of Warner-Lambert.
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, and in Sections 6.5
and 6.6, no Right shall be exercisable unless at the time of such exercise the
Grantee shall be in the employ of the Company.
Section 6.3. Amount Payable Upon Exercise of Right. Upon the exercise of a
Right the amount payable shall be equal to:
(i) 100% of the Spread but not exceeding the difference between the Option
Price and the Fair Market Value of a share of Common Stock on the Valuation
Date; plus
(ii) 125% of the amount, if any, by which the Fair Market Value of a share of
Common Stock on the Valuation Date exceeds the Fair Market Value on the date
the Right was granted;
multiplied by the number of shares with respect to which the Right is being
exercised; provided, however, that the Committee may grant Rights which
provide that upon exercise the amount payable shall be equal to 100% of the
amount by which the Fair Market Value of a share of Common Stock on the
Valuation Date exceeds the Fair Market Value on the date the Right was
granted.
Section 6.4. Form of Payment. The amount payable on exercise of a Right
shall be payable in cash, shares of Common Stock valued at their Fair Market
Value as of the Valuation Date, or in any combination thereof; provided,
however, that the form of payment shall be in the sole discretion of the
Committee. In the event that any payment in the form of both cash and shares
of Common Stock is made to a Reporting Person, the cash portion of such
payment shall be made upon the Grantee becoming taxable in respect of the
Common Stock received upon exercise of the Right. Notwithstanding the
foregoing, a payment, in whole or in part, of cash may be made to a Reporting
Person upon exercise of a Right only if the Right is exercised (i) during the
period beginning on the third business day following the date of release for
publication of the quarterly or annual summary statements of sales and
earnings of the Company and ending on the twelfth business day following such
date, or (ii) during any other period permitted under the provisions of Rule
16b-3 promulgated pursuant to the Act. In addition, a payment of cash shall
be made to a Reporting Person who has held the Right at least six months from
the date of its grant promptly following a Change in Control of Warner-Lambert
which Change in Control is outside the control of any Reporting Person within
the meaning of the aforesaid Rule 16b-3. The Company intends that this
provision shall comply with the requirements of Rule 16b-3 under the Act.
Should this provision not be necessary to comply with the requirements of such
Rule or should any additional provision be necessary in order to comply with
the requirements of such Rule, the Committee may amend the Plan accordingly,
without the necessity of obtaining the approval of stockholders of the
Company. Any fraction of a share resulting from the above calculation shall
be disregarded.
Section 6.5. Termination of Employment. If, prior to the expiration of a
Reference Option, the employment of the Grantee by the Company should
terminate, by reason other than death, the related Right shall terminate,
except that if, after a Grantee shall have remained in the employ of the
Company for the period specified by the Committee, such Grantee's employment
should terminate on or after age 55, the Right theretofore granted shall be
exercisable until the later of (i) the three-year period after termination of
employment, or (ii) the period after termination of employment which is equal
to the number of full months that the Reference Option has been outstanding
prior to such termination, but in no event after the expiration of the Option
Period, without, however, giving effect to the limitations, if any, which may
have been imposed by the Committee pursuant to Section 5.3(b) hereof.
Section 6.6. Death of Grantee. If a Grantee should die prior to the
termination of the Reference Option:
(a) while in the employ of the Company, the Right theretofore granted shall,
if the Grantee was entitled to exercise the Right at the date of death, be
exercisable by the estate of the Grantee, or by a person who acquired the
right to exercise such Right by bequest or inheritance or by reason of the
death of the Grantee, without, however, giving effect to the limitations, if
any, which may have been imposed by the Committee pursuant to Section 5.3(b)
hereof with respect to the percent of the total number of shares to which the
Right relates which may be purchased from time to time during the Option
Period; provided, however, that such Right shall be exercisable until the
later of (i) the three-year period after termination of employment, or (ii)
the period after termination of employment which is equal to the number of
full months that the Reference Option has been outstanding prior to such
termination, but in no event after the expiration of the Option Period; or
(b) after the date of the termination of employment on or after age 55, the
Right theretofore granted shall, if the Grantee was entitled to exercise the
Right at the date of death, be exercisable by the estate of the Grantee, or by
a person who acquired the right to exercise such Right by bequest or
inheritance or by reason of the death of the Grantee, without, however, giving
effect to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) hereof with respect to the percent of the
total number of shares to which the Right relates which may be purchased from
time to time during the Option Period; provided, however, that such Right
shall be exercisable until the latest of (i) the three-year period after
termination of employment, (ii) the period after termination of employment
which is equal to the number of full months that the Reference Option has been
outstanding prior to such termination, or (iii) the twelve-month period after
the death of the Grantee provided such death occurs before the later of (i) or
(ii), but in no event after the expiration of the Option Period.
Section 6.7. Limited Rights. Notwithstanding anything herein to the
contrary, Limited Rights may be granted hereunder by the Committee with
respect to the options granted under this Plan or any other stock option plan
of the Company which shall entitle the holder to receive a payment of cash
promptly following a Change in Control of Warner-Lambert which Change in
Control is outside the control of any Reporting Person within the meaning of
Rule 16b-3 under the Act. Such payment of cash shall be made to a Reporting
Person only if such person has held such Limited Right at least six months
from the date of its grant. Promptly following any such Change in Control,
the Optionee shall be entitled to receive a cash payment equal to the excess
of the Fair Market Value of a share of Common Stock on the Valuation Date over
the Option Price of the related Option multiplied by the number of shares with
respect to which the Limited Right relates (in such case the method of
determining the Fair Market Value in the third sentence of Section 4.6(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. The Participant shall have all rights and privileges of a
stockholder as to such Restricted Stock, including the right to receive
dividends and the right to vote such shares, except that, subject to the
provisions of Section 7.3, the following restrictions shall apply: (i) the
Participant shall not be entitled to delivery of the certificate until the
expiration of the Restricted Period; (ii) none of the shares of Restricted
Stock may be sold, transferred, assigned, pledged, or otherwise encumbered or
disposed of during the Restricted Period; (iii) the Participant shall, if
requested by the Company, execute and deliver to the Company, a stock power
endorsed in blank; and (iv) all of the shares of Restricted Stock still
subject to restrictions shall be forfeited and all rights of the Participant
to such shares shall terminate without further obligation on the part of the
Company if the Participant ceases to be an Employee prior to the expiration of
the Restricted Period applicable to such shares. Upon the forfeiture (in
whole or in part) of shares of Restricted Stock, such forfeited shares shall
become treasury shares of the Company without further action by the
Participant. The Participant shall have the same rights and privileges, and
be subject to the same restrictions, with respect to any shares received
pursuant to Section 10.1 hereof.
Section 7.3. Terms and Conditions. The Committee shall establish the terms
and conditions, which need not be the same for all grants made under the Plan,
applicable to the Restricted Stock, and which may include restrictions based
upon periods of time, performance (corporate, group, individual or otherwise),
combinations thereof or such other restrictions as the Committee shall
determine to be appropriate. The Committee may provide for the restrictions
to lapse with respect to a portion or portions of the Restricted Stock at
different times or upon the occurrence of different events and the Committee
may waive, in whole or in part, any or all restrictions applicable to a grant
of Restricted Stock. Restricted Stock awards may be issued for no cash
consideration or for such minimum consideration as may be required by
applicable law.
Section 7.4. Delivery of Restricted Shares. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, to the Participant or the
Participant's beneficiary or estate, as the case may be. The Company shall not
be required to deliver any fractional share of Common Stock but shall pay, in
lieu thereof, the fair market value (measured as of the date the restrictions
lapse) of such fractional share to the Participant or the Participant's
beneficiary or estate, as the case may be. Notwithstanding the foregoing, the
Committee may authorize the delivery of the Restricted Stock to a Participant
during the Restricted Period, in which event any stock certificates in respect
of shares of Restricted Stock thus delivered to a Participant during the
Restricted Period applicable to such shares shall bear an appropriate legend
referring to the terms and conditions, including the restrictions, applicable
thereto.
Section 7.5. Certain Events.
(a) In the event of a Change in Control of Warner-Lambert the rights and
privileges of Participants hereunder shall be governed by the following clause
(i), clause (ii) or clause (iii), as appropriate:
(i) Value of Restricted Stock. All shares of Restricted Stock then
outstanding shall be immediately forfeited and shall revert to the Company as
treasury shares and, in lieu thereof, each Participant shall receive a cash
payment equal to the Value of the Restricted Stock (as hereinafter defined);
provided, however, that if the Participant is a Reporting Person at the time
of the Change in Control of Warner-Lambert, the provisions of clause (ii)
shall govern the rights and privileges of such Participant.
(ii) Reporting Persons. All shares of Restricted Stock previously granted to
Participants who are Reporting Persons at the time of the Change in Control of
Warner-Lambert, which Change in Control is outside the control of any
Reporting Person within the meaning of Rule 16b-3 under the Act, and which are
then outstanding and have been outstanding for a period of at least six (6)
months, shall be immediately forfeited and shall revert to the Company as
treasury shares and, in lieu thereof, such Participant shall receive a cash
payment equal to the Value of the Restricted Stock.
(iii) Lapse of Restrictions. In the event that clause (ii) shall not become
operational with respect to a Participant who is a Reporting Person, all
restrictions applicable to shares of Restricted Stock previously granted to
such Participant and then outstanding shall expire and such shares shall
thereupon be delivered to the Participant free of all restrictions.
(b) As used in the Plan, the "Value of the Restricted Stock" shall be the
higher of (a) the highest closing price per share of Common Stock on the
Composite Tape for New York Stock Exchange issues during the 30 day period
prior to the Change in Control of Warner-Lambert, or (b) if the Change in
Control of Warner-Lambert occurs as a result of a tender or exchange offer or
consummation of a transaction, then the highest price per share of Common
Stock pursuant thereto, multiplied by the total number of shares of Restricted
Stock granted to such Participant and then outstanding, regardless of whether
the restrictions applicable thereto shall have previously lapsed. Any
consideration other than cash forming a part or all of the consideration for
Common Stock to be paid pursuant to the applicable transaction shall be valued
at the valuation placed thereon by the Board of Directors. Adjustments, if
any, shall be made in accordance with Section 10.1 hereof.
ARTICLE VIII
Terms and Conditions of Performance Awards
Section 8.1. Terms and Conditions. The Committee may grant Performance
Awards, determine the consideration therefor, which may include prior efforts
and accomplishments, and establish the terms and conditions thereof, which may
include provisions based upon periods of time, performance (corporate, group,
individual or otherwise), combinations thereof or such other provisions as the
Committee may determine to be appropriate. Performance Awards may consist of
shares of Common Stock or awards that are valued by reference to shares of
Common Stock (e.g., phantom stock or restricted stock units), cash or such
other measure as the Committee shall determine. Performance Awards may
provide for payment in shares of Common Stock, cash, other property or any
combination thereof as determined by the Committee. Shares of Common Stock
issued pursuant to this Section 8.1 may be issued for no cash consideration or
for such minimum consideration as may be required by applicable law. The
Committee shall determine whether payment shall be made in a lump sum,
installments or deferred. With respect to Performance Awards which are valued
by reference to shares of Common Stock, the Committee shall also determine
whether the Participant may be entitled to receive a payment of, or credit
equivalent to, any dividends payable with respect to such shares of Common
Stock and the terms and conditions applicable thereto. Further, if a payment
of cash is to be made on a deferred basis, the Committee shall establish
whether interest shall be credited, the rate thereof and any other terms and
conditions applicable thereto. The limitations on transfer set forth in
Section 4.4 shall be applicable to all Performance Awards.
ARTICLE IX
Regulatory Compliance and Listing
Section 9.1. Regulatory Compliance and Listing. The issuance or delivery of
any Stock Awards and shares of Common Stock pursuant thereto may be postponed
by the Company for such periods as may be required to comply with any
applicable requirements under the Federal securities laws, any applicable
listing requirements of any national securities exchange or any requirements
under any other law or regulation applicable thereto, and the Company shall
not be obligated to issue or deliver any such awards or shares if the issuance
or delivery thereof shall constitute a violation of any provision of any law
or of any regulation of any governmental authority or any national securities
exchange.
ARTICLE X
Adjustment in Event of Changes in Capitalization
Section 10.1. Adjustments. In the event of a recapitalization, stock split,
stock dividend, combination or exchange of shares, merger, consolidation,
rights offering, reorganization, liquidation, or the sale, conveyance, lease
or other transfer by Warner-Lambert of all or substantially all of its
property, or any other change in the corporate structure or shares of Warner-
Lambert, the Committee may make such equitable adjustments to prevent dilution
or enlargement of rights as it may deem appropriate, including adjustments (i)
in the number and class of shares authorized to be granted hereunder,
(including adjustment to the share limitation of Section 3.2 hereof), (ii) in
the number and kind of shares available under any outstanding Stock Awards
(including substitution of shares of another corporation), (iii) in the price
of any Option, and (iv) in the number of Stock Credits in each Director's
Stock Account; provided, however, that in no event may any change be made to
an incentive stock option which would constitute a "modification" within the
meaning of Section 425(h)(3) of the Code. Stock Awards granted under the Plan
shall contain such provisions as are consistent with the foregoing with
respect to adjustments to be made in the number and kind of shares covered
thereby and in the Option Price in the event of any such change.
ARTICLE XI
Directors' Deferred Compensation
Section 11.1. Election To Participate.
(a) Each Director may elect to defer payment of all or any portion of his or
her Compensation that is payable during the immediately succeeding Plan Year.
Such election must be made with respect to all Compensation payable in such
succeeding Plan Year by 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. 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 and Stock Account
shall be made only in cash.
Section 11.7. Installment Amount.
(a) The amount of each distribution with respect to a Director's Cash Account
shall be the amount obtained by multiplying the balance in such Account by a
fraction, the numerator of which is one (1) and the denominator of which is
the number of years in which distributions remain to be made (including the
current distribution).
(b) The amount of each distribution with respect to a Director's Stock
Account shall be the amount obtained by multiplying the number of Stock
Credits attributable to such installment (determined as hereinafter provided)
by the average of the Closing Prices of shares of Common Stock on each
Business Day in the month immediately prior to the month in which such
installment is to be paid. The number of Stock Credits attributable to an
installment shall be equal to the amount obtained by multiplying the current
number of Stock Credits in such Stock Account by a fraction, the numerator of
which is one (1) and the denominator of which is the number of years in which
distributions remain to be made (including the current distribution).
Section 11.8. Financial Hardship. Notwithstanding any other provision
hereof, at the written request of a Director or a Director's legal
representative, the Committee, in its sole discretion, upon a finding that
continued deferral will result in financial hardship to the Director, may
authorize (i) the payment of all or a part of a Director's Accounts in a
single installment prior to his or her ceasing to be a Director or (ii) the
acceleration of payment of any multiple installments thereof; provided,
however, that Directors may not receive distributions under this Section 11.8
if such distribution would result in liability of the Director under Section
16 of the Act.
Section 11.9. Distribution upon Death. Upon the death of a Director, the
Committee shall pay all of such Director's Cash Account and Stock Account in a
single installment to the beneficiary designated by the Director. All such
designations shall be made in writing and delivered to the Secretary. A
Director may from time to time revoke or change any such designation by
written notice to the Secretary. If there is no designation on file with the
Secretary at the time of the Director's death, or if the beneficiary
designated therein shall have predeceased the Director, such distributions
shall be made to the executor or administrator of the Director's estate. Any
distribution under this Section 11.9 shall be made as soon as practicable
following notification to the Committee of the Director's death and the value
of the Stock Account for the purpose of such distribution shall be based upon
the Closing Price of shares of Common Stock on the date of the Director's
death.
Section 11.10. Certain Events. Notwithstanding any other provision hereof,
in the event of a Change in Control of Warner-Lambert which is outside of the
control of any Reporting Person within the meaning of Rule 16b-3 under the
Act, the balance in the Stock Account of each Director shall be converted to
the Cash Account. For this purpose, the balance in the Stock Account shall be
determined by multiplying the number of Stock Credits by the higher of (i) the
highest Closing Price during the period commencing 30 days prior to such
Change in Control or (ii) if the Change in Control of Warner-Lambert occurs as
a result of a tender or exchange offer or consummation of a Transaction, then
the highest price per share of Common Stock pursuant thereto. Any
consideration other than cash forming a part or all of the consideration for
Common Stock to be paid pursuant to the applicable transaction shall be valued
at the valuation placed thereon by the Board of Directors. Adjustments, if
any, shall be made in accordance with Article X hereof. Within 30 days after
a Change in Control of Warner-Lambert, each Director may designate a
distribution schedule which may provide for a lump sum payment or installment
payments over a period of up to 15 years, provided, however, that no payment
shall be made for a period of one year after the Change in Control. In the
event that a Director shall not make a designation in accordance with the
preceding sentence, the balance in the Cash Account shall be distributed in a
lump sum one year after the Change in Control.
Section 11.11. Valuations. Notwithstanding any other provision hereof, in
any instance in which a Director's Stock Account is to be valued by reference
to the Closing Price of shares of Common Stock on a single day, the Committee
may declare such price to be unrepresentative of the market value of such
Common Stock and, in lieu thereof, shall base such valuation on the average of
the Closing Prices of shares of Common Stock on each Business Day during the
calendar quarter ending coincident with or immediately preceding the day which
would otherwise serve as the basis for the valuation.
Section 11.12. Funding. The Company's sole obligation to a Director or any
person claiming under or through any Director in respect of the payment of any
balance in an Account shall be solely a contractual obligation in accordance
with the terms of the Plan. No promise hereunder shall be secured by any
specific assets of the Company, nor shall any assets of the Company be
designated as attributable or allocated to the satisfaction of such promises.
Section 11.13. Status of Stock Credits. Stock Credits are not, and do not
constitute, shares of Common Stock, and no right as a holder of shares of
Common Stock shall devolve upon a Director by reason of his or her
participation in the Plan.
Section 11.14. Non-Trading Date. In the event that the date of the
determination of a Closing Price hereunder shall be a date which shall not be
a date on which the Common Stock is traded on the New York Stock Exchange,
determination of such Closing Price shall be made as of the first date
thereafter on which the Common Stock is so traded.
Section 11.15. No Right To Reelection. Nothing in the Plan shall be deemed
to create any obligation on the part of the Board to nominate any Director for
reelection by the Company's stockholders, nor confer upon any Director the
right to remain a member of the Board of Directors.
Section 11.16. Predecessor Plans. Upon the Effective Date of the Plan, no
further benefits shall accrue under any Predecessor Plans, except as provided
in Section 11.18 hereof.
Section 11.17. Deferred Compensation Accounts. Upon the Effective Date of
the Plan, all Deferred Compensation Accounts shall become subject to the terms
and conditions of this Plan in lieu of the terms and conditions of the
Predecessor Plans, except as provided in Section 11.18 hereof.
Section 11.18. Retired Directors. Benefits accrued under Predecessor Plans
which are in pay status on the Effective Date shall continue to be paid in
accordance with the provisions of the Predecessor Plans.
Section 11.19. Federal Securities Law. The Company intends that the
provisions of this Article XI, and all transactions effected in accordance
with this Article XI, shall comply with Rule 16b-3 under the Act. In the
event that any provision of this Article XI is not necessary to so comply or
any additional provision is necessary to obtain or maintain such compliance,
the Committee is authorized to revise the Plan accordingly without obtaining
approval of the stockholders of Warner-Lambert. By way of illustration, and
not limitation, the Committee may bifurcate the provisions of this Article XI,
and such other provisions as it shall deem necessary, into a separate plan
(which plan shall be recognized as having received approval of the
stockholders of Warner-Lambert), if the Committee shall deem such action
necessary to maintain qualification of Article XI (and transactions
thereunder) under Rule 16b-3 under the Act and the qualification of the
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.
Absence on leave approved by the Company shall not be considered an
interruption of employment for any purpose of the Plan.
Section 14.5. Listing and Other Conditions.
(a) As long as the Common Stock is listed on the New York Stock Exchange, the
issue of any shares of stock pursuant to a Stock Award shall be conditioned
upon the shares so to be issued being listed on such Exchange. Warner-Lambert
shall make application for listing on such Exchange unlisted shares subject to
Stock Awards, but shall have no obligation to issue such shares unless and
until such shares are so listed, and the right to exercise any Option or Right
with respect to such shares shall be suspended until such listing has been
effected.
(b) If at any time counsel to Warner-Lambert shall be of the opinion that any
sale or delivery of shares of Common Stock pursuant to a Stock Award is or may
in the circumstances be unlawful under the statutes, rules or regulations of
any applicable jurisdiction, Warner-Lambert shall have no obligation to make
such sale or delivery, or to make any application or to effect or to maintain
any qualification or registration under the Securities Act of 1933, as
amended, or otherwise with respect to shares of Common Stock or Stock Awards,
and the right to exercise any Option or Right shall be suspended until, in the
opinion of said counsel, such sale or delivery shall be lawful.
(c) Upon termination of any period of suspension under this Section 14.5, any
Stock Award affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such
suspension and as to shares which would otherwise have become available during
the period of such suspension, but no such suspension shall extend any Option
Period.
Section 14.6. Governing Law. This Plan shall be governed by the law of the
State of New Jersey (regardless of the law that might otherwise govern under
applicable New Jersey principles of conflict of laws).
Section 14.7. Construction. Wherever any words are used herein in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they
were also used in the plural form in all cases where they would so apply.
Section 14.8. Laws of Foreign Jurisdictions. Without amending the Plan, but
subject to the limitations specified in Article XIII hereof, the Committee may
grant, amend, administer, annul or terminate Stock Awards on such terms and
conditions, which may be different from those specified in the Plan, as it may
deem necessary or desirable to make available tax or other benefits of the
laws of any foreign jurisdiction.
Section 14.9. Other Plans. Nothing contained herein shall prevent the
Company from adopting additional compensation plans or arrangements.
Section 14.10. Federal Securities Law. Notwithstanding any other provision
of the Plan, no transaction shall be given effect on any date which would, in
the opinion of counsel to the Company, result in liability under Section 16(b)
of the Act.
ARTICLE XV
Effective Date; Term of Plan
Section 15.1. Effective Date. The Plan shall be submitted to the
stockholders of Warner-Lambert for their approval at the Annual Meeting of
Stockholders to be held in 1992. The Plan shall become effective upon the
affirmative vote of the holders of a majority of the shares of Common Stock
present, or represented, and entitled to vote at the meeting.
Section 15.2. Term of Plan. No Stock Awards may be granted hereunder after
April 28, 1997. This Section 15.2 shall not affect any Stock Award granted
prior to such date. Further, the provisions of Article XI hereof (as amended
from time to time) are ongoing and shall continue until terminated by the
Board.
WARNER-LAMBERT COMPANY
WARNER-LAMBERT COMPANY
1996 STOCK PLAN
As Amended to January 27, 1998
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. Except as otherwise
provided by the Committee, 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
<TABLE>
EXHIBIT 12
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
Years Ended December 31,
Six Months Ended ----------------------------------------------
June 30, 1998 1997 1996 1995 1994 1993
----------------- ---- ---- ---- ---- ----
Earnings before income taxes and
accounting changes (less
<S> <C> <C> <C> <C> <C> <C>
minority interests) $869.6 $1,233.4 $1,107.7 $1,018.6 $ 913.1 $318.5
Add:
Interest on indebtedness-
excluding amount capitalized 62.0 167.0 145.9 122.7 93.7 64.2
Amortization of debt expense .5 .4 .5 .4 .4 .5
Interest factor in rent
expense (a) 15.4 30.7 27.5 26.9 26.2 25.4
------ -------- -------- -------- ------- ------
<S> <C> <C> <C> <C> <C> <C>
Adjusted earnings $947.5 $1,431.5 $1,281.6 $1,168.6 $1,033.4 $408.6
====== ======== ======== ======== ======== ======
Fixed Charges:
Interest on indebtedness $ 62.0 $ 167.0 $ 145.9 $ 122.7 $ 93.7 $ 64.2
Capitalized interest 10.0 8.3 9.6 10.1 9.4 8.6
Amortization of debt expense .5 .4 .5 .4 .4 .5
Interest factor in rent
expense (a) 15.4 30.7 27.5 26.9 26.2 25.4
------ -------- -------- -------- -------- ------
<S> <C> <C> <C> <C> <C> <C>
Total fixed charges $ 87.9 $ 206.4 $ 183.5 $ 160.1 $ 129.7 $ 98.7
====== ======== ======== ======== ======== ======
Ratio of earnings to fixed charges 10.8 6.9 7.0 7.3 8.0 4.1(b)
====== ======== ======== ======== ======== ======
(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 charges of $525.2.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AT JUNE 30, 1998 AND FROM THE RELATED CONSOLIDATED
STATEMENT OF INCOME FOR THE 6 MONTH PERIOD ENDED JUNE 30, 1998 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 690
<SECURITIES> 0
<RECEIVABLES> 1,595
<ALLOWANCES> 0
<INVENTORY> 830
<CURRENT-ASSETS> 3,600
<PP&E> 4,060
<DEPRECIATION> 1,636
<TOTAL-ASSETS> 8,292
<CURRENT-LIABILITIES> 2,950
<BONDS> 1,357
0
0
<COMMON> 962
<OTHER-SE> 2,215
<TOTAL-LIABILITY-AND-EQUITY> 8,292
<SALES> 4,776
<TOTAL-REVENUES> 4,776
<CGS> 1,260
<TOTAL-COSTS> 1,260
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 62
<INCOME-PRETAX> 870
<INCOME-TAX> 252
<INCOME-CONTINUING> 617
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 617
<EPS-PRIMARY> .75<F1>
<EPS-DILUTED> .73
<FN>
<F1>Amount represents basic earnings per share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
RESTATED SCHEDULES <F2> CONTAIN SUMMARY INFO. EXTRACTED FROM THE CONSOLIDATED
BALANCE SHEETS AT DEC. 31, 1995 AND 1996 AND MAR. 31, JUNE 30 AND SEPT. 30,
1996 AND CONSOLIDATED STATEMENTS OF INCOME FOR THE 12 MONTH PERIODS ENDED DEC.
31, 1995 AND 1996 AND THE 3, 6 AND 9 MONTH PERIODS ENDED MAR.31, JUNE 30 AND
SEPT. 30, 1996, RESPECTIVELY.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C> <C> <C> <C>
<PERIOD-TYPE> 12-MOS 3-MOS 6-MOS 9-MOS 12-MOS
<FISCAL-YEAR-END> DEC-31-1995 DEC-31-1996 DEC-31-1996 DEC-31-1996 DEC-31-1996
<PERIOD-END> DEC-31-1995 MAR-31-1996 JUN-30-1996 SEP-30-1996 DEC-31-1996
<CASH> 296 444 380 438 391
<SECURITIES> 267 283 322 199 102
<RECEIVABLES> 1,240 1,256 1,277 1,348 1,149
<ALLOWANCES> 0 0 0 0 0
<INVENTORY> 646 640 672 669 647
<CURRENT-ASSETS> 2,778 2,974 2,998 3,027 2,785
<PP&E> 3,416 3,434 3,463 3,522 3,658
<DEPRECIATION> 1,410 1,435 1,462 1,466 1,490
<TOTAL-ASSETS> 6,101 6,222 7,201 7,376 7,197
<CURRENT-LIABILITIES> 2,425 2,458 2,423 2,406 2,137
<BONDS> 635 631 1,529 1,713 1,720
0 0 0 0 0
0 0 0 0 0
<COMMON> 160 321 321 321 321
<OTHER-SE> 2,086 2,035 2,159 2,179 2,260
<TOTAL-LIABILITY-AND-EQUITY> 6,101 6,222 7,201 7,376 7,197
<SALES> 7,040 1,829 3,620 5,388 7,231
<TOTAL-REVENUES> 7,040 1,829 3,620 5,388 7,231
<CGS> 2,428 590 1,162 1,742 2,347
<TOTAL-COSTS> 2,428 590 1,162 1,742 2,347
<OTHER-EXPENSES> 0 0 0 0 0
<LOSS-PROVISION> 0 0 0 0 0
<INTEREST-EXPENSE> 123 29 60 105 146
<INCOME-PRETAX> 1,149 389 721 936 1,177
<INCOME-TAX> 279 107 189 251 321
<INCOME-CONTINUING> 740 250 463 616 787
<DISCONTINUED> 0 0 0 0 0
<EXTRAORDINARY> 0 0 0 0 0
<CHANGES> 0 0 0 0 0
<NET-INCOME> 740 250 463 616 787
<EPS-PRIMARY> .91<F1> .31<F1> .57<F1> .76<F1> .97<F1>
<EPS-DILUTED> .90 .30 .56 .75 .95
<FN>
<F2>THE FINANCIAL DATA SCHEDULES HAVE BEEN RESTATED TO REFLECT THE ADOPTION IN 1997
OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE"
AND ALSO REFLECT A TWO-FOR-ONE STOCK SPLIT EFFECTIVE MAY 3, 1996 AND A
THREE-FOR-ONE STOCK SPLIT EFFECTIVE MAY 8, 1998.
<F1>Amounts represent basic earnings per share.
</FN>
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THESE RESTATED SCHEDULES <F2> CONTAIN SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE CONSOLIDATED BALANCE SHEETS AT MAR. 31, JUNE 30 AND SEPT. 30, 1997 AND
THE RELATED CONSOLIDATED STATEMENTS OF INCOME FOR THE 3, 6 AND 9 MONTH PERIODS
ENDED MAR. 31, JUN. 30 AND SEPT. 30, 1997, RESPECTIVELY.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000,000
<S> <C> <C> <C>
<PERIOD-TYPE> 3-MOS 6-MOS 9-MOS
<FISCAL-YEAR-END> DEC-31-1997 DEC-31-1997 DEC-31-1997
<PERIOD-END> MAR-31-1997 JUN-30-1997 SEP-30-1997
<CASH> 416 545 684
<SECURITIES> 32 28 18
<RECEIVABLES> 1,345 1,443 1,473
<ALLOWANCES> 0 0 0
<INVENTORY> 654 760 750
<CURRENT-ASSETS> 2,826 3,256 3,376
<PP&E> 3,619 3,804 3,853
<DEPRECIATION> 1,471 1,498 1,517
<TOTAL-ASSETS> 7,156 7,829 7,966
<CURRENT-LIABILITIES> 2,137 2,301 2,611
<BONDS> 1,717 2,093 1,930
0 0 0
0 0 0
<COMMON> 321 321 321
<OTHER-SE> 2,239 2,369 2,406
<TOTAL-LIABILITY-AND-EQUITY> 7,156 7,829 7,966
<SALES> 1,777 3,744 5,852
<TOTAL-REVENUES> 1,777 3,744 5,852
<CGS> 549 1,143 1,757
<TOTAL-COSTS> 549 1,143 1,757
<OTHER-EXPENSES> 0 0 0
<LOSS-PROVISION> 0 0 0
<INTEREST-EXPENSE> 39 87 130
<INCOME-PRETAX> 292 622 905
<INCOME-TAX> 88 187 272
<INCOME-CONTINUING> 204 435 634
<DISCONTINUED> 0 0 0
<EXTRAORDINARY> 0 0 0
<CHANGES> 0 0 0
<NET-INCOME> 204 435 634
<EPS-PRIMARY> .25<F1> .53 .78
<EPS-DILUTED> .24 .52 .76
<FN>
<F2>THE FINANCIAL DATA SCHEDULES HAVE BEEN RESTATED TO REFLECT THE ADOPTION IN 1997
OF STATEMENT OF FINANCIAL ACCOUNTING STANDARDS NO. 128, "EARNINGS PER SHARE"
AND ALSO REFLECT A THREE-FOR-ONE STOCK SPLIT EFFECTIVE MAY 8, 1998.
<F1>Amounts represent basic earnings per share.
</FN>
</TABLE>
