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 March 31, 1999
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 April 30, 1999
----- ----------------------------
Common Stock, $1 par value 823,284,660
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WARNER-LAMBERT COMPANY
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<S> <C> <C>
March 31, December 31,
1999 1998
--------- -----------
(Dollars in millions)
ASSETS:
Cash and cash equivalents $ 1,182.0 $ 911.3
Receivables 1,684.9 1,694.8
Inventories 870.8 888.4
Prepaid expenses and other current assets 628.3 607.8
--------- ---------
Total current assets 4,366.0 4,102.3
Investments and other assets 616.2 625.8
Property, plant and equipment 2,807.6 2,775.3
Intangible assets 1,656.3 1,727.2
--------- ---------
Total assets $ 9,446.1 $ 9,230.6
========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term debt $ 223.7 $ 256.3
Accounts payable, trade 1,738.7 1,575.2
Accrued compensation 207.7 225.1
Other current liabilities 934.0 927.6
Federal, state and foreign income taxes 262.4 245.8
--------- ---------
Total current liabilities 3,366.5 3,230.0
Long-term debt 1,273.9 1,260.3
Deferred income taxes and other
noncurrent liabilities 1,156.9 1,128.2
Shareholders' equity:
Preferred stock - none issued - -
Common stock - 961,981,608 shares issued 962.0 962.0
Capital in excess of par 234.2 182.3
Retained earnings 4,471.6 4,254.9
Accumulated other comprehensive income (601.2) (399.1)
Treasury stock, at cost: 1999 - 139,176,303
shares; 1998 - 140,429,452 shares) (1,417.8) (1,388.0)
--------- ---------
Total shareholders' equity 3,648.8 3,612.1
--------- ---------
Total liabilities and shareholders'
equity $ 9,446.1 $ 9,230.6
========= =========
</TABLE>
See accompanying notes to consolidated financial statements.
WARNER-LAMBERT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
Three Months
Ended March 31,
-----------------
<S> <C> <C>
1999 1998
---- ----
(Dollars in millions, except
per share amounts)
NET SALES $2,860.0 $2,218.9
COSTS AND EXPENSES:
Cost of goods sold 692.4 604.6
Selling, general and administrative 1,344.5 1,011.4
Research and development 233.8 182.9
Other expense (income), net 52.6 26.6
-------- --------
Total costs and expenses 2,323.3 1,825.5
-------- --------
INCOME BEFORE INCOME TAXES 536.7 393.4
Provision for income taxes 155.6 114.1
-------- --------
NET INCOME $ 381.1 $ 279.3
======== ========
NET INCOME PER COMMON SHARE:
Basic $ .46 $ .34
Diluted $ .45 $ .33
DIVIDENDS PER COMMON SHARE $ .20 $ .16
</TABLE>
See accompanying notes to consolidated financial statements.
WARNER-LAMBERT COMPANY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
Three Months
Ended March 31,
---------------
<S> <C> <C>
1999 1998
---- ----
(Dollars in millions)
OPERATING ACTIVITIES:
Net income $ 381.1 $ 279.3
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 82.4 71.7
Deferred income taxes (16.9) (36.2)
Changes in assets and liabilities, net of
effects from disposition of business:
Receivables (43.7) 107.4
Inventories 1.7 (55.9)
Accounts payable and
accrued liabilities 271.7 (42.1)
Other, net 40.9 (30.7)
-------- ---------
Net cash provided by operating activities 717.2 293.5
-------- ---------
INVESTING ACTIVITIES:
Purchases of investments (9.4) (9.2)
Proceeds from maturities/sales of investments 1.1 13.8
Capital expenditures (193.5) (91.4)
Proceeds from disposition of business - 125.0
Other, net (3.7) 23.2
-------- ---------
Net cash (used) provided by investing
Activities (205.5) 61.4
-------- ---------
FINANCING ACTIVITIES:
Proceeds from borrowings 179.6 594.0
Principal payments on borrowings (185.6) (1,002.0)
Purchases of treasury stock (37.8) (37.6)
Cash dividends paid (164.4) (130.9)
Proceeds from stock option exercises 27.0 29.7
-------- ---------
Net cash used by financing activities (181.2) (546.8)
-------- ---------
Effect of exchange rate changes on cash
and cash equivalents (59.8) (4.9)
-------- ---------
Net increase (decrease) in cash
and cash equivalents 270.7 (196.8)
Cash and cash equivalents at beginning of year 911.3 756.5
-------- ---------
Cash and cash equivalents at end of period $1,182.0 $ 559.7
======== =========
</TABLE>
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 1998 Annual Report
on Form 10-K/A.
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: On January 26, 1999, Warner-Lambert announced a definitive
agreement to acquire Agouron Pharmaceuticals, Inc., an
integrated pharmaceutical company committed to the discovery and
development of innovative therapeutic products for treatment of
cancer, AIDS and other serious diseases. Agouron achieved total
revenues of $466.5 and net income of $13.2 for their fiscal year
ended June 30, 1998. The transaction will be accounted
for as a pooling of interests and will require the approval of
Agouron's shareholders. A meeting of Agouron shareholders is
scheduled for May 17, 1999 to vote on approval of the
transaction. The acquisition will not require Warner-Lambert
shareholder approval. Under the terms of the agreement, which
is valued at approximately $2.1 billion, each share of Agouron
stock will be converted into shares of Warner-Lambert Company
common stock at an exchange ratio equal to dividing $60.00 by
the average closing price of Warner-Lambert common stock during
the ten day trading period ending May 13, 1999. In no event
will the exchange ratio be more than .9300 or less than .8108 of
a share of Warner-Lambert Company common stock. Warner-Lambert
expects to issue between 29,500,000 and 33,800,000 shares of
common stock to Agouron shareholders.
NOTE E: 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 were recorded in
Other expense (income), net for the three months ended
March 31, 1998.
NOTE F: Total comprehensive income includes net income and other
comprehensive income which consists primarily of foreign currency
translation adjustments. Total comprehensive income for the
three-month periods ended March 31, 1999 and 1998 was $179.0
and $260.1, respectively. The increase in foreign currency
translation adjustments was $201.2 and $26.8 for the three months
ended March 31, 1999 and 1998, respectively.
NOTE G: The Net income per common share computations were as follows:
(Shares in thousands)
<TABLE>
Three Months Ended
March 31,
------------------
<S> <C> <C>
1999 1998
---- ----
Basic:
Net income $381.1 $279.3
Average common shares outstanding 822,557 818,056
-------- --------
$.46 $.34
======== ========
Diluted:
Net income $381.1 $279.3
Average common shares outstanding 822,557 818,056
Impact of potential future stock
option exercises, net of shares
repurchased 28,555 26,470
-------- --------
Average common shares outstanding -
assuming dilution 851,112 844,526
-------- --------
$.45 $.33
======== ========
</TABLE>
NOTE H: Major classes of inventories were as follows:
<TABLE>
<S> <C> <C>
March 31, 1999 December 31, 1998
-------------- -----------------
Raw materials $170.8 $145.1
Finishing supplies 45.1 48.8
Work in process 181.2 229.3
Finished goods 473.7 465.2
------ ------
$870.8 $888.4
====== ======
</TABLE>
NOTE I: Property, plant and equipment balances were as follows:
<TABLE>
<S> <C> <C>
March 31, 1999 December 31, 1998
-------------- -----------------
Property, plant and equipment $ 4,484.2 $ 4,464.7
Less accumulated depreciation (1,676.6) (1,689.4)
--------- ---------
Net $ 2,807.6 $ 2,775.3
========= =========
</TABLE>
NOTE J: Intangible asset balances were as follows:
<TABLE>
<S> <C> <C>
March 31, 1999 December 31, 1998
-------------- -----------------
Goodwill $1,253.7 $1,299.0
Trademarks and other
intangibles 640.5 662.2
Less accumulated amortization (237.9) (234.0)
-------- --------
Net $1,656.3 $1,727.2
======== ========
</TABLE>
NOTE K: Included in Other expense (income), net was interest expense of
$32.3 and $35.8 for the first quarters of 1999 and 1998,
respectively.
NOTE L: In 1998 the company adopted SFAS No. 131, "Disclosures about
Segments of an Enterprise and Related Information," which
requires reporting certain financial information regarding
operating segments on the basis used internally by management to
evaluate segment performance. In 1999, the Statement also
requires quarterly disclosure of certain segment information.
Segment net sales and income before taxes for the three months
ended March 31, 1999 and 1998 were as follows:
<TABLE>
Net Sales Income Before Taxes
--------------------- -------------------
<S> <C> <C> <C> <C>
1999 1998 1999 1998
---- ---- ---- ----
Pharmaceutical $1,664.3 $1,125.0 $ 457.7 $330.5
Consumer Health Care 735.7 649.5 139.9 126.1
Confectionery 460.0 444.4 40.5 28.0
-------- -------- ------- ------
Total Segments 2,860.0 2,218.9 638.1 484.6
Corporate - - (101.4) (91.2)
-------- -------- ------- -----
Consolidated Total $2,860.0 $2,218.9 $ 536.7 $393.4
======== ======== ======= ======
</TABLE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
FIRST QUARTER ENDED MARCH 31, 1999
- -----------------------------------
COMPARED WITH CORRESPONDING PERIOD IN 1998
- ------------------------------------------
NET SALES
- ---------
Sales for the first quarter of 1999 of $2.9 billion were 29 percent
above 1998 first quarter sales. Sales increased 30 percent,
adjusting for the unfavorable impact of foreign exchange rate
changes. Unit volume grew by 28 percent coupled with price
increases of 2 percent.
U.S. sales increased $446 million or 37 percent to $1.7 billion in
the first quarter of 1999. International sales increased $195
million or 19 percent to $1.2 billion. At constant exchange rates,
international sales were 22 percent above the same period last year.
<TABLE>
SEGMENT SALES Three Months Ended March 31,
- ------------- ------------------------------
<S> <C> <C> <C>
Percent
Increase/
(Dollars in Millions) 1999 1998 (Decrease)
------ ------ --------
Pharmaceutical $1,664 $1,125 48 %
Consumer Health Care 736 650 13
Confectionery 460 444 4
------ ------
Consolidated Net Sales $2,860 $2,219 29 %
====== ======
</TABLE>
Worldwide pharmaceutical sales increased 48 percent to $1.7 billion
in the first quarter of 1999. The sales increase was primarily
attributable to the continued growth of the cholesterol-lowering
agent LIPITOR, the oral agent for the treatment of type 2 diabetes
REZULIN, the anticonvulsant NEURONTIN and the antihypertensive
ACCUPRIL which achieved worldwide sales as follows:
<TABLE>
<S> <C> <C>
Three months ended Three months ended
March 31, 1999 March 31, 1998
(Dollars in millions) ------------------ ------------------
LIPITOR $751 $378
REZULIN 184 138
NEURONTIN 176 96
ACCUPRIL 116 98
</TABLE>
Pharmaceutical sales in the U.S. increased 54 percent to $1.1
billion in the first quarter of 1999. International pharmaceutical
sales increased 38 percent to $572 million in 1999 or 37 percent at
constant exchange rates.
Worldwide sales of LIPITOR nearly doubled to $751 million in the
first quarter of 1999 compared to 1998. LIPITOR continues to be the
cholesterol-lowering medication indicated for the broadest range of
lipid abnormalities. LIPITOR now holds a 40 percent share of new
prescriptions in the U.S. cholesterol lowering market. To sustain
growth in LIPITOR's market share, the company has initiated
aggressive life-cycle management programs exploring new indications
and patient populations. In April 1999 the company announced the
initiation of a major new clinical trial involving LIPITOR. The
IDEAL (Incremental Decrease in Endpoints through Aggressive Lipid
lowering) study will further investigate the continuous direct
relationship between lowering LDL-cholesterol and reducing coronary
heart disease risk.
Worldwide sales of REZULIN increased 33% to $184 million during the
first quarter of 1999. Warner-Lambert markets REZULIN with Sankyo
Company, Ltd., from whom the company licenses the product for North
America and other areas. Warner-Lambert and the FDA have been
discussing reports of adverse liver events (including liver-related
deaths) associated with REZULIN. The company has modified the
labeling of the product to provide for the monitoring of liver
enzymes in an effort to reduce the occurrence of these events. The
FDA held a public meeting of the Endocrinologic and Metabolic Drugs
Advisory Committee on March 26, 1999 to discuss the REZULIN post-
marketing safety data as well as the company's supplemental new drug
application for combination therapy with metformin and a
sulfonylurea. The Committee members voted 11-1 that the benefits of
REZULIN outweigh its risks when used in combination with insulin.
The Committee members also voted 12-0 that the benefits of REZULIN
outweigh its risks when used in combination with sulfonylureas. In
addition, at least half of the members voted that the benefits of
REZULIN as monotherapy do not outweigh its risks with current
labeling. Warner-Lambert believes that sales of REZULIN for
monotherapy approximate 15% of total REZULIN sales. The Advisory
Committee did not vote on whether any restrictions or limitations
should be imposed on future REZULIN sales, but some members
commented that changes to the current labeling could be made that
would serve to improve the benefit to risk ratio and some members
expressed the view that REZULIN sales should be limited to patients
whose diabetes cannot be controlled by other drugs. The FDA is not
bound by the findings of the Advisory Committee. While the company
remains convinced of the favorable risk/benefit profile of the drug,
it cannot predict what action, if any, the FDA may take with respect
thereto. Such action can include further labeling changes,
additional monitoring, warnings to patients or limitations in the
patient population. The FDA also has the power to order the removal
of REZULIN from the market. Any such FDA action could adversely
affect the sales of REZULIN and the profits of the company. In
addition, on April 22 and 23, 1999, an FDA Advisory Committee
reviewed two competing drugs in the same class as REZULIN, known as
glitazones. If such drugs are approved for sale by the FDA, it
could have an adverse effect on the sales of REZULIN and the profits
of the company.
Worldwide sales of NEURONTIN were $176 million in the first quarter
of 1999, an increase of 83% over the same period one year ago. The
company is currently conducting a clinical trial in pediatric
patients at the request of the FDA. If the FDA finds that the study
fairly responds to the request, a six month extension of the
NEURONTIN epilepsy use patent protection from generic competition
through mid-July 2000 could be granted. Additionally, the company
has two other patents covering NEURONTIN whose expiration dates go
well beyond 2000 which are the subject of litigation with potential
generic competitors. The protection from generic competition
provided by these patents would also be extended should pediatric
exclusivity be granted.
Consumer health care product sales in the U.S. increased 17 percent
to $415 million in the first quarter of 1999. At the end of 1998,
Warner-Lambert acquired exclusive rights to over-the-counter ZANTAC
products in the U.S. and Canada as part of the dissolution of its
joint venture arrangements with Glaxo Wellcome plc. Prior to 1999,
sales of the Glaxo Wellcome/Warner-Lambert joint venture, including
ZANTAC 75, were not reflected in Warner-Lambert's reported sales.
ZANTAC 75 sales in the U.S. were $41 million for the quarter ended
March 31, 1999. U.S. sales of LISTERINE increased 22% to $101
million due to the 1999 launch of Tartar Control LISTERINE which had
sales of $22 million in the first quarter. U.S. shaving products
sales increased 3 percent to $53 million driven by strong sales of
SILK EFFECTS razors which increased $7 million compared to the first
quarter of 1998.
International consumer health care sales increased 8 percent to $321
million and 8 percent at constant exchange rates. The increase is
primarily attributable to the international sales of the shaving
products business which increased $16 million to $132 million. The
increase in the shaving products business is due to stronger sales
in Japan where sales increased $12 million.
Confectionery sales in the U.S. increased 2 percent to $154 million
in the first quarter of 1999 primarily due to sales of $5 million of
TRIDENT ADVANTAGE chewing gum which was launched in the third
quarter of 1998.
International confectionery sales were $306 million, an increase of
4 percent or 13 percent at constant exchange rates. The
international sales increase is primarily attributable to Mexico,
where sales increased $6 million as compared to the same period last
year due to stronger gum sales.
COSTS AND EXPENSES
- ------------------
As a percentage of net sales, cost of goods sold improved to 24.2%
from 27.2% in 1998. The improvement in the ratio was mostly
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 was a favorable product mix in
the pharmaceutical segment.
Selling, general and administrative expense in the first quarter of
1999 increased $333 million or 33 percent. As a percentage of net
sales, selling, general and administrative expense for the quarter
increased to 47.0% compared with 45.6% for the same quarter last
year. Pharmaceutical segment expenses significantly increased to
support new products. Quarterly settlements of co-promotion
agreements related to LIPITOR and REZULIN are recorded in selling
expense and increased $132 million compared to the first quarter of
1998. In addition, total company advertising and promotion expense
increased $96 million compared to the first quarter of 1998 in
support of products in all segments. Management expects that
selling, general and administrative expenses as a percentage of net
sales will remain at or slightly above this level for the full year.
Research and development expense increased 28 percent in the first
quarter of 1999. As a percentage of net sales, research and
development expense was 8.2% in both the first quarter of 1999 and
the first quarter of 1998. For 1999 the company plans to invest in
excess of $1 billion in research and development, a projected
increase of over 20 percent compared with 1998.
Other expense (income), net in the first quarter of 1999 compared
unfavorably to the first quarter of 1998 by $26 million. The
unfavorability is partly attributable to foreign currency exchange
losses of $7 million realized in the first quarter of 1999 as
compared to foreign currency exchange gains of $4 million realized
in the same period in 1998. Also contributing to the fluctuation is
the absence of $9 million of 1998 income from milestone payments
relating to the launch of LIPITOR in overseas markets. Costs
related to the acquisition of Agouron Pharmaceuticals, Inc. will be
recorded in Other expense in 1999 upon completion of that
transaction. These costs are not expected to exceed $40 million.
INCOME TAXES
- ------------
The effective tax rate for the first quarter of 1999 remained at
29.0%.
NET INCOME
- ----------
Net income for the first quarter of 1999 increased 36 percent to
$381 million.
Diluted earnings per share for the first quarter of 1999 increased
from $.33 to $.45. Based on current planning assumptions, the
company expects to increase annual earnings per share by 30 percent
in 1999.
LIQUIDITY AND FINANCIAL CONDITION
- ---------------------------------
Selected data:
<TABLE>
<S> <C> <C>
March 31, December 31,
1999 1998
------ ------
Net debt (in millions) $ 234 $ 531
Net debt to net capital(equity
and net debt) 6% 13%
</TABLE>
Net debt (total debt less cash and cash equivalents and other
nonequity securities) decreased $297 million from December 31, 1998.
Cash and cash equivalents were $1.2 billion at March 31, 1999, an
increase of $271 million from December 31, 1998.
The company also held $82 million in nonequity securities, included
in other asset categories that management views as cash equivalents,
representing an increase of $7 million from December 31, 1998. The
total increase in cash and cash equivalents of $278 million coupled
with a decrease in total debt of $19 million account for the overall
decrease in net debt. The first quarter increase in cash and cash
equivalents includes the temporary benefit of approximately $190
million due to the timing of quarterly payments related to
settlement of co-promotion agreements.
Cash provided by operating activities for the first quarter of 1999
of $717 million was more than sufficient to fund capital
expenditures of $194 million and pay dividends of $164 million.
Planned capital expenditures for 1999 are estimated to be nearly $1
billion in support of additional manufacturing operations and
expanded research facilities. The company believes that the amounts
available from operating cash flow and future borrowings will be
sufficient to meet expected operating needs and planned capital
expenditures for the foreseeable future.
OTHER MATTERS
- -------------
Year 2000
The company has continued to make considerable progress towards
achieving Year 2000 (Y2K) compliance by following its five-step
approach, as described in the 1998 Annual Report, for internal
technology systems and business stakeholders. With respect to
internal technology systems, the company has completed most of its
projects. The company plans to substantially complete its internal
Y2K projects by June 30, 1999, with remaining projects to be
completed by September 30, 1999.
With respect to its business stakeholders, the company is continuing
its program of assessing, verifying, auditing and monitoring their
Y2K compliance, through the use of written questionnaires, oral
inquiries, on-site visits and other means, and is factoring that
information into its plans. The company has received responses from
most of its mission critical business stakeholders and continues to
pursue responses from the remainder. The company will continue
assessing, verifying and auditing, through site visits and other
means, the Y2K compliance of its business stakeholders through
September 30, 1999, and beyond, if necessary. In addition, the
company will continue monitoring its business stakeholders
throughout 1999.
As described in the 1998 Annual Report, the company also has been
developing company-wide business continuity plans encompassing all
of its high priority internal systems and its supply chain of
business stakeholders. The company has also begun development of
emergency response plans. In developing both its business
continuity plans and emergency response plans, the company has
sought to exercise sound business judgment and to engage in the
appropriate cost/benefit analysis of the risks posed by Y2K and its
resolution of those risks.
Year 2000-related maintenance and modification costs are expensed as
incurred, while the cost of new information technology is
capitalized and amortized in accordance with company policy.
Management currently estimates incremental expenditures of
approximately $120 million will be necessary to address and
remediate Year 2000 compliance issues, of which approximately $65
million has been incurred as of March 31, 1999. Management does not
see any material change in the cost estimate at this time, however,
currently unforeseen developments or delays could cause this cost
estimate to change. Of the costs incurred to date, $53 million has
been charged to expense and $12 million has been capitalized.
Although management believes that its Year 2000 compliance program
reduces the risk of an internal compliance failure and is taking a
proactive approach with business stakeholders, there can be no
assurances that the company or its business stakeholders will
achieve timely Year 2000 compliance or that such noncompliance will
not have a material adverse impact on the company.
Restructuring
In 1998, the company recorded pretax restructuring charges of $93
million for three foreign plant closures due to a consolidation of
certain product manufacturing resources in Europe. Additionally, in
1993 and 1991, the company recorded pretax restructuring charges of
$525 million and $544 million, respectively, for the worldwide
rationalization of manufacturing and distribution facilities and for
organizational restructuring. At March 31, 1999 the company had a
combined reserve balance related to these programs of $91.9 million.
Management expects expenditures related to these activities to occur
throughout 1999 with substantially all amounts expended by the end
of 1999.
Acquisition
On January 26, 1999, Warner-Lambert announced a definitive agreement
to acquire Agouron Pharmaceuticals, Inc., an integrated
pharmaceutical company committed to the discovery and development of
innovative therapeutic products for treatment of cancer, AIDS and
other serious diseases. Agouron achieved total revenues of $466.5
million and net income of $13.2 million for their fiscal year ended
June 30, 1998. The transaction will be accounted for as a pooling
of interests and will require the approval of Agouron's
shareholders. A meeting of Agouron shareholders is scheduled for
May 17, 1999 to vote on approval of the transaction. The
acquisition will not require Warner-Lambert shareholder approval.
Under the terms of the agreement, which is valued at approximately
$2.1 billion, each share of Agouron stock will be converted into
shares of Warner-Lambert Company common stock at an exchange ratio
equal to dividing $60.00 by the average closing price of Warner-
Lambert common stock during the ten day trading period ending May
13,1999. In no event will the exchange ratio be more than .9300 or
less than .8108 of a share of Warner-Lambert Company common stock.
Warner-Lambert expects to issue between 29,500,000 and 33,800,000
shares of common stock to Agouron shareholders.
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, 1998 Form 10-
K/A filed with the Securities and Exchange Commission. Exhibit 99
to the Form 10-K/A 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 and ZANTAC 75 are registered
trademarks of Glaxo Wellcome plc, 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, were
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 were remanded to the District Court, and trial
of the class action conspiracy action against the non-settling
defendant pharmaceutical manufacturers and wholesalers was concluded
in November, 1998 with a directed verdict for the defendants and
dismissal of the class plaintiffs' case. That decision has been
appealed to the 7th Circuit Court of Appeals. 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.
In addition, the Company has settled the vast majority of the
Robinson-Patman Act lawsuits brought by those retail pharmacies
which opted out of the class action conspiracy lawsuit. The amount
of these settlements is not material.
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. The Company, with the
majority of the other drug company defendants, has agreed to settle
the California consumer class action and this settlement is pending
court approval. The amount of this settlement is not material.
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 was 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 have been approved by all of the above courts, is not
material.
The Company has also been made a party to another class action in
Tennessee, purportedly on behalf of consumers in Alabama, Arizona,
Florida, Kansas, Maine, Michigan, Minnesota, New Mexico, North
Carolina, North Dakota, South Dakota, Tennessee, West Virginia and
Wisconsin, who purchased brand name prescription drugs from retail
pharmacies, and in a similar class action in North Dakota on behalf
of North Dakota consumers. Although it is not possible at this
early stage to predict the outcome of these lawsuits, 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.
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 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 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
(a) The Annual Meeting of Shareholders of Warner-Lambert
was held on April 27, 1999.
(b) The following describes the matters voted upon at
such meeting and sets forth the number of votes cast for, against or
withheld and the number of abstentions with respect to each such
matter. There were no broker non-votes.
(1) Election of Directors:
<TABLE>
<S> <C> <C>
Number of Shares
Number of Shares Withheld From
Name Voted "For" Voting "For"
- ---------------------- ---------------- ----------------
Robert N. Burt 711,743,145 3,108,743
Donald C. Clark 711,023,813 3,828,075
Lodewijk J. R. de Vink 711,374,145 3,477,743
John A. Georges 711,324,190 3,527,698
William H. Gray III 710,958,358 3,893,530
William R. Howell 710,968,087 3,883,801
LaSalle D. Leffall, Jr. 711,469,269 3,382,619
George A. Lorch 711,606,527 3,245,361
Alex J. Mandl 711,682,730 3,169,158
Michael I. Sovern 711,403,111 3,448,777
</TABLE>
(2) Appointment of Independent Accountants for 1999:
<TABLE>
<S> <C> <C>
Number of Shares
Number of Shares Number of Shares Abstaining From
Voted For Voted Against Voting
---------------- ---------------- ----------------
711,484,694 1,183,261 2,183,933
</TABLE>
Item 6. Exhibits and Reports on Form 8-K
--------------------------------
(a) Exhibits
--------
(10) Material contracts
(a) Warner-Lambert Company Executive
Severance Plan, as amended to October 1,
1997.
(b) Employment Agreement dated as of
August 1, 1991 between Warner-Lambert
Company and Lodewijk J.R. de Vink, Chairman
of the Board, President and Chief Executive
Officer, as amended to May 1, 1999.
(c) Consulting Agreement effective May 1,1999
between Warner-Lambert Company and Melvin
R. Goodes.
(12) Computation of Ratio of Earnings to Fixed
Charges.
(27) Financial Data Schedule (EDGAR filing only).
(b) Reports on Form 8-K
-------------------
A Current Report on Form 8-K dated January 26,
1999 was filed with the Securities and
Exchange Commission in January 1999 in
connection with the Company's entering into an
agreement and plan of merger with WLC
Acquisition Corporation, a California
corporation and wholly-owned subsidiary of the
Company, and Agouron Pharmaceuticals, Inc., a
California corporation, whereby WLC will be
merged with and into Agouron, with Agouron as
the surviving entity.
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: May 11, 1999 By: Ernest J. Larini
----------------
Chief Financial Officer and
Executive Vice President,
Administration
(Principal Financial Officer)
Date: May 11, 1999 By: Joseph E. Lynch
---------------
Vice President and Controller
(Principal Accounting Officer)
EXHIBIT INDEX
-------------
Exhibit No. Exhibit
- ----------- -------
(10) Material contracts
(a) Warner-Lambert Company Executive
Severance Plan, as amended to October 1,
1997.
(b) Employment Agreement dated as of
August 1, 1991 between Warner-Lambert
Company and Lodewijk J.R. de Vink, Chairman
of the Board, President and Chief Executive
Officer, as amended to May 1, 1999.
(c) Consulting Agreement effective May 1,1999
between Warner-Lambert Company and Melvin
R. Goodes.
(12) Computation of Ratio of Earnings to Fixed
Charges.
(27) Financial Data Schedule (filed electronically).
Exhibit 10(a)
WARNER-LAMBERT COMPANY
EXECUTIVE SEVERANCE PLAN
As Amended To October 1, 1997
WARNER-LAMBERT COMPANY
EXECUTIVE SEVERANCE PLAN
Section 1. Establishment of Plan. Warner-Lambert
Company (the "Company") hereby establishes this Executive
Severance Plan (the "Plan"). The Plan shall become
effective as of February 17, 1988 (the "Effective Date").
Section 2. Purposes of Plan. In recognition of the
establishment of the Enhanced Severance Plan which is not
applicable to Participants (as hereinafter defined) in this
Plan, and in further recognition of the several different
concerns of Executives encompassed hereby, the purposes of
the Plan are to: (a) fulfill the Company's commitment under
the Warner-Lambert Creed of attracting and retaining capable
people as a means of both addressing the health and well-
being of people throughout the world and providing a fair
and attractive economic return to the Company's
shareholders; (b) address the concerns of the Company's
Executives regarding job security; and (c) help ensure that
the Executives receive the benefits which they legitimately
expect in the normal course of their employment.
Section 3. Definition of Executives; Eligibility.
3.1. Definition of Executives. For purposes of this
Plan, the term "Executives" shall mean (a) all employees of
the Company who are subject to the reporting requirements of
Section 16(a) of the Act (as hereinafter defined)
("Corporate Officers") on the Effective Date; (b) all
persons who become Corporate Officers after the Effective
Date and (c) all employees of the Company who are designated
by the Board of Directors of the Company (the "Board") or by
the Executive Committee of the Company (as such bodies are
constituted prior to the occurrence of a Change in Control
(as hereinafter defined)) as eligible for participation in
this Plan ("Designated Employees"). For purposes of this
Plan, the term "Act" shall mean the Securities Exchange Act
of 1934, as amended.
3.2. Eligibility. All Executives shall participate in
the Plan (the "Participants"); provided, however, that (i)
except as provided in clauses (iii) and (iv) of this
subsection, an Executive shall cease to be a Participant at
the time such Executive ceases to be a Corporate Officer;
(ii) no person who is not an Executive at the time of the
occurrence of a Change in Control shall become a Participant
thereafter; (iii) except as provided in clause (iv) of this
subsection, the participation of a Designated Employee shall
cease at the time that such employee ceases to be a
corporate officer appointed to such position by the Board of
Directors, unless such employee continues to be a Corporate
Officer; and (iv) no Executives who are Participants at the
time of the occurrence of a Change in Control shall cease
participation without their written consent.
Section 4. Definition of Change in Control; Activation
Event.
4.1. Change In Control. For purposes of this Plan, a
"Change in Control" of the Company shall be deemed to have
occurred if (i) any person (as such term is used in Sections
13(d) and 14(d)(2) of the Act) is or becomes the beneficial
owner (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of the Company representing 20% or
more of the combined voting power of the Company's then
outstanding securities, (ii) the stockholders of the Company
approve a merger, consolidation, sale or disposition of all
or substantially all of the Company's assets or plan of
liquidation or (iii) the composition of the Board at any
time during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as hereinafter
defined) cease for any reason to constitute at least fifty-
one percent (51%) of the Board. For purposes of the
foregoing clause (iii), "Continuity Directors" means those
members of the Board who either (a) were directors at the
beginning of such consecutive twenty-four (24) month period,
or (b)(1) filled a vacancy during such twenty-four (24)
month period created by reason of (x) death, (y) a medically
determinable physical or mental impairment which renders the
director substantially unable to function as a director or
(z) retirement at the last mandatory retirement age in
effect for at least two (2) years, and (2) were elected,
nominated or voted for by at least fifty-one percent (51%)
of the current directors who were also directors at the
commencement of such twenty-four (24) month period.
4.2. Activation Event. For purposes of this Plan, the
term "Activation Event" shall mean a termination of
employment with the Company (whether voluntary or
involuntary) within three (3) years after a Change in
Control for any reason other than death or Termination for
Just Cause (as hereinafter defined).
Section 5. Severance Benefits. Upon the occurrence of
an Activation Event with respect to a Participant, the
following shall apply to such Participant: (a) the benefits
specified in Severance Policy #163, as such policy is in
effect immediately prior to the occurrence of the Change in
Control (including amounts due by reason of such event) (the
"Severance Policy"), shall be paid to the Participant, in
accordance with the coverage provisions thereof, even though
the termination would not otherwise give rise to severance
payments, provided, however, that the Severance Pay Duration
Period (as defined in the Severance Policy) of Participants
shall be thirty-six (36) months; (b) severance benefits
shall be determined on the basis of base pay plus Bonus
Amount (as hereinafter defined), extrapolated for the entire
Severance Pay Duration Period, as determined in accordance
with paragraph (a) hereof (for example severance benefits
shall include payment of, and benefits continuance shall in
part be based upon, three (3) times the Participant's Bonus
Amount); (c) severance payments and continued eligibility
for other benefits shall not terminate upon other
employment, retirement or death; (d) severance payments
(including amounts paid in respect of the Participant's
Bonus Amount) shall, at the election of the Participant, be
made monthly or in a lump sum (regardless of eligibility
therefor under the Severance Policy) and the receipt of a
lump sum payment shall not terminate coverage under other
benefit arrangements which are otherwise continued during
the Severance Pay Duration Period under the Severance
Policy; and (e) the Company shall provide third party
outplacement assistance consistent with the Company's prior
practices. For purposes hereof, the term "Bonus Amount"
shall mean the target award for such Participant's job grade
as set forth in Exhibit 5 hereto, as such schedule may be
revised from time to time; provided, however, that upon the
occurrence of a Change in Control, the target awards may not
be reduced.
Section 6. Retirement Plans. Upon the occurrence of a
Change in Control, the vesting requirement applicable to
Participants shall become five (5) Years of Service (as
defined in the Warner-Lambert Retirement Plan (the
"Retirement Plan")) and upon the occurrence of an Activation
Event with respect to a Participant, such Participant shall
receive credit for all purposes of the Retirement Plan for
the Severance Pay Duration Period (including the extension
thereto provided under Section 5) and the payments received
in respect of such Period to the extent permissible under
the Internal Revenue Code of 1986, as amended (the "Code"),
with the balance of such credit, if any, being given under
the Warner-Lambert Supplemental Pension Income Plan (the
"Supplemental Pension Plan"). In addition, upon the
occurrence of an Activation Event with respect to a
Participant, eligibility for Supplemental Pension Income
under the Supplemental Pension Plan shall become attainment
of salary grade 17 prior to the Change in Control. To
implement the aforementioned, the Retirement Plan is hereby
amended by (i) deleting the second parenthetical in the
first sentence of Section 7 of Article XIII thereof, and
(ii) revising the third sentence of Section 7 of Section
XIII thereof, to read in its entirety as provided in Exhibit
6(a) hereto. Further, the Supplemental Pension Plan is
hereby amended by (i) adding the phrase "and the Warner-
Lambert Executive Severance Plan" after the fifteenth word
of Section 13.3 of Article XIII thereof and revising Section
13.1(a) to read in its entirety as provided in Exhibit 6(b)
hereto.
Section 7. Savings Plan. Upon the occurrence of an
Activation Event with respect to a Participant, such
Participant shall receive credit for all purposes of the
Warner-Lambert Savings and Stock Plan (the "Savings Plan")
for the Severance Pay Duration Period (including the
extension thereto provided under Section 5) and the payments
received in respect of such Period (exclusive of Bonus
Amounts) to the extent permissible under the Code, with the
balance of such credit, if any, being given under the
Warner-Lambert Supplemental Savings Plan (the "Supplemental
Savings Plan"). To implement the aforementioned, the
Savings Plan is hereby amended by (i) deleting the second
parenthetical in the first sentence of Section 7.6 thereof,
(ii) revising the third sentence of Section 7.6 thereof, to
read in its entirety as provided in Exhibit 7 hereto and
(iii) the Supplemental Savings Plan is hereby amended by
adding the phrase "and the Warner-Lambert Executive
Severance Plan" after the fifteenth word of the last
paragraph of Section 11.1 of Article 11 thereof.
Section 8. Incentive Compensation Plan. Upon the
occurrence of a Change in Control, (i) the formula for
determining the rate for adjustments to Deferred Bonus
Accounts (as defined in the Warner-Lambert Company Incentive
Compensation Plan (the "Incentive Compensation Plan")) may
not be lower for succeeding periods than the formula in
effect at the occurrence of the Change in Control (for
example, if the formula in effect at the Change in Control
is the average prime rate plus two (2) percent, the formula
for all future years may not be lower than the average prime
rate plus two (2) percent); (ii) the consulting and
forfeiture provisions of the Incentive Compensation Plan
shall no longer apply; (iii) the Company shall promptly
transfer an amount equal to the aggregate of all Deferred
Bonus Accounts to a trustee under an irrevocable trust
commonly known as a "Rabbi Trust"; (iv) if the Participant
had a Deferred Bonus Account on September 27, 1994, and he
or she did not consent in writing to the provisions
described in the following clause (v) prior to November 1,
1994, then upon the Participant's termination of employment
with the Company, he or she shall promptly receive the
balance in the Deferred Bonus Account in a lump sum
distribution; and (v) upon a Participant's termination of
employment with the Company within 3 years after a change in
Control, he or she may, within 30 days thereafter, designate
a distribution schedule for their Deferred Bonus Account
which schedule may provide for a lump sum payment or
installment payments over a period of up to 15 years,
provided, however, that no payment shall be made until the
end of the severance period (for example, if the Participant
is entitled to 3 years' severance pay, deferred bonus
payments may not begin until 3 years after termination even
if such Participant receives the severance pay in a lump sum
at termination). To implement the aforementioned, the
Incentive Compensation Plan is hereby amended by (i)
deleting the second parenthetical in the third sentence of
Section 5.2 thereof and (ii) deleting the parenthetical in
the first sentence of Sections 6.3 and 7.1(d) thereof.
Section 9. Stock Option Plans. Upon the occurrence of
a Change in Control, all Options (as such term is defined in
the Stock Option Plans (as hereinafter defined)) then
outstanding under the Warner-Lambert Company 1974 Stock
Option and Alternate Stock Plan, the Warner-Lambert Company
1983 Stock Option Plan and the Warner-Lambert Company 1987
Stock Option Plan (collectively, the "Stock Option Plans")
and held by Participants shall become immediately
exercisable by the optionee. Effective as of the Effective
Date of the Plan, limited stock appreciation rights
("LSAR's") are hereby granted to all Participants, at such
Effective Date, in connection with all outstanding options
held by such Participants which are not Reference Options
(as defined in the Stock Option Plans). Such LSAR's shall
only be exercisable for a thirty (30) day period beginning
on the date of the occurrence of a Change in Control unless
(i) the optionee is subject to the reporting requirements of
Section 16(a) of the Act at the time of the occurrence of
the Change in Control and (ii) such event occurs within six
(6) months of the date of grant of the LSAR's, in which case
the LSAR's shall only be exercisable during the thirty (30)
day period beginning six (6) months after the grant of the
LSAR's. Such LSAR's shall remain exercisable (during the
thirty (30) day period beginning on the date of the
occurrence of the Change in Control or during the thirty
(30) day period beginning six (6) months after the grant of
the LSAR's, as the case may be), notwithstanding the
termination of the optionee's employment with the Company.
Upon the occurrence of the Change in Control within six (6)
months of the date of grant of the LSAR's, the Company shall
promptly transfer to a trustee under an irrevocable trust
commonly known as a "Rabbi Trust" for the benefit of the
Participants the maximum amount of cash estimated to be
necessary to satisfy the Company's obligations upon exercise
of all such LSAR's. Upon exercise of an LSAR, a Participant
shall be entitled to receive a cash payment equal to the
excess of the Fair Market Value (as hereinafter defined) on
the date of exercise of a share of Warner-Lambert Common
Stock over the grant price of the Option to which the LSAR
relates multiplied by the number of shares with respect to
which the LSAR is being exercised. For purposes hereof, the
term "Fair Market Value" shall have the same definition
currently applicable to the exercise of a Right (as defined
in the Stock Option Plans) during the thirty (30) day period
following a Change in Control. In addition, upon the
occurrence of a Change in Control, all Rights then
outstanding under the Stock Option Plans and held by
Participants shall become immediately exercisable by the
grantee; provided, however, that such Rights which have been
held by the grantee for less than six (6) months shall
become fully exercisable only during the thirty (30) day
period beginning six (6) months after the date of grant,
notwithstanding the termination of the grantee's employment
with the Company. Upon the occurrence of a Change in
Control, the Company shall promptly transfer to a trustee
under a Rabbi Trust for the benefit of Participants the
maximum amount of cash estimated to be necessary to satisfy
the Company's obligations upon exercise of all outstanding
Rights then held by Participants for less than six (6)
months. To implement the aforementioned, (i) Article 7 of
the Stock Option Plans is hereby amended by deleting
paragraph (i) of Section 7(b) thereof in its entirety and
substituting a new Paragraph (i) therefor, to read in its
entirety as provided in Exhibit 9(a) hereto; (ii) Article 8
of the Stock Option Plans is hereby amended by deleting
Paragraph (b) thereof in its entirety and substituting a new
Paragraph (b) therefor, to read in its entirety as provided
in Exhibit 9(b) hereto; and (iii) Article 8 of the Stock
Option Plans is hereby amended by adding a new Paragraph (f)
thereto, to read in its entirety as provided in Exhibit 9(c)
hereto. In addition, all Options and Rights presently
outstanding are hereby amended by deleting the last
paragraph of Paragraph 1 thereof in its entirety and
substituting therefor the language as provided in Exhibit
9(d) hereto. In addition, the Stock Option Plans and the
Warner-Lambert Company 1989 Stock Plan, the Warner-Lambert
Company 1992 Stock Plan and the Warner-Lambert Company 1996
Stock Plan (collectively, the "Stock Plans") are hereby
amended as set forth in Exhibit 9(e) hereof with respect to
a "Merger of Equals" (as therein defined).
Section 10. Medical Benefits. Upon the occurrence of
an Activation Event with respect to a Participant, such
Participant's coverage under the Warner-Lambert Medical Plan
and the Warner-Lambert Dental Plan (or HMO, as the case may
be) shall continue for the duration of the Severance Pay
Duration Period (including the extensions thereto provided
under Section 5), whether or not the Participant receives
the severance payments in a lump sum or in monthly payments.
In addition, the Participant shall be eligible for the
subsidized Retiree Medical/Dental Plan For Post 1991 Warner-
Lambert Retirees if the Participant's age (in full and
partial years) plus service (in full and partial years and
counting all service which is credited for determining
vesting under the Retirement Plan) equals at least seventy
(70), with age and service being determined as of the end of
the Severance Pay Duration Period (including the extensions
thereto provided under Section 5), whether or not the
Participant elects to receive severance payments in a lump
sum or in monthly payments (i.e., service shall be
determined by including the Severance Pay Duration Period
(including the extensions thereto provided under Section 5)
as service, and age shall be determined as of the end of the
Severance Pay Duration Period (including the extensions
thereto provided under Section 5), even if the Participant
elects to receive severance in a lump sum). Further, upon
the occurrence of a Change in Control, the Company's retiree
medical plan may not be terminated or amended in a manner
that is not also applicable to active employees.
Section 11. Termination of Plan. This Plan may not be
terminated with respect to any Participant without the
written consent of such Participant.
Section 12. Amendment of Plan. This Plan may not be
amended in any manner which has a significant adverse effect
on any Participant and his rights hereunder without the
written consent of such Participant. Notwithstanding the
foregoing, upon the occurrence of a Change in Control, this
Plan may not be amended in any respect without the written
consent of each Participant affected by such proposed
amendment. Notwithstanding any other provision hereof, the
Plan may be amended in order to obtain or maintain the
status of (i) the Retirement Plan and Savings Plan as
qualified plans under Section 401(a) of the Code and (ii)
the Stock Option Plans as qualified under Rule 16b-3
promulgated pursuant to the Act.
Section 13. Administration. The Chief Executive
Officer of the Company shall appoint a committee (the
"Committee") consisting of three (3) Participants, one of
whom shall be the Corporate Vice President, Human Resources,
who shall act as chairman, to administer the Plan. The
Committee shall have the authority to interpret the Plan and
to adopt rules for the implementation thereof.
Section 14. Termination for Just Cause. For purposes
of this Plan, the term "Termination for Just Cause" shall
mean termination for the commission of a wrongful action
such as theft of Company property or alcohol or drug abuse.
The Company intends that Termination for Just Cause shall be
limited to actions which are comparable to theft or
substance abuse. The determination of whether alleged
grounds for termination qualify as a Termination for Just
Cause shall be made by an Arbitration Panel (as hereinafter
defined).
Section 15. Contract Right of Participants. The Board
of Directors of the Company intends this Plan to constitute
an enforceable contract between the Company and each
Participant and intends this Plan to vest rights in such
Participants as third party beneficiaries.
Section 16. Compensation. For all purposes hereof,
except Section 3 and except to the extent provided in
Section 5 with respect to the determination of a
Participant's Bonus Amount, a Participant's compensation,
rate of base earnings, job grade, target award or similar
amounts or status shall be the higher of such amount, grade
or status (as the case may be) at the time of (i) the
occurrence of a Change in Control, or (ii) the termination
of the Participant's employment.
Section 17. Construction. Wherever any words are used
herein in the masculine gender they shall be construed as
though they were also used in the feminine gender in all
cases where they would so apply, and wherever any words are
used herein in the singular form they shall be construed as
though they were also used in the plural form in all cases
where they would so apply.
Section 18. Governing Law. This Plan shall be
governed by the law of the State of New Jersey (regardless
of the law that might otherwise govern under applicable New
Jersey principles of conflict of laws).
Section 19. Successors and Assigns. The Plan shall be
binding upon the Company and upon any assignee or successor
in interest to the Company.
Section 20. Excise Tax Reimbursement Agreements. As
soon as practicable after the Effective Date, all
Participants shall enter into excise tax reimbursement
agreements substantially in the form provided in Exhibit 20
hereto. The objective of these agreements is to reimburse
the Participants, on an after-tax basis, for any federal
excise tax or similar state or local taxes (whether or not
such taxes are in existence on the date hereof) that would
be imposed as a result of a change in control of the
Company.
Section 21. Arbitration Panel. For purposes of this
Plan, the term "Arbitration Panel" shall mean three (3)
independent arbitrators, one of whom shall be selected by
the Company, one by the Participant and the third shall be
selected by the two other arbitrators. In the event that
agreement cannot be reached on the selection of the third
arbitrator, such arbitrator shall be selected by the
American Arbitration Association. All arbitrators shall be
selected from a list provided by the American Arbitration
Association. All matters presented to the Arbitration Panel
shall be decided by majority vote. All costs of the
arbitration, including the Participant's attorneys' fees, if
any, shall be paid by the Company.
Section 22. Uniform Definition of Change in Control.
The definitions of change in control in the Retirement Plan,
Savings Plan, Warner-Lambert Company Supplemental Pension
Income Plan, Severance Policy, Warner-Lambert Supplemental
Savings Plan, Stock Option Plans, Warner-Lambert Company
1989 Stock Plan, Restricted Stock Plan for Directors of
Warner-Lambert Company, Deferred Compensation Plan for
Directors of Warner-Lambert Company and Warner-Lambert
Company Directors' Retirement Plan shall be amended to
incorporate the definition of "Change in Control" contained
in Section 4 of this Plan. To implement the foregoing, such
plans are hereby amended as provided in Exhibit 22 hereto.
Section 23. Notice of Termination. During the three
(3) year period after the occurrence of a Change in Control,
the employment of a Participant may not be terminated,
except in the event of Termination for Just Cause, unless
the Participant has received six (6) months' advance notice
of the termination in a letter written to such Participant,
which letter shall specify (i) the date of termination,
which date shall not be sooner than six (6) months after
receipt of such letter by the Participant, (ii) the reason
for termination, and (iii) a commitment to honor this Plan,
including, without limitation, the Severance Policy, and to
pay to the Participant all amounts to which the Participant
is entitled thereunder. In addition, the expiration of such
three (3) year period shall not extinguish the rights of any
Participant who has received notice of termination during
such three (3) year period (i) to a full six (6) month
notice period (even if such notice period thereby extends
beyond the three (3) year period), and (ii) to a payment of
such Participant's severance and other benefits in
accordance with the provisions of this Plan.
Section 24. Maintenance of Status Quo. Upon the
occurrence of a Change in Control, no Participant's salary,
bonus or benefits may be reduced for a period of three (3)
years provided that such Participant's performance is
acceptable. For purposes of this Section, a Participant's
performance shall be considered "acceptable" unless the
Participant receives a written performance appraisal
indicating (a) that such Participant's overall performance
(i) is not acceptable and (ii) has not been acceptable
during a performance review period extending at least six
(6) months and (b) the specific reasons the Participant's
performance is not acceptable. Further, such performance
appraisal must have been (a) reviewed and concurred in by
the Participant's supervisor, the supervisor's supervisor
(unless the Participant's supervisor is the Chief Executive
Officer of the Company) and the Participant's Human
Resources representative and (b) preceded by a written
warning given to such Participant which shall have provided
a reasonable opportunity for the Participant to improve his
or her performance.
WARNER-LAMBERT COMPANY
EXHIBIT 5
1999 TARGET ANNUAL INCENTIVE AWARD
<TABLE>
<S> <C>
Senior Officers Target (as %
of Base Salary)
Chairman of the Board, President and
Chief Executive Officer 105%
Senior Vice President and President, 65%
Adams
Executive Vice President and
President, Pharmaceutical Sector 65%
Chief Financial Officer and
Executive Vice President,
Administration 70%
Senior Vice President and General
Counsel 70%
Senior Vice President, Strategic
Management Processes 55%
Senior Vice President and Chief
Scientific Officer 55%
Vice President and President
Warner-Lambert/Parke-Davis Research
& Development 55%
Senior Vice President and President,
Consumer Healthcare Sector 65%
Vice President and President, Adams
U.S.A. 60%
Vice President and President,
Consumer Healthcare U.S.A. 60%
Vice President and President,
Shaving Products Group 60%
Vice President and President, Parke-
Davis U.S.A. 50%
Senior Vice President
Human Resources 65%
Vice President, Knowledge Management 55%
Senior Vice President, Public
Affairs 50%
Vice President and Treasurer *
Vice President and Controller *
Secretary *
</TABLE>
* Target bonus for these positions determined according to the
attached schedule for banded positions.
5/1/99
1999 TARGET ANNUAL INCENTIVE AWARD FOR BANDED POSITIONS
<TABLE>
<S> <C> <C>
Band If Individual Base Salary Target (as % of
Falls Within Base Salary)
2 <= $154,000 26.0%
$154,001 - $180,450 30.0%
>= $180,451 34.0%
1 <= $258,650 40.0%
>= $258,651 40.0%
</TABLE>
12/17/98
EXHIBIT 6(a)
Retirement Plan
"The term "Activation Event" shall also include a
termination of employment with the Company (whether
voluntary or involuntary) within two (2) years after a
Change in Control for any reason other than death or
Termination for Just Cause (i) with respect to Participants
who are covered by the Executive Severance Plan at the time
of occurrence of the Change in Control, and (ii) with
respect to all other Participants (x) if the Change in
Control occurs otherwise than through a transaction approved
and authorized or consented to by the Board of Directors of
the Company, as constituted prior to such transaction, or
(y) in such other circumstance as the Board of Directors
shall deem appropriate."
EXHIBIT 6(b)
Supplemental Pension Plan
(a) an Employee shall be eligible to receive a Supplemental
Pension Income in an amount determined in accordance with
Article VI hereof if he was at salary grade 17 or higher
prior to such Change in Control of the Company and an
"Activation Event" (as defined in the Executive Severance
Plan) shall have occurred with respect to such Employee;
EXHIBIT 7
Savings Plan
"The term "Activation Event" shall also include a
termination of employment with the Company (whether
voluntary or involuntary) within two (2) years after a
Change in Control (as hereinafter defined) for any reason
other than death or Termination for Just Cause (i) with
respect to Participants who are covered by the Executive
Severance Plan at the time of occurrence of the Change in
Control, and (ii) with respect to all other Participants (x)
if the Change in Control occurs otherwise than through a
transaction approved and authorized or consented to by the
Board of Directors of the Company, as constituted prior to
such transaction, or (y) in such other circumstance as the
Board of Directors shall deem appropriate."
EXHIBIT 9(a)
Stock Option Plans
"(i) Notwithstanding any other provision contained in
this Plan, no part of an Option may be exercised unless the
Optionee remains in the continuous employ of the Company for
one year from the date the Option is granted except that
upon the occurrence of a Change in Control of Warner-Lambert
Company (as hereinafter defined) all Options may be
exercised without giving effect to the one year limitation
and the limitations, if any, which may have been imposed by
the Committee pursuant to paragraph (b)(ii) of this Article
7 with respect to the percent of the total number of shares
to which the Option relates which may be purchased from time
to time during the Option Period."
EXHIBIT 9(b)
Stock Option Plans
"(b) Exercise of Right. A Right shall become
exercisable at such time, and in respect of such number of
shares of Common Stock, as the Reference Option is then
exercisable and such Right shall terminate upon termination
of the Reference Option, provided, however, that no Right
shall be exercisable unless the Grantee shall have remained
in the continuous employ of the Company for one year from
the date the Right was granted except that upon the
occurrence of a Change in Control of Warner-Lambert Company,
all Rights may be exercised without giving effect to the one
year limitation and the limitations, if any, which may have
been imposed by the Committee pursuant to paragraph (b)(ii)
of Article 7 with respect to the percent of the total number
of shares to which the Right relates which may be purchased
from time to time during the Option Period; provided,
however, that Rights which have been held for less than six
months on the date of the occurrence of a Change in Control
by Grantees who at the time of the occurrence of the Change
in Control are subject to the reporting requirements of
Section 16(a) of the Act may be exercised only during the
thirty (30) day period beginning six months after the date
of grant of the Right, notwithstanding the termination of
the Grantee's employment with the Company, and without
giving effect to the one year limitation and the
limitations, if any, which may have been imposed by the
Committee pursuant to paragraph (b)(ii) of Article 7 with
respect to the percent of the total number of shares to
which the Right relates which may be purchased from time to
time during the Option Period. Except as provided in this
paragraph (b) and in paragraphs (d) and (e) of this Article
8, no Right shall be exercisable unless at the time of such
exercise the Grantee shall be in the employ of the Company.
The date on which the exercise of a Right is effective
shall hereinafter be referred to as the Valuation Date."
EXHIBIT 9(c)
Stock Option Plans
"(f) Notwithstanding anything herein to the contrary,
Limited Rights may be granted hereunder by the Compensation
Committee with respect to the Options granted under the Plan
(which are not Reference Options), which shall be
exercisable only upon the occurrence of a Change in Control.
Such Limited Rights may only be exercised by Optionees
during the thirty (30) day period beginning on the date of
the occurrence of a Change in Control unless (i) at the time
of the occurrence of the Change in Control such Optionee is
subject to the reporting requirements of Section 16(a) of
the Act and (ii) such event occurs within six (6) months of
the date of grant, in which case such Limited Rights may
only be exercised during the thirty (30) day period
beginning six (6) months after the grant of the Limited
Rights. During the period specified in the preceding
sentence, such Limited Rights may be exercised notwith-
standing the termination of the Optionee's employment with
the Company. Upon the exercise of a Limited Right, the
Optionee shall be entitled to receive a cash payment equal
to the excess of the Fair Market Value of a share of Common
Stock on the Valuation Date over the Option Price of the
related Option multiplied by the number of shares with
respect to which the Limited Right is being exercised (in
such case the method of determining the Fair Market Value in
the third sentence of Section 6(i) shall apply). Limited
Rights shall expire on the first to occur of the date of
exercise or expiration of the right of exercise of the
Limited Right or of the related Option. Further, upon
exercise of a Limited Right, the related Option shall be
cancelled. The Board of Directors reserves the right to
cancel all outstanding Limited Rights in accordance with
Sections 11 and 12 of the Executive Severance Plan. Except
as otherwise provided herein, the provisions of the Plan
relating to Rights shall also apply to Limited Rights."
EXHIBIT 9(d)
Stock Option Plans
"Notwithstanding anything herein to the contrary, this
Option may be exercised in full as of the date on which
there occurs a "Change in Control of Warner-Lambert Company"
(as defined in the Plan).
Further, you are hereby granted Limited Rights (as
defined in the Plan) with respect to those Options presently
held by you which were not granted in tandem with Rights.
These Limited Rights may only be exercised by you during the
thirty (30) day period beginning on the date of the
occurrence of a "Change in Control" (as hereinafter defined)
unless (i) you are subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, as
amended (the "Act"), at the time of the occurrence of the
Change in Control (a "Reporting Person") and (ii) such
Change in Control occurs within six (6) months of the date
of grant of the Limited Rights, in which case these Limited
Rights may only be exercised during the thirty (30) day
period beginning six (6) months after the date of grant of
the Limited Rights. Lastly, upon exercise of a Limited
Right, you shall be entitled to receive a cash payment equal
to the excess of the "Fair Market Value" (as defined in the
Plan) of a share of Common Stock on the date of exercise
over the Option Price multiplied by the number of shares
with respect to the Limited Right is being exercised.
Notwithstanding the foregoing, the Company reserves the
right to cancel all outstanding Limited Rights in the event
that the Board of Directors of the Company cancels the
Executive Severance Plan. Except as otherwise provided
herein, the provisions of the Plan relating to Rights shall
also apply to Limited Rights.
In addition, notwithstanding anything herein to the
contrary, Rights which are outstanding on the date of the
occurrence of a Change in Control may be exercised in full;
provided, however, that if you are a Reporting Person and
the Change in Control occurs within six (6) months after the
date of grant of the Right, the Right may only be exercised
during the thirty (30) day period beginning six (6) months
after the date of grant of the Right.
For purposes hereof, a Change in Control shall be
deemed to have occurred if (i) any person (as such term is
used in Sections 13(d) and 14(d)(2) of the Act) is or
becomes the beneficial owner (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the
Company representing 20% or more of the combined voting
power of the Company's then outstanding securities, (ii) the
stockholders of the Company approve a merger, consolidation,
sale or disposition of all or substantially all of the
Company's assets or plan of liquidation or (iii) the
composition of the Board of Directors of the Company at any
time during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as hereinafter
defined) cease for any reason to constitute at least fifty-
one percent (51%) of the Board. For purposes of the
foregoing clause (iii), "Continuity Directors" means those
members of the Board who either (a) were directors at the
beginning of such consecutive twenty-four (24) month period,
or (b)(1) filled a vacancy during such twenty-four (24)
month period created by reason of (x) death, (y) a medically
determinable physical or mental impairment which renders the
director substantially unable to function as a director or
(z) retirement at the last mandatory retirement age in
effect for at least two (2) years, and (2) were elected,
nominated or voted for by at least fifty-one percent (51%)
of the current directors who were also directors at the
commencement of such twenty-four (24) month period."
EXHIBIT 9(e)
Stock Plans
1. Section 4.6 of the Warner-Lambert Company 1989
Stock Plan, the Warner-Lambert Company 1992 Stock Plan and
the Warner-Lambert Company 1996 Stock Plan shall be amended
by adding "(a)" before the first sentence thereof and by
adding the following as (b) at the end thereof and Section
6(h) of the Warner-Lambert Company 1983 Stock Option Plan
and the Warner-Lambert Company 1987 Stock Option Plan shall
be amended by adding "(I)" before the first sentence thereof
and by adding the following as (II) at the end thereof:
"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."
2. The Warner-Lambert Company 1989 Stock Plan, the
Warner-Lambert Company 1992 Stock Plan and the Warner-
Lambert Company 1996 Stock Plan shall be amended by adding
the following as new Section 5.9 and the Warner-Lambert
Company 1983 Stock Option Plan and the Warner-Lambert
Company 1987 Stock Option Plan shall be amended by adding
the following as new Section 7(h):
"Rollover Option. 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."
EXHIBIT 20
This AGREEMENT, made and entered into as of June -----,
1990 (this "Agreement"), between Warner-Lambert Company, a
Delaware corporation (the "Company"), and ------------------
- ----------------------- (the "Executive").
WHEREAS, the Executive is a highly valued employee of
the Company; and
WHEREAS, the Company has awarded the Executive, in the
ordinary course of business and during the Executive's
employment with the Company, certain employee benefits,
including, but not limited to, employee stock options, that
are designed to compensate the Executive for his services to
the Company and to give him incentive to expend every effort
to produce the best results for the benefit of the Company's
shareholders; and
WHEREAS, in light of the economic climate and in an
effort to foster a sense of job security for the Executive,
the Company and the Executive have entered into certain
arrangements (the "Executive Compensation Arrangements")
regarding the Executive's employee benefits, including, but
not limited to, arrangements regarding the accelerated
vesting of employee stock options and the payment of
severance, that are designed to preserve the Executive's
benefits in the event of a change in control of the Company;
and
WHEREAS, there exists uncertainty in the tax law
whether, and/or to what extent, the Executive Compensation
Arrangements will subject the Executive to the tax imposed
by Section 4999 of the Internal Revenue Code of 1986, as
amended (the "Code"), or any similar state or local taxes,
(all such taxes, whether or not in existence on the date
hereof, being collectively referred to herein as the "Excise
Tax") thereby diminishing the value of the employee benefits
to which the Executive is entitled;
NOW, THEREFORE, in consideration of the mutual premises
and covenants contained herein, the Company and the
Executive do hereby covenant and agree as follows:
1. Special Payments. In the event that the Executive
becomes entitled to any payments and such payments, or any
part thereof, will be subject to the Excise Tax, the Company
shall pay to the Executive, in accordance with the
provisions set forth below, an additional amount (a "Special
Payment") that may be necessary to reimburse the Executive,
on an after-tax basis, for any Excise Tax that may be
imposed by reason of such payments, or any portion thereof,
and for any federal, state and local income tax and Excise
Tax that may be imposed by reason of the Special Payment.
2. Calculation of Excise Tax and Special Payment. The
Special Payment shall be paid to the Executive as promptly
as practicable following a change in control of the Company
once Price Waterhouse has calculated the estimated Excise
Tax to be imposed on the Executive, except as otherwise
provided in paragraph 3. For purposes of determining
whether any payments will be subject to Excise Tax and the
amount of such Excise Tax, all amounts in any manner
connected with a change in control, whether received by the
Executive at such time or not and including amounts which
the Executive has the right to receive in the future as a
result of the change in control (i) shall be treated as
"parachute payments" within the meaning of Section
280G(b)(2) of the Code, and all "excess parachute payments"
within the meaning of Section 280G(b)(1) of the Code shall
be treated as subject to the Excise Tax, and (ii) the value
of any non-cash benefits or any deferred payment or benefit
shall be determined by Price Waterhouse in accordance with
the principles of Section 280G(d)(3) and (4) of the Code.
For purposes of determining the amount of any Special
Payment, the Executive shall be deemed to pay state and
local income taxes at the highest marginal rate of taxation
imposed by the state and locality in which the Executive
resides or is employed (or both) in the calendar year in
which the Special Payment is to be made, and federal income
taxes at the highest marginal rate of taxation in the
calendar year in which the Special Payment is to be made,
net of the maximum reduction in federal income taxes which
could be obtained from deduction of such state and local
taxes. At no additional cost to the Executive, Price
Waterhouse shall be responsible for completing and filing
appropriate tax returns for the Executive in connection with
the Special Payment hereunder, consistent with Price
Waterhouse's calculation of such Special Payment.
3. Subsequent Special Payment. In the event that
Price Waterhouse shall determine that payments may be
subject to the Excise Tax if made but that it is uncertain
whether such payments will in fact be made, for example,
payments of severance that will only be made if the
Executive terminates his employment, or in the event that
Price Waterhouse shall determine that payments are not
subject to the Excise Tax but that there is a possibility of
such payments being so treated, Price Waterhouse shall
provide the Company and the Executive with an estimate of
the maximum amount of the Special Payment that might be
required to be paid pursuant to this Agreement. Thereupon
the Company shall promptly transfer to a trustee of an
irrevocable trust commonly known as a "Rabbi Trust" the
maximum additional amount of cash estimated to be necessary
to satisfy the Company's obligations under this Agreement
after taking into consideration any Special Payments
previously made to the Executive. The existence of such
trust shall not discharge the Company's obligations
hereunder and the Company shall continue to have the
obligation to make such payments except to the extent that
payments are actually made to the Executive from such fund.
Additional Special Payments shall be made to the Executive
upon a determination by Price Waterhouse that subsequent
payments received by the Executive, for example, payments of
severance following termination of employment, will result
in additional Excise Tax.
4. Adjustment of Special Payments. (a) In the event
that subsequently enacted or decided statutes, regulations,
administrative rulings or case law indicate, in the view of
Price Waterhouse, that the calculation of the Excise Tax
previously made by Price Waterhouse overstates the
Executive's liability for such Excise Tax, the Company may
direct the Executive, at the Company's sole expense, to file
for a refund of such Excise Tax or take such other actions
as Price Waterhouse reasonably may request in order to
reduce the Executive's liability for Excise Tax and to
ensure that the payments and any Special Payments made to
the Executive pursuant to this Agreement are not determined
to be "parachute payments" within the meaning of Section
280G(b)(2) of the Code, provided that the Company shall have
taken consistent positions on its tax returns and the
Company has issued similar directives to all similarly
situated executives or former executives of the Company who
have received Excise Tax reimbursement payments. The
Executive shall cooperate in good faith in assisting the
Company and Price Waterhouse in their actions pursuant to
this paragraph 4(a).
(b) If it shall be determined, following the payment
to the Executive of the Special Payment, in a final judicial
determination or a final administrative settlement to which
the Executive is a party that the calculation of the Excise
Tax and/or the Special Payment is in error, then Price
Waterhouse will determine the amount (the "Adjustment
Amount"), if any, which the Executive must pay to the
Company or the Company must pay to the Executive, as the
case may be, in order to put the Executive in the same
position, after taking account of any and all taxes
(including penalties and interest) paid by or for the
Executive or refunded to or for the benefit of the Executive
and of the value to the Executive of any and all tax
deductions allowed or disallowed with respect to any
adjustment made in such determination or settlement or
pursuant to this clause, as he would have been in had he
received the Special Payment using the calculations set
forth in such determination or settlement; provided,
however, that as soon as practicable after the Adjustment
Amount has been so determined, the Company shall pay the
Adjustment Amount to the Executive, or the Executive shall
pay the Adjustment Amount to the Company, as the case may
be. In the event that the amount of the estimated Special
Payment exceeds the amount subsequently determined to have
been due, such excess shall constitute a loan by the Company
to the Executive payable on the fifth day after demand by
the Company (together with interest at the rate provided in
Section 1274(b)(2)(B) of the Code).
(c) The Executive will promptly notify the Company in
writing whenever he receives notice of the institution of a
judicial or administrative proceeding, formal or informal,
in which the federal tax treatment of any amount paid or
payable under this Agreement is being reviewed or is in
dispute. The Company agrees that, in the event it desires
the claim to be contested, it shall request promptly (but in
no event later than 30 days after notice from the Executive
or such earlier period as the Internal Revenue Service may
specify for responding to such claim) that the Executive
contest the claim. Unless required by law, the Executive
agrees not to make any payment of any tax which is the
subject of the claim before he has given the notice or
during the 30-day period thereafter unless he receives
written instruction from the Company to make such payment,
in which case the Executive will act promptly in accordance
with such instructions. If the Company requests that the
Executive contest the claim and provides the Executive with
an opinion of its counsel, at the Company's sole expense,
setting forth the facts and legal analysis on which it is
based, to the effect that there exists a substantial
likelihood of success in contesting the claim, the Executive
will contest the claim by pursuing administrative remedies,
suing for a refund in the appropriate court or contesting
the claim in the United States Tax Court, all at the
Company's sole expense. If requested by the Company in
writing, the Executive will, at the sole expense of the
Company, take all reasonably necessary actions not adverse
to the Executive to compromise or settle the claim, but in
no event will the Executive compromise or settle the claim
or cease to contest the claim without the written consent of
the Company, which consent shall not be unreasonably
withheld. The Executive agrees, at the sole expense of the
Company, to take appropriate appeals of any judgment or
decision that would require the Company to make a Special
Payment under paragraph 1 if requested by the Company and if
the Executive is provided with an opinion of the Company's
counsel, at the Company's sole expense, setting forth the
facts and legal analysis on which it is based, to the effect
that there exists a substantial likelihood of success on
appeal.
(d) The Company shall pay or reimburse the Executive
from time to time, within five business days after
presentation of reasonable documentation therefor, for all
costs and expenses, including reasonable attorney's fees
incurred as a result of contesting a claim or seeking a
refund with respect to Excise Taxes.
(e) Should the Company fail to provide direction to
the Executive in accordance with the provisions of this
Paragraph 4, the Executive, promptly following the
Executive's written request for such direction, shall take
whatever action he deems appropriate (the Company having no
right to later challenge that decision) and it shall be
deemed that the Company requested him to take that action.
5. State or Local Taxes. All issues surrounding the
application of any Excise Tax which is a state or local tax
shall be resolved by Price Waterhouse based upon the
principles underlying the purpose of this Agreement and by
reference to the methodology, to the extent relevant,
established in Paragraphs 2, 3, and 4 hereof.
6. Amendment; Waiver. This Agreement may not be
modified, amended, waived or terminated in any manner except
by an instrument in writing signed by both parties hereto.
At any time prior to a change in control, the Board of
Directors of the Company may substitute another firm of
certified public accountants. The waiver by either party of
compliance with any provision of this Agreement by the other
party shall not operate or be construed as a waiver of any
other provision of this Agreement, or of any subsequent
breach by such party of a provision of this Agreement.
7. Governing Law. All matters affecting this
Agreement, including the validity thereof, are to be
governed by, interpreted and construed in accordance with
the laws of the State of New Jersey, except provisions
relating to conflict of laws.
8. Notices. Any notice hereunder by either party to
the other shall be given in writing by personal delivery or
certified mail, return receipt requested. If addressed to
the Executive, the notice shall be delivered or mailed to
the Executive at the address specified under the Executive's
signature hereto, or if addressed to the Company, the notice
shall be delivered or mailed to the Company at its executive
offices to the attention of Vice President and General
Counsel. A notice shall be deemed given, if by personal
delivery, on the date of such delivery or, if by certified
mail, on the date shown on the applicable return receipt.
9. Counterparts. This Agreement may be executed by
either of the parties hereto in counterpart, each of which
shall be deemed to be an original, but all such counterparts
shall together constitute one and the same instrument.
10. Headings. The headings of paragraphs herein are
included solely for convenience of reference and shall not
control the meaning or interpretation of any of the
provisions of this Agreement.
IN WITNESS WHEREOF, the Company has caused the
Agreement to be signed by its officer pursuant to the
authority of its Board of Directors, and the Executive has
executed this Agreement, as of the day and year first
written above.
WARNER-LAMBERT COMPANY
By ------------------------
Name:
Title:
[NAME]
----------------------
Address:
EXHIBIT 22
1. The third sentence of the second paragraph of
Section 1 of Article XXI of the Retirement Plan, the second
sentence of the second paragraph of Section 14.1 of Article
14 of the Savings Plan, Section 13.2 of Article XIII of the
Supplemental Pension Income Plan, the second sentence of the
second paragraph of Section 11.1 of Article 11 of the
Supplemental Savings Plan, Article 6(h) of the Stock Option
Plans and the first sentence of Section 4.6 of the Warner-
Lambert Company 1989 Stock Plan, are hereby amended by
deleting the phrase "(with respect to persons who are not
participants in the Warner-Lambert Executive Severance
Plan)".
2. Section 11.2 of Article XI of the Warner-Lambert
Company Directors' Retirement Plan, the last sentence of
Section 4.6 of Article IV of the Deferred Compensation Plan
for Directors of Warner-Lambert Company and Section 4.5(b)
of the Restricted Stock Plan for Directors of Warner-Lambert
Company are hereby amended by adding the following provision
at the end thereof:
"or (iii) the composition of the Board at any time during
any consecutive twenty-four (24) month period changes such
that the Continuity Directors (as hereinafter defined) cease
for any reason to constitute at least fifty-one percent (51%)
of the Board. For purposes of the foregoing clause (iii),
"Continuity Directors" means those members of the Board who
either (a) were directors at the beginning of such consecutive
twenty-four (24) month period, or (b)(1) filled a vacancy
during such twenty-four (24) month period created by reason of
(x) death, (y) a medically determinable physical or mental
impairment which renders the director substantially unable to
function as a director or (z) retirement at the last mandatory
retirement age in effect for at least two (2) years, and (2)
were elected, nominated or voted for by at least fifty-one
percent (51%) of the current directors who were also directors
at the commencement of such twenty-four (24) month period."
Exhibit 10(b)
May 1, 1999
Mr. Lodewijk J.R. de Vink
201 Tabor Road
Morris Plains, NJ 07950
Dear Mr. de Vink:
This letter sets forth the agreement ("Agreement") governing your
continued employment by Warner-Lambert Company (the "Company").
The Company's Board of Directors, at a meeting held on April 27,
1999, has authorized the Company to enter into this revision of
the agreement entered into with you as of July 30, 1991, in order
to be assured that the Company will receive the continuing
benefit of your wide knowledge of the Company's operations and
your experience in the Company's business which you have gained
as an employee of the Company since 1988 and as President of the
Company since 1991. Additionally, this Agreement is intended to
provide you with the level of job security and reasonable
compensation which in the judgment of the Board of Directors is
commensurate with the increased duties and responsibilities which
you will be expected to fulfill during the term of this
Agreement.
In consideration of the agreements hereinafter contained, you and
the Company agree as follows:
I. TERM AND POSITION
a.Active Employment Term: The Active Employment Term shall be the
period of time commencing May 1, 1999 and ending on the earlier
of 1) your retirement on March 1, 2010, or 2) the occurrence of
an event described in Article III hereof.
b. Position: During the Active Employment Term, the Company
shall employ you and you shall serve as Chief Executive Officer
of the Company with responsibility for the general and active
management of the Company's business in accordance with the
Company's By-Laws and subject to the direction and control of the
Board of Directors, or in such other executive capacity as may be
agreed to by you and the Company. You shall devote your full
time and best efforts to the performance of such duties.
c. Consultancy: Notwithstanding the provisions of the preceding
Clause I.b., it is expressly understood and agreed that at the
option of the Board of Directors, and upon written notice, you
shall relinquish the position of Chief Executive Officer, or such
other executive capacity in which you may then be serving, and
you shall instead be employed as an employee-consultant for the
remainder of the Active Employment Term. In such capacity as
employee-consultant, you shall perform such services at such
times and in such places as may reasonably be required by the
Chairman of the Board and the Board of Directors. You need not
accept any assignment that would require your absence from Morris
County for more than four (4) consecutive weeks. Your expenses
incurred in performing your services shall be reimbursed by the
Company in the same manner and to the same extent as are the
expenses of the Company's senior executive employees.
d. Retirement: You shall retire on March 1, 2010, unless you
have previously done so.
e. Resignations: Upon the earlier of 1) your becoming an
employee-consultant pursuant to Clause I.c., or 2) the expiration
of the Active Employment Term, you shall submit to the Secretary
of the Company your resignations from the Board of Directors,
committees, as an officer of the Company and all positions with
affiliated companies, effective as of the date of the earlier of
such events specified in this Clause I.e.
f. Restrictive Covenant: During the Active Employment Term, you
shall devote your full time and best efforts to the performance
of your duties under this Agreement, and you shall not, directly
or indirectly, take any action or become involved in any endeavor
which is, in the sole judgment of the Board of Directors, not in
the best interests of the Company. Furthermore, notwithstanding
any other provision of this Agreement, for a period of one (1)
year after the expiration of the Active Employment Term, you
agree that you shall not, without the prior written consent of
the Company, own more than 5% of, accept employment with, or lend
your name or assistance to any venture, enterprise, company,
business or endeavor which is directly or indirectly in
competition with the Company or its affiliated companies in
fields in which the Company and its affiliated companies have
annual sales of more than ten million dollars ($10,000,000).
During such one (1) year period, you shall receive payment from
the Company at a rate of 75% of your basic annual salary in
effect at the termination of your employment with the Company,
payable in conformity with the Company's policies, practices and
procedures; provided, however, that the amount of such payment
shall be reduced by the amount of retirement income, if any,
which would have been payable to you from the Warner-Lambert
Retirement Plan and the Warner-Lambert Supplemental Pension
Income Plan had you applied for such retirement income at the
commencement of such one (1) year period. Notwithstanding the
foregoing, no payment shall be made to you under the provisions
of this Clause I.f. after March 1, 2010, (ii) for any period
during which you may be serving as a consultant to the Company,
or (iii) for any period during which you are receiving severance
payments from the Company (or would be receiving severance
payments but for your election of a lump sum severance payment).
Further, the Company may grant to you a release from this
restrictive covenant, in which event no payment shall be due
under the provisions of this Clause I.f.
II. BASIC SALARY AND OTHER COMPENSATION
a. Salary: For your services to the Company pursuant to Clauses
I.b. and I.c. of this Agreement, you shall be paid a basic salary
at a rate of Nine Hundred Thirty Thousand Dollars ($930,000) per
year, payable in conformity with the Company's policies,
practices and procedures. In no event shall your basic salary
(as increased in accordance with the preceding sentence) be
reduced.
You will also be eligible to participate in incentive and
deferred compensation programs which may be in effect and for
which executive officers may be eligible while you are performing
services pursuant to Clause I.b. of this Agreement, including the
Company's Incentive Compensation Plan.
b. Withholding: Payments under this Agreement shall be subject
to such withholding taxes as may be required by applicable law.
c. Severance: In the event that your employment with the Company
terminates prior to your retirement on March 1, 2010, under
circumstances which would entitle you to severance payments under
the Company's severance policies or plans (including, but not
limited to, the Executive Severance Plan of the Company), the
Company shall provide you with pay and other benefits in
accordance with such policies and plans. The provisions of this
Clause II.c. are not intended to result in the duplication of
benefits which are otherwise payable under the severance policies
and plans of the Company. Termination of this Agreement, as
provided herein, shall not extinguish your entitlement to
severance in accordance with this Clause II.c.
d. Deferral of Basic Salary: You shall be allowed to defer any
amount of basic salary in excess of one million dollars ($1
million) or such other amount as shall be determined by the
Compensation Committee of the Board of Directors. All such
deferred amounts shall be credited to your deferred bonus account
in the Incentive Compensation Plan and shall be subject to the
terms and conditions of said plan, including without limitation,
the provision regarding accrual of interest.
e. Distributions from Deferred Bonus Account: Distributions from
your deferred bonus account shall be made over a period of
fifteen (15) years unless (i) you elect otherwise either (A) at
least one year prior to the commencement of distributions or (B)
at any time with the concurrence of the Compensation Committee of
the Board of Directors, or (ii) your employment is terminated for
misconduct, as determined by the Compensation Committee, in which
case the distribution schedule shall be established by the
Compensation Committee. Except as set forth in this Agreement,
all matters relating to your deferred bonus account shall be
governed by the provisions of the Incentive Compensation Plan.
III. TERMINATION
a. Disability: If you should, in the reasonable judgment of the
Board of Directors of the Company, come under such disability as
would prevent you from performing substantially all of your major
duties under this Agreement, and if such disability should be
present for a total of six months out of any twelve-month period
commencing with the start of such disability, the Company may
terminate your employment by notice in writing to you. Upon such
termination, you shall receive the benefits to which you are
entitled under the Salary Continuance Policy and Long-Term
Disability Benefits Plan of the Company. The provisions of this
Clause III.a. are not intended to result in the duplication of
disability benefits which are otherwise payable under the
policies and plans of the Company.
b. Death: This Agreement is personal to you and the Company's
obligations hereunder shall terminate in the event of your death,
except for the applicable provisions of Article IV "Death
Benefits."
c. Breach: The party not in breach may terminate its obligations
under this Agreement if either you or the Company commits a
material breach of this Agreement and fails to remedy such breach
within thirty (30) days following receipt of written notice from
the other party specifying the nature of the breach and
specifically referencing this Clause III.c.
d. Detriment to Company: The Company may terminate its
obligations under this Agreement upon thirty (30) days' written
notice if, in the reasonable judgment of the Company's Board of
Directors, you are voluntarily associated with any act or
omission which might reflect unfavorably on the Company or impair
your ability to perform effectively your duties under this
Agreement.
e. Other Employment: If you accept full-time employment with
another employer, the Company's obligations under this Agreement
shall terminate as of the date you become so employed.
f. Resignation: If you resign from the employ of the Company,
the Company's obligations under this Agreement shall terminate as
of the date of such resignation.
IV. DEATH BENEFITS
If you should die during the Active Employment Term, the Company
shall pay or cause to be paid to your widow the Spouse's benefit
she is entitled to under both the Retirement Plan of the Company
and the Supplemental Pension Income Plan of the Company. The
provisions of this Article IV are not intended to result in the
duplication of benefits which are otherwise payable under the
Retirement Plan and Supplemental Pension Income Plan of the
Company.
V. OTHER BENEFITS
a. During Employment: While you are employed by the Company
under Clauses I.b. and I.c. of this Agreement, nothing herein
shall prevent your participating, if you so elect and are
eligible therefor, in any plans or benefits now in effect or
hereafter adopted or amended by the Company (including, but not
limited to, the following plans: Accidental Death and
Dismemberment, Medical, Dental, Group Life Insurance, Incentive
Compensation, Long Term Disability, Retirement and Supplemental
Pension, Salary Continuance, Savings and Stock and Excess
Savings, 1996 Stock Plan, Business Travel Insurance and Executive
Severance), or your having the benefit of rights of
indemnification or reimbursement in favor of officers, directors
or employees of the Company or any of its affiliated companies
(including, but not limited to, the benefit of any excise tax
reimbursement agreement), or your receiving other appropriate
recognition of the status of such office or position as you may
occupy with the Company.
b. Upon Retirement: Upon your retirement, you shall be entitled
to participate in the benefit plans in effect for employees who
retire at that time.
c. Stock Options: Stock options granted to you after 1999 shall
be exercisable for the full term thereof unless your employment
is terminated for misconduct, as determined by the Compensation
Committee of the Board of Directors, in which event the options
shall be forfeited.
VI. GENERAL PROVISIONS
a. Assignments: This Agreement shall inure to the benefit of and
be binding on the Company, its corporate successors and assigns.
This Agreement is personal to you and may not be assigned or
encumbered. This Agreement shall be binding on you, your heirs,
legal representatives, executors and administrators.
b. Corporate Policies: You specifically agree to be bound by and
to observe all of the applicable policies of the Company during
the Active Employment Term to the extent that such policies do
not conflict with the terms and provisions of this Agreement.
c. Notices: All notices, requests or demands to be given by
either party to the other, under the provisions of this
Agreement, shall be delivered or mailed by Registered or
Certified letter, if to the Company, addressed to: General
Counsel, Warner-Lambert Company, 201 Tabor Road, Morris Plains,
New Jersey 07950, and if to you, to the address given on the
first page of this Agreement or to such other address as either
party may, from time to time, by written notice, designate as its
address for the purposes of this Agreement and shall be deemed to
have been received on the earlier of actual receipt or on the
fifth day following posting of any such letter.
d. Entire Agreement: The terms and provisions contained in this
Agreement constitute the entire agreement between you and the
Company relating to your employment by the Company or its
affiliated companies and shall supersede all previous
communications, representations, agreements or understandings,
either oral or written, between you and the Company or its
affiliated companies with respect to your employment by the
Company or its affiliated companies, including, but not limited
to, the agreement by and between you and the Company as of July
30, 1991; and no agreement or understanding varying or extending
this Agreement or waiving any right or obligation under this
Agreement shall be binding upon either party unless it is in a
writing wherein this Agreement is specifically referenced which
has been signed by you and by a duly authorized officer or
representative of the Company.
e. Construction: This Agreement shall be governed by and
construed in accordance with the procedural and substantive laws
(other than the provisions relating to conflict of laws) of the
State of New Jersey.
f. Severability: If and to the extent that any court of
competent jurisdiction holds any provision (or any part thereof)
of this Agreement to be invalid or unenforceable, such holding
shall in no way affect the validity of the remainder of this
Agreement.
g. Continuation of Obligations: Notwithstanding the termination
of the obligations of one party under this Agreement, the
obligations of the other party hereto shall continue, except as
expressly provided herein.
h. Nondisclosure: Notwithstanding anything contained herein,
your obligations under any existing nondisclosure or
confidentiality agreements with the Company shall continue.
i. Counterparts and Headings: This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original and all of which together shall constitute one and the
same instrument. All headings in this Agreement are inserted for
convenience of reference only and shall not be deemed to affect
the meaning or interpretation of this Agreement.
If you accept the terms and provisions of this Agreement and
agree to be bound thereby, please execute both copies of this
Agreement (which is sent to you in two (2) exemplars, each a
duplicate original) at the place indicated and return one copy to
the Company.
Very truly yours,
WARNER-LAMBERT COMPANY
By:
Raymond M. Fino
Vice President,
Human Resources
Agreed and Accepted this
3rd day of May, 1999
Lodewijk J.R. de Vink
6
Exhibit 10(c)
CONSULTING AGREEMENT
CONSULTING AGREEMENT (the "Agreement"), dated as of the
27th day of April, 1999, between WARNER-LAMBERT COMPANY, a
Delaware corporation with offices at 201 Tabor Road, Morris
Plains, New Jersey (the "Company") and Melvin R. Goodes, an
individual residing at Mendham, New Jersey (the "Consultant").
WITNESSETH:
WHEREAS, the Consultant possesses certain expertise in the
businesses in which the Company is engaged; and
WHEREAS, the Company desires to have the Consultant provide
consulting services to it in connection with the above-mentioned
area of the Consultant's expertise (the "Consulting Services")
on the terms and conditions hereinafter set forth; and
WHEREAS, the Consultant is willing to perform the
Consulting Services for the Company on the terms and conditions
hereinafter set forth.
NOW, THEREFORE, in view of the foregoing premises, which
are incorporated as a part of this Agreement, and in
consideration of the mutual covenants herein contained, the
Company and the Consultant agree as follows:
1. DEFINITIONS.
The following terms (except as otherwise expressly
provided or unless the context otherwise requires) for all
purposes of this Agreement shall have the following respective
meanings:
The term "Affiliate" shall mean any Person directly or
indirectly controlling, controlled by, or under direct or
indirect common control with, another Person. A Person shall be
deemed to control a corporation if such Person possesses,
directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation,
whether through the ownership of voting securities, by contract,
or otherwise.
The term "Employment Agreement" shall mean the agreement,
dated July 30, 1991, between the Company and the Consultant.
The term "Person" shall mean and include an individual, a
partnership, a joint venture, a corporation, a trust, an
unincorporated organization, and a government or any department
or agency thereof.
2. DUTIES AND OTHER ACTIVITIES. The Company hereby
engages the Consultant and the Consultant hereby accepts the
Company's engagement, to provide the Consulting Services to the
Company, all on the terms and conditions set forth below. The
Consultant shall use his best efforts and such working time and
energy as may be reasonably required for the satisfactory
performance of the Consulting Services in accordance with the
reasonable requests of the Company. The Company agrees that,
subject to the restrictions contained in Paragraph 17, the
Consultant may engage in other business activities provided same
do not materially affect the Consultant's ability to perform the
Consulting Services, or constitute, in the reasonable judgment
of the Board of Directors of the Company (the "Board of
Directors") a conflict of interest.
3. TERM. The term of the Consultant's consultancy with
the Company shall commence as of May 1, 1999, which the parties
agree shall be the Consultant's retirement date from employment
with the Company, and shall continue until April 30, 2004 (the
"Consultancy Term"). The Company shall have the right to
terminate this Agreement, at any time, and in the event of such
termination will be under no obligation to make any payments
hereunder to the Consultant or provide any further benefits
hereunder for the Consultant, in the event there is, in the
reasonable opinion of the Board of Directors, misconduct by the
Consultant or the Consultant, in the reasonable opinion of the
Board of Directors, takes any action which places the Consultant
in a conflict of interest situation vis-a-vis the Company or any
Affiliate of the Company. In the event of any termination of
this Agreement, the Consultant shall be given thirty (30) days'
written notice of such termination, but during the period
following the notice to the Consultant and the effective date of
the termination of the Consultant, the Company need only fulfill
its fee obligations to the Consultant and need not allow the
Consultant to continue to perform the Consulting Services.
4. FEE AND EXPENSES. The Company shall pay the
Consultant, and the Consultant shall accept as full
consideration for the services to be rendered hereunder, a fee
consisting of One Hundred Fifty Thousand Dollars ($150,000) per
year (the "Fee"), which Fee shall be reduced by any amounts
required to be withheld under applicable law. Payment of the
Fee shall be made yearly. The Company and the Consultant agree
that with respect to any portion of a year that this Agreement
is in effect, payment of the Fee shall be made on a pro rata
basis. The Company shall reimburse the Consultant for all
reasonable travel, entertainment and transportation expenses
incurred in connection with his providing the Consulting
Services.
5. ILLNESS, INCAPACITY OR DEATH. In the event of the
death or disability of the Consultant or the Consultant's
illness or incapacity resulting in the disability of the
Consultant while this Agreement is in effect, this Agreement
shall terminate and all amounts accrued for the benefit of the
Consultant to that date shall be paid to the Consultant or the
estate of the Consultant, as the case may be. Such payment
shall fully discharge all obligations of the Company to the
Consultant (or his estate) under this Agreement. For purposes
of this Agreement, "disability" shall mean the inability of the
Consultant to perform the Consulting Services for One Hundred
Twenty (120) consecutive days, such inability to be documented
to the reasonable satisfaction of the Board of Directors by
appropriate correspondence from duly licensed and registered
physicians.
6. GOVERNING LAW. This Agreement shall be governed by and
construed in accordance with the law (other than the provisions
relating to conflict of law) of the State of New Jersey.
7. ENTIRE AGREEMENT. This Agreement and the Employment
Agreement contain the entire agreement between the Company and
the Consultant with respect to the matters discussed herein and
supersede all previous written or oral negotiations, commitments
and understandings. No representations and warranties or
covenants are made by either the Company or the Consultant other
than those expressly contained in this Agreement.
8. WAIVERS. Any waiver of any term or provision of this
Agreement must be explicitly in writing and executed by the
waiving party. A waiver of any breach or failure to enforce any
of the terms or conditions of this Agreement shall not, in any
way, affect, limit or waive the right of either party hereto at
any time to enforce strict compliance thereafter with every
other term or condition of this Agreement.
9. SEVERABILITY. The covenants of the Consultant
contained in this Agreement shall each be construed as an
agreement independent of any other provision of this Agreement,
and the existence of any claim or cause of action of the
Consultant against the Company, whether predicated on this
Agreement or otherwise, shall not constitute a defense to the
enforcement by the Company of any such covenant. The Company
and the Consultant hereby expressly agree that it is not the
intention of either party hereto to violate any public policy,
or any statutory or common law, and that if any sentence,
paragraph, clause or combination of the same of any provision of
this Agreement is in violation of the law of any state where
applicable, such sentence, paragraph, clause or combination of
the same (subject to the last sentence of this Paragraph 9)
shall be void in the jurisdictions where it is unlawful, and the
remainder of such paragraph and this Agreement shall remain
binding on the parties hereto. It is the intention of both
parties hereto to make the provisions of this Agreement binding
only to the extent that it may be lawfully done under existing
applicable law. In the event that any part of any provision of
this Agreement is determined by a court of law to be overly
broad thereby making the provision unenforceable, the parties
hereto agree, and it is their desire that such court shall
substitute a reasonable judicially enforceable limitation in
place of the offensive part of such provision, and that as so
modified the provision shall be as fully enforceable as if set
forth herein by the parties hereto in the modified form.
10. NOTICES. Any notice, request, instruction or other
document to be given hereunder by the one party hereto to the
other party hereto shall be in writing and delivered personally
or by certified mail, postage prepaid, to the address of the
Company set forth above and to the Consultant at his address on
file with the Company for benefits purposes, respectively, or
such other address as the one party hereto shall specify to the
other party hereto in writing.
11. ASSIGNABILITY AND AMENDMENT. This Agreement shall not
be assignable by either of the parties hereto, except that the
Company may assign this Agreement to any Affiliate of the
Company. This Agreement shall be binding upon, and shall
(subject to the provisions of the immediately preceding
sentence) inure to the benefit of the parties hereto, their
successors, legal representatives and assigns. This Agreement
cannot be altered or otherwise modified or amended except
pursuant to an instrument in writing signed by the Company and
the Consultant.
12. COUNTERPARTS AND HEADINGS. This Agreement may be
executed in two or more counterparts, each of which shall be
deemed an original and all of which together shall constitute
one and the same instrument. All headings in this Agreement are
inserted for convenience or reference only and shall not be
deemed to affect the meaning or interpretation of this
Agreement.
13. RELATIONSHIP OF PARTIES. The relationship of the
Consultant to the Company is that of an independent contractor
and nothing contained herein shall be construed as creating an
employer/employee relationship or any other similar
relationship.
14. SECURITY AND OTHER MATTERS. In recognition of the
Consultant's status, as a former Chairman of the Company, the
Company will maintain the existing security system at the
Consultant's residence.
The Consultant shall be provided by the Company with 50
hours of annual use of a Company-leased Citation X aircraft
(with the understanding that the Consultant may be accompanied
by family members and guests during such use of Company-leased
aircraft). It is expressly understood that the Consultant's
activities at Queen's University, Kingston, Ontario, are
considered to be Warner-Lambert business, and the Consultant
shall have use of Company owned aircraft for such activities
(subject to reasonable availability), at no cost to the
Consultant.
15. REPRESENTATION AND WARRANTY OF CONSULTANT. The
Consultant represents and warrants that the Consultant has read
this Agreement and understands the terms and provisions hereof
(including, with limitation, the restrictions which such
provisions place upon the Consultant).
16. EFFECT ON EMPLOYMENT AGREEMENT. Neither the
execution, delivery, nor performance of this Agreement shall
operate to modify or terminate any term or provision of the
Employment Agreement.
17. RESTRICTIVE COVENANT. During the Consultancy Term and
a period of two (2) years following the termination of the
Consultancy Term, the Consultant shall not, without the prior
written consent of the Company, own more than five percent (5%)
of, accept employment with, or lend his name or assistance to,
any venture, enterprise, company, business, or endeavor which is
directly or indirectly in competition with the Company or an
Affiliate of the Company in fields in which the Company and its
Affiliates have annual sales of more than Ten Million Dollars
($10,000,000). Further, except in connection with the proper
providing of the Consulting Services, the Consultant will not,
at any time, either during the Consultancy Term or thereafter,
directly or indirectly, use any confidential information of the
Company or any Affiliate of the Company for the benefit of the
Consultant or any other Person or, directly or indirectly,
disclose any such confidential information of the Company to any
other Person.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement or caused this Agreement to be executed as of the date
first above written.
WARNER-LAMBERT COMPANY
By: Lodewijk J. R. de Vink
--------------------------
Melvin R. Goodes
-------------------------
EXHIBIT 12
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(Dollars in millions)
<TABLE>
Years Ended December 31,
Three Months Ended ------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
March 31, 1999 1998 1997 1996 1995 1994
------------------ ---- ---- ---- ---- ----
Earnings before income taxes and
accounting changes (less
minority interests) $536.7 $1,766.2 $1,233.4 $1,107.7 $1,018.6 $ 913.1
Add:
Interest on indebtedness-
excluding amount capitalized 32.3 113.3 167.0 145.9 122.7 93.7
Amortization of debt expense .2 .8 .4 .5 .4 .4
Interest factor in rent
expense (a) 9.4 37.7 30.7 27.5 26.9 26.2
------ -------- -------- -------- ------- --------
Adjusted earnings $578.6 $1,918.0 $1,431.5 $1,281.6 $1,168.6 $1,033.4
====== ======== ======== ======== ======== ========
Fixed Charges:
Interest on indebtedness $ 32.3 $ 113.3 $ 167.0 $ 145.9 $ 122.7 $ 93.7
Capitalized interest 4.8 19.2 8.3 9.6 10.1 9.4
Amortization of debt expense .2 .8 .4 .5 .4 .4
Interest factor in rent
expense (a) 9.4 37.7 30.7 27.5 26.9 26.2
------ -------- -------- -------- -------- --------
Total fixed charges $ 46.7 $ 171.0 $ 206.4 $ 183.5 $ 160.1 $ 129.7
====== ======== ======== ======== ======== ========
Ratio of earnings to fixed charges 12.4 11.2 6.9 7.0 7.3 8.0
====== ======== ======== ======== ======== ========
</TABLE>
(a) Represents one third of rental expense, which the Company believes is a
reasonable approximation.
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> MAR-31-1999
<CASH> 1,182
<SECURITIES> 0
<RECEIVABLES> 1,685
<ALLOWANCES> 0
<INVENTORY> 871
<CURRENT-ASSETS> 4,366
<PP&E> 4,484
<DEPRECIATION> 1,677
<TOTAL-ASSETS> 9,446
<CURRENT-LIABILITIES> 3,367
<BONDS> 1,274
0
0
<COMMON> 962
<OTHER-SE> 2,687
<TOTAL-LIABILITY-AND-EQUITY> 9,446
<SALES> 2,860
<TOTAL-REVENUES> 2,860
<CGS> 692
<TOTAL-COSTS> 692
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 32
<INCOME-PRETAX> 537
<INCOME-TAX> 156
<INCOME-CONTINUING> 381
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 381
<EPS-PRIMARY> .46<F1>
<EPS-DILUTED> .45
<FN>
<F1>Amount represents basic earnings per share.
</FN>
</TABLE>
