<PAGE>
________________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM 10-K
(MARK ONE)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 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)
-------------------
<TABLE>
<S> <C> <C>
DELAWARE 201 TABOR ROAD 22-1598912
(STATE OR OTHER JURISDICTION MORRIS PLAINS, NEW JERSEY 07950 (I.R.S. EMPLOYER
OF (ADDRESS OF PRINCIPAL IDENTIFICATION NO.)
INCORPORATION OR EXECUTIVE OFFICES, INCLUDING
ORGANIZATION) ZIP CODE)
</TABLE>
973-385-2000
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
-------------------
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE ON
TITLE OF EACH CLASS WHICH REGISTERED
------------------- ----------------
<S> <C>
Common Stock (Par Value $1 Per Share) The New York Stock Exchange, Inc.
The Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
Rights to Purchase Series A
Junior Participating Preferred Stock The New York Stock Exchange, Inc.
The Chicago Stock Exchange, Inc.
The Pacific Stock Exchange, Inc.
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None.
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ ]
The aggregate market value of the voting stock held by non-affiliates of
Warner-Lambert Company as of February 29, 2000 was approximately $73.2 billion.
The number of shares outstanding of the registrant's Common Stock as of
February 29, 2000 was 867,281,738 shares, Common Stock, par value $1.00 per
share.
________________________________________________________________________________
<PAGE>
PART I
ITEM 1. BUSINESS.
The term 'Warner-Lambert' or the 'Company' refers to Warner-Lambert Company,
a Delaware corporation organized in that state in 1920, and its consolidated
subsidiaries, unless otherwise indicated or unless the context otherwise
requires.
On November 3, 1999, Warner-Lambert, American Home Products Corporation
('AHP') and a wholly-owned subsidiary of AHP entered into a merger agreement
(the 'AHP Merger Agreement'). On February 6, 2000, the AHP Merger Agreement was
terminated, and the stock option agreements exchanged in connection with that
transaction were cancelled by Warner-Lambert and AHP without consideration. In
connection with the termination of the AHP Merger Agreement, and in accordance
with the terms thereof, Warner-Lambert paid AHP a termination fee of $1.8
billion.
Warner-Lambert, Pfizer Inc. ('Pfizer') and a wholly-owned subsidiary
of Pfizer entered into a merger agreement dated as of February 6, 2000 (the
'Pfizer Merger Agreement'). Under the terms of the proposed transaction,
which has been approved by the Board of Directors of both Warner-Lambert and
Pfizer, each share of Warner-Lambert common stock will be exchanged for 2.75
shares of Pfizer common stock. The transaction is contingent upon qualifying as
a tax-free reorganization and being accounted for under the pooling of interests
method of accounting. The transaction is scheduled to close in mid-2000, subject
to antitrust clearance, approval by both companies' shareholders and other
customary conditions.
Reportable Segment Data and Geographic Data. The summary of Warner-Lambert's
reportable segment data, geographic data and related financial information, is
set forth in Note 19 to the Consolidated Financial Statements contained in
'Item 8. Financial Statements and Supplementary Data' below.
Except as otherwise noted below, all product names appearing in capitalized
letters in this report on Form 10-K, femhrt'r' and e.p.t.'r' are trademarks of
Warner-Lambert, its affiliates, related companies or licensors. ZANTAC, ZANTAC
75, BECONASE and ZOVIRAX are registered trademarks of Glaxo Wellcome plc ('Glaxo
Wellcome'), its affiliates, related companies or licensors. CELESTIAL SEASONINGS
is a registered trademark of Celestial Seasonings Inc. CELEXA is a trademark of
Forest Laboratories, Inc. ('Forest Laboratories'), its affiliates, related
companies or licensors. OMNICEF is a registered trademark of Fujisawa
Pharmaceutical Co., Ltd., its affiliates or related companies. RESCRIPTOR is a
registered trademark of Pharmacia & Upjohn Inc., its affiliates or related
companies. RECALDENT is a trademark of Bonlac Foods Limited. SINUPRET is a
registered trademark of Apotheker Popp OHG.
BUSINESS SEGMENTS
A detailed description of Warner-Lambert's reportable segments follows:
Pharmaceutical Products
The principal products of Warner-Lambert in its Pharmaceutical Products
segment are ethical pharmaceuticals, biologicals and capsules.
Ethical Pharmaceuticals and Biologicals: Warner-Lambert manufactures,
markets and/or sells, in the United States and/or internationally, an extensive
line of ethical pharmaceuticals and biologicals under trademarks and trade names
such as PARKE-DAVIS and GOEDECKE. Among these products are analgesics (PONSTAN,
VALORON, VALORON-N, VEGANIN and VALTRAN), anthelmintics (VANQUIN),
anticonvulsants (CELONTIN, CEREBYX, DILANTIN, NEURONTIN and ZARONTIN),
antivaricosities (HEPATHROMBIN), cardiovascular products (NOVADRAL, DILZEM,
ACCUPRIL, ACCURETIC, ACCUZIDE, NITROSTAT and PIMENOL), cognition drugs for
treatment of mild-to-moderate Alzheimer's disease (COGNEX), dermatologics
(BEBEN), diabetes drugs for non-insulin dependent diabetes mellitus patients
(REZULIN), prescription hemorrhoidal preparations (ANUSOL HC), hemostatic agents
(THROMBOSTAT), hormonal agents (PITRESSIN),
1
<PAGE>
lipid regulators (LIPITOR and LOPID), oral contraceptives (ESTROSTEP and
LOESTRIN) and psychotherapeutic products (CETAL, DEMETRIN and NARDIL).
In December 1996, Warner-Lambert received U.S. Food and Drug Administration
('FDA') clearance to market the cholesterol-lowering agent LIPITOR
(Warner-Lambert's trademark for atorvastatin) and began marketing the product in
February 1997. The Company has also received marketing approval in over seventy
countries for the drug and has begun or will begin to market LIPITOR in those
countries. Atorvastatin is primarily marketed as LIPITOR, SORTIS, TAHOR and
ZARATOR in the various countries. Warner-Lambert Export Limited, the Company's
Irish subsidiary, is responsible for the worldwide manufacture and marketing of
LIPITOR. The Company co-promotes LIPITOR in certain countries through a ten-year
marketing agreement with Pfizer.
Warner-Lambert received FDA clearance in January 1997 to market REZULIN
(Warner-Lambert's trademark for troglitazone), a diabetes drug initially used
for non-insulin dependent diabetes mellitus patients who were inadequately
controlled by insulin. Subsequently the Company received FDA approval to market
REZULIN for additional indications. The Company licenses REZULIN from Sankyo
Company, Ltd. ('Sankyo') for North America and certain other areas, including
Central America, South America, Australia, New Zealand and the Philippines and
markets the product in the United States with Sankyo Parke Davis, a joint
venture between the Company and Sankyo.
REZULIN was first marketed in March 1997 in the United States and achieved
sales of $420 million during 1997, $748 million during 1998 and $625 million
during 1999. Since marketing began, the Company has changed the labeling for
REZULIN in response to rare reports during marketed use of hepatic injuries,
which were usually reversible, but which in very rare cases resulted in liver
transplants or death. The changes involved among other things a recommendation
to monitor liver enzymes. In June 1999, the Company withdrew the indication for
REZULIN as initial single agent therapy. On March 21, 2000, the Company
discontinued marketing all remaining indications for REZULIN. For further
discussion of REZULIN see 'Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations -- Net Sales -- Pharmaceutical
Products'.
In December 1997, Warner-Lambert received clearance from the FDA to market
OMNICEF, a broad spectrum cephalosporin antibiotic for adult and pediatric use,
which is licensed from Fujisawa Pharmaceutical Co., Ltd. The Company launched
the product in the United States in 1998. Warner-Lambert received its first
marketing authorization in the world for OMNICEF in the Philippines in July 1994
and began marketing the product in that country in January 1995. The Company has
also received marketing approval and has launched the product in Indonesia and
Thailand. On January 18, 2000, Warner-Lambert sold the marketing rights for
OMNICEF in the United States and Canada to Abbott Laboratories.
In July 1998, the FDA approved the marketing of CELEXA (citalopram HBr), a
selective serotonin reuptake inhibitor, for treatment of depression. Forest
Laboratories has the U.S. marketing rights to CELEXA and co-promotes it with the
Parke-Davis division of Warner-Lambert. CELEXA was developed in the United
States by Forest Laboratories under license from H. Lundbeck A/S.
In April 1998, the Company entered into a marketing agreement with
Yamanouchi Pharmaceutical Co., Ltd. ('Yamanouchi') giving the Company the
marketing rights in Europe and the Americas to a compound called conivaptan.
Warner-Lambert and Yamanouchi are developing conivaptan for the treatment of
congestive heart failure and hyponatremia. Conivaptan is currently in Phase II
studies in the United States and Europe.
On December 26, 1997, the Company submitted a New Drug Application ('NDA')
to the FDA for marketing approval for suramin, a treatment for hormone
refractory prostate cancer. The NDA was reviewed and rejected by the FDA
Oncologic Drugs Advisory Committee on September 1, 1998. Additional data was
submitted to the FDA in November 1998. A non-approval letter was received by the
Company from the FDA on March 29, 1999. The Company intends to withdraw the NDA
for suramin in 2000.
In December 1998, the Company submitted an NDA to the FDA for marketing
approval for norethindrone acetate ('NA') and ethinyl estradiol ('EE')
(femhrt'r'), an oral single-pill combination
2
<PAGE>
estrogen-progestin hormone replacement therapy for osteoporosis and menopausal
symptoms. The FDA approved the femhrt'r' application on October 15, 1999 in 1 mg
NA/5 'u' g EE dose for the treatment of moderate to severe vasomotor symptoms
associated with menopause and for the prevention of osteoporosis in women with
an intact uterus. The Company launched femhrt'r' in February 2000 in the United
States.
In December 1998, the Company submitted an NDA to the FDA for marketing
approval for clinafloxacin, an injectable new generation fluoroquinolone
antibiotic for the treatment of serious, life-threatening infections. The NDA
for clinafloxacin was withdrawn by the Company on November 19, 1999, however,
the investigational new drug application for clinafloxacin will be maintained
to allow for use of the drug in situations where no alternative therapy is
possible.
On December 14, 1999, the Company submitted an application to the FDA for
pediatric usage of NEURONTIN. In January 2000, the FDA granted a six-month
extension of the NEURONTIN epilepsy use patent protection through mid-July 2000
pending its review of the application.
The FDA approved ACCURETIC, an ACE inhibitor/diuretic combination product,
on December 28, 1999.
The FDA approved the twice-daily dosing of VIRACEPT, which is an HIV
protease inhibitor, in October, 1999. The previously approved dosing regimen was
three times a day.
In May 1997, Warner-Lambert purchased the remaining 66% it did not already
own of Jouveinal S.A., a French pharmaceutical group. The Jouveinal group
specialized in ethical and over-the-counter ('OTC') pharmaceuticals, as well as
fine chemicals and food flavors. In order to focus on its core pharmaceutical,
consumer health care and confectionery businesses, Warner-Lambert sold the fine
chemical business and the food flavors business of the Jouveinal group in
December 1997.
Warner-Lambert's pharmaceutical products are promoted for the most part
directly to health care professionals through personal solicitation of doctors
and other professionals by sales representatives with scientific training,
direct mail contact and advertising in professional journals. Products are sold
either directly or through wholesalers to government agencies, chain and
independent retail pharmacies, hospitals, clinics, long-term care facilities,
mail order houses and health maintenance organizations. Sales to managed care
entities have become an increasingly large part of Warner-Lambert's domestic
pharmaceutical sales. The Company estimates that more than 78% of its
pharmaceutical sales in the United States during 1999 were made to managed care
entities (including government agencies and hospitals). For further discussion
of Warner-Lambert's ethical products, see 'Item 1. Business -- Regulation'
below.
Capsules: Warner-Lambert is the leading worldwide producer of empty
hard-gelatin capsules used by pharmaceutical companies for their production of
encapsulated products. These capsules are used by Warner-Lambert or manufactured
by Warner-Lambert according to the specifications of each of its customers and
are sold under such trademarks as CAPSUGEL, CONI-SNAP, SNAP-FIT, VCAPS and
PRESS-FIT. On January 31, 2000, the Capsugel division of Warner-Lambert acquired
Medicaps, S.A., a soft gelatin company in France.
Other: On February 27, 1998, the Company sold its facility in Rochester,
Michigan, as well as certain minor prescription products for $125 million to
Parkedale Pharmaceuticals, Inc., a wholly owned subsidiary of King
Pharmaceuticals, Inc. On May 4, 1998, the Company acquired gene/Networks, a
genomics company located in Alameda, California. On May 17, 1999, the Company
acquired Agouron Pharmaceuticals, Inc. ('Agouron'), a La Jolla, California
based, integrated pharmaceutical company engaged in the discovery, development
and commercialization of drugs for the treatment of cancer, viral diseases, and
diseases of the eye. Agouron currently has two commercial products, VIRACEPT,
which is an HIV protease inhibitor that has been sold since receiving marketing
approval from the FDA in 1997 and RESCRIPTOR, which is an anti-HIV drug that is
licensed from Pharmacia & Upjohn Inc. Warner-Lambert exchanged 28.8 million
shares of its common stock for all of the common stock of Agouron. Each
outstanding share of Agouron common stock was exchanged for .8934 shares of
Warner-Lambert common stock. The transaction was accounted for as a pooling of
interests and qualified as a tax-free exchange.
3
<PAGE>
Consumer Health Care Products
The principal products of Warner-Lambert in its Consumer Health Care
Products segment are OTC health care products, shaving products and pet care
products.
Over-the-Counter Products: Warner-Lambert manufactures, markets and/or
sells, in the United States and/or internationally, an extensive line of
over-the-counter pharmaceuticals and health care products under trade names such
as WARNER-LAMBERT CONSUMER HEALTHCARE. Among these products are oral care
mouthwash/dental rinses (LISTERINE, COOL MINT LISTERINE, LISTERINE Tartar
Control and FRESHBURST LISTERINE), toothpaste (COOL MINT LISTERINE and COOL MINT
LISTERINE Tartar Control), effervescent denture cleaning tablets and denture
cleanser pastes (EFFERDENT, EFFERDENT PLUS and FRESH 'N BRITE), denture
adhesives (EFFERGRIP), upper respiratory cold and sinus preparations (SUDAFED,
SINUTAB, SINUTAB Non-Drying, SUDAFED Non-Drying and ACTIFED), antihistamines and
allergy products (ACTIFED Allergy, SUDAFED Cold and Allergy, BENADRYL
Allergy/Cold, BENADRYL Chewables, BENADRYL Allergy/Sinus Headache and BENADRYL
Dye-Free), cough syrups/suppressants (BENYLIN Multi-Symptom, BENYLIN Adult,
BENYLIN Expectorant and BENYLIN Pediatric), digestive health (ZANTAC 75,
ROLAIDS, Extra Strength ROLAIDS and GELUSIL), dermatological skincare products
(LUBRIDERM, LUBRIDERM Body Bar, LUBRIDERM SERIOUSLY SENSITIVE, LUBRIDERM
Advanced Therapy, LUBRIDERM Daily UV and CORN HUSKERS), topical antibiotic
ointments and creams (NEOSPORIN and POLYSPORIN), hemorrhoidal preparations
(ANUSOL, ANUSOL HC-1 and TUCKS), vitamins (MYADEC), antipruritics (CALADRYL,
BENADRYL spray, cream, gel and stick and STINGOSE), rubbing alcohol (LAVACOL),
hydrogen peroxide (PROXACOL), self-diagnostic early pregnancy test kits
(e.p.t.'r'), complementary medicines (QUANTERRA), head lice treatment (NIX), and
diaper rash preparations (BOROFAX).
In September 1998, Warner-Lambert introduced the new QUANTERRA line of
standardized herbal supplements in the United States. The QUANTERRA line
includes: Mental Sharpness, with Ginkgo Biloba, Prostate, with Saw Palmetto,
Emotional Balance with St. John's Wort, Stomach Comfort with Ginger, Sleep with
Valerian and Sinus Defense with SINUPRET.
In January 1999, Warner-Lambert launched LISTERINE Tartar Control mouthwash
in the United States.
In 1993, Warner-Lambert and Glaxo Wellcome formed a joint venture in the
United States to develop, seek approval of and market OTC versions of Glaxo
Wellcome prescription drugs in the United States. On June 30, 1996
Warner-Lambert and Glaxo Wellcome formed additional joint ventures to develop
and market certain Glaxo Wellcome OTC switch products in other major markets,
including the United Kingdom (the 'Glaxo Wellcome Warner-Lambert joint
venture(s)'). On December 31, 1998, Warner-Lambert and certain of its affiliates
and Glaxo Wellcome and certain of its affiliates entered into transactions in
various countries whereby Glaxo Wellcome transferred to Warner-Lambert rights to
OTC ZANTAC products in the United States and Canada and Warner-Lambert
principally transferred to Glaxo Wellcome its rights to OTC ZANTAC products in
all other markets and its rights to OTC ZOVIRAX and OTC BECONASE, and future
Glaxo Wellcome prescription to OTC switch products in all markets. These OTC
products had principally been marketed through the Glaxo Wellcome Warner-Lambert
joint ventures. These transactions ended the joint venture relationships between
Warner-Lambert and Glaxo Wellcome.
Over-the-counter products are promoted principally through consumer
advertising and promotional programs and some are promoted via the worldwide web
and directly to health care professionals. They are sold principally to drug
wholesalers, chain and retail pharmacies, chain and independent food stores,
mass merchandisers, physician supply houses and hospitals.
Shaving Products: Warner-Lambert manufactures and sells razors and blades,
both domestically and internationally. Shaving products are manufactured and
marketed under the SCHICK trademark and other trademarks worldwide and the
WILKINSON SWORD trademark in Europe, the United States and Canada. Permanent
(nondisposable) products are marketed under various trademarks including SCHICK
FX DIAMOND, PROTECTOR, PROTECTOR 3D, TRACER/FX, FX HYPER,
4
<PAGE>
FX PERFORMER, SILK EFFECTS, LADY PROTECTOR, PERSONAL TOUCH, SUPER II PLUS and
ULTREX PLUS. Disposable products are marketed under a variety of trademarks
including SLIM TWIN ST, EXTRA II, PERSONAL TOUCH and ULTREX Disposable. In some
countries, Warner-Lambert also sells a shaving-related line of toiletries.
In September 1999, the Company launched the new SCHICK FX DIAMOND in the
United States, Canada and Japan, and WILKINSON SWORD FX DIAMOND in Germany and
the United Kingdom.
Warner-Lambert's shaving products are promoted principally through consumer
advertising and promotional programs. They are distributed directly to
wholesalers for sale to smaller retailers, drugstores, pharmacies and to retail
outlets, including pharmacies, food stores, variety stores, mass merchandisers
and other miscellaneous outlets.
Pet Care Products: Warner-Lambert manufactures and/or sells various products
on a worldwide basis for ornamental fish, reptiles and other small pets, as well
as books relating to various pets, under various trademarks including TETRA,
TETRAPOND, SECOND NATURE, TERRAFAUNA and ZOOMEDICA. In addition, Warner-Lambert
manufactures and/or distributes aquarium products (including power filters and
replacement cartridges, air pumps, heaters, plastic plants and other
accessories) that are marketed largely under the SECOND NATURE, TETRAtec and
WHISPER trademarks. These pet care products are promoted to consumers through
advertising, direct marketing and sponsorship programs and to retailers through
direct promotion, advertising in trade publications and TETRA Club membership.
They are sold to wholesalers for sale to smaller retailers and directly to
larger chain stores and retailers, in each case for ultimate sale to consumers.
Confectionery Products
The principal products of Warner-Lambert in its Confectionery Products
segment are chewing gums, breath mints and cough/throat tablets.
Warner-Lambert manufactures, markets and/or sells, in the United States
and/or internationally, a broad line of chewing gums, bubble gums, breath mints
and cough/throat tablets. Among these products are chewing gums (CHICLETS,
CHICLETS TINY SIZE, CINN*A*BURST, MINT*A*BURST, CLORETS, DENTYNE, DENTYNE
Sugarfree, DENTYNE ICE, TRIDENT, TRIDENT ADVANTAGE and MAXAIR) and bubble gums
(BUBBLICIOUS, BUBBALOO and MOTITAS). The breath mint line includes CERTS,
Sugarfree CERTS, CERTS COOL MINT DROPS, CERTS Powerful Mints, CLORETS, CLORETS
Cool and CLORETS OPTIMINTS. The cough/throat tablet line consists of HALLS,
HALLS-PLUS and Sugar Free HALLS. The Company also sells throat drops (CELESTIAL
SEASONINGS SOOTHERS) and dietary supplements (HALLS DEFENSE and HALLS VITA-C).
In addition, the Company sells several specialty candies and mints, including a
line of hard candies and mints that are sold under the SAILA trademark.
In 1999, Warner-Lambert launched an improved TRIDENT ADVANTAGE, a teeth
whitening and strengthening sugarless gum with baking soda and RECALDENT, in the
United States, and TRIDENT for Kids in the United States and selected European
markets.
Warner-Lambert's confectionery products are promoted directly to the
consumer primarily through consumer advertising and in-store promotion programs.
They are sold directly to chain and independent food stores, chain and
independent pharmacies and mass merchandisers or through candy and tobacco
wholesalers and to other miscellaneous outlets which in turn sell to consumers.
On November 30, 1999, the Company acquired the sugar, gum and wafer
confectionery business of Kraft Lacta Suchard Brasil S.A.
INTERNATIONAL OPERATIONS
Warner-Lambert's international businesses are carried on principally through
subsidiaries and branches, which are generally staffed and managed by citizens
of the countries in which they operate. Approximately 28,000 of Warner-Lambert's
employees are located outside the United States and Puerto Rico and only a small
number of such employees are United States citizens. Certain of the products
5
<PAGE>
described above are manufactured and marketed solely in the United States and
certain other products are manufactured and marketed solely in one or more
foreign countries.
Information relating to geographic operating data is contained in Note 19 to
the Consolidated Financial Statements contained in 'Item 8. Financial Statements
and Supplementary Data'.
In March 1997, Warner-Lambert opened confectionery plants in Guangzhou,
China, and Bangalore, India. The plant in China is currently manufacturing and
selling HALLS cough tablets, CLORETS chewing gum and pressed mints and DENTYNE
ICE chewing gum. The plant in India is currently manufacturing and selling HALLS
cough/throat tablets and CLORETS and CHICLETS chewing gums.
In accordance with customary market conditions, sales made outside the
United States are generally made on longer terms of payment than would be
customary in the United States. In addition, international operations are
subject to certain risks inherent in carrying on business abroad, including
possible nationalization, expropriation, price and exchange controls and other
governmental action, as well as fluctuations in currency exchange rates. The
likelihood of such occurrences varies from country to country and is not
predictable. However, the Company believes that its geographic diversity
minimizes exposure to currency fluctuations resulting in one or more foreign
countries.
For a discussion of the impact of the introduction of the euro on the
Company, see 'Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Other Matters -- Euro' below.
COMPETITION
Most markets in which Warner-Lambert is engaged are highly competitive and
characterized by substantial expenditures in the advertising and promotion of
new and existing products. In addition, there is intense competition in research
and development in all of Warner-Lambert's reportable segments.
In 1998, no material part of the business of any of Warner-Lambert's
reportable segments is dependent upon one or a few customers. During 1999, total
sales to one pharmaceutical and health care products wholesaler accounted for
twelve percent of the Company's consolidated net sales. The majority of the
sales to this customer were in the Pharmaceutical Products segment.
YEAR 2000
For a discussion on how the Company is addressing the year 2000 compliance,
see 'Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations -- Other Matters -- Year 2000' below.
MATERIALS AND SUPPLIES
Warner-Lambert's products, in general, are produced and packaged at its own
facilities. Other than certain pet products and certain other products,
relatively few items are manufactured in whole or in part by outside suppliers.
Raw materials and packaging supplies are purchased from a variety of outside
suppliers. Although the Company, in an effort to achieve cost savings, is
consolidating its sources of outside supply, the Company does not believe that
the loss of any one source of such materials and supplies would have a material
adverse effect on the business of any of Warner-Lambert's reportable segments.
Warner-Lambert seeks to protect against fluctuating costs and to assure
availability of raw materials and packaging supplies by, among other things,
locating alternative sources of supply and, in some instances, making selective
advance purchases.
TRADEMARKS AND PATENTS
Warner-Lambert's major trademarks are registered in the United States and
other countries where its products are marketed. Warner-Lambert believes these
trademarks are important to the marketing of the related products and acts to
protect them from infringement. Warner-Lambert owns and/or licenses many patents
and has many patent applications pending in the patent offices of the United
States and
6
<PAGE>
other countries. A number of products and product lines have patent protection
that is significant in the marketing of such products. Additionally, the
management of Warner-Lambert considers the patents on LIPITOR and NEURONTIN to
be material to Warner-Lambert's business as a whole.
RESEARCH AND DEVELOPMENT
Warner-Lambert employs over 4,293 scientific and technical personnel in
research and development activities at various research facilities located in
the United States, Ireland and in other foreign countries. Warner-Lambert
invested approximately $1,259 million in research and development in 1999,
compared with $1,026 million in 1998 and $731 million in 1997. Approximately 91%
of Warner-Lambert's 1999 research and development spending was related to
pharmaceutical products. Warner-Lambert believes research and development
activities are essential to its business and intends to continue such
activities.
EMPLOYEES
At December 31, 1999, approximately 44,000 people were employed by
Warner-Lambert throughout the world.
REGULATION
Warner-Lambert's business is subject to varying degrees of governmental
regulation in the countries in which it manufactures and distributes products.
In the United States, the food, drug and cosmetic industries are subject to
regulation by various federal, state and local agencies with respect to product
safety and effectiveness, manufacturing and advertising and labeling.
Accordingly, from time to time, with respect to particular products under
review, such agencies may require Warner-Lambert to address safety, efficacy,
manufacturing and/or regulatory issues. Addressing such issues with regulatory
agencies can result in requirements for additional testing of products, removal
of a product or products from the market, modification of labeling (which can
have little effect on the future sales of the product or a significant effect on
such sales), the shut down of plants and/or laboratories, the modification of
operation of plants and/or laboratories (which can entail minor changes from
existing operations or significant changes which can add significant cost to
manufacturing), the seizure of finished goods and/or work in process and/or raw
materials, and similar actions involving the discovery, development, approval,
manufacture, marketing and sale of regulated products.
In 1993, a consent decree with the FDA was entered into by Warner-Lambert
and two of its principal officers, covering issues related to manufacturing and
quality practices and procedures. The decree is a court-approved agreement that
primarily requires Warner-Lambert to certify that laboratory and/or
manufacturing facilities in the United States and Puerto Rico are in compliance
with current Good Manufacturing Practices established by the FDA. Relevant
facility and laboratory certifications have been obtained in all United States
and Puerto Rico plants.
In October 1996, the United States Congress enacted the Comprehensive
Methamphetamine Control Act of 1996 (the 'Methamphetamine Control Act') which
brought certain of the Company's OTC pharmaceutical products containing
pseudoephedrine hydrochloride under the chemical control provisions of the
Controlled Substances Act through the revocation of an exemption for listed
chemicals contained in drugs lawfully marketed under the Federal Food, Drug, and
Cosmetic Act. The Methamphetamine Control Act, among other things, imposes new
regulatory restrictions on persons handling such products including
recordkeeping and reporting of certain transactions to the Drug Enforcement
Administration. However, the Methamphetamine Control Act creates a 'safe harbor'
for traditional retail outlets which sell pharmaceutical products in designated
packaging containing limited amounts of pseudoephedrine almost exclusively for
personal use to walk-in customers or in face-to-face direct sales. These
retailers will not, in general, be subject to the recordkeeping and reporting
requirements of the Methamphetamine Control Act. Warner-Lambert believes that
the Methamphetamine Control Act will not have a material adverse effect on
Warner-Lambert's financial position, liquidity, cash flows or results of
operations for any year.
7
<PAGE>
On July 30, 1997, the European Community Decision 97/534 (the 'Decision')
was adopted prohibiting the use or importation in the European Union market of
any bovine, ovine or caprine products that potentially contain specified risk
materials (including the use of these materials in food, medicinal products and
cosmetics). The Decision was enacted to address the concern over the possible
spread of transmissible spongiform encephalopathy ('TSE') and could have the
effect of banning ruminant materials such as gelatin, glycerin, tallow and
tallow derivatives that are pervasive in the pharmaceutical, OTC drug, food and
other industries. The Decision initially was intended to become effective on
January 1, 1998, but given the potential impact the Decision may have on the
availability of necessary pharmaceutical, over-the-counter drug and food
products, its effective date has been postponed over the past two years and is
now scheduled to occur on July 1, 2000. In the interim, new legislation was
enacted in September 1999, in the form of Directive 1999/82/EC to permit the
continued supply of medicinal products derived from ruminant materials under
certain specified conditions. The Directive requires that holders of drug
marketing applications submit supportive scientific information to their
regulatory agencies by March 1, 2001 to demonstrate compliance with a CPMP
Guideline on Minimizing the Risk of TSEs. The Company will be working with its
suppliers to ensure that all necessary filings are made pursuant to this new
Directive. Warner-Lambert believes that this legislation will not have a
material adverse effect on Warner-Lambert's financial position, liquidity, cash
flows or results of operations for any year.
Regulatory requirements concerning the research and development of drug
products have increased in complexity and scope in recent years. This has
resulted in a substantial increase in the time and expense required to bring new
products to market. At the same time, the FDA requirements for approval of
generic drugs (drugs containing the same active chemical as an innovator's
product) have been reduced as a result of the adoption of abbreviated new drug
approval procedures for most generic drugs. Generic versions of many of
Warner-Lambert's products in the Pharmaceutical Products segment are being
marketed in the United States, and generic substitution legislation, which
permits a pharmacist to substitute a generic version of a drug for the one
prescribed, has been enacted in some form in all states. These factors have
resulted in increased competition from generic manufacturers in the market for
ethical products.
The regulatory agencies under whose purview Warner-Lambert operates have
administrative and legal powers that may subject Warner-Lambert and its products
to seizure actions, product recalls and other civil and criminal actions. They
may also subject the industry to emergency regulatory requirements.
Warner-Lambert's policy is to comply fully with all regulatory requirements. It
is impossible to predict, however, what effect, if any, these matters or any
pending or future legislation, regulations or governmental actions may have on
the conduct of Warner-Lambert's business in the future.
In most of the foreign countries where Warner-Lambert does business, it is
subject to a regulatory and legislative climate similar to or more restrictive
than that described above. The Company cannot predict whether or what type of
measures will be encountered in the future.
ENVIRONMENT
Warner-Lambert is responsible for compliance with a number of environmental
laws and regulations. Warner-Lambert maintains control systems designed to
assure compliance in all material respects with environmental laws and
regulations, including environmental policies and maintenance of a worldwide
audit program.
The Company is involved in various administrative or judicial proceedings
related to environmental actions initiated by the Environmental Protection
Agency ('EPA') under the Comprehensive Environmental Response, Compensation and
Liability Act (also known as Superfund) or by state authorities under similar
state legislation, or by third parties. For 11 sites, generally those which the
Company currently owns or previously owned, the Company may be the sole party
responsible for clean-up costs. For other sites, other parties (defined as
potentially responsible parties) may be jointly and severally responsible, along
with Warner-Lambert, to pay remediation and other related expenses. Warner
Lambert's share of costs at a given site is determined through an allocation
process that takes into account many factors, including volume and the nature of
a company's waste. Once established,
8
<PAGE>
remediation costs for a given site may be paid out over several years. While it
is not possible to predict with certainty the outcome of such matters or the
total cost of remediation, management believes it is unlikely that their
ultimate disposition will have a material adverse effect on the Company's
financial position, liquidity, cash flows or results of operations for any year.
Also see 'Item 8. Financial Statements and Supplementary Data' below, for
additional information on environmental actions, which is set forth in Note 18
to the Consolidated Financial Statements.
ITEM 2. PROPERTIES.
The executive offices of Warner-Lambert are located in Morris Plains, New
Jersey. In the United States, including Puerto Rico, Warner-Lambert owns
facilities aggregating approximately 6,724,000 square feet and leases facilities
having an aggregate of approximately 900,000 square feet.
Warner-Lambert's United States manufacturing plants are located in Lititz,
Pennsylvania (pharmaceuticals and consumer health care products); Rockford,
Illinois (confectionery products); Holland, Michigan (pharmaceuticals);
Greenwood, South Carolina (capsules); Milford, Connecticut (razors and blades);
and Blacksburg, Virginia (pet care products). Warner-Lambert Inc., a
wholly-owned subsidiary of Warner-Lambert operating in Puerto Rico, has plants
located in Fajardo (pharmaceuticals) and Vega Baja (consumer health care and
confectionery products). Parke-Davis Pharmaceuticals Limited, a wholly owned
subsidiary of Warner-Lambert, operating in Puerto Rico, has a plant located in
Vega Baja (pharmaceuticals and consumer health care products). For a discussion
on the sale of the manufacturing facility located in Rochester, Michigan see
'Item 1. Business Segments -- Pharmaceutical Products' above.
In the United States, Warner-Lambert currently distributes its various
products through two distribution centers located in Lititz, Pennsylvania and
Elk Grove, Illinois. Principal United States research facilities are located in
Ann Arbor, Michigan (pharmaceuticals), La Jolla, California (pharmaceuticals)
and Morris Plains, New Jersey (pharmaceuticals, consumer health care and
confectionery products).
Internationally, Warner-Lambert owns, leases or operates, through its
subsidiaries or branches, 59 production facilities in 29 countries. Principal
international manufacturing plants are located in Ireland, Germany, Canada,
Mexico, Japan, France, Brazil, Colombia and Australia. Principal international
research facilities are located in Ireland, France, Germany, Japan, the United
Kingdom and Canada.
In order to achieve its objectives of increased efficiency and a lower cost
of goods sold, Warner-Lambert, over a number of years and at significant cost,
has consolidated many of its plants and facilities around the world. This has
often resulted in the production of pharmaceutical products, consumer health
care products and/or confectionery products at a single facility. The loss of
one or more of Warner-Lambert's own production and packaging facilities could
have a material adverse effect on certain of Warner-Lambert's reportable
segments.
Warner-Lambert's facilities are generally in good operating condition and
repair and at present are adequately utilized within reasonable limits. Leases
are not material to the business of Warner-Lambert taken as a whole.
ITEM 3. LEGAL PROCEEDINGS.
For information relating to environmental matters see 'Item 1.
Business -- Environment' above.
In November 1999, following the announcement by the Company of its execution
of the AHP Merger Agreement, Pfizer filed suit against the Company, its board of
directors and AHP, seeking to invalidate certain provisions in the AHP Merger
Agreement and enjoin their implementation. The lawsuit claimed, among other
things, that the termination fee, reciprocal stock option agreements and a
provision preventing Warner-Lambert's directors from amending its shareholder
rights plan were invalid, and that the members of the Company's board of
directors breached their fiduciary duties to the Company's shareholders by
entering into the AHP Merger Agreement. Pursuant to a settlement agreement
executed on February 6, 2000 in connection with the termination of the AHP
Merger Agreement and the execution of the Pfizer Merger Agreement, the Company,
AHP and Pfizer entered
9
<PAGE>
into settlement agreements with respect to this litigation. Shortly thereafter
the litigation against AHP was dismissed with prejudice and the litigation
between Pfizer and the Company was dismissed without prejudice.
The Company, its Directors and AHP have been named in approximately 40
lawsuits in Delaware Chancery Court, one lawsuit in Morris County, New Jersey,
and two lawsuits in federal court in New Jersey brought on behalf of purported
classes of the Company's shareholders. These lawsuits involve allegations
similar to those contained in Pfizer's lawsuit, described above, and contain
additional allegations, including that the consideration that was to be paid to
the Company's shareholders in the proposed merger with AHP was inadequate. The
Company believes these lawsuits to be without merit and is defending them
vigorously. Following the termination of the AHP Merger Agreement, the Company
has begun to seek disposition of these claims.
On November 23, 1999, Pfizer filed suit against the Company in the Delaware
Court of Chancery relating to certain contracts between Pfizer and the Company
for the marketing and co-promotion of LIPITOR. Pfizer alleged that the execution
of the AHP Merger Agreement violated certain provision in those agreements. The
Company counterclaimed on November 29, 1999 and sought a declatory judgment that
the Company was entitled to terminate the LIPITOR agreements. Pursuant to a
settlement agreement executed on February 6, 2000 in connection with the
termination of the AHP Merger Agreement and the execution of the Pfizer Merger
Agreement, the Company and Pfizer entered into a settlement agreement with
respect to the LIPITOR litigation. The litigation was dismissed without
prejudice shortly thereafter.
Certain employees of Warner-Lambert were served with subpoenas in January,
2000, by the U.S. Attorney's office in Boston, Massachusetts, directing them to
provide testimony before a federal grand jury in Boston. The U.S. Attorney's
office is conducting an inquiry into Warner-Lambert's promotion of NEURONTIN.
Warner-Lambert is cooperating with the inquiry and cannot predict what the
outcome of the investigation will be.
In late 1993, Warner-Lambert, along with numerous other pharmaceutical
manufacturers and wholesalers, was sued in a number of state and federal
antitrust lawsuits seeking damages (including trebled and statutory damages,
where applicable) and injunctive relief. These actions arose from allegations
that the defendant drug companies, acting alone or in concert, engaged in
differential pricing whereby they favored institutions, managed care entities,
mail order pharmacies and other buyers with lower prices for brand name
prescription drugs than those afforded to retail pharmacies. The federal cases,
which were brought by retailers, 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 have been 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 was affirmed in substantial part by 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, settled the California consumer class action and this
10
<PAGE>
settlement received 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 several states and to additional class
actions in New Mexico, North Dakota, South Dakota and West Virginia, who
purchased brand name prescription drugs from retail pharmacies. 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 has
cooperated with this investigation. Warner-Lambert cannot at present predict the
outcome of this investigation.
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.
Not Applicable.
11
<PAGE>
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The principal market on which the Company's stock is traded is the New York
Stock Exchange, but the stock is also listed and traded on the following
domestic and international stock exchanges: Chicago, Pacific, London and Zurich.
Shareholders of record totaled approximately 48,000 as of December 31, 1999.
Cash dividends paid in 1999 totaled $672 million. A dividend of $.20 per share
was paid in each quarter of 1999 for an annual total of $.80 per share. This was
a 25.0% increase over the prior year total of $.64 per share, paid in four
quarterly dividends of $.16 per share during 1998.
Information regarding the Company's market prices of common stock and
dividends is set forth in 'Item 8. Financial Statements and Supplementary
Data -- Market Prices of Common Stock and Dividends' below.
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
The selected financial data of Warner-Lambert for the years ended 1999,
1998, 1997, 1996 and 1995 are set forth below:
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
FIVE-YEAR SUMMARY OF SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Results for Year:
Net sales................................ $12,929 $10,744 $8,408 $7,231 $7,040
Cost of goods sold....................... 3,042 2,860 2,503 2,347 2,428
Research and development expense......... 1,259 1,026 731 599 514
Income before income taxes and minority
interests.............................. 2,441 1,791 1,189 1,138 1,134
Net income............................... 1,733 1,273 862 747 724
Net income per common share:
Basic................................ 2.03 1.50 1.03 .89 .88
Diluted.............................. 1.96 1.45 .99 .88 .87
Year-end Financial Position:
Current assets........................... $ 5,690 $ 4,249 $3,522 $2,910 $2,778
Current liabilities...................... 3,689 3,244 2,637 2,150 2,426
Working capital.......................... 2,001 1,005 885 760 352
Property, plant and equipment............ 3,342 2,822 2,455 2,177 2,006
Total assets............................. 11,442 9,520 8,352 7,339 6,216
Long-term debt........................... 1,250 1,267 1,836 1,721 635
Total debt............................... 1,547 1,531 2,211 2,300 1,530
Shareholders' equity..................... 5,098 3,880 3,051 2,709 2,332
Common Stock Information:
Average number of common shares
outstanding (in millions):
Basic................................ 854.9 847.7 841.1 834.8 824.8
Diluted.............................. 884.6 879.0 868.1 850.2 833.8
Common Stock Price Per Share:
High................................. $ 93 15/16 $ 85 15/16 $ 50 7/8 $ 26 43/64 $ 16 21/64
Low.................................. 60 13/16 39 3/8 23 11/64 14 7/8 12 15/64
Year-end............................. 81 15/16 75 3/16 41 25/64 25 16 3/16
Book value per common share.............. 5.91 4.57 3.61 3.23 2.80
Cash dividends per common share.......... .80 .64 .51 .46 .43
Other Data:
Number of employees (in thousands)....... 44 42 41 39 37
Capital expenditures..................... $ 932 $ 753 $ 513 $ 395 $ 389
Cash dividends paid...................... 672 525 413 374 351
Depreciation and amortization............ 363 308 282 234 204
</TABLE>
All amounts have been restated under the pooling of interests method of
accounting to include the financial results of Agouron Pharmaceuticals, Inc.
acquired on May 17, 1999.
All restated amounts in 1995 and the 1996 balance sheet amounts have been
derived from unaudited financial statements.
13
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Management's Discussion and Analysis set forth below should be read in
conjunction with the Consolidated Financial Statements and the notes thereto
contained in 'Item 8. Financial Statements and Supplementary Data'.
NET SALES
Sales in 1999 of $12.9 billion were 20 percent higher than in 1998. Sales
increased 22 percent adjusting for the unfavorable impact of foreign exchange
rate changes. Unit volume grew by 20 percent with price increases adding 2
percent to sales growth.
Sales in 1998 of $10.7 billion were 28 percent higher than in 1997. Sales
increased 31 percent adjusting for the unfavorable impact of foreign exchange
rate changes. Unit volume grew by 32 percent offset by price decreases of 1
percent.
On a geographic basis, U.S. sales increased $1.6 billion, or 25 percent, to
$7.9 billion in 1999. International sales increased $627 million, or 14 percent,
to $5.0 billion. At constant exchange rates, international sales increased 18
percent. In 1998, U.S. sales increased $1.9 billion, or 43 percent, to $6.3
billion. International sales increased $448 million, or 11 percent, to $4.4
billion. At constant exchange rates, international sales increased 17 percent.
PHARMACEUTICAL PRODUCTS
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net Sales............................... $7,982 +30% $6,134 +59% $3,848
</TABLE>
Worldwide pharmaceutical sales increased 30 percent to $8.0 billion in 1999
compared to 1998. With the significant growth of pharmaceutical product sales
since 1996, the pharmaceutical segment has become Warner-Lambert's largest
segment. In 1999, pharmaceutical sales represented 62 percent of total company
net sales. Pharmaceutical profits in 1999 represented 74 percent of total
company operating profits before corporate expenses.
During the second quarter of 1999, Warner-Lambert completed the acquisition
of Agouron. VIRACEPT (nelfinavir mesylate), Agouron's first commercial product
and the U.S.'s leading protease inhibitor for the treatment of HIV and AIDS, now
joins Warner-Lambert's major pharmaceutical products, which achieved worldwide
sales as follows:
<TABLE>
<CAPTION>
1999 1998
---- ----
(DOLLARS IN
MILLIONS)
<S> <C> <C>
LIPITOR..................................................... $3,732 $2,185
NEURONTIN................................................... 913 514
REZULIN..................................................... 625 748
VIRACEPT.................................................... 530 530
ACCUPRIL.................................................... 514 454
</TABLE>
Pharmaceutical sales in the U.S. increased 31 percent to $5.5 billion in
1999. International pharmaceutical sales increased 27 percent to $2.5 billion in
1999, or 30 percent at constant exchange rates.
Worldwide sales of LIPITOR increased 71 percent to $3.7 billion in 1999.
LIPITOR continues to be the most prescribed cholesterol-lowering agent in the
U.S., holding a 43 percent share of total prescriptions in the
cholesterol-lowering market. LIPITOR is now sold in all major world markets
except Japan. In January 2000, LIPITOR was recommended for approval by
regulatory authorities in Japan, the world's second-largest cholesterol-lowering
market. The Company looks forward to launching LIPITOR in Japan once all
necessary approvals have been received. LIPITOR will be co-promoted in Japan
with Yamanouchi, the third-largest pharmaceutical company in Japan. Warner-
Lambert has co-promoted LIPITOR in most other markets with Pfizer since its
launch in 1997. The agreements with Pfizer cover many countries and consist of
three broad categories: markets in which
14
<PAGE>
Warner-Lambert and Pfizer co-promote LIPITOR under a single brand name, markets
in which the two companies co-market the product under separate brand names in
competition with each other, and markets in which Pfizer has exclusive rights.
Pfizer does not have rights to the product in France and Japan. The co-promotion
agreement applies in most major markets, including the U.S., Canada, Germany and
the U.K. Under the agreement, the parties generally share certain product
expenses and sales force efforts. Pfizer is compensated on a sliding
percentage-of-sales basis depending on achieving certain sales objectives. The
agreements generally run, on a country-by-country basis, for 10 years from the
date of product launch in each respective country. The agreements include a
provision giving Warner-Lambert the right to co-promote one of Pfizer's
products.
Based on current planning assumptions, worldwide sales of LIPITOR in 2000
are expected to reach $5.0 billion.
Worldwide sales of NEURONTIN grew 78 percent in 1999 to $913 million.
NEURONTIN now holds a market-leading 24 percent share of total prescriptions in
the U.S. antiepileptic market. At the request of the FDA, the Company has
recently conducted a clinical trial of NEURONTIN in pediatric patients. Based on
the results of that study, the FDA, in January 2000, granted a six-month
extension of the NEURONTIN epilepsy use patent protection through mid-July 2000.
The Company also has two other patents covering NEURONTIN with expiration dates
well after 2000 that are the subject of litigation with potential generic
competitors. Additionally, the Company is introducing new tablet formulations of
NEURONTIN to offer patients more convenient dosing. Based on the anticipated
success of these life-cycle extending initiatives, and allowing for the
possibility of generic competition some time in late 2000, the Company currently
estimates that worldwide NEURONTIN sales will grow approximately 10 percent in
2000.
REZULIN achieved worldwide sales of $625 million in 1999, a decrease of 16
percent from 1998 sales. Warner-Lambert marketed REZULIN in the U.S. with an
affiliate of Sankyo Company, Ltd. (Sankyo), from whom the Company licenses the
product for North America and other areas. REZULIN sales were adversely affected
by two competing drugs approved by the FDA during 1999. Additionally, in June
1999, the Company withdrew the indication for REZULIN as initial single agent
therapy, but continued to sell REZULIN for other indications.
On March 21, 2000, the Company announced that it was voluntarily
discontinuing the sale of REZULIN, although the Company continues to believe
that the benefits of the drug outweigh its associated risks. The Company
believed that repeated media reports sensationalizing the risks associated with
REZULIN therapy created an environment in which patients and physicians were
unable to make well-informed decisions regarding the safety and efficacy of
REZULIN. Under these circumstances, and after an unexpected request from the FDA
in the early evening of March 21 to consider removing the drug from the market,
the Company decided to discontinue marketing REZULIN. The one-time costs
associated with the withdrawal, consisting primarily of product returns and
inventory write-off, are expected to be approximately $100 million.
In a related matter, during 1999, Warner-Lambert and Sankyo announced their
intention to co-develop and market a second-generation glitazone for the
treatment of type 2 diabetes. Based on its preclinical profile, the new compound
has the potential to provide greater efficacy than other glitazones, including
effective treatment in advanced stages of the disease when other agents are
ineffective. The compound is currently in the clinical trial stage of
development.
Worldwide sales of VIRACEPT in 1999 were $530 million, consistent with 1998
sales. VIRACEPT is sold in collaboration with F. Hoffmann-La Roche Ltd.
('Roche'). Warner-Lambert sells the product in North America and Roche has the
licensing rights in all other markets. The reported 1999 sales figure reflects
the planned progression of our agreement with Roche, whereby Roche is now
manufacturing most of its product needs for sale in its licensed territory
instead of purchasing VIRACEPT from Warner-Lambert. The Company's royalty
revenue from Roche's subsequent commercial sales of VIRACEPT, recorded in other
income, increased by over 150 percent in 1999. Worldwide sales in 2000 are
expected to approximate the 1999 figures as increased sales in North America
should offset further reduced sales to Roche.
15
<PAGE>
ACCUPRIL achieved worldwide sales of $514 million in 1999, an increase of 13
percent over 1998. Sales of ACCUPRIL are evenly divided between U.S. and
international markets. ACCUPRIL is an ACE inhibitor for the treatment of
hypertension and congestive heart failure. During 1999, total prescriptions for
ACCUPRIL in the U.S. surpassed 1 million, resulting in a 14 percent market
share. Latest estimates for worldwide ACCUPRIL sales in 2000 indicate a 15-20
percent growth rate.
In 1998, pharmaceutical segment sales in the U.S. increased 76 percent to
$4.2 billion. The sales increase was attributable to the continued success of
LIPITOR and REZULIN, which generated sales of $1.6 billion and $747 million,
respectively. Other pharmaceutical products contributing to the increase were
NEURONTIN, VIRACEPT and ACCUPRIL with sales of $442 million, $417 million and
$232 million, respectively.
In 1998, international pharmaceutical sales increased 32 percent to $2.0
billion, 39 percent at constant exchange rates. The increase was primarily
attributable to LIPITOR, which achieved international sales of $540 million, due
to several large market launches during 1998 as well as growth in existing
markets. Additionally, international sales of ACCUPRIL, VIRACEPT and NEURONTIN
grew to $222 million, $114 million and $72 million, respectively.
CONSUMER HEALTH CARE PRODUCTS
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net Sales................................ $2,996 +10% $2,722 +1% $2,691
</TABLE>
Consumer health care segment sales in the U.S. increased $211 million, or 14
percent, to $1.7 billion in 1999. The principal driver of this increase was the
inclusion in 1999 of sales of ZANTAC 75 at $161 million. Prior to 1999, ZANTAC
75 was marketed by the Glaxo Wellcome Warner-Lambert joint venture and sales
were not reflected in Warner-Lambert's reported sales. 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. Other products contributing to segment sales growth in
the U.S. include LISTERINE mouthwash, which increased 11 percent to $368 million
due to the new product launch of Tartar Control LISTERINE, and LUBRIDERM, which
increased 12 percent to $101 million due to the launch of LUBRIDERM Advanced
Therapy. U.S. sales of shaving products grew 6 percent to $239 million driven by
strong sales of the SILK EFFECTS razor. Sales of TETRA pet care products in the
U.S. grew 5 percent to $83 million.
International consumer health care sales increased 5 percent to $1.3 billion
in 1999. At constant exchange rates, international segment sales increased 6
percent. Improving economic conditions in Asia, and especially Japan, have
contributed to the segment's international sales growth. Japanese sales of
shaving products grew 22 percent to $154 million. Japanese sales of TETRA pet
care products grew 24 percent to $46 million.
In 1998, consumer health care segment sales in the U.S. increased 5 percent
to $1.5 billion. Within the segment, U.S. shaving products sales increased 14
percent to $226 million for the year. The increase was due to strong sales of
the PROTECTOR shaving system and the newly designed SLIM TWIN disposable razor.
Also contributing to the sales growth within the segment were increased U.S.
sales of SUDAFED cold/sinus medication, BENADRYL allergy medication and
LISTERINE mouthwash, and the launch of LUBRIDERM UV moisturizing and sun
protection lotion.
International consumer health care segment sales decreased 3 percent to $1.2
billion in 1998. The decrease reflected the impact of the overall economic
weakness in Asian markets coupled with the unfavorable impact of exchange in
Canada and Australia. At constant exchange rates, international segment sales
increased 3 percent for the year. International sales of the Company's shaving
products decreased 4 percent to $518 million and was unchanged at constant
exchange rates in 1998. International sales of the Company's TETRA pet care
products fell 5 percent to $114 million and 2 percent at constant exchange rates
for the year. Both the shaving products and TETRA pet care divisions were
significantly affected by the broad economic downturn in Southeast Asia and
Japan.
16
<PAGE>
CONFECTIONERY PRODUCTS
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Net Sales......................................... $1,951 +3% $1,888 +1% $1,869
</TABLE>
Confectionery sales in the U.S. increased 5 percent to $693 million in 1999.
Sales growth in the U.S. is partially attributable to $21 million in sales of
TRIDENT ADVANTAGE, which was launched in the third quarter of 1998, and the
continued success of DENTYNE ICE, where sales increased 56 percent to $79
million. The third quarter 1999 launch of HALLS Defense Vitamin C supplement
drops also contributed $19 million of new sales.
International confectionery sales increased 2 percent to $1.3 billion in
1999. At constant exchange rates, international segment sales increased 10
percent. The negative impact of exchange is primarily due to the Brazilian
currency devaluation. Markets contributing to international confectionery sales
increases include Mexico, where sales increased 28 percent to $223 million on
continued growth across all gum brands, and Thailand, where sales increased 29
percent to $48 million.
In 1998, confectionery sales in the U.S. increased 3 percent to $659 million
due to strong sales of DENTYNE ICE and TRIDENT chewing gum and CERTS COOL MINT
DROPS and CERTS Powerful Mints breath fresheners.
International confectionery sales of $1.2 billion in 1998 were virtually
unchanged compared to 1997 but increased 7 percent at constant exchange rates.
The increase at constant exchange rates was primarily due to strong sales in
Mexico, where sales increased across all gum brands, and successful product
launches in Japan. The negative impact of exchange for the year was most
significant in Brazil, Japan, Colombia and Canada.
COSTS AND EXPENSES
Cost of goods sold increased 6 percent in 1999 and 14 percent in 1998. As a
percentage of net sales, cost of goods sold fell to 23.5% from 26.6% in 1998 and
29.8% in 1997. The improvement in the ratio was partly attributable to an
increase in pharmaceutical segment product sales, with generally higher margins
than consumer health care or confectionery products, as a percentage of total
company sales. Also contributing to the improvement in the ratio was a favorable
product mix within the pharmaceutical segment and the consumer health care
segment. Based on current planning assumptions, the Company expects that the
cost of goods sold ratio will improve as much as 200 basis points in 2000.
Selling, general and administrative expense in 1999 and 1998 increased $1.1
billion each year, or 23 percent and 30 percent, respectively. Pharmaceutical
segment expenses significantly increased in 1999 and 1998. Quarterly settlements
of co-promotion agreements related to LIPITOR and REZULIN that are recorded in
selling, general and administrative expense increased $609 million and $505
million for the years ended December 31, 1999 and 1998, respectively, compared
to the prior year. As a percentage of net sales, selling, general and
administrative expense was 46.1% compared with 45.2% in 1998 and 44.3% in 1997.
Research and development expense increased 23 percent and 40 percent in 1999
and 1998, respectively. As a percentage of net sales, research and development
expense was 9.7% in 1999, 9.5% in 1998 and 8.7% in 1997. For 2000 the Company
plans to invest approximately $1.5 billion in research and development, a
projected increase of 19 percent compared with 1999.
In 1993 and 1991, the Company recorded, as a separate income statement
component, restructuring charges of $525 million and $544 million, respectively,
as described in Note 4 to the consolidated financial statements. These
restructuring charges included worldwide pharmaceutical manufacturing
rationalizations, which included extensive product relocations requiring
regulatory approvals. The time involved in completion of these activities
included strategic planning and systematic executions of the transfers of
manufacturing operations to other locations. The product relocations were phased
in, with the related approval processes taking approximately two years for each
relocation. Charges of $40 million, $38 million and $60 million were recorded
against the reserves during the years 1999, 1998 and 1997, respectively. The
charges during this period represented costs associated with manufacturing
relocations, the elimination of approximately 1,200 positions and the cost of
work-systems redesign. As
17
<PAGE>
of December 31, 1999, all aspects of these rationalization programs were
complete and all reserves were utilized.
In 1993, the Company estimated that the 1993 restructuring actions would
generate average annual pretax savings compared with pre-restructuring spending
levels of approximately $150 million upon completion of the project. In 1999,
the Company realized actual annual pretax savings of $161 million. Similarly, in
1991 the Company estimated that the 1991 restructuring actions would generate
approximately $1 billion in cumulative pretax savings upon completion of the
activities. Through 1999, the Company has realized actual annual pretax savings
in excess of $1 billion.
Other expense, net in 1999 of $228 million was essentially the same as in
1998. Other expense, net in 1998 compared favorably by $44 million to 1997. The
favorability is primarily attributable to income of $29 million realized from
the Glaxo Wellcome Warner-Lambert joint venture in 1998, as compared to a loss
in 1997 of $14 million. Other expense, net in 1998 also included a gain on the
sale of the Company's Rochester, Michigan, manufacturing plant and certain minor
prescription products of $67 million, as well as a gain on the sale of
investment securities of $24 million, which were offset by charges of $93
million related to the Company's plans to close three European manufacturing
facilities. As described in Note 4 to the consolidated financial statements, the
costs of these closings consisted primarily of $35 million for asset write-offs
and $47 million for severance and related expenses. The closures will result in
a workforce reduction of approximately 450 positions and generate approximately
$28 million in annual pretax savings. As of December 31, 1999, $77 million has
been expended and manufacturing operations at all three plants have ceased.
Management expects to sell the plants in 2000, and the proceeds are not expected
to be material.
INCOME TAXES
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Effective tax rate.................................. 29.0% 28.9% 27.5%
</TABLE>
The Company's 1999 effective tax rate remained essentially consistent with
the prior year. The 1998 effective tax rate increased by 1.4 percentage points,
primarily due to the absence of the 1997 reduction to Agouron's valuation
allowances and reduced U.S. possession tax credits. These increases were partly
offset by increased income generated in foreign jurisdictions with lower tax
rates.
For 2000, excluding the effect of Merger Events as discussed in Other
Matters, the Company anticipates a slight decrease in its effective tax rate.
The projected decrease is primarily due to increased income generated in foreign
jurisdictions with lower tax rates.
NET INCOME
In 1999, net income of $1.7 billion increased 36 percent and diluted
earnings per share of $1.96 increased 35 percent. In 1998, net income of $1.3
billion increased 48 percent and diluted earnings per share of $1.45 increased
46 percent. Based on current planning assumptions, excluding the effect of
Merger Events as discussed in Other Matters and the one-time costs associated
with the withdrawal of REZULIN, the Company expects to increase earnings per
share by approximately 25 percent in 2000.
LIQUIDITY AND FINANCIAL CONDITION
Selected data:
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Cash and cash equivalents*.......................... $1,955 $1,057 $ 973
Less: Total debt.................................... 1,547 1,531 2,211
------ ------ -------
Net cash (debt)..................................... $ 408 $ (474) $(1,238)
Debt to total capital............................... 23% 28% 42%
Return on average shareholders' equity.............. 39% 37% 30%
Return on average total assets...................... 17% 14% 11%
</TABLE>
- ---------
* Includes nonequity securities, which are recorded in other asset categories.
18
<PAGE>
The net cash position of $408 million reflected an $882 million improvement
from the prior year's net debt position. This improvement reflected increased
cash provided by operating activities due to total company sales growth of 20
percent, coupled with a stable debt position. In 1998, net debt of $474 million
improved $764 million from December 31, 1997. This improvement was mainly due to
a reduction in total debt resulting from the cash generated by total company
sales growth of 28 percent.
In 1999, cash provided by operating activities of $2.4 billion was primarily
used to fund capital expenditures of $932 million and to pay dividends of $672
million. In 1998, cash provided by operating activities of $2.0 billion was
primarily used to fund capital expenditures of $753 million, to reduce total
debt by $680 million and to pay dividends of $525 million.
In February 2000, as part of the termination of the Company's merger
agreement with AHP, Warner-Lambert made a $1.8 billion termination fee payment
to AHP. Warner-Lambert funded the payment out of its existing cash resources and
other credit arrangements including the issuance of commercial paper. Planned
capital expenditures for 2000 are estimated to be $1.2 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.
The Company has readily available financial resources, including unused
worldwide lines of credit totaling $830 million. The Company has the ability to
issue commercial paper at favorable rates. The lines of credit support
commercial paper and bank borrowing arrangements. At December 31, 1999, the
Company has $850 million of shelf registrations filed with the Securities and
Exchange Commission, whereby it could issue debt securities for general
corporate purposes, of which $350 million remains available.
In January 2000, the Board of Directors approved a 20 percent increase in
the quarterly dividend to $.24 per share payable in the first quarter of 2000.
The Company anticipates that the quarterly dividend rate will remain $.24 per
share during 2000 and that dividends will be paid with cash provided by
operations.
OTHER MATTERS
MERGER EVENTS
On November 3, 1999, Warner-Lambert, AHP and a wholly-owned subsidiary of
AHP entered into a definitive merger agreement. Subsequent to the announcement
of the agreement, Pfizer made an unsolicited, conditional all stock offer for
all of the outstanding common stock of Warner-Lambert.
On January 13, 2000, Warner-Lambert's Board of Directors authorized the
Company's management to enter into discussions with Pfizer to explore a possible
business combination.
On February 6, 2000, the merger agreement between Warner-Lambert and AHP was
terminated, and the stock option agreements issued in connection with that
transaction were rescinded by Warner-Lambert and AHP without consideration. In
connection with the termination of the AHP Merger Agreement, and in accordance
with the terms thereof, Warner-Lambert paid AHP a termination fee of $1.8
billion, which will be reflected in the Company's results in the first quarter
of 2000.
On February 6, 2000, Warner-Lambert, Pfizer and a wholly-owned subsidiary of
Pfizer entered into a definitive merger agreement. Under the terms of the
proposed transaction, which has been approved by the Board of Directors of both
Warner-Lambert and Pfizer, each share of Warner-Lambert common stock will be
exchanged for 2.75 shares of Pfizer common stock. The transaction is contingent
upon qualifying as a tax-free reorganization and being accounted for under the
pooling of interests method of accounting. The transaction is scheduled to close
in mid-2000, subject to antitrust clearance, approval by both companies'
shareholders and other customary conditions.
EURO
On January 1, 1999, the euro was introduced as the common currency in the 11
European Union member states participating in the Economic and Monetary Union.
The conversion to the euro provides
19
<PAGE>
for a three-year transition period during which transactions may be conducted
using either the euro or the legacy currency of the participating country.
Effective January 1, 2002, only the euro will be legal tender in these
countries. The Company has proactively prepared for the advent of the single
European currency. Modifications to information systems have proven to be
effective in processing business transactions. Further steps toward the adoption
of the euro as the sole currency in these countries will be taken during the
transition period to meet the January 2002 deadline. The Company has invested
and continues to invest in a training and communication program to enable its
colleagues to understand, address and communicate the implications of the single
currency.
Increased price transparency resulting from conversion to a single currency
is not expected to have a material impact on the pharmaceutical business because
individual European countries closely regulate pricing of pharmaceutical
products. Pricing issues in the consumer health care and confectionery
businesses have been identified and incorporated into our normal business
planning process. On a total Company basis, pricing issues are expected to have
a neutral impact on our business.
YEAR 2000
The Company completed its five-step approach for achieving Year 2000 ('Y2K')
compliance with its internal technology systems and mission-critical business
stakeholders. In addition, the Company continued to monitor its systems and
stakeholders through year-end, and put in place its company wide business
continuity and emergency response plans. During the year-end rollover period,
the Company activated its emergency response command centers and teams and those
groups monitored the Company's transition to the Year 2000.
The Company experienced a successful transition to the Year 2000. Worldwide
operations were resumed as scheduled after the millennial rollover.
The Company intends to continue monitoring its internal technology systems
and mission-critical business stakeholders, as necessary, for a reasonable time
period during the first quarter of 2000. The Company freeze on implementation of
new internal technology systems, originally imposed as of October 1, 1999, was
lifted ahead of schedule, on February 11, 2000.
Year 2000-related maintenance and modification costs have been expensed as
incurred, while the cost of new information technology has been capitalized and
amortized in accordance with company policy. Through December 31, 1999, $123
million has been incurred to address and remediate Y2K compliance issues. Of the
costs incurred, $104 million has been charged to expense and $19 million has
been capitalized.
Although the Company has experienced a successful transition to the Year
2000, there can be no assurance that the Company or its business stakeholders
will continue to experience Year 2000 compliance, or that any noncompliance will
not have a material adverse impact on the Company.
ENVIRONMENTAL
The Company is involved in various administrative or judicial proceedings
related to environmental actions initiated by the EPA under the Comprehensive
Environmental Response, Compensation and Liability Act (also know as Superfund)
or by state authorities under similar state legislation, or by third parties.
The Company accrues costs for an estimated environmental liability when
management becomes aware that a liability is probable and is able to reasonably
estimate the Company's share. While it is reasonably possible that additional
costs may be incurred beyond the amounts accrued as a result of new information,
those costs, if any, cannot be estimated currently. As of December 31, 1999 and
1998, the accrual for environmental liabilities was $28 million and $34 million
covering 53 and 50 sites, respectively. For 11 sites, generally those which the
Company currently owns or previously owned, the Company may be the sole party
responsible for clean-up costs. For other sites, other parties (defined as
potentially responsible parties) may be jointly and severally responsible, along
with Warner-Lambert, to pay remediation and other related expenses.
Warner-Lambert's share of costs at a given site is determined through an
allocation process that takes into account many factors, including volume and
the nature of a Company's waste. Once established, remediation costs for a given
site may be paid out over several years. While it is not possible to predict
with certainty the outcome of such matters or the
20
<PAGE>
total cost of remediation, management believes it is unlikely that their
ultimate disposition will have a material adverse effect on the Company's
financial position, liquidity, cash flows or results of operations for any year.
FORWARD-LOOKING STATEMENTS
Statements made in this discussion 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 differ materially from those in the forward-looking
statements is contained in Exhibit 99 of this Form 10-K.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.
The Company's primary market risk exposures consist of interest rate risk
and foreign currency exchange risk. See Note 12 'Financial Instruments' to the
consolidated financial statements in 'Item 8. Financial Statements and
Supplementary Data' for the Company's objectives and strategies for managing
potential exposures related to these risks. The Company's financial instrument
holdings were analyzed to determine their sensitivity to changes in market
rates. The model used to assess sensitivity assumed a 10 percent hypothetical
rate change on all instruments. All other factors were held constant in the
analysis. The parameters of the analysis included all instruments subject to
changes in market rates, including foreign denominated assets and liabilities
hedged by foreign exchange contracts. Unhedged foreign currency denominated
assets and liabilities were not significant at December 31, 1999.
Management primarily uses derivative instruments, the majority of which are
forward exchange contracts involving multiple currencies, to hedge exposures to
certain foreign currency fluctuations as described in Note 12. As hedges, gains
and losses on forward contracts are offset by the effects of currency movements
on respective underlying hedged transactions. Therefore, with respect to
derivative instruments outstanding at December 31, 1999, using a sensitivity
analysis, a change of 10 percent in currency rates would not have a material
effect on the Company's consolidated financial position, liquidity, cash flows
or results of operations.
The Company holds certain instruments, primarily debt obligations, which are
sensitive to changes in market interest rates. At December 31, 1999, the
majority of the Company's variable rate debt consisted of short-term commercial
paper, which is subject to changes in market interest rates. However, at
December 31, 1999, using a sensitivity analysis, a change of 10 percent in
interest rates would not have a material effect on the Company's consolidated
financial position, liquidity, cash flows or results of operations.
21
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The consolidated financial statements of Warner-Lambert and its subsidiaries
and the notes thereto, together with the report thereon of
PricewaterhouseCoopers LLP dated January 24, 2000, except for Note 6, as to
which the date is February 7, 2000, the report by management and quarterly
financial information is set forth below:
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------
1999 1998 1997
--------- --------- --------
(DOLLARS IN MILLIONS,
EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C>
NET INCOME
Net sales................................................... $12,928.9 $10,743.8 $8,408.1
Costs and expenses:
Cost of goods sold...................................... 3,041.9 2,860.2 2,502.9
Selling, general and administrative..................... 5,958.5 4,852.2 3,726.5
Research and development................................ 1,259.0 1,025.6 730.7
Other expense, net...................................... 228.3 214.8 259.2
--------- --------- --------
Total costs and expenses............................ 10,487.7 8,952.8 7,219.3
--------- --------- --------
Income before income taxes.................................. 2,441.2 1,791.0 1,188.8
Provision for income taxes.................................. 708.0 517.8 326.4
--------- --------- --------
Net income.................................................. $ 1,733.2 $ 1,273.2 $ 862.4
--------- --------- --------
--------- --------- --------
Net income per common share:
Basic................................................... $ 2.03 $ 1.50 $ 1.03
Diluted................................................. $ 1.96 $ 1.45 $ .99
Cash dividends per common share............................. $ .80 $ .64 $ .51
COMPREHENSIVE INCOME
Net income.................................................. $ 1,733.2 $ 1,273.2 $ 862.4
Other comprehensive income (net of tax):
Foreign currency translation............................ (280.9) 57.7 (193.8)
Other................................................... 34.8 (18.3) (14.6)
--------- --------- --------
Total other comprehensive income.................... (246.1) 39.4 (208.4)
--------- --------- --------
Comprehensive income........................................ $ 1,487.1 $ 1,312.6 $ 654.0
--------- --------- --------
--------- --------- --------
</TABLE>
All amounts have been restated under the pooling of interests method of
accounting to include the financial results of Agouron Pharmaceuticals, Inc.
acquired on May 17, 1999.
See notes to consolidated financial statements.
22
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
--------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C>
ASSETS:
Cash and cash equivalents............................... $ 1,633.6 $ 945.8
Short-term investments.................................. 309.6 42.2
Accounts receivable, less allowances of $39.4 in 1999
and $30.6 in 1998..................................... 1,722.5 1,475.9
Other receivables....................................... 258.7 205.6
Inventories............................................. 979.2 992.8
Prepaid expenses and other current assets............... 786.5 586.6
--------- ---------
Total current assets........................ 5,690.1 4,248.9
Investments and other assets............................ 793.4 718.9
Property, plant and equipment, net...................... 3,341.9 2,821.9
Intangible assets....................................... 1,616.1 1,730.4
--------- ---------
$11,441.5 $ 9,520.1
--------- ---------
--------- ---------
LIABILITIES AND SHAREHOLDERS' EQUITY:
Short-term debt......................................... $ 297.1 $ 264.2
Accounts payable, trade................................. 1,881.5 1,518.2
Accrued compensation.................................... 236.1 233.3
Other current liabilities............................... 990.1 980.1
Federal, state and foreign income taxes................. 283.7 248.2
--------- ---------
Total current liabilities................... 3,688.5 3,244.0
Long-term debt.......................................... 1,249.5 1,266.7
Deferred income taxes and other noncurrent
liabilities........................................... 1,405.2 1,129.1
Shareholders' equity:
Preferred stock -- none issued...................... -- --
Common stock issued:
1999 and 1998 -- 961,981,608 shares............. 962.0 962.0
Capital in excess of par value...................... 897.2 520.6
Retained earnings................................... 5,098.1 4,038.5
Accumulated other comprehensive income.............. (645.4) (399.3)
Treasury stock, at cost:
1999 -- 99,934,571 shares; 1998 -- 112,073,966
shares........................................ (1,213.6) (1,241.5)
--------- ---------
Total shareholders' equity.................. 5,098.3 3,880.3
--------- ---------
$11,441.5 $ 9,520.1
--------- ---------
--------- ---------
</TABLE>
All amounts have been restated under the pooling of interests method of
accounting to include the financial results of Agouron Pharmaceuticals, Inc.
acquired on May 17, 1999.
See notes to consolidated financial statements.
23
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1999 1998 1997
--------- --------- ---------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C>
Operating Activities:
Net income.............................................. $ 1,733.2 $ 1,273.2 $ 862.4
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization....................... 362.8 308.4 281.9
Deferred income taxes............................... (207.5) (164.5) (65.1)
Changes in assets and liabilities, net of effects
from acquisitions/dispositions of businesses:
Receivables..................................... (378.1) (331.4) (169.8)
Inventories..................................... (38.2) (158.6) (167.4)
Accounts payable and accrued liabilities........ 737.0 749.1 705.1
Other, net.......................................... 227.8 277.3 129.5
--------- --------- ---------
Net cash provided by operating activities... 2,437.0 1,953.5 1,576.6
--------- --------- ---------
Investing Activities:
Purchases of investments................................ (637.0) (105.6) (145.2)
Proceeds from maturities/sales of investments........... 421.7 218.1 245.6
Capital expenditures.................................... (931.9) (753.2) (512.5)
Acquisitions of businesses.............................. -- -- (228.4)
Proceeds from dispositions of businesses................ -- 125.0 --
Other, net.............................................. (87.1) 66.0 (16.8)
--------- --------- ---------
Net cash used by investing activities....... (1,234.3) (449.7) (657.3)
--------- --------- ---------
Financing Activities:
Proceeds from borrowings................................ 516.2 871.3 1,577.5
Principal payments on borrowings........................ (497.7) (1,562.3) (1,622.7)
Purchases of treasury stock............................. (42.1) (265.2) (135.2)
Cash dividends paid..................................... (671.8) (524.6) (413.1)
Proceeds from stock option exercises.................... 195.3 117.1 84.3
--------- --------- ---------
Net cash used by financing activities....... (500.1) (1,363.7) (509.2)
--------- --------- ---------
Effect of exchange rate changes on cash and cash
equivalents............................................... (14.8) 19.7 (31.7)
--------- --------- ---------
Net increase in cash and cash equivalents................... 687.8 159.8 378.4
Cash and cash equivalents at beginning of year.............. 945.8 786.0 407.6
--------- --------- ---------
Cash and cash equivalents at end of year.................... $ 1,633.6 $ 945.8 $ 786.0
--------- --------- ---------
--------- --------- ---------
</TABLE>
All amounts have been restated under the pooling of interests method of
accounting to include the financial results of Agouron Pharmaceuticals, Inc.
acquired on May 17, 1999.
See notes to consolidated financial statements.
24
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE 1 -- SIGNIFICANT ACCOUNTING POLICIES:
Basis of consolidation -- The consolidated financial statements include the
accounts of Warner-Lambert Company and all controlled, majority-owned
subsidiaries ('Warner-Lambert' or the 'Company'). Investments in companies in
which Warner-Lambert's interest is between 20 percent and 50 percent are
accounted for using the equity method.
Reclassification -- Certain prior year amounts have been reclassified to
conform with current year presentation.
Use of estimates -- The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and use assumptions that affect certain reported amounts. Actual
amounts could differ from those estimates.
Revenue recognition -- Sales are recorded as product is shipped and title
passes to customers. Provisions for discounts, returns and other allowances are
recorded in the same period the related sales are recognized.
Cash equivalents -- Cash equivalents include non-equity short-term
investments with original maturity dates of 90 days or less.
Inventories -- Inventories are valued at the lower of cost or market. Cost
is determined principally on the basis of first-in, first-out or standards that
approximate average cost.
Property, plant and equipment -- Property, plant and equipment are recorded
at cost. The cost of maintenance, repairs, minor renewals and betterments and
minor equipment items is charged to income; the cost of major renewals and
betterments is capitalized. Depreciation is calculated generally on the
straight-line method over the estimated useful lives of the various classes of
assets.
Intangible assets -- Intangible assets are recorded at cost and are
amortized on the straight-line method over appropriate periods not exceeding 40
years. The Company continually reviews goodwill and other intangible assets to
evaluate whether events or changes have occurred that would suggest an
impairment of carrying value. An impairment would be recognized when expected
future operating cash flows are lower than the carrying value.
Advertising costs -- Advertising costs are expensed as incurred and amounted
to $1,056.1 in 1999, $927.5 in 1998, and $840.1 in 1997.
Newly issued accounting standards -- In June 1999, the Financial Accounting
Standards Board ('FASB') issued Statement of Financial Accounting Standards
('SFAS') No. 137, 'Accounting for Derivative Instruments and Hedging
Activities -- Deferral of the Effective Date of FASB Statement No. 133.' This
pronouncement deferred the effective date of SFAS No. 133 to the first quarter
of 2001. The adoption of SFAS No. 133 is not expected to have a material effect
on the Company's consolidated financial position, liquidity, cash flows or
results of operations.
25
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE 2 -- NET INCOME PER COMMON SHARE:
The earnings per share (EPS) computations are as follows:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
(SHARES IN THOUSANDS)
<S> <C> <C> <C>
Basic EPS computation:
Net income......................................... $1,733.2 $1,273.2 $ 862.4
Average common shares outstanding.................. 854,894 847,733 841,112
-------- -------- --------
$ 2.03 $ 1.50 $ 1.03
-------- -------- --------
-------- -------- --------
Diluted EPS computation:
Net income......................................... $1,733.2 $1,273.2 $ 862.4
Average common shares outstanding.................. 854,894 847,733 841,112
Impact of potential future stock option exercises,
net of shares repurchased........................ 29,749 31,226 26,974
-------- -------- --------
Average common shares outstanding -- assuming
dilution......................................... 884,643 878,959 868,086
-------- -------- --------
$ 1.96 $ 1.45 $ .99
-------- -------- --------
-------- -------- --------
</TABLE>
The diluted EPS computation includes the potential impact on the average
number of common shares outstanding if all common stock options issued are
exercised. The dilutive effect of stock options is computed using the treasury
stock method, which assumes the repurchase of common shares by the Company at
the average market price for the period.
NOTE 3 -- INTEREST INCOME AND INTEREST EXPENSE:
Interest income and interest expense are included in Other expense, net.
Interest income totaled $126.5, $56.6 and $46.9 and interest expense totaled
$140.3, $114.3 and $167.5 in 1999, 1998 and 1997, respectively. Total interest
paid was $141.0, $103.9 and $152.3 and interest costs of $27.1, $19.2 and $8.3
have been capitalized and included in Property, plant and equipment for those
respective periods.
NOTE 4 -- RESTRUCTURING AND PLANT CLOSURES:
In 1993 and 1991, the Company recorded, as a separate income statement
component, restructuring charges of $525.2 and $544.0, respectively. The total
of $1,069.2 was recorded for worldwide rationalization of manufacturing and
distribution facilities and for organizational restructuring and related
workforce reductions of about 5,500 positions. As of December 31, 1999, all
aspects of these rationalization programs were complete and all reserves were
fully utilized. In total, approximately 4,900 positions were eliminated and 26
plants were closed.
In 1998, the Company committed to a plan to close three foreign
manufacturing facilities. The planned closures are due to a consolidation of
certain product manufacturing resources in Europe. The costs of the three
closings consist of $47.0 for severance and related expenses, $35.0 for asset
write-offs and $11.0 for other costs. The provisions for these costs are
reflected in Other expense, net for the year ended December 31, 1998. The
charges were funded by operations and do not have a material impact on
liquidity. As of December 31, 1999, the severance and other amounts that have
not been expended of $13.5 and $3.0 are reflected in Other current liabilities
and Deferred income taxes and other noncurrent liabilities, respectively. The
$35.0 in asset write-offs has been reflected as a reduction of Property, plant
and equipment. Cost savings associated with these closures, which is expected to
be realized in 2000, are estimated to be approximately $28.0 annually. As of
December 31, 1999, manufacturing operations at all
26
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
three plants have ceased. Management plans to sell the plants in 2000. Proceeds
from the sales are not expected to be material.
NOTE 5 -- ACQUISITIONS AND DIVESTITURES:
In May 1999, Warner-Lambert acquired Agouron Pharmaceuticals, Inc.
('Agouron'), an integrated pharmaceutical company committed to the discovery and
development of innovative therapeutic products for treatment of cancer, AIDS and
other serious diseases. Warner-Lambert exchanged 28.8 million shares of its
common stock for all of the common stock of Agouron. Each outstanding share of
Agouron common stock was exchanged for .8934 shares of Warner-Lambert common
stock. In addition, Agouron's employee stock options outstanding were converted
at the same rate and resulted in options to purchase 7.5 million shares of
Warner-Lambert common stock.
The transaction was accounted for as a pooling of interests under Accounting
Principles Board Opinion ('APB') No. 16 and qualified as a tax-free exchange.
Accordingly, all consolidated financial statements presented have been restated
to include combined results of operations, financial position and cash flows of
Agouron as though it had always been a part of Warner-Lambert. Dividends per
common share are equal to Warner-Lambert's historical dividends per common share
since Agouron has never declared or paid cash dividends on its common stock.
Prior to the merger, Agouron's fiscal year ended on June 30. As a result,
Agouron's financial statements have been restated to conform with
Warner-Lambert's December 31 year end. No adjustments were necessary to conform
Agouron's accounting policies; however, certain reclassifications were made to
the Agouron financial statements to conform to Warner-Lambert's presentation.
The results of operations for the separate companies and the combined
amounts for the most recent quarter prior to the merger and the prior years
presented in the consolidated financial statements are shown below:
<TABLE>
<CAPTION>
THREE MONTHS
ENDED YEAR ENDED DECEMBER 31,
MARCH 31, --------------------------
1999 1998 1997
-------- --------- --------
<S> <C> <C> <C>
Net Sales:
Warner-Lambert............................. $2,860.0 $10,213.7 $8,179.8
Agouron.................................... 146.0 530.1 228.3
-------- --------- --------
Combined....................................... $3,006.0 $10,743.8 $8,408.1
-------- --------- --------
-------- --------- --------
Net Income:
Warner-Lambert............................. $ 381.1 $ 1,254.0 $ 869.5
Agouron.................................... .9 19.2 (7.1)
-------- --------- --------
Combined....................................... $ 382.0 $ 1,273.2 $ 862.4
-------- --------- --------
-------- --------- --------
</TABLE>
On December 31, 1998, Warner-Lambert and certain of its affiliates and Glaxo
Wellcome plc and certain of its affiliates ('Glaxo Wellcome') entered into
transactions in various countries whereby Glaxo Wellcome transferred to
Warner-Lambert rights to over-the-counter ('OTC') ZANTAC products in the U.S.
and Canada, and Warner-Lambert principally transferred to Glaxo Wellcome its
rights to OTC ZANTAC products in all other markets and its rights to OTC
ZOVIRAX, OTC BECONASE and future Glaxo Wellcome prescription to OTC switch
products in all markets. These OTC products had been marketed through joint
ventures between Warner-Lambert and Glaxo Wellcome that were formed to develop,
seek approval of and market OTC versions of Glaxo Wellcome prescription drugs.
These joint ventures were accounted for as equity method investments. For
financial reporting purposes, the December 31, 1998 transactions, which ended
the joint venture relationships
27
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
between Warner-Lambert and Glaxo Wellcome, were accounted for as a nonmonetary
exchange of similar assets with no gain or loss recognized.
On May 21, 1997, Warner-Lambert purchased the remaining 66 percent of the
Jouveinal group it did not already own. Consideration for this acquisition,
including estimated acquisition costs, net of cash acquired and proceeds from
the sale of certain acquired assets, was approximately $117.0. In January 1993,
Warner-Lambert initially acquired a 34 percent interest in Jouveinal, a
privately held French pharmaceutical group. Prior to the acquisition of the
remaining interest, Jouveinal was accounted for as an equity method investment.
In addition, the Company acquired two Irish manufacturing facilities from
Hickson Pharmachem Limited and Plaistow Limited, respectively, during the second
quarter of 1997 for approximately $118.0. The consideration for these three
acquisitions was primarily charged to intangible assets and is being amortized
over periods of 40 years for goodwill and five to 20 years for trademarks and
other intangibles. The transactions were financed with a long-term credit
facility.
All completed acquisitions, except the rights exchange with Glaxo Wellcome
and the merger with Agouron, have been accounted for under the purchase method.
The excess of purchase price over the estimated fair values of net tangible and
identifiable intangible assets acquired has been treated as goodwill. Net assets
and results of operations of all acquisitions have been included in the
consolidated financial statements since the effective acquisition dates. The
completed acquisitions did not have a material pro forma impact on consolidated
earnings.
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 certain foreign manufacturing
facilities. The results of these transactions are recorded in Other expense, net
for the year ended December 31, 1998.
NOTE 6 -- MERGER EVENTS:
On November 3, 1999, Warner-Lambert, AHP and a wholly-owned subsidiary of
AHP entered into a definitive merger agreement. Subsequent to the announcement
of the agreement, Pfizer made an unsolicited, conditional all stock offer for
all of the outstanding common stock of Warner-Lambert.
On January 13, 2000, Warner-Lambert's Board of Directors authorized the
Company's management to enter into discussions with Pfizer to explore a possible
business combination.
On February 6, 2000, the merger agreement between Warner-Lambert and AHP was
terminated, and the stock option agreements issued in connection with that
transaction were rescinded by Warner-Lambert and AHP without consideration. In
connection with the termination of the AHP merger agreement, and in accordance
with the terms thereof, Warner-Lambert paid AHP a termination fee of $1.8
billion, which will be reflected in the Company's results in the first quarter
of 2000.
On February 6, 2000, Warner-Lambert, Pfizer and a wholly-owned subsidiary of
Pfizer entered into a definitive merger agreement. Under the terms of the
proposed transaction, which has been approved by the Board of Directors of both
Warner-Lambert and Pfizer, each share of Warner-Lambert common stock will be
exchanged for 2.75 shares of Pfizer common stock. The transaction is contingent
upon qualifying as a tax-free reorganization and being accounted for under the
pooling of interests method of accounting. The transaction is scheduled to close
during 2000, subject to antitrust clearance, approval by both companies'
shareholders and other customary conditions.
NOTE 7 -- INTERNATIONAL OPERATIONS:
In translating foreign currency financial statements, local currencies of
foreign subsidiaries and branches have generally been determined to be the
functional currencies, except for those in
28
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
hyperinflationary economies, principally in Latin America. Net aggregate
exchange losses (gains) resulting from foreign currency transactions and
translation adjustments related to subsidiaries operating in highly inflationary
countries amounted to $8.6, $13.6 and $(18.2) in 1999, 1998 and 1997,
respectively.
NOTE 8 -- INVENTORIES:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1999 1998
------ ------
<S> <C> <C>
Raw materials....................................... $128.9 $165.1
Finishing supplies.................................. 42.1 48.8
Work in process..................................... 266.8 308.4
Finished goods...................................... 541.4 470.5
------ ------
$979.2 $992.8
------ ------
------ ------
</TABLE>
NOTE 9 -- PROPERTY, PLANT AND EQUIPMENT:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1999 1998
--------- ---------
<S> <C> <C>
Land........................................... $ 49.7 $ 45.7
Buildings...................................... 1,561.6 1,387.0
Machinery, furniture and fixtures.............. 3,542.8 3,109.0
--------- ---------
5,154.1 4,541.7
Less accumulated depreciation.................. (1,812.2) (1,719.8)
--------- ---------
$ 3,341.9 $ 2,821.9
--------- ---------
--------- ---------
</TABLE>
Depreciation expense totaled $299.5, $248.0 and $224.8 in 1999, 1998 and
1997, respectively. Depreciation expense is charged to various income statement
line items based upon the functions utilizing the assets.
NOTE 10 -- INTANGIBLE ASSETS:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Goodwill......................................... $1,234.5 $1,299.0
Trademarks and other intangibles................. 655.7 666.4
-------- --------
1,890.2 1,965.4
Less accumulated amortization.................... (274.1) (235.0)
-------- --------
$1,616.1 $1,730.4
-------- --------
-------- --------
</TABLE>
Amortization expense, which is reflected primarily in Other expense, net,
totaled $63.3, $60.4 and $57.1 in 1999, 1998 and 1997, respectively.
At December 31, 1999 and 1998, goodwill is being amortized primarily over 40
years and trademarks and other intangibles are being amortized over a weighted
average of approximately 33 years.
29
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE 11 -- DEBT:
The components of Short-term debt were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1999 1998
------ ------
<S> <C> <C>
Notes payable....................................... $275.0 $245.9
Current portion of long-term debt................... 22.1 18.3
------ ------
$297.1 $264.2
------ ------
------ ------
</TABLE>
The weighted-average interest rate for notes payable outstanding at
December 31, 1999 and 1998 was 5.7 percent and 6.9 percent, respectively. The
Company has lines-of-credit arrangements with numerous banks with interest rates
generally equal to the best prevailing rate. At December 31, 1999, worldwide
unused lines of credit amounted to $830.0.
The components of Long-term debt were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------------
1999 1998
-------- --------
<S> <C> <C>
Commercial paper................................. $ 408.1 $ 383.4
Variable-rate master note........................ 100.0 100.0
6 5/8% notes due 2002............................ 199.8 199.8
5 3/4% notes due 2003............................ 250.0 250.0
6% notes due 2008................................ 249.5 249.5
7.6% industrial revenue bonds due 2014........... -- 24.5
Other............................................ 42.1 59.5
-------- --------
$1,249.5 $1,266.7
-------- --------
-------- --------
</TABLE>
At December 31, 1999, all commercial paper and the master note have been
classified as long-term debt due to the Company's intent and ability to
refinance on a long-term basis. These instruments are supported by lines of
credit. At December 31, 1999, the weighted-average interest rate was 5.8 percent
for commercial paper outstanding. The interest rate on the master note at
December 31, 1999 was 6.3 percent.
The aggregate annual maturities of long-term debt at December 31, 1999,
payable in each of the years 2000 through 2003, excluding short-term borrowings
reclassified to long-term, are $19.7, $208.3, $257.5 and $1.2, respectively.
NOTE 12 -- FINANCIAL INSTRUMENTS:
The estimated fair values of financial instruments were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------------------------------
1999 1998
--------------------- ---------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
------ ----- ------ -----
<S> <C> <C> <C> <C>
Investment securities...................... $ 149.3 $ 149.1 $ 165.6 $ 165.2
Long-term debt............................. (1,249.5) (1,222.1) (1,266.7) (1,294.7)
Foreign exchange contracts................. (.2) (16.3) .3 (8.5)
( ) = Liability
</TABLE>
Investment securities and Long-term debt were valued at quoted market prices
for similar instruments. The fair values of the remaining financial instruments
in the preceding table are based on dealer quotes and reflect the estimated
amounts that the Company would pay or receive to terminate
30
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
the contracts. The carrying values of all other financial instruments in the
Consolidated Balance Sheets approximate fair values.
The investment securities were reported in the following balance sheet
categories:
<TABLE>
<CAPTION>
DECEMBER 31,
---------------
1999 1998
------ ------
<S> <C> <C>
Cash and cash equivalents........................... $ 48.2 $ 40.3
Short-term investments.............................. 35.5 32.3
Investments and other assets........................ 65.6 93.0
------ ------
$149.3 $165.6
------ ------
------ ------
</TABLE>
The investment securities portfolio was primarily comprised of negotiable
certificates of deposit, U.S. and Puerto Rico government securities and
guaranteed collateralized mortgage obligations as of year-end 1999 and 1998.
These securities are classified as 'held-to-maturity.'
As of December 31, 1999 and 1998, the long-term investments of $65.6 and
$93.0 include a $4.1 interest-bearing, mortgage-backed security maturing beyond
10 years and 'available-for-sale' equity securities with a fair value of $54.1
and $24.3, respectively.
Financial instruments that potentially subject the Company to concentrations
of credit risk are trade receivables and interest-bearing investments. The
Company sells a broad range of products in the pharmaceutical, consumer health
care and confectionery businesses worldwide. The Company's products are
distributed to wholesalers and directly or indirectly to pharmacies, chain food
stores, mass merchandisers, smaller independent retailers, hospitals, government
agencies, health maintenance organizations and other managed care entities. Due
to the large number and diversity of the Company's customer base, concentrations
of credit risk with respect to trade receivables are limited. The Company does
not normally require collateral. One customer balance accounted for
approximately 12% of total trade receivables at December 31, 1999. No customer
balances accounted for greater than 10% of total trade receivables at
December 31, 1998. The Company's interest-bearing investments are high-quality
liquid instruments, such as certificates of deposit issued by major banks, or
securities issued or guaranteed by the U.S. or other governments. The Company
limits the amount of credit exposure to any one issuer.
The Company does not hold or issue financial instruments for trading
purposes nor is it a party to leveraged derivatives. The Company uses
derivatives, particularly interest rate swaps and forward or purchased option
foreign exchange contracts, that are relatively straightforward and involve
little complexity as hedge instruments to manage interest rate and foreign
currency risks.
The Company's foreign exchange risk management objectives are to stabilize
cash flows and reported income from the effect of foreign currency fluctuations
and reduce the overall foreign exchange exposure to insignificant levels.
Extensive international business activities result in a variety of foreign
currency exposures including foreign currency denominated assets and
liabilities, firm commitments, anticipated intercompany sales and purchases of
goods and services, intercompany lending, net investments in foreign
subsidiaries and anticipated net income of foreign affiliates. The Company
continually monitors its exposures and enters into foreign exchange contracts
for periods of up to two years to hedge such exposures.
At December 31, 1999 and 1998, the Company had forward or purchased option
foreign exchange contracts with contractual amounts of $595.2 and $552.0,
respectively. These contracts principally exchange Japanese yen, Canadian
dollars, South African rands, Thailand baht and Australian dollars for U.S.
dollars; U.S. dollars for euros and British pounds in 1999; Japanese yen,
Australian dollars and Portuguese escudos for U.S. dollars; Canadian dollars for
U.S. dollars and Irish punts; Australian dollars for Irish punts; and U.S.
dollars for German marks in 1998.
31
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The Company's interest rate risk management objectives are to manage the
interest cost of debt by using a mix of long-term fixed rate and short-term
variable rate instruments and entering into certain interest rate swap
agreements. Interest rate swap agreements were not material during 1999 or 1998.
The counterparties to the Company's derivatives consist of major
international financial institutions. Because of the number of these
institutions and their high credit ratings, management believes derivatives do
not present significant credit risk to the Company.
Gains and losses related to derivatives designated as effective hedges of
firm commitments are deferred and recognized in income as part of, and
concurrent with, the underlying hedged transaction. Other derivative instruments
primarily relate to hedging foreign currency denominated assets and liabilities
and anticipated net income of foreign subsidiaries. Hedges of anticipated net
income are marked to market on a current basis with gains and losses recognized
in Other expense, net. Cash flows associated with derivative financial
instruments are classified as operating in the Consolidated Statements of Cash
Flows.
NOTE 13 -- LEASES:
The Company rents various facilities and equipment. Rental expense amounted
to $137.5, $119.0 and $96.4 in 1999, 1998 and 1997, respectively.
The future minimum rental commitments under noncancelable capital and
operating leases at December 31, 1999 are summarized below:
<TABLE>
<CAPTION>
CAPITAL OPERATING
------- ---------
<S> <C> <C>
2000....................................................... $ 2.1 $ 99.7
2001....................................................... 2.0 78.6
2002....................................................... 1.5 51.6
2003....................................................... 1.2 28.8
2004....................................................... 1.2 23.8
Remaining years............................................ 5.8 149.7
----- ------
Total minimum lease payments........................... 13.8 432.3
Less minimum sublease income........................... -- (28.7)
----- ------
Net minimum lease payments............................. 13.8 $403.6
----- ------
------
Less amount representing interest...................... (3.5)
-----
Present value of minimum lease payments................ $10.3
-----
-----
</TABLE>
Property, plant and equipment included capitalized leases of $126.7, less
accumulated depreciation of $9.9, at December 31, 1999 and $71.8, less
accumulated depreciation of $7.8, at December 31, 1998. Long-term debt included
capitalized lease obligations of $12.8 and $8.9 at those respective dates.
NOTE 14 -- PENSIONS AND OTHER POSTRETIREMENT BENEFITS:
The Company has various pension plans covering substantially all of its
employees in the U.S. and certain foreign subsidiaries.
The Company provides other postretirement benefits, primarily health
insurance, to qualifying retirees and their dependents. These plans are
currently noncontributory for domestic employees who retired prior to January 1,
1992. Effective January 1, 1998, the Company expanded the health insurance
program by offering contributory benefits to all domestic employees who have
retired after December 31, 1991 and their dependents, and future retirees
meeting minimum age and service requirements. This amendment increased the
accumulated postretirement benefit obligation by $88.8 million as of
32
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
December 31, 1997. This amount is being amortized to expense over the average
remaining employee service period of six years to reach eligibility at age 55.
The following tables present the benefit obligation and funded status of the
plans:
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT
------------------- -----------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
Change in Benefit Obligation:
Benefit obligation at beginning of year..... $2,593.5 $2,276.6 $ 283.7 $ 273.1
Service cost................................ 71.5 60.0 6.6 6.2
Interest cost............................... 167.9 160.1 19.6 19.9
Plan participants' contributions............ 3.0 2.4 .3 .2
Amendments.................................. 2.1 11.6 -- (3.5)
Actuarial (gain) loss....................... (48.4) 221.7 (6.2) 10.5
Benefits paid............................... (155.4) (138.9) (27.0) (22.7)
-------- -------- ------- -------
Benefit obligation at end of year....... $2,634.2 $2,593.5 $ 277.0 $ 283.7
-------- -------- ------- -------
-------- -------- ------- -------
Change in Plan Assets:
Fair value of plan assets at beginning of
year...................................... $2,423.8 $2,276.6 $ -- $ --
Actual return on plan assets................ 305.5 230.1 -- --
Company contributions....................... 67.3 53.6 26.7 22.5
Plan participants' contributions............ 3.0 2.4 .3 .2
Benefits paid............................... (155.4) (138.9) (27.0) (22.7)
-------- -------- ------- -------
Fair value of plan assets at end of
year.................................. $2,644.2 $2,423.8 $ -- $ --
-------- -------- ------- -------
-------- -------- ------- -------
Funded status................................... $ 10.0 $ (169.7) $(277.0) $(283.7)
Unrecognized actuarial loss..................... 32.8 197.3 45.0 59.8
Unrecognized prior service cost................. 34.7 40.9 63.2 78.1
Unrecognized net transition obligation.......... (1.5) (1.9) -- --
-------- -------- ------- -------
Net amount recognized....................... $ 76.0 $ 66.6 $(168.8) $(145.8)
-------- -------- ------- -------
-------- -------- ------- -------
Amounts recognized in the Consolidated
Balance Sheets consist of:
Prepaid benefit cost........................ $ 219.1 $ 197.7 $ -- $ --
Accrued benefit liability................... (161.1) (154.7) (168.8) (145.8)
Intangible asset............................ 3.5 1.8 -- --
Accumulated other comprehensive income...... 14.5 21.8 -- --
-------- -------- ------- -------
Net amount recognized....................... $ 76.0 $ 66.6 $(168.8) $(145.8)
-------- -------- ------- -------
-------- -------- ------- -------
</TABLE>
Foreign pension plan assets at fair value included in the preceding table
were $779.1 in 1999 and $757.5 in 1998. The foreign pension plan projected
benefit obligation was $840.9 in 1999 and $784.0 in 1998.
The projected benefit obligation, accumulated benefit obligation and fair
value of plan assets for the pension plans with accumulated benefit obligations
in excess of plan assets were $218.9, $172.4 and $34.5, respectively as of
December 31, 1999, and $197.5, $161.1 and $26.1, respectively as of December 31,
1998.
33
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The following table presents the annual cost related to the plans:
<TABLE>
<CAPTION>
PENSION POSTRETIREMENT
--------------------------- ---------------------
YEARS ENDED DECEMBER 31,
---------------------------------------------------
1999 1998 1997 1999 1998 1997
------- ------- ------- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C>
Components of Net Pension and Postretirement
Costs:
Service cost............................. $ 71.5 $ 60.0 $ 53.5 $ 6.6 $ 6.2 $ .4
Interest cost............................ 167.9 160.1 156.0 19.6 19.9 14.0
Expected return on plan assets........... (200.6) (187.3) (175.5) -- -- --
Amortization of prior service cost and
net transition obligation.............. 8.0 7.5 7.2 20.7 14.7 .6
Recognized actuarial loss................ 13.7 3.6 4.0 2.8 2.6 2.5
Curtailment and special benefit charge... -- 5.3 -- -- -- --
------- ------- ------- ----- ----- -----
Net pension and post-retirement
costs.............................. $ 60.5 $ 49.2 $ 45.2 $49.7 $43.4 $17.5
------- ------- ------- ----- ----- -----
------- ------- ------- ----- ----- -----
</TABLE>
The sale of the Rochester plant, as discussed in Note 5, resulted in a
curtailment and special benefit charge of $5.3 in 1998. Included in amortization
of prior service cost and net transition obligation for 1999 is $5.8
representing the transition charge for a Canadian postretirement plan.
The assumptions for the U.S. pension and postretirement plans included an
expected increase in salary levels of 4.25 percent for the year ended December
31, 1999 and 4.0 percent for each of the years ended December 31, 1998 and 1997.
The weighted-average discount rate was 8.0, 7.25 and 7.75 percent for 1999, 1998
and 1997, respectively. The expected long-term rate of return on U.S. pension
plan assets was 10.5 percent for each of the years ended December 31, 1999, 1998
and 1997. Assumptions for foreign pension plans did not vary significantly from
the U.S. plans.
Net pension expense attributable to foreign plans included in the preceding
table was $20.2, $15.0 and $14.8 in 1999, 1998 and 1997, respectively.
Separate assumed health care cost trend rates have been used in the
valuation of domestic postretirement health insurance benefits. The foreign
postretirement benefit obligation is not material. Accordingly, the following
disclosures consider domestic postretirement plans only.
<TABLE>
<CAPTION>
HEALTH CARE TREND RATES:
---------------------------------------------
1999 1998 1997
------------- ------------- -------------
<S> <C> <C> <C>
Employees retiring before January 1, 1992
Under age 65 (1).................................. 8.6% 9.2% 9.8%
Age 65 and over (2)............................... 5.5% 5.9% 6.3%
Employees retiring after December 31, 1991 (3)........ 6.3% - 8.0% 6.7% - 8.8% 7.0% - 9.5%
</TABLE>
- ---------
(1) Rate declines to 5.5% in 2005
(2) Rate remains at 5.5% for all years after 1999
(3) Rate declines to 5.0% in 2004
A one percentage point increase in health care cost trend rates in each year
would increase the accumulated postretirement benefit obligation as of December
31, 1999 by $14.4 and the net periodic postretirement benefit cost by $1.9. A
one percentage point decrease in the health care cost trend rates in each year
would decrease the accumulated postretirement benefit obligation as of December
31, 1999 by $14.3 and the net periodic postretirement benefit cost for 1999 by
$1.9.
34
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
Other postretirement benefits for foreign plans expensed under the cash
method in 1999, 1998 and 1997 were not material.
NOTE 15 -- INCOME TAXES:
The components of Income before income taxes were:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
U.S. and Puerto Rico................................... $1,011.5 $ 951.6 $ 515.9
Foreign................................................ 1,429.7 839.4 672.9
-------- -------- --------
$2,441.2 $1,791.0 $1,188.8
-------- -------- --------
-------- -------- --------
</TABLE>
The Provision for income taxes consisted of:
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------
1999 1998 1997
------- ------- ------
<S> <C> <C> <C>
Current:
Federal............................................... $ 472.1 $ 342.4 $132.9
Foreign............................................... 409.2 290.6 219.5
State and Puerto Rico................................. 34.2 49.3 39.1
------- ------- ------
915.5 682.3 391.5
------- ------- ------
Deferred:
Federal............................................... $(134.5) $(100.5) $(58.5)
Foreign............................................... (37.0) (60.8) (1.9)
State and Puerto Rico................................. (36.0) (3.2) (4.7)
------- ------- ------
(207.5) (164.5) (65.1)
------- ------- ------
Provision for income taxes................................ $ 708.0 $ 517.8 $326.4
------- ------- ------
------- ------- ------
</TABLE>
The tax effects of significant temporary differences, which comprise the
deferred tax assets and liabilities, were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------------------------------
1999 1998
---------------------- ---------------------
ASSETS LIABILITIES ASSETS LIABILITIES
-------- ----------- ------- -----------
<S> <C> <C> <C> <C>
Restructuring reserves......................... $ -- $ -- $ 30.3 $ --
Compensation/benefits.......................... 137.6 -- 118.0 --
Postretirement/postemployment obligations...... 75.8 -- 69.6 --
Inventory...................................... 153.4 14.2 125.3 13.1
Tax loss and other carryforwards............... 162.4 -- 101.3 --
Research tax credit and other carryforwards.... 127.6 -- 57.9 --
Pensions....................................... 13.7 84.0 13.2 65.9
Property, plant and equipment.................. 25.4 179.4 33.9 211.4
Intangibles.................................... 48.5 90.5 52.4 93.3
Foreign tax credit carryforwards............... 89.1 -- -- --
Other.......................................... 231.4 95.0 249.6 84.9
-------- ------ ------- ------
1,064.9 463.1 851.5 468.6
Valuation allowance............................ (45.2) -- (34.4) --
-------- ------ ------- ------
$1,019.7 $463.1 $817.1 $468.6
-------- ------ ------- ------
-------- ------ ------- ------
</TABLE>
35
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
The Company has research tax credit carryforwards of $115.3 as of
December 31, 1999. The carryforwards expire in 2000 through 2019. The foreign
tax credit carryforwards of $89.1 expire in 2004.
A valuation allowance on deferred tax assets is provided if it is more
likely than not that some portion or all of the deferred asset will not be
realized. The 1999 increase in the valuation allowance was primarily due to the
increase in tax loss carryforwards of foreign affiliates in certain
jurisdictions that have limited carryforward periods.
At December 31, 1999, for income tax purposes, Agouron had approximately
$224.4 of net operating loss carryforwards. Due to the acquisition of Agouron,
there will be limitations on the amount of those net operating losses that can
be utilized in any given year against certain future taxable income. The
carryforwards expire in 2000 through 2018. In addition, there are tax loss
carryforwards of $113.3 in foreign jurisdictions, which have various expiration
dates.
Income taxes of $279.2 and $288.1 were paid during 1999 and 1998,
respectively. Prepaid expenses and other current assets included deferred income
taxes of $462.1 and $337.1 at December 31, 1999 and 1998, respectively.
The earnings of Warner-Lambert's operations in Puerto Rico are subject to
tax pursuant to a grant, effective through December 31, 2012. The grant provides
for certain tax relief if certain conditions are met. The Company continued to
be in compliance with these conditions at December 31, 1999.
Earnings of foreign subsidiaries considered to be reinvested for an
indefinite period at December 31, 1999 were approximately $2.5 billion. No
additional U.S. income taxes or foreign withholding taxes have been provided on
these earnings. It would be impractical to compute the estimated deferred tax
liability on these earnings.
The Provision for income taxes in 1997 was reduced by 1.4 percentage points
due to the favorable tax impact of the liquidation of a foreign affiliate. Also,
in 1997 Agouron reduced its valuation allowance by $42.5, caused by
changes to future income projections and tax planning strategies.
As of December 31, 1999, Warner-Lambert's U.S. federal income tax returns
through 1992 have been examined and settled with the Internal Revenue Service.
Agouron's U.S. federal income tax returns are open from 1986 to the present.
The Company's effective income tax rate differed from the U.S. statutory tax
rate as follows:
<TABLE>
<CAPTION>
YEARS ENDED
DECEMBER 31,
------------------
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
U.S. statutory tax rate..................................... 35.0% 35.0% 35.0%
Benefit from U.S. possession tax credit..................... (1.5) (1.8) (3.5)
Foreign income subject to increased (reduced) tax rates
including taxes on repatriation........................... (4.4) (3.7) 1.0
U.S. research tax credit, net............................... (1.1) (1.4) (1.3)
State and local taxes, net.................................. .2 1.1 .8
Valuation allowance......................................... .4 .3 (3.5)
Other items, net............................................ .4 (.6) (1.0)
---- ---- ----
Effective tax rate.......................................... 29.0% 28.9% 27.5%
---- ---- ----
---- ---- ----
</TABLE>
NOTE 16 -- SHAREHOLDERS' EQUITY:
The authorized preferred stock of Warner-Lambert is 5 million shares with a
par value of $1.00 per share, of which there are no shares issued.
Par value of common stock issued was $962.0, $962.0 and $320.7 at
December 31, 1999, 1998 and 1997, respectively.
36
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
On April 28, 1998 the stockholders approved an increase in the number of
authorized shares of common stock from 500 million to 1.2 billion to effectuate
a three-for-one stock split effective May 8, 1998. Par value remained at $1.00
per share.
Changes in certain components of shareholders' equity are summarized as
follows:
<TABLE>
<CAPTION>
TREASURY STOCK
CAPITAL IN ------------------------
EXCESS OF SHARES (IN RETAINED
PAR VALUE THOUSANDS) COST EARNINGS
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Balance at December 31, 1996. $119.9 (49,456) $(1,065.5) $3,436.2
Adjustment for pooling of interests........ 213.2 8,076 125.2 (210.9)
------- -------- --------- --------
Adjusted balance at December 31, 1996...... 333.1 (41,380) (940.3) 3,225.3
Shares repurchased, at cost................ -- (1,436) (135.2) --
Employee benefit plans, net of tax......... 159.9 3,072 45.7 (7.7)
Issuance of stock for acquisition of Alanex
by Agouron............................... 37.9 430 6.7 (5.6)
Net income................................. -- -- -- 862.4
Cash dividends paid........................ -- -- -- (413.1)
------- -------- --------- --------
Balance at December 31, 1997............... 530.9 (39,314) (1,023.1) 3,661.3
Three-for-one stock split.................. (274.2) (78,629) -- (367.1)
Shares repurchased, at cost................ -- (4,050) (265.2) --
Employee benefit plans, net of tax......... 263.9 9,919 46.8 (4.3)
Net income................................. -- -- -- 1,273.2
Cash dividends paid........................ -- -- -- (524.6)
------- -------- --------- --------
Balance at December 31, 1998............... 520.6 (112,074) (1,241.5) 4,038.5
Shares repurchased, at cost................ -- (592) (42.1) --
Employee benefit plans, net of tax......... 376.6 12,731 70.0 (1.8)
Net income................................. -- -- -- 1,733.2
Cash dividends paid........................ -- -- -- (671.8)
------- -------- --------- --------
Balance at December 31, 1999............... $ 897.2 (99,935) $(1,213.6) $5,098.1
------- -------- --------- --------
------- -------- --------- --------
</TABLE>
Pursuant to the Company's Stockholder Rights Plan, as amended March 25,
1997, a right is attached to each outstanding share of common stock. In the
event that any person or group acquires 15 percent or more of the outstanding
common shares, or acquires the Company in a merger or other business
combination, each right (other than those held by the 'Acquiring Person') will
entitle its holder to purchase, for a specified purchase price, stock of the
Company or the Acquiring Person having a market value of twice such purchase
price. The rights expire on March 25, 2007 and can be redeemed for $.003 per
right by the Board of Directors prior to the time the rights become exercisable.
Tax benefits credited to Capital in excess of par value for employee stock
options exercised were $242.1, $165.2 and $64.8 for the years ended
December 31, 1999, 1998 and 1997, respectively.
Total comprehensive income includes net income and other comprehensive
income, which consists of foreign currency translation adjustments, unrealized
net gains (losses) on investments and minimum pension liability adjustments. The
components of other comprehensive income were as follows:
37
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOREIGN OTHER ACCUMULATED
CURRENCY ITEMS, OTHER
TRANSLATION NET OF COMPREHENSIVE
ADJUSTMENTS TAX INCOME
----------- ------------ -------------
<S> <C> <C> <C>
Balance at December 31, 1996................... $(236.2) $ 5.9 $(230.3)
Current period change.......................... (193.8) (14.6) (208.4)
------- ------ -------
Balance at December 31, 1997................... (430.0) (8.7) (438.7)
Current period change.......................... 57.7 (18.3) 39.4
------- ------ -------
Balance at December 31, 1998................... (372.3) (27.0) (399.3)
Current period change.......................... (280.9) 34.8 (246.1)
------- ------ -------
Balance at December 31, 1999................... $(653.2) $ 7.8 $(645.4)
------- ------ -------
------- ------ -------
</TABLE>
NOTE 17 -- STOCK OPTIONS AND AWARDS:
Warner-Lambert has stock awards outstanding at December 31, 1999 granted
under various stock plans. Future grants may be issued under the 1996 Stock
Plan, which became effective January 1, 1997. The 1996 Stock Plan provides for
the granting of stock awards to employees in the form of options to purchase
shares of common stock at a price equal to fair market value on the date of the
grant, restricted stock and performance awards. Options generally become
exercisable in installments of 25 percent per year on each of the first through
the fourth anniversaries of the grant date and have a maximum term of 10 years.
Restricted stock granted to employees is delivered upon the expiration of
restricted periods established at the time of grant. Performance awards, which
are also subject to restricted periods, provide for the recipient to receive
payment in shares, cash or any combination thereof equivalent to the award being
granted. The 1996 Stock Plan provides that in the event of a change in control
of Warner-Lambert, the ability to exercise stock options is accelerated.
The aggregate number of shares of common stock that may be awarded under the
1996 Stock Plan in any year is not more than 1.65 percent of the issued shares
on January 1 of the year of the grant. In any year in which stock awards are
granted for less than the maximum permissible number of shares, the balance of
unused shares will be added to the number of shares permitted to be granted
during the following year. No stock awards may be made under the 1996 Stock Plan
after April 23, 2007.
The Company applies APB Opinion No. 25, 'Accounting for Stock Issued to
Employees,' and related Interpretations in accounting for its stock awards.
Accordingly, no compensation cost has been recognized for stock options.
Compensation expense is recorded over the vesting period for restricted stock
and performance awards. Expenses of $5.7, $17.0 and $13.3 for restricted stock
and performance awards were charged to income in 1999, 1998 and 1997,
respectively. Had compensation cost been recorded as an alternative provided by
FASB Statement No. 123, 'Accounting for Stock-Based Compensation,' for options
granted in 1999, 1998 and 1997, the Company's net income and earnings per share
would have been reduced to the pro forma amounts below:
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- ------
<S> <C> <C> <C>
Net income:
As reported.......................................... $1,733.2 $1,273.2 $862.4
Pro forma............................................ 1,642.8 1,203.6 816.5
Basic earnings per share:
As reported.......................................... $ 2.03 $ 1.50 $ 1.03
Pro forma............................................ 1.92 1.42 .97
Diluted earnings per share:
As reported.......................................... $ 1.96 $ 1.45 $ .99
Pro forma............................................ 1.86 1.37 .94
</TABLE>
38
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
These amounts are for disclosure purposes only and may not be representative
of future calculations, since the estimated fair value of stock options would be
amortized to expense over the vesting period, and additional options may be
granted in future years. The fair value for these options was estimated at the
date of grant using the Black-Scholes option-pricing model with the following
weighted-average assumptions for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
------ ------ ------
<S> <C> <C> <C>
Dividend yield........................................... 1.90% 2.37% 2.81%
Expected volatility...................................... 26.85% 24.21% 20.59%
Risk-free interest rate.................................. 4.53% 5.55% 6.21%
Expected life (years).................................... 5.75 5.90 5.90
</TABLE>
Transactions involving stock options are summarized as follows:
<TABLE>
<CAPTION>
NUMBER WEIGHTED-
OF AVERAGE
SHARES EXERCISE
IN THOUSANDS PRICE
------------ --------
<S> <C> <C>
Stock options outstanding, December 31, 1996................ 69,418 $13.37
Granted 16,704 30.36
Exercised............................................... (8,787) 9.59
Forfeited............................................... (1,510) 20.72
------- ------
Stock options outstanding, December 31, 1997................ 75,825 17.37
Granted................................................. 9,696 46.43
Exercised............................................... (9,716) 12.05
Forfeited............................................... (1,364) 27.31
------- ------
Stock options outstanding, December 31, 1998................ 74,441 21.67
Granted................................................. 9,529 68.80
Exercised............................................... (12,490) 15.64
Forfeited............................................... (980) 41.07
------- ------
Stock options outstanding, December 31, 1999................ 70,500 28.84
------- ------
-------
Weighted-average fair value of stock options:
Granted during 1997..................................... 8.84
Granted during 1998..................................... 12.94
Granted during 1999..................................... 19.69
Shares available for annual stock award grants at:
December 31, 1997....................................... 17,212
December 31, 1998....................................... 25,366
December 31, 1999....................................... 32,345
</TABLE>
The following table summarizes outstanding and exercisable stock options as
of December 31, 1999:
<TABLE>
<CAPTION>
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE
- ------------------------------------------- --------------------------------------
WEIGHTED-
AVERAGE WEIGHTED- WEIGHTED-
RANGE OF NUMBER REMAINING AVERAGE NUMBER AVERAGE
EXERCISE OUTSTANDING CONTRACTUAL EXERCISE EXERCISABLE EXERCISE
PRICES IN THOUSANDS LIFE (YEARS) PRICE IN THOUSANDS PRICE
- ------------ ------------ ------------ --------- ------------ ---------
<S> <C> <C> <C> <C> <C>
$ .33-22.00 35,261 4.4 $13.80 33,462 $13.50
23.00-45.00 18,086 7.2 29.30 10,309 28.80
46.00-68.00 16,395 8.6 58.80 3,027 52.00
69.00-93.00 758 9.4 71.10 14 75.20
- ------------ ------ --- ------ ------ ------
.33-93.00 70,500 6.2 28.84 46,812 19.40
------ ------
------ ------
</TABLE>
39
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
NOTE 18 -- CONTINGENCIES AND ENVIRONMENTAL LIABILITIES:
Various claims, suits and complaints, such as those involving government
regulations, patents and trademarks and product liability, arise in the ordinary
course of Warner-Lambert's business. In the opinion of management, all such
pending matters are without merit or are of such kind, or involve such amounts,
as would not have a material adverse effect on the Company's consolidated
financial position, liquidity, cash flows or results of operations for any year.
The Company is involved in various environmental matters including actions
initiated by the Environmental Protection Agency under the Comprehensive
Environmental Response, Compensation and Liability Act (i.e., CERCLA or
Superfund and similar legislation), various state environmental organizations
and other parties. The Company is presently engaged in environmental remediation
at certain sites, including sites previously owned.
The Company accrues costs for an estimated environmental liability when
management becomes aware that a liability is probable and is able to reasonably
estimate the Company's share. Generally, that occurs no later than when
feasibility studies and related cost assessments of remedial techniques are
completed, and the extent to which other potentially responsible parties
('PRPs') can be expected to contribute is determined. For most sites, there are
other PRPs that may be jointly and severally liable to pay all cleanup costs. As
of December 31, 1999 and 1998, the accrual for environmental liabilities was
approximately $28 and $34 covering 53 and 50 sites, respectively. Outside
consultants are generally used to assess the costs of remediation. Accruals are
established based on current technology and are not discounted. While it is
reasonably possible that additional costs may be incurred beyond the amounts
accrued as a result of new information, those costs, if any, cannot be estimated
currently.
Some portion of the liabilities associated with the Company's environmental
actions may be covered by insurance. The Company is currently in litigation with
respect to the scope and extent of liability coverage from certain insurance
companies; however, recoveries will not be recorded as income until there is
assurance that recoveries are forthcoming.
In management's opinion, the liabilities for all environmental matters
mentioned above that are probable and reasonably estimable are adequately
accrued. Although it is not possible to predict with certainty the outcome of
these matters or the ultimate costs of remediation, management believes it is
unlikely that their ultimate disposition will have a material adverse effect on
the Company's consolidated financial position, liquidity, cash flows or results
of operations for any year.
NOTE 19 -- SEGMENT INFORMATION:
Reportable segments are comprised as follows: Pharmaceutical -- consisting
of ethical pharmaceuticals, biologicals and empty hard-gelatin capsules;
Consumer Health Care -- consisting of OTC, shaving and pet care products;
Confectionery -- consisting of chewing gums, breath mints and cough tablets.
The Company's pharmaceutical products are promoted primarily to health care
professionals and are sold either directly or through wholesalers. Consumer
Health Care products are promoted principally through consumer advertising and
promotional programs. They are sold principally to drug wholesalers, pharmacies,
food stores, mass merchandisers, physician supply houses and hospitals.
Confectionery products are promoted primarily through consumer advertising and
in-store promotions and are sold directly to food stores, pharmacies and mass
merchandisers, which in turn sell to consumers.
With the significant growth of the cholesterol-lowering agent LIPITOR, the
pharmaceutical segment has become the Company's largest segment. Warner-Lambert
has co-promoted LIPITOR, which achieved worldwide sales of $3.7 billion, in most
markets with Pfizer since its launch in 1997. The agreements with Pfizer cover
many countries and consist of three broad categories: markets in which
Warner-Lambert and Pfizer co-promote LIPITOR under a single brand name, markets
in which the two
40
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
companies co-market the product under separate brand names in competition with
each other and markets in which Pfizer has exclusive rights. Pfizer does not
have rights to the product in France and Japan. The co-promotion agreement
applies in most major markets, including the U.S., Canada, Germany and the U.K.
Under the agreement, the parties generally share certain product expenses and
sales force efforts. Pfizer is compensated on a sliding percentage-of-sales
basis depending on achieving certain sales objectives. The agreements generally
run, on a country-by-country basis, for 10 years from the date of product launch
in each respective country.
During 1999, total sales to one pharmaceutical and health care products
wholesaler accounted for 12 percent of the Company's consolidated net sales. The
majority of sales to this customer were in the pharmaceutical segment. In 1998
and 1997, no individual customer accounted for more than 10 percent of
consolidated net sales.
The accounting policies of the segments are the same as those described in
the 'Significant Accounting Policies.' Segments are determined based on product
categories. The Company evaluates performance based on profit or loss before
income taxes.
REPORTABLE SEGMENT DATA
<TABLE>
<CAPTION>
NET SALES INCOME BEFORE TAXES
-------------------------- ------------------------
1999 1998 1997 1999 1998 1997
------- ------- ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Pharmaceutical............................ $ 7,982 $ 6,134 $3,848 $2,059 $1,495 $ 781
Consumer Health Care...................... 2,996 2,722 2,691 548 510 549
Confectionery............................. 1,951 1,888 1,869 182 159 185
------- ------- ------ ------ ------ ------
Total Segments........................ 12,929 10,744 8,408 2,789 2,164 1,515
Corporate (1)............................. -- -- -- (348) (373) (326)
------- ------- ------ ------ ------ ------
Consolidated Total........................ $12,929 $10,744 $8,408 $2,441 $1,791 $1,189
------- ------- ------ ------ ------ ------
------- ------- ------ ------ ------ ------
</TABLE>
<TABLE>
<CAPTION>
DEPRECIATION/
SEGMENT ASSETS (2) AMORTIZATION CAPITAL EXPENDITURES
------------------------- ------------------ ---------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
------- ------ ------ ---- ---- ---- ----- ----- -----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Pharmaceutical............... $ 4,009 $3,418 $2,788 $160 $139 $120 $651 $523 $269
Consumer Health Care......... 2,442 2,471 2,384 95 85 83 116 90 108
Confectionery................ 966 960 908 61 49 51 88 78 80
------- ------ ------ ---- ---- ---- ---- ---- ----
Total Segments............... 7,417 6,849 6,080 316 273 254 855 691 457
Corporate (3)................ 4,025 2,671 2,272 47 35 28 77 62 56
------- ------ ------ ---- ---- ---- ---- ---- ----
Consolidated Total........... $11,442 $9,520 $8,352 $363 $308 $282 $932 $753 $513
------- ------ ------ ---- ---- ---- ---- ---- ----
------- ------ ------ ---- ---- ---- ---- ---- ----
</TABLE>
- ---------
(1) Corporate expense includes general corporate income and expense, corporate
investment income and interest expense. Corporate expense in 1998 includes
a pretax gain on the sale of the Company's Rochester, Michigan,
manufacturing plant and certain minor prescription products of $67 which
was offset by costs related to the Company's plans to close certain
foreign manufacturing facilities.
(2) Segment assets consist of Accounts receivable, Inventories, Property, plant
and equipment, Intangible assets and certain investments.
(3) Corporate assets include Cash and cash equivalents, investments and other
unallocated assets.
41
<PAGE>
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
GEOGRAPHIC DATA
<TABLE>
<CAPTION>
1999 1998 1997
---- ---- ----
<S> <C> <C> <C>
Net Sales: (a)
United States......................................... $ 7,862 $ 6,304 $4,416
Foreign............................................... 5,067 4,440 3,992
------- ------- ------
Total............................................. $12,929 $10,744 $8,408
------- ------- ------
------- ------- ------
Long-Lived Assets:
United States......................................... $ 1,794 $ 1,562 $1,433
Ireland............................................... 589 311 125
Germany............................................... 235 248 205
All other foreign..................................... 724 701 692
------- ------- ------
Total............................................. $ 3,342 $ 2,822 $2,455
------- ------- ------
------- ------- ------
</TABLE>
- ---------
(a) Net sales are attributed to countries based on location of customer. No
single foreign country was material to consolidated Net sales.
42
<PAGE>
REPORT BY MANAGEMENT
Management of Warner-Lambert Company has prepared the accompanying
consolidated financial statements and related information in conformity with
generally accepted accounting principles and is responsible for the information
and representations in such financial statements, including estimates and
judgments required for their preparation. PricewaterhouseCoopers LLP,
independent accountants, has audited the consolidated financial statements and
their report appears herein.
In order to meet its responsibilities, management maintains a system of
internal controls designed to provide reasonable assurance that assets are
safeguarded and that financial records properly reflect all transactions. The
internal control system is augmented by an ongoing internal audit program, an
organizational structure that provides for appropriate division of
responsibility and communication programs that explain the Company's policies
and standards.
The Audit Committee of the Board of Directors, composed entirely of
nonemployee directors, meets periodically with the independent accountants,
management and internal auditors to review auditing, internal accounting
controls and other financial reporting matters. Both the independent accountants
and internal auditors have full access to the Audit Committee.
Management also recognizes its responsibility for fostering a strong ethical
climate so that the Company's affairs are conducted according to the highest
standards of personal and corporate conduct. This responsibility is
characterized and reflected in the Company's Creed, which summarizes
Warner-Lambert's commitment to its customers, colleagues, shareholders,
suppliers and society, and the creation of a corporate compliance program, which
is a formal system designed to oversee compliance with applicable laws,
regulations, policies and procedures on a worldwide basis.
<TABLE>
<S> <C>
Lodewijk J.R. de Vink Ernest J. Larini
Chairman, President and Chief Financial Officer and
Chief Executive Officer Executive Vice President, Administration
</TABLE>
43
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF
WARNER-LAMBERT COMPANY
In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of income and comprehensive income and of cash flows
present fairly, in all material respects, the financial position of
Warner-Lambert Company and its subsidiaries at December 31, 1999 and 1998, and
the results of their operations and their cash flows for each of the three years
in the period ended December 31, 1999, in conformity with accounting principles
generally accepted in the United States. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with auditing standards generally
accepted in the United States, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
PRICEWATERHOUSECOOPERS LLP
400 Campus Drive
Florham Park, New Jersey
January 24, 2000, except for Note 6,
as to which the date is February 7, 2000
44
<PAGE>
QUARTERLY FINANCIAL INFORMATION:
<TABLE>
<CAPTION>
1999 QUARTERS
-------------------------------------------------
FIRST SECOND THIRD FOURTH
---------- ---------- ---------- ----------
(DOLLARS IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
(UNAUDITED)
<S> <C> <C> <C> <C>
Net sales......................................... $3,006.0 $3,150.7 $3,237.6 $3,534.6
Gross profit...................................... 2,253.6 2,427.5 2,470.4 2,735.5
Net income........................................ 382.0 446.9 417.0 487.3
Net income per common share:
Basic......................................... .45 .52 .49 .57
Diluted....................................... .43 .51 .47 .55
</TABLE>
<TABLE>
<CAPTION>
1998 QUARTERS
-----------------------------------------
FIRST SECOND THIRD FOURTH
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Net sales......................................... $2,330.9 $2,682.7 $2,694.1 $3,036.1
Gross profit...................................... 1,677.3 1,975.8 1,990.8 2,239.7
Net income........................................ 292.9 329.1 302.5 348.7
Net income per common share:
Basic......................................... .35 .39 .36 .41
Diluted....................................... .34 .37 .34 .40
</TABLE>
MARKET PRICES OF COMMON STOCK AND DIVIDENDS:
<TABLE>
<CAPTION>
1999 RANGE OF PRICES 1998 RANGE OF PRICES
-------------------------- --------------------------
DIVIDENDS DIVIDENDS
HIGH LOW PER SHARE HIGH LOW PER SHARE
---- --- --------- ---- --- ---------
<S> <C> <C> <C> <C> <C> <C>
First quarter............................ $77 $63 1/2 $.20 $56 7/8 $39 3/8 $.16
Second quarter........................... 72 5/8 61 .20 71 9/16 55 .16
Third quarter............................ 73 1/2 60 13/16 .20 85 15/16 64 3/4 .16
Fourth quarter........................... 93 15/16 66 1/2 .20 82 60 1/8 .16
</TABLE>
ITEM 9.CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
DISCLOSURE.
Not Applicable.
45
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information with respect to the directors and executive officers of
Warner-Lambert as of March 1, 2000 is set forth below:
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
---- ---- --------------- -------------------------
<S> <C> <C> <C>
Robert N. Burt. 62 Director Director of the Company (since
1995); Chairman of the Board and
Chief Executive Officer of FMC
Corporation (chemical and
machinery manufacturing) (since
1991); Director of FMC
Corporation (since 1989); Director
of Phelps Dodge Corporation, the
Rehabilitation Institute of Chicago
and Evanston Hospital Corp.;
Director and member of the
Executive Committee of Chemical
Manufacturers Association;
Chairman of the Business
Roundtable and Vice Chairman of
the Illinois Business Roundtable;
Trustee and member of the
Executive Committee of the
Chicago Symphony Orchestra
Donald C. Clark................... 68 Director Director of the Company (since
1984); Retired Chairman of the
Board (1984 - 1996) and Chief
Executive Officer (1982 - 1994)
of Household International, Inc.
(financial services); Director of
Armstrong World Industries, Inc.
and PMI Group, Inc.; Life Trustee
of Northwestern University;
Chairman of the Board of Trustees
of Clarkson University
John A. Georges................... 69 Director Director of the Company (since
1983); Retired Chairman of the
Board and Chief Executive Officer
of International Paper Company
(packaging, paper and forest
products) (1985 - 1996); Director
of AK Steel Corporation and Ryder
System, Inc.; Trustee of the
Public Policy Institute of The
Business Council of New York
State; Graduate member of The
Business Council and a member of
the Trilateral Commission and the
Board of the University of
Illinois Foundation
</TABLE>
(table continued on next page)
46
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
---- --- --------------- -------------------
<S> <C> <C> <C>
William H. Gray III............... 58 Director Director of the Company (since
1991); President and Chief
Executive Officer of the United
Negro College Fund (since 1991);
Senior Minister of the Bright
Hope Baptist Church (since
1963); Director of CBS
Corporation, The Chase Manhattan
Corporation, Electronic Data
Systems Corporation, ezgov.com,
Municipal Bond Investors
Assurance Corporation, The
Prudential Insurance Company of
America, Rockwell International
Corp. and Union Pacific
Corporation
William R. Howell................. 64 Director Director of the Company (since
1983); Chairman Emeritus of J.C.
Penney Company, Inc. (retailing)
(since 1997); Chairman of the
Board and Chief Executive
Officer of J.C. Penney Company,
Inc. (1983 - 1997); Director of
Bankers Trust New York
Corporation and Bankers Trust
Company, Exxon Mobil
Corporation, Halliburton Company
and The Williams Companies, Inc.
and Central & South West
Corporation; Chairman of the
Southern Methodist University's
Board of Trustees; Member of The
Business Council
LaSalle D. Leffall, Jr. M.D....... 69 Director Director of the Company (since
1988); Charles R. Drew Professor
of Surgery, Howard University
College of Medicine (since
1992); Professorial Lecturer in
Surgery, Georgetown University;
Director of Celsion Corporation,
Mutual of America, Chevy Chase
Bank and the Charles A. Dana
Foundation; Member of the
National Urban League, the
National Association for
Advancement of Colored People,
The Young Men's Christian
Association, National Center on
Addiction and Substance Abuse at
Columbia University, the
Trustees Council of the National
Gallery of Art and the Cosmos
Club; Consultant for the
National Cancer Institute;
Diplomat for the American Board
of Surgery; Fellow for the
American College of Surgeons
</TABLE>
(table continued on next page)
47
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
---- --- --------------- -------------------
<S> <C> <C> <C>
George A. Lorch................... 58 Director Director of the Company (since
1997); Chairman of the Board
(since 1994) and Chief Executive
Officer (since 1993) of
Armstrong World Industries, Inc.
(flooring, building and other
specialty products); Director of
Armstrong World Industries,
Household International, Inc.
and RR Donnelley & Sons Company;
Member of the Pennsylvania
Business Roundtable and the
Policy Committee of The Business
Roundtable
Alex J. Mandl..................... 56 Director Director of the Company (since
1995); Chairman of the Board and
Chief Executive Officer of
Teligent, Inc.
(telecommunications) (since
1996); President and Chief
Operating Officer AT&T Corp.
(1993 - 1996); Director of
Teligent, Inc., Dell Computer
Corporation, Forstmann Little &
Co. and General Instrument
Corp., Walter A. Haas School of
Business at the University of
California at Berkeley,
Willamette University, Carnegie
Hall, the Museum of Television
and Radio and WETA Public
Television and Radio
Michael I. Sovern................. 68 Director Director of the Company (since
1993); Chairman of the Board,
Sotheby's Holdings Inc. (since
2000); President Emeritus and
Chancellor Kent Professor of
Law, Columbia University (since
1977); President, Shubert
Foundation (since 1996);
Director of AT&T Corp. and Sequa
Corporation; Chairman of the
Japan Society and the American
Academy in Rome; Member of the
board of the Shubert Foundation
and Organization, the Asian
Cultural Council, Channel
Thirteen and the Henry J. Kaiser
Family Foundation; Trustee of
Freedom Forum Newseum, Inc.;
Chairman of the Advisory
Committee of Freedom Forum Media
Studies Center
</TABLE>
(table continued on next page)
48
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
---- --- --------------- -------------------
<S> <C> <C> <C>
Lodewijk J. R. de Vink............ 55 Chairman of the Chairman of the Board and Chief
Board, President Executive Officer (since May
and Chief Executive 1999); President (since August
Officer; Director 1991); Chief Operating Officer
August 1991 - May 1999);
Director (since 1991); Director
of Bell Atlantic Corporation,
Pharmaceutical Research and
Manufacturers of America and the
United Negro College Fund;
Member of the Supervisory Board
of Royal Ahold N.V.; President
of the International Federation
of the Pharmaceutical
Manufacturers Association;
Director of the National Actors'
Theater; Trustee of the National
Foundation for Infectious
Diseases; Member of the
International Advisory Board of
Nijenrode University
Ernest J. Larini.................. 57 Chief Financial Executive Vice President (since
Officer and Executive May 1999); Chief Financial Officer
Vice President, (since November 1992); Vice
Administration President (November 1992 - May
1999)
Anthony H. Wild, Ph.D............. 51 Executive Vice Executive Vice President (since
President May 1999); President,
Pharmaceutical Sector (since May
1996); Vice President (September
1995 - May 1999); President,
Parke-Davis, North America
(February 1995 - May 1996)
Raymond M. Fino................... 57 Senior Vice Senior Vice President, Human
President, Human Resources (since May 1999); Vice
Resources President, Human Resources
(January 1985 - May 1999)
Philip M. Gross................... 58 Senior Vice Senior Vice President, Strategic
President, Strategic Management Processes (since May
Management 1999); Vice President, Strategic
Processes Management Processes (January
1994 - May 1999)
Gregory L. Johnson................ 53 Senior Vice President Senior Vice President and General
and General Counsel Counsel (since May 1999); Vice
President and General Counsel
(October 1983 - May 1999)
Richard W. Keelty................. 58 Senior Vice Senior Vice President, Public
President, Public Affairs (since May 1999); Vice
Affairs President, Public Affairs,
(December 1995 - May 1999); Vice
President, Public Relations
(November 1990 - November 1995)
</TABLE>
(table continued on next page)
49
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
---- --- --------------- -------------------
<S> <C> <C> <C>
J. Frank Lazo..................... 52 Senior Vice President Senior Vice President (since May
1999); Vice President (April
1990 - May 1999); President,
Adams Sector (since December
1994); President, Latin America,
Asia, Australia, Middle East
Africa Group (January
1992 - December 1994)
S. Morgan Morton.................. 60 Senior Vice President Senior Vice President (since May
1999); Vice President (January
1994 - May 1999); President,
Consumer Healthcare Sector
(since August 1997); President
Warner-Lambert Consumer
Healthcare U.S.A. (June
1996 - July 1997); President,
Shaving Products Group
(September 1993 - December 1995)
Peter B. Corr, Ph.D............... 51 Vice President Vice President (since April 1999);
President, Warner-Lambert/Parke-
Davis Pharmaceutical Research
and Development (since October
1998); Senior Vice President,
Discovery Research,
Monsanto/Searle (January 1996 -
September 1998); Vice President
Discovery Research,
Monsanto/Searle (January 1994 -
December 1996)
John S. Craig..................... 48 Vice President Vice President (since January
1996); President, Adams USA (since
July 1995)
Joseph E. Lynch................... 48 Vice President and Vice President and Controller
Controller (since June 1995); Comptroller,
American Home Products
Corporation (March 1995 - June
1995); Director, Corporate
Accounting and Budgets, American
Cyanamid Company (April
1992 - March 1995)
Harold F. Oberkfell............... 53 Vice President Vice President (since 1992); Vice
President, Knowledge Management
Officer (since September 1998);
President Latin America/Asia
Sector (February
1995 - September 1998)
Maurice A. Renshaw................ 53 Vice President Vice President (since January
1997); President Parke-Davis
U.S.A. (since April 1998);
President, Parke-Davis U.S. and
Mexico (August 1996 - March
1998) President, Warner-Lambert
K.K., Japan (December
1989 - August 1996)
</TABLE>
(table continued on next page)
50
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
POSITIONS AND PRINCIPAL OCCUPATIONS
OFFICES HELD AND EMPLOYMENT
NAME AGE WITH REGISTRANT DURING PAST 5 YEARS
---- --- --------------- -------------------
<S> <C> <C> <C>
Barbara S. Thomas................. 50 Vice President Vice President (since April 1998);
President Consumer Healthcare
USA and Canada (since January
2000); President Consumer
Healthcare USA (December 1997 -
December 1999); President and
Chief Executive Officer,
Pillsbury Canada Ltd. (March
1995 - November 1997)
John F. Walsh..................... 57 Vice President Vice President (since May 1999);
Executive Vice President
(January 1991 - May 1999);
President Shaving Products Group
(since August 1997); President
Consumer Healthcare Sector
(December 1994 - July 1997);
President, Consumer Products
Sector (January 1992 - December
1994)
Rae G. Paltiel.................... 53 Secretary Secretary (since February 1986)
</TABLE>
All of the above-mentioned officers, with the exception of Ms. Thomas, Mr.
Craig, Mr. Lynch and Dr. Corr, have been employed by Warner-Lambert for the past
five years.
Ms. Thomas has been employed by Warner-Lambert since December 1997. Prior to
that time, Ms. Thomas was employed by The Pillsbury Company serving as President
and Chief Executive Officer of Pillsbury Canada, Ltd., from March 1995 to
November 1997. Ms. Thomas joined The Pillsbury Company in October 1993 as Vice
President, General Manager, for the pizza/snack division. The Pillsbury Company
is a multinational consumer company.
Mr. Craig has been employed by Warner-Lambert since July 1995. Prior to that
time, Mr. Craig had been employed by Kraft Foods, Inc., serving as President and
Chief Executive Officer of Kraft's Lender's Bagel Bakery division from September
1986 to February 1994. Kraft Foods, Inc., a wholly-owned subsidiary of Philip
Morris Companies Inc., is a multinational producer of packaged grocery products.
Mr. Lynch has been employed by Warner-Lambert since June 1995. Prior to that
time and during his last three months with American Cyanamid Company, which was
acquired by American Home Products Corporation in November 1994, Mr. Lynch
performed certain functions of Comptroller at American Home Products Corporation
from March 1995 to June 1995. American Home Products is a multinational health
care and food products company. From April 1991 to March 1995, Mr. Lynch held
the position of Director, Corporate Accounting and Budgets, American Cyanamid
Company. Prior to being acquired by American Home Products Corporation, American
Cyanamid Company was a multinational medical and agricultural products company.
Dr. Corr has been employed by Warner-Lambert since October 1998. Prior to
joining Warner-Lambert, Dr. Corr served as Senior Vice President, Discovery
Research at Monsanto/Searle and during the period from January 1994 through
December 1996 held the position of Vice President Discovery Research,
Monsanto/Searle.
None of the above officers has any family relationship with any Director or
with any other officer. Officers are elected by the Board of Directors for a
term of office lasting until the next annual organizational meeting of the Board
of Directors or until their successors are elected and have qualified. No
officer listed above was appointed pursuant to any arrangement or understanding
between such officer and the Board of Directors or any member or members
thereof.
51
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION.
All non-employee directors of Warner-Lambert receive an annual fee of
$45,000 and a fee of $1,000 for attendance at each meeting of the Board or
Committee of the Board of Directors, as well as for attendance at or
participation in special meetings and other Board-related activities.
Non-employee directors are also reimbursed for their expenses. In addition, each
director who chairs a Committee receives an annual fee of $3,000. Directors may
elect to defer receipt of their fees.
The provisions of the Company stock plans relating to deferred compensation
for directors permit non-employee directors to elect to defer their directors'
annual fees and meeting attendance fees. Deferred amounts are credited to an
account which accrues interest annually or to a Warner-Lambert Common Stock
equivalent account which is credited as of the day the deferred fees would have
been payable with stock credits equal to the number of shares of Common Stock
that could have been purchased with the amount of such deferred fees. Directors
may not make withdrawals from their deferred accounts until they are no longer
members of the Board. The provisions relating to directors' deferred
compensation provide that all amounts which participating directors had
previously elected to defer are payable following a change in control of
Warner-Lambert (as defined in the plan) in accordance with a distribution
schedule the director elects.
In order to further align the interests of the directors with the Company's
stockholders, an amount equal to one-half of the retainer in effect on January 1
of each year, for a maximum period of ten years, is made available to
non-employee directors for crediting to their Warner-Lambert Common Stock
equivalent accounts.
Pursuant to the Restricted Stock Plan for Directors of Warner-Lambert
Company, each non-employee director of Warner-Lambert receives a grant of 12,000
shares of Common Stock, subject to certain restrictions. The director is not
entitled to delivery of the share certificate, and the shares are subject to
transfer restrictions for a period from the date of grant until the earliest to
occur of certain specified events. If the director remains a member of the Board
for the entire period during which the restrictions apply, the restrictions will
lapse with respect to one-tenth of the shares for each full year of service as a
director. In the event of a change in control of Warner-Lambert (as defined in
the plan) the restrictions will lapse. Subject to the foregoing, the director
has the rights and privileges of a stockholder, including the right to receive
dividends and the right to vote the shares.
Non-employee directors are also eligible to participate in Warner-Lambert's
Group Life Insurance, Medical, Dental and Accidental Death and Dismemberment
Plans.
The following table provides a summary of cash and non-cash compensation for
each of the last three completed fiscal years ended December 31, 1999, 1998 and
1997 with respect to Warner-Lambert's current and former Chief Executive Officer
and the other four most highly compensated executive officers of the Company:
52
<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM COMPENSATION
----------------------------------------------------
ANNUAL COMPENSATION AWARDS PAYOUTS
------------------------------------- ----------------------- --------------------------
(a) (b) (c) (d) (e) (f) (g) (h) (i)
--- --- --- --- --- --- --- --- ---
OTHER SECURITIES
ANNUAL RESTRICTED UNDERLYING ALL OTHER
COMPENSA- STOCK OPTIONS/ LTIP COMPENSA-
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) TION (7)($) AWARDS ($) SARS (#) PAYOUTS ($) TION (9)($)
- --------------------------- ---- ---------- --------- ----------- ---------- -------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Lodewijk J.R. de Vink(1) ... 1999 $ 891,433 $1,558,500 $62,816 0 188,700 0 $ 256,691
Chairman of the Board, 1998 773,333 1,106,000 0 0 198,900 0 225,840
President and Chief 1997 714,000 926,300 0 0 370,500 0 111,362
Executive Officer
Melvin R. Goodes(2) ........ 1999 411,833 1,000,000 0 0 392,550 0 9,960,608
Retired Chairman of the 1998 1,173,333 2,028,800 67,988 0 440,700 0 13,215,698
Board and Chief Executive 1997 1,083,550 1,542,800 55,280 0 777,000 0 7,632,931
Officer
Ernest J. Larini(3) ........ 1999 500,633 549,800 0 0 77,000 0 135,363
Chief Financial Officer and 1998 419,650 488,000 0 0 81,000 0 120,179
Executive Vice President, 1997 386,400 413,700 0 0 175,500 0 61,623
Administration
Anthony H. Wild(4) ......... 1999 534,600 600,000 0 0 112,400 0 68,245
Executive Vice President; 1998 480,083 545,000 0 0 93,000 0 53,844
President, Pharmaceutical 1997 413,833 545,000 0 0 183,000 0 23,005
Sector
J. Frank Lazo(5) ........... 1999 477,817 452,300 0 0 44,000 0 139,034
Senior Vice President; 1998 453,967 374,000 0 0 67,800 0 140,407
President, Adams 1997 436,133 268,500 0 0 150,000 0 75,278
Peter B. Corr(6) ........... 1999 491,667 410,600 0 0 57,300 0 9,282
Vice President; President, 1998 98,958 350,000 0 $1,482,500(8) 75,000 0 0
Warner-Lambert/Parke-Davis 1997 0 0 0 0 0 0 0
Pharmaceutical Research and
Development
</TABLE>
- ---------
(1) Mr. de Vink was appointed Chairman of the Board, President and Chief
Executive Officer, effective May 1, 1999, upon the retirement of Mr. Goodes.
Mr. de Vink served as President and Chief Operating Officer from 1991 until
May 1999.
(2) Mr. Goodes served as Chairman of the Board and Chief Executive Officer until
May 1, 1999, when he retired from the Company.
(3) Mr. Larini served as Vice President and Chief Financial Officer until May
1999, when he was promoted to the position Chief Financial Officer and
Executive Vice President, Administration.
(4) Dr. Wild was promoted to Executive Vice President, effective May 1, 1999.
(5) Mr. Lazo was promoted to Senior Vice President, effective May 1, 1999.
(6) Dr. Corr joined the Company in October 1998.
(7) Includes transportation services provided to Mr. de Vink in 1999 in the
amount of $41,353 and to Mr. Goodes in 1998 and 1997 in amounts of $50,246
and $40,955.
(8) Dr. Corr received a restricted stock award upon joining the Company in 1998.
His aggregate restricted stockholdings as of December 31, 1999, valued at
the market price at year-end, were 20,000 shares with a value of $1,638,750.
These shares will vest in equal installments in 2001, 2002 and 2003.
Dividends on restricted shares are paid quarterly in conjunction with, and
at the same rate as, dividends on the Company's Common Stock.
(9) All Other Compensation consists of the following: (i) annual Company
contributions to the Savings and Stock Plan and the Excess Savings Plan for
1999, 1998, and 1997 as follows: Mr. de Vink $71,570, $58,132 and $29,993;
Mr. Goodes $16,610, $337,584 and $173,679; Mr. Larini $38,169, $29,214 and
$15,640; Dr. Wild $14,649, $12,356 and $9,454; Mr. Lazo $44,736, $49,026 and
$25,753; and Dr. Corr $9,282; and (ii) the above-market interest on deferred
annual bonuses for 1999, 1998 and 1997 as follows: Mr. de Vink; $185,121,
$167,708 and $81,369; Mr. Goodes $420,998, $378,341 and $194,955; Mr. Larini
$97,194, $90,965 and $45,983; Dr. Wild $53,596, $41,488 and $13,551; Mr.
Lazo $94,298, $91,381 and $49,525; and Dr. Corr $0, $0 and $0. The annual
bonus was payable for such years, but deferred at the election of the named
executive officer. According to the terms of the Warner-Lambert Incentive
Compensation Plan, deferred bonuses accrue interest that is automatically
credited to the officer's account.
The amounts stated for Mr. Goodes for 1999, 1998 and 1997 include payments
of $9,523,000, $12,499,773 and $7,264,297 for cash awards that were based on
the Company's stock price performance and granted in 1989, 1988 and 1987
respectively.
-------------------
53
<PAGE>
AGREEMENTS WITH THE FORMER AND CURRENT CHIEF EXECUTIVE OFFICER
In 1985, Warner-Lambert entered into an employment agreement with Mr.
Goodes. Effective May 1, 1999, pursuant to the terms of this agreement, Mr.
Goodes retired from the Company. In April 1999, Warner-Lambert entered into a
consulting agreement with Mr. Goodes. The consulting agreement provides for a
term commencing on May 1, 1999 and ending on April 30, 2004. The consulting
agreement provides for a minimum annual fee.
In May 1999, Warner-Lambert entered into an employment agreement with Mr. de
Vink, pursuant to which he serves as Chairman of the Board, President and Chief
Executive Officer of Warner-Lambert. This agreement provides for a term
commencing on May 1, 1999 and ends on the earlier of (1) March 1, 2010 or (2)
the occurrence of certain events described in the agreement. Mr. de Vink's
employment agreement provides for a minimum annual salary which may be increased
but not decreased. Pursuant to the terms of the agreement, Mr. de Vink is also
entitled to participate in Warner-Lambert's Incentive Compensation Plan as well
as other compensation and benefit programs available to officers of
Warner-Lambert at their respective levels.
OPTION/SAR GRANT TABLE
The following table sets forth information concerning grants of stock
options and stock appreciation rights ('SARs') during 1999 to the Company's
current and former Chief Executive Officer and the other four most highly
compensated executive officers.
OPTION/SAR GRANTS IN 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------------------------------------------------------
(a) (b) (c) (d) (e) (f)
NUMBER OF % OF TOTAL
SECURITIES OPTIONS/SARS
UNDERLYING GRANTED TO EXERCISE OR GRANT DATE
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION PRESENT VALUE
NAME GRANTED (#)(1) 1999 ($/SH) DATE ($)(2)
---- -------------- ---- ------ ---- ------
<S> <C> <C> <C> <C> <C>
Lodewijk J.R. de Vink.............. 188,700 2.24% $68.8437 1/25/09 $3,673,989
Melvin R. Goodes................... 392,550 4.66% 68.8437 1/25/09 7,642,949
Ernest J. Larini................... 77,000 .91% 68.8437 1/25/09 1,499,190
Anthony H. Wild.................... 112,400 1.33% 68.8437 1/25/09 2,188,428
J. Frank Lazo...................... 44,000 .52% 68.8437 1/25/09 856,680
Peter B. Corr...................... 57,300 .68% 68.8437 1/25/09 1,115,631
</TABLE>
- ---------
(1) Stock options entitle the holder to purchase shares of Common Stock at a
price which is equal to the fair market value per share for such stock on
the date the stock option was granted. Payment of this price is made in cash
or, with the consent of the Compensation Committee, in whole or in part, in
Common Stock or other consideration. Stock options generally become
exercisable over a four-year period (beginning one year after grant) in four
equal installments. No stock option may be exercised after the expiration of
ten years from the date of grant. In the event of a change in control of
Warner-Lambert (as defined in the stock option plans), (i) the ability to
exercise stock options is accelerated, (ii) amounts payable upon exercise of
stock appreciation rights will be determined by reference, among other
things to the price pursuant to which the change in control was effected,
(iii) amounts payable upon the exercise of stock appreciation rights will be
in the form of cash and (iv) limited stock appreciation and conversion
rights are provided to the grantees of stock options.
(2) Present value determinations were made using a Black-Scholes option pricing
model based on the following assumptions: the holding period is based on a
five-year average of all option holders' exercises; the risk-free rate of
return is the interest rate on a zero coupon bond with a maturity equivalent
to the holding period; the volatility is based on weekly stock prices for
the holding period; and the dividend yield is based on the dividends paid on
Warner-Lambert's Common Stock for the five-year period 1995-1999. The actual
value an executive officer receives is dependent on future stock market
conditions, and there can be no assurance that the amounts reflected in
column
(footnotes continued on next page)
54
<PAGE>
(footnotes continued from previous page)
(f) of the Option/SAR Grants Table will actually be realized. No gain to the
executive officer is possible without an appreciation in the stock value
which will benefit all stockholders commensurately.
OPTION/SAR EXERCISES AND YEAR-END VALUE TABLE
The following table sets forth individual exercises of stock options and
SARs during 1999 by the Company's current and former Chief Executive Officer and
the other four most highly compensated executive officers and provides
information related to stock option and SAR values:
AGGREGATED OPTION/SAR EXERCISES IN 1999
AND YEAR-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY
UNDERLYING UNEXERCISED OPTIONS/SARS AT
OPTIONS/SAR'S AT YEAR-END ($)
SHARES ACQUIRED VALUE YEAR-END (#) ($81.9375 PER SHARE)
NAME ON EXERCISE (#) REALIZED($) EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
---- --------------- ----------- ------------------------- -------------------------
<S> <C> <C> <C> <C>
Lodewijk J.R. de 0 0 2,066,175/ $135,834,434/
Vink................. 611,625 22,981,118
Melvin R. Goodes*...... 679,000 $50,918,659 4,217,750/ $235,755,670/
0 0
Ernest J. Larini....... 0 0 845,548/ $ 54,930,270/
267,352 10,376,360
Anthony H. Wild........ 0 0 354,598/ $ 21,341,538/
309,202 10,959,938
J. Frank Lazo.......... 100,000 $ 6,132,300 1,121,550/ $ 76,450,126/
216,350 9,211,683
Peter B. Corr.......... 0 0 0/ $ 0/
132,300 1,336,212
</TABLE>
- ---------
* Mr. Goodes' exercises occurred following his retirement from the Company.
RETIREMENT BENEFITS
The following table sets forth the estimated aggregate annual benefits
payable in the form of a straight life annuity by Warner-Lambert upon retirement
at age 65 (exclusive of retirement benefits from Social Security) after a
specified number of years of service, pursuant to the Warner-Lambert Company
Retirement Plan (the 'Retirement Plan') and Warner-Lambert Supplemental Pension
Income Plan (the 'Supplemental Plan'). In the event of early retirement, the
following amounts will be reduced by the annual retirement credits that would
otherwise have been earned to normal retirement and further reduced in
accordance with the early retirement reduction factors then in effect under the
Retirement Plan and, where applicable, the Supplemental Plan. The aggregate of
amounts shown in columns (c) and (d) of the Summary Compensation Table
approximate the amount of creditable earnings under the pension plans.
55
<PAGE>
PENSION PLAN TABLE
<TABLE>
<CAPTION>
YEARS OF SERVICE
---------------------------------------------------------------------------------
REMUNERATION 10 15 20 25 30 35 40
------------ -- -- -- -- -- -- --
<S> <C> <C> <C> <C> <C> <C> <C>
$ 500,000............ $ 151,753 $ 208,233 $ 264,713 $ 265,193 $ 265,673 $ 270,587 $ 308,926
750,000............ 235,753 320,233 404,713 405,193 405,673 406,587 463,926
1,000,000............ 319,753 432,233 544,713 545,193 545,673 546,153 618,926
1,250,000............ 403,753 544,233 684,713 685,193 685,673 686,153 773,926
1,500,000............ 487,753 656,233 824,713 825,193 825,673 826,153 928,926
1,750,000............ 571,753 768,233 964,713 965,193 965,673 966,153 1,083,926
2,000,000............ 655,753 880,233 1,104,713 1,105,193 1,105,673 1,106,153 1,238,926
2,250,000............ 739,753 992,233 1,244,713 1,245,193 1,245,673 1,246,153 1,393,926
2,500,000............ 823,753 1,104,233 1,384,713 1,385,193 1,385,673 1,386,153 1,548,926
2,750,000............ 907,753 1,216,233 1,524,713 1,525,193 1,525,673 1,526,153 1,703,926
3,000,000............ 991,753 1,328,233 1,664,713 1,665,193 1,665,673 1,666,153 1,858,926
3,250,000............ 1,075,753 1,440,233 1,804,713 1,805,193 1,805,673 1,806,153 2,013,926
3,500,000............ 1,159,753 1,552,233 1,944,713 1,945,193 1,945,673 1,946,153 2,168,926
3,750,000............ 1,243,753 1,664,233 2,084,713 2,085,193 2,085,673 2,086,153 2,323,926
4,000,000............ 1,327,753 1,776,233 2,224,713 2,225,193 2,225,673 2,226,153 2,478,926
</TABLE>
The Retirement Plan is a defined benefit, career average plan which is
periodically updated in order to provide pension benefits which are more
reflective of current creditable earnings. The most recent update was effective
January 1, 1998. The Retirement Plan provides that annual creditable earnings
are determined by an employee's January 1st base salary plus overtime and
Warner-Lambert Incentive Compensation Plan awards. The Retirement Plan provides
that, in the event of a change in control of Warner-Lambert (as defined in such
plan), (i) the benefits of participants will be afforded certain additional
protection for a limited period of time and (ii) if certain actions are taken
with respect to the Retirement Plan, any surplus assets then held in the trust
will inure to the benefit of participants and their beneficiaries. Credited
years of service under the Retirement Plan, as of December 31, 1999, for each of
the executive officers named in the Summary Compensation Table are: Lodewijk J.
R. de Vink -- 11.0 years; Melvin R. Goodes -- 32.8 years; Ernest J.
Larini -- 23.0 years; Anthony H. Wild -- 4.0 years; J. Frank Lazo 27.7 years;
and Peter B. Corr 1.0 year.
The Supplemental Plan was established to attract and retain employees in
senior managerial positions by providing supplemental pension income in amounts
reasonably related to their compensation and length of service with
Warner-Lambert. Benefits under the Supplemental Plan are based upon average
final compensation (the total amount of an employee's compensation for the three
calendar years during which such employee's compensation was the highest of the
five-year period of service ending with such employee's early or normal
retirement date, divided by three). Compensation for this purpose is the sum of
the employee's January 1st base salary plus compensation under the
Warner-Lambert Incentive Compensation Plan. The benefit under the Supplemental
Plan is reduced by the benefit payable under the Retirement Plan and certain
other retirement benefits including Social Security. The Supplemental Plan also
provides for payment to eligible employees of amounts they would have received
under the Retirement Plan in the absence of certain limitations imposed by the
Employee Retirement Income Security Act of 1974 and subsequent legislation, and
provides for payment to eligible employees of amounts they would have received
under the Retirement Plan if deferred incentive awards had been included in
creditable earnings under such plan. The Supplemental Plan provides that, in the
event of a change in control of Warner-Lambert (as defined in such plan),
(i) employees 55 years of age and older who meet certain salary level
requirements and who would have become eligible to receive Supplemental Plan
benefits upon retirement will receive such benefits upon retirement and
(ii) post-employment consulting requirements set forth in the Supplemental Plan
would no longer be applicable. Credited years of service under the Supplemental
Plan, as of December 31, 1999, for each of the executive officers named in the
Summary Compensation Table are: Lodewijk J. R. de Vink -- 9.8 years; Melvin R.
Goodes -- 19.0 years; Ernest J. Larini -- 11.8 years; Anthony H. Wild -- 4.8
years; J. Frank Lazo -- 7.7 years; and Peter B. Corr -- 1.2 years.
56
<PAGE>
TERMINATION OF EMPLOYMENT AND CHANGE IN CONTROL ARRANGEMENTS AND OTHER MATTERS
Warner-Lambert has severance policies which provide for payments of up to
twenty-four months' salary depending upon several factors, including age and
length of service, subject to modifications made by the Warner-Lambert Executive
Severance Plan (the 'Executive Severance Plan').
The Executive Severance Plan provides benefits in the event of a change in
control of Warner-Lambert (as defined in such plan) to those employees,
essentially officers, who are subject to the reporting requirements of
Section 16(a) of the Securities Exchange Act of 1934, as amended. A change in
control is deemed to generally have occurred upon the acquisition of the voting
power of 20% or more of Warner-Lambert's outstanding securities, shareholder
approval of a merger, consolidation, sale or disposition of substantially all of
Warner-Lambert's assets or a change in more than half of Warner-Lambert's Board
of Directors. The Executive Severance Plan provides for severance benefits,
which are payable only if a participant leaves the employ of Warner-Lambert for
any reason other than termination for just cause (as defined in such plan)
within three years after a change in control, of thirty-six months' salary and
bonus and a pro-rata bonus for the year of termination, calculated through the
date of termination. The executive must be provided with six months notice of
such termination of employment. The executive will also be eligible to receive
36 months of welfare benefit continuation (including age credit), certain
outplacement services, and will receive credit for 36 additional months of
service under Warner-Lambert's pension plan and savings and stock plan. The
Executive Severance Plan also provides special payments to participants to
reimburse them for any federal excise tax or similar state or local tax that may
be imposed on payments received following a change in control. Warner-Lambert
has also established an Enhanced Severance Plan, which is similar to the
Executive Severance Plan, for all United States non-hourly employees who are not
eligible to participate in the Executive Severance Plan.
In addition, in the event of a change in control of Warner-Lambert (as
defined), the benefits in Warner-Lambert's Excess Savings Plan become fully
vested.
Pursuant to the terms of Warner-Lambert's equity compensation plans, upon a
change in control (as defined in such plans), all unvested options to purchase
Warner-Lambert stock become vested and exercisable and the restrictions with
respect to restricted stock lapse.
COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Warner-Lambert's executive compensation programs are designed to attract,
retain and motivate the broad based executive talent required to achieve its
business objectives and increase stockholder value. The Company's executive
compensation programs are administered by the Compensation Committee of the
Board of Directors (the 'Committee') which is comprised of the individuals
listed below. The Committee members are outside directors of the Company with
responsibility for all compensation matters for Warner-Lambert's executive
officers. The Committee selected the outside compensation consultants who advise
the Committee and Management on compensation matters.
GENERAL
Total compensation for Warner-Lambert's executive officers consists of a
base salary, annual cash bonus and long-term incentives, which include stock
options and restricted stock. The annual bonus and long-term incentives
introduce risk to the total executive compensation package. These compensation
components are variable, may fluctuate significantly from year to year and are
directly tied to Company and individual performance.
To ensure that Management's interest in the Company is aligned with those of
its stockholders, a significant portion of executive compensation is delivered
through the equity component. Stock options are tied to the long-term
performance of Warner-Lambert and are used to provide an incentive that focuses
attention on managing the Company from an owner's perspective. Restricted stock
grants are used selectively to build stock ownership and to promote a long-term
focus by restricting the holder's ability to sell, transfer or assign the shares
until the end of the specified vesting period when the restrictions lapse. The
combination of stock options and restricted stock grants provides a level of
risk and upside opportunity that encourages Management performance in the
achievement of the Company's long-term goals and objectives. To further align
Management's interests with Warner-
57
<PAGE>
Lambert's stockholders, the Committee has established formal stock ownership
goals for key members of Management with the intent that each individual invest
a certain dollar amount in shares of Warner-Lambert Common Stock.
The Committee annually reviews the competitiveness of the Company's
executive compensation programs within the industries in which it
competes -- Pharmaceutical, Consumer Health Care and Confectionery. The
companies in this compensation peer group include the companies that are in the
industry peer group index in the Five-Year Cumulative Total Shareholder Return
graph. In addition, this compensation peer group also includes several leading
consumer products companies that, together with the industry peer group,
represent the broader marketplace for the Company's executive talent. The
Committee's outside compensation consultants agree that the companies in the
group are appropriate benchmarks for Warner-Lambert.
Warner-Lambert targets a level of total compensation (base salary, annual
bonus and stock awards) above the median total compensation of its comparator
group for like jobs, adjusted for company size. Since stock awards represent a
significant portion of the executives' total compensation, the overall
compensation package provides both downside risk and upside opportunity that
encourages the executives' performance in the achievement of the Company's
long-term goals and objectives.
The Committee continues to review executive compensation in light of Section
162(m) of the Internal Revenue Code ('Section 162(m)'), which establishes a
limit on the deductibility of annual compensation for certain executive officers
that exceeds $1,000,000. It is the general intention of the Committee to meet
the requirements for deductibility under Section 162(m); however, the Committee
reserves the right, where merited by changing business conditions or an
executive's individual performance, to authorize compensation payments which may
not be fully deductible by the Company. The Committee will re-examine this
policy on an on-going basis.
EXECUTIVE OFFICERS' COMPENSATION
In determining increases to executive officer compensation, the Committee
considered Company performance, including both financial and nonfinancial
indicators, individual performance, the business environment in which the
Company operated and competitive compensation trends.
Base salary increases were determined based upon individual performance,
competitive compensation trends and a review of salaries for like jobs at the
companies comprising Warner-Lambert's compensation peer group.
With respect to annual cash bonuses, the maximum annual amount which may be
set aside for payment is first derived from a formula approved by stockholders.
This formula takes into account the Company's net profit for the year and the
amount of capital employed by the Company. The annual cash bonus that is
actually paid to an individual executive officer is then determined by reviewing
the performance of the business unit which the executive officer manages,
including sales, profit and return on assets managed, and the officer's
performance and position level within the Company. As a result of such review of
business and individual performance for the year 1999, total annual bonus awards
to the Company's executive officers as a group increased over the prior year. A
majority of each individual award was based on Company and business unit
performance, with the remainder based on individual performance.
The Committee has established annual stock option award guidelines for each
position level within the Company. These guidelines provide for a range of
options to be granted from zero shares up to a maximum number of shares. The
Committee annually reviews competitive data from the compensation peer group and
the estimated value of the Company's stock options to develop these guidelines.
The actual stock option award granted to a Company executive is based upon the
individual's overall job performance and specific contributions to Company
performance for the prior year. While factors such as Company performance are
considered in determining the number of stock options to be granted, the
individual's current performance and contributions to Company performance are
the primary determinants in these deliberations. In January, 1999, the terms and
conditions of the Company's 1996 Stock Option Plan were amended to provide that
option holders who retire from the Company may exercise all outstanding options
the individual holds.
58
<PAGE>
CEO COMPENSATION -- MR. MELVIN R. GOODES
The following is a description of the Committee's decisions with regard to
Mr. Goodes' 1999 compensation. Mr. Goodes retired from the Company on April 30,
1999. In 1999, while he was CEO, Mr. Goodes received a salary increase of
approximately 8%, an annual cash bonus of $2,028,800 and an annual stock option
grant of 392,550 shares, based on a review of his prior year job performance and
his compensation relative to his peers at companies comparable to
Warner-Lambert. The stock options have an exercise price equal to the fair
market value on the date of grant and are exercisable for a ten-year term.
Following his retirement, Mr. Goodes received a pro rata portion of his 1999
annual cash bonus equal to $1,000,000. In determining Mr. Goodes' bonus, the
Committee considered several Company financial performance measures, as well as
Mr. Goodes' individual performance during the period in 1999 while he served as
CEO. The Committee did not attach specific weights or values to the various
factors considered.
CEO COMPENSATION -- MR. LODEWIJK J.R. DE VINK
The following is a description of the Committee's decisions with regard to
Mr. de Vink's 1999 compensation as CEO.
Mr. de Vink was elected CEO on May 1, 1999. As a result of his election, the
Committee increased Mr. de Vink's salary by 10%, based on a review of his
compensation relative to CEOs at companies comparable to Warner-Lambert. Mr. de
Vink's employment agreement, provides for a minimum annual salary, which may be
increased but not decreased. Effective March, 2000, the Committee increased Mr.
de Vink's salary by 18%, thus establishing a new minimum annual salary under the
terms of his employment agreement. In addition, in 2000, Mr. de Vink received an
annual cash bonus of $1,558,500 and an annual stock option grant of 471,000
shares. The stock options have an exercise price equal to the fair market value
on the date of grant and are exercisable for a ten-year term.
In considering Mr. de Vink's base salary increase, annual bonus and stock
option grant, each effective in 2000, the Committee considered several Company
financial performance measures for 1999, as well as Mr. de Vink's individual
performance during the year. In determining Mr. de Vink's compensation, the
Committee did not attach specific weights or values to the various factors
considered.
The Committee considered the Company's sales, profits and earnings per share
for 1999, which measures exceeded expectations. During 1999, the Company
recorded four consecutive quarters of earnings growth in excess of 25% over
prior year results. In addition, Warner-Lambert's share price rose 9% as of
year-end 1999, resulting in a market capitalization of $70.6 billion. For 1999,
the Company achieved a number 2 ranking in stock price appreciation, compared to
that of its industry peer group; and for the five-year period ending 1999, the
Company achieved a number 1 ranking, compared to that of its compensation peer
group.
The Committee also reviewed Mr. de Vink's key accomplishments in 1999, as
follows:
Acquired Agouron Pharmaceuticals, an integrated pharmaceutical company
engaged in the discovery and development of innovative therapeutic products
for the treatment of cancer, AIDS and other serious diseases
Announced an agreement with Sankyo Co., Ltd. to co-develop and market a
second-generation compound from the glitazone class to treat type 2
diabetes
Received approval from the U.S. Food and Drug Administration to market
femhrt'r', a continuous combined estrogen replacement product
Made available the Company's QUANTERRA herbal remedies through
Healthshop.com, a natural health e-commerce company/a natural health
e-commerce site on the Internet
Acquired the gum, sugar and wafer confectionery business of Kraft Lacta
Suchard Brasil S.A.
Joined with PlanetRx.com, a leading Internet healthcare destination for
commerce, content and community, for a first-of-its kind marketing and
e-commerce alliance to bring the Company's disease state management
programs directly to consumers
Continued to focus on worldwide productivity and cost-effectiveness
Successfully completed all material projects relating to Y2K compliance
59
<PAGE>
Received numerous awards during 1999, including Platinum List (Forbes),
Number 42 (Financial Times Global 500), Number 157, up from 192 in 1998
(Fortune 500 Companies), 100 Best Companies for Working Mothers (Working
Mother), LIPITOR 'Brand of the Year' (Med Ad News), 100 Best Managed
Companies (Industry Week), Warner-Lambert Board one of five 'Best' in 1999
(Chief Executive Magazine)
The Committee noted Mr. de Vink's leadership role in the Company's
quantitative and qualitative achievements.
COMPENSATION COMMITTEE MEMBERS
Alex J. Mandl, Chairman
Donald C. Clark
John A. Georges
William R. Howell
George A. Lorch
60
<PAGE>
PERFORMANCE GRAPH
The graph set forth below compares the yearly percentage change in
Warner-Lambert's cumulative total shareholder return on its Common Stock to the
cumulative total return of the Standard & Poor's 500 Stock Index (the 'S&P 500')
and a peer group index comprised of Abbott Laboratories, American Home Products
Corporation, Bristol-Myers Squibb Company, Eli Lilly and Company, Johnson &
Johnson, Merck & Co., Inc., Pfizer Inc. and Schering-Plough Corporation.
WARNER-LAMBERT COMPANY
Cumulative Total Shareholder Return for
Five-Year Period Ending December 31, 1999*
[PERFORMANCE GRAPH]
<TABLE>
<CAPTION>
December 31... 1994 1995 1996 1997 1998 1999
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Warner-Lambert 100.0 130.06 205.57 345.23 633.35 698.14
S&P 500 100.0 137.45 168.92 225.20 289.43 350.26
Peer Group 100.0 161.07 202.64 315.15 463.90 402.18
- -------------------------------------------------------------------------------------
</TABLE>
*Assumes that the value of the investment in Warner-Lambert Common Stock and
each index was $100 on December 31, 1994 and that all dividends were reinvested.
61
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
SECURITY OWNERSHIP OF OFFICERS AND DIRECTORS
The following table sets forth information, as of February 29, 2000,
regarding beneficial ownership of Warner-Lambert Common Stock by each director,
each of the executive officers named in the Summary Compensation Table and all
directors and executive officers as a group:
<TABLE>
<CAPTION>
NUMBER OF COMMON
SHARES AND
SHARE
NAME EQUIVALENTS(1)(2)
- ---- -----------------
<S> <C>
Robert N. Burt.................................... 24,643
Donald C. Clark................................... 135,323
Peter B. Corr..................................... 34,370(3)
Lodewijk J.R. de Vink............................. 2,280,404(3)
John A. Georges................................... 84,750
Melvin R. Goodes.................................. 3,750,230(3)
William H. Gray III............................... 26,516
William R. Howell................................. 23,280
Ernest J. Larini.................................. 961,964(3)
J. Frank Lazo..................................... 1,201,960(3)
LaSalle D. Leffall, Jr............................ 51,715
George A. Lorch................................... 16,217
Alex J. Mandl..................................... 23,568
Michael I. Sovern................................. 19,196
Anthony H. Wild................................... 470,127(3)
All executive officers and directors as a group
(27)............................................ 14,671,767
</TABLE>
- ---------
(1) As of February 29, 2000, no individual named in the Table owned more than
1%, and all executive officers and directors as a group owned approximately
1.7% of the outstanding shares of Common Stock.
(2) Each of the above persons has (or will have upon the exercise of options
exercisable within sixty days) sole voting and investment power with respect
to all shares shown as beneficially owned by such person, except for an
aggregate of 108,000 shares granted to the non-employee directors named
above, pursuant to the Restricted Stock Plan for Directors of Warner-Lambert
Company. Each director has the power to direct the vote of such shares. The
shareholdings listed above also include shares of Common Stock equivalents
held pursuant to Warner-Lambert's deferred compensation arrangements for
non-employee directors, as follows: Mr. Burt 5,682, Mr. Clark 107,494, Mr.
Georges 56,030, Mr. Gray 14,311, Mr. Howell 10,080, Dr. Leffall 36,510, Mr.
Lorch 3,617, Mr. Mandl 11,568 and Mr. Sovern 7,196. The shareholdings listed
above also include shares of Common Stock and Common Stock equivalents held
pursuant to Warner-Lambert's benefit plans as follows: Mr. de Vink 2,579,
Mr. Goodes 5,480, Mr. Larini 17,187, Dr. Wild 247, Mr. Lazo 3,335 and Dr.
Corr 45.
(3) Includes shares subject to options or rights granted pursuant to the
Company's stock plans exercisable within sixty days of February 29, 2000, as
follows: by Mr. de Vink 2,277,825, Mr. Goodes 3,744,750, Mr. Larini 939,386,
Dr. Wild 460,586, Mr. Lazo 1,198,625, Dr. Corr 14,325 and all executive
officers and directors as a group 13,967,913.
Warner-Lambert believes that stock ownership by its executive officers is
important to promote an identification of the interests of Management with
Warner-Lambert's stockholders. Accordingly, the Compensation Committee has
established stock ownership goals for its key members of Management with the
intent that each individual invest a certain dollar amount in shares of
Warner-Lambert Common Stock equal to a multiple ranging from six to ten times
the salary for such individual, depending on such individual's position level.
For purposes of this program, the amount of shares of Common Stock held by the
officer includes shares held directly and indirectly, shares and share
62
<PAGE>
equivalents held under Warner-Lambert's benefit plans, 50% of vested,
unexercised stock options and 50% of restricted stock.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 requires
Warner-Lambert's officers and directors to file reports of ownership and changes
in ownership with the Securities and Exchange Commission and the New York Stock
Exchange. Warner-Lambert believes that during 1998 its officers and directors
complied with all applicable Section 16(a) filing requirements, except that Mr.
John Georges, a director, filed one late Form 4 report, covering one
transaction; Mr. Philip Gross, an officer, filed six late Form 4 reports,
covering eight transactions; and Mr. Harold Oberkfell filed one amended Form 5
report, covering one transaction.
SECURITY OWNERSHIP OF WARNER-LAMBERT
The following table sets forth information with respect to the persons known
to Warner-Lambert to own beneficially more than 5% of Warner-Lambert's Common
Stock, as of December 31, 1999:
<TABLE>
<CAPTION>
NAME AND ADDRESS OF AMOUNT AND NATURE OF PERCENT OF
BENEFICIAL OWNER BENEFICIAL OWNERSHIP CLASS
- ---------------- -------------------- -----
<S> <C> <C>
FMR Corp.
82 Devonshire Street
Boston, Massachusetts 02109........................... 56,591,474(1) 6.590%
</TABLE>
- ---------
(1) As reported on Amendment No. 1 to Schedule 13G filed with the Securities and
Exchange Commission, as of December 31, 1999, FMR beneficially owned and had
sole power to dispose of 56,591,474 shares. FMR's direct and indirect
subsidiaries reported holding the following amount of shares in Warner
Lambert Company: Fidelity Management & Research Company was the beneficial
owner of 51,904,741 shares, Fidelity Management Trust Company was the
beneficial owner of 3,891,381 shares and Fidelity International LTD was the
beneficial owner of 723,152 shares.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not Applicable.
63
<PAGE>
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(A) 1. ALL FINANCIAL STATEMENTS
The following items are included in 'Item 8. -- Financial Statements and
Supplementary Data' Part II of this report:
Consolidated Statements of Income and Comprehensive Income for
each of the three years in the period ended December 31, 1999.
Consolidated Balance Sheets at December 31, 1999 and 1998.
Consolidated Statements of Cash Flows for each of the three years
in the period ended December 31, 1999.
Notes to Consolidated Financial Statements.
Report by Management.
Report of Independent Accountants.
2. FINANCIAL STATEMENT SCHEDULE
Included in Part IV of this report:
Report of Independent Accountants on Financial Statement Schedule.
Schedule II -- Valuation and Qualifying Accounts.
Schedules other than those listed above are omitted because they are not
applicable.
3. EXHIBITS
(2) Plan of Acquisition, Reorganization, Arrangement, Liquidation of
Succession.
(a) Agreement and Plan of Merger dated as of November 3, 1999 among
Warner-Lambert Company, American Home Products Corporation and
Wolverine Sub Corp. (Incorporated by reference to Warner-Lambert's
Current Report on Form 8-K filed on November 8, 1999 (File No.
1-3608)).
(b) Agreement and Plan of Merger dated as of February 6, 2000 among
Pfizer Inc., Seminole Acquisition Sub Corp. and Warner-Lambert
Company (Incorporated by reference to Warner-Lambert's Current
Report on Form 8-K filed on February 18, 2000 (File No. 1-3608)).
(3) Articles of Incorporation and By-Laws.
(a) Restated Certificate of Incorporation of Warner-Lambert Company
filed November 10, 1972, as amended to April 28, 1998 (Incorporated
by reference to Warner-Lambert's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 (File No. 1-3608)).
(b) By-Laws of Warner-Lambert Company, as amended to April 1, 1999
(Incorporated by reference to Warner-Lambert's Form 10-K/A for
the fiscal year ended December 31, 1998 (File No. 1-3608)).
(4) Instruments defining the rights of security holders, including
indentures.
(a) Amended and Restated Rights Agreement, dated as of March 25, 1997,
between Warner-Lambert Company and First Chicago Trust Company of
New York, as Rights Agent (Incorporated by reference to
Warner-Lambert's Registration Statement on Form 8-A, dated
June 28, 1988, as amended by Form 8-A/A, dated July 5, 1989, by
Form 8-A/A, dated March 27, 1997, by Form 8-A12B/A, dated
November 12, 1999 and by Form 8-A12B/A, dated February 18, 2000
(File No. 1-3608)).
(b) Warner-Lambert agrees to furnish to the Commission, upon request, a
copy of each instrument with respect to issues of long-term debt of
Warner-Lambert. The principal amount of debt issues authorized
under each such instrument does not exceed 10% of the total assets
of Warner-Lambert.
64
<PAGE>
(10) Material contracts.
<TABLE>
<S> <C>
(a)* Warner-Lambert Company 1989 Stock Plan, as amended to
February 6, 2000.
(b)* Warner-Lambert Company 1992 Stock Plan, as amended to
February 6, 2000.
(c)* Warner-Lambert Company 1996 Stock Plan, as amended to
February 6, 2000.
(d)* Warner-Lambert Company Incentive Compensation Plan, as
amended to February 6, 2000.
(e)* Warner-Lambert Company Supplemental Pension Income Plan, as
amended to February 6, 2000.
(f)* Group Plan Participation by Non-employee Directors
(Incorporated by reference to Warner-Lambert's Form 10-K for
the fiscal year ended December 31, 1991 (File No. 1-3608)).
(g)* Warner-Lambert Company Directors' Retirement Plan, as
amended to June 1, 1995 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the
quarter ended June 30, 1995 (File No. 1-3608)).
(h)* Warner-Lambert Excess Savings Plan, formerly Warner-Lambert
Supplemental Savings Plan, as amended to February 6, 2000.
(i)* Warner-Lambert Company Executive Severance Plan, as amended
to October 1, 1997 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999 (File No. 1-3608)).
(j)* Restricted Stock Plan for Directors of Warner-Lambert
Company, as amended to February 6, 2000.
(k)* Employment Agreement dated September 24, 1985 between
Warner-Lambert Company and Melvin R. Goodes, Chairman of the
Board and Chief Executive Officer, as amended to August 1,
1991 (Incorporated by reference to Warner-Lambert's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1991 (File No. 1-3608)).
(l)* Employment Agreement effective 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 (Incorporated by reference to
Warner-Lambert's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1999 (File No. 1-3608)).
(m)* Consulting Agreement effective May 1, 1999 between
Warner-Lambert Company and Melvin R. Goodes (Incorporated by
reference to Warner-Lambert's Quarterly Report on Form 10-Q
for the Quarter ended March 31, 1999 (File No. 1-3608)).
</TABLE>
(12) Computation of Ratio of Earnings to Fixed Charges.
(21) Subsidiaries of the registrant.
(23) Consent of Independent Accountants.
(27) Financial Data Schedule (EDGAR filing only).
(99) Cautionary Statements Relating to 'Safe Harbor' Provisions of the
Private Securities Litigation Reform Act of 1995.
- ---------
* Management contract or compensatory plan or arrangement required to be filed
as an exhibit to this Form 10-K pursuant to Item 14(c).
(b) REPORTS ON FORM 8-K
(1) A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on November 8, 1999 in connection with the Company entering into
an Agreement and Plan of Merger (the 'Merger Agreement') with American Home
Products Corporation, a Delaware corporation ('AHP') and Wolverine Sub Corp.
65
<PAGE>
(2) A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on November 9, 1999 in connection with the joint Warner-Lambert
and AHP press release and the Joint Analyst Presentation by AHP
and Warner-Lambert.
(3) A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on November 12, 1999 in connection with the Amendment to the
Rights Agreement dated as of November 3, 1999 entered into between
Warner-Lambert and First Chicago Trust Company (the 'Rights Agent') amending
the Amended and Restated Rights Agreement, dated as of March 25, 1997,
between Warner-Lambert and the Rights Agent.
(4) A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on November 16, 1999 in connection with the release of the terms
of the agreements related to the LIPITOR arrangement between the Company and
Pfizer pursuant to an understanding between Warner-Lambert and Pfizer
reached on November 15, 1999.
(5) A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on November 22, 1999 in connection with the visual portion of
the Joint Analyst Presentation of the Company and AHP.
(6) A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on November 30, 1999 in connection with an answer and
counterclaim filed by the Company in the Delaware Court of Chancery in
response to a complaint filed by Pfizer on November 23, 1999.
(7) A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on December 2, 1999 in connection with a letter the board of
directors of Warner-Lambert sent to the shareholders of Warner-Lambert on
December 2, 1999 relating to the proposed merger of the Company and AHP.
(8) A Current Report on Form 8-K was filed with the Securities and Exchange
Commission on December 20, 1999 in connection with the filing of Restated
Financial Statements including the financial results of Agouron
Pharmaceuticals Inc.
Warner-Lambert will furnish to any holder of its securities, upon request
and at a reasonable cost, copies of the Exhibits listed in Item 14.
TRANSFER AGENT, REGISTRAR AND DIVIDEND PURCHASING AGENT
First Chicago Trust Company, a division of EquiServe, P.O. Box 2500, Jersey
City, NJ 07303-2500; 1-800-446-2617; E-mail: [email protected]; TDD:
201-222-4955.
66
<PAGE>
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
REPORT OF INDEPENDENT ACCOUNTANTS ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
WARNER-LAMBERT COMPANY
Our audits of the consolidated financial statements referred to in our
report dated January 24, 2000, except for Note 6, as to which the date is
February 7, 2000, appearing on page 28 of this Form 10-K, also included an audit
of the Financial Statement Schedule listed in Item 14(a)2 of this Form 10-K. In
our opinion, this Financial Statement Schedule presents fairly, in all material
respects, the information set forth therein when read in conjunction with the
related consolidated financial statements.
PRICEWATERHOUSECOOPERS LLP
400 Campus Drive
Florham Park, New Jersey
January 24, 2000
67
<PAGE>
SCHEDULE II
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998 AND 1997
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO BALANCE
BEGINNING COSTS AND AT END
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS OF YEAR
----------- ------- -------- ---------- -------
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C>
Year ended December 31, 1999:
Allowance for doubtful accounts.................. $ 30.6 $ 15.3 $ 6.5 $ 39.4
Allowance for discounts and customer claims...... 112.1 380.9 347.8 145.2
Allowance for deferred tax assets................ 34.4 24.4 13.7 45.1
------ ------ ------ ------
$177.1 $420.6 $368.0 $229.7
------ ------ ------ ------
------ ------ ------ ------
Year ended December 31, 1998:
Allowance for doubtful accounts.................. $ 34.8 $ 11.8 $ 16.0 $ 30.6
Allowance for discounts and customer claims...... 60.7 273.4 222.0 112.1
Allowance for deferred tax assets................ 28.9 14.4 8.9 34.4
------ ------ ------ ------
$124.4 $299.6 $246.9 $177.1
------ ------ ------ ------
------ ------ ------ ------
Year ended December 31, 1997:
Allowance for doubtful accounts.................. $ 36.6 $ 4.2 $ 6.0 $ 34.8
Allowance for discounts and customer claims...... 39.5 299.3 278.1 60.7
Allowance for deferred tax assets................ 50.2 5.4 26.7 28.9
------ ------ ------ ------
$126.3 $308.9 $310.8 $124.4
------ ------ ------ ------
------ ------ ------ ------
</TABLE>
68
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON
ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
WARNER-LAMBERT COMPANY
Registrant
Dated as of March 28, 2000 By /S/ LODEWIJK J. R. DE VINK
..............................................
Lodewijk J. R. de Vink
Chairman of the Board,
President and Chief Executive Officer
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<S> <C> <C>
/S/ LODEWIJK J. R. DE VINK
By ................................................
Lodewijk J. R. de Vink
Chairman of the Board, President
and Chief Executive Officer
(Principal Executive Officer)
and Director
/S/ ERNEST J. LARINI
By ................................................
Ernest J. Larini
Chief Financial Officer and
Executive Vice President Administration
(Principal Financial Officer)
March 28, 2000
/S/ JOSEPH E. LYNCH
By ................................................
Joseph E. Lynch
Vice President and Controller
(Principal Accounting Officer)
/S/ ROBERT N. BURT
By ................................................
Robert N. Burt, Director
/S/ DONALD C. CLARK
By ................................................
Donald C. Clark, Director
</TABLE>
69
<PAGE>
<TABLE>
<S> <C> <C>
/S/ JOHN A. GEORGES
By ................................................
John A. Georges, Director
/S/ WILLIAM H. GRAY III
By ................................................
William H. Gray III, Director
/S/ WILLIAM R. HOWELL
By ................................................
William R. Howell, Director
/S/ LASALLE D. LEFFALL, JR.
By ................................................
LaSalle D. Leffall, Jr., M.D., Director March 28, 2000
/S/ GEORGE A. LORCH
By ................................................
George A. Lorch, Director
/S/ ALEX J. MANDL
By ................................................
Alex J. Mandl, Director
/S/ MICHAEL I. SOVERN
By ................................................
Michael I. Sovern, Director
</TABLE>
70
STATEMENT OF DIFFERENCES
The registered trademark symbol shall be expressed as............... 'r'
The Greek letter Mu shall be expressed as........................... 'u'
<PAGE>
EXHIBIT 10(a)
________________________________________________________________________________
WARNER-LAMBERT COMPANY
-------------------
1989 STOCK PLAN
AS AMENDED TO FEBRUARY 6, 2000
________________________________________________________________________________
<PAGE>
WARNER-LAMBERT COMPANY
1989 STOCK PLAN
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. Purpose. The purpose of the 1989 Stock Plan is to provide
additional incentive to the officers and other employees of the Company (as
hereinafter defined) and to recognize and reward efforts and accomplishments in
order to strengthen the desire of employees to remain with the Company,
stimulate their efforts on behalf of the Company and attract and retain persons
of competence, and, by encouraging ownership of a stock interest in the Company,
to gain for the organization the advantages inherent in employees having a sense
of proprietorship.
ARTICLE II
DEFINITIONS
SECTION 2.1. Definitions. Whenever used herein, unless the context otherwise
indicates, the following terms shall have the respective meaning set forth
below:
Act: The Securities Exchange Act of 1934, as amended.
Board of Directors (or Board): The Board of Directors of Warner-Lambert.
Code: The Internal Revenue Code of 1986, as amended.
Committee: The committee appointed to administer the Plan in accordance with
Section 11.1 hereof.
Common Stock: Common Stock, par value $1.00 per share, of Warner-Lambert.
Company: Warner-Lambert and its Subsidiaries.
Employee: Officers and other employees of the Company (including such
persons who are also members of the Board of Directors).
Fair Market Value: As used in the Plan, the term 'Fair Market Value' shall
be the mean between the high and low sales prices for Common Stock of
Warner-Lambert Company on the Composite Tape for New York Stock Exchange issues
on the date the calculation thereof shall be made. In the event the date of
calculation shall be on a date which shall not be a trading date on the New York
Stock Exchange, determination of Fair Market Value shall be made as of the first
date prior theretowhich shall have been a trading date on the New York Stock
Exchange.
Grantee: A Participant to whom Rights have been granted in accordance with
the provisions of Articles IV and VI hereof.
Option: The grant to Participants of options to purchase shares of Common
Stock in accordance with the provisions of Articles IV and V hereof.
Optionee: A Participant to whom Options have been granted in accordance with
the provisions of Articles IV and V hereof.
Option Period: The period of time during which an Option may be exercised in
accordance with the provisions hereof.
Option Price: The price per share payable to the Company for shares of
Common Stock upon the exercise of an Option.
Participant: Each Employee to whom a Stock Award is granted under the Plan.
Performance Awards: Awards made to Employees in accordance with the
provisions of Article VIII hereof.
Plan: The Warner-Lambert Company 1989 Stock Plan.
Reference Option: An Option, other than an incentive stock option, to which
a Right shall relate.
1
<PAGE>
Reporting Person: A person subject to the reporting requirements of Section
16(a) of the Act.
Restricted Period: The period of time from the date of grant of Restricted
Stock until the lapse of restrictions attached thereto.
Restricted Stock: Common Stock granted under the Plan which is subject to
restrictions in accordance with the provisions of Article VII hereof.
Right: The grant to Participants of rights to acquire shares of Common Stock
in accordance with the provisions of Articles IV and VI hereof.
Spread: The amount by which the Option Price that would be payable by the
Grantee upon the exercise of the Reference Option is less than the Fair Market
Value of a share of Common Stock on the date the related Right was granted.
Stock Award: A grant of Options, Rights, Restricted Stock or Performance
Awards in accordance with the provisions hereof.
Subsidiary: Any corporation (other than Warner-Lambert) in an unbroken chain
of corporations beginning with and including Warner-Lambert if, at the time of
the granting of a Stock Award, each of the corporations other than the last
corporation in said unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
Valuation Date: The date on which the exercise of a Right is effective.
Warner-Lambert: Warner-Lambert Company or any successor to it in ownership
of substantially all of its assets, whether by merger, consolidation or
otherwise.
ARTICLE III
ELIGIBILITY AND GRANTS
SECTION 3.1. Eligibility and Grants. The Committee shall determine the
Employees who shall be granted Stock Awards and the number of shares thereof.
The Committee may make more than one grant to an Employee during the life of the
Plan. Each grant shall be evidenced by a written instrument duly executed by or
on behalf of the Company.
SECTION 3.2. Share Limitation. The aggregate number of shares of Common
Stock which may be issued under the Plan shall not exceed 8,000,000 shares of
Common Stock which may be either authorized and unissued shares or issued shares
reacquired by the Company. Notwithstanding the above limitation, if any Option
granted under the Plan shall expire, terminate or be cancelled for any reason
without having been exercised in full, the corresponding number of unpurchased
shares shall again be available for the purposes of the Plan; provided, however,
that if such expired, terminated or cancelled Option shall have been a Reference
Option, none of such unpurchased shares shall again become available for
purposes of the Plan to the extent that the related Right granted under the Plan
is exercised. Further, if any shares of Common Stock granted hereunder are
forfeited or such award otherwise terminates without the delivery of such shares
upon the lapse of restrictions, the shares subject to such grant, to the extent
of such forfeiture or termination, shall again be available under the Plan. In
addition, any shares of Common Stock issued under the Plan through the
assumption or substitution of outstanding grants from an acquired company shall
not reduce the shares available under the Plan.
ARTICLE IV
GENERAL TERMS OF OPTIONS AND RIGHTS
SECTION 4.1. Consideration. The Committee shall determine the consideration
to the Company for the granting of Options and Rights under the Plan, as well as
the conditions, if any, which it may deem appropriate to ensure that such
consideration will be received by, or will accrue to, the Company, and, in the
discretion of the Committee, such consideration need not be the same, but may
vary for Options and Rights granted under the Plan at the same time or from time
to time.
2
<PAGE>
SECTION 4.2. Number of Options and Rights.
(a) The Committee may grant more than one Option or Right to an individual
during the life of the Plan and, subject to the requirements of Section 422A of
the Code with respect to incentive stock options, such Option or Right may be in
addition to, in tandem with, or in substitution for, options or rights
previously granted under the Plan or under another stock plan of the Company or
of another corporation and assumed by Warner-Lambert.
(b) The Committee may permit the voluntary surrender of all or a portion of
any Option granted under the Plan or any prior plan to be conditioned upon the
granting to the Employee of a new Option for the same or a different number of
shares as the Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Option to such Employee. Such new Option
shall be exercisable at the price, during the period, and in accordance with any
other terms or conditions specified by the Committee at the time the new Option
is granted.
SECTION 4.3. Option and Right Agreements. The Company shall effect the grant
of Options and Rights under the Plan, in accordance with determinations made by
the Committee, by execution of instruments in writing, in a form approved by the
Committee. Each Option and Right shall contain such terms and conditions (which
need not be the same for all Options and Rights, whether granted at the same
time or at different times) as the Committee shall deem to be appropriate. The
Committee may, in its sole discretion, and subject to such terms and conditions
as it may adopt, accelerate the date or dates on which some or all outstanding
Options and Rights may be exercised. Except as otherwise provided by the
Committee, Options and Rights shall be exercised by submitting to Warner-Lambert
a signed copy of a notice of exercise in a form to be supplied by Warner-Lambert
and the exercise of an Option or Right shall be effective on the date on which
Warner-Lambert receives such notice at its principal corporate offices.
SECTION 4.4. Non-Transferability of Option or Right. Except as otherwise
provided by the Committee, no Option or Right granted under the Plan to an
Employee shall be transferable by the Employee otherwise than by will or by the
laws of descent and distribution, and such Option and Right shall be
exercisable, during the Employee's lifetime, only by such Employee.
SECTION 4.5. Optionees and Grantees not Stockholders. An Optionee or Grantee
or legal representative thereof shall have none of the rights of a stockholder
with respect to shares subject to Options or Rights until such shares shall be
issued upon exercise of the Option or Right.
SECTION 4.6. Certain Events. (a) As used in the Plan, a 'Change in Control
of Warner-Lambert Company' shall be deemed to have occurred if (i) any person
(as such term is used in Sections 13(d) and 14(d)(2) of the Act is or becomes
the beneficial owner (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of Warner-Lambert Company representing 20% or more of
the combined voting power of Warner-Lambert Company's then outstanding
securities, (ii) upon the consummation of a merger, consolidation, sale or
disposition of all or substantially all of Warner-Lambert Company's assets or
plan of liquidation which is approved by shareholders of Warner-Lambert Company
(a 'Transaction'), or (iii) the composition of the Board of Directors of
Warner-Lambert Company (the 'Board') at any time during any consecutive
twenty-four (24) month period changes such that the Continuity Directors (as
hereinafter defined) cease for any reason to constitute at least fifty-one
percent (51%) of the Board. For purposes of the foregoing clause (iii),
'Continuity Directors' means those members of the Board who either (a) were
directors at the beginning of such consecutive twenty-four (24) month period, or
(b)(1) filled a vacancy during such twenty-four (24) month period created by
reason of (x) death, (y) a medically determinable physical or mental impairment
which renders the director substantially unable to function as a director or (z)
retirement at the last mandatory retirement age in effect for at least two (2)
years, and (2) were elected, nominated or voted for by at least fifty-one
percent (51%) of the current directors who were also directors at the
commencement of such twenty-four (24) month period. Notwithstanding the
provisions of Article II hereof, upon the exercise of a Right during the 30-day
period following Warner-Lambert Company obtaining actual knowledge of a Change
in Control of Warner-Lambert Company, 'Fair Market Value' of a share of Common
Stock on the Valuation Date shall be equal to the higher of (i) the highest
closing sale price per share of Common Stock of Warner-Lambert Company on the
Composite Tape for New York Stock Exchange issues during the period commencing
30 days prior to such Change in Control and ending
3
<PAGE>
immediately prior to such exercise or (ii) if the Change in Control of
Warner-Lambert Company occurs as a result of a tender or exchange offer or
approval by stockholders of Warner-Lambert Company of a Transaction, then the
highest price per share of Common Stock of Warner-Lambert Company pursuant
thereto. Any consideration other than cash forming a part or all of the
consideration for Common Stock to be paid pursuant to the exchange offer shall
be valued at the valuation placed thereon by the Board of Directors.
Adjustments, if any, shall be made in accordance with Section 10.1 hereof.
(b) As used in the Plan, a 'Merger of Equals' shall mean either: (a) a
Change in Control of Warner-Lambert Company, pursuant to the terms of which the
stockholders of Warner-Lambert Company receive consideration, including
securities, with an Aggregate Value (as defined below) not greater than 115
percent of the average closing price of the Common Stock of Warner-Lambert
Company on the Composite Tape for New York Stock Exchange issues for the twenty
business days immediately preceding the earlier of the execution of the
definitive agreement pertaining to the transaction or the public announcement of
the transaction; or (b) any other Change in Control of Warner-Lambert Company
which the Board of Directors, in its sole discretion, determines to be a 'Merger
of Equals' for the purposes of this provision. For purposes of this section,
'Aggregate Value' shall mean the consideration to be received by the
stockholders of Warner-Lambert Company equal to the sum of (A) cash, (B) the
value of any securities and (C) the value of any other non-cash consideration.
The value of securities received shall equal the average closing price of the
security on the principal security exchange on which such security is listed for
the twenty business days immediately preceding the earlier of the execution of
the definitive agreement pertaining to the transaction or the public
announcement of the transaction. For securities not traded on a security
exchange, and for any other non-cash consideration that is received, the value
of such security or such non-cash consideration shall be determined by the Board
of Directors.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
SECTION 5.1. Types of Options. Options granted under the Plan shall be in
the form of (i) incentive stock options as defined in Section 422A of the Code,
or (ii) options not qualifying under such section, or both, in the discretion of
the Committee. The status of each Option shall be identified in the Option
agreement.
SECTION 5.2. Option Price. The Option Price shall be such as shall be fixed
by the Committee but not less in any case than the Fair Market Value per share
for such stock on the date of the granting of the Option, subject to adjustment
pursuant to Section 10.1 hereof. The date of the granting of an Option under the
Plan shall be the date fixed by the Committee as the date for such Option for
the Employee who is to be the recipient thereof.
SECTION 5.3. Period of Option.
(a) No part of an Option may be exercised unless the Optionee remains in the
continuous employ of the Company for one year from the date the Option is
granted except that upon the occurrence of a Change in Control of Warner-Lambert
Company all Options may be exercised without giving effect to the one-year
limitation and the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) with respect to the percent of the total
number of shares to which the Option relates which may be purchased from time to
time during the Option Period.
(b) Options will be exercisable thereafter over the Option Period, which, in
the case of each Option, shall be a period determined by the Committee
(provided, however, that the term of an incentive stock option shall be a period
of not more than ten years from the date of the grant of such Option), and will
be exercisable at such times and in such amounts as determined by the Committee
at the time each Option is granted. Notwithstanding any other provision
contained in this Plan, no Option shall be exercisable after the expiration of
the Option Period. Except as provided in Sections 5.4, 5.5 and 5.6 hereof, no
Option may be exercised unless the Optionee is then in the employ of the Company
and shall have been continuously so employed since the date of the grant of such
Option.
SECTION 5.4. Termination of Employment Before Age 55. An Optionee whose
employment terminates before age 55, by reason other than death, shall be
entitled to exercise such Option, only
4
<PAGE>
within the three-month period after the date of such termination of employment
and in no event after the expiration of the Option Period, and then only if and
to the extent that the Optionee was entitled to exercise the Option at the date
of the termination of employment, giving effect to the limitations, if any,
which may have been imposed by the Committee pursuant to Section 5.3(b) with
respect to the percent of the total number of shares to which the Option relates
which may be purchased from time to time during the Option Period.
SECTION 5.5. Termination of Employment On or After Age 55. An Optionee whose
employment terminates on or after age 55, by reason other than death, shall be
entitled to exercise such Option if the Optionee was entitled to exercise the
Option at the date of the termination, without, however, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant to
Section 5.3(b) with respect to the percent of the total number of shares to
which the Option relates which may be purchased from time to time during the
Option Period; provided, however, that such Option shall be exercisable until
the later of (i) the three-year period after termination of employment, or (ii)
the period after termination of employment which is equal to the number of full
months that the Option has been outstanding prior to such termination, but in no
event after the expiration of the Option Period.
SECTION 5.6. Death of Optionee. If an Optionee should die:
(a) while in the employ of the Company, the Option theretofore granted
shall, if the Optionee was entitled to exercise the Option at the date of death,
be exercisable by the estate of the Optionee, or by a person who acquired the
right to exercise such Option by bequest or inheritance or by reason of the
death of the Optionee, without, however, giving effect to the limitations, if
any, which may have been imposed by the Committee pursuant to Section 5.3(b)
with respect to the percent of the total number of shares to which the Option
relates which may be purchased from time to time during the Option Period;
provided, however, that such Option shall be exercisable until the later of (i)
the three-year period after termination of employment, or (ii) the period after
termination of employment which is equal to the number of full months that the
Option has been outstanding prior to such termination and in no event after the
expiration of the Option Period;
(b) within the three-month period after the date of the termination of
employment before age 55, the Option theretofore granted shall be exercisable by
the estate of the Optionee, or by a person who acquired the right to exercise
such Option by bequest or inheritance or by reason of the death of the Optionee,
but then only if and to the extent that the Optionee was entitled to exercise
the Option at the date of death, giving effect to the limitations, if any, which
may have been imposed by the Committee pursuant to Section 5.3(b) with respect
to the percent of the total number of shares to which the Option relates which
may be purchased from time to time during the Option Period; provided, however,
that such Option shall be exercisable only within the twelve-month period next
succeeding the death of the Optionee and in no event after the expiration of the
Option Period; or
(c) after the date of the termination of employment on or after age 55, the
Option theretofore granted shall, if the Optionee was entitled to exercise the
Option at the date of death, be exercisable by the estate of the Optionee, or by
a person who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the Optionee, without, however, giving
effect to the limitations, if any, which may have been imposed by the Committee
pursuant to Section 5.3(b) with respect to the percent of the total number of
shares to which the Option relates which may be purchased from time to time
during the Option Period; provided, however, that such Option shall be
exercisable until the latest of (i) the three-year period after termination of
employment, (ii) the period after termination of employment which is equal to
the number of full months that the Option has been outstanding prior to such
termination, or (iii) the twelve-month period after the death of the Optionee
provided such death occurs before the later of (i) or (ii), but in no event
after the expiration of the Option Period.
SECTION 5.7. Payment for shares. Payment for shares of Common Stock
purchased shall be made in full at the time of exercise of the Option. Nothing
herein shall be construed to prohibit the Company from making a loan or advance
to the Optionee for the purpose of financing, in whole or in part, the purchase
of optioned shares. Payment of the Option Price shall be made in cash or, with
the consent of the Committee, in whole or in part in Common Stock, Stock Awards
or other consideration. Payment may also be made by delivering a properly
executed exercise notice together with irrevocable
5
<PAGE>
instructions to a third party to promptly deliver to the Company the amount of
sale or loan proceeds to pay the exercise price.
SECTION 5.8. Incentive Stock Options. Options granted in the form of
incentive stock options shall be subject, in addition to the foregoing
provisions, to the following provisions:
(a) Annual Limit. To the extent that the aggregate Fair Market Value
(determined at the time of grant) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by any Optionee
during any calendar year (under the Plan or under any other stock plan of
the Company) exceeds $100,000, such options shall be treated as options
which are not incentive stock options.
(b) Ten Percent Shareholder. No incentive stock option shall be granted
to any individual who, at the time of the proposed grant, owns Common Stock
possessing more than ten percent of the total combined voting power of all
classes of stock of Warner-Lambert or any Subsidiary.
(c) Option Period. No incentive stock option shall be exercisable after
the expiration of ten years from the date of grant.
The Company intends that Options designated by the Committee as incentive stock
options shall constitute incentive stock options under Section 422A of the Code.
Should any of the foregoing provisions not be necessary in order to so comply or
should any additional provisions be required, the Committee may amend the Plan
accordingly, without the necessity of obtaining the approval of stockholders of
Warner-Lambert.
SECTION 5.9. Rollover Options. Notwithstanding anything herein to the
contrary, in the event of a Merger of Equals all Options granted hereunder shall
become immediately exercisable by the Optionee and the Options shall be
converted into options to purchase the stock of the company which other
shareholders of Warner-Lambert Company receive in the transaction (the 'Rollover
Options'). The Rollover Options shall be subject to the same terms and
conditions as those applicable to the Options held prior to the Merger of
Equals, including, but not limited to, exercisability and Option Period, except
as hereinafter provided. If the Aggregate Value consists only of shares of a
publicly traded security ('New Security'), each Rollover Option shall entitle
the holder to purchase the number of shares of New Security which is equal to
the product of (a) the Exchange Ratio (as hereinafter defined) and (b) the
number of shares of Common Stock subject to the Option immediately prior to the
effective date of the Merger of Equals (rounded to the nearest full number of
shares). The exercise price for each Rollover Option shall be the exercise price
per share of each Option divided by the Exchange Ratio (rounded to the nearest
full cent). For purposes hereof, 'Exchange Ratio' shall mean the ratio for
exchanging Common Stock held by the stockholders of Warner-Lambert Company for
shares of New Security which is set forth in the definitive agreement pertaining
to the transaction. If the Aggregate Value consists of consideration other than
New Securities, the Board shall make appropriate adjustments to the number of
Rollover Options and the exercise price thereof. In addition, with respect to
Options granted after March 25, 1997, if an optionee who is not 55 years old is
terminated within three (3) years following the Merger of Equals (for a reason
other than 'Termination for Just Cause,' as defined in the Warner-Lambert
Company Enhanced Severance Plan), such optionee's Options shall remain
exercisable notwithstanding such termination of employment by the Company or any
successor or its affiliates and such Options shall be exercisable until two
years following the termination of employment, but in no event after the
expiration of the Option Period.
ARTICLE VI
TERMS OF RIGHTS
SECTION 6.1. Relation to Option. Each Right shall relate specifically to a
Reference Option, then held by, or concurrently granted to, the Grantee. Upon
exercise of a Right an amount shall be payable from Warner-Lambert, determined
in accordance with Section 6.3 hereof. The Reference Option shall terminate to
the extent that the related Right is exercised.
SECTION 6.2. Exercise of Right. A Right shall become exercisable at such
time, and in respect of such number of shares of Common Stock, as the Reference
Option is then exercisable and such Right
6
<PAGE>
shall terminate upon termination of the Reference Option, provided, however,
that no Right shall be exercisable unless the Grantee shall have remained in the
continuous employ of the Company for one year from the date the Right was
granted, except that upon the occurrence of a Change in Control of
Warner-Lambert Company, all Rights may be exercised without giving effect to the
one-year limitation and the limitations, if any, which may have been imposed by
the Committee pursuant to Section 5.3(b) with respect to the percent of the
total number of shares to which the Right relates which may be purchased from
time to time during the Option Period; provided, however, that Rights which have
been held for less than six months on the date of the occurrence of a Change in
Control by Grantees who at the time of the occurrence of the Change in Control
are Reporting Persons may be exercised only during the thirty (30) day period
beginning six months after the date of grant of the Right, notwithstanding the
termination of the Grantee's employment with the Company, and without giving
effect to the one-year limitation and the limitations, if any, which may have
been imposed by the Committee pursuant to Section 5.3(b) with respect to the
percent of the total number of shares to which the Right relates which may be
purchased from time to time during the Option Period. Except as provided in this
Section 6.2, and in Sections 6.5 and 6.6, no Right shall be exercisable unless
at the time of such exercise the Grantee shall be in the employ of the Company.
SECTION 6.3. Amount Payable Upon Exercise of Right. Upon the exercise of a
Right the amount payable shall be equal to:
(i) 100% of the Spread but not exceeding the difference between the
Option Price and the Fair Market Value of a share of Common Stock on the
Valuation Date; plus
(ii) 125% of the amount by which the Fair Market Value of a share of
Common Stock on the Valuation Date exceeds the Fair Market Value on the date
the Right was granted;
multiplied by the number of shares with respect to which the Right is being
exercised; provided, however, that (x) the Committee may grant Rights which
provide that upon exercise the amount payable shall be equal to 100% of the
amount by which the Fair Market Value of a share of Common Stock on the
Valuation Date exceeds the Fair Market Value on the date the Right was granted,
and (y) the amount payable shall not exceed an amount equal to the number of
shares with respect to which the Right is being exercised multiplied by the Fair
Market Value of a share of Common Stock on the Valuation Date.
SECTION 6.4. Form of Payment. The amount payable on exercise of a Right
shall be payable in cash, shares of Common Stock valued at their Fair Market
Value as of the Valuation Date, or in any combination thereof; provided,
however, that the form of payment shall be in the sole discretion of the
Committee. In the event that any payment in the form of both cash and shares of
Common Stock is made to a Reporting Person, the cash portion of such payment
shall be made upon the Grantee becoming taxable in respect of the Common Stock
received upon exercise of the Right. Notwithstanding the foregoing, a payment,
in whole or in part, of cash may be made to a Reporting Person upon exercise of
a Right only if the Right is exercised (i) during the period beginning on the
third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the Company and
ending on the twelfth business day following such date, or (ii) during any other
period in which cash may be paid under the provisions of Rule 16b-3 promulgated
pursuant to the Act. In addition, a payment of cash shall be made to a person
subject to the reporting requirements of Section 16(a) of the Act who has held
the Right at least six months from the date of its grant promptly following a
Change in Control of Warner-Lambert Company which Change in Control is outside
the control of any person subject to such reporting requirements within the
meaning of the aforesaid Rule 16b-3. The Company intends that this provision
shall comply with the requirements of Rule 16b-3 under the Act. Should this
provision not be necessary to comply with the requirements of such Rule or
should any additional provision be necessary in order to comply with the
requirements of such Rule, the Committee may amend the Plan accordingly, without
the necessity of obtaining the approval of stockholders of the Company. Any
fraction of a share resulting from the above calculation shall be disregarded.
SECTION 6.5. Termination of Employment. If, prior to the expiration of a
Reference Option, the employment of the Grantee by the Company should terminate,
by reason other than death, the related Right shall terminate, except that if,
after a Grantee shall have remained in the employ of the Company
7
<PAGE>
for one year after the date of the grant of the Right, such Grantee's employment
should terminate on or after age 55, the Right theretofore granted shall be
exercisable until the later of (i) the three-year period after termination of
employment, or (ii) the period after termination of employment which is equal to
the number of full months that the Reference Option has been outstanding prior
to such termination, but in no event after the expiration of the Option Period,
without, however, giving effect to the limitations, if any, which may have been
imposed by the Committee pursuant to Section 5.3(b) hereof.
SECTION 6.6. Death of Grantee. If a Grantee should die prior to the
termination of the Reference Option:
(a) while in the employ of the Company, the Right theretofore granted
shall, if the Grantee was entitled to exercise the Right at the date of
death, be exercisable by the estate of the Grantee, or by a person who
acquired the right to exercise such Right by bequest or inheritance or by
reason of the death of the Grantee, without, however, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant
to Section 5.3(b) hereof with respect to the percent of the total number of
shares to which the Right relates which may be purchased from time to time
during the Option Period; provided, however, that such Right shall be
exercisable until the later of (i) the three-year period after termination
of employment, or (ii) the period after termination of employment which is
equal to the number of full months that the Reference Option has been
outstanding prior to such termination, but in no event after the expiration
of the Option Period; or
(b) after the date of the termination of employment on or after age 55,
the Right theretofore granted shall, if the Grantee was entitled to exercise
the Right at the date of death, be exercisable by the estate of the Grantee,
or by a person who acquired the right to exercise such Right by bequest or
inheritance or by reason of the death of the Grantee, without, however,
giving effect to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) hereof with respect to the percent of
the total number of shares to which the Right relates which may be purchased
from time to time during the Option Period; provided, however, that such
Right shall be exercisable until the latest of (i) the three-year period
after termination of employment, (ii) the period after termination of
employment which is equal to the number of full months that the Reference
Option has been outstanding prior to such termination, or (iii) the
twelve-month period after the death of the Grantee provided such death
occurs before the later of (i) or (ii), but in no event after the expiration
of the Option Period.
SECTION 6.7. Limited Rights. Notwithstanding anything herein to the
contrary, Limited Rights may be granted hereunder by the Committee with respect
to the options granted under this Plan or any other stock option plan of the
Company (which are not Reference Options under any such plan) which shall
entitle the holder to receive a payment of cash promptly following a Change in
Control of Warner-Lambert Company which Change in Control is outside the control
of any person subject to the reporting requirements of Section 16(a) of the Act
within the meaning of Rule 16b-3 under the Act. Such payment of cash shall be
made to a person subject to the reporting requirements of Section 16(a) of the
Act only if such person has held such Limited Right at least six months from the
date of its grant. Promptly following any such Change in Control, the Optionee
shall be entitled to receive a cash payment equal to the excess of the Fair
Market Value of a share of Common Stock on the Valuation Date over the Option
Price of the related Option multiplied by the number of shares with respect to
which the Limited Right is being exercised (in such case the method of
determining the Fair Market Value in the second sentence of Section 4.6(a) shall
apply). Limited Rights shall expire on the first to occur of the date of
exercise or expiration of the right of exercise of the Limited Right or of the
related Option. Further, upon exercise of a Limited Right, the related Option
shall be cancelled. The Board of Directors reserves the right to cancel all
outstanding Limited Rights in accordance with Sections 11 and 12 of the
Executive Severance Plan. Except as otherwise provided herein, the provisions of
the Plan relating to Rights shall also apply to Limited Rights.
8
<PAGE>
ARTICLE VII
TERMS AND CONDITIONS OF RESTRICTED STOCK
SECTION 7.1. General. The restrictions set forth in Section 7.2 shall apply
to each grant of Restricted Stock for the duration of the Restricted Period.
SECTION 7.2. Restrictions. A stock certificate representing the number of
shares of Restricted Stock granted shall be registered in the Participant's name
but shall be held in custody by the Company for the Participant's account. The
Participant shall have all rights and privileges of a stockholder as to such
Restricted Stock, including the right to receive dividends and the right to vote
such shares, except that, subject to the provisions of Section 7.3, the
following restrictions shall apply: (i) the Participant shall not be entitled to
delivery of the certificate until the expiration of the Restricted Period; (ii)
none of the shares of Restricted Stock may be sold, transferred, assigned,
pledged, or otherwise encumbered or disposed of during the Restricted Period;
(iii) the Participant shall, if requested by the Company, execute and deliver to
the Company, a stock power endorsed in blank; and (iv) all of the shares of
Restricted Stock still subject to restrictions shall be forfeited and all rights
of the Participant to such shares shall terminate without further obligation on
the part of the Company if the Participant ceases to be an Employee prior to the
expiration of the Restricted Period applicable to such shares. Upon the
forfeiture (in whole or in part) of shares of Restricted Stock, such forfeited
shares shall become treasury shares of the Company without further action by the
Participant. The Participant shall have the same rights and privileges, and be
subject to the same restrictions, with respect to any shares received pursuant
to Section 10.1 hereof.
SECTION 7.3. Terms and Conditions. The Committee shall establish the terms
and conditions, which need not be the same for all grants made under the Plan,
applicable to the Restricted Stock, and which may include restrictions based
upon periods of time, performance (corporate, group, individual or otherwise),
combinations thereof or such other restrictions as the Committee shall determine
to be appropriate. The Committee may provide for the restrictions to lapse with
respect to a portion or portions of the Restricted Stock at different times or
upon the occurrence of different events and the Committee may waive, in whole or
in part, any or all restrictions applicable to a grant of Restricted Stock.
Restricted Stock awards may be issued for no cash consideration or for such
minimum consideration as may be required by applicable law.
SECTION 7.4. Delivery of Restricted Shares. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, to the Participant or the
Participant's beneficiary or estate, as the case may be. The Company shall not
be required to deliver any fractional share of Common Stock but shall pay, in
lieu thereof, the fair market value (measured as of the date the restrictions
lapse) of such fractional share to the Participant or the Participant's
beneficiary or estate, as the case may be. Notwithstanding the foregoing, the
Committee may authorize the delivery of the Restricted Stock to a Participant
during the Restricted Period, in which event any stock certificates in respect
of shares of Restricted Stock thus delivered to a Participant during the
Restricted Period applicable to such shares shall bear an appropriate legend
referring to the terms and conditions, including the restrictions, applicable
thereto.
SECTION 7.5. Certain Events.
(a) In the event of a Change in Control of Warner-Lambert the rights and
privileges of Participants hereunder shall be governed by the following clause
(i), (ii), (iii), or (iv) as appropriate:
(i) Value of Restricted Stock. All shares of Restricted Stock then
outstanding shall be immediately forfeited and shall revert to the Company
as treasury shares and, in lieu thereof, each Participant shall receive a
cash payment equal to the Value of the Restricted Stock (as hereinafter
defined); provided, however, that if the Participant is a Reporting Person
at the time of the Change in Control of Warner-Lambert Company, the
provisions of clause (ii) shall govern the rights and privileges of such
Participant.
(ii) Reporting Persons. All shares of Restricted Stock previously
granted to Participants who are Reporting Persons at the time of the Change
in Control of Warner-Lambert Company which Change in Control is outside the
control of any Reporting Person within the meaning of Rule 16b-3
9
<PAGE>
under the Act, and which are then outstanding and have been outstanding for
a period of at least six (6) months, shall be immediately forfeited and
shall revert to the Company as treasury shares and, in lieu thereof, such
Participant shall receive a cash payment equal to the Value of the
Restricted Stock.
(iii) Lapse of Restrictions. In the event that clause (ii) shall not
become operational with respect to a Participant who is a Reporting Person,
all restrictions applicable to shares of Restricted Stock previously granted
to such Participant and then outstanding shall expire and such shares shall
thereupon be delivered to the Participant free of all restrictions.
(iv) Notwithstanding anything herein to the contrary, in the case of the
Change in Control transaction contemplated by the Agreement and Plan of
Merger, dated as of February 6, 2000, among Pfizer Inc., Seminole
Acquisition Sub Corp. and Warner-Lambert, as the same may be amended from
time to time (the 'Merger Agreement'), all shares of Restricted Stock which
are outstanding immediately prior to such Change in Control shall, as of the
consummation of such Change in Control, (a) become fully vested and free of
restrictions and (b) thereupon be converted into a number of fully vested
shares of the ultimate parent entity resulting from such Change in Control
based upon the same exchange ratio pursuant to which shares of Common Stock
are so converted pursuant to the Merger Agreement.
(b) As used in the Plan, the 'Value of the Restricted Stock' shall be the
higher of (a) the highest closing price per share of Common Stock on the
Composite Tape for New York Stock Exchange issues during the 30 day period prior
to the Change in Control of Warner-Lambert Company, or (b) if the Change in
Control of Warner-Lambert Company occurs as a result of a tender or exchange
offer or approval by the stockholders of the Company of a Transaction, then the
highest price per share of Common Stock pursuant thereto, multiplied by the
total number of shares of Restricted Stock granted to such Participant and then
outstanding, regardless of whether the restrictions applicable thereto shall
have previously lapsed. Any consideration other than cash forming a part or all
of the consideration for Common Stock to be paid pursuant to an exchange offer
shall be valued at the valuation placed thereon by the Board of Directors.
Adjustments, if any, shall be made in accordance with Section 10.1 hereof.
ARTICLE VIII
TERMS AND CONDITIONS OF PERFORMANCE AWARDS
SECTION 8.1. Terms and Conditions. The Committee may grant Performance
Awards, determine the consideration therefor, which may include prior efforts
and accomplishments, and establish the terms and conditions thereof, which may
include provisions based upon periods of time, performance (corporate, group,
individual or otherwise), combinations thereof or such other provisions as the
Committee may determine to be appropriate. Performance Awards may consist of
shares of Common Stock or awards that are valued by reference to shares of
Common Stock, cash or such other measure as the Committee shall determine.
Performance Awards may provide for payment in shares of Common Stock, cash,
other property or any combination thereof as determined by the Committee. Shares
of Common Stock issued pursuant to this Section 8.1 may be issued for no cash
consideration or for such minimum consideration as may be required by applicable
law. The Committee shall determine whether payment shall be made in a lump sum,
installments or deferred. With respect to Performance Awards which are valued by
reference to shares of Common Stock, the Committee shall also determine whether
the Participant may be entitled to receive a payment of, or credit equivalent
to, any dividends payable with respect to such shares of Common Stock and the
terms and conditions applicable thereto. Further, if a payment of cash is to be
made on a deferred basis, the Committee shall establish whether interest shall
be credited, the rate thereof and any other terms and conditions applicable
thereto.
ARTICLE IX
REGULATORY COMPLIANCE AND LISTING
SECTION 9.1. Regulatory Compliance and Listing. The issuance or delivery of
any Stock Awards and shares of Common Stock pursuant thereto may be postponed by
the Company for such periods as may be required to comply with any applicable
requirements under the Federal securities laws, any
10
<PAGE>
applicable listing requirements of any national securities exchange or any
requirements under any other law or regulation applicable thereto, and the
Company shall not be obligated to issue or deliver any such awards or shares if
the issuance or delivery thereof shall constitute a violation of any provision
of any law or of any regulation of any governmental authority or any national
securities exchange.
ARTICLE X
ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION
SECTION 10.1. Adjustments. In the event of a recapitalization, stock split,
stock dividend, combination or exchange of shares, merger, consolidation, rights
offering, separation, reorganization, liquidation, or the sale, conveyance,
lease or other transfer by Warner-Lambert of all or substantially all of its
property, or any other change in the corporate structure or shares of the
Company, the Committee may make such equitable adjustments to prevent dilution
or enlargement of rights as it may deem appropriate in the number and class of
shares authorized to be granted hereunder, including adjustment to the share
limitation of Section 3.2 hereof, and change the number and kind of shares
available under any outstanding Option and Right (including substitution of
shares of another corporation), and the price of any Option and the Fair Market
Value in such manner as it shall deem equitable; provided, however, that in no
event may any change be made to an incentive stock option which would constitute
a 'modification' within the meaning of section 425(h)(3) of the Code. Options
granted under the Plan shall contain such provisions as are consistent with the
foregoing with respect to adjustments to be made in the number and kind of
shares covered thereby and in the Option Price in the event of any such change.
ARTICLE XI
ADMINISTRATION
SECTION 11.1. Administration.
(a) The Plan shall be administered by a committee consisting of not less
than three members of the Board of Directors, who shall be appointed by, and
shall serve at the pleasure of, the Board of Directors. No person who is or,
within one year prior thereto, has been eligible to receive a Stock Award under
the Plan may be a member of the Committee, and no person may be granted a Stock
Award while a member of the Committee. A majority of the Committee shall
constitute a quorum and the acts of a majority of the members present at any
meeting at which a quorum is present, expressed from time to time by a vote at a
meeting (including a meeting held by telephone conference call or in which one
or more members of the Committee participate by telephone), or acts approved in
writing by a majority of the Committee, shall be the acts of the Committee.
(b) In addition to the Committee's discretionary authority set forth in
other Articles hereof, the Committee is authorized to establish such rules and
regulations for the proper administration of the Plan as it may deem advisable
and not inconsistent with the provisions of the Plan. All questions arising
under the Plan or under any rule or regulation with respect to the Plan adopted
by the Committee, whether such questions involve an interpretation of the Plan
or otherwise, shall be decided by the Committee, and its decisions shall be
conclusive and binding in all cases.
(c) The Committee shall determine the Employees to whom Stock Awards under
the Plan are to be granted, the terms and conditions applicable thereto and the
number of shares to be covered by each award. In selecting the individuals to
whom Stock Awards shall be granted, as well as in determining the terms and
conditions applicable thereto and the number of shares subject to each grant,
the Committee shall consider the positions and responsibilities of the Employees
being considered, the nature of the services and accomplishments of each, the
value to the Company of their services, their present and potential contribution
to the success of the Company, the anticipated number of years of service
remaining and such other factors as the Committee may deem relevant. The
Committee may obtain such advice or assistance as it deems appropriate from
persons not serving on the Committee.
SECTION 11.2. Stock Awards Committee. In addition, and not in limitation of
the authority of the Committee, the Stock Awards Committee (as hereinafter
constituted) may grant Stock Awards, in
11
<PAGE>
accordance with the provisions of the Plan, including the establishment of the
terms and conditions thereof and the consideration to the Company therefor, to
Employees who, at the time of the grant, are not Reporting Persons. The Stock
Awards Committee, whose members need not serve on the Board of Directors, shall
be appointed by, and shall serve at the pleasure of, the Committee. A majority
of the Stock Awards Committee shall constitute a quorum and the acts of a
majority of the members present at any meeting at which a quorum is present,
expressed from time to time by a vote at a meeting (including a meeting held by
telephone conference call or in which one or more members of the Stock Awards
Committee participate by telephone), or acts approved in writing by a majority
of the Stock Awards Committee, shall be the acts of the Stock Awards Committee.
Notwithstanding the foregoing, the Stock Awards Committee may not undertake any
action which the provisions of Rule 16b-3, promulgated pursuant to the Act,
require to be undertaken by 'disinterested persons' (as defined in said Rule) as
a condition of the continued qualification of the Plan under Rule 16b-3.
ARTICLE XII
TERMINATION OR AMENDMENT OF THE PLAN
SECTION 12.1. Termination or Amendment.
(a) The Board may at any time terminate the Plan and may from time to time
alter or amend the Plan or any part thereof (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Article IX); provided, however, that, unless otherwise required
by law, the rights of a Participant with respect to Stock Awards granted prior
to such termination, alteration or amendment may not be impaired without the
consent of such Participant and, provided further, without the approval of the
Company's stockholders, no alteration or amendment may be made which would (i)
increase the aggregate number of shares of Common Stock that may be issued under
the Plan (except by operation of Article X), or (ii) change the category of
employees eligible to receive Stock Awards under the Plan. The Company intends
that the Plan shall comply with the requirements of Rule 16b-3 promulgated
pursuant to the Act. Should any provisions hereof not be necessary in order to
comply with the requirements of such Rule or should any additional provisions be
necessary in order to so comply, the Committee may amend the Plan accordingly,
without the necessity of obtaining the approval of the Company's stockholders.
(b) The Committee may at any time adopt any amendment to the Plan which
(i)(A) does not increase Plan liabilities by an amount in excess of five million
dollars ($5,000,000) and does not increase Plan expense by an amount in excess
of five hundred thousand dollars ($500,000) or (B) is required by an applicable
law, regulation or ruling, (ii) can be undertaken by the Board of Directors
under the terms of the Plan, (iii) does not involve a termination of the Plan,
(iv) does not affect the limitations contained in this sentence, and (v) does
not affect the composition or compensation of the Committee.
(c) The Committee shall have the power to cancel all Rights theretofore
granted pursuant to the Plan in the event that it shall determine that the
accounting effects of the grant or exercise of Rights under the Plan would not
be in the best interests of the Company.
(d) Any action which may be undertaken by the Committee pursuant to the
terms hereof may be undertaken by the Board, except as provided in Rule 16b-3
promulgated pursuant to the Act.
ARTICLE XIII
MISCELLANEOUS
SECTION 13.1. No Right To Employment. Nothing in the Plan shall be deemed to
confer upon any Participant the right to remain in the employ of the Company.
SECTION 13.2. Withholding of Taxes.
(a) The Company shall have the right to require, prior to the issuance or
delivery of any shares of Common Stock or the payment of any cash hereunder,
payment by the Participant of any taxes required by law with respect thereto.
12
<PAGE>
(b) The Committee may permit any such withholding obligation to be satisfied
by reducing the number of shares of Common Stock otherwise deliverable. A
Reporting Person may elect to have a sufficient number of shares of Common Stock
withheld to fulfill such tax obligations (hereinafter a 'Withholding Election')
only if the election complies with the following conditions: (x) the Withholding
Election shall be subject to the disapproval of the Committee and (y) the
Withholding Election is made (i) during the period beginning on the third
business day following the date of release for publication of the quarterly or
annual summary statements of sales and earnings of the Company and ending on the
twelfth business day following such date, (ii) six months before the Stock Award
becomes taxable, or (iii) during any other period in which a Withholding
Election may be made under the provisions of Rule 16b-3 promulgated pursuant to
the Act. Any fraction of a share of Common Stock required to satisfy such tax
obligations shall be disregarded and the amount due shall be paid instead in
cash by the Participant.
SECTION 13.3. No Assignment of Benefits. No benefit payable under the Plan
shall, except as otherwise specifically provided by law, be subject in any
manner to anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, attach,
sell, transfer, assign, pledge, encumber or charge any such benefit shall be
void, and any such benefit shall not in any manner be liable for or subject to
the debts, contracts, liabilities, engagements or torts of any person who shall
be entitled to such benefit, nor shall it be subject to attachment or legal
process for or against such person. If any person entitled to a benefit
hereunder shall be adjudicated a bankrupt or shall attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge such benefit, or if
any attempt is made to subject any such benefit to the debts, contracts,
liabilities, engagements or torts of any person entitled to such benefit, then
such benefit shall, in the discretion of the Committee, cease and terminate, and
in that event the Committee may cause such benefit, or any part thereof, to be
held or applied for the benefit of such person, his or her spouse, children or
other dependents, or any of them, in such manner and in such proportion as the
Committee shall determine.
SECTION 13.4. Death; Disability; Termination. The Committee shall establish
the provisions which shall govern in the event of the death, disability, or
termination (including layoff) of a Participant, which provisions may be
different than the provisions otherwise described herein with respect to death,
disability, and termination. If, for any reason, the Committee shall determine
that it is not desirable because of the incapacity of the person who shall be
entitled to receive any payments hereunder, to make such payments directly to
such person, the Committee may apply such payment for the benefit of such person
in any way that the Committee shall deem advisable or may make any such payment
to any third person who, in the judgment of the Committee, will apply such
payment for the benefit of the person entitled thereto. In the event of such
payment, the Company, the Board of Directors and the Committee shall be
discharged from all further liability therefor. An Employee's employment shall
be deemed terminated for purposes of the Plan as of the date benefit payments
would have commenced under the Warner-Lambert Long Term Disability Benefits Plan
had the Participant been enrolled in such plan, except as otherwise provided
herein. Absence on leave approved by the Company shall not be considered an
interruption of employment for any purpose of the Plan.
SECTION 13.5. Listing and Other Conditions.
(a) As long as the Common Stock is listed on the New York Stock Exchange,
the issue of any shares of stock pursuant to a Stock Award shall be conditioned
upon the shares so to be issued being listed on such Exchange. Warner-Lambert
shall make application for listing on such Exchange unlisted shares subject to
Stock Awards, but shall have no obligation to issue such shares unless and until
such shares are so listed, and the right to exercise any Option or Right with
respect to such shares shall be suspended until such listing has been effected.
(b) If at any time counsel to Warner-Lambert shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to a Stock Award is or
may in the circumstances be unlawful under the statutes, rules or regulations of
any applicable jurisdiction, Warner-Lambert shall have no obligation to make
such sale or delivery, or to make any application or to effect or to maintain
any qualification or registration under the Securities Act of 1933, as amended,
or otherwise with respect to shares of Common Stock or Stock Awards, and the
right to exercise any Option or Right shall be suspended until, in the opinion
of said counsel, such sale or delivery shall be lawful.
13
<PAGE>
(c) Upon termination of any period of suspension under this Section 13.5,
any Stock Award affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such suspension
and as to shares which would otherwise have become available during the period
of such suspension, but no such suspension shall extend any Option Period.
SECTION 13.6. Governing Law. This Plan shall be governed by the law of the
State of New Jersey (regardless of the law that might otherwise govern under
applicable New Jersey principles of conflict of laws).
SECTION 13.7. Construction. Wherever any words are used herein in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
SECTION 13.8. Laws of Foreign Jurisdictions. Without amending the Plan, but
subject to the limitations specified in Article XII hereof, the Committee may
grant, amend, administer, annul or terminate Stock Awards on such terms and
conditions, which may be different from those specified in the Plan, as it may
deem necessary or desirable to make available tax or other benefits of the laws
of any foreign jurisdiction.
SECTION 13.9. Other Plans. Nothing contained herein shall prevent the
Company from adopting additional compensation plans or arrangements.
ARTICLE XIV
EFFECTIVE DATE; EXPIRATION
SECTION 14.1. Effective Date. The Plan shall be submitted to the
stockholders of Warner-Lambert for their approval at the Annual Meeting of
Stockholders to be held in 1989. The Plan shall become effective upon the
affirmative vote of the holders of a majority of the shares of Common Stock
present, or represented, and entitled to vote at the meeting.
SECTION 14.2. Expiration. No Stock Awards may be granted hereunder after
April 25, 1994. The expiration of the Plan as herein provided shall not affect
any Stock Award granted prior to such expiration.
WARNER-LAMBERT COMPANY
14
<PAGE>
EXHIBIT 10(b)
________________________________________________________________________________
WARNER-LAMBERT COMPANY
-------------------
1992 STOCK PLAN
AS AMENDED TO FEBRUARY 6, 2000
________________________________________________________________________________
<PAGE>
WARNER-LAMBERT COMPANY
1992 STOCK PLAN
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. Purpose.
(a) The purpose of the 1992 Stock Plan is to provide additional incentive to
selected officers and other employees of the Company (as hereinafter defined),
to recognize and reward their efforts and accomplishments in order to strengthen
the desire of employees to remain with the Company and stimulate their efforts
on behalf of the Company and to attract and retain persons of competence, and,
by encouraging ownership of a stock interest in the Company, to gain for the
Company the advantages inherent in employees having a sense of proprietorship.
(b) In addition, the Plan (as hereinafter defined) will assist in the
attraction and retention of non-employee members of the Board of Directors by
providing the opportunity for such Directors to obtain a proprietary interest in
the Company's success and progress and with increased flexibility in the timing
of the receipt of fees for services on, and attending meetings of, the Board of
Directors and committees thereof.
ARTICLE II
DEFINITIONS
SECTION 2.1. Definitions. Whenever used herein, unless the context otherwise
indicates, the following terms shall have the respective meaning set forth
below:
Account: A Cash Account or a Stock Account.
Act: The Securities Exchange Act of 1934, as amended.
Affiliate: Any corporation, partnership, association, joint-stock company,
business trust, joint venture or unincorporated organization controlled,
directly or indirectly, by Warner-Lambert. Warner-Lambert shall be deemed to
control any such entity if Warner-Lambert possesses, directly or indirectly, the
power to direct or cause the direction of its management and policies, whether
through the ownership of voting securities, by contract or otherwise.
Board of Directors (or Board): The Board of Directors of Warner-Lambert.
Business Day: A day except for a Saturday, Sunday or a legal holiday.
Cash Account: The Account which reflects the Compensation deferred by a
Director pursuant to Section 11.3.
Cash Credit: A credit to a Director's Cash Account, expressed in whole
dollars and fractions thereof, pursuant to Section 11.3.
Closing Price: The closing price of the Common Stock on the Composite Tape
for New York Stock Exchange issues.
Code: The Internal Revenue Code of 1986, as amended.
Committee: The committee appointed to administer the Plan in accordance with
Section 12.1 hereof.
Common Stock: Common Stock, par value $1.00 per share, of Warner-Lambert.
Company: Warner-Lambert and its Affiliates.
Compensation: All cash remuneration payable to a Director for services to
the Company as a Director or as a consultant, other than reimbursement for
expenses, and shall include retainer fees for service on, and fees for
attendance at meetings of, the Board and any committees thereof.
1
<PAGE>
Deferred Compensation Account: An account established by the Company for a
Director under a Predecessor Plan.
Director: Any member of the Board of Directors who is not an employee of the
Company or any of its Affiliates.
Effective Date: The date specified in Article XV hereof.
Employee: Officers and other employees of the Company or any of its
Affiliates (including such persons who are also members of the Board of
Directors).
Fair Market Value: As used in the Plan, the term 'Fair Market Value' shall
be the mean between the high and low sales prices for Common Stock on the
Composite Tape for New York Stock Exchange issues on the date the calculation
thereof shall be made. In the event the date of calculation shall be a date on
which the Common Stock shall not trade on the New York Stock Exchange,
determination of Fair Market Value shall be made as of the first date prior
thereto on which the Common Stock shall have traded on the New York Stock
Exchange.
Grantee: A Participant to whom Rights have been granted in accordance with
the provisions of Articles IV and VI hereof.
Option: The grant to Participants of options to purchase shares of Common
Stock in accordance with the provisions of Articles IV and V hereof.
Optionee: A Participant to whom one or more Options have been granted in
accordance with the provisions of Articles IV and V hereof.
Option Period: The period of time during which an Option may be exercised in
accordance with the provisions hereof.
Option Price: The price per share payable to the Company for shares of
Common Stock upon the exercise of an Option.
Participant: Each Employee to whom a Stock Award is granted under the Plan.
Performance Awards: Awards made to Employees in accordance with the
provisions of Article VIII hereof.
Plan: The Warner-Lambert Company 1992 Stock Plan.
Plan Year: The calendar year.
Predecessor Plans: The Warner-Lambert Directors' Fees Deferral Plan, the
Warner-Lambert Consulting Fees Deferral Plan and the Deferred Compensation Plan
for Directors of Warner-Lambert Company.
Reference Option: An Option, other than an incentive stock option, to which
a Right shall relate.
Reporting Person: A person subject to the reporting requirements of Section
16(a) of the Act, excluding former officers and directors whose transactions in
Common Stock are no longer subject to Section 16 of the Act.
Restricted Period: The period of time from the date of grant of Restricted
Stock until the lapse of restrictions attached thereto.
Restricted Stock: Common Stock granted under the Plan which is subject to
restrictions in accordance with the provisions of Article VII hereof.
Right: The grant to Participants of rights to acquire shares of Common Stock
in accordance with the provisions of Articles IV and VI hereof.
Secretary: The Secretary of Warner-Lambert.
Spread: The amount by which the Option Price that would be payable by the
Grantee upon the exercise of the Reference Option is less than the Fair Market
Value of a share of Common Stock on the date the related Right was granted.
Stock Account: The Account which reflects the Compensation deferred by a
Director pursuant to Section 11.4.
2
<PAGE>
Stock Award: A grant of Options, Rights, Restricted Stock or Performance
Awards in accordance with the provisions hereof.
Stock Credit: A credit to a Director's Stock Account, expressed in whole
shares and fractions thereof, pursuant to Section 11.4.
Subsidiary: Any corporation (other than Warner-Lambert) in an unbroken chain
of corporations beginning with and including Warner-Lambert if, at the time of
the granting of a Stock Award, each of the corporations other than the last
corporation in said unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
Valuation Date: The date on which a Right is exercised.
Warner-Lambert: Warner-Lambert Company or any successor to it in ownership
of substantially all of its assets, whether by merger, consolidation or
otherwise.
ARTICLE III
ELIGIBILITY AND GRANTS
SECTION 3.1. Eligibility and Grants.
The Committee shall determine the Employees who shall be granted Stock
Awards and the number of shares thereof. The Committee may make more than one
grant to an Employee during the life of the Plan. Each grant shall be evidenced
by a written instrument duly executed by or on behalf of the Company.
SECTION 3.2. Share Limitation.
Stock Awards may not be granted in any year which provide for the issuance
of more than 1.75% of the shares of Common Stock outstanding (including issued
shares reacquired by the Company) on the January 1 of the year of grant. Shares
of Common Stock issued under the Plan may be either authorized and unissued
shares or issued shares reacquired by the Company. Notwithstanding the above
limitation, in any year in which Stock Awards are granted which provide for the
issuance of less than the maximum permissible number of shares, the balance of
such unused shares shall be added to the limitation in subsequent years. In
addition, if any Option granted under the Plan shall expire, terminate or be
cancelled for any reason without having been exercised in full, the
corresponding number of unpurchased shares shall be added to the limitation in
subsequent years; provided, however, that if such expired, terminated or
cancelled Option shall have been a Reference Option, none of such unpurchased
shares shall again become available for purposes of the Plan to the extent that
the related Right granted under the Plan is exercised. Further, if any shares of
Common Stock granted hereunder are forfeited or such award otherwise terminates
without the delivery of such shares upon the lapse of restrictions, the shares
subject to such grant, to the extent of such forfeiture or termination, shall be
added to the limitation in subsequent years so long as the Participant received
no 'benefits of ownership' (within the meaning of Section 16 of the Act) in
connection with such grant. To the extent permitted by Section 16 of the Act,
any shares of Common Stock issued under the Plan through the assumption or
substitution of outstanding grants from an acquired company shall not reduce the
shares available under the Plan.
ARTICLE IV
GENERAL TERMS OF OPTIONS AND RIGHTS
SECTION 4.1. Consideration. The Committee shall determine the consideration
to the Company for the granting of Options and Rights under the Plan, as well as
the conditions, if any, which it may deem appropriate to ensure that such
consideration will be received by, or will accrue to, the Company, and, in the
discretion of the Committee, such consideration need not be the same, but may
vary for Options and Rights granted under the Plan at the same time or from time
to time.
SECTION 4.2. Number of Options and Rights.
(a) The Committee may grant more than one Option or Right to an individual
during the life of the Plan and, subject to the requirements of Section 422 of
the Code with respect to incentive stock options,
3
<PAGE>
such Option or Right may be in addition to, in tandem with, or in substitution
for, options or rights previously granted under the Plan or under another stock
plan of the Company or of another corporation and assumed by the Company.
(b) The Committee may permit the voluntary surrender of all or a portion of
any Option granted under the Plan or any prior plan to be conditioned upon the
granting to the Employee of a new Option for the same or a different number of
shares as the Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Option to such Employee. Such new Option
shall be exercisable at the price, during the period, and in accordance with any
other terms or conditions specified by the Committee at the time the new Option
is granted.
SECTION 4.3. Option and Right Agreements.The Company shall effect the grant
of Options and Rights under the Plan, in accordance with determinations made by
the Committee, by execution of instruments in writing, in a form approved by the
Committee. Each Option and Right shall contain such terms and conditions (which
need not be the same for all Options and Rights, whether granted at the same
time or at different times) as the Committee shall deem to be appropriate. The
Committee may, in its sole discretion, and subject to such terms and conditions
as it may adopt, accelerate the date or dates on which some or all outstanding
Options and Rights may be exercised. Except as otherwise provided by the
Committee, Options and Rights shall be exercised by submitting to the Company a
signed copy of a notice of exercise in a form to be supplied by the Company and
the exercise of an Option or Right shall be effective on the date on which the
Company receives such notice at its principal corporate offices.
SECTION 4.4. Non-Transferability of Option or Right. Except as otherwise
provided by the Committee, no Option or Right granted under the Plan to an
Employee shall be transferable by the Employee otherwise than by will or by the
laws of descent and distribution or pursuant to a 'qualified domestic relations
order' (as defined in the Code), and such Option and Right shall be exercisable,
during the Employee's lifetime, only by such Employee.
SECTION 4.5. Optionees and Grantees not Stockholders. An Optionee or Grantee
or legal representative thereof shall have none of the rights of a stockholder
with respect to shares subject to Options or Rights until such shares shall be
issued upon exercise of the Option or Right.
SECTION 4.6. Certain Events. (a) As used in the Plan, a 'Change in Control
of Warner-Lambert' shall be deemed to have occurred if (i) any person (as such
term is used in Sections 13(d) and 14(d)(2) of the Act is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of Warner-Lambert representing twenty percent (20%) or
more of the combined voting power of Warner-Lambert's then outstanding
securities, (ii) upon the consummation of a merger, consolidation, sale or
disposition of all or substantially all of Warner-Lambert's assets or plan of
liquidation which is approved by the stockholders of Warner-Lambert (a
'Transaction'), or (iii) the composition of the Board at any time during any
consecutive twenty-four (24) month period changes such that the Continuity
Directors (as hereinafter defined) cease for any reason to constitute at least
fifty-one percent (51%) of the Board. For purposes of the foregoing clause
(iii), 'Continuity Directors' means those members of the Board who either
(a) were directors at the beginning of such consecutive twenty-four (24) month
period, or (b)(1) filled a vacancy during such twenty-four (24) month period
created by reason of (x) death, (y) a medically determinable physical or mental
impairment which renders the director substantially unable to function as a
director or (z) retirement at the last mandatory retirement age in effect for at
least two (2) years, and (2) were elected, nominated or voted for by at least
fifty-one percent (51%) of the current directors who were also directors at the
commencement of such twenty-four (24) month period. Notwithstanding the
provisions of Article II hereof, upon the exercise of a Right during the 30-day
period following Warner-Lambert obtaining actual knowledge of a Change in
Control of Warner-Lambert, 'Fair Market Value' of a share of Common Stock on the
Valuation Date shall be equal to the higher of (i) the highest closing sale
price per share of Common Stock of Warner-Lambert on the Composite Tape for New
York Stock Exchange issues during the period commencing 30 days prior to such
Change in Control and ending immediately prior to such exercise or (ii) if the
Change in Control of Warner-Lambert occurs as a result of a tender or exchange
offer or consummation of a Transaction, then the highest price per share of
Common Stock pursuant thereto. Any consideration other than cash forming a part
or all of the consideration for Common Stock
4
<PAGE>
to be paid pursuant to the applicable transaction shall be valued at the
valuation placed thereon by the Board. Adjustments, if any, shall be made in
accordance with Section 10.1 hereof.
(b) As used in the Plan, a 'Merger of Equals' shall mean either: (a) a
Change in Control of Warner-Lambert Company, pursuant to the terms of which the
stockholders of Warner-Lambert Company receive consideration, including
securities, with an Aggregate Value (as defined below) not greater than 115
percent of the average closing price of the Common Stock of Warner-Lambert
Company on the Composite Tape for New York Stock Exchange issues for the twenty
business days immediately preceding the earlier of the execution of the
definitive agreement pertaining to the transaction or the public announcement of
the transaction; or (b) any other Change in Control of Warner-Lambert Company
which the Board of Directors, in its sole discretion, determines to be a 'Merger
of Equals' for the purposes of this provision. For purposes of this section,
'Aggregate Value' shall mean the consideration to be received by the
stockholders of Warner-Lambert Company equal to the sum of (A) cash, (B) the
value of any securities and (C) the value of any other non-cash consideration.
The value of securities received shall equal the average closing price of the
security on the principal security exchange on which such security is listed for
the twenty business days immediately preceding the earlier of the execution of
the definitive agreement pertaining to the transaction or the public
announcement of the transaction. For securities not traded on a security
exchange, and for any other non-cash consideration that is received, the value
of such security or such non-cash consideration shall be determined by the Board
of Directors.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
SECTION 5.1. Types of Options. Options granted under the Plan shall be in
the form of (i) incentive stock options as defined in Section 422 of the Code,
or (ii) options not qualifying under such section, or both, in the discretion of
the Committee. The status of each Option shall be identified in the Option
agreement.
SECTION 5.2. Option Price. The Option Price shall be such as shall be fixed
by the Committee, subject to adjustment pursuant to Section 10.1 hereof. The
date of the granting of an Option under the Plan shall be the date fixed by the
Committee.
SECTION 5.3. Period of Option.
(a) No part of an Option may be exercised unless the Optionee remains in the
continuous employ of the Company for the period of time specified by the
Committee, except that upon the occurrence of a Change in Control of
Warner-Lambert all Options may be exercised without giving effect to the period
of employment limitation and the limitations, if any, which may have been
imposed by the Committee pursuant to Section 5.3(b) with respect to the percent
of the total number of shares to which the Option relates which may be purchased
from time to time during the Option Period.
(b) Options will be exercisable thereafter over the Option Period, which, in
the case of each Option, shall be a period determined by the Committee and will
be exercisable at such times and in such amounts as determined by the Committee
at the time each Option is granted. Notwithstanding any other provision
contained in this Plan, no Option shall be exercisable after the expiration of
the Option Period. Except as provided in Sections 5.4, 5.5 and 5.6 hereof, no
Option may be exercised unless the Optionee is then in the employ of the Company
and shall have been continuously so employed since the date of the grant of such
Option.
SECTION 5.4. Termination of Employment Before Age 55. An Optionee whose
employment terminates before age 55, by reason other than death, shall be
entitled to exercise such Option, only within the three-month period after the
date of such termination of employment and in no event after the expiration of
the Option Period, and then only if and to the extent that the Optionee was
entitled to exercise the Option at the date of the termination of employment,
giving effect to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) with respect to the percent of the total
number of shares to which the Option relates which may be purchased from time to
time during the Option Period and have not been removed pursuant to Section
5.3(a).
5
<PAGE>
SECTION 5.5. Termination of Employment On or After Age 55. An Optionee whose
employment terminates on or after age 55, by reason other than death, shall be
entitled to exercise such Option if the Optionee was entitled to exercise the
Option at the date of the termination, without, however, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant to
Section 5.3(b) with respect to the percent of the total number of shares to
which the Option relates which may be purchased from time to time during the
Option Period; provided, however, that such Option shall be exercisable until
the later of (i) the three-year period after termination of employment, or (ii)
the period after termination of employment which is equal to the number of full
months that the Option has been outstanding prior to such termination, but in no
event after the expiration of the Option Period.
SECTION 5.6. Death of Optionee. If an Optionee should die:
(a) while in the employ of the Company, the Option theretofore granted
shall, if the Optionee was entitled to exercise the Option at the date of death,
be exercisable by the estate of the Optionee, or by a person who acquired the
right to exercise such Option by bequest or inheritance or by reason of the
death of the Optionee, without, however, giving effect to the limitations, if
any, which may have been imposed by the Committee pursuant to Section 5.3(b)
with respect to the percent of the total number of shares to which the Option
relates which may be purchased from time to time during the Option Period;
provided, however, that such Option shall be exercisable until the later of (i)
the three-year period after termination of employment, or (ii) the period after
termination of employment which is equal to the number of full months that the
Option has been outstanding prior to such termination, but in no event after the
expiration of the Option Period;
(b) within the three-month period after the date of the termination of
employment before age 55, the Option theretofore granted shall be exercisable by
the estate of the Optionee, or by a person who acquired the right to exercise
such Option by bequest or inheritance or by reason of the death of the Optionee,
but then only if and to the extent that the Optionee was entitled to exercise
the Option at the date of death, giving effect to the limitations, if any, which
may have been imposed by the Committee pursuant to Section 5.3(b) with respect
to the percent of the total number of shares to which the Option relates which
may be purchased from time to time during the Option Period and have not been
removed pursuant to Section 5.3(a); provided, however, that such Option shall be
exercisable only within the twelve-month period next succeeding the death of the
Optionee and in no event after the expiration of the Option Period; or
(c) after the date of the termination of employment on or after age 55, the
Option theretofore granted shall, if the Optionee was entitled to exercise the
Option at the date of death, be exercisable by the estate of the Optionee, or by
a person who acquired the right to exercise such Option by bequest or
inheritance or by reason of the death of the Optionee, without, however, giving
effect to the limitations, if any, which may have been imposed by the Committee
pursuant to Section 5.3(b) with respect to the percent of the total number of
shares to which the Option relates which may be purchased from time to time
during the Option Period; provided, however, that such Option shall be
exercisable until the latest of (i) the three-year period after termination of
employment, (ii) the period after termination of employment which is equal to
the number of full months that the Option has been outstanding prior to such
termination, or (iii) the twelve-month period after the death of the Optionee
provided such death occurs before the later of (i) or (ii), but in no event
after the expiration of the Option Period.
SECTION 5.7. Payment for shares. Payment for shares of Common Stock shall be
made in full at the time of exercise of the Option. Nothing herein shall be
construed to prohibit the Company from making a loan or advance to the Optionee
for the purpose of financing, in whole or in part, the purchase of optioned
shares. Payment of the Option Price shall be made in cash or, with the consent
of the Committee, in whole or in part in Common Stock, Stock Awards or other
consideration. Payment may also be made by delivering a properly executed
exercise notice together with irrevocable instructions to a third party to
promptly deliver to the Company the amount of sale or loan proceeds to pay the
exercise price.
SECTION 5.8. Incentive Stock Options. Options granted in the form of
incentive stock options shall be subject, in addition to the foregoing
provisions, to the following provisions:
6
<PAGE>
(a) Annual Limit. To the extent that the aggregate Fair Market Value
(determined at the time of grant) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by any Optionee
during any calendar year (under the Plan or under any other stock plan of the
Company) exceeds $100,000, such options shall be treated as options which are
not incentive stock options.
(b) Ten Percent Shareholder. No incentive stock option shall be granted to
any individual who, at the time of the proposed grant, owns Common Stock
possessing more than ten percent (10%) of the total combined voting power of all
classes of stock of Warner-Lambert or any Subsidiary.
(c) Option Period. No incentive stock option shall be exercisable after the
expiration of ten years from the date of grant.
(d) Option Price. The Option Price of an incentive stock option shall not be
less than the Fair Market Value per share on the date of grant.
(e) Subsidiary. Incentive stock options may only be granted to employees of
Warner-Lambert and its Subsidiaries.
(f) Aggregate Limit. The aggregate number of shares of Common Stock which
may be issued pursuant to the exercise of incentive stock options shall not
exceed the lesser of (i) 10,000,000 shares or (ii) the number of shares
determined in accordance with the share limitation specified in Section 3.2
hereof.
The Company intends that Options designated by the Committee as incentive stock
options shall constitute incentive stock options under Section 422 of the Code.
Should any of the foregoing provisions not be necessary in order to so comply or
should any additional provisions be required, the Committee may amend the Plan
accordingly, without the necessity of obtaining the approval of stockholders of
Warner-Lambert.
SECTION 5.9. Rollover Options. Notwithstanding anything herein to the
contrary, in the event of a Merger of Equals all Options granted hereunder shall
become immediately exercisable by the Optionee and the Options shall be
converted into options to purchase the stock of the company which other
shareholders of Warner-Lambert Company receive in the transaction (the 'Rollover
Options'). The Rollover Options shall be subject to the same terms and
conditions as those applicable to the Options held prior to the Merger of
Equals, including, but not limited to, exercisability and Option Period, except
as hereinafter provided. If the Aggregate Value consists only of shares of a
publicly traded security ('New Security'), each Rollover Option shall entitle
the holder to purchase the number of shares of New Security which is equal to
the product of (a) the Exchange Ratio (as hereinafter defined) and (b) the
number of shares of Common Stock subject to the Option immediately prior to the
effective date of the Merger of Equals (rounded to the nearest full number of
shares). The exercise price for each Rollover Option shall be the exercise price
per share of each Option divided by the Exchange Ratio (rounded to the nearest
full cent). For purposes hereof, 'Exchange Ratio' shall mean the ratio for
exchanging Common Stock held by the stockholders of Warner-Lambert Company for
shares of New Security which is set forth in the definitive agreement pertaining
to the transaction. If the Aggregate Value consists of consideration other than
New Securities, the Board shall make appropriate adjustments to the number of
Rollover Options and the exercise price thereof. In addition, with respect to
Options granted after March 25, 1997, if an optionee who is not 55 years old is
terminated within three (3) years following the Merger of Equals (for a reason
other than 'Termination for Just Cause,' as defined in the Warner-Lambert
Company Enhanced Severance Plan), such optionee's Options shall remain
exercisable notwithstanding such termination of employment by the Company or any
successor or its affiliates and such Options shall be exercisable until two
years following the termination of employment, but in no event after the
expiration of the Option Period.
ARTICLE VI
TERMS OF RIGHTS
SECTION 6.1. Relation to Option. Each Right shall relate specifically to a
Reference Option, then held by, or concurrently granted to, the Grantee. Upon
exercise of a Right an amount shall be payable
7
<PAGE>
from Warner-Lambert, determined in accordance with Section 6.3 hereof. The
Reference Option shall terminate to the extent that the related Right is
exercised.
SECTION 6.2. Exercise of Right. A Right shall become exercisable at such
time, and in respect of such number of shares of Common Stock, as the Reference
Option is then exercisable and such Right shall terminate upon termination of
the Reference Option, provided, however, that no Right shall be exercisable
unless the Grantee shall have remained in the continuous employ of the Company
for the period specified by the Committee, except that upon the occurrence of a
Change in Control of Warner-Lambert, all Rights may be exercised without giving
effect to the period of employment limitation and the limitations, if any, which
may have been imposed by the Committee pursuant to Section 5.3(b) with respect
to the percent of the total number of shares to which the Right relates which
may be purchased from time to time during the Option Period. Except as provided
in this Section 6.2, and in Sections 6.5 and 6.6, no Right shall be exercisable
unless at the time of such exercise the Grantee shall be in the employ of the
Company.
SECTION 6.3. Amount Payable Upon Exercise of Right. Upon the exercise of a
Right the amount payable shall be equal to:
(i) 100% of the Spread but not exceeding the difference between the
Option Price and the Fair Market Value of a share of Common Stock on the
Valuation Date; plus
(ii) 125% of the amount, if any, by which the Fair Market Value of a
share of Common Stock on the Valuation Date exceeds the Fair Market Value on
the date the Right was granted;
multiplied by the number of shares with respect to which the Right is being
exercised; provided, however, that the Committee may grant Rights which provide
that upon exercise the amount payable shall be equal to 100% of the amount by
which the Fair Market Value of a share of Common Stock on the Valuation Date
exceeds the Fair Market Value on the date the Right was granted.
SECTION 6.4. Form of Payment. The amount payable on exercise of a Right
shall be payable in cash, shares of Common Stock valued at their Fair Market
Value as of the Valuation Date, or in any combination thereof; provided,
however, that the form of payment shall be in the sole discretion of the
Committee. In the event that any payment in the form of both cash and shares of
Common Stock is made to a Reporting Person, the cash portion of such payment
shall be made upon the Grantee becoming taxable in respect of the Common Stock
received upon exercise of the Right. Notwithstanding the foregoing, a payment,
in whole or in part, of cash may be made to a Reporting Person upon exercise of
a Right only if the Right is exercised (i) during the period beginning on the
third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the Company and
ending on the twelfth business day following such date, or (ii) during any other
period permitted under the provisions of Rule 16b-3 promulgated pursuant to the
Act. In addition, a payment of cash shall be made to a Reporting Person who has
held the Right at least six months from the date of its grant promptly following
a Change in Control of Warner-Lambert which Change in Control is outside the
control of any Reporting Person within the meaning of the aforesaid Rule 16b-3.
The Company intends that this provision shall comply with the requirements of
Rule 16b-3 under the Act. Should this provision not be necessary to comply with
the requirements of such Rule or should any additional provision be necessary in
order to comply with the requirements of such Rule, the Committee may amend the
Plan accordingly, without the necessity of obtaining the approval of
stockholders of the Company. Any fraction of a share resulting from the above
calculation shall be disregarded.
SECTION 6.5. Termination of Employment. If, prior to the expiration of a
Reference Option, the employment of the Grantee by the Company should terminate,
by reason other than death, the related Right shall terminate, except that if,
after a Grantee shall have remained in the employ of the Company for the period
specified by the Committee, such Grantee's employment should terminate on or
after age 55, the Right theretofore granted shall be exercisable until the later
of (i) the three-year period after termination of employment, or (ii) the period
after termination of employment which is equal to the number of full months that
the Reference Option has been outstanding prior to such termination, but in no
event after the expiration of the Option Period, without, however, giving effect
to the limitations, if any, which may have been imposed by the Committee
pursuant to Section 5.3(b) hereof.
8
<PAGE>
SECTION 6.6. Death of Grantee. If a Grantee should die prior to the
termination of the Reference Option:
(a) while in the employ of the Company, the Right theretofore granted shall,
if the Grantee was entitled to exercise the Right at the date of death, be
exercisable by the estate of the Grantee, or by a person who acquired the right
to exercise such Right by bequest or inheritance or by reason of the death of
the Grantee, without, however, giving effect to the limitations, if any, which
may have been imposed by the Committee pursuant to Section 5.3(b) hereof with
respect to the percent of the total number of shares to which the Right relates
which may be purchased from time to time during the Option Period; provided,
however, that such Right shall be exercisable until the later of (i) the three-
year period after termination of employment, or (ii) the period after
termination of employment which is equal to the number of full months that the
Reference Option has been outstanding prior to such termination, but in no event
after the expiration of the Option Period; or
(b) after the date of the termination of employment on or after age 55, the
Right theretofore granted shall, if the Grantee was entitled to exercise the
Right at the date of death, be exercisable by the estate of the Grantee, or by a
person who acquired the right to exercise such Right by bequest or inheritance
or by reason of the death of the Grantee, without, however, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant to
Section 5.3(b) hereof with respect to the percent of the total number of shares
to which the Right relates which may be purchased from time to time during the
Option Period; provided, however, that such Right shall be exercisable until the
latest of (i) the three-year period after termination of employment, (ii) the
period after termination of employment which is equal to the number of full
months that the Reference Option has been outstanding prior to such termination,
or (iii) the twelve-month period after the death of the Grantee provided such
death occurs before the later of (i) or (ii), but in no event after the
expiration of the Option Period.
SECTION 6.7. Limited Rights. Notwithstanding anything herein to the
contrary, Limited Rights may be granted hereunder by the Committee with respect
to the options granted under this Plan or any other stock option plan of the
Company which shall entitle the holder to receive a payment of cash promptly
following a Change in Control of Warner-Lambert which Change in Control is
outside the control of any Reporting Person within the meaning of Rule 16b-3
under the Act. Such payment of cash shall be made to a Reporting Person only if
such person has held such Limited Right at least six months from the date of its
grant. Promptly following any such Change in Control, the Optionee shall be
entitled to receive a cash payment equal to the excess of the Fair Market Value
of a share of Common Stock on the Valuation Date over the Option Price of the
related Option multiplied by the number of shares with respect to which the
Limited Right relates (in such case the method of determining the Fair Market
Value in the third sentence of Section 4.6(a) shall apply). Limited Rights shall
expire on the first to occur of their date of payment or expiration of the
Limited Right or the related Option. Further, upon payment of a Limited Right,
the related Option (and any other Right related thereto) shall be cancelled.
Except as otherwise provided herein, the provisions of the Plan relating to
Rights shall also apply to Limited Rights.
ARTICLE VII
TERMS AND CONDITIONS OF RESTRICTED STOCK
SECTION 7.1. General. The restrictions set forth in Section 7.2 shall apply
to each grant of Restricted Stock for the duration of the Restricted Period.
SECTION 7.2. Restrictions. A stock certificate representing the number of
shares of Restricted Stock granted shall be registered in the Participant's name
but shall be held in custody by the Company for the Participant's account. The
Participant shall have all rights and privileges of a stockholder as to such
Restricted Stock, including the right to receive dividends and the right to vote
such shares, except that, subject to the provisions of Section 7.3, the
following restrictions shall apply: (i) the Participant shall not be entitled to
delivery of the certificate until the expiration of the Restricted Period;
(ii) none of the shares of Restricted Stock may be sold, transferred, assigned,
pledged, or otherwise encumbered or disposed of during the Restricted Period;
(iii) the Participant shall, if requested by the Company,
9
<PAGE>
execute and deliver to the Company, a stock power endorsed in blank; and
(iv) all of the shares of Restricted Stock still subject to restrictions shall
be forfeited and all rights of the Participant to such shares shall terminate
without further obligation on the part of the Company if the Participant ceases
to be an Employee prior to the expiration of the Restricted Period applicable to
such shares. Upon the forfeiture (in whole or in part) of shares of Restricted
Stock, such forfeited shares shall become treasury shares of the Company without
further action by the Participant. The Participant shall have the same rights
and privileges, and be subject to the same restrictions, with respect to any
shares received pursuant to Section 10.1 hereof.
SECTION 7.3. Terms and Conditions. The Committee shall establish the terms
and conditions, which need not be the same for all grants made under the Plan,
applicable to the Restricted Stock, and which may include restrictions based
upon periods of time, performance (corporate, group, individual or otherwise),
combinations thereof or such other restrictions as the Committee shall determine
to be appropriate. The Committee may provide for the restrictions to lapse with
respect to a portion or portions of the Restricted Stock at different times or
upon the occurrence of different events and the Committee may waive, in whole or
in part, any or all restrictions applicable to a grant of Restricted Stock.
Restricted Stock awards may be issued for no cash consideration or for such
minimum consideration as may be required by applicable law.
SECTION 7.4. Delivery of Restricted Shares. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, to the Participant or the
Participant's beneficiary or estate, as the case may be. The Company shall not
be required to deliver any fractional share of Common Stock but shall pay, in
lieu thereof, the fair market value (measured as of the date the restrictions
lapse) of such fractional share to the Participant or the Participant's
beneficiary or estate, as the case may be. Notwithstanding the foregoing, the
Committee may authorize the delivery of the Restricted Stock to a Participant
during the Restricted Period, in which event any stock certificates in respect
of shares of Restricted Stock thus delivered to a Participant during the
Restricted Period applicable to such shares shall bear an appropriate legend
referring to the terms and conditions, including the restrictions, applicable
thereto.
SECTION 7.5. Certain Events.
(a) In the event of a Change in Control of Warner-Lambert the rights and
privileges of Participants hereunder shall be governed by the following
clause (i), (ii), (iii), or (iv) as appropriate:
(i) Value of Restricted Stock. All shares of Restricted Stock then
outstanding shall be immediately forfeited and shall revert to the Company
as treasury shares and, in lieu thereof, each Participant shall receive a
cash payment equal to the Value of the Restricted Stock (as hereinafter
defined); provided, however, that if the Participant is a Reporting Person
at the time of the Change in Control of Warner-Lambert, the provisions of
clause (ii) shall govern the rights and privileges of such Participant.
(ii) Reporting Persons. All shares of Restricted Stock previously
granted to Participants who are Reporting Persons at the time of the Change
in Control of Warner-Lambert, which Change in Control is outside the control
of any Reporting Person within the meaning of Rule 16b-3 under the Act, and
which are then outstanding and have been outstanding for a period of at
least six (6) months, shall be immediately forfeited and shall revert to the
Company as treasury shares and, in lieu thereof, such Participant shall
receive a cash payment equal to the Value of the Restricted Stock.
(iii) Lapse of Restrictions. In the event that clause (ii) shall not
become operational with respect to a Participant who is a Reporting Person,
all restrictions applicable to shares of Restricted Stock previously granted
to such Participant and then outstanding shall expire and such shares shall
thereupon be delivered to the Participant free of all restrictions.
(iv) Notwithstanding anything herein to the contrary, in the case of the
Change in Control transaction contemplated by the Agreement and Plan of
Merger, dated as of February 6, 2000, among Pfizer Inc., Seminole
Acquisition Sub Corp. and Warner-Lambert, as the same may be amended from
time to time (the 'Merger Agreement'), all shares of Restricted Stock which
are
10
<PAGE>
outstanding immediately prior to such Change in Control shall, as of the
consummation of such Change in Control, (a) become fully vested and free of
restrictions and (b) thereupon be converted into a number of fully vested
shares of the ultimate parent entity resulting from such Change in Control
based upon the same exchange ratio pursuant to which shares of Common Stock
are so converted pursuant to the Merger Agreement.
(b) As used in the Plan, the 'Value of the Restricted Stock' shall be the
higher of (a) the highest closing price per share of Common Stock on the
Composite Tape for New York Stock Exchange issues during the 30 day period prior
to the Change in Control of Warner-Lambert, or (b) if the Change in Control of
Warner-Lambert occurs as a result of a tender or exchange offer or consummation
of a transaction, then the highest price per share of Common Stock pursuant
thereto, multiplied by the total number of shares of Restricted Stock granted to
such Participant and then outstanding, regardless of whether the restrictions
applicable thereto shall have previously lapsed. Any consideration other than
cash forming a part or all of the consideration for Common Stock to be paid
pursuant to the applicable transaction shall be valued at the valuation placed
thereon by the Board of Directors. Adjustments, if any, shall be made in
accordance with Section 10.1 hereof.
ARTICLE VIII
TERMS AND CONDITIONS OF PERFORMANCE AWARDS
SECTION 8.1. Terms and Conditions. The Committee may grant Performance
Awards, determine the consideration therefor, which may include prior efforts
and accomplishments, and establish the terms and conditions thereof, which may
include provisions based upon periods of time, performance (corporate, group,
individual or otherwise), combinations thereof or such other provisions as the
Committee may determine to be appropriate. Performance Awards may consist of
shares of Common Stock or awards that are valued by reference to shares of
Common Stock (e.g., phantom stock or restricted stock units), cash or such other
measure as the Committee shall determine. Performance Awards may provide for
payment in shares of Common Stock, cash, other property or any combination
thereof as determined by the Committee. Shares of Common Stock issued pursuant
to this Section 8.1 may be issued for no cash consideration or for such minimum
consideration as may be required by applicable law. The Committee shall
determine whether payment shall be made in a lump sum, installments or deferred.
With respect to Performance Awards which are valued by reference to shares of
Common Stock, the Committee shall also determine whether the Participant may be
entitled to receive a payment of, or credit equivalent to, any dividends payable
with respect to such shares of Common Stock and the terms and conditions
applicable thereto. Further, if a payment of cash is to be made on a deferred
basis, the Committee shall establish whether interest shall be credited, the
rate thereof and any other terms and conditions applicable thereto. The
limitations on transfer set forth in Section 4.4 shall be applicable to all
Performance Awards.
ARTICLE IX
REGULATORY COMPLIANCE AND LISTING
SECTION 9.1. Regulatory Compliance and Listing. The issuance or delivery of
any Stock Awards and shares of Common Stock pursuant thereto may be postponed by
the Company for such periods as may be required to comply with any applicable
requirements under the Federal securities laws, any applicable listing
requirements of any national securities exchange or any requirements under any
other law or regulation applicable thereto, and the Company shall not be
obligated to issue or deliver any such awards or shares if the issuance or
delivery thereof shall constitute a violation of any provision of any law or of
any regulation of any governmental authority or any national securities
exchange.
ARTICLE X
ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION
SECTION 10.1. Adjustments. In the event of a recapitalization, stock split,
stock dividend, combination or exchange of shares, merger, consolidation, rights
offering, reorganization, liquidation, or
11
<PAGE>
the sale, conveyance, lease or other transfer by Warner-Lambert of all or
substantially all of its property, or any other change in the corporate
structure or shares of Warner-Lambert, the Committee may make such equitable
adjustments to prevent dilution or enlargement of rights as it may deem
appropriate, including adjustments (i) in the number and class of shares
authorized to be granted hereunder, (including adjustment to the share
limitation of Section 3.2 hereof), (ii) in the number and kind of shares
available under any outstanding Stock Awards (including substitution of shares
of another corporation), (iii) in the price of any Option, and (iv) in the
number of Stock Credits in each Director's Stock Account; provided, however,
that in no event may any change be made to an incentive stock option which would
constitute a 'modification' within the meaning of Section 425(h)(3) of the Code.
Stock Awards granted under the Plan shall contain such provisions as are
consistent with the foregoing with respect to adjustments to be made in the
number and kind of shares covered thereby and in the Option Price in the event
of any such change.
ARTICLE XI
DIRECTORS' DEFERRED COMPENSATION
SECTION 11.1. Election To Participate.
(a) Each Director may elect to defer payment of all or any portion of his or
her Compensation that is payable during the immediately succeeding Plan Year.
Such election must be made with respect to all Compensation payable in such
succeeding Plan Year by the date established by the Secretary of the Company but
in no event later than December 31 of such preceding Plan Year.
(b) An election to defer any Compensation shall be: (i) in writing,
(ii) delivered to the Secretary, and (iii) irrevocable. A Director may file a
new election each Plan Year applicable to the immediately succeeding Plan Year.
If no election or revocation of a prior election is received by such date as may
be permissible under the preceding paragraph, the election, if any, in effect
for such Plan Year will continue to be effective for the immediately succeeding
Plan Year. If a Director does not elect to defer Compensation payable during a
Plan Year, all such Compensation shall be paid directly to such Director in
accordance with resolutions adopted by the Board from time to time.
SECTION 11.2. Mode of Deferral. A Director who has elected to defer all or a
portion of his or her Compensation as provided in Section 11.1 hereof may
further elect to have such deferred amounts credited to a Cash Account, a Stock
Account, or a combination of both such Accounts. The Secretary shall maintain
such Accounts in the name of the Director. The election referred to in this
Section 11.2 may be made once per year and shall become effective on the January
1st which follows such election; provided, however, that no election to defer
amounts into the Stock Account shall become effective unless the transaction
qualifies as exempt under Rule 16b-3(d) under the Act. Any such election shall
be specified in a writing delivered by the Director to the Secretary and shall
be irrevocable. If a Director fails to elect the Account to which deferral shall
be made or if any such election would result in a transaction which would not
qualify as exempt under Rule 16b-3(d) under the Act, he or she shall be deemed
to have elected deferral to the Cash Account. In addition, a Director may cease
deferring amounts into the Stock Account at any time by written notice delivered
to the Secretary and thereafter such amounts shall be credited to the Cash
Account. Compensation deferred to a Cash Account or Stock Account shall result
in Cash Credits or Stock Credits, respectively.
SECTION 11.3. Cash Account. The Cash Account of a Director shall be
credited, as of the day the deferred Compensation otherwise would have been
payable to such Director, with Cash Credits equal to the dollar amount of such
deferred Compensation. The Cash Account shall be adjusted and increased each
year, as if interest was credited thereon, at the rate utilized for adjusting
deferred bonus accounts under the Warner-Lambert Company Incentive Compensation
Plan.
SECTION 11.4. Stock Account. The Stock Account of a Director shall be
credited, as of the day the deferred Compensation otherwise would have been
payable to such Director, with Stock Credits equal to the number of shares of
Common Stock (including fractions of a share) that could have been purchased
with the amount of such deferred Compensation at the Closing Price of shares of
Common Stock on the day the deferred Compensation otherwise would have been
payable to such Director. As of the date of any dividend record date for the
Common Stock, the Director's Stock Account shall be
12
<PAGE>
credited with additional Stock Credits equal to the number of shares of Common
Stock (including fractions of a share) that could have been purchased, at the
Closing Price of shares of Common Stock on such date, with the amount which
would have been paid as dividends on that number of shares (including fractions
of a share) of Common Stock which is equal to the number of Stock Credits then
attributed to the Director's Stock Account; provided, however, that in the event
that there is not then in effect an election under Section 11.2 hereof to have
any of such Director's Compensation credited to a Stock Account and, further,
that the Director has elected under Section 11.5(a) hereof to transfer his or
her Stock Account to a Cash Account then the amount which would have been
credited to the Stock Account in accordance with this sentence but for this
proviso shall instead be credited to such Director's Cash Account. In the case
of dividends paid in property other than cash, the amount of the dividend shall
be deemed to be the fair market value of the property at the time of the payment
of the dividend, as determined in good faith by the Committee.
SECTION 11.5. Conversions.
(a) Stock Account to Cash Account. A Director may elect to convert all or
any portion of his or her Stock Account to his or her Cash Account; provided,
however, that no such election shall become effective unless the transaction
qualifies as exempt under Rule 16b-3(f) under the Act. The amount to be credited
to such Director's Cash Account shall be obtained by multiplying the number of
Stock Credits credited to his or her Stock Account as of the last day of the
month in which such election is made by the Closing Price of shares of Common
Stock on such date.
(b) Cash Account to Stock Account. A Director may elect to convert all or
any portion of his or her Cash Account to his or her Stock Account; provided,
however, that no such election shall become effective unless the transaction
qualifies as exempt under Rule 16b-3(f) under the Act. The number of Stock
Credits to be credited to such Director's Stock Account shall be obtained by
dividing the number of Cash Credits credited to his or her Cash Account as of
the last day of the month in which such election is made by the Closing Price of
shares of Common Stock on such date.
(c) An election under this Section 11.5 shall be in a writing delivered to
the Secretary and may be revoked or revised at any time prior to the last day of
the month in which the election is made.
SECTION 11.6. Distribution of Cash Account or Stock Account.
(a) Distributions in respect of a Director's Cash Account and Stock Account
shall become payable in full to such Director, annually, over a period of
ten (10) years, except as otherwise agreed to by the Committee and the Director,
beginning with the first day of the calendar year following the year in which
the individual ceases to be a member of the Board of Directors.
(b) Distributions in respect of a Director's Cash Account and Stock Account
shall be made only in cash.
SECTION 11.7. Installment Amount.
(a) The amount of each distribution with respect to a Director's Cash
Account shall be the amount obtained by multiplying the balance in such Account
by a fraction, the numerator of which is one (1) and the denominator of which is
the number of years in which distributions remain to be made (including the
current distribution).
(b) The amount of each distribution with respect to a Director's Stock
Account shall be the amount obtained by multiplying the number of Stock Credits
attributable to such installment (determined as hereinafter provided) by the
average of the Closing Prices of shares of Common Stock on each Business Day in
the month immediately prior to the month in which such installment is to be
paid. The number of Stock Credits attributable to an installment shall be equal
to the amount obtained by multiplying the current number of Stock Credits in
such Stock Account by a fraction, the numerator of which is one (1) and the
denominator of which is the number of years in which distributions remain to be
made (including the current distribution).
SECTION 11.8. Financial Hardship. Notwithstanding any other provision
hereof, at the written request of a Director or a Director's legal
representative, the Committee, in its sole discretion, upon a finding that
continued deferral will result in financial hardship to the Director, may
authorize (i) the payment of all or a part of a Director's Accounts in a single
installment prior to his or her ceasing to be
13
<PAGE>
a Director or (ii) the acceleration of payment of any multiple installments
thereof; provided, however, that Directors may not receive distributions under
this Section 11.8 if such distribution would result in liability of the Director
under Section 16 of the Act.
SECTION 11.9. Distribution upon Death. Upon the death of a Director, the
Committee shall pay all of such Director's Cash Account and Stock Account in a
single installment to the beneficiary designated by the Director. All such
designations shall be made in writing and delivered to the Secretary. A Director
may from time to time revoke or change any such designation by written notice to
the Secretary. If there is no designation on file with the Secretary at the time
of the Director's death, or if the beneficiary designated therein shall have
predeceased the Director, such distributions shall be made to the executor or
administrator of the Director's estate. Any distribution under this
Section 11.9 shall be made as soon as practicable following notification to the
Committee of the Director's death and the value of the Stock Account for the
purpose of such distribution shall be based upon the Closing Price of shares of
Common Stock on the date of the Director's death.
SECTION 11.10. Certain Events. Notwithstanding any other provision hereof,
in the event of a Change in Control of Warner-Lambert which is outside of the
control of any Reporting Person within the meaning of Rule 16b-3 under the Act,
the balance in the Stock Account of each Director shall be converted to the Cash
Account. For this purpose, the balance in the Stock Account shall be determined
by multiplying the number of Stock Credits by the higher of (i) the highest
Closing Price during the period commencing 30 days prior to such Change in
Control or (ii) if the Change in Control of Warner-Lambert occurs as a result of
a tender or exchange offer or consummation of a Transaction, then the highest
price per share of Common Stock pursuant thereto. Any consideration other than
cash forming a part or all of the consideration for Common Stock to be paid
pursuant to the applicable transaction shall be valued at the valuation placed
thereon by the Board of Directors. Adjustments, if any, shall be made in
accordance with Article X hereof. Within 30 days after a Change in Control of
Warner-Lambert, each Director may designate a distribution schedule which may
provide for a lump sum payment or installment payments over a period of up to 15
years, provided, however, that no payment shall be made for a period of one year
after the Change in Control. In the event that a Director shall not make a
designation in accordance with the preceding sentence, the balance in the Cash
Account shall be distributed in a lump sum one year after the Change in Control.
SECTION 11.11. Valuations. Notwithstanding any other provision hereof, in
any instance in which a Director's Stock Account is to be valued by reference to
the Closing Price of shares of Common Stock on a single day, the Committee may
declare such price to be unrepresentative of the market value of such Common
Stock and, in lieu thereof, shall base such valuation on the average of the
Closing Prices of shares of Common Stock on each Business Day during the
calendar quarter ending coincident with or immediately preceding the day which
would otherwise serve as the basis for the valuation.
SECTION 11.12. Funding. The Company's sole obligation to a Director or any
person claiming under or through any Director in respect of the payment of any
balance in an Account shall be solely a contractual obligation in accordance
with the terms of the Plan. No promise hereunder shall be secured by any
specific assets of the Company, nor shall any assets of the Company be
designated as attributable or allocated to the satisfaction of such promises.
SECTION 11.13. Status of Stock Credits. Stock Credits are not, and do not
constitute, shares of Common Stock, and no right as a holder of shares of Common
Stock shall devolve upon a Director by reason of his or her participation in the
Plan.
SECTION 11.14. Non-Trading Date. In the event that the date of the
determination of a Closing Price hereunder shall be a date which shall not be a
date on which the Common Stock is traded on the New York Stock Exchange,
determination of such Closing Price shall be made as of the first date
thereafter on which the Common Stock is so traded.
SECTION 11.15. No Right To Reelection. Nothing in the Plan shall be deemed
to create any obligation on the part of the Board to nominate any Director for
reelection by the Company's stockholders, nor confer upon any Director the right
to remain a member of the Board of Directors.
SECTION 11.16. Predecessor Plans. Upon the Effective Date of the Plan, no
further benefits shall accrue under any Predecessor Plans, except as provided in
Section 11.18 hereof.
14
<PAGE>
SECTION 11.17. Deferred Compensation Accounts. Upon the Effective Date of
the Plan, all Deferred Compensation Accounts shall become subject to the terms
and conditions of this Plan in lieu of the terms and conditions of the
Predecessor Plans, except as provided in Section 11.18 hereof.
SECTION 11.18. Retired Directors. Benefits accrued under Predecessor Plans
which are in pay status on the Effective Date shall continue to be paid in
accordance with the provisions of the Predecessor Plans.
SECTION 11.19. Federal Securities Law. The Company intends that the
provisions of this Article XI, and all transactions effected in accordance with
this Article XI, shall comply with Rule 16b-3 under the Act. In the event that
any provision of this Article XI is not necessary to so comply or any additional
provision is necessary to obtain or maintain such compliance, the Committee is
authorized to revise the Plan accordingly without obtaining approval of the
stockholders of Warner-Lambert. By way of illustration, and not limitation, the
Committee may bifurcate the provisions of this Article XI, and such other
provisions as it shall deem necessary, into a separate plan (which plan shall be
recognized as having received approval of the stockholders of Warner-Lambert),
if the Committee shall deem such action necessary to maintain qualification of
Article XI (and transactions thereunder) under Rule 16b-3 under the Act and the
qualification of the provisions of the Plan affecting Employees (and
transactions thereunder) under Rule 16b-3 under the Act.
ARTICLE XII
ADMINISTRATION
SECTION 12.1. Administration.
(a) The Plan shall be administered by a committee consisting of not less
than three members of the Board of Directors, who shall be appointed by, and
shall serve at the pleasure of, the Board of Directors. No person who is or,
within one year prior thereto, has been eligible to receive an award under the
Plan or any other plan of the Company which would result in loss of
'disinterested person' status within the meaning of Section 16 of the Act may be
a member of the Committee, and no person may be granted a Stock Award while a
member of the Committee. A majority of the Committee shall constitute a quorum
and the acts of a majority of the members present at any meeting at which a
quorum is present, expressed from time to time by a vote at a meeting (including
a meeting held by telephone conference call or in which one or more members of
the Committee participate by telephone), or acts approved in writing by a
majority of the Committee, shall be the acts of the Committee.
(b) In addition to the Committee's discretionary authority set forth in
other Articles hereof, the Committee has discretionary authority to construe and
interpret the Plan and is authorized to establish such rules and regulations for
the proper administration of the Plan as it may deem advisable and not
inconsistent with the provisions of the Plan. All questions arising under the
Plan or under any rule or regulation with respect to the Plan adopted by the
Committee, whether such questions involve an interpretation of the Plan or
otherwise, shall be decided by the Committee, and its decisions shall be
conclusive and binding in all cases.
(c) The Committee has discretionary authority to determine the Employees to
whom Stock Awards under the Plan are to be granted, the terms and conditions
applicable thereto and the number of shares to be covered by each award. In
selecting the individuals to whom Stock Awards shall be granted, as well as in
determining the terms and conditions applicable thereto and the number of shares
subject to each grant, the Committee shall consider the positions and
responsibilities of the Employees being considered, the nature of the services
and accomplishments of each, the value to the Company of their services, their
present and potential contribution to the success of the Company, the
anticipated number of years of service remaining and such other factors as the
Committee may deem relevant. The Committee may obtain such advice or assistance
as it deems appropriate from persons not serving on the Committee.
SECTION 12.2. Stock Awards Committee. In addition, and not in limitation of
the authority of the Committee, the Stock Awards Committee (as hereinafter
constituted) may grant Stock Awards, in accordance with the provisions of the
Plan, including the establishment of the terms and conditions
15
<PAGE>
thereof and the consideration to the Company therefor, to Employees who, at the
time of the grant, are not Reporting Persons. The Stock Awards Committee, whose
members need not serve on the Board of Directors, shall be appointed by, and
shall serve at the pleasure of, the Committee. A majority of the Stock Awards
Committee shall constitute a quorum and the acts of a majority of the members
present at any meeting at which a quorum is present, expressed from time to time
by a vote at a meeting (including a meeting held by telephone conference call or
in which one or more members of the Stock Awards Committee participate by
telephone), or acts approved in writing by a majority of the Stock Awards
Committee, shall be the acts of the Stock Awards Committee. Notwithstanding the
foregoing, the Stock Awards Committee may not undertake any action which the
provisions of Rule 16b-3, promulgated pursuant to the Act, require to be
undertaken by 'Non-Employee Directors' (as defined in said Rule) as a condition
of the continued qualification of the Plan (and transactions thereunder) under
Rule 16b-3.
ARTICLE XIII
TERMINATION OR AMENDMENT OF THE PLAN
SECTION 13.1. Termination or Amendment.
(a) The Board may at any time terminate the Plan and may from time to time
alter or amend the Plan or any part thereof (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Article IX); provided, however, that, unless otherwise required
by law, the rights of a Participant with respect to Stock Awards granted or the
rights of a Director with respect to his or her Accounts prior to such
termination, alteration or amendment may not be impaired without the consent of
such Participant or Director, as the case may be, and, provided further, without
the approval of the Company's stockholders, no alteration or amendment may be
made which would require approval of such stockholders as a condition of
compliance with Rule 16b-3 under the Act. The Company intends that the Plan (and
transactions thereunder) shall comply with the requirements of Rule 16b-3
promulgated pursuant to the Act. Should any provisions hereof not be necessary
in order to comply with the requirements of such Rule or should any additional
provisions be necessary in order to so comply, the Committee may amend the Plan
accordingly, without the necessity of obtaining approval of the stockholders of
Warner-Lambert.
(b) The Committee may at any time adopt any amendment to the Plan which
(i)(A)does not increase Plan liabilities by an amount in excess of five million
dollars ($5,000,000) and does not increase Plan expense by an amount in excess
of five hundred thousand dollars ($500,000) or (B) is required by an applicable
law, regulation or ruling, (ii) can be undertaken by the Board of Directors
under the terms of the Plan, (iii) does not involve a termination of the Plan,
(iv) does not affect the limitations contained in this sentence, and (v) does
not affect the composition or compensation of the Committee.
(c) The Committee shall have the power to cancel all Rights theretofore
granted pursuant to the Plan in the event that it shall determine that the
accounting effects of the grant or exercise of Rights under the Plan would not
be in the best interests of the Company.
(d) Any action which may be undertaken by the Committee pursuant to the
terms hereof may be undertaken by the Board, except as provided in Rule 16b-3
promulgated pursuant to the Act.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. No Right To Employment. Nothing in the Plan shall be deemed to
confer upon any Participant the right to remain in the employ of the Company.
SECTION 14.2. Withholding of Taxes.
(a) The Company shall have the right to require, prior to the issuance or
delivery of any shares of Common Stock or the payment of any cash hereunder,
payment by the Participant or the Director, as the case may be, of any taxes
required by law with respect thereto.
16
<PAGE>
(b) The Committee may permit any such withholding obligation to be satisfied
by reducing the number of shares of Common Stock otherwise deliverable. A
Reporting Person may elect to have a sufficient number of shares of Common Stock
withheld to fulfill such tax obligations (hereinafter a 'Withholding Election')
only if the election complies with the following conditions: (x) the Withholding
Election shall be subject to the disapproval of the Committee and (y) the
Withholding Election is made (i) during the period beginning on the third
business day following the date of release for publication of the quarterly or
annual summary statements of sales and earnings of the Company and ending on the
twelfth business day following such date, or (ii) during any other period in
which a Withholding Election may be made under the provisions of Rule 16b-3
promulgated pursuant to the Act. Any fraction of a share of Common Stock
required to satisfy such tax obligations shall be disregarded and the amount due
shall be paid instead in cash by the Participant.
SECTION 14.3. No Assignment of Benefits. No benefit payable under the Plan
shall, except as otherwise specifically provided by law, be subject in any
manner to anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, attach,
sell, transfer, assign, pledge, encumber or charge any such benefit shall be
void, and any such benefit shall not in any manner be liable for or subject to
the debts, contracts, liabilities, engagements or torts of any person who shall
be entitled to such benefit, nor shall it be subject to attachment or legal
process for or against such person. If any person entitled to a benefit
hereunder shall be adjudicated a bankrupt or shall attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge such benefit, or if
any attempt is made to subject any such benefit to the debts, contracts,
liabilities, engagements or torts of any person entitled to such benefit, then
such benefit shall, in the discretion of the Committee, cease and terminate, and
in that event the Committee may cause such benefit, or any part thereof, to be
held or applied for the benefit of such person, his or her spouse, children or
other dependents, or any of them, in such manner and in such proportion as the
Committee shall determine.
SECTION 14.4. Death; Disability; Termination. The Committee shall establish
the provisions which shall govern in the event of the death, disability, or
termination (including layoff) of a Participant or a Director, which provisions
may be different than the provisions otherwise described herein with respect to
death, disability, and termination. If, for any reason, the Committee shall
determine that it is not desirable because of the incapacity of the person who
shall be entitled to receive any payments hereunder, to make such payments
directly to such person, the Committee may apply such payment for the benefit of
such person in any way that the Committee shall deem advisable or may make any
such payment to any third person who, in the judgment of the Committee, will
apply such payment for the benefit of the person entitled thereto. In the event
of such payment, the Company, the Board of Directors and the Committee shall be
discharged from all further liability therefor. The employment of an Employee
who becomes disabled shall be deemed terminated for purposes of the Plan as of
the date benefit payments would have commenced under the Warner-Lambert Long
Term Disability Benefits Plan had the Participant been enrolled in such plan,
except as otherwise provided herein. Absence on leave approved by the Company
shall not be considered an interruption of employment for any purpose of the
Plan.
SECTION 14.5. Listing and Other Conditions.
(a) As long as the Common Stock is listed on the New York Stock Exchange,
the issue of any shares of stock pursuant to a Stock Award shall be conditioned
upon the shares so to be issued being listed on such Exchange. Warner-Lambert
shall make application for listing on such Exchange unlisted shares subject to
Stock Awards, but shall have no obligation to issue such shares unless and until
such shares are so listed, and the right to exercise any Option or Right with
respect to such shares shall be suspended until such listing has been effected.
(b) If at any time counsel to Warner-Lambert shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to a Stock Award is or
may in the circumstances be unlawful under the statutes, rules or regulations of
any applicable jurisdiction, Warner-Lambert shall have no obligation to make
such sale or delivery, or to make any application or to effect or to maintain
any qualification or registration under the Securities Act of 1933, as amended,
or otherwise with respect to shares of Common Stock or Stock Awards, and the
right to exercise any Option or Right shall be suspended until, in the opinion
of said counsel, such sale or delivery shall be lawful.
17
<PAGE>
(c) Upon termination of any period of suspension under this Section 14.5,
any Stock Award affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such suspension
and as to shares which would otherwise have become available during the period
of such suspension, but no such suspension shall extend any Option Period.
SECTION 14.6. Governing Law. This Plan shall be governed by the law of the
State of New Jersey (regardless of the law that might otherwise govern under
applicable New Jersey principles of conflict of laws).
SECTION 14.7. Construction. Wherever any words are used herein in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
SECTION 14.8. Laws of Foreign Jurisdictions. Without amending the Plan, but
subject to the limitations specified in Article III hereof, the Committee may
grant, amend, administer, annul or terminate Stock Awards on such terms and
conditions, which may be different from those specified in the Plan, as it may
deem necessary or desirable to make available tax or other benefits of the laws
of any foreign jurisdiction.
SECTION 14.9. Other Plans. Nothing contained herein shall prevent the
Company from adopting additional compensation plans or arrangements.
SECTION 14.10. Federal Securities Law. Notwithstanding any other provision
of the Plan, no transaction shall be given effect on any date which would, in
the opinion of counsel to the Company, result in liability under Section 16(b)
of the Act.
ARTICLE XV
EFFECTIVE DATE; TERM OF PLAN
SECTION 15.1. Effective Date. The Plan shall be submitted to the
stockholders of Warner-Lambert for their approval at the Annual Meeting of
Stockholders to be held in 1992. The Plan shall become effective upon the
affirmative vote of the holders of a majority of the shares of Common Stock
present, or represented, and entitled to vote at the meeting.
SECTION 15.2. Term of Plan. No Stock Awards may be granted hereunder after
April 28, 1997. This Section 15.2 shall not affect any Stock Award granted prior
to such date. Further, the provisions of Article XI hereof (as amended from time
to time) are ongoing and shall continue until terminated by the Board.
WARNER-LAMBERT COMPANY
18
<PAGE>
EXHIBIT 10(c)
________________________________________________________________________________
WARNER-LAMBERT COMPANY
-------------------
1996 STOCK PLAN
AS AMENDED TO FEBRUARY 6, 2000
________________________________________________________________________________
<PAGE>
WARNER-LAMBERT COMPANY
1996 STOCK PLAN
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. Purpose.
(a) The purpose of the 1996 Stock Plan is to provide additional incentive to
selected officers and other employees of the Company (as hereinafter defined),
to recognize and reward their efforts and accomplishments in order to strengthen
the desire of employees to remain with the Company and stimulate their efforts
on behalf of the Company and to attract and retain persons of competence, and,
by encouraging ownership of a stock interest in the Company, to gain for the
Company the advantages inherent in employees having a sense of proprietorship.
(b) In addition, the Plan (as hereinafter defined) will assist in the
attraction and retention of non-employee members of the Board of Directors by
providing the opportunity for such Directors to obtain a proprietary interest in
the Company's success and progress and with increased flexibility in the timing
of the receipt of fees for services on, and attending meetings of, the Board of
Directors and committees thereof.
ARTICLE II
DEFINITIONS
SECTION 2.1. Definitions. Whenever used herein, unless the context otherwise
indicates, the following terms shall have the respective meaning set forth
below:
Account: A Cash Account or a Stock Account.
Act: The Securities Exchange Act of 1934, as amended.
Affiliate: Any corporation, partnership, association, joint-stock company,
business trust, joint venture or unincorporated organization controlled,
directly or indirectly, by Warner-Lambert. Warner-Lambert shall be deemed to
control any such entity if Warner-Lambert possesses, directly or indirectly, the
power to direct or cause the direction of its management and policies, whether
through the ownership of voting securities, by contract or otherwise.
Board of Directors (or Board): The Board of Directors of Warner-Lambert.
Business Day: A day except for a Saturday, Sunday or a legal holiday.
Cash Account: The Account which reflects the Compensation deferred by a
Director pursuant to Section 11.3.
Cash Credit: A credit to a Director's Cash Account, expressed in whole
dollars and fractions thereof, pursuant to Section 11.3.
Closing Price: The closing price of the Common Stock on the Composite Tape
for New York Stock Exchange issues.
Code: The Internal Revenue Code of 1986, as amended.
Committee: The committee appointed to administer the Plan in accordance with
Section 12.1 hereof.
Common Stock: Common Stock, par value $1.00 per share, of Warner-Lambert.
Company: Warner-Lambert and its Affiliates.
Compensation: All cash remuneration payable to a Director for services to
the Company as a Director or as a consultant, other than reimbursement for
expenses, and shall include retainer fees for service on, and fees for
attendance at meetings of, the Board and any committees thereof.
1
<PAGE>
Deferred Compensation Account: An account established by the Company for a
Director under a Predecessor Plan.
Director: Any member of the Board of Directors who is not an employee of the
Company or any of its Affiliates.
Effective Date: The date specified in Article XV hereof.
Employee: Officers and other employees of the Company or any of its
Affiliates (including such persons who are also members of the Board of
Directors).
Fair Market Value: As used in the Plan, the term 'Fair Market Value' shall
be the mean between the high and low sales prices for Common Stock on the
Composite Tape for New York Stock Exchange issues on the date the calculation
thereof shall be made. In the event the date of calculation shall be a date on
which the Common Stock shall not trade on the New York Stock Exchange,
determination of Fair Market Value shall be made as of the first date prior
thereto on which the Common Stock shall have traded on the New York Stock
Exchange.
Grantee: A Participant to whom Rights have been granted in accordance with
the provisions of Articles IV and VI hereof.
Option: The grant to Participants of options to purchase shares of Common
Stock in accordance with the provisions of Articles IV and V hereof.
Optionee: A Participant to whom one or more Options have been granted in
accordance with the provisions of Articles IV and V hereof.
Option Period: The period of time during which an Option may be exercised in
accordance with the provisions hereof.
Option Price: The price per share payable to the Company for shares of
Common Stock upon the exercise of an Option.
Participant: Each Employee to whom a Stock Award is granted under the Plan.
Performance Awards: Awards made to Employees in accordance with the
provisions of Article VIII hereof.
Plan: The Warner-Lambert Company 1996 Stock Plan.
Plan Year: The calendar year.
Predecessor Plans: The Warner-Lambert Directors' Fees Deferral Plan, the
Warner-Lambert Consulting Fees Deferral Plan, the Deferred Compensation Plan for
Directors of Warner-Lambert Company and the Warner-Lambert 1992 Stock Plan.
Reference Option: An Option, other than an incentive stock option, to which
a Right shall relate.
Reporting Person: A person subject to the reporting requirements of
Section 16(a) of the Act, excluding former officers and directors whose
transactions in Common Stock are no longer subject to Section 16 of the Act.
Restricted Period: The period of time from the date of grant of Restricted
Stock until the lapse of restrictions attached thereto.
Restricted Stock: Common Stock granted under the Plan which is subject to
restrictions in accordance with the provisions of Article VII hereof.
Right: The grant to Participants of rights to acquire shares of Common Stock
in accordance with the provisions of Articles IV and VI hereof.
Secretary: The Secretary of Warner-Lambert.
Spread: The amount by which the Option Price that would be payable by the
Grantee upon the exercise of the Reference Option is less than the Fair Market
Value of a share of Common Stock on the date the related Right was granted.
Stock Account: The Account which reflects the Compensation deferred by a
Director pursuant to Section 11.4.
2
<PAGE>
Stock Award: A grant of Options, Rights, Restricted Stock or Performance
Awards in accordance with the provisions hereof.
Stock Credit: A credit to a Director's Stock Account, expressed in whole
shares and fractions thereof, pursuant to Section 11.4.
Subsidiary: Any corporation (other than Warner-Lambert) in an unbroken chain
of corporations beginning with and including Warner-Lambert if, at the time of
the granting of a Stock Award, each of the corporations other than the last
corporation in said unbroken chain owns stock possessing 50 percent or more of
the total combined voting power of all classes of stock in one of the other
corporations in such chain.
Valuation Date: The date on which a Right is exercised.
Warner-Lambert: Warner-Lambert Company or any successor to it in ownership
of substantially all of its assets, whether by merger, consolidation or
otherwise.
ARTICLE III
ELIGIBILITY AND GRANTS
SECTION 3.1. Eligibility and Grants. The Committee shall determine the
Employees who shall be granted Stock Awards and the number of shares thereof.
The Committee may make more than one grant to an Employee during the life of the
Plan. Each grant shall be evidenced by a written instrument duly executed by or
on behalf of the Company.
SECTION 3.2. Share Limitation.
(a) Stock Awards may not be granted in any year which provide for the
issuance of more than 1.65% of the shares of Common Stock outstanding (including
issued shares reacquired by the Company) on the January 1 of the year of grant.
Restricted Stock may not be granted in any year for more than 20% of the shares
authorized under the preceding sentence. Shares of Common Stock issued under the
Plan may be either authorized and unissued shares or issued shares reacquired by
the Company. Notwithstanding the above limitation, in any year in which Stock
Awards (including Restricted Stock) are granted which provide for the issuance
of less than the maximum permissible number of shares, the balance of such
unused shares shall be added to the limitation in subsequent years. In addition,
if any Option granted under the Plan shall expire, terminate or be cancelled for
any reason without having been exercised in full, the corresponding number of
unpurchased shares shall be added to the limitation in subsequent years;
provided, however, that if such expired, terminated or cancelled Option shall
have been a Reference Option, none of such unpurchased shares shall again become
available for purposes of the Plan to the extent that the related Right granted
under the Plan is exercised. Further, if any shares of Common Stock granted
hereunder are forfeited or such award otherwise terminates without the delivery
of such shares upon the lapse of restrictions, the shares subject to such grant,
to the extent of such forfeiture or termination, shall be added to the
limitation in subsequent years so long as the Participant received no 'benefits
of ownership' (within the meaning of Section 16 of the Act) in connection with
such grant. To the extent permitted by Section 16 of the Act, any shares of
Common Stock issued under the Plan through the assumption or substitution of
outstanding grants from an acquired company shall not reduce the shares
available under the Plan.
(b) Stock Awards may not be granted in any year to any individual which
provide for the issuance of more than 600,000 shares of Common Stock (as such
number shall be adjusted in accordance with Article X). Notwithstanding the
above limitation, in any year in which Stock Awards are granted which provide
for the issuance of less than the maximum permissible number of shares, the
balance of such unused shares shall be added to the limitation in subsequent
years.
ARTICLE IV
GENERAL TERMS OF OPTIONS AND RIGHTS
SECTION 4.1. Consideration. The Committee shall determine the consideration
to the Company for the granting of Options and Rights under the Plan, as well as
the conditions, if any, which it may deem
3
<PAGE>
appropriate to ensure that such consideration will be received by, or will
accrue to, the Company, and, in the discretion of the Committee, such
consideration need not be the same, but may vary for Options and Rights granted
under the Plan at the same time or from time to time.
SECTION 4.2. Number of Options and Rights.
(a) The Committee may grant more than one Option or Right to an individual
during the life of the Plan and, subject to the requirements of Section 422 of
the Code with respect to incentive stock options, such Option or Right may be in
addition to, in tandem with, or in substitution for, options or rights
previously granted under the Plan or under another stock plan of the Company or
of another corporation and assumed by the Company.
(b) The Committee may permit the voluntary surrender of all or a portion of
any Option granted under the Plan or any prior plan to be conditioned upon the
granting to the Employee of a new Option for the same or a different number of
shares as the Option surrendered, or may require such voluntary surrender as a
condition precedent to a grant of a new Option to such Employee. Such new Option
shall be exercisable at the price, during the period, and in accordance with any
other terms or conditions specified by the Committee at the time the new Option
is granted.
SECTION 4.3. Option and Right Agreements. The Company shall effect the grant
of Options and Rights under the Plan, in accordance with determinations made by
the Committee, by execution of instruments in writing, in a form approved by the
Committee. Each Option and Right shall contain such terms and conditions (which
need not be the same for all Options and Rights, whether granted at the same
time or at different times) as the Committee shall deem to be appropriate. The
Committee may, in its sole discretion, and subject to such terms and conditions
as it may adopt, accelerate the date or dates on which some or all outstanding
Options and Rights may be exercised. Except as otherwise provided by the
Committee, Options and Rights shall be exercised by submitting to the Company a
signed copy of a notice of exercise in a form to be supplied by the Company and
the exercise of an Option or Right shall be effective on the date on which the
Company receives such notice at its principal corporate offices.
SECTION 4.4. Non-Transferability of Option or Right. Except as otherwise
provided by the Committee, no Option or Right granted under the Plan to an
Employee shall be transferable by the Employee otherwise than by will or by the
laws of descent and distribution or pursuant to a 'qualified domestic relations
order' (as defined in the Code), and such Option and Right shall be exercisable,
during the Employee's lifetime, only by such Employee.
SECTION 4.5. Optionees and Grantees not Stockholders. An Optionee or Grantee
or legal representative thereof shall have none of the rights of a stockholder
with respect to shares subject to Options or Rights until such shares shall be
issued upon exercise of the Option or Right.
SECTION 4.6. Certain Events. (a) As used in the Plan, a 'Change in Control
of Warner-Lambert' shall be deemed to have occurred if (i) any person (as such
term is used in Sections 13(d) and 14(d)(2) of the Act) is or becomes the
beneficial owner (as defined in Rule 13d-3 under the Act), directly or
indirectly, of securities of Warner-Lambert representing twenty percent (20%) or
more of the combined voting power of Warner-Lambert's then outstanding
securities, (ii) upon the consummation of a merger, consolidation, sale or
disposition of all or substantially all of Warner-Lambert's assets or plan of
liquidation which is approved by the stockholders of Warner-Lambert (a
'Transaction'), or (iii) the composition of the Board at any time during any
consecutive twenty-four (24) month period changes such that the Continuity
Directors (as hereinafter defined) cease for any reason to constitute at least
fifty-one percent (51%) of the Board. For purposes of the foregoing clause
(iii), 'Continuity Directors' means those members of the Board who either (a)
were directors at the beginning of such consecutive twenty-four (24) month
period, or (b)(1) filled a vacancy during such twenty-four (24) month period
created by reason of (x) death, (y) a medically determinable physical or mental
impairment which renders the director substantially unable to function as a
director or (z) retirement at the last mandatory retirement age in effect for at
least two (2) years, and (2) were elected, nominated or voted for by at least
fifty-one percent (51%) of the current directors who were also directors at the
commencement of such twenty-four (24) month period. Notwithstanding the
provisions of Article II hereof, upon the exercise of a Right during the 30-day
period following Warner-Lambert obtaining actual knowledge of a
4
<PAGE>
Change in Control of Warner-Lambert, 'Fair Market Value' of a share of Common
Stock on the Valuation Date shall be equal to the higher of (i) the highest
closing sale price per share of Common Stock of Warner-Lambert on the Composite
Tape for New York Stock Exchange issues during the period commencing 30 days
prior to such Change in Control and ending immediately prior to such exercise or
(ii) if the Change in Control of Warner-Lambert occurs as a result of a tender
or exchange offer or consummation of a Transaction, then the highest price per
share of Common Stock pursuant thereto. Any consideration other than cash
forming a part or all of the consideration for Common Stock to be paid pursuant
to the applicable transaction shall be valued at the valuation placed thereon by
the Board. Adjustments, if any, shall be made in accordance with Section 10.1
hereof.
(b) As used in the Plan, a 'Merger of Equals' shall mean either: (a) a
Change in Control of Warner-Lambert Company, pursuant to the terms of which the
stockholders of Warner-Lambert Company receive consideration, including
securities, with an Aggregate Value (as defined below) not greater than 115
percent of the average closing price of the Common Stock of Warner-Lambert
Company on the Composite Tape for New York Stock Exchange issues for the twenty
business days immediately preceding the earlier of the execution of the
definitive agreement pertaining to the transaction or the public announcement of
the transaction; or (b) any other Change in Control of Warner-Lambert Company
which the Board of Directors, in its sole discretion, determines to be a 'Merger
of Equals' for the purposes of this provision. For purposes of this section,
'Aggregate Value' shall mean the consideration to be received by the
stockholders of Warner-Lambert Company equal to the sum of (A) cash, (B) the
value of any securities and (C) the value of any other non-cash consideration.
The value of securities received shall equal the average closing price of the
security on the principal security exchange on which such security is listed for
the twenty business days immediately preceding the earlier of the execution of
the definitive agreement pertaining to the transaction or the public
announcement of the transaction. For securities not traded on a security
exchange, and for any other non-cash consideration that is received, the value
of such security or such non-cash consideration shall be determined by the Board
of Directors.
ARTICLE V
TERMS AND CONDITIONS OF OPTIONS
SECTION 5.1. Types of Options. Options granted under the Plan shall be in
the form of (i) incentive stock options as defined in Section 422 of the Code,
or (ii) options not qualifying under such section, or both, in the discretion of
the Committee. The status of each Option shall be identified in the Option
agreement.
SECTION 5.2. Option Price. The Option Price shall be such as shall be fixed
by the Committee, subject to adjustment pursuant to Section 10.1 hereof;
provided, however, that the Option Price shall not be less than the Fair Market
Value of Warner-Lambert Common Stock on the date of grant. The date of the
granting of an Option under the Plan shall be the date fixed by the Committee.
SECTION 5.3. Period of Option.
(a) No part of an Option may be exercised unless the Optionee remains in the
continuous employ of the Company for the period of time specified by the
Committee, except that upon the occurrence of a Change in Control of
Warner-Lambert all Options may be exercised without giving effect to the period
of employment limitation and the limitations, if any, which may have been
imposed by the Committee pursuant to Section 5.3(b) with respect to the percent
of the total number of shares to which the Option relates which may be purchased
from time to time during the Option Period.
(b) Options will be exercisable thereafter over the Option Period, which, in
the case of each Option, shall be a period determined by the Committee and will
be exercisable at such times and in such amounts as determined by the Committee
at the time each Option is granted. Notwithstanding any other provision
contained in this Plan, no Option shall be exercisable after the expiration of
the Option Period. Except as provided in Sections 5.4, 5.5 and 5.6 hereof or as
otherwise determined by the Committee, no Option may be exercised unless the
Optionee is then in the employ of the Company and shall have been continuously
so employed since the date of the grant of such Option.
5
<PAGE>
SECTION 5.4. Termination of Employment Before Age 55. An Optionee whose
employment terminates before age 55, by reason other than death, shall be
entitled to exercise such Option, only within the three-month period after the
date of such termination of employment and in no event after the expiration of
the Option Period, and then only if and to the extent that the Optionee was
entitled to exercise the Option at the date of the termination of employment,
giving effect to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) with respect to the percent of the total
number of shares to which the Option relates which may be purchased from time to
time during the Option Period and have not been removed pursuant to
Section 5.3(a).
SECTION 5.5. Termination of Employment On or After Age 55. An Optionee whose
employment terminates on or after age 55, by reason other than death, shall be
entitled to exercise such Option if the Optionee was entitled to exercise the
Option at the date of the termination, without, however, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant to
Section 5.3(b) with respect to the percent of the total number of shares to
which the Option relates which may be purchased from time to time during the
Option Period; provided, however, that such Option shall be exercisable until
the later of (i) the three-year period after termination of employment, or (ii)
the period after termination of employment which is equal to the number of full
months that the Option has been outstanding prior to such termination, but in no
event after the expiration of the Option Period.
SECTION 5.6. Death of Optionee. If an Optionee should die:
(a) while in the employ of the Company, the Option theretofore granted
shall, if the Optionee was entitled to exercise the Option at the date of
death, be exercisable by the estate of the Optionee, or by a person who
acquired the right to exercise such Option by bequest or inheritance or by
reason of the death of the Optionee, without, however, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant
to Section 5.3(b) with respect to the percent of the total number of shares
to which the Option relates which may be purchased from time to time during
the Option Period; provided, however, that such Option shall be exercisable
until the later of (i) the three-year period after termination of
employment, or (ii) the period after termination of employment which is
equal to the number of full months that the Option has been outstanding
prior to such termination, but in no event after the expiration of the
Option Period;
(b) within the three-month period after the date of the termination of
employment before age 55, the Option theretofore granted shall be
exercisable by the estate of the Optionee, or by a person who acquired the
right to exercise such Option by bequest or inheritance or by reason of the
death of the Optionee, but then only if and to the extent that the Optionee
was entitled to exercise the Option at the date of death, giving effect to
the limitations, if any, which may have been imposed by the Committee
pursuant to Section 5.3(b) with respect to the percent of the total number
of shares to which the Option relates which may be purchased from time to
time during the Option Period and have not been removed pursuant to
Section 5.3(a); provided, however, that such Option shall be exercisable
only within the twelve-month period next succeeding the death of the
Optionee and in no event after the expiration of the Option Period; or
(c) after the date of the termination of employment on or after age 55,
the Option theretofore granted shall, if the Optionee was entitled to
exercise the Option at the date of death, be exercisable by the estate of
the Optionee, or by a person who acquired the right to exercise such Option
by bequest or inheritance or by reason of the death of the Optionee,
without, however, giving effect to the limitations, if any, which may have
been imposed by the Committee pursuant to Section 5.3(b) with respect to the
percent of the total number of shares to which the Option relates which may
be purchased from time to time during the Option Period; provided, however,
that such Option shall be exercisable until the latest of (i) the three-year
period after termination of employment, (ii) the period after termination of
employment which is equal to the number of full months that the Option has
been outstanding prior to such termination, or (iii) the twelve-month period
after the death of the Optionee provided such death occurs before the later
of (i) or (ii), but in no event after the expiration of the Option Period.
6
<PAGE>
SECTION 5.7. Payment for shares. Payment for shares of Common Stock shall be
made in full at the time of exercise of the Option. Nothing herein shall be
construed to prohibit the Company from making a loan or advance to the Optionee
for the purpose of financing, in whole or in part, the purchase of optioned
shares. Payment of the Option Price shall be made in cash or, with the consent
of the Committee, in whole or in part in Common Stock, Stock Awards or other
consideration. Payment may also be made by delivering a properly executed
exercise notice together with irrevocable instructions to a third party to
promptly deliver to the Company the amount of sale or loan proceeds to pay the
exercise price.
SECTION 5.8. Incentive Stock Options. Options granted in the form of
incentive stock options shall be subject, in addition to the foregoing
provisions, to the following provisions:
(a) Annual Limit. To the extent that the aggregate Fair Market Value
(determined at the time of grant) of the Common Stock with respect to which
incentive stock options are exercisable for the first time by any Optionee
during any calendar year (under the Plan or under any other stock plan of
the Company) exceeds $100,000, such options shall be treated as options
which are not incentive stock options.
(b) Ten Percent Shareholder. No incentive stock option shall be granted
to any individual who, at the time of the proposed grant, owns Common Stock
possessing more than ten percent (10%) of the total combined voting power of
all classes of stock of Warner-Lambert or any Subsidiary.
(c) Option Period. No incentive stock option shall be exercisable after
the expiration of ten years from the date of grant.
(d) Option Price. The Option Price of an incentive stock option shall
not be less than the Fair Market Value per share on the date of grant.
(e) Subsidiary. Incentive stock options may only be granted to employees
of Warner-Lambert and its Subsidiaries.
(f) Aggregate Limit. The aggregate number of shares of Common Stock
which may be issued pursuant to the exercise of incentive stock options
shall not exceed the lesser of (i) 20,000,000 shares or (ii) the number of
shares determined in accordance with the share limitation specified in
Section 3.2 hereof.
The Company intends that Options designated by the Committee as incentive
stock options shall constitute incentive stock options under Section 422 of the
Code. Should any of the foregoing provisions not be necessary in order to so
comply or should any additional provisions be required, the Committee may amend
the Plan accordingly, without the necessity of obtaining the approval of
stockholders of Warner-Lambert.
SECTION 5.9. Rollover Options. Notwithstanding anything herein to the
contrary, in the event of a Merger of Equals all Options granted hereunder shall
become immediately exercisable by the Optionee and the Options shall be
converted into options to purchase the stock of the company which other
shareholders of Warner-Lambert Company receive in the transaction (the 'Rollover
Options'). The Rollover Options shall be subject to the same terms and
conditions as those applicable to the Options held prior to the Merger of
Equals, including, but not limited to, exercisability and Option Period, except
as hereinafter provided. If the Aggregate Value consists only of shares of a
publicly traded security ('New Security'), each Rollover Option shall entitle
the holder to purchase the number of shares of New Security which is equal to
the product of (a) the Exchange Ratio (as hereinafter defined) and (b) the
number of shares of Common Stock subject to the Option immediately prior to the
effective date of the Merger of Equals (rounded to the nearest full number of
shares). The exercise price for each Rollover Option shall be the exercise price
per share of each Option divided by the Exchange Ratio (rounded to the nearest
full cent). For purposes hereof, 'Exchange Ratio' shall mean the ratio for
exchanging Common Stock held by the stockholders of Warner-Lambert Company for
shares of New Security which is set forth in the definitive agreement pertaining
to the transaction. If the Aggregate Value consists of consideration other than
New Securities, the Board shall make appropriate adjustments to the number of
Rollover Options and the exercise price thereof. In addition, with respect to
Options granted after March 25, 1997, if an optionee who is not 55 years old is
terminated within three (3) years following the Merger of Equals (for a reason
other than 'Termination for Just Cause,'
7
<PAGE>
as defined in the Warner-Lambert Company Enhanced Severance Plan), such
optionee's Options shall remain exercisable notwithstanding such termination of
employment by the Company or any successor or its affiliates and such Options
shall be exercisable until two years following the termination of employment,
but in no event after the expiration of the Option Period.
ARTICLE VI
TERMS OF RIGHTS
SECTION 6.1. Relation to Option. Each Right shall relate specifically to a
Reference Option, then held by, or concurrently granted to, the Grantee. Upon
exercise of a Right an amount shall be payable from Warner-Lambert, determined
in accordance with Section 6.3 hereof. The Reference Option shall terminate to
the extent that the related Right is exercised.
SECTION 6.2. Exercise of Right. A Right shall become exercisable at such
time, and in respect of such number of shares of Common Stock, as the Reference
Option is then exercisable and such Right shall terminate upon termination of
the Reference Option, provided, however, that no Right shall be exercisable
unless the Grantee shall have remained in the continuous employ of the Company
for the period specified by the Committee, except that upon the occurrence of a
Change in Control of Warner-Lambert, all Rights may be exercised without giving
effect to the period of employment limitation and the limitations, if any, which
may have been imposed by the Committee pursuant to Section 5.3(b) with respect
to the percent of the total number of shares to which the Right relates which
may be purchased from time to time during the Option Period. Except as provided
in this Section 6.2, Section 6.5 and Section 6.6, or as otherwise determined by
the Committee, no Right shall be exercisable unless at the time of such exercise
the Grantee shall be in the employ of the Company.
SECTION 6.3. Amount Payable Upon Exercise of Right. Upon the exercise of a
Right the amount payable shall be equal to:
(i) 100% of the Spread but not exceeding the difference between the
Option Price and the Fair Market Value of a share of Common Stock on the
Valuation Date; plus
(ii) 125% of the amount, if any, by which the Fair Market Value of a
share of Common Stock on the Valuation Date exceeds the Fair Market Value on
the date the Right was granted;
multiplied by the number of shares with respect to which the Right is being
exercised; provided, however, that the Committee may grant Rights which provide
that upon exercise the amount payable shall be equal to 100% of the amount by
which the Fair Market Value of a share of Common Stock on the Valuation Date
exceeds the Fair Market Value on the date the Right was granted.
SECTION 6.4. Form of Payment. The amount payable on exercise of a Right
shall be payable in cash, shares of Common Stock valued at their Fair Market
Value as of the Valuation Date, or in any combination thereof; provided,
however, that the form of payment shall be in the sole discretion of the
Committee. In the event that any payment in the form of both cash and shares of
Common Stock is made to a Reporting Person, the cash portion of such payment
shall be made upon the Grantee becoming taxable in respect of the Common Stock
received upon exercise of the Right. Notwithstanding the foregoing, a payment,
in whole or in part, of cash may be made to a Reporting Person upon exercise of
a Right only if the Right is exercised (i) during the period beginning on the
third business day following the date of release for publication of the
quarterly or annual summary statements of sales and earnings of the Company and
ending on the twelfth business day following such date, or (ii) during any other
period permitted under the provisions of Rule 16b-3 promulgated pursuant to the
Act. In addition, a payment of cash shall be made to a Reporting Person who has
held the Right at least six months from the date of its grant promptly following
a Change in Control of Warner-Lambert which Change in Control is outside the
control of any Reporting Person within the meaning of the aforesaid Rule 16b-3.
The Company intends that this provision shall comply with the requirements of
Rule 16b-3 under the Act. Should this provision not be necessary to comply with
the requirements of such Rule or should any additional provision be necessary in
order to comply with the requirements of such Rule, the Committee may amend the
Plan accordingly, without the necessity of obtaining the approval of
stockholders of the Company. Any fraction of a share resulting from the above
calculation shall be disregarded.
8
<PAGE>
SECTION 6.5. Termination of Employment. If, prior to the expiration of a
Reference Option, the employment of the Grantee by the Company should terminate,
by reason other than death, the related Right shall terminate, except that if,
after a Grantee shall have remained in the employ of the Company for the period
specified by the Committee, such Grantee's employment should terminate on or
after age 55, the Right theretofore granted shall be exercisable until the later
of (i) the three-year period after termination of employment, or (ii) the period
after termination of employment which is equal to the number of full months that
the Reference Option has been outstanding prior to such termination, but in no
event after the expiration of the Option Period, without, however, giving effect
to the limitations, if any, which may have been imposed by the Committee
pursuant to Section 5.3(b) hereof.
SECTION 6.6. Death of Grantee. If a Grantee should die prior to the
termination of the Reference Option:
(a) while in the employ of the Company, the Right theretofore granted
shall, if the Grantee was entitled to exercise the Right at the date of
death, be exercisable by the estate of the Grantee, or by a person who
acquired the right to exercise such Right by bequest or inheritance or by
reason of the death of the Grantee, without, however, giving effect to the
limitations, if any, which may have been imposed by the Committee pursuant
to Section 5.3(b) hereof with respect to the percent of the total number of
shares to which the Right relates which may be purchased from time to time
during the Option Period; provided, however, that such Right shall be
exercisable until the later of (i) the three-year period after termination
of employment, or (ii) the period after termination of employment which is
equal to the number of full months that the Reference Option has been
outstanding prior to such termination, but in no event after the expiration
of the Option Period; or
(b) after the date of the termination of employment on or after age 55,
the Right theretofore granted shall, if the Grantee was entitled to exercise
the Right at the date of death, be exercisable by the estate of the Grantee,
or by a person who acquired the right to exercise such Right by bequest or
inheritance or by reason of the death of the Grantee, without, however,
giving effect to the limitations, if any, which may have been imposed by the
Committee pursuant to Section 5.3(b) hereof with respect to the percent of
the total number of shares to which the Right relates which may be purchased
from time to time during the Option Period; provided, however, that such
Right shall be exercisable until the latest of (i) the three-year period
after termination of employment, (ii) the period after termination of
employment which is equal to the number of full months that the Reference
Option has been outstanding prior to such termination, or (iii) the
twelve-month period after the death of the Grantee provided such death
occurs before the later of (i) or (ii), but in no event after the expiration
of the Option Period.
SECTION 6.7. Limited Rights. Notwithstanding anything herein to the
contrary, Limited Rights may be granted hereunder by the Committee with respect
to the options granted under this Plan or any other stock option plan of the
Company which shall entitle the holder to receive a payment of cash promptly
following a Change in Control of Warner-Lambert which Change in Control is
outside the control of any Reporting Person within the meaning of Rule 16b-3
under the Act. Such payment of cash shall be made to a Reporting Person only if
such person has held such Limited Right at least six months from the date of its
grant. Promptly following any such Change in Control, the Optionee shall be
entitled to receive a cash payment equal to the excess of the Fair Market Value
of a share of Common Stock on the Valuation Date over the Option Price of the
related Option multiplied by the number of shares with respect to which the
Limited Right relates (in such case the method of determining the Fair Market
Value in the third sentence of Section 4.6(a) shall apply). Limited Rights shall
expire on the first to occur of their date of payment or expiration of the
Limited Right or the related Option. Further, upon payment of a Limited Right,
the related Option (and any other Right related thereto) shall be cancelled.
Except as otherwise provided herein, the provisions of the Plan relating to
Rights shall also apply to Limited Rights.
9
<PAGE>
ARTICLE VII
TERMS AND CONDITIONS OF RESTRICTED STOCK
SECTION 7.1. General. The restrictions set forth in Section 7.2 shall apply
to each grant of Restricted Stock for the duration of the Restricted Period.
SECTION 7.2. Restrictions. A stock certificate representing the number of
shares of Restricted Stock granted shall be registered in the Participant's name
but shall be held in custody by the Company for the Participant's account.
Subject to the provisions of Section 7.3, the Participant shall have all rights
and privileges of a stockholder as to such Restricted Stock, including the right
to receive dividends and the right to vote such shares, and the following
restrictions shall apply: (i) the Participant shall not be entitled to delivery
of the certificate until the expiration of the Restricted Period; (ii) none of
the shares of Restricted Stock may be sold, transferred, assigned, pledged, or
otherwise encumbered or disposed of during the Restricted Period; (iii) the
Participant shall, if requested by the Company, execute and deliver to the
Company, a stock power endorsed in blank; and (iv) all of the shares of
Restricted Stock still subject to restrictions shall be forfeited and all rights
of the Participant to such shares shall terminate without further obligation on
the part of the Company if the Participant ceases to be an Employee prior to the
expiration of the Restricted Period applicable to such shares. Upon the
forfeiture (in whole or in part) of shares of Restricted Stock, such forfeited
shares shall become treasury shares of the Company without further action by the
Participant. The Participant shall have the same rights and privileges, and be
subject to the same restrictions, with respect to any shares received pursuant
to Section 10.1 hereof.
SECTION 7.3. Terms and Conditions. The Committee shall establish the terms
and conditions, which need not be the same for all grants made under the Plan,
applicable to the Restricted Stock, and which may include restrictions based
upon periods of time, performance (corporate, group, individual or otherwise),
combinations thereof or such other restrictions as the Committee shall determine
to be appropriate. The Committee may provide for the restrictions to lapse with
respect to a portion or portions of the Restricted Stock at different times or
upon the occurrence of different events and the Committee may waive, in whole or
in part, any or all restrictions applicable to a grant of Restricted Stock.
Restricted Stock awards may be issued for no cash consideration or for such
minimum consideration as may be required by applicable law.
SECTION 7.4. Delivery of Restricted Shares. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, to the Participant or the
Participant's beneficiary or estate, as the case may be. The Company shall not
be required to deliver any fractional share of Common Stock but shall pay, in
lieu thereof, the fair market value (measured as of the date the restrictions
lapse) of such fractional share to the Participant or the Participant's
beneficiary or estate, as the case may be. Notwithstanding the foregoing, the
Committee may authorize the delivery of the Restricted Stock to a Participant
during the Restricted Period, in which event any stock certificates in respect
of shares of Restricted Stock thus delivered to a Participant during the
Restricted Period applicable to such shares shall bear an appropriate legend
referring to the terms and conditions, including the restrictions, applicable
thereto.
SECTION 7.5. Certain Events.
(a) In the event of a Change in Control of Warner-Lambert the rights and
privileges of Participants hereunder shall be governed by the following clause
(i), (ii), (iii), or (iv) as appropriate:
(i) Value of Restricted Stock. All shares of Restricted Stock then
outstanding shall be immediately forfeited and shall revert to the Company
as treasury shares and, in lieu thereof, each Participant shall receive a
cash payment equal to the Value of the Restricted Stock (as hereinafter
defined); provided, however, that if the Participant is a Reporting Person
at the time of the Change in Control of Warner-Lambert, the provisions of
clause (ii) shall govern the rights and privileges of such Participant.
10
<PAGE>
(ii) Reporting Persons. All shares of Restricted Stock previously
granted to Participants who are Reporting Persons at the time of the Change
in Control of Warner-Lambert, which Change in Control is outside the control
of any Reporting Person within the meaning of Rule 16b-3 under the Act, and
which are then outstanding and have been outstanding for a period of at
least six (6) months, shall be immediately forfeited and shall revert to the
Company as treasury shares and, in lieu thereof, such Participant shall
receive a cash payment equal to the Value of the Restricted Stock.
(iii) Lapse of Restrictions. In the event that clause (ii) shall not
become operational with respect to a Participant who is a Reporting Person,
all restrictions applicable to shares of Restricted Stock previously granted
to such Participant and then outstanding shall expire and such shares shall
thereupon be delivered to the Participant free of all restrictions.
(iv) Notwithstanding anything herein to the contrary, in the case of the
Change in Control transaction contemplated by the Agreement and Plan of
Merger, dated as of February 6, 2000, among Pfizer Inc., Seminole
Acquisition Sub Corp. and Warner-Lambert, as the same may be amended from
time to time (the 'Merger Agreement'), all shares of Restricted Stock which
are outstanding immediately prior to such Change in Control shall, as of the
consummation of such Change in Control, (a) become fully vested and free of
restrictions and (b) thereupon be converted into a number of fully vested
shares of the ultimate parent entity resulting from such Change in Control
based upon the same exchange ratio pursuant to which shares of Common Stock
are so converted pursuant to the Merger Agreement.
(b) As used in the Plan, the 'Value of the Restricted Stock' shall be the
higher of (a) the highest closing price per share of Common Stock on the
Composite Tape for New York Stock Exchange issues during the 30 day period prior
to the Change in Control of Warner-Lambert, or (b) if the Change in Control of
Warner-Lambert occurs as a result of a tender or exchange offer or consummation
of a Transaction, then the highest price per share of Common Stock pursuant
thereto, multiplied by the total number of shares of Restricted Stock granted to
such Participant and then outstanding, regardless of whether the restrictions
applicable thereto shall have previously lapsed. Any consideration other than
cash forming a part or all of the consideration for Common Stock to be paid
pursuant to the applicable transaction shall be valued at the valuation placed
thereon by the Board of Directors. Adjustments, if any, shall be made in
accordance with Section 10.1 hereof.
ARTICLE VIII
TERMS AND CONDITIONS OF PERFORMANCE AWARDS
SECTION 8.1. Terms and Conditions. The Committee may grant Performance
Awards, determine the consideration therefor, which may include prior efforts
and accomplishments, and establish the terms and conditions thereof, which may
include provisions based upon periods of time, performance (corporate, group,
individual or otherwise), combinations thereof or such other provisions as the
Committee may determine to be appropriate. Performance Awards may consist of
shares of Common Stock or awards that are valued by reference to shares of
Common Stock (e.g., phantom stock or restricted stock units), cash or such other
measure as the Committee shall determine. Performance Awards may provide for
payment in shares of Common Stock, cash, other property or any combination
thereof as determined by the Committee. Shares of Common Stock issued pursuant
to this Section 8.1 may be issued for no cash consideration or for such minimum
consideration as may be required by applicable law. The Committee shall
determine whether payment shall be made in a lump sum, installments or deferred.
With respect to Performance Awards which are valued by reference to shares of
Common Stock, the Committee shall also determine whether the Participant may be
entitled to receive a payment of, or credit equivalent to, any dividends payable
with respect to such shares of Common Stock and the terms and conditions
applicable thereto. Further, if a payment of cash is to be made on a deferred
basis, the Committee shall establish whether interest shall be credited, the
rate thereof and any other terms and conditions applicable thereto. The
limitations on transfer set forth in Section 4.4 shall be applicable to all
Performance Awards.
11
<PAGE>
ARTICLE IX
REGULATORY COMPLIANCE AND LISTING
SECTION 9.1. Regulatory Compliance and Listing. The issuance or delivery of
any Stock Awards and shares of Common Stock pursuant thereto may be postponed by
the Company for such periods as may be required to comply with any applicable
requirements under the Federal securities laws, any applicable listing
requirements of any national securities exchange or any requirements under any
other law or regulation applicable thereto, and the Company shall not be
obligated to issue or deliver any such awards or shares if the issuance or
delivery thereof shall constitute a violation of any provision of any law or of
any regulation of any governmental authority or any national securities
exchange.
ARTICLE X
ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION
SECTION 10.1. Adjustments. In the event of a recapitalization, stock split,
stock dividend, combination or exchange of shares, merger, consolidation, rights
offering, reorganization, liquidation, or the sale, conveyance, lease or other
transfer by Warner-Lambert of all or substantially all of its property, or any
other change in the corporate structure or shares of Warner-Lambert, equitable
adjustments shall be made to prevent dilution or enlargement of rights (i) in
the number and class of shares authorized to be granted hereunder, (including
adjustment to the share limitation of Section 3.2 hereof), (ii) in the number
and kind of shares available under any outstanding Stock Awards (including
substitution of shares of another corporation), (iii) in the price of any
Option, (iv) in the number of Stock Credits in each Director's Stock Account and
(v) in any other aspect of the Plan as the Committee shall deem appropriate;
provided, however, that in no event may any change be made to an incentive stock
option which would constitute a 'modification' within the meaning of Section
424(h)(3) of the Code. Stock Awards granted under the Plan shall contain such
provisions as are consistent with the foregoing with respect to adjustments to
be made in the number and kind of shares covered thereby and in the Option Price
in the event of any such change.
ARTICLE XI
DIRECTORS' DEFERRED COMPENSATION
SECTION 11.1. Election To Participate.
(a) Each Director may elect to defer payment of all or any portion of his or
her Compensation that is payable during the immediately succeeding Plan Year.
Such election must be made with respect to all Compensation payable in such
succeeding Plan Year by the date established by the Secretary of the Company but
in no event later than December 31 of such preceding Plan Year.
(b) An election to defer any Compensation shall be: (i) in writing, (ii)
delivered to the Secretary, and (iii) irrevocable. A Director may file a new
election each Plan Year applicable to the immediately succeeding Plan Year. If
no election or revocation of a prior election is received by such date as may be
permissible under the preceding paragraph, the election, if any, in effect for
such Plan Year will continue to be effective for the immediately succeeding Plan
Year. If a Director does not elect to defer Compensation payable during a Plan
Year, all such Compensation shall be paid directly to such Director in
accordance with resolutions adopted by the Board from time to time.
SECTION 11.2. Mode of Deferral. A Director who has elected to defer all or a
portion of his or her Compensation as provided in Section 11.1 hereof may
further elect to have such deferred amounts credited to a Cash Account, a Stock
Account, or a combination of both such Accounts. The Secretary shall maintain
such Accounts in the name of the Director. The election referred to in this
Section 11.2 may be made once per year and shall become effective on the January
1st which follows such election; provided, however, that no election to defer
amounts into the Stock Account shall become effective unless the transaction
qualifies as exempt under Rule 16b-3(d) under the Act. Any such election shall
be specified in a writing delivered by the Director to the Secretary and shall
be irrevocable. If a Director fails to elect the Account to which deferral shall
be made or if any such election would result
12
<PAGE>
in a transaction which would not qualify as exempt under Rule 16b-3(d) under the
Act, he or she shall be deemed to have elected deferral to the Cash Account. In
addition, a Director may cease deferring amounts into the Stock Account at any
time by written notice delivered to the Secretary and thereafter such amounts
shall be credited to the Cash Account. Compensation deferred to a Cash Account
or Stock Account shall result in Cash Credits or Stock Credits, respectively.
SECTION 11.3. Cash Account. The Cash Account of a Director shall be
credited, as of the day the deferred Compensation otherwise would have been
payable to such Director, with Cash Credits equal to the dollar amount of such
deferred Compensation. The Cash Account shall be adjusted and increased each
year, as if interest was credited thereon, at the rate utilized for adjusting
deferred bonus accounts under the Warner-Lambert Company Incentive Compensation
Plan.
SECTION 11.4. Stock Account. The Stock Account of a Director shall be
credited, as of the day the deferred Compensation otherwise would have been
payable to such Director, with Stock Credits equal to the number of shares of
Common Stock (including fractions of a share) that could have been purchased
with the amount of such deferred Compensation at the Closing Price of shares of
Common Stock on the day the deferred Compensation otherwise would have been
payable to such Director. As of the date of any dividend record date for the
Common Stock, the Director's Stock Account shall be credited with additional
Stock Credits equal to the number of shares of Common Stock (including fractions
of a share) that could have been purchased, at the Closing Price of shares of
Common Stock on such date, with the amount which would have been paid as
dividends on that number of shares (including fractions of a share) of Common
Stock which is equal to the number of Stock Credits then attributed to the
Director's Stock Account; provided, however, that in the event that there is not
then in effect an election under Section 11.2 hereof to have any of such
Director's Compensation credited to a Stock Account and, further, that the
Director has elected under Section 11.5(a) hereof to transfer his or her Stock
Account to a Cash Account then the amount which would have been credited to the
Stock Account in accordance with this sentence but for this proviso shall
instead be credited to such Director's Cash Account. In the case of dividends
paid in property other than cash, the amount of the dividend shall be deemed to
be the fair market value of the property at the time of the payment of the
dividend, as determined in good faith by the Committee.
SECTION 11.5. Conversions.
(a) Stock Account to Cash Account. Prior to January 1, 1998, a Director may
elect to convert all or any portion of his or her Stock Account to his or her
Cash Account; provided, however, that no such election shall become effective
unless the transaction qualifies as exempt under Rule 16b-3(f) under the Act.
The amount to be credited to such Director's Cash Account shall be obtained by
multiplying the number of Stock Credits credited to his or her Stock Account as
of the last day of the month in which such election is made by the Closing Price
of shares of Common Stock on such date.
(b) Cash Account to Stock Account. A Director may elect to convert all or
any portion of his or her Cash Account to his or her Stock Account; provided,
however, that no such election shall become effective unless the transaction
qualifies as exempt under Rule 16b-3(f) under the Act. The number of Stock
Credits to be credited to such Director's Stock Account shall be obtained by
dividing the number of Cash Credits credited to his or her Cash Account as of
the last day of the month in which such election is made by the Closing Price of
shares of Common Stock on such date.
(c) An election under this Section 11.5 shall be in a writing delivered to
the Secretary and may be revoked or revised at any time prior to the last day of
the month in which the election is made.
SECTION 11.6. Distribution of Cash Account or Stock Account.
(a) Distributions in respect of a Director's Cash Account and Stock Account
shall become payable in full to such Director, annually, over a period of ten
(10) years, except as otherwise agreed to by the Committee and the Director,
beginning with the first day of the calendar year following the year in which
the individual ceases to be a member of the Board of Directors.
(b) Distributions in respect of a Director's Cash Account shall be made only
in cash. Distributions in respect of a Director's Stock Account shall be made
only in shares of Common Stock.
13
<PAGE>
SECTION 11.7. Installment Amount.
(a) The amount of each distribution with respect to a Director's Cash
Account shall be the amount obtained by multiplying the balance in such Account
by a fraction, the numerator of which is one (1) and the denominator of which is
the number of years in which distributions remain to be made (including the
current distribution).
(b) The number of Stock Credits attributable to each distribution shall be
equal to the number obtained by multiplying the current number of Stock Credits
in such Stock Account by a fraction, the numerator of which is one (1) and the
denominator of which is the number of years in which distributions remain to be
made (including the current distribution).
SECTION 11.8. Financial Hardship. Notwithstanding any other provision
hereof, at the written request of a Director or a Director's legal
representative, the Committee, in its sole discretion, upon a finding that
continued deferral will result in financial hardship to the Director, may
authorize (i) the payment of all or a part of a Director's Accounts in a single
installment prior to his or her ceasing to be a Director or (ii) the
acceleration of payment of any multiple installments thereof; provided, however,
that Directors may not receive distributions under this Section 11.8 if such
distribution would result in liability of the Director under Section 16 of the
Act.
SECTION 11.9. Distribution upon Death. Upon the death of a Director, the
Committee shall pay all of such Director's Cash Account and Stock Account in a
single installment to the beneficiary designated by the Director. All such
designations shall be made in writing and delivered to the Secretary. A Director
may from time to time revoke or change any such designation by written notice to
the Secretary. If there is no designation on file with the Secretary at the time
of the Director's death, or if the beneficiary designated therein shall have
predeceased the Director, such distributions shall be made to the executor or
administrator of the Director's estate. Any distribution under this Section 11.9
shall be made as soon as practicable following notification to the Committee of
the Director's death.
SECTION 11.10. Certain Events. Notwithstanding any other provision hereof,
in the event of a Change in Control of Warner-Lambert which is outside of the
control of any Reporting Person within the meaning of Rule 16b-3 under the Act,
the balance in the Stock Account of each Director shall be converted to the Cash
Account. For this purpose, the balance in the Stock Account shall be determined
by multiplying the number of Stock Credits by the higher of (i) the highest
Closing Price during the period commencing 30 days prior to such Change in
Control or (ii) if the Change in Control of Warner-Lambert occurs as a result of
a tender or exchange offer or consummation of a Transaction, then the highest
price per share of Common Stock pursuant thereto. Any consideration other than
cash forming a part or all of the consideration for Common Stock to be paid
pursuant to the applicable transaction shall be valued at the valuation placed
thereon by the Board of Directors. Adjustments, if any, shall be made in
accordance with Article X hereof. Notwithstanding the preceding provisions of
this Section, in the case of the Change in Control transaction contemplated by
the Agreement and Plan of Merger, dated as of February 6, 2000, among Pfizer
Inc., Seminole Acquisition Sub Corp. and Warner-Lambert, as the same may be
amended from time to time (the 'Merger Agreement'), the Stock Credits in the
Stock Account of each Director immediately prior to such Change in Control shall
be converted, as of such Change in Control, into a number of stock credits in
the ultimate parent entity resulting from such Change in Control based upon the
same exchange ratio pursuant to which shares of Common Stock are converted to
shares of such entity pursuant to the Merger Agreement. Within 30 days after a
Change in Control of Warner-Lambert, each Director may designate a distribution
schedule which may provide for a lump sum payment or installment payments over a
period of up to 15 years, provided, however, that no payment shall be made for a
period of one year after the Change in Control. In the event that a Director
shall not make a designation in accordance with the preceding sentence, the
balances in the Cash Account and the Stock Account shall be distributed in a
lump sum one year after the Change in Control.
SECTION 11.11. Valuations. Notwithstanding any other provision hereof, in
any instance in which a Director's Stock Account is to be valued by reference to
the Closing Price of shares of Common Stock on a single day, the Committee may
declare such price to be unrepresentative of the market value of such Common
Stock and, in lieu thereof, shall base such valuation on the average of the
Closing Prices
14
<PAGE>
of shares of Common Stock on each Business Day during the calendar quarter
ending coincident with or immediately preceding the day which would otherwise
serve as the basis for the valuation.
SECTION 11.12. Funding. The Company's sole obligation to a Director or any
person claiming under or through any Director in respect of the payment of any
balance in an Account shall be solely a contractual obligation in accordance
with the terms of the Plan. No promise hereunder shall be secured by any
specific assets of the Company, nor shall any assets of the Company be
designated as attributable or allocated to the satisfaction of such promises.
SECTION 11.13. Status of Stock Credits. Stock Credits are not, and do not
constitute, shares of Common Stock, and no right as a holder of shares of Common
Stock shall devolve upon a Director by reason of his or her participation in the
Plan.
SECTION 11.14. Non-Trading Date. In the event that the date of the
determination of a Closing Price hereunder shall be a date which shall not be a
date on which the Common Stock is traded on the New York Stock Exchange,
determination of such Closing Price shall be made as of the first date
thereafter on which the Common Stock is so traded.
SECTION 11.15. No Right To Reelection. Nothing in the Plan shall be deemed
to create any obligation on the part of the Board to nominate any Director for
reelection by the Company's stockholders, nor confer upon any Director the right
to remain a member of the Board of Directors.
SECTION 11.16. Predecessor Plans. Upon the Effective Date of the Plan, no
further benefits shall accrue under any Predecessor Plans and account balances
accrued under any Predecessor Plans shall be governed by the provisions of this
Plan, except as provided in Section 11.18 hereof.
SECTION 11.17. Deferred Compensation Accounts. Upon the Effective Date of
the Plan, all Deferred Compensation Accounts shall become subject to the terms
and conditions of this Plan in lieu of the terms and conditions of the
Predecessor Plans, except as provided in Section 11.18 hereof.
SECTION 11.18. Retired Directors. Benefits accrued under Predecessor Plans
which are in pay status on the Effective Date shall continue to be paid in
accordance with the provisions of the Predecessor Plans.
Section 11.19. Federal Securities Law. The Company intends that the
provisions of this Article XI, and all transactions effected in accordance with
this Article XI, shall comply with Rule 16b-3 under the Act. In the event that
any provision of this Article XI is not necessary to so comply or any additional
provision is necessary to obtain or maintain such compliance, the Committee is
authorized to revise the Plan accordingly without obtaining approval of the
stockholders of Warner-Lambert. By way of illustration, and not limitation, the
Committee may bifurcate the provisions of this Article XI, and such other
provisions as it shall deem necessary, into a separate plan (which plan shall be
recognized as having received approval of the stockholders of Warner-Lambert),
if the Committee shall deem such action necessary to maintain qualification of
Article XI (and transactions thereunder) under Rule 16b-3(d) under the Act and
the qualification of the provisions of the Plan affecting Employees (and
transactions thereunder) under Rule 16b-3 under the Act.
ARTICLE XII
ADMINISTRATION
SECTION 12.1. Administration.
(a) The Plan shall be administered by a committee consisting of not less
than three members of the Board of Directors, who shall be appointed by, and
shall serve at the pleasure of, the Board of Directors. No person who is or,
within one year prior thereto, has been eligible to receive an award under the
Plan or any other plan of the Company which would result in loss of
'disinterested person' status within the meaning of Section 16 of the Act may be
a member of the Committee, and no person may be granted a Stock Award while a
member of the Committee. A majority of the Committee shall constitute a quorum
and the acts of a majority of the members present at any meeting at which a
quorum is present, expressed from time to time by a vote at a meeting (including
a meeting held by
15
<PAGE>
telephone conference call or in which one or more members of the Committee
participate by telephone), or acts approved in writing by a majority of the
Committee, shall be the acts of the Committee.
(b) In addition to the Committee's discretionary authority set forth in
other Articles hereof, the Committee has discretionary authority to construe and
interpret the Plan and is authorized to establish such rules and regulations for
the proper administration of the Plan as it may deem advisable and not
inconsistent with the provisions of the Plan. All questions arising under the
Plan or under any rule or regulation with respect to the Plan adopted by the
Committee, whether such questions involve an interpretation of the Plan or
otherwise, shall be decided by the Committee, and its decisions shall be
conclusive and binding in all cases.
(c) The Committee has discretionary authority to determine the Employees to
whom Stock Awards under the Plan are to be granted, the terms and conditions
applicable thereto and the number of shares to be covered by each award. In
selecting the individuals to whom Stock Awards shall be granted, as well as in
determining the terms and conditions applicable thereto and the number of shares
subject to each grant, the Committee shall consider the positions and
responsibilities of the Employees being considered, the nature of the services
and accomplishments of each, the value to the Company of their services, their
present and potential contribution to the success of the Company, the
anticipated number of years of service remaining and such other factors as the
Committee may deem relevant. The Committee may obtain such advice or assistance
as it deems appropriate from persons not serving on the Committee.
SECTION 12.2. Stock Awards Committee. In addition, and not in limitation of
the authority of the Committee, the Stock Awards Committee (as hereinafter
constituted) may grant Stock Awards, in accordance with the provisions of the
Plan, including the establishment of the terms and conditions thereof and the
consideration to the Company therefor, to Employees who, at the time of the
grant, are not Reporting Persons. The Stock Awards Committee, whose members need
not serve on the Board of Directors, shall be appointed by, and shall serve at
the pleasure of, the Committee. A majority of the Stock Awards Committee shall
constitute a quorum and the acts of a majority of the members present at any
meeting at which a quorum is present, expressed from time to time by a vote at a
meeting (including a meeting held by telephone conference call or in which one
or more members of the Stock Awards Committee participate by telephone), or acts
approved in writing by a majority of the Stock Awards Committee, shall be the
acts of the Stock Awards Committee. Notwithstanding the foregoing, the Stock
Awards Committee may not undertake any action which the provisions of Rule
16b-3, promulgated pursuant to the Act, require to be undertaken by
'Non-Employee Directors' (as defined in said Rule) as a condition of the
continued qualification of the Plan (and transactions thereunder) under Rule
16b-3.
ARTICLE XIII
TERMINATION OR AMENDMENT OF THE PLAN
SECTION 13.1. Termination or Amendment.
(a) The Board may at any time terminate the Plan and may from time to time
alter or amend the Plan or any part thereof (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Article IX); provided, however, that, unless otherwise required
by law, the rights of a Participant with respect to Stock Awards granted or the
rights of a Director with respect to his or her Accounts prior to such
termination, alteration or amendment may not be impaired without the consent of
such Participant or Director, as the case may be, and, provided further, without
the approval of the Company's stockholders, no alteration or amendment may be
made which would require approval of such stockholders as a condition of
compliance with Rule 16b-3 under the Act. The Company intends that the Plan (and
transactions thereunder) shall comply with the requirements of Rule 16b-3
promulgated pursuant to the Act. Should any provisions hereof not be necessary
in order to comply with the requirements of such Rule or should any additional
provisions
16
<PAGE>
be necessary in order to so comply, the Committee may amend the Plan
accordingly, without the necessity of obtaining approval of the stockholders of
Warner-Lambert.
(b) The Committee may at any time adopt any amendment to the Plan which
(i)(A) does not increase Plan liabilities by an amount in excess of five million
dollars ($5,000,000) and does not increase Plan expense by an amount in excess
of five hundred thousand dollars ($500,000) or (B) is required by an applicable
law, regulation or ruling, (ii) can be undertaken by the Board of Directors
under the terms of the Plan, (iii) does not involve a termination of the Plan,
(iv) does not affect the limitations contained in this sentence, and (v) does
not affect the composition or compensation of the Committee.
(c) The Committee shall have the power to cancel all Rights theretofore
granted pursuant to the Plan in the event that it shall determine that the
accounting effects of the grant or exercise of Rights under the Plan would not
be in the best interests of the Company.
(d) Any action which may be undertaken by the Committee pursuant to the
terms hereof may be undertaken by the Board, except as provided in Rule 16b-3
promulgated pursuant to the Act.
ARTICLE XIV
MISCELLANEOUS
SECTION 14.1. No Right To Employment. Nothing in the Plan shall be deemed to
confer upon any Participant the right to remain in the employ of the Company.
SECTION 14.2. Withholding of Taxes.
(a) The Company shall have the right to require, prior to the issuance or
delivery of any shares of Common Stock or the payment of any cash hereunder,
payment by the Participant or the Director, as the case may be, of any taxes
required by law with respect thereto.
(b) The Committee may permit any such withholding obligation to be satisfied
by reducing the number of shares of Common Stock otherwise deliverable. A
Reporting Person may elect to have a sufficient number of shares of Common Stock
withheld to fulfill such tax obligations (hereinafter a 'Withholding Election')
only if the election complies with the following conditions: (x) the Withholding
Election shall be subject to the disapproval of the Committee and (y) the
Withholding Election is made (i) during the period beginning on the third
business day following the date of release for publication of the quarterly or
annual summary statements of sales and earnings of the Company and ending on the
twelfth business day following such date, or (ii) during any other period in
which a Withholding Election may be made under the provisions of Rule 16b-3
promulgated pursuant to the Act. Any fraction of a share of Common Stock
required to satisfy such tax obligations shall be disregarded and the amount due
shall be paid instead in cash by the Participant.
SECTION 14.3. No Assignment of Benefits. No benefit payable under the Plan
shall, except as otherwise specifically provided by law, be subject in any
manner to anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, attach,
sell, transfer, assign, pledge, encumber or charge any such benefit shall be
void, and any such benefit shall not in any manner be liable for or subject to
the debts, contracts, liabilities, engagements or torts of any person who shall
be entitled to such benefit, nor shall it be subject to attachment or legal
process for or against such person. If any person entitled to a benefit
hereunder shall be adjudicated a bankrupt or shall attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge such benefit, or if
any attempt is made to subject any such benefit to the debts, contracts,
liabilities, engagements or torts of any person entitled to such benefit, then
such benefit shall, in the discretion of the Committee, cease and terminate, and
in that event the Committee may cause such benefit, or any part thereof, to be
held or applied for the benefit of such person, his or her spouse, children or
other dependents, or any of them, in such manner and in such proportion as the
Committee shall determine.
SECTION 14.4. Death; Disability; Termination. The Committee shall establish
the provisions which shall govern in the event of the death, disability, or
termination (including layoff) of a Participant or a Director, which provisions
may be different than the provisions otherwise described herein with respect
17
<PAGE>
to death, disability, and termination. If, for any reason, the Committee shall
determine that it is not desirable because of the incapacity of the person who
shall be entitled to receive any payments hereunder, to make such payments
directly to such person, the Committee may apply such payment for the benefit of
such person in any way that the Committee shall deem advisable or may make any
such payment to any third person who, in the judgment of the Committee, will
apply such payment for the benefit of the person entitled thereto. In the event
of such payment, the Company, the Board of Directors and the Committee shall be
discharged from all further liability therefor. The employment of an Employee
who becomes disabled shall be deemed terminated for purposes of the Plan as of
the date benefit payments would have commenced under the Warner-Lambert Long
Term Disability Benefits Plan had the Participant been enrolled in such plan,
except as otherwise provided herein or under Company policy. Absence on leave
approved by the Company shall not be considered an interruption of employment
for any purpose of the Plan.
SECTION 14.5. Listing and Other Conditions.
(a) As long as the Common Stock is listed on the New York Stock Exchange,
the issue of any shares of stock pursuant to a Stock Award shall be conditioned
upon the shares so to be issued being listed on such Exchange. Warner-Lambert
shall make application for listing on such Exchange unlisted shares subject to
Stock Awards, but shall have no obligation to issue such shares unless and until
such shares are so listed, and the right to exercise any Option or Right with
respect to such shares shall be suspended until such listing has been effected.
(b) If at any time counsel to Warner-Lambert shall be of the opinion that
any sale or delivery of shares of Common Stock pursuant to a Stock Award is or
may in the circumstances be unlawful under the statutes, rules or regulations of
any applicable jurisdiction, Warner-Lambert shall have no obligation to make
such sale or delivery, or to make any application or to effect or to maintain
any qualification or registration under the Securities Act of 1933, as amended,
or otherwise with respect to shares of Common Stock or Stock Awards, and the
right to exercise any Option or Right shall be suspended until, in the opinion
of said counsel, such sale or delivery shall be lawful.
(c) Upon termination of any period of suspension under this Section 14.5,
any Stock Award affected by such suspension which shall not then have expired or
terminated shall be reinstated as to all shares available before such suspension
and as to shares which would otherwise have become available during the period
of such suspension.
SECTION 14.6. Governing Law. This Plan shall be governed by the law of the
State of New Jersey (regardless of the law that might otherwise govern under
applicable New Jersey principles of conflict of laws).
SECTION 14.7. Construction. Wherever any words are used herein in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
SECTION 14.8. Laws of Foreign Jurisdictions. Without amending the Plan, but
subject to the limitations specified in Article XIII hereof, the Committee may
grant, amend, administer, annul or terminate Stock Awards on such terms and
conditions, which may be different from those specified in the Plan, as it may
deem necessary or desirable to make available tax or other benefits of the laws
of any foreign jurisdiction.
SECTION 14.9. Other Plans. Nothing contained herein shall prevent the
Company from adopting additional compensation plans or arrangements.
SECTION 14.10. Federal Securities Law. Notwithstanding any other provision
of the Plan, no transaction shall be given effect on any date which would, in
the opinion of counsel to the Company, result in liability under Section 16(b)
of the Act.
18
<PAGE>
ARTICLE XV
EFFECTIVE DATE; TERM OF PLAN
SECTION 15.1. Effective Date. The Plan shall be submitted to the
stockholders of Warner-Lambert for their approval at the Annual Meeting of
Stockholders to be held in 1996. Approval will require the affirmative vote of
the holders of a majority of the shares of Common Stock present, or represented,
and entitled to vote at the meeting. If approved, the Plan shall become
effective January 1, 1997.
SECTION 15.2. Term of Plan. No Stock Awards may be granted hereunder after
April 23, 2007. This Section 15.2 shall not affect any Stock Award granted prior
to such date. Further, the provisions of Article XI hereof (as amended from time
to time) are ongoing and shall continue until terminated by the Board.
WARNER-LAMBERT COMPANY
19
<PAGE>
EXHIBIT 10(d)
________________________________________________________________________________
WARNER-LAMBERT COMPANY
-------------------
INCENTIVE COMPENSATION PLAN
AS AMENDED TO FEBRUARY 6, 2000
________________________________________________________________________________
<PAGE>
WARNER-LAMBERT COMPANY
INCENTIVE COMPENSATION PLAN
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. Warner-Lambert Company has prepared this Plan in order to
compensate and reward its Officers and key Employees in managerial and other
important positions for their share in the growth and success of the Company and
in order to retain and attract persons of competence. The Plan provides a means
of sharing, in addition to salaries, certain incentive compensation dependent on
profits realized by the Company.
ARTICLE II
DEFINITIONS
SECTION 2.1. For the purposes of the Plan, unless the context otherwise
indicates, the following definitions shall be applicable:
(a) 'Beneficiary' shall mean the person who has been so designated by a
Participant, on a form and in a manner acceptable to the Committee or, if no
person has been so designated by a Participant or if a Participant is not
survived by the person so designated, 'Beneficiary' shall mean the estate of
the Participant.
(b) 'Board of Directors' or 'Board' shall mean the Board of Directors or
the Executive Committee of the Company.
(c) 'Committee' shall mean the committee appointed to administer the
Plan, as provided in Article X, as such committee may from time to time be
constituted.
(d) 'Company' shall mean Warner-Lambert Company.
(e) 'Deferred Bonus Account' shall mean the account established in
accordance with Section 4.4 of this Plan.
(f) 'Deferred Bonus Portion' shall mean the amount of the Reserve
allocated to a Participant which is deferred in accordance with Section 4.3
of this Plan.
(g) 'Employee' shall mean an employee of the Company or of a subsidiary
of the Company.
(h) 'Fiscal year' shall mean the calendar year or such other fiscal year
as may be established from time to time by the Company.
(i) 'Incentive Compensation Net Income' shall mean the amount determined
under Section 3.2 of this Plan.
(j) 'Incentive Compensation Reserve' shall mean the appropriation
provided for in Section 3.1 of this Plan.
(k) 'Officer' shall mean an officer of the Company or of a subsidiary of
the Company.
(l) 'Participant' shall mean an Officer or Employee (i) to whom an
amount of additional incentive compensation has been allocated under the
Plan for any Fiscal year in accordance with Section 3.4 of this Plan,
(ii) whose Deferred Bonus Portions or balance in his Deferred Bonus Account
to which he is entitled have not been wholly distributed, or (iii) to whom
an amount of additional incentive compensation previously allocated under
the Plan remains subject to restrictions, conditions or limitations imposed
by the Committee.
(m) 'Plan' shall mean the Incentive Compensation Plan as set forth
herein and in predecessor documents, and as amended from time to time.
(n) 'Reserve' shall mean the Incentive Compensation Reserve provided for
in Section 3.1 of this Plan.
1
<PAGE>
(o) The use of the singular shall also include within its meaning the
plural and vice versa. The use of masculine shall include feminine.
ARTICLE III
DETERMINATION AND MAINTENANCE OF INCENTIVE COMPENSATION
RESERVE; DETERMINATION OF PARTICIPANTS
SECTION 3.1. Incentive Compensation Reserve. Beginning with the Fiscal year
commencing January 1, 1959, there shall be established and maintained an
Incentive Compensation Reserve. The Board of Directors may in the year 1960 and
annually thereafter appropriate as additional incentive compensation for the
preceding year an amount up to but not in excess of the Incentive Compensation
Net Income of the preceding Fiscal year as the Board of Directors, in its
discretion, shall determine. The amount so appropriated shall be credited to the
Reserve.
SECTION 3.2. Definition of Incentive Compensation Net Income. The term
'Incentive Compensation Net Income' shall consist of an amount equal to four
percent (4%) of the amount by which the net profit shall exceed six percent (6%)
of the capital actually employed in carrying on the business of the Company (as
such capital shall be determined from time to time by the Board of Directors,
including in such determination an appropriate amount for goodwill); provided,
however, that no such additional incentive compensation shall be paid for any
Fiscal year of the Company during which the amount which would otherwise be
available for such purposes shall be less than $80,000, or for any year in which
no cash dividend is paid on the common stock of the Company.
Said net profit shall be the net profit of the Company and its subsidiaries
computed on a consolidated basis determined in accordance with generally
accepted accounting principles, provided that, in any event, in making such
determination, the following provisions of this Section shall govern:
(a) The net profit shall be determined before any deduction for federal
or equivalent foreign taxes based on income and before any deduction in
respect of or provision for appropriations or distributions made or to be
made under this Plan.
(b) In determining net profit there shall be deducted an amount equal to
dividends and interest accruing during such year on any stock or other
securities of the Company which are senior to common stock of the Company,
or on any stock or other securities of a subsidiary not held by the Company
or a subsidiary, which were outstanding during each year.
(c) There shall be excluded from such net profit extraordinary or
unusual or infrequently occurring items of income and expense which,
individually or in the aggregate, are material in amount.
SECTION 3.3. Procedure for Determination of Incentive Compensation Net
Income and Amount of Annual Appropriation to Reserve. (a) As soon as feasible
after the close of the Fiscal year 1959, and the close of each Fiscal year
thereafter, the fiscal officers of the Company shall determine the amount of the
Incentive Compensation Net Income for the preceding Fiscal year in accordance
with the provisions of Section 3.2 hereof, and shall report such determination
to the Board of Directors, to the Committee, and to the independent public
accountants of the Company.
(b) The independent public accountants of the Company shall review such
determination and report to the Committee and to the Board of Directors their
opinion thereof and any corrections which they deem proper. The Committee upon
the receipt of such determination and report shall recommend to the Board of
Directors the amount of the annual appropriation to be made by the Company to
the Reserve, which shall not exceed the maximum amount authorized by the
provisions of Section 3.1 hereof, as additional incentive compensation for the
preceding year.
(c) Such reports of the fiscal officers of the Company and of the
independent public accountants, and such determination and recommendations of
the Committee, shall be reviewed by and subject to the approval of the Board of
Directors, which shall authorize the appropriation to be made by the Company to
the Reserve as additional incentive compensation for the preceding year as
provided in Section 3.1, within the maximum limit therein provided.
2
<PAGE>
SECTION 3.4. Determination of Participants and Amount of Allocations. The
Committee shall each year, after consultation with management, determine the
Officers and key Employees who shall be entitled to participate under the Plan
for the preceding year, and the amount to be allocated to each such person as
additional incentive compensation for such year, and the restrictions,
conditions or limitations, if any, which are to be imposed upon all or any part
of any amounts allocated to any or all Participants under the Plan, which
determination shall be reviewed by and subject to the approval of the Board of
Directors. The total compensation to each Participant, including salary,
additional incentive compensation payable pursuant to the Plan, retirement and
all other benefits, shall not, in the opinion of the Committee and of the Board
of Directors, be in excess of the fair and reasonable compensation for the
services of such Participant. All determinations, by the Committee and the
Board, of Incentive Compensation Net Income for any year, of the amounts to be
appropriated annually to the Reserve, the determination of the persons to
participate under the Plan, and the amounts to be allocated to each, shall be
final and conclusive and binding upon all interested parties. No director shall
vote on his own participation in the Plan. If all of the Reserve for a Fiscal
year shall not be allocated as additional incentive compensation, the excess
shall be credited to the earnings of such Fiscal year.
ARTICLE IV
CURRENT CASH PAYMENTS; ELIGIBILITY FOR DEFERRAL OF BONUS;
DEFERRED BONUS ELECTION; DEFERRED BONUS ACCOUNT
SECTION 4.1. Current Cash Payments. Except as provided in Section 4.3, the
amount of the Reserve allocated to a Participant for any Fiscal year shall be
paid, in cash, to such Participant as soon as practicable in the calendar year
in which such amount is allocated to the Participant, on a date fixed by the
Committee.
SECTION 4.2. Eligibility for Deferral of Bonus. Commencing with Reserves
allocated for Fiscal years after 1984, the Committee shall determine the
Officers and Employees who shall be eligible to elect deferral, in accordance
with the provisions of Section 4.3. The Committee may change such eligibility
from time to time in its sole discretion.
Notwithstanding the foregoing provisions of this Section 4.2, a Participant
who has satisfied the requirements to elect deferral with respect to allocations
made for Fiscal years prior to 1984 in accordance with Section 2.5 of the Plan,
As Amended To September 27, 1983, shall continue to be eligible to elect
deferral.
SECTION 4.3. DEFERRED BONUS ELECTION. An Officer or Employee who is eligible
for deferral in accordance with Section 4.2 hereof may each year elect to defer
payment of all or a portion of the Reserve which may be allocated to him with
respect to such Fiscal year, provided that the election is made on or before
December 31 of the year with respect to which such allocation is made. The
amount so deferred shall be referred to as the Deferred Bonus Portion.
Except as provided in Article XI, an election to defer payment of any
portion of the Reserve allocated to a Participant for a particular year shall
become irrevocable on the last day of the year on which such election may be
made.
SECTION 4.4. Deferred Bonus Account. There shall be established, in the name
of each Participant who has made the election described in Section 4.3, a
Deferred Bonus Account. As of January 1 of the year immediately following the
year with respect to which the Deferred Bonus Portion relates, each
Participant's Deferred Bonus Account shall be credited with the amount of the
Deferred Bonus Portion. Payment of amounts credited to a Participant's Deferred
Bonus Account shall be made in the manner and at the time prescribed in
Section 6.1.
3
<PAGE>
ARTICLE V
INVESTMENT OF AND RETURN ON DEFERRED BONUS PORTION
SECTION 5.1. Use of Deferred Bonus Accounts by Company. The Company shall
not be required to segregate the funds required for the establishment of a
Participant's Deferred Bonus Account but may utilize such funds for such
purposes as it deems appropriate, including working capital.
SECTION 5.2. Adjustment to Deferred Bonus Accounts. Deferred Bonus Accounts
shall be adjusted and increased each year, as if interest was credited thereon,
at the average prime rate (as determined by the Committee) for the year plus 4%
which shall be credited to each Participant's Deferred Bonus Account as of
December 31 in each year, or as of such other date during the year as shall be
determined by the Committee, and such adjustment shall thereafter become a part
of the Participant's Deferred Bonus Account. The rate of adjustment to be
credited to Participants' Deferred Bonus Accounts shall be subject to annual
review by the Committee which may, in its sole discretion, change such rate as
to succeeding periods. Upon the occurrence of a Change in Control (as
hereinafter defined), the formula for determining the rate of adjustment to be
credited to Deferred Bonus Accounts of Participants in all future years may not
be reduced below the formula in effect at the Change in Control. For purposes
hereof, a Change in Control shall be deemed to have occurred if (i) any person
(as such term is used in Sections 13(d) and 14(d)(2) of the Securities Exchange
Act of 1934, as amended (the 'Act')), is or becomes the beneficial owner (as
defined in Rule 13d-3 under the Act), directly or indirectly, of securities of
the Company representing 20% or more of the combined voting power of the
Company's then outstanding securities, (ii) the stockholders of the Company
approve a merger, consolidation, sale or disposition of all or substantially all
of the Company's assets or plan of liquidation, or (iii) the composition of the
Board of Directors of Warner-Lambert Company (for purposes of this paragraph,
the 'Board') at any time during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as hereinafter defined) cease for
any reason to constitute at least fifty-one percent (51%) of the Board. For
purposes of the foregoing clause (iii), 'Continuity Directors' means those
members of the Board who either (a) were directors at the beginning of such
consecutive twenty-four (24) month period, or (b)(1) filled a vacancy during
such twenty-four (24) month period created by reason of (x) death, (y) a
medically determinable physical or mental impairment which renders the director
substantially unable to function as a director or (z) retirement at the last
mandatory retirement age in effect for at least two (2) years, and (2) were
elected, nominated or voted for by at least fifty-one percent (51%) of the
current directors who were also directors at the commencement of such
twenty-four (24) month period. The third sentence of Section 5.2 shall not apply
to any employee who is not an 'Employee' (as defined in Section 3.1 of the
Enhanced Severance Plan) as of the date of approval by the stockholders of
Warner-Lambert Company of the transaction contemplated by the Agreement and Plan
of Merger, dated February 6, 2000, among Pfizer Inc., Seminole Acquisition Sub
Corp. and Warner-Lambert Company. The foregoing shall not affect the rights of
any beneficiary of a Participant.
ARTICLE VI
PAYMENT OF DEFERRED BONUS ACCOUNTS
SECTION 6.1. Distributions out of Deferred Bonus Accounts. Subject to the
provisions of Section 7.1 hereof, distributions in respect of the Deferred Bonus
Account of any Participant shall, unless the Committee otherwise determines,
become payable in full to such Participant or to his Beneficiary, as the case
may be, in cash, annually, over a period of not less than three nor more than
fifteen years, as determined by the Committee, upon the happening of any of the
events described in this Section. The first payment shall be made within fifteen
months after the happening of any such event. The amount of each distribution
shall be the amount obtained by multiplying the balance in the Participant's
Deferred Bonus Account by a fraction, the numerator of which is 1 and the
denominator of which is the number of years in which distributions remain to be
made (including the current distribution).
4
<PAGE>
The Participant's Deferred Bonus Account shall be charged with the amount of
each distribution. The events are as follows:
(a) Termination of Participant's Employment with the Company or a
Subsidiary. Termination of a Participant's employment provided that a leave
of absence approved by the Company shall not constitute a termination of
service. In the event of a Participant's death, the Deferred Bonus Account
shall be distributed to the Participant's Beneficiary.
(b) Total and Permanent Disability. Such disability shall be deemed to
have occurred only when certified by a physician appointed by the Company or
by a physician acceptable to the Company. In the event of the cessation of
such disability and the return of such Participant to work for the Company,
distribution in respect of such part, if any, of such balance as shall
remain to his credit shall be deferred and shall be made only to such extent
and at such time as distribution would otherwise be made in accordance with
the Plan.
SECTION 6.2. Withholding of Taxes. There shall be deducted from all payments
under the Plan any taxes or other amounts required by any government to be
withheld from any such payments.
SECTION 6.3. Accelerated Distributions from Deferred Bonus Accounts.
Notwithstanding any other provision of the Plan, upon the occurrence of a Change
in Control, the provisions of this Section 6.3 shall govern all distributions
from the Plan to Participants. Upon the first to occur after a Change in Control
of the Participant's termination of service with the Company or total and
permanent disability, the Participant shall promptly receive a lump sum payment,
in cash, of the balance in his Deferred Bonus Account, provided, however, if
(x) a Participant was eligible for bonus deferral under Section 4.2 hereof on
September 27, 1994, and he or she consented in writing to the provisions
described in the following sentence prior to November 1, 1994, or (y) a
Participant became eligible for bonus deferral after September 27, 1994, then
the provisions described in the following sentence shall apply in lieu of this
sentence. Upon the first to occur within 3 years after a Change in Control of a
Participant's termination of employment with the Company or the Participant's
total and permanent disability, he or she may, within 30 days thereafter,
designate a distribution schedule for their Deferred Bonus Account which
schedule may provide for a lump sum payment or installment payments over a
period of up to 15 years, provided, however, that no payment shall be made until
the end of the severance period (for example, if the Participant is entitled to
3 years' severance pay, deferred bonus payments may not begin until 3 years
after termination even if such Participant receives the severance pay in a lump
sum at termination). If a Participant to whom the preceding sentence is
applicable fails to designate a distribution schedule in accordance with such
sentence, then the Deferred Bonus Account shall be distributed in a lump sum at
the end of the severance period. This Section shall not apply to Participants
with respect to whom an event described in Section 6.1 occurred prior to the
Change in Control. This Section shall not apply to any employee who is not an
'Employee' (as defined in Section 3.1 of the Enhanced Severance Plan) as of the
date of approval by the stockholders of Warner-Lambert Company of the
transaction contemplated by the Agreement and Plan of Merger, dated February 6,
2000, among Pfizer Inc., Seminole Acquisition Sub Corp. and Warner-Lambert
Company. The foregoing shall not affect the rights of any beneficiary of a
Participant.
ARTICLE VII
CONTINGENCIES RESULTING IN REDUCTION OF DEFERRED BONUS ACCOUNTS
SECTION 7.1. Notwithstanding any of the provisions hereinabove set forth
(except Section 6.3), distribution in respect of the balance in the Deferred
Bonus Account of any Participant shall be subject to the following conditions:
(a) Reduction of Deferred Bonus Accounts on Certain Terminations of
Employment. If a Participant shall cease to be an Employee within a period
of three years following the close of a Fiscal year with respect to which an
allocation shall have been made to him, the balance in his Deferred Bonus
Account and the Company's obligation in respect thereof shall be reduced as
follows: for the third Fiscal year preceding the year in which he shall
cease to be an Employee the balance shall be reduced by the sum of 5% of the
amount credited to his Deferred Bonus Account with respect to that year and
all adjustments allocable thereto; for the second Fiscal year preceding
5
<PAGE>
such termination of employment the balance shall be reduced by the sum of
10% of the amount credited to his Deferred Bonus Account with respect to
that year and all adjustments allocable thereto; and for the Fiscal year
immediately preceding such termination of employment the balance shall be
reduced by the sum of 15% of the amount credited to his Deferred Bonus
Account with respect to that year and all adjustments allocable thereto. The
amount by which any balance in a Deferred Bonus Account shall be reduced
shall be forfeited by the Participant, and the Company's obligation in
respect thereto shall be canceled. No such reduction in a balance in a
Deferred Bonus Account, or the cancellation of the Company's obligation in
respect thereto, shall be made, however, where termination of employment
shall have resulted from death, disability or retirement under a retirement
plan of the Company or a subsidiary, or shall occur under circumstances
deemed by the Committee in its sole discretion not to be contrary to the
interests of the Company.
(b) Services to be Rendered after Termination of Employment. Each
Participant who has a balance in a Deferred Bonus Account shall, after he
ceased to be an Employee, make himself available for such consultative and
advisory services as the Company may reasonably request taking fairly into
consideration the age, health, residence, and individual circumstances of
the Participant and the total amount of his allocation. If such Participant
shall unreasonably refuse to render such services, the Company's obligation
to make further payments in respect of the balance in his Deferred Bonus
Account shall forthwith terminate. Such Participant shall have no obligation
to render any services pursuant to this Plan after he shall cease to be an
Employee except as may be required by the Company under this subparagraph,
and the death or disability of such Participant or the failure of the
Company to call upon him for rendering of the services called for under this
subparagraph shall not affect in any way the right of such Participant or
his Beneficiary, as the case may be, to receive distributions with respect
to the unpaid balance in his Deferred Bonus Account, it being the intent and
purpose of this subparagraph that the obligation of the Participant shall be
to use his best efforts to render such consultative and advisory services,
if any, as the Company may reasonably call upon him to render during each
Fiscal year in which distribution in respect of the balance in his Deferred
Bonus Account shall have been made or shall be due to him.
(c) Allocations Lost to be Retained by Company. Any amount which a
Participant shall not be entitled to receive by virtue of the provisions of
paragraphs (a) and (b) of this Section shall be retained by the Company free
of all claim or restrictions and the appropriate amount eliminated from the
Participant's Deferred Bonus Account and the Reserve.
(d) In the event of the occurrence of a Change in Control, the foregoing
provisions of this Section 7 shall cease to apply to Participants. This
Section shall not apply to any employee who is not an 'Employee' (as defined
in Section 3.1 of the Enhanced Severance Plan) as of the date of approval by
the stockholders of Warner-Lambert Company of the transaction contemplated
by the Agreement and Plan of Merger, dated February 6, 2000, among Pfizer
Inc., Seminole Acquisition Sub Corp. and Warner-Lambert Company. The
foregoing shall not affect the rights of any beneficiary of a Participant.
ARTICLE VIII
SCOPE OF PLAN
SECTION 8.1. To Whom Applicable. This Plan shall apply to such Officers and
key Employees as may be selected by or under the authority of the Committee
after consultation with the management of the Company.
SECTION 8.2. No Prohibition Against Other Plans. Nothing in this Plan shall
be construed as preventing the Company or any of its subsidiaries from
establishing sales commission plans or any other or different plans providing
for incentive compensation for employees.
6
<PAGE>
ARTICLE IX
GENERAL CONDITIONS; MISCELLANEOUS PROVISIONS
SECTION 9.1. Plan amendments. The Board of Directors may from time to time
amend, suspend or terminate in whole or in part or may reinstate any or all of
the provisions of the Plan, except that (a) no amendment, suspension or
termination may, without his consent, apply to the payment made to any
Participant of any Reserve amount allocated to such participant (deferred or
otherwise), or with respect to the balance in his Deferred Bonus Account, prior
to the effective date of such amendment, suspension or termination, and (b) no
amendment may be made which will increase the maximum amount which may be
appropriated to the Reserve under the Plan without prior approval of the holders
of a majority of the outstanding shares of the common stock of the Company.
Notwithstanding anything in the preceding sentence to the contrary, the
Committee may adopt any amendment to the Plan which (a)(i) does not increase
Plan liabilities by an amount in excess of five million dollars ($5,000,000) and
does not increase Plan expense by an amount in excess of five hundred thousand
dollars ($500,000) or (ii) is required by an applicable law, regulation or
ruling, (b) can be undertaken by the Board of Directors under the terms of the
Plan, (c) does not involve a termination or suspension of the Plan, and
(d) does not affect the limitations contained in this sentence and does not
affect the composition or compensation of the Committee. Without limiting the
generality of the foregoing, the Board of Directors or the Committee may,
subject to the limitations contained in this Section, amend or rescind any
provision of the Plan so as to change the number of installments or modify the
period of time during which any such installments shall be paid and the
contingencies under which any such installments shall be paid.
SECTION 9.2. Non-Assignability of Benefits; Loans Prohibited. Except as
otherwise required by law, it is a condition of the Plan that no Participant or
any person claiming under or through any Participant shall have any right to
assign, transfer, appropriate, encumber, or anticipate his interest in the Plan
or any payments to be made thereunder, and no benefits or payments, rights or
interests of a Participant of any kind or nature shall in any way be subject to
any legal process to levy upon, garnishee or attach the same for payment of any
claim against the Participant or any person claiming under or through the
Participant nor shall any Participant or any person claiming under or through
any Participant have any right of any kind whatsoever with respect to the Plan
or any interest therein other than the right to receive distributions under the
Plan as and when the same are due and payable under the terms of the Plan.
No loan shall be made by the Company to any Participant of any amount
allocated to him under the Plan.
SECTION 9.3. Right to Terminate Employment. The selection of any Officer or
Employee for participation in the Plan in any year shall not give such
Participant any right to participate in the Plan in any future year or to be
retained in the employ of the Company or any subsidiary, and the right and power
of the Company or any subsidiary to dismiss or discharge any Participant is
specifically reserved.
SECTION 9.4. Unclaimed Benefit. Any benefit hereunder which is unclaimed,
including outstanding checks, may, as determined by the Committee, be forfeited.
SECTION 9.5. No Vested Rights of Participants. The Company's sole obligation
to a Participant or any person claiming under or through any Participant in
respect of the payment of any balance in his Deferred Bonus Account shall be
solely a contractual obligation in accordance with the terms of this Plan. The
Company shall have no further or other obligation in respect of any amounts
described above. The Deferred Bonus Accounts and the Deferred Bonus Portions
credited thereto shall not be held or set aside in trust. No Participant or any
person claiming under or through him shall have any vested or other rights in
the Reserve, in the Deferred Bonus Portion or the Deferred Bonus Account in his
name.
No Participant shall have any right with respect to any allocation, until
such allocation or written notice thereof shall have been delivered to him; nor
shall any such Participant or any person claiming under or through him have any
right or interest in this Plan, or in the Reserve, or in any allocation
hereunder, or in any balance in any Deferred Bonus Account unless and until all
the terms, conditions
7
<PAGE>
and provisions of the Plan that affect such Participant have been complied with
as specified herein and, in such case, only to the extent provided herein.
SECTION 9.6. Withholding of Distributions. In the event that any dispute
shall arise as to the person or persons to whom any distribution shall be made,
the Company may withhold such distribution until such dispute shall have been
determined in accordance with law. All distributions to Participants and
Beneficiaries shall be subject to any applicable tax, community property or
other statutes and regulations of the United States or of any state having
jurisdiction thereof.
SECTION 9.7. Reliance on Accounts. The Board of Directors and the Committee
may rely upon any information supplied to them by an Officer or by the Company's
independent public accountants in connection with the administration of the
Plan. The determination of the Company's independent public accountants as to
the Incentive Compensation Net Income of the Company for any year and the
maximum amounts which may be appropriated to the Reserve in any year and any
other computations or matters arising under the Plan and referred to such
independent public accountants by the Committee or the Board for determination
shall be final, conclusive and binding on the Company and on all Participants
and upon all persons claiming through or under any Participant.
SECTION 9.8. Liability. No member of the Board of Directors or of the
Committee shall be liable for any act or action, whether of commission or
omission, taken by any other member, or by any officer, agent, or employee or by
any investment advisor or financial institution appointed by the Committee.
SECTION 9.9. Governing Law. This Plan shall be governed by the law of the
State of New York (regardless of the law that might otherwise govern under
applicable New York principles of conflicts of laws).
ARTICLE X
ADMINISTRATION OF THE PLAN; COMMITTEE
SECTION 10.1. Appointments of Committee. The Plan shall be administered by a
Committee of not less than three members to be appointed by the Board of
Directors from among its own members, none of whom shall be a present Officer or
Employee. No member of the Committee shall be eligible to participate in the
Plan or in any award of incentive compensation allocated under the Plan after
the date he becomes a member of the Committee. The membership of the Committee
may be reduced, changed or increased from time to time in the absolute
discretion of the Board of Directors.
SECTION 10.2. Organization of Committee. The Committee shall select a
Chairman from among its members and designate a Secretary, who need not be a
member of the Committee and who may be a Participant under the Plan. The
Secretary shall keep all records of meetings of the Committee and of any actions
taken by the Committee. A majority of the Committee shall constitute a quorum
and the decision of a majority of the members of the Committee present at any
meeting at which a quorum is present, expressed from time to time by a vote at a
meeting (including a meeting held by telephone conference call or in which one
or more members of the Committee participate by telephone), or the decision of a
majority of the members expressed in writing without a meeting, shall govern and
control the exercise of the authority of the Committee. The Committee shall meet
at such time and place as the Chairman shall designate. The Committee shall
serve without compensation, except that they shall be entitled to the usual
attendance fees and disbursements in connection with attending any meeting.
SECTION 10.3. Powers and Duties of Committee. The Committee shall have full
discretionary power to construe and interpret this Plan, to modify the rate of
adjustment to be paid on the amounts in the Deferred Bonus Accounts on a
prospective basis, to determine any and all questions arising under the Plan,
including the right to remedy possible ambiguities, inconsistencies and
omissions, and to establish and amend rules and regulations for its
administration. Similarly, the determination of the happening of any of the
contingencies mentioned in Article VII resulting in the loss or reduction of
benefits therein provided, the determination of those who may participate in
additional incentive compensation under the Plan, the amount of individual
allocation to such Participants, and whether distributions to any Participants
or their Beneficiaries should be made otherwise than in installments of from
three to fifteen years provided for in Section 6.1, shall rest in the absolute
discretion of the Committee subject to the review of the Board as herein
provided (and no Participant or Beneficiary shall have the right to require
8
<PAGE>
any distribution otherwise than in accordance with said Section 6.1). The
Committee shall make an initial determination of the amount of the Reserve to be
allocated to Participants and the restrictions, conditions or limitations upon
the payment of all or any part of any amounts allocated to a Participant under
the Plan it considers appropriate at the time such amount is allocated.
All such determinations, constructions, interpretations, rules and
regulations made pursuant to this Section shall be conclusive and binding upon
all Participants and on all persons claiming under or through any Participant.
ARTICLE XI
REVOCATION OF ELECTION TO DEFER PAYMENT FOR FINANCIAL HARDSHIP
SECTION 11.1. The Committee may, in its sole discretion, alter or revoke an
election made by a Participant to defer payment of any amount of the Reserve
allocated to such Participant, on a clear showing of financial hardship suffered
or to be suffered by such Participant.
ARTICLE XII
CONTINGENT ALLOTMENT RESERVE ACCOUNT
SECTION 12.1. A Participant who had a Contingent Allotment Reserve Account
under the Plan as in effect before December 31, 1976 shall continue to be
governed by the terms and conditions of Article XII of the Plan, As Amended To
September 27, 1983, with respect to such Contingent Allotment Reserve Account.
ARTICLE XIII
APPROVAL; EFFECTIVE DATE
SECTION 13.1. This document restates the Plan in its entirety, as adopted by
the stockholders of the Company at the Annual Meeting of Stockholders of the
Company on May 12, 1959, and as amended by all amendments to the Plan since that
date.
WARNER-LAMBERT COMPANY
9
<PAGE>
EXHIBIT 10(e)
________________________________________________________________________________
WARNER-LAMBERT COMPANY
-------------------
SUPPLEMENTAL PENSION INCOME PLAN
AS AMENDED TO FEBRUARY 6, 2000
________________________________________________________________________________
<PAGE>
WARNER-LAMBERT COMPANY
SUPPLEMENTAL PENSION INCOME PLAN
ARTICLE I
PURPOSE
SECTION 1.1. There is hereby established a Supplemental Pension Income Plan
in order to attract and hold officers and key employees in senior managerial and
other important positions with the Company and its Affiliates by providing such
executives compensation in the form of supplemental pension and retirement
income in amounts reasonably related to their compensation and the length of
their service with the Company.
ARTICLE II
DEFINITIONS
SECTION 2.1. Whenever used herein, unless the context otherwise indicates,
the following terms shall have the respective meanings set forth below:
Affiliate: any person directly or indirectly controlling, controlled by, or
under direct or indirect common control with another Person. A Person shall be
deemed to control another Person if such Person possesses, directly or
indirectly, the power to direct or cause the direction of the management and
policies of such other Person, whether through the ownership of voting
securities, by contract or otherwise.
Average Final Compensation: the total amount of an Employee's Compensation
for the three calendar years during which his Compensation was the highest of
the five year period of Service ending with his Retirement Date, divided by 3.
The determination of any currency exchange rate shall be made as of the
Retirement Date.
Average Final Salary: the total amount of an Employee's Salary for the three
calendar years during which his salary was the highest of the five year period
of Service ending with his Retirement Date, divided by 3. The determination of
any currency exchange rate shall be made as of the Retirement Date.
Basic Pension Income: the amount of annual pension benefits determined in
accordance with Article V hereof.
Board of Directors: the Board of Directors of the Company or the Executive
Committee thereof.
Committee: the Committee authorized to administer the Plan pursuant to
Article IX hereof.
Company: Warner-Lambert Company, its predecessors, or any successor to it in
ownership of substantially all of its assets, whether by merger, consolidation
or otherwise.
Compensation: An Employee's Salary during the calendar year plus the amount,
if any, allocated to the Employee as additional incentive compensation with
respect to the preceding year pursuant to Section 3.4 of the Warner-Lambert
Company Incentive Compensation Plan, not including any amount allocated subject
to restrictions dependent upon future per share earnings of the Company.
Early Retirement Date: the first day of the calendar month coincident with
or next following any date, prior to a Participant's Normal Retirement Date and
on or after his 55th birthday, on which his employment shall terminate.
Employee: any person in the employ of the Company or its domestic
Affiliates.
Internal Revenue Code: Internal Revenue Code of 1986, as amended.
Normal Retirement Date: the first day of the calendar month coincident with
or next following a Participant's 65th birthday.
1
<PAGE>
Participant: a person who shall have met the requirements for participation
in the Retirement Plan as provided in Article III thereof and whose
participation in the Retirement Plan shall not have terminated as provided in
said Article.
Pension Income Objective: the annual amount determined in accordance with
Article IV hereof.
Person: an individual, a partnership, a joint venture, a corporation, a
trust, an unincorporated organization, and a government or any department or
agency thereof.
Plan: the Supplemental Pension Income Plan as set forth herein and as
amended from time to time.
Postponed Retirement Date: the first day of the calendar month coincident
with or next following any date, subsequent to a Participant's Normal Retirement
Date, on which his employment with the Company shall terminate.
Retired Senior Executive: a person who has met the requirements of Article
III or XIII, as the case may be.
Retirement Date: an individual's Retirement Date shall be his Normal, Early
or Postponed Retirement Date, whichever is coincident with or next follows his
termination of Service.
Retirement Plan: the Warner-Lambert Retirement Plan as in effect on the date
hereof and as subsequently amended.
Retirement Plan Benefit: the amount of the annual benefit that a Retired
Senior Executive is eligible to receive under the Retirement Plan (determined
without regard to the flat dollar benefit of Section 9 of Article VI of the
Retirement Plan) and under Article VII of this Plan, determined as of and
commencing on his Retirement Date or, if greater, the amount of such benefit
that he would have been eligible to receive if he had begun to participate in
the Retirement Plan when he first became eligible to do so and thereafter
neither voluntarily ceased to make contributions to, nor elected a refund of
contributions under, the Retirement Plan.
Salary: effective January 1, 1990, an Employee's annualized basic rate of
remuneration as of the first day of the calendar year for services performed for
the Company or its Affiliates, excluding any bonuses or other compensation.
Salary/Age Minimum: a number, representing the combination of Salary,
expressed in $1,000 units, and age required for eligibility for a Supplemental
Pension Income, which shall equal 200 on the effective date of the Plan. For
each calendar year subsequent to calendar year 1975, the Salary/Age Minimum
shall equal
(i) the Salary/Age Minimum for the preceding year; plus or minus
(ii) one-fourth of the percentage increase or decrease in the Bureau of
Labor Statistics Consumer Price Index for Urban Wage Earners and Clerical
Workers: U.S. City Average, All Items, 1967=100, for such preceding year
multiplied by the difference between such preceding year's Salary/Age
Minimum and 65.
Service: a period of service with the Company or its Affiliates determined
in accordance with service rules applicable to the Retirement Plan in effect at
the time when the determination shall be made.
Spouse's Supplemental Pension Income: the annual amount of benefits to be
paid to a Surviving Spouse under Article VI hereof.
Supplemental Pension Income: the annual amount of benefits to be paid to a
Retired Senior Executive under Article VI hereof.
Supplemental Retirement Plan Income: the benefits to be paid to a
Participant (or his spouse, contingent annuitant or other person) under Article
VII hereof.
Surviving Spouse: the person to whom an Employee or Retired Senior Executive
was married on the date of his death if the marriage occurred (a) on or before
the date on which the Retired Senior Executive's retirement income shall have
commenced or (b) at least one year prior to the death of the Employee who dies
prior to commencing receipt of benefits.
2
<PAGE>
ARTICLE III
ELIGIBILITY FOR SUPPLEMENTAL PENSION INCOME
SECTION 3.1. An Employee shall be eligible to receive a Supplemental Pension
Income in an amount determined in accordance with Article VI hereof if he meets
the following requirements as of his Early or Normal Retirement Date:
(a) he has attained age fifty-five (55) or, for executives hired on or
after January 1, 1996, age sixty-two (62);
(b) he has completed at least five (5) years of Service;
(c) the sum of his Average Final Salary divided by $1,000 plus his age
in years equals or exceeds the Salary/Age Minimum;
(d) he is not entitled to receive Equity Annuity Retirement Income
pursuant to Article VII of the Retirement Plan;
(e) he holds a non-banded corporate officer position or a senior
management position designated by the Company as eligible to participate in
this Plan (as set forth in the attached Appendix II, as revised from time to
time); and
(f) if his employment with the Company terminates on an Early Retirement
Date prior to age 62, the Committee has approved his eligibility.
SECTION 3.2. The Committee, acting within its discretion, may designate an
Employee who meets all of the requirements of Section 3.1 hereof as of his Early
or Normal Retirement Date except (c) and/or (e) as being eligible to receive a
Supplemental Pension Income provided:
(a) with respect to Section 3.1(c), the sum referred to therein equals
or exceeds 90% of the Salary/Age Minimum as of his Early or Normal
Retirement Date; and
(b) with respect to Section 3.1(e), the Employee held a non-banded
corporate officer position or a senior management position designated by the
Company as eligible to participate in this Plan (as set forth in the
attached Appendix II, as revised from time to time) during at least 24
months of the five year period of Service ending with his Early or Normal
Retirement Date.
SECTION 3.3. For the purposes of Section 3.1 and Section 3.2, an Employee
whose Service is terminated by his death shall be deemed to have retired
immediately prior to the date of his death. If he would have qualified as a
Retired Senior Executive at that time, his Surviving Spouse, if any, shall be
eligible for a Spouse's Supplemental Pension Income in accordance with Section
6.3.
ARTICLE IV
PENSION INCOME OBJECTIVE
SECTION 4.1. For each Retired Senior Executive whose employment terminates
on a Normal or Postponed Retirement Date, his Pension Income Objective shall be:
(a) Executives Hired Before January 1, 1996:
(i) 3.36% for each year of his Service after he attains age 45, up to
10 years; plus
(ii) 2.24% for each year of his Service after he attains age 45, in
excess of 10 and up to 20 years times his Average Final Compensation. No
period of Service after Normal Retirement Date shall be taken into
account in determining a Pension Income Objective, except as otherwise
required by law.
A person is considered to have attained age 45 on the first day on the month
coincident with or next following his 45th birthday.
(b) Executives Hired On Or After January 1, 1996
The Pension Income Objective shall be the percentage of Average Final
Compensation determined in accordance with the schedule attached hereto
as Appendix I.
SECTION 4.2. For each Retired Senior Executive hired before January 1, 1996
whose employment with the Company terminates on an Early Retirement Date, a
Pension Income Objective shall be
3
<PAGE>
calculated in the amount provided in Section 4.1 hereof, reduced by the amount
obtained by multiplying the sum of:
(i) 6% for each year, if any, between the date payments commence under
this Plan and his 60th birthday; plus
(ii) 3% for each year, if any, between the later of the date payments
commence under this Plan or his 60th birthday and his 62nd birthday.
SECTION 4.3. Periods of Service and age of less than a year shall be
included in the calculations required by this Article IV as the number of months
in such period divided by 12. Credit shall be given for each month through the
first of the month coincident with or next following the completion of such
period.
ARTICLE V
BASIC PENSION INCOME
SECTION 5.1. For each Retired Senior Executive there shall be computed a
Basic Pension Income as of his Retirement Date. The Basic Pension Income shall
equal the sum of the amounts of annual pension benefit determined in accordance
with Section 5.2 or Section 5.3, whichever is applicable.
SECTION 5.2. The Basic Pension Income for each Retired Senior Executive
whose employment with the Company terminates on a Normal or Postponed Retirement
Date shall be the sum of the following amounts determined as of his Normal
Retirement Date and converted as hereinafter described:
(a) his Retirement Plan Benefit;
(b) the amount of any pension benefit that he is eligible to receive or
has previously received under a pension plan maintained by any Affiliate of
the Company or any other company;
(c) for executives hired on or after January 1, 1996, the pension
equivalent of the amount of the company provided benefit that he is eligible
to receive or has previously received under a defined contribution plan
maintained by any Affiliate of the Company or any other company if such plan
is the primary retirement income plan of such company;
(d) the amount of any annual pension benefit that he is eligible to
receive or has previously received under the Social Security Act or would be
eligible to receive if he were to realize no net earnings from
self-employment and no wages for services rendered after his Retirement
Date;
(e) the amount of any pension, retirement income, severance or
termination pay (or similar benefit) that he is eligible to receive or has
previously received which is required under the law of any country other
than the United States of America or under the law of any territory or
possession of the United States of America; and
(f) the amount of any other pension benefit that he is eligible to
receive or has previously received under any other pension plan, contract or
program, including a pension plan established by the Retired Senior
Executive with respect to periods of self-employment.
Amounts of Basic Pension Income shall be determined before any reduction
which may have resulted from an election by the Retired Senior Executive to
receive a lump-sum benefit in lieu of a pension benefit, whether or not related
to his own contributions. The amount of any annual pension benefit payments
which commence prior or subsequent to Normal Retirement Date shall be determined
as if the payment of such benefits commenced on Normal Retirement Date
irrespective of the date on which the pension actually commenced. The amount of
any annual pension (not including Section 5.2(d) amounts) determined at Normal
Retirement Date other than on the basis of a single life annuity for a Retired
Senior Executive who is not married or on a 50% joint and survivor basis for a
Retired Senior Executive who is married shall be converted actuarially to a
pension payable on such basis, respectively, using the actuarial assumptions
specified in Section 7 of Appendix B of the Retirement Plan.
Any amount of Basic Pension Income which is payable from a plan under which
the normal form of benefit is not a pension benefit shall be converted using the
actuarial assumptions specified in Section 7 of Appendix B of the Retirement
Plan to a pension payable at age 65 on the basis of a single life annuity for a
Participant who is not married or on a 50% joint and survivor basis for a
Participant who
4
<PAGE>
is married. The conversion shall be based upon the age of the person and value
of such benefit when the executive terminated employment with the company
maintaining such plan.
For purposes of this Article V, the marital status of a Retired Senior
Executive shall be determined at the Retirement Date and the actual date of
birth of the current spouse will be used.
The determination of any currency exchange rate for any amount of Basic
Pension Income payable in other than U.S. dollars shall be made at the last day
of the second month preceding the Retirement Date. If the exchange rate on such
date is not representative of the exchange rate in effect over a representative
period, then the Company may select an average exchange rate in effect over a
representative period of time.
SECTION 5.3. The Basic Pension Income for a Retired Senior Executive who
terminates employment on an Early Retirement Date shall be the sum of the
amounts of annual pension benefits listed in Section 5.2 hereof, determined as
if the payment of such benefits commenced on the Retired Senior Executive's
Normal Retirement Date. Each component of Basic Pension Income shall be
actuarially reduced (based upon the factors of the plan under which the benefit
is being provided or, if such factors are not available or applicable, under the
factors applicable to the Retirement Plan in effect on the Retirement Date) to
the later of the Early Retirement Date or the earliest date such pension
benefits are actually available. In the event that the payment of any annual
pension benefit listed in Section 5.2 hereof shall first become available on a
date following the Early Retirement Date of such Retired Senior Executive, the
amount of such annual pension benefit shall be included in the Basic Pension
Income of such Retired Senior Executive only from and after the first date on
which the benefit is available. As applied to Social Security benefits, the
preceding sentence shall be applied to a Retired Senior Executive (1) whose
Retirement Date is prior to age 62 by estimating the amount of Social Security
benefits that will be available at age 62 based upon the law in effect at the
Retirement Date, with such amount being included in the Basic Pension Income of
such Retired Senior Executive commencing at age 62, and (2) whose Retirement
Date is at or after age 62 by including the amount of Social Security benefits
available at the Retirement Date based on the law in effect at such Retirement
Date in the Basic Pension Income of the Retired Senior Executive commencing at
the Retirement Date.
SECTION 5.4. Notwithstanding the foregoing, payments to or other amounts
realized by the Retired Senior Executive pursuant to a deferred compensation
agreement, a profit sharing plan (except as provided in Section 5.2(c) hereof),
a stock option or alternate stock plan or any other incentive compensation plan
or agreement shall not be included in computing his Basic Pension Income.
ARTICLE VI
SUPPLEMENTAL PENSION INCOME
SECTION 6.1. There shall be paid to each Retired Senior Executive who
commences payment of benefits hereunder, a Supplemental Pension Income which
shall be an annual amount equal to the excess, if any, of his Pension Income
Objective computed in accordance with Article IV hereof over his Basic Pension
Income computed in accordance with Article V hereof, except as provided in
Section 6.2.
SECTION 6.2. With respect to executives hired by the Company on or after
January 1, 1996, the Pension Income Objective based upon service (as provided in
Section 4.1(b)) shall be reduced by another employer's benefit in accordance
with Section 5.2(b) only to the extent that total annual pension income from all
sources (including this Plan) exceeds the maximum objective set forth in
Appendix I for the age at which the executive terminates employment with the
Company.
SECTION 6.3. If a Retired Senior Executive shall die survived by a Surviving
Spouse, such Surviving Spouse shall be paid a Spouse's Supplemental Pension
Income which shall be an amount equal to one-half of the amount of the
Supplemental Pension Income which otherwise would have been payable to the
Retired Senior Executive.
5
<PAGE>
ARTICLE VII
SUPPLEMENTAL RETIREMENT PLAN INCOME
SECTION 7.1. There shall be paid to each Participant (or his spouse,
contingent annuitant or other person), in accordance with Section 7.2 hereof, a
Supplemental Retirement Plan Income which shall be the additional amount which
would have been payable to him or her from the Retirement Plan if the
limitations of the Internal Revenue Code were not applicable. For this purpose,
the limitations of the Internal Revenue Code include, but are not limited to,
Sections 415, 401(a)(17) and 401(a)(4), and therefore, this Section 7.1 shall
include, but not be limited to, the additional amount that would be payable to
him or her if Compensation as defined in the Retirement Plan was to include
deferred annual bonuses (but not long term bonuses) and Compensation in excess
of $150,000 (as adjusted) ).
SECTION 7.2. Payment of Supplemental Retirement Plan Income to a Participant
or to his spouse, contingent annuitant or other person shall be governed by the
provisions of the Retirement Plan in all respects (including payment
commencement date), except that any amounts otherwise payable as Equity Annuity
Retirement Income as referred to in Article VII of the Retirement Plan shall be
payable hereunder as Dollar Annuity Retirement Income as referred to in Article
VI of the Retirement Plan.
ARTICLE VIII
ABSENCE OF FUNDING
Section 8.1. The sole obligation of the Company hereunder to a Retired
Senior Executive, Surviving Spouse, Participant, or any other person claiming
through or under any such individual, is a contractual obligation to make
payments in accordance with the terms hereof. No amount of cash or other
property shall be set aside as a separate trust for the payment of any
Supplemental Pension Income or Supplemental Retirement Plan Income under the
Plan, except that the Company may, in its sole discretion, establish a trust for
the purpose of paying benefits under the Plan, the assets of which shall remain
subject to the claims of the general creditors of the Company in the event of
the Company's bankruptcy or insolvency, in accordance with the provisions of any
such trust. Any amounts payable under the Plan shall be paid by the Company
directly only out of the general assets of the Company, or shall be paid from
such a trust.
SECTION 8.2. No Retired Senior Executive or other Employee shall acquire, or
otherwise be vested with, any rights under Article VI of the Plan prior to his
Retirement Date.
SECTION 8.3. Participation in the Plan shall not confer upon any Employee
the right to remain in the employ of the Company or its Affiliates, and the
right and power of the Company or its Affiliates to dismiss or discharge any
Employee is specifically reserved.
ARTICLE IX
ADMINISTRATION
SECTION 9.1. The Plan shall be administered by a Committee of not less than
three members to be appointed by the Board of Directors from among its own
members, none of whom shall be Employees. The membership of the Committee may be
reduced, changed or increased from time to time in the absolute discretion of
the Board of Directors. The Committee shall select a Chairman from among its
members and designate any person as Secretary, who need not be a member of the
Committee and who may be an Employee. The Secretary shall keep all records of
meetings of the Committee and of any actions taken by the Committee. A majority
of the Committee shall constitute a quorum and the decision of a majority of the
members of the Committee present at any meeting at which a quorum is present,
expressed from time to time by a vote at a meeting (including a meeting held by
telephone conference call or in which one or more members of the Committee
participate by telephone), or the decision of a majority of the members
expressed in writing without a meeting, shall govern and control the exercise of
the authority of the Committee.
SECTION 9.2. The Committee shall have full discretionary power to construe
and interpret the Plan, to determine any and all questions arising under the
Plan, including the right to remedy possible
6
<PAGE>
ambiguities, inconsistencies and omissions, and to establish and amend rules and
regulations for its administration. All such determinations, constructions,
interpretations, rules and regulations made pursuant to this Section 9.2 shall
be conclusive and binding upon all Employees and on all persons claiming under
or through any Employee.
SECTION 9.3. The Committee shall determine, within its discretion, the
actuarial methods and assumptions to be used in determining any amount payable
under the Plan. The Committee may rely on the advice of such independent
actuaries or other persons as it may deem proper in making such determination.
SECTION 9.4. No member of the Board of Directors or of the Committee shall
be liable for any act or action, whether of commission or omission, taken by any
other member, or by any officer, agent or employee or by any investment advisor
or financial institution appointed by any such person; nor, except in
circumstances involving his bad faith, for anything done or omitted to be done
by himself.
SECTION 9.5. The Committee may require, as a condition to the payment of any
amounts under this Plan, that a Retired Senior Executive or Surviving Spouse
disclose such information as the Committee shall deem necessary to determine the
Basic Pension Income of such Retired Senior Executive. All such information
shall be held in confidence by the Committee. In the event that the Committee
shall determine that all such necessary information shall not have been
provided, it shall redetermine the Basic Pension Income and the amount of the
Supplemental Pension Income to be paid thereafter, and it may, on a finding of
an intentional omission or misrepresentation by a Retired Senior Executive or
Surviving Spouse, reduce subsequent payments by the amount of any such prior
payments in excess of amounts actually due or terminate payments under the Plan
to such Retired Senior Executive or Surviving Spouse.
ARTICLE X
MANNER OF PAYMENT OF SUPPLEMENTAL PENSION INCOME
SECTION 10.1. An amount equal to one-twelfth of the Supplemental Pension
Income shall be paid to a Retired Senior Executive commencing on the date
payments begin from the Retirement Plan and on the first day of each calendar
month thereafter, but not after the first day of the calendar month in which the
Retired Senior Executive shall die.
SECTION 10.2. An amount equal to one-twelfth of the Spouse's Supplemental
Pension Income provided in accordance with Section 6.3 hereof shall be paid to a
Surviving Spouse on the first day of the calendar month next following the month
in which the Retired Senior Executive shall die, and on the first day of each
calendar month thereafter, but not after the first day of the month in which the
Surviving Spouse shall die.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1. Neither the establishment of this Plan, nor any modification
thereof, nor the payment of any benefits, shall be construed as giving to any
Employee, Participant, Retired Senior Executive, Surviving Spouse or other
person any legal or equitable right against the Company, or any officer or
employee thereof, except as herein provided. Under no circumstances shall the
terms of employment of any Employee, Participant, Retired Senior Executive or
any other person be modified or in any way affected thereby.
SECTION 11.2. No benefit payable under the Plan shall, except as otherwise
specifically provided by law, be subject in any manner to anticipation,
alienation, attachment, sale, transfer, assignment, pledge, encumbrance or
charge, and any attempt to anticipate, alienate, attach, sell, transfer, assign,
pledge, encumber or charge any such benefit shall be void, and any such benefit
shall not in any manner be liable for or subject to the debts, contracts,
liabilities, engagements or torts of any person who shall be entitled to such
benefit, nor shall it be subject to attachment or legal process for or against
such person.
SECTION 11.3. If any person entitled to a benefit hereunder shall be
adjudicated a bankrupt or shall attempt to anticipate, alienate, sell, transfer,
assign, pledge, encumber or charge such benefit, or if any
7
<PAGE>
attempt is made to subject any such benefit to the debts, contracts,
liabilities, engagements or torts of any person entitled to such benefit, then
such benefit shall, in the discretion of the Committee, cease and terminate, and
in that event the Committee may cause such benefit, or any part thereof, to be
held or applied for the benefit of such person, his spouse, children or other
dependents, or any of them, or other beneficiary, in such manner and in such
proportion as the Committee shall determine.
SECTION 11.4. If, for any reason, the Committee shall determine that it is
not desirable because of the incapacity of the person who shall be entitled to
receive any payments hereunder, to make such payments directly to such person,
the Committee may apply such payment for the benefit of such person in any way
that the Committee shall deem advisable or may make any such payment to any
third person who, in the judgment of the Committee, will apply such payment for
the benefit of the person entitled thereto. In the event of such payment the
Company and the Committee shall be discharged from all further liability for
such payment.
SECTION 11.5. Each Retired Senior Executive shall, after his Retirement
Date, make himself available for such consultative and advisory services as the
Company may reasonably request, taking fairly into consideration the age,
health, residence, and individual circumstances of the Retired Senior Executive
and the total amount of his Supplemental Pension Income. If such Retired Senior
Executive shall unreasonably refuse to render such services, the Company's
obligation to make further payments under the Plan shall forthwith terminate.
SECTION 11.6. This Plan shall be governed by the law of the State of New
Jersey (regardless of the law that might otherwise govern under applicable New
Jersey principles of conflicts of laws).
SECTION 11.7. Wherever any words are used herein in the masculine gender
they shall be construed as though they were also used in the feminine gender in
all cases where they would so apply, and wherever any words are used herein in
the singular form they shall be construed as though they were also used in the
plural form in all cases where they would so apply.
SECTION 11.8. No loan shall be made by the Company to any person of any
amount of his benefit hereunder or of any amount the security for which is his
benefit hereunder.
SECTION 11.9. Any benefit hereunder which is unclaimed, including
outstanding checks, may, as determined by the Committee, be forfeited.
ARTICLE XII
AMENDMENT AND EFFECTIVE DATE
SECTION 12.1. The Board of Directors shall have the right at any time or
from time to time to modify, amend or terminate the Plan in whole or in part;
provided, however, that no such modification, amendment or termination shall
reduce the amount of any benefits payable under the Plan on the date thereof;
and further provided, that following a Change in Control of the Company (as
defined in Section 13.2 hereof), no modification or amendment shall be made,
directly or indirectly, to the provisions of Article XIII hereof without the
consent of 90% of the individuals described therein.
SECTION 12.2. Notwithstanding anything in Section 12.1 to the contrary, the
Committee may adopt any amendment to the Plan which (a)(i) does not increase
Plan liabilities by an amount in excess of five million dollars ($5,000,000) and
does not increase Plan expense by an amount in excess of five hundred thousand
dollars ($500,000) or (ii) is required by an applicable law, regulation or
ruling, (b) can be undertaken by the Board of Directors under the terms of the
Plan, (c) does not involve a termination or suspension of the Plan, and (d) does
not affect the limitations contained in this sentence and does not affect the
composition or compensation of the Committee.
SECTION 12.3. This document restates the Plan in its entirety, as adopted by
the Board of Directors, effective January 1, 1975, and as amended by all
amendments to the Plan since that date. In the case of Employees who terminate
employment with the Company after January 1, 1980, the determination of Salary
and Compensation for all years shall be in accordance with the terms of the Plan
as then in effect.
SECTION 12.4. Subject to the restriction of Section 12.2 or action by the
Board of Directors or the Committee to the contrary, this Plan shall be deemed
amended or modified at the time of amendment
8
<PAGE>
or modification of the Retirement Plan to the extent necessary to (i) provide
consistency in the provisions of this Plan and the Retirement Plan with respect
to definitions and their related operational provisions, and (ii) maintain the
relationship between the benefits provided by this Plan and the Retirement Plan.
Amendments or modifications to the Plan made pursuant to this section shall be
effective as of the effective date of the related amendment or modification to
the Retirement Plan unless the Board of Directors or Committee declare
otherwise.
SECTION 12.5. All actions, including Plan amendments, which are undertaken
by the Board of Directors or the Committee shall be authorized by a duly adopted
resolution approved by the respective body.
ARTICLE XIII
EFFECT OF CERTAIN EVENTS
SECTION 13.1. Notwithstanding anything to the contrary contained in this
Plan, the provisions set forth in this Section shall apply following a Change in
Control of the Company (as defined in Section 13.2 hereof):
(a) an Employee shall be eligible to receive a Supplemental Pension
Income in an amount determined in accordance with Article VI hereof if he
held a non-banded corporate officer position or a senior management position
designated by the Company as eligible to participate in this Plan (as set
forth in the attached Appendix II, as revised from time to time) prior to
such Change in Control of the Company and an 'Activation Event' (as defined
in the Executive Severance Plan) shall have occurred with respect to such
Employee;
(b) the provisions of Sections 9.5 and 11.5 shall no longer apply; and
(c) as soon as practicable after an Employee has satisfied the
requirements set forth in (a) above (whether or not such Employee has
terminated his Service), or with respect to a Retired Senior Executive, as
soon as practicable upon such Change in Control of the Company, the Company
shall furnish to such Employee or Retired Senior Executive (or, if
applicable, his Surviving Spouse) a letter which acknowledges the right of
such Employee or Retired Senior Executive (or Surviving Spouse) to receive,
and the obligation of the Company to provide, benefits in accordance with
the provisions of this Plan. The Company shall furnish a similar letter to
each Participant (or his spouse, contingent annuitant or other person) who
is receiving or is entitled to receive Supplemental Retirement Plan Income
pursuant to Article VII hereof. The aforementioned letters shall constitute
an enforceable contract with the Company.
SECTION 13.2. For purposes hereof, a 'Change in Control of the Company'
shall be deemed to have occurred if (i) any person (as such term is used in
Sections 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended
(the 'Act')) is or becomes the beneficial owner (as defined in Rule 13d-3 under
the Act), directly or indirectly, of securities of the Company representing 20%
or more of the combined voting power of the Company's then outstanding
securities, (ii) the stockholders of the Company approve a merger,
consolidation, sale or disposition of all or substantially all of the Company's
assets or plan of liquidation, or (iii) the composition of the Board of
Directors of Warner-Lambert Company (for purposes of this paragraph, the
'Board') at any time during any consecutive twenty-four (24) month period
changes such that the Continuity Directors (as hereinafter defined) cease for
any reason to constitute at least fifty-one percent (51%) of the Board. For
purposes of the foregoing clause (iii), 'Continuity Directors' means those
members of the Board who either (a) were directors at the beginning of such
consecutive twenty-four (24) month period, or (b)(1) filled a vacancy during
such twenty-four (24) month period created by reason of (x) death, (y) a
medically determinable physical or mental impairment which renders the director
substantially unable to function as a director or (z) retirement at the last
mandatory retirement age in effect for at least two (2) years, and (2) were
elected, nominated or voted for by at least fifty-one percent (51%) of the
current directors who were also directors at the commencement of such
twenty-four (24) month period.
SECTION 13.3. To the extent that implementation of the Warner-Lambert
Enhanced Severance Plan and the Warner-Lambert Executive Severance Plan requires
the accrual of amounts hereunder, this Plan
9
<PAGE>
is hereby amended to include such amounts as Supplemental Retirement Plan Income
under Article VII hereof.
SECTION 13.4. Article XIII hereof shall not apply to any employee who is not
an 'Employee' (as defined in Section 3.1 of the Enhanced Severance Plan) as of
the date of approval by the stockholders of Warner-Lambert Company of the
transaction contemplated by the Agreement and Plan of Merger, dated as of
February 6, 2000, among Pfizer Inc., Seminole Acquisition Sub Corp. and
Warner-Lambert Company. The foregoing shall not affect the rights of any
beneficiary of a Participant.
ARTICLE XIV
LUMP SUM PAYMENT
SECTION 14.1. Notwithstanding any other provisions hereof, in the event that
(x) an Employee receives a lump sum payment from the Retirement Plan in lieu of
all other benefits under such plan or (y) the benefit under this Plan which is
payable to the Employee is less than $50 per month at normal retirement age or
at any earlier date in which benefits are payable hereunder (regardless of the
amount payable to such employee from the Retirement Plan), then the Employee
shall receive a lump sum payment of the benefit which is payable from this Plan
with the amount thereof determined in accordance with Section 6 of Appendix B of
the Retirement Plan.
WARNER-LAMBERT COMPANY
10
<PAGE>
EXHIBIT 10(h)
________________________________________________________________________________
WARNER-LAMBERT
-------------------
EXCESS SAVINGS PLAN
AS AMENDED TO FEBRUARY 6, 2000
________________________________________________________________________________
<PAGE>
TABLE OF CONTENTS
-------------------
<TABLE>
<CAPTION>
ARTICLE SECTION PAGE
- ------- ------- ----
<C> <S> <C> <C>
1 Purpose of Plan
1.1 Establishment of Plan....................................... 1-1
2 Definitions
2.1 Accounts.................................................... 2-1
2.2 Affiliated Company.......................................... 2-1
2.3 After-Tax Contributions..................................... 2-1
2.4 Annual Reported Earnings Per Share.......................... 2-1
2.5 Beneficiary................................................. 2-1
2.6 Board of Directors.......................................... 2-1
2.7 Company..................................................... 2-2
2.8 Company Matching Contributions.............................. 2-2
2.9 Company Matching Contribution Account....................... 2-2
2.10 Compensation................................................ 2-2
2.11 Compensation Reduction Agreement............................ 2-2
2.12 Effective Date.............................................. 2-2
2.13 Election Change Date........................................ 2-2
2.14 Employee.................................................... 2-2
2.15 Hardship.................................................... 2-2
2.16 Investment Committee........................................ 2-3
2.17 Participant................................................. 2-3
2.18 Participating Company or Companies.......................... 2-3
2.19 Plan........................................................ 2-3
2.20 Plan Year................................................... 2-3
2.21 Pre-Tax Contributions....................................... 2-3
2.22 Pre-Tax Contributions Account............................... 2-4
2.23 Regular Contributions....................................... 2-4
2.24 Retirement Committee........................................ 2-4
2.25 Savings and Stock Plan...................................... 2-4
2.26 Savings Contributions....................................... 2-4
2.27 Savings Contributions Account............................... 2-4
2.28 Total Disability............................................ 2-4
2.29 Valuation Date.............................................. 2-4
3 Requirements for Participation
3.1 Eligibility................................................. 3-1
3.2 Requirements................................................ 3-1
3.3 Establishing an Account..................................... 3-1
3.4 Collective Bargaining Units................................. 3-2
3.5 ERISA....................................................... 3-2
4 Participant Contributions
4.1 Elections................................................... 4-1
4.2 Savings Contributions....................................... 4-1
4.3 Savings and Stock Plan Discontinuations..................... 4-2
4.4 Valuations.................................................. 4-2
4.5 Effective Date of Elections................................. 4-2
5 Company Contributions
5.1 Company Matching Contributions.............................. 5-1
5.2 Valuations.................................................. 5-3
6 Vesting
6.1 Savings Contributions Accounts.............................. 6-1
6.2 Company Matching Contributions.............................. 6-1
7 Absence of Funding.......................................... 7-1
</TABLE>
i
<PAGE>
<TABLE>
<CAPTION>
ARTICLE SECTION PAGE
- ------- ------- ----
<C> <S> <C> <C>
8 Distributions After Termination of Employment
8.1 Termination of Employment................................... 8-1
8.2 Death....................................................... 8-1
8.3 Disability.................................................. 8-1
8.4 Valuation of Accounts Upon Distribution..................... 8-1
9 Withdrawals While Employed
9.1 Hardship Withdrawals........................................ 9-1
9.2 Suspensions................................................. 9-1
9.3 Third Withdrawals........................................... 9-1
9.4 Section 16(b) Transactions.................................. 9-2
10 Administration of the Plan.................................. 10-1
11 Amendment of the Plan
11.1 Amendments.................................................. 11-1
11.2 Collective Bargaining Units................................. 11-2
11.3 Investment Committee Actions................................ 11-2
11.4 Deemed Amendments........................................... 11-2
12 Termination or Suspension of the Plan
12.1 Termination................................................. 12-1
12.2 Suspension.................................................. 12-1
13 General Provisions
13.1 Plan Not a Contract......................................... 13-1
13.2 Nonalienation, etc.......................................... 13-1
13.3 Incapacity.................................................. 13-2
13.4 Applicable Law.............................................. 13-3
13.5 Quarterly Statements........................................ 13-3
13.6 Distributions............................................... 13-3
13.7 Waivers..................................................... 13-3
13.8 Similar Treatment........................................... 13-3
13.9 Claims...................................................... 13-3
13.10 Indemnifications............................................ 13-4
</TABLE>
ii
<PAGE>
ARTICLE 1
PURPOSE OF PLAN
1.1 Establishment of Plan. The Warner-Lambert Excess Savings Plan is
established and maintained by the Company primarily for the purpose of providing
deferred compensation for a select group of management or highly-compensated
employees. The Plan is exempt from the provisions of the Employee Retirement
Income Security Act of 1974 ('ERISA'), relating to participation, vesting,
funding and fiduciary responsibilities. The Company intends that the portion of
this Plan that provides benefits in excess of the limitations on contributions
imposed by section 415 of the Code shall be treated as a separate plan which is
an excess benefit plan as defined in ERISA Section 3(36).
ARTICLE 2
DEFINITIONS
Whenever used herein, unless the context otherwise indicates, the masculine
pronoun shall include the feminine pronoun and the feminine pronoun shall
include the masculine and the singular shall include the plural and the plural
shall include the singular.
2.1 'Accounts.' The aggregate of a Participant's Savings Contributions
Account and Company Matching Contributions Account.
2.2 'Affiliated Company.' An entity as defined in Article 2 of the Savings
and Stock Plan.
2.3 'After-Tax Contributions.' The contributions of an Employee made
pursuant to Article 4 of the Savings and Stock Plan and without regard to a
Compensation Reduction Agreement.
2.4 'Annual Reported Earnings Per Share.' The annual basic earnings per
share as reported to the Investment Committee by the Company's independent
auditor for purposes of the Company's annual report. Notwithstanding the
foregoing, any extraordinary, unusual or nonrecurring gains or losses shall be
disregarded by the Investment Committee.
2.5 'Beneficiary.' The person or persons determined in accordance with
Article 16 of the Savings and Stock Plan, entitled to a distribution upon the
death of a Participant.
2.6 'Board of Directors.' The Board of Directors of the Company, or the
Executive Committee thereof.
2.7 'Company.' Warner-Lambert Company or any successor to it in ownership of
substantially all of its assets, whether by merger, consolidation or otherwise.
2.8 'Company Matching Contributions.' The contributions of a Participating
Company on behalf of a Participant, as provided in Section 5.1.
2.9 'Company Matching Contributions Account.' An individual account
established under the Plan to which Company Matching Contributions are credited.
2.10 'Compensation.' The amount defined in Article 2 of the Savings and
Stock Plan, except that Compensation shall not be limited as provided in
Section 401(a)(17) of the Internal Revenue Code of 1986, as amended (the
'Code').
2.11 'Compensation Reduction Agreement.' The agreement to make contributions
to this Plan between an Employee and the Participating Company by which he is
employed.
2.12 'Effective Date.' November 1, 1987.
2.13 'Election Change Date.' The dates set forth in Article 2 of the Savings
and Stock Plan.
2.14 'Employee.' All persons as defined in Article 2 of the Savings and
Stock Plan.
2.15 'Hardship.' A severe financial hardship to the Participant resulting
from a sudden and unexpected illness or accident of the Participant or of a
dependent (as defined in Section 152 of the Code) of the Participant, loss of
the Participant's property due to casualty, or other similar extraordinary and
unforeseeable circumstances arising as a result of events beyond the control of
the Participant. A Hardship does not exist to the extent that a financial
condition is or may be relieved (i) through reimbursement or compensation by
insurance or otherwise, (ii) by liquidation of the Participant's assets,
1
<PAGE>
to the extent that liquidation of such assets would not itself cause severe
financial hardship, or (iii) by cessation of deferrals under the Plan. The need
to send a Participant's child to college or the desire to purchase a home do not
constitute Hardships.
2.16 'Investment Committee.' The Investment Committee as appointed by the
Retirement Committee pursuant to Article 10 of this Plan.
2.17 'Participant.' A person who shall have met the requirements for
participation in the Plan as provided in Article 3 and whose participation shall
not have terminated as provided in such Article.
2.18 'Participating Company or Companies.' Those companies whose employees
are authorized by the Board of Directors to participate in the Savings and Stock
Plan, as provided for in Article 2 of such plan.
2.19 'Plan.' The Warner-Lambert Excess Savings Plan, as in effect from time
to time.
2.20 'Plan Year.' The calendar year. However, the first Plan Year shall
begin November 1, 1987 and end December 31, 1987.
2.21 'Pre-Tax Contributions.' The contributions authorized by a Participant
pursuant to Article 4 of the Savings and Stock Plan and made by a Participating
Company.
2.22 'Pre-Tax Contributions Account.' The account described in Article 2 of
the Savings and Stock Plan.
2.23 'Regular Contributions.' With respect to each Participant, the
After-Tax Contributions and the Pre-Tax Contributions made pursuant to Article 4
of the Savings and Stock Plan.
2.24 'Retirement Committee.' The Retirement and Savings Plan Committee
(U.S.), as appointed by the Board of Directors, pursuant to Article 10 of the
Plan.
2.25 'Savings and Stock Plan' The Warner-Lambert Savings and Stock Plan, as
it may be amended from time to time.
2.26 'Savings Contributions.' The contributions, sometimes referred to as
Excess Savings Contributions, authorized by a Participant pursuant to
Article 4.
2.27 'Savings Contributions Account.' An individual account established
under the Plan to which a Participant's Savings Contributions, and the earnings
thereon, are credited.
2.28 'Total Disability.' A Total Disability as defined in Article 2 of the
Savings and Stock Plan.
2.29 'Valuation Date.' The valuation date or dates established under the
Savings and Stock Plan.
ARTICLE 3
REQUIREMENTS FOR PARTICIPATION
3.1 Eligibility. Any person who is an Employee on the Effective Date is
eligible to participate provided he satisfied, and continues to satisfy, the
requirements of Section 3.2. Any other Employee is eligible to participate as of
the first of the month following the date he satisfies the requirements of
Section 3.2. In the event that a Participant fails to continue to meet the
requirements of Section 3.2, the Participant may no longer make contributions to
the Plan or receive Company Matching Contributions to the Plan until such time
that he once again meets such requirements.
3.2 Requirements. An Employee eligible to participate under Section 3.1 of
the Plan must first satisfy the following requirements:
(a) He is a participant in and making contributions to the Savings and
Stock Plan; and
(b) His Compensation for the current year is greater than $80,000 or
such other dollar amount as set forth in Code Section 414(q)(1); and
(c) The amount the Employee could otherwise contribute to the Savings
and Stock Plan is limited under (i) Section 401(a)(17) of the Code,
(ii) Article 4 of the Savings and Stock Plan, or (iii) Article 6 of the
Savings and Stock Plan as to the amount of annual additions as defined in
that Article; and
2
<PAGE>
(d) The Employee is contributing the maximum pre-tax amount permitted
under the limits referenced in (ii) of subsection (c).
3.3 Establishing an Account. Any Employee who is eligible to become a
Participant shall become a Participant by making an election as provided in
Section 4.1. A person who becomes a Participant shall remain a Participant
as long as he shall continue to have an Account.
3.4 Collective Bargaining Units. Notwithstanding any other provisions of
this Plan to the contrary, and to the extent determined by the Investment
Committee, no Employee may become a Participant in this Plan while in a
collective bargaining unit represented by a certified or recognized
bargaining representative, unless such unit has entered into a collective
bargaining agreement which provides that such members of such unit shall
participate in the Plan, and such participation is approved by the
Investment Committee.
3.5 ERISA. The Plan is established and maintained by the Company
'primarily for the purpose of providing deferred compensation for a select
group of management or highly compensated employees,' within the meaning of
ERISA. The Company reserves the right to end the participation of any
employee whose continued participation may jeopardize this qualification.
ARTICLE 4
PARTICIPANT CONTRIBUTIONS
4.1 Elections. Savings Contributions shall be voluntarily authorized by a
Participant by means of a Compensation Reduction Agreement executed by the
Participant in the manner required by the Investment Committee. Contribution
amounts may be changed as of any Election Change Date designated by the
Investment Committee for this purpose.
4.2 Savings Contributions.
(a) Excess Savings Contributions. A Participant may elect by way of a
Compensation Reduction Agreement to reduce his Compensation by an amount,
expressed as a whole percentage, which does not exceed 15% when aggregated
with the percentage of his Compensation being contributed by him to the
Savings and Stock Plan.
(b) Incremental Savings Contributions. In addition, a Participant whose
compensation under the Savings and Stock Plan is subject to the limitations
of Section 401(a)(17) of the Code may elect to reduce his Compensation in an
amount equal to the difference between his Compensation and the applicable
section 401(a)(17) limit multiplied by the total percentage elected for his
Savings and Stock Plan contributions.
(c) Savings Contributions shall be credited to the Participant's Savings
Contributions Account.
4.3 Savings and Stock Plan Discontinuations. If a Participant elects to
discontinue all or any portion of his contributions to the Savings and Stock
Plan, he must also discontinue his Savings Contributions until such time that he
resumes making the maximum contribution he is permitted to make under the
Savings and Stock Plan after considering the limitations specified in
Articles 4 and 6 of such plan. After such time he may resume making Savings
Contributions as of any Election Change Date.
4.4 Valuations. On the basis of the valuations made on each Valuation Date,
Savings Contributions authorized by a Participant shall be credited with
interest, at a rate equal to the return on the Fixed Income Fund in the Savings
and Stock Plan.
4.5 Effective Date Of Elections. Notwithstanding any other provision of the
Plan, no election by a Participant (including an election to discontinue
contributions) shall take effect prior to the Participant's next payroll period.
ARTICLE 5
COMPANY CONTRIBUTIONS
5.1 Company Matching Contributions.
(a) Excess and Additional Savings Match. Company Matching Contributions
shall be made in respect of a Participant's Excess Savings Contributions and
Incremental Savings Contributions up
3
<PAGE>
to, but not exceeding, an amount equal to the difference between 6% of the
Participant's Compensation and the Participant's Regular Contributions made
during the same period to the Savings and Stock Plan. Effective January 1,
1994, the amount of the Company Matching Contributions on Excess Savings
Contributions and Incremental Savings Contributions shall be equal to 35%.
(b) Additional Company Matching Contributions.
(i) Additional Company Matching Contributions will be made in
accordance with the following table:
<TABLE>
<CAPTION>
ANNUAL REPORTED EARNINGS
ADDITIONAL MATCH PER SHARE GROWTH
- --------------------------------------------- ---------------------------------------------
<S> <C>
25%.......................................... 12% or greater, but less than 16%
45%.......................................... 16% or greater, but less than 20%
65%.......................................... 20% or greater
</TABLE>
Company Matching Contributions made pursuant to the preceding table will be made
as soon as practicable after the Investment Committee receives a determination
of the Annual Reported Earnings Per Share. Additional Company Matching
Contributions shall be made in respect of the Participant's Excess Savings
Contributions and Incremental Savings Contributions up to, but not exceeding, an
amount equal to the difference between 6% of the Participant's Compensation and
the Participant's Regular Contributions made during the same period to the
Savings and Stock Plan. Such additional Company Matching Contributions will be
allocated in a lump sum based upon the amount of qualifying contributions made
during the prior calendar year provided that such Participant (a) had completed
three Years of Plan Membership as of the last day of the prior calendar year and
(b) was eligible to make Savings Contributions to the Plan as of the last day of
the calendar year notwithstanding any suspension provisions of the Plan to the
contrary.
(ii) Each Participant who would have received an Additional Matching
Company Contribution to the Savings and Stock Plan attributable to Annual
Reported Earnings Per Share Growth but for the limitations on
Section 401(m) Contributions under Section 4.12 of the Savings and Stock
Plan shall receive a Company contribution to this Plan equal to the
amount of such foregone contribution to the Savings and Stock Plan.
(c) 10% Match. Each Participant whose pre-tax contributions to the
Savings and Stock Plan are limited to less than 6% and whose Regular
Contributions are greater than his pre-tax contributions shall also be
credited Company Matching Contributions in the amount of the difference
between the match actually credited in the Savings and Stock Plan and the
amount that would have been credited had the Participant's Regular
Contributions been made solely on a pre-tax basis.
5.2 Valuations. Amounts credited prior to May 1, 1991 to a Participant's
Company Matching Contributions Account will be deemed held in shares of Company
common stock and will be adjusted on the basis of the valuations made on each
Valuation Date to reflect any increases or decreases in the market value of
Company common stock, and the value of any dividends which may be credited
thereon. Amounts credited on or after May1, 1991 to a Participant's Company
Matching Contributions Account will be adjusted on the basis of the return
provided by the Fixed Income Fund of the Savings and Stock Plan.
ARTICLE 6
VESTING
6.1 Savings Contribution Accounts. A Participant's interest in his Savings
Contributions Account shall be fully vested.
6.2 Company Matching Contributions. A Participant's interest in his Company
Matching Contributions Account shall be vested when the Participant is fully
vested in his Company Matching Contributions Account under Article 7 of the
Savings and Stock Plan.
4
<PAGE>
ARTICLE 7
ABSENCE OF FUNDING
The sole obligation of the Company (or any Participating Company) hereunder
to a Participant, Beneficiary or any other person claiming through such
individual is a contractual obligation to make payments in accordance with the
terms of the Plan. No amount of cash or other property shall be set aside as a
separate trust for the payment of any benefits under the Plan. Any benefits
payable under the Plan shall be paid directly by the Company only out of the
general assets of the Company.
ARTICLE 8
DISTRIBUTIONS AFTER TERMINATION OF EMPLOYMENT
8.1 Termination of Employment. If a Participant's employment shall
terminate, the value of his Accounts in which he is vested in accordance with
Article 6 shall be distributed to him in a lump sum, by check, as soon as
practicable after such termination.
8.2 Death. If a Participant's employment shall terminate by reason of his
death, the value of his Accounts in which he is vested in accordance with
Article 6 shall be distributed in a lump sum, by check, as soon as practicable
after such death, to the Beneficiary who is entitled or becomes entitled to
receive benefits from the Savings and Stock Plan upon the death of the
Participant.
8.3 Disability. If a Participant becomes Totally Disabled, such Participant
shall receive the value of his Accounts in a lump sum by check as soon as
reasonably practicable.
8.4 Valuation of Account upon Distribution. For purposes of determining the
amount to be distributed under this Article, the portion of a Participant's
Company Matching Contributions Account which is deemed held in shares of Company
common stock as provided under Section 5.2 will be determined by multiplying
(i) the number of Company shares deemed held in the Participant's Company
Matching Contributions Account by (ii) the average price for Company shares
traded in the Savings and Stock Plan on the appropriate Valuation Date. In the
event that no such trades take place in the Savings and Stock Plan on such date,
the amount in clause (ii) above shall be the closing price listed on the New
York Stock Exchange for Company shares on the appropriate Valuation Date.
ARTICLE 9
WITHDRAWALS WHILE EMPLOYED
9.1 Hardship Withdrawals. If the Investment Committee determines that a
Participant has incurred a Hardship, he can withdraw all or part of his Savings
Contributions Account (including interest) and, to the extent vested and
provided that all of his Savings Contributions Account has first been withdrawn,
his Company Matching Contributions Account, provided, however, that he has first
withdrawn the maximum amount available from the Savings and Stock Plan,
including the amount, if any, in his Pre-Tax Contributions Account. The amount
available for any withdrawal shall not exceed that amount determined by the
Investment Committee as necessary to alleviate such Hardship.
9.2 Suspensions. A Participant who makes a withdrawal under this Article
shall immediately cease making contributions to this Plan and shall not again be
eligible to make or authorize contributions under this Plan until the first day
of any month which is at least six months after the pay day on which
contributions were discontinued and after the receipt by the Investment
Committee of a notice of election to resume such contributions. No Participant
may elect to make more than two withdrawals during any calendar year, except as
may be provided in Section 9.3.
9.3 Third Withdrawals. Notwithstanding the provisions of Section 9.2, the
Investment Committee may, in its absolute discretion and in accordance with such
criteria as it may establish, permit a Participant to make a third withdrawal
from the Plan during a calendar year if the Investment Committee is satisfied
that such withdrawal is necessitated by extreme or unusual circumstances. The
Investment Committee may impose such conditions on such third withdrawal as it
deems appropriate, including, without limitation, requiring that the Participant
withdraw the entire amount of his Account which is available for withdrawal or
suspending the Participant from contributing to the Plan for a period not to
exceed 12 months.
5
<PAGE>
9.4 Section 16(b) Transactions. Notwithstanding the foregoing provisions of
this Article 9, Participants who are subject to Section 16 of the Securities
Exchange Act of 1934 (the 'Act') may not make withdrawals from their Company
Matching Contributions Accounts unless counsel to the Company has opined that
such withdrawals will not cause transactions in respect of the Plan to be
nonexempt transactions under Section 16(b) of the Act.
ARTICLE 10
ADMINISTRATION OF THE PLAN
This Plan shall be administered in the same way that the Savings and Stock
Plan is administered, as set forth in Article 13 of the Savings and Stock Plan
(to the extent such Article applies), except that administrative expenses of the
Plan shall be paid by each Participating Company.
ARTICLE 11
AMENDMENT OF THE PLAN
11.1 Amendments. The Board of Directors shall have the right at any time or
from time to time to modify or amend the Plan in whole or in part. No such
modification or amendment shall retroactively reduce the rights of any
Participant or Beneficiary unless required by law.
Notwithstanding any other provisions of this Plan, all amounts credited to a
Participant's Savings Contributions Account and Company Matching Contributions
Account shall be immediately vested upon a 'Change in Control of the Company.'
For purposes hereof, a 'Change in Control of the Company' shall be deemed to
have occurred if (i) any person (as such term is used in Sections 13(d) and
14(d)(2) of the Securities Exchange Act of 1934, as amended (the 'Act')) is or
becomes the beneficial owner (as defined in Rule 13d-3 under the Act), directly
or indirectly, of securities of the Company representing 20% or more of the
combined voting power of the Company's then outstanding securities, (ii) the
stockholders of the Company approve a merger, consolidation, sale or disposition
of all or substantially all of the Company's assets or plan of liquidation, or
(iii) the composition of the Board of Directors of Warner-Lambert Company (for
purposes of this paragraph, the 'Board') at any time during any consecutive
twenty-four (24) month period changes such that the Continuity Directors (as
hereinafter defined) cease for any reason to constitute at least fifty-one
percent (51%) of the Board. For purposes of the foregoing clause (iii),
'Continuity Directors' means those members of the Board who either (a) were
directors at the beginning of such consecutive twenty-four (24) month period, or
(b)(1) filled a vacancy during such twenty-four (24) month period created by
reason of (x) death, (y) a medically determinable physical or mental impairment
which renders the director substantially unable to function as a director or (z)
retirement at the last mandatory retirement age in effect for at least two (2)
years, and (2) were elected, nominated or voted for by at least fifty-one
percent (51%) of the current directors who were also directors at the
commencement of such twenty-four (24) month period. The previous sentence shall
not apply to any employee who is not an 'Employee' (as defined in Section 3.1 of
the Enhanced Severance Plan) as of the date of approval by the stockholders of
Warner-Lambert Company of the transaction contemplated by the Agreement and Plan
of Merger, dated as of February 6, 2000, among Pfizer Inc., Seminole Acquisition
Sub Corp. and Warner-Lambert Company. The foregoing shall not affect the rights
of any beneficiary of a Participant.
To the extent that implementation of the Warner-Lambert Enhanced Severance
Plan and the Warner-Lambert Executive Severance Plan requires the accrual of
amounts hereunder, this Plan is hereby amended to include such amounts under
Article 4 or Article 5 hereof, as appropriate.
11.2 Collective Bargaining Units. No modification or amendment of the Plan
shall be applicable to Participants in a collective bargaining unit represented
by a certified or recognized bargaining representative, unless or until, if at
all, an applicable collective bargaining agreement which has been approved by
the Retirement Committee specifically provides otherwise.
11.3 Retirement Committee Actions. The Retirement Committee may undertake
any action with respect to the Plan (including the adoption of amendments) which
(a)(i) does not increase Plan liabilities by an amount in excess of five million
dollars ($5,000,000) and does not increase Plan expense by an amount in excess
of five hundred thousand dollars ($500,000) or (ii) is required by an applicable
law, regulation or ruling, (b) can be undertaken by the Board of Directors under
the terms of the Plan,
6
<PAGE>
(c) does not involve a termination or suspension of the Plan, (d) does not
affect the limitations contained in this sentence and (e) does not affect the
composition or compensation of the Retirement Committee.
11.4 Investment Committee Actions. The Investment Committee may undertake
any action with respect to the Plan (including the adoption of amendments) which
(a)(i) does not increase Plan liabilities by an amount in excess of two million
five hundred thousand dollars ($2,500,000) and does not increase Plan expense by
an amount in excess of two hundred fifty thousand dollars ($250,000) or (ii) is
required by an applicable law, regulation or ruling, (b) can be undertaken by
the Board of Directors under the terms of the Plan, (c) does not involve a
termination or suspension of the Plan, (d) does not affect the limitations
contained in this sentence, (e) does not affect the composition or compensation
of the Retirement Committee, (f) does not have a disproportionate or
preferential impact on officers' compensation and (g) does not significantly
impact Plan design. In exercising its rights under this section, the Investment
Committee shall be deemed to exercise a management prerogative as a delegatee of
the Board of Directors, and shall not be deemed a fiduciary.
11.5 Adoption by Resolution. All actions, including Plan amendments, which
are undertaken by the Board of Directors, Retirement Committee or Investment
Committee shall be authorized by a duly adopted resolution approved by the
respective body.
11.6 Deemed Amendments. Subject to the restrictions of Section 11.3 and 11.4
hereof or action by the Board of Directors, the Retirement Committee or the
Investment Committee to the contrary, this Plan shall be deemed amended or
modified at the time of amendment or modification of the Savings and Stock Plan
to the extent necessary to (i) provide consistency in the provisions of this
Plan and the Savings and Stock Plan with respect to definitions and their
related operational provisions, and (ii) maintain the relationship between the
benefits provided by this Plan and the Savings and Stock Plan. Amendments or
modifications to the Plan made pursuant to this section shall be effective as of
the effective date of the related amendment or modification to the Savings and
Stock Plan unless the Board of Directors, the Retirement Committee or the
Investment Committee declares otherwise.
ARTICLE 12
TERMINATION OR SUSPENSION OF THE PLAN
12.1 Termination. The Company intends to continue the Plan indefinitely;
however, the Board of Directors may at any time terminate the Plan by a
resolution specifying the date of termination.
12.2 Suspension. The Board of Directors may at any time and from time to
time suspend or reduce the rate of Participating Company contributions to the
Plan by a resolution specifying the period of suspension or reduction.
ARTICLE 13
GENERAL PROVISIONS
13.1 Plan Not a Contract. The Plan shall not be deemed to constitute a
contract between any company and any Participant, former Participant,
Beneficiary, person in its employ or other person, or a contract for the benefit
of any person, or to be a consideration for, or an inducement or condition of,
the employment of any person, or to give any right to be retained in the employ
of any company, or to interfere with the right of any company to discharge any
person in its employ at any time without regard to the effect which such
discharge shall have, if any, upon his rights under the Plan.
13.2 Nonalienation, etc. No benefits under this Plan to any Participant or
Beneficiary shall be subject in any manner to anticipation, alienation, sale,
transfer, assignment, pledge, encumbrance or charge, whether voluntary or
involuntary, and any attempt to so anticipate, alienate, sell, transfer, assign,
pledge, encumber or charge the same shall be void, nor shall any such benefits
be in any way liable for or subject to the debts, contracts, liabilities,
engagements or torts of any person entitled to such benefits, nor shall any
benefits be subject to attachment or legal process for or against any such
person. If any such Participant or Beneficiary has been adjudicated bankrupt or
has purported to anticipate, alienate, sell, transfer, assign, pledge, encumber
or charge any such benefits, voluntarily or involuntarily, or if any attempt is
made to subject any such benefits to the debts, contracts, liabilities,
engagements or torts of the person entitled to any such benefits, then the
Investment Committee may,
7
<PAGE>
in its discretion, cause such benefits, or any part thereof, to be held or
applied for the benefit of or distributed to such Participant or Beneficiary, or
held or applied for the benefit of or distributed to the spouse, children or
other dependents, or any of them, or any other person, in such manner and in
such proportion as the Investment Committee shall determine and such
determination shall be binding and conclusive on all persons, including the
person originally entitled to such benefits and, where applicable, his
Beneficiary.
13.3 Incapacity. If, for any reason, the Investment Committee shall
determine that it is not desirable, because of the minority or other incapacity
(whether or not recognized or recognizable by law) of the person who shall be
entitled to receive any distribution under the Plan, to withhold such
distribution or to make such distribution directly to such person, the
Investment Committee may apply any such distribution for the benefit of such
person in any way that the Investment Committee shall deem advisable or to make
any such distribution to any third person who, in the judgment of the Investment
Committee, will apply such distribution for the benefit of the person entitled
thereto. Such distribution for the benefit of the person entitled thereto, or to
a third person for his benefit, having been made, each Participating Company and
the Investment Committee shall be discharged from all further liability for such
distribution.
13.4 Applicable Law. The provisions of the Plan shall be construed,
administered and governed under the laws of the State of New Jersey (other than
the provisions governing conflict of laws) to the extent not preempted by the
Employee Retirement Income Security Act of 1974.
13.5 Quarterly Statements. As soon as practicable after the end of each
calendar quarter, the Investment Committee shall furnish each Participant with a
statement of his participation in the Plan.
13.6 Distributions. All distributions under this Plan shall be subject to
any tax and other laws and statutes, and regulations thereunder, and the decrees
or rulings of any court or any administrative or other regulatory representative
or agency, deemed by the Investment Committee to be applicable.
13.7 Waivers. A Participant or Beneficiary may, by notice in writing to the
Investment Committee, at any time and from time to time, waive his right to
participate in this Plan, subject to the requirements of the Investment
Committee.
13.8 Similar Treatment. All Participants in similar circumstances shall be
treated alike for all purposes of the Plan.
13.9 Claims. If any person shall claim a right to receive any benefit under
the Plan, the Investment Committee shall determine whether such benefit is
permitted or required by the terms of the Plan. If the Investment Committee
shall determine that no such benefit is permitted or required, it shall provide
written notice to such person setting forth the reasons for such determination
in a manner calculated to be understood by the recipient. A person who receives
such notice may, by written request filed with the Investment Committee within
60 days after the receipt of the notice, request a review of such determination
by the Investment Committee. If so requested, the Investment Committee shall
review such determination and shall notify such person of its decision in
writing within 60 days after receipt of such request for review (120 days if
special circumstances require an extension of time), setting forth therein the
reasons for its decision.
13.10 Indemnifications. Each member of the Investment Committee and of the
board of directors of any Participating Company, and each other Employee who is
charged with administrative duties or responsibilities with respect to the Plan,
shall be indemnified by the Participating Companies against liability imposed on
him and against all expenses and costs which may be reasonably incurred by him
in connection with or resulting from any action, suit or proceeding, or any
claim against him, if he shall have been made a party to such action, suit or
proceeding, or such claim shall have been made, by reason of his having
administrative or other duties with respect to the Plan; but such
indemnification shall not apply to matters as to which he shall be finally
adjudged therein to have been liable on account of, or to have been guilty of,
gross negligence or willful misconduct in the performance of his duties with
respect to the Plan. In the case of settlement of any such action, proceeding or
claim before a final adjudication, the right of indemnification shall similarly
exist.
WARNER-LAMBERT COMPANY
8
<PAGE>
EXHIBIT 10(j)
________________________________________________________________________________
RESTRICTED STOCK PLAN
FOR DIRECTORS OF
WARNER-LAMBERT COMPANY
-------------------
AS AMENDED TO FEBRUARY 6, 2000
________________________________________________________________________________
<PAGE>
RESTRICTED STOCK PLAN
FOR DIRECTORS OF
WARNER-LAMBERT COMPANY
ARTICLE I
PURPOSE OF PLAN
SECTION 1.1. Purpose. The purpose of the Restricted Stock Plan for Directors
of Warner-Lambert Company is to attract and retain non-employee members of the
Board of Directors by granting such Directors shares of the Company's Common
Stock, which are restricted in accordance with the terms and conditions set
forth below, and thereby providing a proprietary interest in the Company's
success and progress.
ARTICLE II
DEFINITIONS
SECTION 2.1. Definitions. Whenever used herein, unless the context otherwise
indicates, the following terms shall have the respective meaning set forth
below:
Act: The Securities Exchange Act of 1934, as amended.
Board Membership: The period of time during which a person serves on the
Board of Directors, regardless of whether occurring before or after the
Effective Date.
Board of Directors (or Board): The Board of Directors of the Company.
Committee: The committee appointed to administer the Plan in accordance with
Section 7.1 hereof.
Common Stock: Common Stock, par value $1.00 per share, of Warner-Lambert
Company.
Company: Warner-Lambert Company or any successor to it in ownership of
substantially all of its assets, whether by merger, consolidation or otherwise.
Director: Any member of the Board of Directors who is not an employee of the
Company or any of its subsidiaries or affiliates.
Disability: A medically determinable physical or mental impairment which
renders a Participant substantially unable to function as a Director.
Effective Date: The date specified in Article X hereof.
Participant: Each Director to whom Restricted Stock is granted under the
Plan.
Plan: The Restricted Stock Plan for Directors of Warner-Lambert Company.
Restricted Period: The period of time from the date of grant of the
Restricted Stock until the earliest to occur of the events described in Section
4.3 hereof.
Restricted Stock: Common Stock granted under the Plan which is subject to
restrictions in accordance with Article IV hereof.
Year of Board Membership: 365 consecutive days of Board Membership;
provided, however, that in no event shall Board Membership from the date of one
annual meeting of stockholders of the Company to the date of the next
consecutive annual meeting of such stockholders be treated as less than one Year
of Board Membership.
ARTICLE III
ELIGIBILITY AND GRANTS
SECTION 3.1. Eligibility and Grants. To be eligible to participate in the
Plan, a Director must not be an employee of the Company or any of its
subsidiaries or affiliates. Each such Director on the Effective Date of the Plan
shall be granted two thousand (2000) shares of Restricted Stock. In addition,
each person who becomes a non-employee Director for the first time after the
Effective Date of the
1
<PAGE>
Plan shall also be granted two thousand (2000) shares of Restricted Stock,
effective as of the date of such person becoming a non-employee Director. If
required by the Committee, each grant of Restricted Stock shall be evidenced by
a written agreement duly executed by or on behalf of the Company and the
Participant.
SECTION 3.2. Non-Consecutive Terms. A Director who is elected to
non-consecutive terms on the Board shall receive additional grants of shares of
Restricted Stock at the time of such reelection to the Board in an amount which,
when aggregated with the number of shares of Restricted Stock previously granted
to such Director with respect to which the Director received a certificate for
Common Stock upon the lapse of restrictions with respect to such earlier grant,
does not exceed two thousand (2000) shares.
ARTICLE IV
TERMS AND CONDITIONS OF RESTRICTED STOCK
SECTION 4.1. General. The restrictions set forth in Section 4.2 shall apply
to each grant of Restricted Stock for the duration of the Restricted Period.
SECTION 4.2. Restrictions. A stock certificate representing the number of
shares of Restricted Stock granted shall be registered in the Participant's name
but shall be held in custody by the Company for the Participant's account. The
Participant shall have all rights and privileges of a stockholder as to such
Restricted Stock, including the right to receive dividends and the right to vote
such shares, except that, subject to the provisions of Section 4.3, the
following restrictions shall apply: (i) the Participant shall not be entitled to
delivery of the certificate until the expiration of the Restricted Period; (ii)
none of the shares of Restricted Stock may be sold, transferred, assigned,
pledged, or otherwise encumbered or disposed of during the Restricted Period;
(iii) the Participant shall, if requested by the Company, execute and deliver to
the Company, a stock power endorsed in blank; and (iv) all of the shares of
Restricted Stock shall be forfeited and all rights of the Participant to such
shares shall terminate without further obligation on the part of the Company if
the Participant ceases to be a member of the Board of Directors prior to the
expiration of the Restricted Period applicable to such shares. If the
Participant has remained a member of the Board for the entire Restricted Period,
such restrictions shall, at the end of the Restricted Period, lapse with respect
to one-tenth of the shares of Restricted Stock for each Year of Board Membership
then completed by the Participant (including service prior to the date of
grant); provided, however, that a Participant who has received a certificate for
Common Stock upon the lapse of restrictions with respect to any earlier grant
under the Plan shall not receive credit for such prior service in determining
Years of Board Membership for purposes of any subsequent grant under Section 3.2
hereof. The Participant shall forfeit all shares of Restricted Stock with
respect to which such restrictions do not lapse at the end of the Restricted
Period. Upon the forfeiture (in whole or in part) of shares of Restricted Stock,
such forfeited shares shall become treasury shares of the Company without
further action by the Participant. The Participant shall have the same rights
and privileges, and be subject to the same restrictions, with respect to any
shares received pursuant to Article VI.
SECTION 4.3. Events. The Restricted Period shall end upon the first to occur
of the following events:
(i) Retirement. The Participant ceasing to be a Director as a result of
attainment of the age at which retirement from the Board is mandatory.
(ii) Disability. The Participant ceasing to be a Director by reason of
Disability.
(iii) Death. The Participant ceasing to be a Director by reason of death.
(iv) Not Being Reelected. The Participant ceasing to be a Director as a
result of not being reelected by the stockholders of the Company, although
nominated for reelection by the Board.
(v) Waiver. The Board, in its sole and absolute discretion, waiving the
restrictions of Section 4.2 as to some or all of the shares of Restricted Stock.
Determinations under this Section 4.3 shall be made by the Board without
participation by the affected Director.
2
<PAGE>
SECTION 4.4. Delivery of Restricted Shares. At the end of the Restricted
Period as herein provided, a stock certificate for the number of shares of
Restricted Stock with respect to which the restrictions have lapsed shall be
delivered, free of all such restrictions, to the Participant or the
Participant's beneficiary or estate, as the case may be, subject to the
withholding requirements of Section 9.2 hereof. The Company shall not be
required to deliver any fractional share of Common Stock but will pay, in lieu
thereof, the fair market value (measured as of the date the restrictions lapse)
of such fractional share to the Participant or the Participant's beneficiary or
estate, as the case may be.
SECTION 4.5. Limited Rights.
(a) In the event of a 'Change in Control of the Company' (as hereinafter
defined) the rights and privileges of Directors hereunder shall be governed by
the following clause (i), (ii), or (iii) as appropriate:
(i) Limited Rights. In the event of a Change In Control of the Company which
is outside the control of any Reporting Person within the meaning of Rule 16b-3
under the Act, all shares of Restricted Stock then outstanding, and which have
been outstanding for a period of six (6) months, shall be immediately forfeited
and shall revert to the Company as treasury shares and, in lieu thereof, each
Participant shall receive a cash payment equal to the higher of (a) the highest
closing price per share of Common Stock on the Composite Tape for New York Stock
Exchange issues during the 30 day period prior to such change in control, or (b)
if the Change in Control of the Company occurs as a result of a tender or
exchange offer or approval by the stockholders of the Company of a Transaction
(as hereinafter defined), then the highest price per share of Common Stock
pursuant thereto, multiplied by the total number of shares of Restricted Stock
granted to such Participant, regardless of whether the Participant's Years of
Board Membership were sufficient to cause all restrictions to lapse under
Section 4.2. Any consideration other than cash forming a part or all of the
consideration for Common Stock to be paid pursuant to an exchange offer shall be
valued at the valuation placed thereon by the Board of Directors. Adjustments,
if any, shall be made in accordance with Article VI.
(ii) Lapse of Restrictions. In the event that clause (i) shall not become
operational as therein provided, all restrictions applicable to shares of
Restricted Stock then outstanding shall expire and each Participant shall
thereupon receive all the shares of Restricted Stock previously granted to such
Participant, regardless of whether the Participant's Years of Board Membership
were sufficient to cause all restrictions to lapse under Section 4.2.
(iii) Notwithstanding anything herein to the contrary, in the case of the
Change in Control transaction contemplated by the Agreement and Plan of Merger,
dated as of February 6, 2000, among Pfizer Inc., Seminole Acquisition Sub Corp.
and Warner-Lambert, as the same may be amended from time to time (the 'Merger
Agreement'), all shares of Restricted Stock which are outstanding immediately
prior to such Change in Control shall, as of the consummation of such Change in
Control, (a) become fully vested and free of restrictions and (b) thereupon be
converted into a number of fully vested shares of the ultimate parent entity
resulting from such Change in Control based upon the same exchange ratio
pursuant to which shares of Common Stock are so converted pursuant to the Merger
Agreement.
(b) As used in the 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) upon the consummation of a merger, consolidation,
sale or disposition of all or substantially all of the Company's assets or plan
of liquidation which is approved by shareholders of the Company (herein referred
to as a 'Transaction'), or (iii) the composition of the Board at any time during
any consecutive twenty-four (24) month period changes such that the Continuity
Directors (as hereinafter defined) cease for any reason to constitute at least
fifty-one percent (51%) of the Board. For purposes of the foregoing clause
(iii), 'Continuity Directors' means those members of the Board who either (a)
were directors at the beginning of such consecutive twenty-four (24) month
period, or (b)(1) filled a vacancy during such twenty-four (24) month period
created by reason of (x) death, (y) a medically determinable physical or mental
impairment which renders the director substantially unable to function as a
director or (z) retirement at the last mandatory retirement age in effect for at
least two
3
<PAGE>
(2) years, and (2) were elected, nominated or voted for by at least fifty-one
percent (51%) of the current directors who were also directors at the
commencement of such twenty-four (24) month period.
ARTICLE V
REGULATORY COMPLIANCE AND LISTING
SECTION 5.1. Regulatory Compliance and Listing. The issuance or delivery of
any shares of Restricted Stock may be postponed by the Company for such period
as may be required to comply with any applicable requirements under the Federal
securities laws, any applicable listing requirements of any national securities
exchange or any requirements under any other law or regulation applicable to the
issuance or delivery of such shares, and the Company shall not be obligated to
issue or deliver any such shares if the issuance or delivery thereof shall
constitute a violation of any provision of any law or of any regulation of any
governmental authority or any national securities exchange.
ARTICLE VI
ADJUSTMENT IN EVENT OF CHANGES IN CAPITALIZATION
SECTION 6.1. Adjustments. In the event of a recapitalization, stock split,
stock dividend, combination or exchange of shares, merger, consolidation, rights
offering, separation, reorganization or liquidation, or any other change in the
corporate structure or shares of the Company, the Committee may make such
equitable adjustments, to prevent dilution or enlargement of rights, as it may
deem appropriate in the number and class of shares authorized to be granted
hereunder.
ARTICLE VII
ADMINISTRATION
SECTION 7.1. Administration.The Plan shall be administered by a committee
consisting of at least three (3) persons appointed by the Board. Questions
involving eligibility for grants of Restricted Stock, entitlement to Restricted
Stock or the operation of the Plan shall be referred to the Committee. All
determinations of the Committee shall be conclusive. The Committee may obtain
such advice or assistance as it deems appropriate from persons not serving on
the Committee.
SECTION 7.2. Restricted Stock Committee. The Board may at any time designate
three (3) persons (hereinafter referred to as the 'Restricted Stock Committee'),
who need not be members of the Committee, who shall have the authority to make
additional grants of Restricted Stock to Participants hereunder, which
additional grants shall be in such amounts and shall be subject to such
restrictions and conditions (which may be different than the provisions of
Article IV hereof) as the Restricted Stock Committee shall determine; provided,
however, that (i) each member of the Restricted Stock Committee shall qualify as
'disinterested' under Rule 16b-3 of the Act, and (ii) the aggregate number of
shares of Common Stock which may be delivered upon the lapse of restrictions
hereunder shall not exceed two hundred thousand (200,000) shares. If any action
to be taken by the Committee or the Board hereunder would cause the Plan or
transactions thereunder to no longer comply with Rule 16b-3 of the Act, the
Board shall appoint the Restricted Stock Committee, as provided above, and such
committee shall be authorized to undertake such action on behalf of the
Committee or the Board, as the case may be.
ARTICLE VIII
TERMINATION OR AMENDMENT OF THE PLAN
SECTION 8.1. Termination or Amendment.
(a) The Board may at any time terminate the Plan and may from time to time
alter or amend the Plan or any part thereof (including any amendment deemed
necessary to ensure that the Company may comply with any regulatory requirement
referred to in Article V); provided, however, that, unless otherwise required by
law, the rights of a Participant with respect to shares of Restricted Stock
granted prior to such termination, alteration or amendment may not be impaired
without the consent of such
4
<PAGE>
Participant and, provided further, without the approval of the Company's
stockholders, no alteration or amendment may be made which would (i) increase
the aggregate number of shares of Restricted Stock that may be granted under the
Plan (except by operation of Article VI), or (ii) change the category of
Directors eligible to receive shares of Restricted Stock under the Plan. The
Company intends that the Plan and transactions thereunder shall comply with the
requirements of Rule 16b-3 of the Act. Should any provisions hereof not be
necessary in order to comply with the requirements of such Rule or should any
additional provisions be necessary in order to so comply, the Board of Directors
may amend the Plan accordingly, without the necessity of obtaining the approval
of the Company's stockholders.
(b) The Committee may at any time adopt any amendment to the Plan which
(i)(A) does not increase Plan liabilities by an amount in excess of five million
dollars ($5,000,000) and does not increase Plan expense by an amount in excess
of five hundred thousand dollars ($500,000) or (B) is required by an applicable
law, regulation or ruling, (ii) can be undertaken by the Board of Directors
under the terms of the Plan, (iii) does not involve a termination of the Plan,
(iv) does not affect the limitations contained in this sentence, and (v) does
not affect the composition or compensation of the Committee.
ARTICLE IX
MISCELLANEOUS
SECTION 9.1. No Right To Reelection. Nothing in the Plan shall be deemed to
create any obligation on the part of the Board to nominate any Director for
reelection by the Company's stockholders, nor confer upon any Director the right
to remain a member of the Board of Directors.
SECTION 9.2. Withholding of Taxes. The Company shall have the right to
require, prior to the issuance or delivery of any shares of Restricted Stock,
payment by the Participant of any taxes required by law with respect to the
issuance or delivery of such shares. Alternatively, the Committee may permit any
such withholding obligation to be satisfied by reducing the number of shares of
Common Stock otherwise deliverable to a Director.
SECTION 9.3. Source of Common Stock. The shares of Common Stock granted
under the Plan shall be transferred from the Company's treasury and shall not be
newly issued unless the Company receives a written opinion of counsel to the
effect that use of newly issued shares would comply with all applicable
statutory or regulatory requirements.
SECTION 9.4. No Assignment of Benefits. No benefit payable under the Plan
shall, except as otherwise specifically provided by law, be subject in any
manner to anticipation, alienation, attachment, sale, transfer, assignment,
pledge, encumbrance or charge, and any attempt to anticipate, alienate, attach,
sell, transfer, assign, pledge, encumber or charge any such benefit shall be
void, and any such benefit shall not in any manner be liable for or subject to
the debts, contracts, liabilities, engagements or torts of any person who shall
be entitled to such benefit, nor shall it be subject to attachment or legal
process for or against such person. If any person entitled to a benefit
hereunder shall be adjudicated a bankrupt or shall attempt to anticipate,
alienate, sell, transfer, assign, pledge, encumber or charge such benefit, or if
any attempt is made to subject any such benefit to the debts, contracts,
liabilities, engagements or torts of any person entitled to such benefit, then
such benefit shall, in the discretion of the Committee, cease and terminate, and
in that event the Committee may cause such benefit, or any part thereof, to be
held or applied for the benefit of such person, his or her spouse, children or
other dependents, or any of them, in such manner and in such proportion as the
Committee shall determine.
SECTION 9.5. Incapacity. If, for any reason, the Committee shall determine
that it is not desirable because of the incapacity of the person who shall be
entitled to receive any payments hereunder, to make such payments directly to
such person, the Committee may apply such payment for the benefit of such person
in any way that the Committee shall deem advisable or may make any such payment
to any third person who, in the judgment of the Committee, will apply such
payment for the benefit of the person entitled thereto. In the event of such
payment, the Company, the Board of Directors and the Committee shall be
discharged from all further liability therefor.
SECTION 9.6. Governing Law. This Plan shall be governed by the law of the
State of New Jersey (regardless of the law that might otherwise govern under
applicable New Jersey principles of conflict of laws).
5
<PAGE>
SECTION 9.7. Construction. Wherever any words are used herein in the
masculine gender they shall be construed as though they were also used in the
feminine gender in all cases where they would so apply, and wherever any words
are used herein in the singular form they shall be construed as though they were
also used in the plural form in all cases where they would so apply.
SECTION 9.8. Prohibition Against Loans. No loan shall be made by the Company
to any person of any amount of the benefit hereunder or of any amount the
security for which is the benefit hereunder.
Section 9.9. Federal Securities Law. Notwithstanding any other provision of
the Plan, no transaction shall be given effect on any date which would, in the
opinion of counsel to the Company, result in liability under Section 16(b) of
the Act.
ARTICLE X
EFFECTIVE DATE OF THE PLAN
SECTION 10.1. Effective Date. The Plan shall be submitted to the
stockholders of the Company for their approval at the Annual Meeting of
Stockholders to be held in 1988. The Plan shall become effective upon the
affirmative vote of the holders of a majority of the shares of Common Stock
present, or represented, and entitled to vote at the meeting.
WARNER-LAMBERT COMPANY
6
<PAGE>
EXHIBIT 12
WARNER-LAMBERT COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN MILLIONS)
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
----------------------------------------------------
1999 1998 1997 1996 1995
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Earnings before income taxes and accounting
changes (less minority interests).......... $2,441.2 $1,791.0 $1,188.8 $1,069.1 $1,004.1
Add:
Interest on indebtedness -- excluding
amount capitalized..................... 140.3 114.3 167.5 145.9 122.7
Amortization of debt expense............. .6 .8 .4 .5 .4
Interest factor in rent expense(a)....... 45.8 39.4 32.1 28.5 27.7
-------- -------- -------- -------- --------
Adjusted earnings.................... $2,627.9 $1,945.5 $1,388.8 $1,244.0 $1,154.9
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Fixed Charges:
Interest on indebtedness................. $ 140.3 $ 114.3 $ 167.5 $ 145.9 $ 122.7
Capitalized interest..................... 27.1 19.2 8.3 9.6 10.1
Amortization of debt expense............. .6 .8 .4 .5 .4
Interest factor in rent expense(a)....... 45.8 39.4 32.1 28.5 27.7
-------- -------- -------- -------- --------
Total fixed charges.................. $ 213.8 $ 173.7 $ 208.3 $ 184.5 $ 160.9
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
Ratio of earnings to fixed charges........... 12.3 11.2 6.7 6.7 7.2
-------- -------- -------- -------- --------
-------- -------- -------- -------- --------
</TABLE>
- ---------
(a) Represents one third of rental expense, which the Company believes is a
reasonable approximation.
<PAGE>
EXHIBIT 21
The following is a list of subsidiaries of Warner-Lambert showing the state
or country of organization and the percentage of voting securities owned by
Warner-Lambert or by subsidiaries of Warner-Lambert as of December 31, 1999.
Except as otherwise indicated, such subsidiaries are included in the
consolidated financial statements.
<TABLE>
<CAPTION>
STATE OR
COUNTRY OF
NAME OF SUBSIDIARY ORGANIZATION PERCENTAGE OF OWNERSHIP
- ------------------ ------------ -----------------------
<S> <C> <C> <C>
Agouron Pharmaceuticals, Inc. California 100
American Chicle Company............................. Delaware 100
Euronett, Inc....................................... Delaware 100
International Affiliated Corporation................ Delaware 100
Laboratorios Laprofa, Sociedad Anonima............. Guatemala 100 International Affiliated Corporation
Warner-Lambert Holland B.V......................... Netherlands 100 International Affiliated Corporation
Parke-Davis B.V.................................. Netherlands 100 Warner-Lambert Holland B.V.
Grupo Warner Lambert Mexico, S.A. de C.V........ Mexico 100 Parke-Davis B.V.
Schick Nederland B.V............................ Netherlands 100 Parke-Davis B.V.
Warner Lambert A.E............................ Greece 99 Schick Nederland B.V.
1 Warner-Lambert Holland B.V.
Warner Lambert Distribuidora, S.A. de C.V....... Mexico 100 Parke-Davis B.V.
Warner-Lambert GmbH............................. Germany 100 Parke-Davis B.V.
Goedecke Aktiengesellschaft................... Germany 100 Warner-Lambert GmbH
Adenylchemie GmbH........................... Germany 100 Goedecke Aktiengesellschaft
Goedecke Gesellschaft m.b.H................. Austria 100 Goedecke Aktiengesellschaft
International Company for Gum and
Confectionery (INCOGUM) S.A.E............... Egypt 57 Warner-Lambert GmbH
PanServ-Anzeigen-Service GmbH................. Germany 100 Warner-Lambert GmbH
Parke-Davis GmbH.............................. Germany 100 Warner-Lambert GmbH
Warner-Lambert Consumer Products GmbH,
Berlin...................................... Germany 100 Warner-Lambert GmbH
S.A. Wilkinson Sword NV..................... Belgium 100 Warner-Lambert Consumer Products GmbH,
Berlin
Wilkinson Sword Gesellschaft GmbH........... Austria 100 Warner-Lambert Consumer Products GmbH,
Berlin
Wilkinson Sword S.A.E....................... Spain 100 Warner-Lambert Consumer Products GmbH,
Berlin
Wilkinson Sword S.p.A....................... Italy 99 Warner-Lambert Consumer Products GmbH,
Berlin
1 Wilkinson Sword Limited
Wilkinson Sword Tras Uruntieri Ticaret Ltd.
Sirketi.................................... Turkey 99.8 Warner-Lambert Consumer Products GmbH,
Berlin
.2 Warner-Lambert GmbH
Wilkinson Sword Verwaltungs GmbH............ Germany 100 Warner-Lambert Consumer Products GmbH,
Berlin
W&A Grundstucksverwaltungs GbR............. Germany 98 Wilkinson Sword Verwaltungs GmbH
2 Warner-Lambert GmbH
Warner-Lambert Europaische Beteiligungs
GmbH........................................ Germany 100 Warner-Lambert GmbH
Parke-Davis GmbH............................ Austria 100 Warner-Lambert Europaische Beteiligungs
GmbH
Warner-Lambert (Schweiz) AG................. Switzerland 100 Warner-Lambert Europaische Beteiligungs
GmbH
Warner-Lambert Philippines, Inc................. Philippines 100 Parke-Davis B.V.
Zalmplaat Holding B.V........................... Netherlands 100 Parke-Davis B.V.
Parke-Davis S.C.A............................. France 66.1 Zalmplaat Holding B.V.
33.9 Substantia (France)
Parke-Davis Pharmaceuticals Limited................ Cayman Islands, British
West Indies 99 Warner-Lambert Holland B.V.
1 Parke-Davis B.V.
Warner-Lambert Ireland Limited..................... Ireland 100 Warner-Lambert Holland B.V.
Parke Davis European Distributors Limited....... Ireland 100 Warner-Lambert Ireland Limited
Plaistow Limited................................ Ireland 100 Warner-Lambert Ireland Limited
Warner-Lambert Plaistow Manufacturing......... Ireland 50 Plaistow Limited
50 Warner-Lambert Export Limited
Warner-Lambert Export Limited................... Ireland 100 Warner-Lambert Ireland Limited
Island Pharmaceuticals Limited................ Ireland 100 Warner-Lambert Export Limited
Warner-Lambert Cork Limited................... Ireland 100 Warner-Lambert Export Limited
Warner-Lambert Manufacturing (Ireland) Ltd......... Cayman Islands, British
West Indies 100 Warner-Lambert Holland B.V.
Wilkinson Sword Nederland B.V...................... Netherlands 100 Warner-Lambert Holland B.V.
</TABLE>
(table continued on next page)
1
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
STATE OR
COUNTRY OF
NAME OF SUBSIDIARY ORGANIZATION PERCENTAGE OF OWNERSHIP
- ------------------ ------------ -----------------------
<S> <C> <C> <C>
Warner-Lambert Industria e Comercio Limitada....... Brazil 100 International Affiliated Corporation
Quantum Investments S.A......................... Uruguay 100 Warner-Lambert Industria e Comercio
Limitada
Adams S.A..................................... Argentina 100 Quantum Investments S.A.
Keystone Chemurgic Corp............................. Delaware 100
Exchic C.A. Limited................................ Bermuda 57.5
42.5 Keystone Chemurgic Corp.
Warner-Lambert Guatemala, S.A...................... Guatemala 100 Keystone Chemurgic Corp.
Lambert & Feasley, Inc.............................. New York 100
Med-Tech Ventures, Inc.............................. Delaware 100
Meito Adams Co., Ltd.*.............................. Japan 50
Parke-Davis Sales Corporation....................... Virgin Islands 100
Parke, Davis & Company ('Parke-Davis').............. Michigan 100
Parke, Davis & Company, Limited.................... Pakistan 75.6 Parke-Davis
Parke Davis International Limited.................. Bahamas 100 Parke-Davis
Parke-Davis Korea Limited.......................... Korea 100 Parke-Davis
Parke Davis Pty. Limited........................... Australia 100 Parke-Davis
Warner-Lambert Consumer Healthcare Pty.
Limited....................................... Australia 100 Parke Davis Pty. Limited
Warner-Lambert Pty. Limited..................... Australia 100 Parke Davis Pty. Limited
P-D Co., Inc....................................... Delaware 100 Parke-Davis
Capsugel AG..................................... Switzerland 100 P-D Co., Inc.
Empresas Warner Lambert S.A..................... Chile 90 P-D Co., Inc.
10 Tabor Corporation
Parke-Davis (Thailand) Limited.................. Thailand 100 P-D Co., Inc.
Substantia (France)............................. France 84.1 P-D Co., Inc.
14 Warner-Lambert Ireland Limited
1.9 Goedecke Aktiengesellschaft
Cachou Lajaunie............................... France 100 Substantia (France)
Capsugel France............................... France 100 Substantia (France)
Societe Nouvelle des Pastilles de Vichy....... France 100 Substantia (France)
Warner-Lambert (Belgium) N.V.................... Belgium 100 P-D Co., Inc.
Warner-Lambert Company AG....................... Switzerland 100 P-D Co., Inc.
Adams (Thailand) Limited...................... Thailand 100 Warner-Lambert Company AG
Warner-Lambert (East Africa) Limited.......... Kenya 100 Warner-Lambert Company AG
Warner-Lambert Pottery Road Limited........... Ireland 100 Warner-Lambert Company AG
Warner-Lambert Canada Inc........................... Canada 100 Parke-Davis
Omni Laboratories Inc......................... Canada 100 Warner-Lambert Canada Inc.
Parke-Davis Afrique de l'Ouest................ Senegal 100 Warner-Lambert Canada Inc.
Renrall K.K................................... Japan 75 Warner-Lambert Canada Inc.
25 Warner-Lambert K.K.
Warner-Lambert (UK) Limited......................... United Kingdom 100 Parke-Davis
Lambert Chemical Company Limited.............. United Kingdom 100 Warner-Lambert (UK) Limited
Parke Davis & Co. Limited..................... Jersey, Channel Islands 100 Warner-Lambert (UK) Limited
Wilkinson Sword Limited....................... United Kingdom 100 Warner-Lambert (UK) Limited
Warner-Lambert Espana, S.A.......................... Spain 85.6
14.4 Warner-Lambert Company AG
Laboratorios Parke Davis, S.L....................... Spain 100 Warner-Lambert Espana, S.A.
Parke-Davis S.p.A................................... Italy 100 (Indirect)
P.T. Capsugel Indonesia............................. Indonesia 90
10 International Affiliated Corporation
Suzhou Capsugel'r' Ltd.*............................ People's Republic of
China 50
Tabor Corporation................................... Delaware 100
Chicle Adams, S.A.................................. Colombia 80.3 Tabor Corporation
19.7 Latin American Holdings Inc.
Tetra-Werke Dr. rer. nat. Ulrich Baensch GmbH....... Germany 100 (Indirect)
Tetra Heimtierbedarf Verwaltungsgesellschaft
m.b.H............................................ Germany 100 Tetra-Werke Dr. rer. nat. Ulrich Baensch
GmbH
Tetra Werke Holding GmbH........................... Germany 100 Tetra-Werke Dr. rer. nat. Ulrich Baensch
GmbH
Tetra Heimtierbedarf GmbH....................... Germany 100 Tetra Werke Holding GmbH
Biorell GmbH.................................. Germany 100 Tetra Heimtierbedarf GmbH
HILENA Biologische und Chemische Erzeugnisse
Germany GmbH............................... Germany 100 Biorell GmbH
Zoomedica Frickhinger GmbH.................... Germany 100 Tetra Heimtierbedarf GmbH
Wilkinson Sword GmbH............................. Germany 59.4 Tetra-Werke Dr. rer. nat. Ulrich Baensch
GmbH
40.6 Warner-Lambert Consumer Products GmbH,
Berlin
</TABLE>
(table continued on next page)
2
<PAGE>
(table continued from previous page)
<TABLE>
<CAPTION>
STATE OR
COUNTRY OF
NAME OF SUBSIDIARY ORGANIZATION PERCENTAGE OF OWNERSHIP
- ------------------ ------------ -----------------------
<S> <C> <C> <C>
Warner-Lambert de Venezuela S.A..................... Venezuela 93.2
6.8 Parke-Davis
Chicle Adams, S.A................................ Venezuela 100 Warner-Lambert de Venezuela S.A.
Laboratorios Substantia, S.A..................... Venezuela 80 Warner-Lambert de Venezuela S.A.
Warner-Lambert Europe, N.V.......................... Belgium 99.8
.2 P-D Co., Inc.
Warner-Lambert Inc.................................. Nevada 100
Warner-Lambert India Limited........................ India 100
Warner-Lambert K.K.................................. Japan 65
35 Tetra-Werke Dr. rer. nat. Ulrich Baensch
GmbH
Warner-Lambert Nordic AB............................ Sweden 100
Warner-Lambert (NZ) Limited......................... New Zealand 100
Warner-Lambert Consumer Healthcare Pty. Limited.. New Zealand 100 Warner-Lambert (NZ) Limited
Warner-Lambert de Panama, Sociedad Anonima.......... Panama 100
Warner-Lambert (Portugal) Comercio e Industria,
Limitada........................................... Portugal 99.9
.1 Parke-Davis
Warner-Lambert S.A. (Proprietary) Limited........... South Africa 100
Wilcox Sweets (Proprietary) Limited.............. South Africa 100 Warner-Lambert S.A. (Proprietary) Limited
Warner-Lambert (Thailand) Limited................... Thailand 100 (Indirect)
W-C Laboratories Inc................................ Delaware 100
Willinger Bros., Inc................................ Delaware 100
</TABLE>
- ---------
* Subsidiary not consolidated
The foregoing list omits 11 domestic subsidiaries and 85 foreign
subsidiaries which, considered in the aggregate, would not constitute a
significant subsidiary.
3
<PAGE>
EXHIBIT 23
WARNER-LAMBERT COMPANY AND CONSOLIDATED SUBSIDIARIES
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Prospectuses
constituting part of the Registration Statements on Form S-3 (Registration
Nos. 33-4049, 33-38725, 33-55692, 333-04353 and 333-51533) and to the
incorporation by reference in the Registration Statements on Form S-8
(Registration Nos. 33-21123, 33-28375, 33-12209, 33-49244, 33-57918, 333-19311,
333-78643, 333-78645, and 333-78647) of Warner-Lambert Company of our report
dated January 24, 2000, except for Note 6 for which the date is February 7,
2000, which appears on page 28 of this Form 10-K. We also consent to the use of
our report on the Financial Statement Schedule, which appears on page 67 of this
Form 10-K.
PRICEWATERHOUSECOOPERS LLP
400 Campus Drive
Florham Park, NJ 07932
March 28, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AT
DECEMBER 31, 1999 AND FROM THE RELATED CONSOLIDATED
STATEMENT OF INCOME FOR THE 12 MONTH PERIOD ENDED
DECEMBER 31, 1999 AND IS QUALIFIED IN ITS ENTIRETY
BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> DEC-31-1999
<CASH> 1,634
<SECURITIES> 0
<RECEIVABLES> 1,722
<ALLOWANCES> 0
<INVENTORY> 979
<CURRENT-ASSETS> 5,690
<PP&E> 5,154
<DEPRECIATION> 1,812
<TOTAL-ASSETS> 11,442
<CURRENT-LIABILITIES> 3,689
<BONDS> 1,249
0
0
<COMMON> 962
<OTHER-SE> 4,136
<TOTAL-LIABILITY-AND-EQUITY> 11,442
<SALES> 12,929
<TOTAL-REVENUES> 12,929
<CGS> 3,042
<TOTAL-COSTS> 3,042
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 140
<INCOME-PRETAX> 2,441
<INCOME-TAX> 708
<INCOME-CONTINUING> 1,733
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,733
<EPS-BASIC> 2.03<F1>
<EPS-DILUTED> 1.96
<FN>
<F1>
Amount represents basis earnings per share.
<PAGE>
EXHIBIT 99
CAUTIONARY STATEMENTS RELATING TO 'SAFE HARBOR' PROVISIONS OF
THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Certain Company communications contain forward-looking statements. These
statements may be identified by the use of forward-looking words or phrases such
as 'believe,' 'expect,' 'anticipate,' 'should,' 'planned,' 'may,' 'estimated'
and 'potential.' These forward-looking statements are based on the Company's
current expectations. The Private Securities Litigation Reform Act of 1995
provides a 'safe harbor' for such forward-looking statements. In order to comply
with the terms of the safe harbor, the Company notes that a variety of factors
could cause actual results and experience to differ materially from the
anticipated results or other expectations expressed in such forward-looking
statements. The risks and uncertainties that may affect the operations,
performance, development and results of the Company's business include:
Changes in the favorable market reaction to the Company's significant
pharmaceutical products, such as the cholesterol-lowering agent LIPITOR.
Competitive factors, including managed care and other groups or
institutions seeking price discounts; technological advances attained by
competitors; and patents granted to or contested by competitors, which would
result in their ability to compete against the Company more effectively.
Difficulties or delays in pharmaceutical product development, including,
but not limited to, the inability to identify viable new chemical compounds,
to successfully complete toxicology testing and/or clinical trials, to
obtain regulatory approval for the compounds or to gain market acceptance of
approved products.
Unexpected safety or efficacy concerns arising with respect to marketed
products, whether or not scientifically justified, leading to product
recalls, withdrawals or other actions which could result in declining sales.
The expiration of patents or governmental grants of exclusivity with
respect to the Company's products.
Government laws and regulations affecting domestic and international
operations, which could include matters affecting drug approval and pricing;
or actions of regulatory agencies with respect to products and/or
manufacturing facilities which could result in fines, product interruptions
or withdrawals, plant closures or consent decrees.
Changes in economic conditions (including inflation, interest rates and
foreign currency exchange rates) in the global marketplace, including
Canada, Japan, Mexico and Western Europe, where the Company has significant
businesses.
Significant litigation adverse to the Company, including, particularly,
product liability litigation, antitrust litigation and patent and trademark
litigation.
